The Banks That Swallowed Europe, Western Civilization Built on Debt
Long-time readers will be familiar with Michael Lewitt, one of my favorite thinkers and analysts. He has gone off on his own to write his letter, and I am encouraging him to write even more. I call Michael a thinker because he really does. He reads a lot of thought-provoking tomes and then thinks about them. And then writes, making his readers think. The world needs more Michael Lewitts.
Today, he roams the world, commenting as he goes, starting of course with Europe. I have permission to use the first half of this most recent letter as today’s Outside the Box, leaving off the investment recommendations that he shares with his subscribers. If you are interested you can subscribe at www.thecreditstrategist.com.
I am back from the Kilkenomics Economics Festival in Ireland, where there was a lot of attendee angst about their banks. They are not happy about taking on private debt with public money, and the mood in Ireland is to tell the ECB to take their debt and (insert your favorite personal expletive). Clearly, the rest of Europe wants the Irish to pay.
I told them to be patient. When the rest of European banks are upside down sometime next year and France, Spain, et al. have to pay, the mood among voters everywhere will be quite different. I said they could probably default on their bank debt at that point and no one would notice, amidst the massive debts that are going to implode on the Continent. My remarks excited a measure of schadenfreude-tinged laughter from the crowd.
Michael Lewitt agrees. Noting this interview with Oliver Sarkozy, the half-brother of France’s Nicholas Sarkozy, he says:
“Institutional funding has a three-year average life, so European banks need to generate more than $800 billion each month to fund maturing institutional borrowings. This is, in Mr. Sarkozy’s words, unsustainable. And the markets are saying so. The CDS market for European banks is back at or above the peak levels seen during the 2008 financial crisis. While Mr. Sarkozy does not come out and say it, TCS will – the likely future for European banks is Dexia SA, which was nationalized by France and Belgium when it ran aground a couple of weeks ago.”
I will write more about what I learned in Kilkenny later this week, but Europe is getting ever closer to imploding, one way or another. There is no end of problems for the markets to focus on. I can only hope that we in the US will observe the increasingly sad state of affairs in Europe and become sufficiently motivated to fix our own problems. If we do not, we will end up in an even worse condition, which will then be worse for the entire world. I remain somewhat optimistic that we will fix what ails us, as not doing so is just too horrible to contemplate.
On that bright note, have a great week. I am off to Atlanta tomorrow and then DC this Sunday, and then home for a few months (more or less).
Your seeing too much to worry about analyst,
John Mauldin, Editor
Outside the Box
A very important Chart to begin to understand whats going on by Interest Debt Bondage,
and why the debt (interest -usury) crisis is not going away soon, and is only getting worse and worse.
If we do not realize how we got into the mess, we will be condemned to remain mired in the morass.
The salvation is in total prohibition of interest usury debt in all currencies and translations, to return to honest just work, services and trade.
Is it too late?
Can it be fixed?
What after the collapse?
Is Islam which absolutely prohibits idolatry and interest usury transaction, and demands just dealings, the solution and answer?
Explore the realities beyond the mass media hype.
It’s All Greek To Me
By Michael Lewitt
“This is a great trap of the twentieth century: on the one side is the logic of the market, where we like to imagine we all start out as individuals who don’t owe each other anything. On the other is the logic of the state, where we all begin with a debt we can never truly pay. We are constantly told that they are opposites, and that between them they contain the only real human possibilities. But it’s a false dichotomy. States created markets. Markets require states. Neither could continue without the other, at least, in anything like the forms we would recognize today.”
– David Graeber, Debt: The First 5,000 Years
For a couple of days last week, European authorities appeared to have settled on a massive monetization scheme that would have eliminated the imminent risk of a collapse of Europe’s banking system. We wrote “appeared to have settled” because less than a week after the plan was announced, Greek Prime Minister Papandreou unexpectedly called on Monday for a public referendum on the plan. The vote wouldn’t occur until January 2012, which would extend the period of uncertainty for two more months. The market reaction to this announcement was dutifully panicked, with European bourses plunging (the DAX and CAC indices were both down 5 percent) while German bond yields dropped 26 basis points to 1.76 percent as investors flocked to safety. Systemic risk was placed squarely back on the table and cut out the legs from the rally that boosted markets out of the upper end of their trading range at the end of last week.
The markets thought they could step back from the brink on the news that the European Financial Stability Facility (EFSF) would be leveraged by 400 percent and European banks had agreed to write-off 50 percent of their Greek debt. These measures had convinced the market that Armageddon would have to wait for another day. Now the markets are not so sure. Counting on byzantine Greek politics to deliver certainty is a dubious proposition to say the least. But the plot thickened even further as money managers around the world were pulling out their remaining strands of hair. On Tuesday, November 1, shortly after European markets closed, reports surfaced that the Greek referendum was off. As I wrote to one of my friends, every time I tried to put this issue to bed, more news came out of Greece that made it impossible to know exactly what to say. At this point, I am starting to feel like Sybil, the girl with 27 personalities (and now we’ve learned –like we didn’t already know – that she was a complete fabrication in the first place). Nonetheless I will do my best to wade ahead with the limited number of personalities I have left.
At best, the proposed bailout plan would have been/will only be a temporary solution to a long-term structural problem that requires an entirely different set of solutions than monetization and leverage. Our initial reaction to the plan was decidedly positive, however. We believed it would lead to a strong rally because it would remove systemic risk through the end of 2012 even though it did not provide a permanent solution. TCS wrote the following last month: “If the plan ultimately takes the form of leveraging the EFSF, the markets will likely rally and ignore the fact that such a program would at best place a Band-Aid on the underlying wound. Even a flawed plan will be perceived to be better than no plan at all. Unfortunately, such a plan would only create the illusion of stability while allowing the underlying imbalances and flawed policies to fester”(The Credit Strategist, October 1, 2011, “Confidence Games,” p. 1). The markets were desperate for a genuine solution but would have settled for stopgap measures. Now, unfortunately, they aren’t even being granted the latter.
In terms of the substance of the plan, it is obviously designed to cover Italy’s and Spain’s collective €1.5 trillion of borrowing needs over the next three years as well as those of Greece, Portugal and others. In that respect, however, it leaves little, if any, margin of error. After all, the EFSF is not an actual pool of money but merely a collection of IOUs that have to be fulfilled by 17 European states, at least two of which (Italy and Spain) are unlikely to keep them. As a result, one can expect further strains in the arrangement and market volatility resulting therefrom if the plan actually proceeds. If the plan does not proceed, investors will be begging for volatility as a welcome alternative to what they could be facing.
As one who has written that there is little chance of a long-term solution to these problems without a radical rethinking of global economic policy, the Europeans still have little choice once they peer over the cliff to realize other than to step back and buy some time before taking the inevitable leap. For, in the end, they have no other options than to jump. If they can squeeze a favorable vote out of Greece in January, they will then face the test of trying to implement meaningful pro-growth economic policies as their banks absorb their Greek losses. Skeptics are certainly correct to raise questions about the prospects for long-term solutions, but investors were not being reckless in acting as though systemic collapse was a worry for another day. They were wrong-footed by the announcement of a Greek referendum, which came as a surprise to us and to many others. But the removal of imminent systemic risk was a reasonable short-term buy signal for those with short-term investment horizons.
European economies are facing severe economic contractions in late 2011 and 2012 with little clarity on pathways toward growth. This is not news to the markets. Italian 10-year bond yields took little time to blow back through 6 percent and have now widened by 225 basis points this year. The European Central Bank might as well thrown money down a rat hole as purchased Italian bonds earlier this year. Yet, while Italy seems to be getting most of the attention of both the media and European political leaders pressuring its Prime Minister to implement budget cuts, Spain is starting to experience alarming degrees of economic pain.
In the third quarter, Spain’s unemployment rate reached the highest level in 15 years –an abominable 21.5 percent. The number of households without any income also reached a record level – 559,900, or 3.2 percent of all families. This is a result of the exhaustion of unemployment benefits for a growing number of Spaniards. In Spain, these benefits end or decline significantly after 24 months, compared with 3 to 5 years in some other European countries. While the Spanish government is looking for ways to stimulate job growth through government spending, the European Union is pressuring the country to reduce its budget deficit from more than 9 percent of GDP to 3 percent by 2013. The struggle between the government safety net and budget discipline will be increasingly painful across the union for the next few years.
Greece is mired in a depression that is getting worse by the day as it is forced to meet its northern neighbors’ austerity demands in order to receive aid that still won’t get it out of the bottomless economic pit it has dug for itself (the country needs to exit the EU, something that may be addressed in the referendum – if there is one). Banks taking 50 percent haircuts on Greek debt will now have to raise additional capital either in the public markets (highly unlikely) or via the EFSF, which will further dilute their already washed out stocks and divert them from the business of lending into recessionary economies (see below for more on European banks). The rating agencies are licking their chops in anticipation of dunning France’s AAA-rating, and Germany is only slightly further behind on their list for downgrade (for more on Germany’s credit rating, see below). The costs of fiscal union are proving to be somewhere between excessive and prohibitive.
One of the rabbits that the Europeans succeeded in pulling out of their hats is deeming the 50 percent write-off of Greek debt something other than a “credit event” that would trigger payment under the credit insurance contracts governing Greek debt. According to The Wall Street Journal, only a relatively small amount of money would have actually changed hands had a “credit event” been deemed to have occurred – $3.7 billion. But European leaders were able to convince holders of the debt to accept a “voluntary” write-down, which does not trigger a payment under the insurance contracts (known as credit default swap contracts, or CDS). The concern raised by market participants is that CDS will lose its utility as a hedge if parties are able to negotiate around it as they did in this case. A number of bankers were fretting in the media that this would result in higher borrowing costs for sovereigns by making it harder for buyers of sovereign debt to hedge their positions. To a limited extent that argument may have some merit, but for the most part CDS is used to speculate and not to hedge. If these self-interested bankers are really concerned about lowering sovereign borrowing costs, they should simply support a ban on naked sovereign CDS. That would leave investors with the ability to hedge, which would lead borrowers to lower their yield demands, and eliminate the pressure on rates placed by speculators who sell short sovereign credit without actually owning it. One of the reasons European leaders were so focused on not invoking a “credit event” in a Greek debt restructuring was to prevent speculators from profiting from Greece’s troubles.
The Banks That Swallowed Europe
A key part of the European rescue plan is leveraging the EFSF so that banks will be able to take the write-downs of their Greek debt holdings and then access capital so they will not be rendered insolvent (although since the entire edifice is built on debt it is unclear how they will be able to pull that off: It would seem that some non-traditional financing structures are going to be required for European banks. Among the structures that should be considered are bonds with warrants and convertible securities. Lenders will be taking equity risk and should be compensated accordingly. They should also be granted appropriate covenants that limit the ability of managements to make the same kind of stupid decisions that got them into their current messes). Nonetheless, the dilemma facing Europe’s banks is truly formidable. Banks represent a much larger presence in European economies than they do in the United States, as Figure 1 illustrates above.
In an appearance on CNBC’s Squawk Box and in an important essay in the Financial Times, Oliver Sarkozy, the half-brother of France’s Nicholas Sarkozy, laid out the challenges facing the sector. (Oliver Sarkozy, “Europe’s dithering over banking risks 2008 again,” Financial Times, October 25, 2011, p. 9.) Mr. Sarkozy notes that Europe’s banking sector has $55 trillion of assets, four times larger than the U.S. sector. As a result, European banks are funded through institutional (what he calls wholesale markets, which he describes as much less stable and much more fickle than depositors. European banks rely on institutional markets for about $30 trillion of their funding, about 10 times more than U.S. banks. In the third quarter, this market was essentially closed to European banks, leaving them with only internally-generated sources of cash to repay institutional funding as it rolls off. Institutional funding has a three-year average life, so European banks need to generate more than $800 billion each month to fund maturing institutional borrowings. This is, in Mr. Sarkozy’s words, unsustainable. And the markets are saying so. The CDS market for European banks is back at or above the peak levels seen during the 2008 financial crisis. While Mr. Sarkozy does not come out and say it, TCS will – the likely future for European banks is Dexia SA, which was nationalized by France and Belgium when it ran aground a couple of weeks ago. Figure 2 below shows the horrible performance of European bank stocks over the past few years and since January 2011(readers will note that TCS has been recommending that investors short European banks all year).
The Heart of the Problem
Mr. Sarkozy suggests that European banks will require $2 trillion of recapitalization, twice the amount that is provided for in the plan announced by European leaders.TCS would like to ask what type of financial prestidigitation is going to be required to transmogrify EFSF borrowings into bank equity. Either way, the problem is enormous and is unlikely to be solved by what the Europeans have proposed thus far.
Fears of a double dip recession can placed on the back burner as the U.S. economy grew at a respectable 2.5 percent annual rate in the third quarter. After six months of below one percent growth, this was a welcome recovery. The main contributors to growth were personal spending, which increased by 2.4 percent (adding 1.7 percent to annualized GDP) and business fixed investment (which added 1.5 percent to annualized GDP). Inventories subtracted 1.1 percent from GDP growth and government spending was flat. If readers are puzzled by the contribution of personal spending in the face of 9.1 percent unemployment and a persistent housing crisis, we are too. The will-to-spend of the American consumer is something to behold, and apparently the addition of even a disappointing 100,000-125,000 jobs per month is sufficient to keep it afloat. But it should also be recognized that personal spending remains below the levels of previous recoveries (as does pretty much every other sign of economic health). Business spending is responding to decent demand in the emerging world, but there are indications that this is starting to slow. The point to be taken from these numbers is that the U.S. would do well to maintain growth in the 2.5-3.0 percent range going into 2012. This is a growth rate that is going to have to be proven; it is not something to bank on.
The Global Debt Albatross
In a late August interview on Bloomberg television with Tom Keane, I argued that one of the major factors suppressing economic growth in the U.S. is the enormous weight of debt throughout the economy. Debt service is a drag on economic growth today because much of this debt was not incurred with respect to productive activities. Instead, much of this debt is related to either housing (which is an unproductive asset) or financial speculation in the markets. Accordingly, economic actors are required to commit their capital to service debt that didn’t contribute to productive economic growth.
A Civilization Built on Debt
There is also increasing evidence that the sheer amount of debt has reached the point where it is retarding growth and that additional debt will place additional downward pressure on the economy. TCS came across confirmation of its argument in the always indispensable writings of our friend Christopher Wood. Mr. Wood wrote in the October 6, 2011 issue of GREED & fear that: “the evidence increasingly suggests that the Western world has now reached a point where further increases in total aggregate indebtedness are bad for growth even if it is assumed, optimistically, that the authorities are successful in triggering private-sector deleveraging.”
Mr. Wood cited a Bank of International Settlements (BIS) Working Paper written by Stephen Cecchetti, M.S. Mohanty and Fabrizio Zampolli entitled “ The real effects of debt.” This paper was presented at the August meeting of central bankers in Jackson Hole, Wyoming. The authors of this report analyzed data for 18 OECD countries for the 30-year period 1980-2010. Their findings are disturbing (though hardly surprising). First, the ratio of debt-to-GDP (total government, corporate and household debt but excluding financial sector debt) has risen from 167 percent to 314 percent during that period. Second, regression analysis showed that debt becomes sufficiently large to slow economic growth as follows: government debt – 85 percent; corporate debt – 90 percent; household debt – 85 percent. Needless to say, the United States has exceeded those levels today with no diminution of the debt burden in sight. U.S. government debt is at 97 percent and household debt is 95 percent. Only corporate debt, at 76 percent, is below the threshold. Figure 3 above shows these statistics for all of the countries studied. It is not a pretty picture.
One thing to focus on in Figure 3 above and in Figure 4 below is the fact that Germany, the country on which the economic fate of Europe largely rests, is itself heavily indebted. Germany carries a total non-financial debt-to-GDP ratio of 241 percent (government – 77 percent; corporate– 100 percent; household – 64 percent). One can see why it is far from certain that Germany will have the economic or political wherewithal to bail out its weak European neighbors even if it musters up the political will to do so.
Germany– Going, Going, Gone?
One of the other points made in the BIS paper – something TCS discussed in the Introduction to The Death of Capital – is the enormous impact that aging populations will have on countries throughout the world. Figure 5, which appears on the next page (it appears on page 24 of The Death of Capital), was developed by the International Monetary Fund to show that spending on the 2008 financial crisis, which was in the trillions of dollars, is dwarfed by the projected costs of caring for aging populations. On average, aging populations will cost the advanced G-20 countries 14 times more than the financial crisis.
The point made in both the BIS study and my book is that it is incumbent upon advanced economies to bring their debt under control. Otherwise, the world is at risk of not having the resources to deal with the problems that they are going to face in the future. These problems include natural disasters (like Japan’s tsunami); environmental degradation and climate change; nuclear proliferation; terrorism; military conflict; pandemics, and hunger and poverty. Each one of these poses a potential threat to human survival (and is precisely the type of Black Swan for which most investors are not prepared). To continue to run our economies like a bunch of drunken sailors is incredibly reckless in the face of these future challenges.
Debt May Kill Us Before Old Age Does
It should also be noted that China, the Great Hope of the global economy, is hardly a paragon of fiscal rectitude. China’s total non-financial debt-to-GDP ratio is 174 percent (government debt –44 percent; household debt – 19 percent; corporate debt – 111 percent. This does not include the massive amounts of debt hidden on the balance sheets of opaque Chinese banks. China is concealing its own debt problem and the opaque nature of the situation renders it a bit of a wild card in the global economic picture.
The “ Occupy Wall Street” movement has received more than its fair share of media attention. There is no doubt that the protestors are emitting a primal scream against the system of “ capitalism for the poor, socialism for the rich” that characterized the steps that both led to the 2008 financial crisis and those that were taken to stem it. A growing percentage of the citizenry is coming to believe that a system that privatizes profits and socializes losses lacks legitimacy.
At the same time that protestors are railing against the current capitalist regime, and European leaders are doing everything in their power to perpetuate it, legal authorities in the United States are doing their part to insure that little will change. The recent insider trading prosecutions have properly attacked a flagrant and distasteful underside of the capital markets, although someday it will have to be explained how it is not insider trading when a well-known investor is permitted to accumulate a position in a company before publicly disclosing it and watching it soar in value. Leaving that aside, however, there is another legal assault that raises far more important systemic questions that the insider trading prosecutions. TCS is speaking of the lawsuits against the nation’s largest financial institutions for their sales of toxic mortgage securities. Last August, the Federal Housing Finance Agency sued 17 major Wall Street and European banks for selling more than $200 billion of these mortgage securities to Fannie Mae and Freddie Mac. At the same time, a number of state attorney generals are suing mortgage servicers for various abuses. Finally, there are a number of specific ongoing investigations (and a lawsuit or two) against specific underwriters for transactions similar to the Abacus abortion that brought so much shame on Goldman Sachs (and might one say that the Gods have exacted their revenge this year on John Paulson for his profiteering from that dirty business?). Where these legal proceedings will ultimately end up is anybody’s guess (although one can say with certainty that they will enrich the attorneys working on them).
TCS would like to raise a broader issue. The people camping out in Zuccotti Park are evidence of societal unease about the legitimacy of the current form of crony capitalism that has contributed to this country’s economic difficulties. Contributing to this unease has been the often-heard complaint that virtually nobody has gone to jail for causing the financial crisis. There is a very good reason for that, however. And that reason is not the one we heard from the U.S. Attorney with respect to its failure to bring charges against the incompetents who ran Washington Mutual, that the evidence did “ not meet the exacting standards for criminal charges.” Of course there was no evidence of criminality – the perpetrators of the conduct are on the same side of the table as the prosecutors! The reason that blatantly dangerous and unethical behavior cannot be prosecuted under our current system of laws is that there is no independent, third party, arm’s-length arbiter of behavior for the system. The system is worse than one in which the fox is guarding the henhouse. In our system, the fox is the architect that designed the henhouse!
Our justice suffers from a design flaw. It requires an independent investigative/prosecutorial arm that is part of the judicial rather than the executive or legislative branch of government. The only individuals that have truly stepped up and challenged the status quo that governs the political-financial ascendancy are federal judges such as Jed Rakoff. Judge Rakoff has given hell to the Securities and Exchange Commission over its bogus settlements with the large banks over settlements that are obvious political accommodations rather than true holdings to account. The judicial branch, which is certainly less beholden to large financial interests than the legislative branch (our bought-and-paid-for Congress) and the Executive Branch (our bought-and-paid-for President and Justice Department), is well positioned to serve as an independent arbiter of financial wrongdoing. It therefore offers the best opportunity to restore legitimacy to a system that has lost any right to judge its own conduct.
The Devolution of Wall Street
During the final segment of CNBC’s Strategy Session (which TCS will miss), David Faber made a very compelling comparison between two financiers – Michael Milken and John Paulson. Mr. Faber made the point that when he began his career as a Wall Street journalist (he started in the same year that I joined Drexel Burnham Lambert, Inc. –1987) the most highly compensated financier of the era was Michael Milken. Today John Paulson wears that crown. Mr. Milken famously earned $550 million in1987 (which pretty much sealed his legal fate regardless of the validity (or lack thereof) of the charges brought against him) while Mr. Paulson earned an astounding $5 billion in 2010 (and a couple of billion more in 2009 from his bet on subprime mortgages). Mr. Faber then went on to point out that Mr. Milken created the high yield bond market, which has expanded into a major economic force that financed many new businesses such as telecommunications (MCI), cable television (John Malone), and casinos (Steve Wynn and others). In contrast, Mr. Paulson has created nothing and instead profited from mere speculation. The difference between how these two men made their fortunes not only says a lot about how Wall Street has devolved over the last 25 years, but also how the U.S. economy has deteriorated during that period.
By John F. Mauldin
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The Crash of Western Capitalist Civilization?
“Train-wreck” doesn’t even begin to describe what is starting to happen to the U.S. today with the financial crisis, an onrushing depression, and the failure of George W. Bush’s war policy as he is faced down by Iran and the Russian bear.
But in an even broader sense, the West, as a civilization, after a century of world war and the utter failure of global finance capitalism, may have reached its limits.
Those with a vested interest in the status quo dismiss any suggestion that something is wrong. This includes Donald Luskin, author of an article in the Washington Post on Sunday, September 14, titled: “A Nation of Exaggerators: Quit Doling Out That Bad Economy Line.”
Luskin writes, “The relentless drumbeat of pessimism in the media and on the campaign trail” is “a virus.”
He continues: “Sure, there are trouble spots in the economy, as the government takeover of mortgage giants Fannie Mae and Freddie Mac, and jitters about Wall Street firm Lehman Brothers, amply demonstrate. And unemployment figures are up a bit, too. None of this, however, is cause for depression — or exaggerated Depression comparisons.”
Continue reading, and you find out who Luskin is: a campaign adviser to John McCain.
We know that “where you stand depends on where you sit”—and who pays you for advice. So is a catastrophic meltdown coming?
If so, probably a majority of the people in the world are thinking: “Serves them right.” For the last 500 years, the West has been striding across the globe, armed to the teeth with firearms, warships, bombers, and—more recently—depleted uranium, enforcing the “white man’s burden” by enslaving nations and peoples and confiscating everything of value—ranging from art objects to gold to oil—that can be carried away.
The financiers behind it all have also used the diabolically clever practice of creating money “out of thin air” to put the natives everywhere into debt, and, when that has proven insufficient, of doing the same to their own populations.
All this is rationalized by various brands of racism, cultural superiority, social Darwinism, historical determinism, “dominion of the Elect,” “God’s chosen people,” etc. Or, simply, “might makes right.”
Some call it “The New World Order.”
So today, we Americans, denizens of the “land of the free and the home of the brave,” victors in two world wars, bearers of “democracy” to Afghanistan and Iraq, allies of the brave Israelis who hold high the banner of Judeo-Christian values among the ungrateful Palestinians—well, we Americans owe our own bankers almost $70 trillion at most recent count. With the government takeover of Fannie Mae and Freddie Mac, we owe holders of bad housing loans, including the governments of China, Korea, and Japan, another few trillion.
The bluster of Kissinger, Brzezinski, the Kristols, the Christian fundamentalists, and their paid-off politicians and media millionaires notwithstanding, America—indeed, the entire West—has been found out, perhaps even checkmated on the world stage.
The Bush/Cheney wars in Afghanistan and Iraq have blackened America’s name forever. Iran has called our bluff. In Israel the gap between rich and poor is increasing as much as in the U.S. According to an article by Ian S. Lustick, the Palestinians have stood up to the Israelis to the point where more Jews are emigrating from that country than are moving in, and where those who remain are increasingly huddling around Tel Aviv as a safe haven. (Ian S. Lustick, “Abandoning the Iron Wall: ‘Israel and the Middle Eastern Muck’,” Middle East Policy , Vo. XV, No. 3, Fall 2008.)
In the 1990s, the European bankers used U.S. and NATO forces to dismember Yugoslavia so George Soros and the Rothschilds could gobble up Balkan resources. But that strategy is failing in the Caucasus, where the Russians fought back against the genocidal attack by Dick Cheney’s poodle, Mikheil Saakashvili, the New York-trained attorney the CIA got elected as the president of Georgia.
And now the people of Ukraine, the “Little Russians,” realizing what the West has in store for them, are rushing back into the Slavic fold and may be only a year or so away from reuniting with their “Great Russian” cousins across the border.
What is telling is to watch the Western financier press, chiefly the Washington Post and the New York Times , fume about Russian prime minister Vladimir Putin and his “authoritarian” manner. An example is the article by Times correspondent Ellen Barry on Putin’s September 11 press conference in Moscow. She wrote, “In three-and-a-half hours, in tones that were alternatively pugilistic and needy, Vladimir V. Putin tried to explain himself.”
I’m sorry, Ms. Barry. You and your editors may think your writing is cute, but Vladimir Putin is the foremost figure on the world stage today. He will remain so after George W. Bush leaves the White House disgraced.
Putin is heir to an epochal movement of patriots who began in the 1970s to take back Russia from within. It started with a base of operations within the KGB and the Orthodox Church, led to Gorbachev’s glasnost in the 1980s, and culminated in the Second Russian Revolution of 1991. At that point, the Western financiers gleefully rushed in to support an assault from the Russian “oligarchs” who were looting Russia of everything it owned.
The oligarchs were the shock troops of a financier assault that had already begun to overlap in the West with the Russian Mafia. Cheered on by the Washington Post and aided by academic advisors from places like Harvard, this international syndicate nearly destroyed Russia during the 1990s. But when Putin was appointed interim president by Boris Yelstin in 1999, and after winning the presidential election of 2000 in his own right, he began to fight back.
From the mid-1970s to today, thousands of Russian gangsters, along with many hard-line Bolsheviks/Stalinists, were allowed to emigrate. Many settled in the U.S. and are here today, and many more settled in Israel. In fact, one reason the price of condos in New York, Miami, Tel Aviv, and elsewhere has inflated so much reportedly is the flood of cash from racketeering.
The crooks have allied themselves with the Colombian drug cartels and have heavily infiltrated the world’s financial systems, even setting up their own banks for laundering money and speculating in the commodities markets.
Today, Putin is cleaning out the remaining gangster class. His efforts reached a milestone in January with the arrest in Moscow of Semion Mogilevich, called “the world’s most dangerous man.”
Putin has declared that the world will not be governed in a “unipolar” manner; i.e. by the U.S. military as the police force for the global financiers. This does not mean Russia has to be our enemy. In fact the world would be much better off, and much safer, if we joined with Russia as allies in keeping the peace.
But to do that our system would have to change, because finance capitalism is far too unstable to coexist with other nations as equals. It must either grow or die, because it always needs new victims to pay the interest on its usury practices and to finance its speculative balloons. As a last resort, it needs the kind of financial institution bailouts being engineered by Secretary of the Treasury Henry Paulson, where the only remaining stopgap is borrowing from public funds and adding to the national debt.
Once economic growth stops, as has now happened, and all the bubbles to restart it have blown up, as has also happened, the end really is nigh. Especially if the host—the U.S.—is bankrupt.
What is coming at us today isn’t just another downturn. If people like McCain adviser Donald Luskin doubt it, maybe, instead of writing campaign propaganda, they should ask the fired CEOs of Fannie Mae and Freddie Mac, the stockholders of Lehman Brothers, whose shares have dropped ninety percent in less than a year, and the millions who are losing their homes.
Presidential candidates Barack Obama and John McCain are calling for “change.” Well, if I were standing on a beach with a 100-foot tsunami roaring in my direction, I would call for change too. Except I would not be standing around arguing about the meaning of the words “lipstick on a pig.”
By Richard C. Cook
Copyright 2008 by Richard C. Cook
Richard C. Cook is a former U.S. federal government analyst, whose career included service with the U.S. Civil Service Commission, the Food and Drug Administration, the Carter White House, NASA, and the U.S. Treasury Department. His articles on economics, politics, and space policy have appeared on numerous websites. His book on monetary reform entitled We Hold These Truths: The Hope of Monetary Reform will be published soon by Tendril Press. He is also the author of Challenger Revealed: An Insider’s Account of How the Reagan Administration Caused the Greatest Tragedy of the Space Age , called by one reviewer, “the most important spaceflight book of the last twenty years . ” His Challenger website is at www.richardccook.com . A new economics website at www.RealSustainableLiving.com is upcoming with partner/author Susan Boskey. To get on his mailing list, for questions and comments, or to pre-purchase copies of his new book, please write EconomicSanity@gmail.com .
Richard C. Cook Archive
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The mischievous debt culture of the western Civilization
Sure it applies to the miniature institution like an individual to anything big as a government itself and, surprisingly it reserves the divine ability to take down any of them to the bottom of nowhere. In case, unclear, I am talking about the mischievous debt depending habit of the western civilization. Or, in a more contemporary definition, anything that is scaring the big government of the European Union like the ghost stories does to little kids in the night.
Simply, this habit contained in the western civilization of depending on debts for financing purposes has often led them to drown themselves in their own mounting debts. No wonder, this habit and vastly spread in the public financing behavior in European and American community, and its contemporary negative consequence has certainly become the hottest cover that a journalist for The New York times, Washington Post or CNN could find for now.
Basically, I am not willing to discuss the overall contemporary debt crisis stories of the America, Greece or any other European nation, in this article, but here, I am rather interested in discussing the debt-depending habit, that has been evolving in the western civilization of 21st century and which has been the main source of pain in the western economy. And of course, something that has been threatening the existence of the western economics, no matter how big it is.
Basically, this debt depending habit is so profound and delicate that it has always been touching the heart of the western civilization, through the individual level. No wonder, we have always noticed that people (westerners) rely on debt to further their university education, to buy a car, to buy homes, even to start a business, SME or to finance everything else. By the way, we cannot totally blame the people for this habit, considering the reason that it is how the system has been evolving. Besides, it was always the society that created system and it was the individuals that created the society.
The occurring and the dreadful consequences of American recession (2008) due to property bubble burst has always been a perfect experiment for the negative effects of debt-depending habit in the western civilization. The overall issue initiated after individuals and institutions started buying homes on loan and, the bigger financial institutions would just happened to support this overall mechanism of sub-prime mortgage loans and finally to crash everything to ashes. Not to mention, one would be surprised to recognize that socio-criminology consider excess debts burden for individual as a major reason for life threatening activities.
Today, it’s the Europe as a whole, whom has been the clear-cut victim of this debt-depending habit of the governments to finance development, enough to disable the government to meet the payment deadlines, as the interest rate hikes with the falling confidence of the creditors (forgive me, if I broke my promise of not discussing this topic in this article). After all, it’s the group of small individuals who make big Government, and it naturally reflects the values as a whole.
After talking about the present debt-depending habit of the western and its possible negative consequences, It would be wise to place my opinion about what should be done after aftermath. Well simply, it is time for the westerners to change their so-called already inane trait of debt depending. Well, if they (westerners) think they are good at making revolutions (and think it is what that has been keeping them ahead), they need to strengthen this claim by revolting against this habit. After all, we have already visualized its intensity of placing the world economics at stake.
No offence, but as a resolution, I would recommend the western civilization to learn from the Easterners of self-depending. If noticed, Eastern people, say Asians mostly prefer equity over debt for financing purposes. Well, the good part it is that, it makes the economy a bit more recession proof. Besides, equity financing is also quite common in Western economy, with so many Public companies and their stocks traded in exchanges, but unfortunately, it has some sort of overly ties with the debts. No wonder, when Standard & Poor downgraded the U.S. Treasury Bonds, it was actually the American Stocks that had to suffer.
Well, from another perspective, it is a masterful representation of a link between Socio-Psychology and economics, with so much of intensive heat enough to affect the World economics at large. And at last, it is something that has to be reconciled.
Debt Bubble: We’re in a Dangerous New Phase – Here’s Why
The head of the International Monetary Fund, Christine Largarde, said Friday the world economy is entering a “dangerous new phase.” Lagarde is referring to a debt bubble, the likes of which the planet has never seen before, and the possibility that it could all unravel at any moment. Uncertainty over the debt crisis in Europe is what caused the Dow to crash more than 300 points at the end of last week. What is Lagarde going to do about the debt problem? Words: 1752
So says Greg Hunter (www.USAWatchdog.com) in an article* produced in its entirety. As editor of www.munKNEE.com (Your Key to Making Money!) this is the first time I have posted an article that did not need to be edited, abridged or reformatted to ensure a fast and easy read so it is presented below for your edification.
Hunter goes on to say:
A CNBC story reported,
“She warned that both advanced and emerging economies faced key economic challenges, and that governments must ‘act now’ to stop further contagion. ‘Policymakers should stand ready, as needed, to take more action to support the recovery, including through unconventional measures,’ Lagarde said.”
Lagarde is surely talking about revving up the global printing presses for more bailouts.
Meanwhile, the Germans are talking about letting countries like Greece go bankrupt. Another CNBC story yesterday said,
“Even senior figures in Merkel’s conservative Christian Democrats (CDU) are leaving open the possibility of default. ‘The way things are looking, you can no longer rule out a possible Greek restructuring,’ CDU budget expert Norbert Barthle told Reuters, when asked about a default or euro zone exit.”
So which is it? Will it be bailout or default? Who knows, maybe a little of both before it is all over. A post on Zerohedge.com Friday may give the answer. It reported,
“Wondering what is next for Europe? Don’t be. With Jurgen Stark, aka the last real hawk at the ECB, gone, here comes “the printing.” SocGen’s (Societe Generale) Dylan Grice explains. From SocGen: Suppose that Italy or Spain get caught up in the whirlwind like Greece, Ireland and Portugal, as threatened to happen last month. Maybe the Italian political situation deteriorates, maybe Ireland defaults, maybe Greece will go revolutionary, or maybe an ill-advised wayward comment from an influential European politician will spook markets and send them into renewed tailspin. We don’t know which of these will happen, if any. All we know is that these are some of the many plausible triggers for a further deterioration in this fragile situation.”
That “fragile situation” would mean a panic set off by an impending debt implosion, but SocGen’s Grice says the powers will not allow it to happen. In the end, there will be a burst of money printing to stave off insolvency that has already infected many European banks.
Then, there is the absurd idea that Europe and America, for that matter, can “grow” their way out of the trillions of dollars of debt the western world has racked up. An Associated Press story on Friday said,
“The argument put forth by (Tim) Geithner and others is that the best deficit-reducer is growth: When the economy is humming, it offsets spending and drives down both the size and the proportion of deficits. Rather than trying to scrimp their way back to prosperity, world economies need to spend money to make money.”
The “spending” is code for printing money out of thin air, and “growth” is really code for inflation.
It looks like European banks will need some cash long before they can “grow” their way out of the tremendous debt they are in. Just last week, Deutsche Bank CEO Josef Ackermann said,
“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.”
There are twenty Federal Reserve primary dealers of Treasury debt around the planet. Do you think the Fed will let a single one fail?
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Economist John Williams at Shadowstats.com says for the Federal Reserve “systemic failure is not an option.” The financial crisis in 2008 caused the Fed to dump $16 trillion into the world economy. Five trillion dollars was pumped into foreign banks alone to keep them afloat. In his latest report, Williams said,
“The U.S. and global financial markets remain extraordinarily volatile and unstable, with systemic instabilities offering the potential, again, of systemic failure. Following the collapse of Lehman in 2008, the U.S. Treasury and the Federal Reserve committed to preventing a systemic collapse at any cost. They created and spent, loaned or guaranteed whatever money was needed to forestall systemic failure, kicking the proverbial can down the road. Most of the actions taken then and since, however, were stopgap measures; little was done to address the systemic and economic crises fundamentally. At present, the system has moved enough further along the road that the can likely will be kicked again. Now, though, the road ahead drops off a cliff, well within current kicking distance.”
I think the “kicking distance” and the “cliff” are somewhere between now and early 2013.
Greece is going to default and even take the euro, and maybe the EU, with it. There will be 5 investment opportunities should that unfold as expected and one of them will be the U.S. dollar. [Let me explain.] Words: 1187
Every single day the U.S. economy is getting weaker. Every single day we are going into more debt. Every single day we get closer to the collapse of the entire system but time is running out. The entire U.S. financial system has become a gigantic shell game (a confidence trick to perpetrate fraud) but when it ends the consequences can be painful and, sadly, that [pain is eventually going to be ours to experience. Let me explain.] Words: 1483
Over the past two months stock markets have crashed around the world and gold prices have soared as global investors decided that the U.S. has lost its race against time. A new recession is upon us before we even half-closed the output gap left open from the last recession. It means even larger deficits and an even weaker dollar. The price of gold and Treasury bonds is telling us that a full-blown international bond and currency crisis is approaching. There is no international policy mechanism available to stop the panic short of re-opening the gold window that the U.S. closed unilaterally and “temporarily” in 1971. [Let me explain.] Words: 3025
The debt crisis in the United States is unsustainable, and the debt crisis in Europe is unsustainable. As such, we are facing a global debt meltdown and are heading for an economic collapse. You aren’t going to hear that truth from the media or from our politicians, however, because keeping people calm is much more of a priority to them than is telling the truth – and right now we are in the calm before the storm. Nobody knows exactly when the storm is going to strike (i.e. when the collapse is going to happen) – but it is definitely on the way — and now even Goldman Sachs is admitting [that that is most likely the outcome of the present situation. Here is what they had to say recently in a “secret” document that has just now been made public.] Words: 1147
The United States and most of Europe…risk an eruption and collapse of the mountain of unsustainable sovereign debt built up over the last two decades. Frankly, the U.S. dollar and national debt situation is so dire – and our means to contain a sovereign debt crisis so limited by multiple wars and Washington’s debt and political incompetence at home – that anything could happen, almost overnight. [The best] America and most European governments and the central banking elites, which created the criminal sovereign debt fiasco, [appear able to do is] try to buy more time and delay the inevitable. This inaction means the threat of an immediate US debt and dollar collapse cannot be ruled out. Therefore, readers who have not protected themselves certainly have cause to worry because now could be too late. [Let me explain further.] Words: 1689
A predictive software program called Senturion, developed for the U.S. military and sporting a 85% accuracy rate, has concluded that Greece is going to default. [Let me explain further.] Words: 244
SocGen has published a fantastic, must read, big picture report which compares the world in the 1980/1985-2000/2005 time period and juxtaposes it to what the author, Veronique Riches-Flores, predicts will happen over… the period from 2005/2010 to 2025/2030. She sees dramatic changes but, unfortunately, they will not be pretty. Let’s take a look at what the report has to say about the future. Words: 3025
The next crisis will be a Crisis of Faith pertaining to the US Federal Reserve… when the market begins to realize that the Fed CANNOT backstop the entire financial system (it never could but most people hoped regardless) – and…when this happens, THEN the REAL crisis will hit and it will make 2008 look like a picnic. Bernanke has [already] admitted publicly that he’s clueless [as to] what’s going on [and this] is a MAJOR step towards the world realizing that he’s lost control. [As such,] if you’re not taking steps now to prepare for what’s coming, you need to start moving. [The REAL crisis is coming – soon! Let me explain.] Words: 1018
U.S. Financial System is a Shell Game, a Confidence Trick, a Ponzi Scheme, Which Will Eventually Collapse!
The Economic Shell Game
Every single day the U.S. economy is getting weaker. Every single day we are going into more debt. Every single day we get closer to the collapse of the entire system but time is running out. The entire U.S. financial system has become a gigantic shell game (a confidence trick to perpetrate fraud) but when it ends the consequences can be painful and, sadly, that [pain is eventually going to be ours to experience. Let me explain.] Words: 1483
So says Michael T. Snyder in edited excerpts from an article* which Lorimer Wilson, editor of www.munKNEE.com (It’s all about Money!), has further edited ([ ]), abridged (…) and reformatted below for the sake of clarity and brevity to ensure a fast and easy read. Please note that this paragraph must be included in any article re-posting to avoid copyright infringement. Snyder goes on to say:
The Federal Reserve is like a con artist that is desperately trying to stay one step ahead of everyone else. The folks at the Fed know that the debt that the U.S. government has accumulated is not sustainable and will eventually collapse. They also know that the U.S. dollar is eventually going to become essentially worthless. For now, however, the Federal Reserve is putting on a grand show and is trying to keep everyone believing that the game is fair and legitimate.
The Federal Reserve’s much ballyhooed “QE2″ program has come to an end, and most Americans still don’t even understand what “quantitative easing” is. Basically, what the Federal Reserve did was zap hundreds of billions of dollars into existence out of thin air and used them to buy U.S. government debt. It is kind of like if you are playing poker with someone and they reach under the table and pull out a gigantic pile of chips which they add to their own stack. In the process, the big banks made a ton of money because they are the ones that the Federal Reserve was buying U.S. Treasuries from and the U.S. government was happy because all of the new government debt being issued was getting soaked up by the system. Of course, all of this is one giant Ponzi scheme, but up to this point the Federal Reserve has gotten away with it. Meanwhile, average Americans were getting the short end of the stick because all of this new money has been causing the price of food and the price of gas to go up.
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Now that QE2 has come to an end does that mean that “quantitative easing” is going to be completely over? No, not really. The shell game continues. The Federal Reserve has announced that it is going to continue to purchase U.S. government debt using the proceeds from maturing debt that it already owns. It is being projected that the Federal Reserve will purchase $300 billion in U.S. government debt over the next 12 months using this method. This isn’t being called “quantitative easing,” but that is essentially what it is. In fact, one CNN article is calling it “QE2.5″.
Loans to the Big Banks
Quantitative easing is just one example of a shell game run by the Fed. There have been lots more. For example, during the financial crisis, the Federal Reserve started loaning gigantic amounts of cash to the big banks for next to nothing. The big banks took a lot of this cash and invested it in U.S. Treasuries. U.S. Treasuries typically only pay a couple of percentage points, but when you can borrow massive amounts of nearly free money suddenly they become extremely profitable. Instead of loaning out large amounts of money to all of us to get the economy rolling again, the big banks just parked huge amounts of cash in U.S. Treasuries and watched the risk-free profits come rolling in. In this way, the Federal Reserve helped big banks make a ton of money and they supported the exploding federal government debt load at the same time.
The chart below shows that the amount of U.S. government securities owned by the banks has increased exponentially since the beginning of the financial crisis. This is not an accident.
The Debt Ceiling
The Federal Reserve does lots of stuff like this. It knows that it will probably never get audited, and it knows that the American people don’t understand all of this financial stuff, so it gets away with it. What if something came along, however, and suddenly interrupted the shell games that the Fed is playing? Well, that is exactly what this debt ceiling debate threatens to do. If the U.S. defaults, even for a short time, all of the financial shell games and Ponzi schemes are going to be greatly jeopardized.
If Congress does not raise the debt ceiling by August 2, the U.S. government will start defaulting, and that would unleash a tremendous amount of chaos. A recent USA Today article described some of the things that might happen if the government was not able to borrow any more money later this summer:
If Social Security, Medicare, Medicaid, unemployment benefits, payments to defense contractors and interest payments on Treasury bonds were exempt, that would be all the government could afford for the month. No money for troops or veterans. No tax refunds. No food stamps or welfare. No federal salaries or benefits.
In addition, financial markets all over the world would be severely rattled. If the default only lasted a couple of days it would not be bad, but if the U.S. ended up defaulting on debts for weeks or months it really would be cataclysmic. [Indeed,] the International Monetary Fund warned this week that a failure to raise the debt ceiling by August 2 would be a “severe shock” to global financial markets. In this case, the IMF is actually right. In fact, a “severe shock” would be an understatement. [In fact,] the managing director of Standard & Poor’s has told Reuters that if the U.S. starts defaulting, the credit rating on U.S. Treasury bonds that are supposed to mature on August 4 will go all the way down from AAA to D…
A lot of Americans believe that Congress should just refuse to raise the debt ceiling and let the whole system crash but the reality is that most Americans simply have no idea how much of a financial disaster that would be for the entire globe. Yes, the U.S. national debt is completely and totally out of control. Yes, something must be done about it urgently but defaulting on our debts and wrecking global financial markets is not going to solve much of anything. Sadly, even if we do not default on our debts this year, the reality is that the U.S. government debt bubble is going to collapse one way or another eventually.
U.S. Economy is Being Dismantled
The path that we are currently on is not even close to sustainable. Even as our debt expands exponentially, the U.S. economy is being systematically dismantled and we are becoming poorer as a nation… Jobs and businesses are leaving the United States at a staggering rate because of cheap labor overseas and because of ridiculous regulations…Businesses of all sizes are trying to avoid… the highest corporate tax rate in the entire world…[and, as such,] have a great deal of incentive to avoid incorporating in the United States. The rate of new business creation in the United States has been declining steadily since the 1980s. We won’t have a chance at a real economic recovery until the creation of small businesses is encouraged once again.
What we are doing is not working so what is the answer? As I have said before, we need to entirely scrap the current tax system and come up with something that works in the 21st century – but we all know that is not going to happen. Meanwhile, our economy continues to unravel.
According to the Department of Labor, the unemployment rate rose in 210 metro areas during the month of May, and it only declined in 131 metro areas. Consumer confidence in this country has hit a seven-month low, and average Americans are becoming increasingly anxious about the state of the economy. Unfortunately, most of our politicians don’t seem to have any answers and the Federal Reserve is just trying to keep their shell games going.
Every single day the U.S. economy is getting weaker. Every single day we are going into more debt. Every single day we get closer to the collapse of the entire system. Time is running out. I hope you are making good use of the time you still have left.
- Telling it Like It Is: Monetary Policy, the Federal Reserve, and the National Debt Problem http://www.munknee.com/2011/06/telling-it-like-it-is-monetary-policy-the-federal-reserve-and-the-national-debt-problem/
- Another Economic Collapse and Great Depression are Coming! Here’s Why http://www.munknee.com/2011/06/another-economic-collapse-and-great-depression-are-coming-heres-why/
- “Financial Repression” May Soon Become Our Worst Nightmare! Here’s Why http://www.munknee.com/2011/06/%e2%80%9cfinancial-repression%e2%80%9d-may-soon-become-our-worst-nightmare-heres-why/
- Raising the Roof – On a Higher Debt Ceiling That Is! http://www.munknee.com/2011/05/raising-the-roof-on-a-higher-debt-ceiling-that-is/
- Top Myths on the U.S. Debt-ceiling Crisis http://www.munknee.com/2011/05/top-myths-on-the-u-s-debt-ceiling-crisis/
- ‘America Is Bankrupt’ Claim is Total Nonsense! Here’s Why http://www.munknee.com/2011/04/america-is-bankrupt-claim-is-total-nonsense-heres-why/
- Relax! Defaulting on Debt Is Not an “End of the World” Scenario http://www.munknee.com/2011/04/relax-defaulting-on-debt-is-not-an-end-of-the-world-scenario/
- The U.S. is Headed Towards Self-inflicted Disaster: Here’s Why http://www.munknee.com/2011/04/the-u-s-is-headed-towards-self-inflicted-disaster-heres-why/
- IMF: Major Changes Required to Close U.S. Fiscal Imbalance – Here’s Why, What and How http://www.munknee.com/2011/04/imf-major-changes-required-to-close-u-s-fiscal-imbalance-heres-why-what-and-how/
- America: The Party is Over! Here’s Why http://www.munknee.com/2011/04/america-the-party-is-over-heres-why/
- America’s Political Process Guarantees Another Financial Crisis! http://www.munknee.com/2011/03/america%e2%80%99s-political-process-virtually-guarantees-financial-crisis-2-0/
- Weiss: A Financial Apocalypse Awaits America! http://www.munknee.com/2011/03/weiss-a-financial-apocalypse-awaits-america/
- Americans Have Thrown in the Towel as They Await “The Big Splatter” http://www.munknee.com/2011/02/americans-have-thrown-in-the-towel-as-they-await-the-big-splatter/
- Washington Faces Possible Armageddon Unlike Any Since Civil War http://www.munknee.com/2011/01/washington-faces-possible-armageddon-unlike-any-since-civil-war/
- Why Slashing Government Spending Now Would Result In A Depression http://www.munknee.com/2011/01/why-slashing-government-spending-now-would-result-in-a-depression/
- Remedies to Fiscal Gap Guarantee Hyperinflation! http://www.munknee.com/2010/11/remedies-to-fiscal-gap-guarantee-hyperinflation/
- Warning Signs Suggest U.S. Headed for a Complete Societal Collapse! http://www.munknee.com/2010/10/warning-signs-suggest-u-s-headed-for-a-complete-societal-collapse/
- Let’s Get Real: The U.S. is Bankrupt and the Consequences Will Be Dire! http://www.munknee.com/2010/09/lets-get-real-the-u-s-is-bankrupt-and-we-dont-even-know-it/
- U.S. Between a Rock and a Hard Place and Its Options Are – At Best – Dire! http://www.munknee.com/2010/09/u-s-between-a-rock-and-a-hard-place-and-its-options-are-at-best-dire/
- Nielson: America’s Debts are Staggering – It is Hopelessly Insolvent! http://www.munknee.com/2010/07/debt-denial-and-default-why-every-investor-needs-to-protect-their-wealth-with-precious-metals/
- The above article consists of reformatted edited excerpts from the original for the sake of brevity, clarity and to ensure a fast and easy read. The author’s views and conclusions are unaltered.
- Permission to reprint in whole or in part is gladly granted, provided full credit is given as per paragraph 2 above.
Crashing Towards a New World Social Order 2012
Richard K. Moore writes: Historical background – the establishment of capitalist supremacy
When the Industrial Revolution began in Britain, in the late 1700s, there was lots of money to be made by investing in factories and mills, by opening up new markets, and by gaining control of sources of raw materials. The folks who had the most money to invest, however, were not so much in Britain but more in Holland. Holland was the leading Western power in the 1600s, and its bankers were the leading capitalists. In pursuit of profit, Dutch capital flowed to the British stock market, and thus the Dutch funded the rise of Britain, who subsequently eclipsed Holland both economically and geopolitically.
In this way British industrialism came to be dominated by wealthy investors, and capitalism became the dominant economic system. This led to a major social transformation. Britain had been essentially an aristocratic society, dominated by landholding families. As capitalism became dominant economically, capitalists became dominant politically. Tax structures and import-export policies were gradually changed to favor investors over landowners.
It was no longer economically viable to simply maintain an estate in the countryside: one needed to develop it, turn it to more productive use. Victorian dramas are filled with stories of aristocratic families who fall on hard times, and are forced to sell off their properties. For dramatic purposes, this decline is typically attributed to a failure in some character, a weak eldest son perhaps. But in fact the decline of aristocracy was part of a larger social transformation brought on by the rise of capitalism.
The business of the capitalist is the management of capital, and this management is generally handled through the mediation of banks and brokerage houses. It should not be surprising that investment bankers came to occupy the top of the hierarchy of capitalist wealth and power. And in fact, there are a handful of banking families, including the Rothschilds and the Rockefellers, who have come to dominate economic and political affairs in the Western world.
Unlike aristocrats, capitalists are not tied to a place, or to the maintenance of a place. Capital is disloyal and mobile – it flows to where the most growth can be found, as it flowed from Holland to Britain, then from Britain to the USA, and most recently from everywhere to China. Just as a copper mine might be exploited and then abandoned, so under capitalism a whole nation can be exploited and then abandoned, as we see in the rusting industrial areas of America and Britain.
This detachment from place leads to a different kind of geopolitics under capitalism, as compared to aristocracy. A king goes to war when he sees an advantage to his nation in doing so. Historians can ‘explain’ the wars of pre-capitalist days, in terms of the aggrandizement of monarchs and nations.
A capitalist stirs up a war in order to make profits, and in fact our elite banking families have financed both sides of most military conflicts since at least World War 1. Hence historians have a hard time ‘explaining’ World War 1 in terms of national motivations and objectives.
In pre-capitalist days warfare was like chess, each side trying to win. Under capitalism warfare is more like a casino, where the players battle it out as long as they can get credit for more chips, and the real winner always turns out to be the house – the bankers who finance the war and decide who will be the last man standing. Not only are wars the most profitable of all capitalist ventures, but by choosing the winners, and managing the reconstruction, the elite banking families are able, over time, to tune the geopolitical configuration to suit their own interests.
Nations and populations are but pawns in their games. Millions die in wars, infrastructures are destroyed, and while the world mourns, the bankers are counting their winnings and making plans for their postwar reconstruction investments.
From their position of power, as the financiers of governments, the banking elite have over time perfected their methods of control. Staying always behind the scenes, they pull the strings controlling the media, the political parties, the intelligence agencies, the stock markets, and the offices of government. And perhaps their greatest lever of power is their control over currencies. By means of their central-bank scam, they engineer boom and bust cycles, and they print money from nothing and then loan it at interest to governments. The power of the banking elites is both absolute and subtle…
“Some of the biggest men in the United
States are afraid of something. They
know there is a power somewhere, so
organised, so subtle, so watchful, so
interlocked, so complete, so pervasive
that they had better not speak above
their breath when they speak in
condemnation of it.”
— President Woodrow Wilson
The end of growth – capitalists vs. capitalism
It was always inevitable, on a finite planet, that there would be a limit to economic growth. Industrialization has enabled us to rush headlong toward that limit over the past two centuries. Production has become ever more efficient, markets have become ever more global, and finally we have reached the point where the paradigm of perpetual growth can no longer be maintained.
Indeed, that point was actually reached by about 1970. Since then capital has not so much sought growth through increased production, but rather by extracting greater returns from relatively flat production levels. Hence globalization, which moved production to low-waged areas, providing greater profit margins. Hence privatization, which transfers revenue streams to investors that formerly went to national treasuries. Hence derivative and currency markets, which create the electronic illusion of economic growth, without actually producing anything in the real world.
If one studies the collapse of civilizations, one learns that failure-to-adapt is fatal. Continuing on the path of pursuing growth would be such a failure to adapt. And if one reads the financial pages these days, one finds that it is full of doomsayers. We read that the Eurozone is doomed, and Greece is just the first casualty. We read that stimulus packages are not working, unemployment is increasing, the dollar is in deep trouble, growth continues to stagnate, business real estate will be the next bubble to burst, etc. It is easy to get the impression that capitalism is failing to adapt, and that our societies are in danger of collapsing into chaos.
Such an impression would be partly right and partly wrong. In order to understand the real situation we need to make a clear distinction between the capitalist elite and capitalism itself. Capitalism is an economic system driven by growth; the capitalist elite are the folks who have managed to gain control of the Western world while capitalism has operated over the past two centuries. The capitalist system is past its sell-by date, the banking elite are well aware of that fact – and they are adapting.
Capitalism is a vehicle that helped bring the bankers to absolute power, but they have no more loyalty to that system than they have to place, or to anything or anyone else. As mentioned earlier, they think on a global scale, with nations and populations as pawns. They define what money is and they issue it, just like the banker in a game of Monopoly. They can also make up a new game with a new kind of money. They have long outgrown any need to rely on any particular economic system in order to maintain their power. Capitalism was handy in an era of rapid growth. For an era of non-growth, a different game is being prepared.
Thus, capitalism has not been allowed to die a natural death. First it was put on a life-support system, as mentioned above, with globalization, privatization, derivative markets, etc. Then it was injected with a euthanasia death-drug, in the form of toxic derivatives. And when the planned collapse occurred, rather than industrial capitalism being bailed out, the elite bankers were bailed out. It’s not that the banks were too big to fail, rather the bankers were too politically powerful to fail. They made governments an offer they couldn’t refuse.
The outcome of the trillion-dollar bailouts was easily predictable, although you wouldn’t know that from reading the financial pages. National budgets were already stretched, and they certainly did not have reserves available to service the bailouts. Thus the bailouts amounted to nothing more than the taking on of immense new debts by governments. In order to fulfill the bailout commitments, the money would need to be borrowed from the same financial institutions that were being bailed out.
With the bailouts, Western governments delivered their nations in hock to the bankers. The governments are now in perpetual debt bondage to the bankers. Rather than the banks going into receivership, governments are now in receivership. Obama’s cabinet and advisors are nearly all from Wall Street; they are in the White House so they can keep close watch over their new acquisition, the once sovereign USA. Perhaps they will soon be presiding over its liquidation.
The bankers are now in control of national budgets. They say what can be funded and what can’t. When it comes to financing their wars and weapons production, no limits are set. When it comes to public services, then we are told deficits must be held in check. The situation was expressed very well by Brian Cowan, Ireland’s government chief. In the very same week that Ireland pledged 200 billion Euro to bailout the banks, he was being asked why he was cutting a few million Euro off of critical service budgets. He replied, “I’m sorry, but the funds just aren’t there”. Of course they’re not there! The treasury was given away. The cupboard is bare.
As we might expect, the highest priority for budgets is servicing the debt to the banks. Just as most of the third world is in debt slavery to the IMF, so the whole West is now in debt slavery to its own central banks. Greece is the harbinger of what is to happen everywhere.
The carbon economy – controlling consumption
In a non-growth economy, the mechanisms of production will become relatively static. Instead of corporations competing to innovate, we’ll have production bureaucracies. They’ll be semi-state, semi-private bureaucracies, concerned about budgets and quotas rather than growth, somewhat along the lines of the Soviet model. Such an environment is not driven by a need for growth capital, and it does not enable a profitable game of Monopoly.
We can already see steps being taken to shift the corporate model towards the bureaucratic model, through increased government intervention in economic affairs. With the Wall Street bailouts, the forced restructuring of General Motors, the call for centralized micromanagement of banking and industry, and the mandating of health insurance coverage, the government is saying that the market is to superseded by government directives. Not that we should bemoan the demise of exploitive capitalism, but before celebrating we need to understand what it is being replaced with.
In an era of capitalism and growth, the focus of the game has been on the production side of the economy. The game was aimed at controlling the means of growth: access to capital. The growth-engine of capitalism created the demand for capital; the bankers controlled the supply. Taxes were mostly based on income, again related to the production side of the economy.
In an era of non-growth, the focus of the game will be on the consumption side of the economy. The game will be aimed at controlling the necessities of life: access to food and energy. Population creates the demand for the necessities of life; the bankers intend to control the supply. Taxes will be mostly based on consumption, particularly of energy. That’s what the global warming scare is all about, with its carbon taxes and carbon credits.
Already in Britain there is talk of carbon quotas, like gasoline rationing in wartime. It’s not just that you’ll pay taxes on energy, but the amount of energy you can consume will be determined by government directive. Carbon credits will be issued to you, which you can use for driving, for heating, or on rare occasions for air travel. Also in Britain, the highways are being wired so that they can track how many miles you drive, tax you accordingly, and penalize you if you travel over your limit. We can expect these kinds of things to spread throughout the West, as it’s the same international bankers who are in charge everywhere.
In terms of propaganda, this control over consumption is being sold as a solution to global warming and peak oil. The propaganda campaign has been very successful, and the whole environmental movement has been captured by it. In Copenhagen, demonstrators confronted the police, carrying signs in support of carbon taxes and carbon credits. But in fact the carbon regime has nothing to do with climate or with sustainability. It is all about micromanaging every aspect of our lives, as well as every aspect of the economy.
If the folks who are running things actually cared about sustainability, they’d be investing in efficient mass transit, and they’d be shifting agriculture from petroleum-intensive, water-intensive methods to sustainable methods. Instead they are mandating biofuels and selling us electric cars, which are no more sustainable or carbon-efficient than standard cars. Indeed, the real purpose behind biofuels is genocide. With food prices linked to energy prices, and agriculture land being converted from food production to fuel production, the result can only be a massive increase in third-world starvation. Depopulation has long been a stated goal in elite circles, and the Rockefeller dynasty has frequently been involved in eugenics projects of various kinds.
‘The War on Terrorism’ – preparing the way for the transition
The so-called War on Terrorism has two parts. The first part is a pretext for arbitrary abuse of citizen’s rights, whenever Homeland Security claims the action is necessary for security reasons. The second part is a pretext for US military aggression anywhere in the world, whenever the White House claims that Al Qaeda is active there.
I emphasized the word ‘claims’ above, because the terrorism pretext is being used to justify arbitrary powers, both domestically and globally. No hard evidence need be presented to Congress, the UN, or anyone else, before some nation is invaded, someone is kidnapped and tortured as a ‘terrorist suspect’, or some new invasive security measure is implemented. When powers are arbitrary, then we are no longer living under the rule of law, neither domestically nor internationally. We are living under the rule of men, as you would expect in a dictatorship, or in an old-fashioned kingdom or empire.
Part 1: Preparing the way for a new social order
In a very real sense, the terrorism pretext is being used to undo everything that The Enlightenment and the republication revolutions achieved two centuries ago. The very heart of the Bill of Rights – due process – has been abandoned. The gulag, the concentration camp, and the secret arrest in the night – these we have always associated with fascist and communist dictatorships – and now they are not only functioning under US jurisdiction, but being justified publicly by the President himself.
Is there really a terrorist threat to the homeland, and would these measures be a sensible response to such a threat? People sre strongly divided in their answers to these questions. Quite a bit of hard forensic evidence has come to light, including links to intelligence agencies, and my own view is that most of the dramatic ‘terrorist’ events in the US, UK, and Europe have been covert false-flag operations.
From an historical perspective this would not be at all surprising. Such operations have been standard practice – modus operandi – in many nations, though we usually don’t get proof until years later. For example, every war the US has been involved in has had its own phony Gulf of Tonkin Incident, or its Weapons of Mass Destruction scam, in one form or another. It’s a formula that works. Instant mobilization of public opinion, prompt passage without debate of enabling resolutions and legislation. Why would the War on Terrorism be any different?
As regards motive: while Muslims have only suffered as a result of these dramatic events, our elite bankers have been able to create a police-state infrastructure that can be used to deal with any foreseeable popular resistance or civic chaos that might emerge as they prepare the way for their post-capitalist future.
With the collapse, the bailouts, and the total failure to pursue any kind of effective recovery strategy, the signals are very clear: the system will be allowed to collapse totally, thus clearing the ground for a pre-architected ‘solution’. Ground Zero can be seen as a metaphor, with the capitalist economy as the Twin Towers. And the toxic derivatives illustrate the fact that the collapse is actually a controlled demolition.
It seems to me inevitable, given the many signals, that martial law will be part of the transition process, allegedly to deal with the problems of economic collapse. Perhaps a collapse in the food-supply chain, due to a collapse in the energy-supply chain. The US emergency responses in New Orleans and again in Haiti give us more signals, actual test trials, of what kind of ’emergency response’ we can expect.
First and foremost comes the security of the occupation forces. Those suffering in the emergency are treated more like insurgents than victims in need of help. In the case of Haiti, the US response can only be described as an intentional genocide project. When people are pinned under rubble in an earthquake, the first 48 hours, and 72 hours, are absolutely critical points, as regards survival rates. When the US military systematically blocked incoming aid for those critical hours, turning back doctors and emergency teams, they sealed the fate of many thousands who could have been saved.
One can imagine many nightmare scenarios, given these various signals, these ominous signs. World Wars 1 and 2 were nightmares that really happened, with millions dying, and these same banking dynasties orchestrated those scenarios and then covered their tracks. We must also keep in mind the Shock Doctrine, where catastrophe is seen as opportunity – when ‘things can be done that otherwise could not be accomplished’. We are still being impacted by the shock waves that were sent out on 9/11, and again when the financial system collapsed. And the the really big shock, the general collapse of society, is yet to come. The ultimate version of the Shock Doctrine: ‘If the collapse is total, we can accomplish any damned thing we want to accomplish’.
I won’t venture a guess about how this transition process will play out, but I do expect that it will be a nightmare of one description or another. Already the growing homeless population is suffering a nightmare, by any civilized standards. One day you’re living in a home whose value is going up, commuting to a good job, and the next thing you know your family is out on the streets. That’s a nightmare. The transition time will be a difficult time, but it will be a transition, it will be temporary, like a war. And like a war, it will enable social and economic reconstruction in the aftermath.
Consider how Japan and Germany were socially and politically transformed by the postwar reconstruction process. Those were exercises in social engineering, as were the preceding transformations under Mussolini and Hitler. Although the outcomes were quite different, in each case a total collapse / defeat was the preamble to reconstruction. A total collapse of the capitalist economy is simply the application of a proven formula. The second part of the formula will be some new social order, or perhaps some old social order, or some mixture. Something appropriate to a non-growth, command economy.
That’s part 1 of the War on Terrorism: it has enabled the creation of the police-state infrastructures required to to deal with the collapse of society, and to provide security for the reconstruction process.
Part 2: Preparing the way for global domination
Part 2 of the War on Terrorism is about the geopolitical dimensions of a non-growth-based global economy. Earlier I suggested that geopolitics was different under capitalism, than it was under sovereign monarchs. The whole dynamic was different, and outcomes were weighed on a different scale. Similarly, many things will change in a shift from chaotic, growth-oriented capitalism, to a centralized, micromanaged, economic regime.
Consider, for example, the significance of control over oil reserves. In a growth economy, profits were the prize, and controlling the markets and the distribution channels amounted to holding a winning hand in the game. The local dictators could manage things as they pleased, and take their cut of oil revenues, as long as they honored their contracts with the oil majors, who were happy to sell to the highest bidders.
In a non-growth economy, where the focus is on direct control over the supply and distributions of resources, it becomes necessary to secure, in the military sense, the sources of petroleum, and the routes for its distribution. It is no longer sufficient to merely profit from unbridled operations. Securing of the sources, and directly allocating the distribution, is the foundation for micromanaging the non-growth economy. This applies to other critical resources as well, such as uranium, and the rare minerals needed by the ‘defense’ and electronics industries.
In fact we are in the midst of a resource-grab war, with China and Russia making long-term energy deals with Iran and Venezuela, China buying up agricultural land in Africa, Washington making long-term deals for Brazilian biofuels, and there are many other examples. In many ways imperialism is reverting to colonial days, when direct administration was the model, rather than the capitalist model: profiting from corporate investments under dictators who suppress their populations.
There is a natural reversion to the dynamics of the ‘good old days of empire’ when the Great Powers of Europe focused their economic activity within their individual spheres of influence. Everyone knows that global resource limits are being reached, partly from population pressures, and partly from resource-exploitation practices. For this reason alone, we have the peaceful part of the resource-grab war.
In Iraq, Afghanistan, and now in Pakistan and Yemen, the US, with NATO support, is playing a very non-peaceful hand in the resource-grab game. It’s the hand of a bully, ‘I have the biggest gun, so I’ll take what I want’. These aggressive actions are very provocative to Russia and China, and threatening to their vital economic interests. An attack on Iran would be more than a provocation, it would be a direct slap in the face, a challenge: ‘Fight now or resign yourself to being subdued piecemeal’.
In addition to all this petroleum grabbing, the US has been surrounding Russia and China with military bases, and has recently accelerated the installations of anti-missile systems on their borders, over the strong objections of Russia and China. The US is being intentionally provocative, and it is threatening vital interests of these potential adversaries.
Alliances are being formed in response, on a bilateral basis, and in the form of the SCO. China and Russia are very close in their military cooperation, and technology sharing. Their strategic planning is based on the expectation of a US attack, and their strategic response is based on the principle of asymmetric warfare. For example, a million dollar missile capable of taking out a multi-billion dollar aircraft carrier. Or perhaps a handful of missiles capable of disabling the Pentagon’s command-and-control satellite systems.
Meanwhile the US is spending astronomical sums developing a first-strike capability, with space-based weapons systems, control-of-theater capability, forward-based ‘tactical’ nukes, etc. The new anti-missile systems are an important part of a first-strike strategy, reducing the ability of Russia or China to retaliate. These systems are more than just provocative. They are the modern equivalent of marching your armies up to your adversary’s border.
If there is a nuclear exchange between the major powers, historians will cite all of these things I’ve mentioned as ‘obvious signs’ that war was coming. Parallels would be drawn to the pre-World War 1 scenario, when Germany was eclipsing Britain economically, as China is eclipsing the US now. In both cases a ‘desperate attempt to maintain hegemony’ would be seen as the cause of the war.
There may or may not be a World War 3, but all of these preparations make it clear that our banking elite intend to preside over a global system, by hook or by crook. If they wanted a peaceful arrangement, a splitting of the third-world pie, so to speak, it could be easily arranged at any time, along with substantial nuclear disarmament. China and Russia would like to see a stable, multi-polar world; it is only our elite bankers who are obsessed with world domination.
It is possible that nuclear war is a ‘desired outcome’, accomplishing depopulation, and making the collapse even more total. Or perhaps China and Russia will be given an offer they can’t refuse: ‘Surrender your economic sovereignty to our global system, or face the consequences’.
One way or another, the elite bankers, the masters of the universe, intend to preside over a micromanaged global system. The collapse project is now well underway, and the ‘surround your enemy’ project seems to be more or less completed. From a strategic perspective, there will be some trigger point, some stage in the economic collapse scenario, when geopolitical confrontation is judged to be most advantageous. It’s a multi-dimensional chess board, and with the stakes so high, you can rest assured that the timing of the various moves will be carefully coordinated. And from the overall shape of the board, we seem to be nearing the endgame.
Prognosis 2012 – a Neo Dark Age
2012 might not be the exact year, but it’s difficult to see the endgame lasting much beyond that, and the masters of the universe love symbolism, as with 911 (both in Chile and in Manhattan), KLA 007, and others. 2012 is loaded with symbolism, eg. the Mayan Calendar, and the Internet is buzzing with various 2012-related prophecies, survival strategies, anticipated alien interventions, alignments with galactic radiation fields, etc. And then there is the Hollywood film, 2012, which explicitly portrays the demise of most of humanity, and the pre-planned salvation of a select few. One never knows with Hollywood productions, what is escapist fantasy, and what is aimed at preparing the public mind symbolically for what is to come.
Whatever the exact date, all the threads will come together, geopolitically and domestically, and the world will change. It will be a new era, just as capitalism was a new era after aristocracy, and the Dark Ages followed the era of the Roman Empire. Each era has its own structure, its own economics, its own social forms, and its own mythology. These things must relate to one another coherently, and their nature follows from the fundamental power relationships and economic circumstances of the system.
In our post-2012 world, we have for the first time one centralized global government, and one ruling elite clique, a kind of extended royal family, the lords of finance. As we can see with the IMF, WHO, and the WTO, and the other pieces of the embryonic world government, the institutions of governance will make no pretensions about popular representation or democratic responsiveness. Rule will be by means of autocratic global bureaucracies, who take their marching orders from the royal family. This model has already been operating for some time, within its various spheres of influence, as with the restructuring programs forced on the third world, as a condition for getting financing.
Whenever there is a change of era, the previous era is always demonized in mythology. In the Garden of Eden story the serpent is demonized – a revered symbol in paganism, the predecessor to Christianity. When republics came along, the demonization of monarchs was an important part of the process. In the post-2012 world, democracy and national sovereignty will be demonized. This will be very important, in getting people to accept totalitarian rule, and the mythology will contain much that is true…
In those terrible dark days, before the blessed unification of humanity, anarchy reigned in the world. One nation would attack another, no better than predators in the wild. Nations had no coherent policies; voters would swing from one party to another, keeping governments always in transition and confusion. How did they ever think that masses of semi-educated people could govern themselves, and run a complex society? Democracy was an ill-conceived experiment that led only to corruption and chaotic governance. How lucky we are to be in this well-ordered world, where humanity has finally grown up, and those with the best expertise make the decisions.
The economics of non-growth are radically different than capitalist economics. The unit of exchange is likely to be a carbon credit, entitling you to consume the equivalent of one kilogram of fuel. Everything will have a carbon value, allegedly based on how much energy it took to produce it and transport it to market. ‘Green consciousness’ will be a primary ethic, conditioned early into children. Getting by with less is a virtue; using energy is anti-social; austerity is a responsible and necessary condition.
As with every currency, the bankers will want to manage the scarcity of carbon credits, and that’s where global warming alarmism becomes important. Regardless of the availability of resources, carbon credits can be kept arbitrarily scarce simply by setting carbon budgets, based on directives from the IPCC, another of our emerging units of global bureaucratic governance. Such IPCC directives will be the equivalent of the Federal Reserve announcing a change in interest rates. Those budgets set the scale of economic activity.
Presumably nations will continue to exist, as official units of governance. However security and policing will be largely centralized and privatized. Like the Roman Legions, the security apparatus will be loyal to the center of empire, not to the place where someone happens to be stationed. We have seen this trend already in the US, as mercenaries have become big business, and police forces are increasingly federalized, militarized, and alienated from the general public.
Just as airports have now been federalized, all transport systems will be under the jurisdiction of the security apparatus. Terrorism will continue as an ongoing bogey-man, justifying whatever security procedures are deemed desirable for social-control purposes. The whole security apparatus will have a monolithic quality to it, a similarity of character regardless of the specific security tasks or location. Everyone dressed in the same Evil Empire black outfits, with big florescent letters on the back of their flack jackets. In essence, the security apparatus will be an occupying army, the emperor’s garrison in the provinces.
On a daily basis, you will need to go through checkpoints of various kinds, with varying levels of security requirements. This is where biometrics becomes important. If people can be implanted with chips, then much of the security can be automated, and everyone can be tracked at at all times, and their past activity retrieved. The chip links into your credit balance, so you’ve got all your currency always with you, along with your medical records and lots else that you don’t know about.
There is very little left as regards national sovereignty. Nothing much in the way of foreign policy will have any meaning. With security marching to its own law and its distant drummer, the main role of so-called ‘government’ will be to allocate and administer the carbon-credit budget that it receives from the IPCC. The IPCC decides how much wealth a nation will receive in a given year, and the government then decides how to distribute that wealth in the form of public services and entitlements. Wealth being measured by the entitlement to expend energy.
In a fundamental sense, this is how things already are, following the collapse and the bailouts. Because governments are so deeply in debt, the bankers are able to dictate the terms of national budgets, as a condition of keeping credit lines open. The carbon economy, with its centrally determined budgets, provides a much simpler and more direct way of micromanaging economic activity and resource distribution throughout the globe.
In order to clear the way for the carbon-credit economy, it will be necessary for Western currencies to collapse, to become worthless, as nations become increasingly insolvent, and the global financial system continues to be systematically dismantled. The carbon currency will be introduced as an enlightened, progressive ‘solution’ to the crisis, a currency linked to something real, and to sustainability. The old monetary system will be demonized, and again the mythology will contain much that is true…
The pursuit of money is the root of all evil, and the capitalist system was inherently evil. It encouraged greed, and consumption, and it cared nothing about wasting resources. People thought the more money they had, the better off they were. How much wiser we are now, to live within our means, and to understand that a credit is a token of stewardship.
Culturally, the post-capitalist era will be a bit like the medieval era, with aristocrats and lords on top, and the rest peasants and serfs. A definite upper class and lower class. Just as only the old upper class had horses and carriages, only the new upper class will be entitled to access substantial carbon credits. Wealth will be measured by entitlements, more than by acquisitions or earnings. Those outside the bureaucratic hierarchies are the serfs, with subsistence entitlements. Within the bureaucracies, entitlements are related to rank in the hierarchy. Those who operate in the central global institutions are lords of empire, with unlimited access to credits.
But there is no sequestering of wealth, or building of economic empires, outside the structures of the designated bureaucracies. Entitlements are about access to resources and facilities, to be used or not used, but not to be saved and used as capital. The flow of entitlements comes downward, micromanaged from the top. It’s a dole economy, at all levels, for people and governments alike – the global regimentation of consumption. As regards regimentation, the post-capitalist culture will also be a bit like the Soviet system. Here’s your entitlement card, here’s your job assignment, and here’s where you’ll be living.
With the pervasive security apparatus, and the micromanagement of economic activity, the scenario is clearly about fine-grained social control, according to centralized guidelines and directives. Presumably media will be carefully programmed, with escapist trivia, and a sophisticated version of 1984-style groupthink propaganda pseudo-news, which is pretty much what we already have today. The non-commercial Internet, if there is one, will be limited to monitored, officially-designated chat sites, and other kinds of sanitized forums.
With such a focus on social micromanagement, I do not expect the family unit to survive in the new era, and I expect child-abuse alarmism will be the lever used to destabilize the family. The stage has been set with all the revelations about church and institutional child sexual abuse. Such revelations could have been uncovered any time in the past century, but they came out at a certain time, just as all these other transitional things have been happening. People are now aware that widespread child abuse happens, and they have been conditioned to support strong measures to prevent it.
Whenever I turn on the TV, I see at least one public-service ad, with shocking images, about children who are physically or sexually abused, or criminally neglected, in their homes, and there’s a hotline phone number that children can call. It is easy to see how the category of abuse can be expanded, to include parents who don’t follow vaccination schedules, whose purchase records don’t indicate healthy diets, who have dubious psychological profiles, etc. The state of poverty could be deemed abusive neglect.
With the right media presentation, abuse alarmism would be easy to stir up. Ultimately, a ‘child rights’ movement becomes an anti-family movement. The state must directly protect the child from birth. The family is demonized…
How scary were the old days, when unlicensed, untrained couples had total control over vulnerable children, behind closed doors, with whatever neuroses, addictions, or perversions the parents happened to possess. How did this vestige of patriarchal slavery, this safe-house den of abuse, continue so long to exist, and not be recognized for what it was? How much better off we are now, with children being raised scientifically, by trained staff, where they are taught healthy values.
Ever since public education was introduced, the state and the family have competed to control childhood conditioning. In religious families, the church has made its own contribution to conditioning. In the micromanaged post-capitalist future, with its Shock Doctrine birth scenario, it would make good sense to take that opportunity to implement the ‘final solution’ of social control, which is for the state to monopolize child raising. This would eliminate from society the parent-child bond, and hence family-related bonds in general. No longer is there a concept of relatives. There’s just worker bees, security bees, and queen bees, who dole out the honey.
This has been an extensive and somewhat detailed prognosis, regarding the architecture of the post-capitalist regime, and the transition process required to bring it about. The term ‘new world order’ is too weak a term to characterize the radical nature of the social transformation anticipated in the prognosis. A more apt characterization would be a ‘quantum leap in the domestication of the human species’. Micromanaged lives and microprogrammed beliefs and thoughts. A once wild primate species transformed into something resembling more a bee or ant culture. Needless to say, regular use of psychotropic drugs would be mandated, so that people could cope emotionally with such a sterile, inhuman environment.
For such a profound transformation to be possible, it is easy to see that a very great shock is required, on the scale of collapse and social chaos, and possibly on the scale of a nuclear exchange. There needs to be an implicit mandate to ‘do whatever is necessary to get society running again’. The shock needs to leave people in a condition of total helplessness comparable to the survivors in the bombed-out rubble of Germany and Japan after World War 2. Nothing less will do.
The accuracy of the prognosis, as prediction, is of course impossible to know in advance. However each part of the prognosis has been based on precedents that have been set, modus operandi that has been observed, trends that have been initiated, sentiments that have been expressed, signals that have been given, and actions that have been taken whose consequences can be confidently predicted.
In addition, in looking at all of these indicators together, one sees a certain mindset, an absolutist determination to implement the ‘ideal solution’, without compromise, using extreme means, and with unbridled audacity. World wars have been rehearsals for this historic moment. The police state infrastructure is in place and has been tested. The economy is in the process of collapse. The enemy is surrounded with missiles. Arbitrary powers have been assumed. If not now, the ultimate prize, then when will there be a better opportunity?
Our elite planners are backed up by competent think tanks, and they know that the new society must have coherence of various kinds. They’ve had quite a bit of experience with social engineering, nurturing the rise of fascism, and then engineering the postwar regimes. They understand the importance of mythology.
For example there is the mythology of the holocaust, where the story is all about extermination per se, and the story is not told of the primary mission of the concentration camps, which was to provide slave labor for war production. And some of the companies using the slave labor were American owned, and were supplying the German war machine. Thus does mythology, though containing truth, succeed in hiding the tracks and the crimes of elite perps, leaving others to carry the whole burden of historical demonization.
So I think there is a sound basis for anticipating the kinds of mythology that would be designed for leaving behind and rejecting the old ways, and seeing the new as a salvation. There is a long historical precedent of era changes linked with mythology changes, often expressed in religious terms. There will be a familiar ring to the new mythology, a remixing and re-prioritizing of familiar values and assumptions, so as to resonate with the dynamics of the new regime.
The nature of the carbon economy has been somewhat clearly signaled. Carbon budgets, and carbon credits, are clearly destined to become primary components of the economy. As we’ve seen with the elite and grassroots supported global warming movement, the arbitrary scarcity of carbon credits can be easily regulated on the pretext of environmentalism. And peak oil alarmism is always available as a backup. As elite spokespeople have often expressed, when the time comes, the masses will demand the new world order.
The focus on control over consumption, resources, and distribution is implicit in the emphasis on energy limits, is latent in the geopolitical situation, as regards depletion of global resources, and is indicated by the need for a new unifying paradigm, as the growth paradigm is no longer viable.
The nature of the security apparatus has been clearly signaled by the responses to demonstrations ever since 1998 in Seattle, by the increased use of hardened-killer mercenaries at home and abroad, by excessive and abusive police behavior, by airport security procedures, by Guantanamo and renditions, by the creation of a domestic branch of the army, dedicated to responding to civil emergencies, and by the way Katrina and Haiti have been handled.
It would be a major mistake to think of those last two as bungled operations. They were exercises in collapse management of a certain kind, to be applied to certain populations, where the training and equipment appropriate for combat in Afghanistan is seen as being appropriate for administering aid to civilian disaster victims. These selected disaster victims will be seen primarily as threats to civil order, or perhaps undesirables to be incarcerated or eliminated. They will be demonized as rioters and looters. Assistance will comes later, if at all. And it can all be broadcast on TV, and somehow be seen as the way things have to be. These two exercises were not bungled at all. They were alarmingly successful, most notably in the case of the realtime PR mythology.
The limited role of national governments, being primarily allocators of mandated budgets, has been clearly signaled by long-standing IMF policies in the third world, and by the way the bankers have been dictating to governments, in the wake of the over-extended bailout commitments. The carbon entitlement budgeting paradigm accomplishes the same micromanagement in a much more direct way, and is the natural outcome of the push toward hard carbon limits.
Richard K. Moore is a frequent contributor to Global Research. Global Research Articles by Richard K. Moore
© Copyright Richard K. Moore , Global Research, 2010
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A Russian perspective, of course very slanted
Russian Leader Slams US As Western Civilization Nears Collapse
In a withering speech before members of the Russian Academy of Science in Moscow, Prime Minister Putin branded the United States current monetary policy as “hooliganism” and stated, “We, thankfully or not, cannot print a reserve currency. But what are they (the Americans) doing? They simply spit nails, turn on the printing press and throw money to the world, in order to resolve their urgent problems.”
The United States printing of money out of thin air is called Quantitative Easing (QE) and is an unconventional monetary policy tool used to stimulate their national economy since conventional monetary policy has become ineffective. The US Federal Reserve began their policy of Quantitative Easing by purchasing financial assets from banks and other private sector businesses with new money that it had created electronically, but which has no hard assets backing it up.
Though the US began the practice of creating money out of thin air after the Great Economic Collapse of 2008, it has not been alone as the Bank of England, The European Central Bank and the Bank of Japan have, likewise, over the past nearly 3 years printed in excess of over $4 Trillion in currency that when joined with the $5 Trillion printed by the Americans have left our world awash in paper money that has near worthless value.
According to top Russian economists, the greatest danger posed to the entire global economic structure by the Western nations flooding world markets with near worthless money is the staggering weight it has put on those few currencies that our based on sound measures and backed with real worth, but whose markets are now flooded with foreign buyers seeking safety for their assets, which at the same time is pricing their products out of reach due to the appreciation of their money.
Perhaps no nation has been hurt more than the South American nation of Brazil whose economy remains one of the soundest in the entire world, but whose Finance Minister, Guido Mantega, warned this past week that the “global currency war shows no signs of ending” and are, indeed, about to get worse.
Unbeknownst to the vast majority of Western peoples is that for the first time in history their entire civilization is on the brink of total collapse as the United States, Europe and Japan are all poised to see their economies crash, and there is no one in the world that can stop it.
The worst, by far, of this triad of global powers that underpin the entire Western World is the United States whose debt woes can only be described in the most apocalyptic of terms as their total debt is over $54 Trillion and their unfunded liabilities have reached the impossible to pay amount of $114 Trillion.
Not being understood by the American people about this crisis is that it centers on the $114 Trillion owed to them under what are called entitlement programmes, such as Social Security, Medicaid and Medicare, which all are insolvent as the monies paid into them over these past 5 decades have been looted to pay for wars, corporate subsidies, tax breaks for their elite classes, and too many other extravagant programmes to mention.
Even worse for these unsuspecting Americans is that in the 1960 US Supreme Court Case titled Flemming v. Nestor (363 U.S. 603) the Court ruled that they do not have any “earned rights” to any Social Security benefits, or any other government entitlement programme, as their perceived benefits were a “non-contractual interest.” The Court further declared, “To engraft upon the Social Security system a concept of ‘accrued property rights’ would deprive it of the flexibility and boldness in adjustment to ever-changing conditions which it demands.”
The current “ever-changing conditions” spoken of by the US Supreme Court in their 1960 decision in regards to Social Security, and other entitlement programmes, owed to the American taxpayers, who actually paid for them in the first place, allows their government to wipe them out entirely and, instead, give these Trillions-of-dollars to the “too big to fail” banks, corporations and financial elite who looted all of this wealth in the first place.
It is, also, important to note that since that fateful 1960 US Supreme Court decision the US has used the vast wealth of their Social Security system to wage unrelenting and continued war to expand their empire, but at the cost of destroying their own nation.
Though the United States is the largest of the Western nations rushing toward total economic collapse they are far from being alone as the European Union today stands on the brink of oblivion and the catastrophic disasters of nuclear meltdowns, earthquake and tsunami damage have all but eviscerated Japan from ever rising again as a major power.
To the most catastrophic outcome now being faced by the Western world is their fulfilling the “vision” of the German Marxist political theorists Karl Marx and Friedrich Engels who in their 1848 book Manifesto of the Communist Party (most commonly known as “The Communist Manifesto”) advocated the destruction of capitalistic societies through the exact means we are now witnessing, and which include economic collapse to followed by civil unrest which would then allow the elite classes to seize power and enslave all of their citizens.
Most chilling to note is that the United States today, which was once the freest nation our world has ever known, has now fulfilled 90% of the demands made by Karl Marx, and as we can see evidenced:
The 10 Planks of Communism by Karl Marx
1. Abolition of private property in land and application of all rents of land to public purpose
No one in America owns their land outright anymore as the government has the ability to tax it at an amount unaffordable to the land owner. Through the concept of “eminent domain” the government can, also, seize any private land it so chooses.
2. A heavy progressive or graduated income tax.
After the ending of World War II the US instituted this tax depriving millions of middle class people from fully realizing the benefit of what they earned. [Note: After throwing off the yoke of communism Russia instituted a flat tax for all of its citizens and businesses.]
3. Abolition of all rights of inheritance
In the US these are called estate taxes or death taxes which keep the middle classes from being able to pass on their accumulated wealth to their heirs.
4. Confiscation of the property of all emigrants and rebels
This is nothing more than government seizures, IRS property confiscation and the 1997 Crime/Terrorist bill which calls for the imprisonment of terrorists but also for those who speak out against the government. Your LIFE is the most valuable property you have, but the government has the right to take it away because of things that you may say. Consider Senate Bill 3081, the “Enemy Belligerent, Interrogation, Detention, and Prosecution Act of 2010,” co-sponsored by Sens. John McCain and Joe Lieberman. The following is actual text from the bill that explains what a belligerent may be and the reasons they can be detained without due process: “(A) The potential threat the individual poses for an attack on civilians or civilian facilities within the United States or upon United States citizens or United States civilian facilities abroad at the time of capture or when coming under the custody or control of the United States… (B) The potential threat the individual poses to United States military personnel or United States military facilities at the time of capture or when coming under the custody or control of the United States…. (C) The potential intelligence value of the individual… (D) Membership in al-Qaida or in a terrorist group affiliated with al-Qaida… (E) Such other matters as the president considers appropriate. . .”
5. Centralization of credit in the hands of the state, by means of a national bank with state capital and an exclusive monopoly
6. Centralization of the means of communication and transportation in the hands of the state
The FAA, FCC, and the ICC (Interstate Commerce Commission) are all US government entities that propose to regulate how citizens travel and what is said.
7. Extension of factories and instruments of production owned by the state; the bringing into cultivation of waste lands, and the improvement of the soil generally in accordance with a common plan
On 9 June 2011 President Obama signed into law Executive Order 13575 in which the intent is to seize greater power over “food, fiber, and energy.”
8. Equal obligation of all to work and the establishment of industrial armies, especially for agriculture
Because of high inflation and higher taxes US society has been thrust for these past 60+ years into a dual income family at the minimum. In many instances both husband and wife have multiple jobs.
9. Combination of agriculture with manufacturing industries; gradual abolition of the distinction between town and country by a more equable distribution of the population over the country
Follow link to Executive Order 13575 under Plank #7
10. Free education for all children in government schools and abolition of children’s factory labor in its present form – combination of education with industrial production, etc
The American public school system indoctrinates children into the agenda that the federal government wants for them. Both the national department of education and the state level departments of education adhere to an outcome based education model where excellence in not rewarded and lackluster performance is not dealt with in the proper manner so kids don’t get their feelings hurt. The whole standard of “equalization” is drilled into these children’s heads through the public school system so by the time they graduate they are “socialized” having no context of who they are supposed to be as American citizens.
The next “stage,” so to speak, for the total destruction of America following The Communist Manifesto is the igniting of mass civil unrest, and which one of the United States top statesmen, and National Security Advisor to President Jimmy Carter, Zbigniew Brzezinski warned is about to happen when this past week he predicted that middle class unrest caused by economic disenfranchisement would soon hit America.
The Founding Fathers of America warned their future generations that a democracy was both extreme and dangerous for a country as it would most assuredly result in the oppression of the minority by the majority.
After the destruction of Europe due to World War I, and in witnessing the descent into madness caused by the Russian Revolution which allowed the Communists to take power, the US War Department on 30 November 1928 issued to all US Soldiers a handbook reiterating this warning given to all Americans by their Founding Fathers about what could happen, and we quote exactly:
A government of the masses. Authority derived through mass meeting or any other form of “direct” expression. Results in mobocracy. Attitude toward property is communistic–negating property rights. Attitude toward law is that the will of the majority shall regulate, whether is be based upon deliberation or governed by passion, prejudice, and impulse, without restraint or regard to consequences. Results in demogogism, license, agitation, discontent, anarchy.
Authority is derived through the election by the people of public officials best fitted to represent them. Attitude toward law is the administration of justice in accord with fixed principles and established evidence, with a strict regard to consequences. A greater number of citizens and extent of territory may be brought within its compass. Avoids the dangerous extreme of either tyranny or mobocracy. Results in statesmanship, liberty, reason, justice, contentment, and progress. Is the “standard form” of government throughout the world. A republic is a form of government under a constitution which provides for the election of:
(1) an executive and (2) a legislative body, who working together in a representative capacity, have all the power of appointment, all power of legislation, all power to raise revenue and appropriate expenditures, and are required to create (3) a judiciary to pass upon the justice and legality of their government acts and to recognize (4) certain inherent individual rights.
Take away any one or more of those four elements and you are drifting into autocracy. Add one or more to those four elements and you are drifting into democracy.
Outside Independence Hall in when the Constitutional Convention of 1787 ended, Mrs. Powel of Philadelphia asked of the Great American Founding Father Benjamin Franklin, “Well, Doctor, what have we got a republic or a monarchy?” With no hesitation whatsoever, Franklin responded, “A republic, if you can keep it.”
Today that exact question is being asked of all Americans “can they keep it?” On their answer hangs the balance of all Western civilization, let’s all hope they get it right.
Another view close to to home
Barack Obama: Crime Boss Stephen Lendman
April 18, 2009
He called Geithner and Bernanke “hapless,” the result of their ruinous misjudgments (and, along with Alan Greenspan, complicit) with finance-sector malfeasance.” He said Summers will be “remembered for helping to block federal regulation of financial derivatives and orchestrat(ing) the 1999” Glass-Steagall repeal, among his other “achievements.” He went down the list of key economic officials and trashed them all as the very types to be avoided, not appointed. He noted that Bernanke was chairman of George Bush’s Council of Economic Advisers and added:
Worse still, ruinous economic policies “could prove fatal” if White House policies favor “Wall Street but not the national economy or American people” — the very direction they’ve now taken. In a follow-up April 7 article, Phillips highlighted:
Today’s crisis represents:
It’s realigning global power with America losing its economic leadership won in WW II.
Yet major media pundits and reporters barely noticed and now claim relief is just a few quarters away — ignoring a metastasizing cancer, a national disaster, while policy makers heap fuel on a raging blaze now consuming us, yet too little public rage confronts them. A Former Insider Speaks OutEconomics Professor William Black is a former senior bank regulator and Savings and Loan prosecutor, currently teaching economics and law at the University of Missouri. In an April 13 Barrons interview, he referred to “failed bankers (advising) failed regulators on how to deal with failed assets” they all had a hand in creating and proliferating. His conclusion: “How can it result in anything but failure.” He called the scale of financial fraud “immense,” and said “Unless the current administration changes course pretty drastically, the scandal will destroy Barack Obama’s presidency,” besides what it’s doing to the country, global economies, and many millions of people here and abroad. He scathed Summers and Geithner, both “important architects of (today’s) problems,” and the latter as a failed and dishonest regulator, yet “numbering himself among those who convey tough medicine when he’s really pandering to the interests of a select group of banks.” No need to mention which ones. The law mandates corrective action, the kind FDR took in the 1930s. He, Bernanke and Summers flout the law, “in naked violation, in order to pursue the kind of favoritism that the law was designed to prevent.” They’ve turned taxpayers into “suckers” who’ll pay dearly for decades, maybe generations. [Not unless they are very, very, very, stupid — Kewe] His refusal to put insolvent banks into receivership, resorting to deceptive language like “legacy assets,” and pursuing the worst of Chicago School economics “is positively Orwellian….If cheaters prosper, (they’ll) dominate. It’s like Gresham’s law: Bad money drives out the good. Well, bad behavior” does the same thing “without good enforcement.” His bailout plans are disastrous. They prop up zombie banks by:
Multi-trillion dollar cover-up by publicly traded enterprisesWith most, perhaps all, the big banks insolvent (a polite term for bankrupt), what’s going on is “a multi-trillion dollar cover-up by publicly traded (enterprises), which amounts to felony securities fraud on a massive scale.” Ultimately, these firms will be forced into receivership, their “managements and boards stripped of office, title, and compensation.” What’s needed is a 1930s-style Pecora investigation to get to the bottom of their fraud, deceit, and cover-up, along with government complicity to hide it. More on that below. Black cited billions to AIG as the single worst abuse so far — to bail out their counterparties like Switzerland’s UBS at the same time we were prosecuting it for tax fraud. As bad was following Goldman Sachs’ advice to direct a $13 billion counterparty windfall to itself. The whole process reeks of corruption. It must be stopped, and a new direction instituted under a reformist economic team — one that will admit the nature and depth of the problem, cut the tie to Wall Street, and take corrective action the law mandates. That’s “precisely what isn’t happening.” Washington is “wedded to the bad idea of bigness” and power of Wall Street. In today’s America, financialization is predominant. It’s a cancer eating away at the fabric of the nation and many millions affected, the result of the grandest of grand thefts. A good start would be to break up the financial giants into more effectively managed and less powerful units — maybe the way Standard Oil was dismantled through a simple share spinoff. In addition, “a new seriousness must be put into regulation,” and a new resolve to enforce it. Today, the whole system encourages fraud, one based on results at any cost, so “fudging the numbers” becomes de rigueur and global bigness the holy grail. It sends the wrong message — play or pay with your job and future on Wall Street.
It’s been decades since we’ve been there and high time we took it seriously. Job one is a thorough housecleaning and new direction, much like what’s described below. On April 3, Black appeared on Bill Moyers Journal on PBS and explained what’s briefly enumerated below. From his experience as a regulator and prosecutor, he said:
In an April 6 article, Black calls ongoing “stress tests a complete sham…. to fool people…. make us chumps” and essentially say ‘If we lie and they believe us, all will be well'” when, in fact, it’s not. Greatest ever criminal fraud by bankers and complicit government officials It’s part of the giant cover-up and greatest ever criminal fraud — by bankers and complicit government officials. On April 13, Nouriel Roubini shared Black’s view. He cited the stress test “spin machine” leaking stories to the press that all 19 banks in question will pass. None will fail. If more “exceptional assistance” is needed, Washington will provide it. However, Q 1 macro data tells another story as growth, unemployment, and falling home prices alone “are worse than those in FDIC’s baseline scenario for 2009 AND even worse than those for the more adverse stressed scenario for 2009. Make believeThus, the stress test results are meaningless” as worsening data are outdistancing “the worst case scenario.” In other words, test results “are not worth the paper (they’ll be) written on” as their assumptions are fraudulently based. They’re “fudge tests….blatantly rigged” to put a brave face on a very bleak economic picture. They’re in addition to other changes, including the recent Financial Accounting Standards Board (FASB) ruling. It’s responsible for developing “generally accepted accounting principles” known as GAAP. On April 3, it changed so-called “mark-to-market” standards to “mark-to-make believe” ones. It also voted to allow banks to book smaller impaired asset losses to paint a brighter profits picture. It let Wells Fargo, for example, claim a Q 1 profit when it’s drowning in losses, ones it can hide and not take. Also likely coming is restoration of the “uptick rule” that prohibited short-selling in a down market. Established in 1938 to prevent disorderly selling, it allows shorts only when shares trade up. In June 2007, it was removed. Re-introductory proposals are now being considered to artificially boost prices. Roubini calls it “a form of legalized manipulation of the stock market by regulators….to prevent short-sellers (from doing) their job, i.e. make stock prices reflect fundamentals and prevent bubbles.” Overall, alarm bells should be warning about reckless monetary and fiscal policies, but perverse market reaction was relief. That’s wildly premature according to some like Roubini. Others see a protracted downturn, a prolonged winter, and if conditions deteriorate enough perhaps a nuclear one, unlike anything before seen, and why not:
From Bubble to DepressionOn April 6, Professor Vernon Smith (a 2002 economics Nobel laureate) and research associate Steven Gjerstad headlined a Wall Street Journal op-ed: “From Bubble to Depression?” They asked:
They believe “events of the past 10 years have an eerie similarity to the period leading up to the Great Depression,” including rising mortgage debt and speculation, then asked:
But they weren’t apparent until fall 1930, a year later. Further, if money supply contraction caused bank failures, why haven’t massive infusions today prevented the crisis? They conclude that conventional wisdom needs reassessing and believe “excessive consumer debt — especially mortgage debt — was transmitted into the financial sector” causing the Great Depression. Their hypothesis:
However, much more than that is needed — real reform, a complete reversal from current policy of the kind addressed below. Also, Smith and Gjerstad omitted a crucial fact — how misdirected today’s massive infusions have been. Instead of helping beleaguered households, they’ve gone mostly to bankers for purposes other than economic recovery; namely, recapitalizations, for acquisitions, and big bonuses at the same time they fire thousands of lower level staff. The 1930s Pecora CommissionOn March 4, 1932 (one year to the day before FDR took office), a majority-Republican Senate Banking, Housing, and Urban Affairs Committee established it to investigate the causes of the 1929 crash. It was little more than a fig leaf until Democrats took over, appointed Ferdinand Pecora as special counsel, and made a real effort for banking and regulatory reform. Straightaway, Pecora looked into Wall Street’s seamy underside by placing powerful bankers in the dock, holding them accountable for their actions, and doing through hearings what would have been impossible in open court given their ability to “buy” justice. He confronted Wall Street’s biggest names:
No income taxes paidHe got Morgan to admit that he and his 20 partners paid no income taxes in 1931 and 1932. Neither did its Philadelphia operation, Drexel and Co., in the same years and way underpaid them in previous ones. It made headlines, was stunning, and galvanized critics to demand reform. Pecora went further. He questioned Morgan and others on various matters, including sweetheart deals for political figures and insider ones for Wall Street cronies, similar shenanigans to today but not on the same scale, and under a president then who cared once Roosevelt took office. He directed “pitiless publicity” on Street corruption, what they easily got away with under Republicans. Pecora was a former New York district attorney, an Eliot Spitzer-type with a reputation for toughness and fearlessness, but one serving at the behest of the President. He established straightaway that some of Wall Street’s most powerful lied to their shareholders, manipulated stocks to their advantage, and profited hugely through malfeasance. Roosevelt encouraged him in his March 4, 1933 inaugural address saying:
Imagine Obama saying this Imagine Obama saying this, followed by strong policies for enforcement under Roosevelt-style officials. Men like Pecora who asked tough questions and demanded answers, including on the House of Morgan’s operations, something unimaginable today under any leadership. Morgan’s counsel, John W. Davis, called Pecora’s questions outrageous, but Morgan had to answer in detail enough to shake the “secret government’s” foundations. Pecora’s staff examined company records that revealed financial manipulations among the Street’s powerful to reap enormous profits — enough for Morgan to gain control of most US industry, buy politicians and diplomats, and effectively control the most powerful banks in the country. Small group of highly placed financiers holds more real power Years later in his book, Wall Street Under Fire, Pecora wrote: “Undoubtedly, this small group of highly placed financiers, controlling the very springs of economic activity, holds more real power than any similar group in the United States.” Morgan called it performing a “service” and exercising no more control than through “argument and persuasion.” His managing partner, Thomas Lamont, told the committee that the firm only offered advice that clients could accept or reject. Pecora learned otherwise as he peeled away the layers of company power and influence. Friends of the bank lists in two tiersHe discovered “preferred clients” and friends of the bank lists in two tiers — special allies, operatives, and cronies and a “fishing list” from which new ones were recruited. In total, it showed Morgan was more powerful than Washington — that the firm effectively controlled a network of companies that made US financial policy for over three decades plus leading politicians and much of the federal bench. Pecora discovered what’s as true today — that a select group of giant banks run things. They set policy, rig the game to their advantage, buy politicians the way Morgan did, and pretty much run the country and the world. Again Pecora from his book:
Pecora proceeded from Morgan to others, powerful bankers in their own right like Kuhn, Loeb’s Otto Kahn. Roosevelt championed the hearings and from them came legislative reforms, the kinds so desperately needed now but nowhere in sight by an administration totally subservient to money and power and thoroughly corrupted by them — after a scant three months in office. Congressional Oversight Panel (COP) Calls for Sweeping ChangesIts head, Elizabeth Warren, called on the Treasury to get tough on TARP recipients, including:
Given the extent and long-term nature of today’s crisis, it’s shocking that bad policy practically assures the worst outcome. Maybe a government/Wall Street cabal prefers it to capitalize on the wreckage at fire sale prices, at home and globally, as part of a long-term process of sucking wealth to the top while ignoring its fallout, both human and economic. Those calculations don’t enter their sophisticated models, only bottom line ones they can bank on. Other Bank Bailout CriticsWillem Buiter was a former member of the Bank of England’s Monetary Policy Committee (1997 — 2000). He’s now has a Maverecon blog and is a Financial Times (FT) regular. He’s also a fierce critic of bank bailouts, a policy he says wastes good time and money and is destined to fail.
Soon enough it will be apparent anyway, before year end.
And they’ll be no fiscal resources to the rescue.
Bailing out bankers at expense of economyJoseph Stiglitz was even blunter in an April 17, 2009, Bloomberg interview headlined: “Stiglitz Says White House Ties to Wall Street Doom Bank Rescue.” He accused the administration of bailing out bankers at the expense of the economy.
Government clearly cooking the booksFinancial expert and investor safety advocate Martin Weiss is most critical of all. He calls bank stress tests “FLIM-FLAM” in accusing Washington of hiding the true condition of the nation’s 19 largest banks. Key economic indicators like GDP contraction and unemployment are far worse than stress test parameters.
Economy sinking, not stabilizing, let alone recovering On May 4, they’ll announce the results — jerry-rigged to present an illusion of solvency, but clearly a deceptive lie. The economy is sinking, not stabilizing, let alone recovering. The administration is bailing out bankers while wrecking the economy and millions of households. Why isn’t Washington addressing the tough questions, he asks. Answers have them terrifiedBecause the answers have them “terrified,” so they play for time while: Home foreclosures are exploding Factories are sitting idle Consumption keeps falling Yet they hope conditions will improve. No one asks:
What if that day is todayWhat if one day we discover America is no longer America. What if we realize that day is today. Another Day, Another Scheme — the latest one lets ordinary people participate in Geithner’s Public-Private Partnership Program (PPIP) that sounds suspiciously like “liars’ loan” fraud, except this time “investments” in worthless junk are involved that will separate fools from their money. The New York Times headlined the plan by comparing it to WW I Liberty Bonds that helped the country win the war. Now it’s “to come to the aid of their banks — with the added inducement of possibly making some money….” The idea is for “large investment companies to create the financial-crisis equivalent of war bonds: bailout funds” to sucker the unwary to “invest” and, simultaneously, quiet opposition to the handouts. According to money management firm BlackRock director Steven Baffico:
Absolutely for him so he loves it. Plans are still being discussed. They won’t likely be announced for several months, but already the scheme is apparent. It’s to offload toxic junk on the public, let unwary investors take losses, relieve troubled banks of more of them, and arrange for investment fund issuers (like Pimco and BlackRock) to reap healthy fees if enough suckers can be enlisted to go along. As troublesome is FDIC’s role in the scam — through its transformation from insuring depositors to a much greater one guaranteeing over $1 trillion in junk assets, way over its charter $30 billion limit by twisting the rules to arrange it. Its charter allows extraordinary steps to be taken when an “emergency determination by secretary of the Treasury” is made to mitigate “systemic risk.” However, its Section 14 Borrowing Authority states:
PPIP violates FDIC rules. If it’s opened to the public, greater fraud will result with ordinary people hit hardest as usual, the best reason to avoid this and alert others to be as prudent. Do it at inflated prices and stick taxpayers with the riskIt’s another dubious scheme to separate the unwary from their money and redirect it to the top — to the same fraudsters responsible for the crisis and their investment company partners going along with the scam. The Treasury extended the deadline for PPIP participants (to April 24) and loosened some of its guidelines — suggesting that investor support has been less than expected. However, on April 2, the Financial Times (FT) headlined: “Bailed-out banks eye toxic asset buys.” Giants like JP Morgan Chase, Citigroup, Bank of America, and Goldman Sachs “are considering buying (each other’s) toxic assets,” and why not when it’s a win-win way to offload each other’s junk, do it at inflated prices, and stick taxpayers with the risk. New York University’s Stern School of Business Professor Lawrence White put it this way:
On April 3, Reuters reported that “US regulators may be open to letting TARP recipients participate in the new program,” and already Goldman Sachs and Morgan Stanley suggested they’ll do it. Others expressed interest in what some observers call a giant money laundering scheme compounding the colossal flimflam that in the end most likely won’t work — except to extract multi-trillions from the public to banksters with Washington acting complicitly as transfer agent. Meanwhile economic fundamentals are deteriorating at depression-level speed and depth while Obama remains in denial. On April 2 at the G 20, he cited “a very productive summit that will be, I believe, a turning point in our pursuit of global economic recovery” when, in fact, it produced nothing beyond the usual hype — plus this time the quadrupling of the IMF’s budget to inflict debt bondage on its willing partakers. We’re clearly in early stage unchartered waters of what Michel Chossudovsky calls “The Great Depression of the 21st Century” heading America for “fiscal collapse” because of policies amounting to “the most drastic curtailment in public spending in American history” — directing most of it for militarism and foreign wars, Wall Street bailouts, and half a trillion for public debt service. In an April 12 commentary, longtime, well-respected Chicago financial journalist Terry Savage headlined “Social Security Myth” in reporting on some of the fallout. Someone has to pay for “fixes” and militarism, that someone is us, and target one is Social Security. According to Savage:
In other words, Washington intends to renege on the 74-year old promise FDR announced to the nation on August 14, 1935:
It’s now in jeopardy, so here’s what Savage advises. Prepare. “Save more money, (and) start from an honest assessment” of what’s coming. What FDR gave will be taken away. “And that’s The Savage Truth.” A disturbing and outrageous one as well as all the other ways we’ve been betrayed. [Better to prepare with items such as food and other valuable commodities your home and family will need — worthless money is just that, worthless — Kewe] Stephen Lendman is a Research Associate of the Centre for Research on Globalization.
He lives in Chicago and can be reached at: http://sjlendman.blogspot.com thepeoplesvoice.org — click here
Max Keiser Wall St. banks plunder economy Spread this video aroundmp4 download — right click here
As money flees a banking system loaded with derivative debt
— click here
in this instance even the governments do not know
Job creation illusions click here
US Capital Hill awash in Wall Street’s filthy lucreclick here
Financial collapse and the Illuminati Gods
Stabilization and recovery is not part of the plan. Only extension of the economy — until the right spot is reached to pull the plug on the entire system. The key to that is the bond market, which is ten times larger than the stock market.
Illuminati health and porno games
That is where eventually the biggest losses will be takenclick here
Obama and the Illuminati Gods
And think of all the volatility that all these events will bring to world financial markets, and the fabulous wealth accumulated by anyone having insider information on when these events will be orchestrated to occur! However, as for the those of you who have not been anointed by the New World Order, only those who own gold and silver [that means part buried in your garden, part under the floorboards] will survive! [Better]
[And those who have stored food And those who listen to that higher Being of YourSelf — Kewe]
Illusion of Economic Recovery: Electronic Money click here
New World Order Statistic The gifts of billions of dollars of taxpayers’ money provided the banks with an abundance of low cost capital that has boosted the banks’ profits, while the taxpayers who provided the capital are increasingly unemployed and homeless. JPMorgan Chase announced that it has earned $3.6 billion in the third quarter of this year. Meanwhile, New York City’s homeless shelters have reached the all time high of 39,000, 16,000 of whom are children. London Evening Standardreports about Goldman Sachs’
“5,500 London staff can look forward to record average payouts of around 500,000 pounds ($800,000) each. Senior executives will get bonuses of several million pounds each with the highest paid as much as 10 million pounds ($16 million).“
The Financial Times is offering a new magazine — ”How To Spend It.”
The Rich Have Stolen The Economy click here
|This period — up to a future where the veil can no longer cloak — is going to see heightening dissembling within our present structures!
Dissemble — to hide under a false semblance or seeming; to feign (something) not to be what it really is; to put an untrue appearance upon; to disguise; to mask.
And from now — and for the next few years — we are going to see major dismembering of everything we have viewed and expected as a progression of our Earth lives! Whatever they are telling you, the time to prepare is fast coming to an end! Prepare means food procurement and private storage and other survival mechanisms! This applies to people in all Western countries, and all other nation-states also!
Economic data shows the silent run on Greece banks has spread into a massive number of people pulling their money out of banks all across Europe.
I recently reported on a buried article from the Guardian reporting on a silent yet great depression style run on the Greek banks.
The Guardian reports that while Western media has been silent on the issue Greece is in an absolute state of panic facing a Great Depression style run on the banks as people race to withdrawal their cash.
The growing economic crisis in Greece has entered the cusp of a complete financial collapse which for the most part being ignored by the Western media.
Perhaps the news out of Greece has been overshadowed by debt ceiling debate and today’s collapse in domestic financial markets which was fueled by economic data indicating that the U.S has either entered a second recession or is in a double-dip recession that some say in fact is a depression.
Regardless of why Greece is was not on the radar it should be because the situation is dire.
As CNBC’s Michelle Caruso Cabrera points out safety deposit boxes in Greece are sold out due to a Great Depression style run on Greek banks. For those that don’t know what a “bank-run” is the masses in Greece are flocking to their banks to pull their cash out of the banks.
As the Guardian article below informs us the dreaded bank-run has arrived despite politicians selling out the live hoods and futures of the people of Greece in exchange for a second banker bailout loan to pay back the interest on the first banker bailout loan.
The latest economic data reveals that the silent run on banks has spread from Greece into the other European banks, to the tune of an unexplained $10 billion a week.
The Daily Markets just ran a report analyzing the M2 money supply. They point to a$400 billion run on the European banks that the media is failing to report as a reason for our current stock market crash.
A Reason For The August Stock Market Crash, Oct Pending
Our overall readings on the web suggest to us that there is a silent but sure to be deadly trending going on right now. The media is not covering it, your broker is not telling you and your financial adviser is not advising you. Only the informed blogging world is leading with this story. Also note that this will be a great chance to profit.
The deadly trend: A European wide bank run.
We know folks in Portugal, Ireland and Greece took their funds out of their banks and purchased gold, Swiss franc and Yen. But things just moved to defcon 2, Italy and Spain banks have deposits falling, the money is finding other ‘non Euro’ safe places to hide.
Source: The Daily Markets
The report cites an analysis of the M2 money supply.
Money supply growth alert
This is a follow up to some posts from last month, in which I noted the surprising jump in M2 growth. As this chart of the M2 measure of money supply shows, it has gone on to experience a gigantic surge in the past seven weeks. M2 has risen almost $420 billion since the week of June 13th, on average almost 60 billion per week. To put this in perspective, annual M2 growth has averaged about 6% per year since 1995, and growth at this rate would translate into about $10 billion per week. In other words, M2 normally would have grown by $10 billion a week, but instead has grown six times faster. M2 has never grown this fast in a seven week period for at least the past 50 years. No matter how you look at it, this is a major event.
Where is the growth in M2 coming from? Virtually all of the increase can be traced to savings deposits (up $267 billion) and checking accounts (up $148 billion). Now we know why several large banks have announced they will now begin to charge customers who have over $50 million on deposit—they don’t know what to do with all the money coming in.
The last time M2 growth approached these levels was in the first quarter of 1983, at a time when inflation was still very high but starting to collapse, the dollar was booming, and the economy was just beginning its first of what would prove to be seven years of exceptionally strong growth. Rapid M2 growth back then was driven by a surge of confidence in the U.S. economy, but that is clearly not the case today. The recent growth of M2 surpasses even the explosive safe-haven demand for money that accompanied 9/11 and the financial crisis of late 2008. Something big is going on, and it can only be the financial panic that is sweeping Europe, as money flees a banking system that is loaded to the gills with PIIGS debt. In short, it looks like there is a run on the European banks, and the U.S. banking system is the safe haven of choice.
Source: Scott Grannis
The Daily Markets goes onto further comment on this development.
The recent growth of M2 surpasses even the explosive safe-haven demand for money that accompanied 9/11 and the financial crisis of late 2008. Something big is going on, and it can only be the financial panic that is sweeping Europe, as money flees a banking system that is loaded to the gills with PIIGS debt. In short, it looks like there is a run on the European banks, and the U.S. banking system is the safe haven of choice.
Given the lags between real time and when data hit M2, it’s quite likely that Europeans already have shifted substantially more than half a billion into U.S. banks in the past two months. I suspect we haven’t seen the end of this story either.
COMMENTS: We know from Felix Zulauf comments that Italy’s and slow but deadly bank run has started, it now seams the pace of withdrawals is accelerating. Fear does funny things. Marc Faber said recently the stock market is a discounting mechanism, and the recent 16% sell off suggest something serious is going on. Well a European bank run would do it. The EU/Germany have been replacing lost funds from depositors with cash so far (this is why the Euro has not yet crashed), soon the cash required will be very large and require German back quarantees (ie Eurobond, fiscal union), and if that doesnt happen. POP goes the asset bubble balloon!
Important history point: The great 1930′s depression started when a large bank in Austrian bank suffered exactly the same event. A bank run. Spooky.
Hopefully we’ll see Zero Hedge’s Tyler Durden add his input to this analysis.
The Global Financial Meltdown has dramatically worsened as Corporations and China Jump Aboard The “Institutional” Global Bank Run As Banks Fall Apart As Their Seams.
Earlier today the world saw a global financial meltdown as investors dumped everything from stocks to commodities and literally everything in between.
Major Stock Market Indexes, Commodities, Currencies And Everything In Between Is Being Dumped By Investors Across The Globe In The Midst Of A Global Financial Meltdown.
The financial markets across the globe are facing one of the most massive sell-offs in recent memory.
The Dow Jones Industrial average has sold off over 467 points today. When and when you add that on top of 284 point drop following yesterday’s crash FED’s statement, which announced operation ‘twist’ and warned of significant downside risk and strains in global financial markets, we have a 751 point drop in the DOW since 2:45 PM est yesterday, which is the largest 2 day slump since 2008.
There are an endless parade of economic statistics many of which are the worse since the Great Depression and World War 2 era. We have also seen 111 of the s&P 500 hit fresh 52 week lows, a drop in global currencies – beside the dollar, oil dropping into the high $70 per barrel range and gold plummeting over 5% to trade in the low $1,700 per ounce range.
Business Week points out the massive crash in U.S. stocks immediately below while CNBC points out further below that this in fact a global meltdown – investors are dumping everything.
While today’s sell off was monumental and in fact is on course for the 3rd worse week on Wall Street ever, the sell-off was on the heels of the FED’s economic outlook. Today’s Global Financial Meltdown is about to become much worse as a slew of news reports out today reveal the run on the European banks has spread to include corporations and institutions pulling their money out of banks and China finally arriving at the party.
As a backdrop, the IMF warned the entire global financial systems is more vulnerable to collapse than at any other time since the 2008 financial crisis. The alarm is being sounded with the stern warning the European debt crisis could trigger the complete collapse of the entire global financial system at any minute. On the other hand, the alternative media and independent economists warn we are in fact in of a great depression style collapse. The only difference is this time around we would be facing a global depression. But as the ship their countrymen sail on continues to sink, bureaucrats continue to play politics and put their partisan interests above the interest of their constituents.
The run on European banks has already began with from the customers pulling their money from banks some time ago. While the corporate media kept the run on the Greece banks on the hush the media blackout didn’t stop the run nor did it stop the run from spreading to other nations. Simply put, the public is learning they can’t trust their governments and they can’t trust the media. Indeed the withdrawal of deposits from the banks in Greece has quietly spread across the other European nations only to spread into some of the supposedly most stable banks in the Euro-zone, the French banks.
Now we have learned the run on the banks that was originally limited to customers has now spread to include corporate and institutional clients withdrawing their money from the banks. First, we caught wind of the rumor that Siemens pulled its cash from one of the French banks. Then came the confirmation came that Siemens pulled $500 million Euros from Societe Generale. Siemens of course is a huge conglomerate. For such a huge corporation to lose trust in one of the supposedly most stable of the French banks is clearly a very significant development. To be clear, the ramification have simply rocked the markets and the many more corporations soon will follow. In fact, some corporations and nations have followed their lead.
Consider the breaking news that The Bank of China has stopped doing business with four major European banks. To be exact thy have stopped trading swaps and foreign exchange forwards with the Societe Gnerale, BNP Paribas, Credit Agricole and the Swiss banking giant UBS.
Speaking of BNP Paribas, Reggie Middleton – who long predicted the collapse of Lehman’s and Bear Stearns far ahead of anyone else because of their shady banking practices – has been warning for months BNP Paribas is ripe for a Lehman style collapse. Reggie argues that BNP Paribas is engaging in the same practices and fraud that caused Lehman’s and Bear Stearn’s to collapse.
While on the subject of China, we learn today they are not immune to the bank run either. China Securities Journal reveals that 420 billion yuan have been pulled out of the big four state-owned Chinese bank during the 15 days of September. Even bank employees are pulling their deposits from the banks as it is estimated that three trillion yuan has been diverted to illegal money lenders which pay interest rates 10 times higher than the one-year Chinese bank deposit rate.
Today we also learn that Insurer Lloyd’s of London confirmed it’s withdrawing deposits from all of the European banks for fear they may collapse. The rationalization for their withdrawal is quite simple – if world is worried about the European governments themselves collapsing then on must assume the sovereign debt collapse will also cause the banks themselves to collapse.
Still that message doesn’t seem to be reaching the retail banking client and the corporate owned media is to blame for repeatedly assuring the public there bank deposits are safe because the banks are insured by their respective European government.
When we see corporations not buying the propaganda being pushed by the media and instead withdrawing their deposits that should be a clear sign to the retail client it is time to withdraw their deposits. Unfortunately, too many people believe their governments and the media would never lie to them so some of them will unfortunately need to learn the hard way.
However, anyone keeping up with the details of latest financial news that doesn’t quite make the headlines knows that banks across the world have been hit with a parade of credit rating cuts warning of their risk of collapse. Those same cuts have been coupled with recent credit rating cuts of the sovereign of nations themselves, most notably the credit downgrades of the United States and Italy.
Adding to the bleak reality a global financial collapse may be imminent is the fact that 9 Banks failed last years EU stress test and another 16 barely passed the test. Yet instead of being proactive and shoring up capital to assure the survival of financial turmoil, we have seen many banks continue to conduct business in absolute denial they were at risk. In ignorance of reality the banks have sat around for over a year knowing they are at risk of collapse while doing little to nothing the improve their situation. Why should they act? They know when shit hits the fan taxpayers will be bent over the barrel and be forced to give the banks billions in bailouts from which the executives will collect lavish bonuses.
Now we have warnings from top economists and the FED that there is significant downside risk and strains in the global financial system that threatens the entire system. The is coupled with warnings from the IMF and EU leaders to immediately recapitalize the banks or face collapse. The calls for recapitalization have persisted for weeks with no action taken to stave off the collapse. Meanwhile, the consequences of not acting immediately continue to become more severe by the day.
The EU credit markets have frozen up and the situation is now beyond the point of dire. The question is which bank will be the first to collapse.
While all eyes seem to be focused on the Euro banks across the pond, banks back in the US are not immune from the crisis and neither are the Chinese banks.
In fact, Bank of America has been hammered by the alternative media as needing capitalization but BAC has denied those allegations and the corporate media has dismissed the alternative media reports as comments from fringe blogs. Until today that is.
Pimco’s Mohamed El-Erian raised the alarm today about the health of French banks and went on to point out there is an institutional run on thosebanks.
CNBC, went on to use the metrics El-Erain used to measure the health of the French banks to measure the health of US banks and found US banks aren’t nearly as healthy as Wall Street would like to believe.
Sources, Further Reading, and Background Information:
Morgan Stanley’s Exposure To French Banks Is 60% Greater Than Its Market Cap… And More Than Half Its Book Value
The Sovereign Risk Dislocation Trade Means Big, Black Clouds Coming To “Risk Free”
European Service Activity Contracts For First Time In Two Years As Global Recession Now Ensured
China CDS Spikes To Highest Since MAR09 As PMI Disappoints
CHARTS: Here’s What The Wall Street Protesters Are So Angry About…
The “Occupy Wall Street” protests are gaining momentum, having spread from a small park in New York to marches to other cities across the country.So far, the protests seem fueled by a collective sense that things in our economy are not fair or right. But the protesters have not done a good job of focusing their complaints—and thus have been skewered as malcontents who don’t know what they stand for or want.
(An early list of “grievances” included some legitimate beefs, but was otherwise just a vague attack on “corporations.” Given that these are the same corporations that employ more than 100 million Americans and make the products we all use every day, this broadside did not resonate with most Americans).
So, what are the protesters so upset about, really?
Do they have legitimate gripes?
To answer the latter question first, yes, they have very legitimate gripes.
And if America cannot figure out a way to address these gripes, the country will likely become increasingly “de-stabilized,” as sociologists might say. And in that scenario, the current protests will likely be only the beginning.
The problem in a nutshell is this: Inequality in this country has hit a level that has been seen only once in the nation’s history, and unemployment has reached a level that has been seen only once since the Great Depression. And, at the same time, corporate profits are at a record high.
In other words, in the never-ending tug-of-war between “labor” and “capital,” there has rarely—if ever—been a time when “capital” was so clearly winning.
Let’s start with the obvious: Unemployment. Three years after the financial crisis, the unemployment rate is still at the highest level since the Great Depression (except for a brief blip in the early 1980s)
Jobs are scarce, so many adults have given up looking for them. Thus, a sharp decline in the “participation ratio.”
And it’s not like unemployment these days is a quick, painful jolt: A record percentage of unemployed people have been unemployed for longer than 6 months.
And it’s not just construction workers who can’t find jobs. The median duration of all unemployment is also near an all-time high.
That 9% rate, by the way, equates to 14 million Americans—people who want to work but can’t find a job.
And that’s just people who meet the strict criteria for “unemployed.” Include people working part-time who want to work full-time, plus some people who haven’t looked for a job in a while, and unemployment’s at 17%
Put differently, this is the lowest percentage of Americans with jobs since the early 1980s (And the boom prior to that, by the way, was from women entering the workforce).
So that’s the jobs picture. Not pretty.
And now we turn to the other side of this issue… the Americans for whom life has never been better. The OWNERS.
Corporate profits just hit another all-time high.
Corporate profits as a percent of the economy are near a record all-time high. With the exception of a brief happy period in 2007 (just before the crash), profits are higher than they’ve been since the 1950s. And they are VASTLY higher than they’ve been for most of the intervening half-century.
CEO pay is now 350X the average worker’s, up from 50X from 1960-1985.
CEO pay has skyrocketed 300% since 1990. Corporate profits have doubled. Average “production worker” pay has increased 4%. The minimum wage has dropped. (All numbers adjusted for inflation).
After adjusting for inflation, average hourly earnings haven’t increased in 50 years.
In short… while CEOs and shareholders have been cashing in, wages as a percent of the economy have dropped to an all-time low.
In other words, in the struggle between “labor” and “capital,” capital has basically won. (This man lives in a tent city in Lakewood, New Jersey, about a hundred miles from Wall Street. He would presumably be “labor,” except that he lost his job and can’t find another one.)
Image: Robert Johnson
Of course, life is great if you’re in the top 1% of American wage earners. You’re hauling in a bigger percentage of the country’s total pre-tax income than you have at any time since the late 1920s. Your share of the national income, in fact, is almost 2X the long-term average!
And the top 0.1% in America are doing way better than the top 0.1% in other first-world countries.
In fact, income inequality has gotten so extreme here that the US now ranks 93rd in the world in “income equality.” China’s ahead of us. So is India. So is Iran.
And, by the way, few people would have a problem with inequality if the American Dream were still fully intact—if it were easy to work your way into that top 1%. But, unfortunately, social mobility in this country is also near an all-time low.
So what does all this mean in terms of net worth? Well, for starters, it means that the top 1% of Americans own 42% of the financial wealth in this country. The top 5%, meanwhile, own nearly 70%.
That’s about 60% of the net worth of the country held by the top 5% (left chart).
And remember that huge debt problem we have—with hundreds of millions of Americans indebted up to their eyeballs? Well, the top 1% doesn’t have that problem. They only own 5% of the country’s debt.
And then there are taxes… It’s a great time to make a boatload of money in America, because taxes on the nation’s highest-earners are close to the lowest they’ve ever been.
Image: National Taxpayers Union
The aggregate tax rate for the top 1% is lower than for the next 9%—and not much higher than it is for pretty much everyone else.
As the nation’s richest people often point out, they do pay the lion’s share of taxes in the country: The richest 20% pay 64% of the total taxes. (Lower bar). Of course, that’s because they also make most of the money. (Top bar).
And now we come to the type of American corporation that gets—and deserves—a big share of the blame: The banks. Willie Sutton once explained that the reason he robbed banks was because “that’s where the money is.” The man knew what he was talking about.
Remember when we bailed out the banks? Yes, and remember the REASON we were told we had to bail out the banks? We had to bail out the banks, we were told, so that the banks could keep lending to American businesses. Without that lending, we were told, society would collapse…
So, did the banks keep lending? Um, no. Bank lending dropped sharply, and it has yet to recover.
So, what have banks been doing since 2007 if not lending money to American companies? Lending money to America’s government! By buying risk-free Treasury bonds and other government-guaranteed securities.
And, remarkably, they’ve also been collecting interest on money they are NOT lending—the “excess reserves” they have at the Fed. Back in the financial crisis, the Fed decided to help bail out the banks by paying them interest on this money that they’re not lending. And they’re happily still collecting it. (It’s AWESOME to be a bank.)
Meanwhile, of course, the banks are able to borrow money FOR FREE. Because the Fed has slashed rates to basically zero. And the banks have slashed the rates they pay on deposits to basically zero. So they can have all the money they want—for nearly free!
When you can borrow money for nothing, and lend it back to the government risk-free for a few percentage points, you can COIN MONEY. And the banks are doing that. According to IRA, the “net interest margin” made by US banks in the first six months of this year is $211 Billion. Nice!
And that has helped produce $58 billion of profit in the first six months of the year.
And it has helped generate near-record financial sector profits—while the rest of the country struggles with its 9% unemployment rate.
Image: Reuters (Felix Salmon)
And these profits are getting back toward a record as a percentage of all corporate profits.
Image: The Big Picture
And those profits, of course, are AFTER the banks have paid their bankers. And it’s still great to be a banker. The average banker in New York City made $361,330 in 2010. Not bad!
This average Wall Street salary was 6X the average private-sector salary (which, in turn, is actually lower than the average government salary, but that’s a different issue).
So it REALLY doesn’t suck to be a banker.
And so, in conclusion, we’ll end with another look at the “money shot”—the one overarching reason the Wall Street protesters are so upset: Wages as a percent of the economy. Again, it’s basically the lowest it has ever been.
another reason > flash crash fraud and trickery
Flash crash videos
|Trading – Market psychology|
|Written by Raoul Suurmeijer|
|Wednesday, 11 May 2011 10:32|
|It’s been over a year now since we’ve witnessed the so called flash crash. On May 6th 2010, within minutes the markets dropped several percentages, then bounced and recovered a large part of the losses. To relive those exciting moments, here are some video clips. If you know of any other clip that should be here, please send me an email. This post with video clips is mostly fun, but it’s also showing us panic, anxiety, greed and fear.The first video shows a live chart and audio from someone calling price levels. I don’t know how things work over there, but how does this man still have a job in the era of electronic trading? Let’s just assume that I don’t know what I’m talking about Anyway, just imagine this man coming home later that day and his wife asking “How was work today?”
This next video starts out real quiet, but then takes off. A rather friendly voice turns into sort of devilish low grunting voice.
From CNBC is the next clip. Just see how the Greece riots footage is adding extra suspense to the whole thing.
FOX has almost the same footage with the Greece riots.
A not-so-happy trader.
There’s always a very logic explanation for market movement and how we all could have seen this thing coming from miles away. This is not from May 6th, but a few days later when the markets were still digesting the flash crash.
Last but not least, one that has nothing to do with the flash crash, but it just is the classic of all classics. Jim Cramer is going nuts about the FED and Ben Bernanke. This clip is from the time when the financial crisis took off. “They’re nuts, they know nothing!” “No, we HAVE armageddon!” “He has no idea, NO IDEA, NONE!”. Poetic, all great quotes, actually every sentence in this clip is
> going, going ,,,, gone > keep seeking for knowledge is the beginning of salvation if you act upon.