That is good.  She and the other AGs should not sign until a thorough investigation has been conducted.  The evidence to date suggests that “robo-signing” was not a mere technical default or sloppy business practice but was part and parcel of a much larger fraud, the fraud that brought down the whole economy in 2008.  It is not just distressed homeowners but the entire economy that has paid the price, resulting in massive unemployment and a shrunken tax base, throwing state and local governments into insolvency and forcing austerity measures and cutbacks in government services across the nation.

The details of the robo-signing scam were spelled out in my last article, here.  The robo-signing fraud and its implications are expanded on below.

Why All the Robo-signing?

Over half the homes in the country are now held in the name of an electronic database called MERS—Mortgage Electronic Registration Services.  MERS is a smokescreen behind which mortgages were sold to trusts that sold them to investors.  The mortgages were chopped into pieces and sold as “mortgage-backed securities” (MBS), which traded in a supposedly liquid market.  That meant the investors could sell them in the money market at any time on a day’s notice.  Yale economist Gary Gorton gives this example:

Suppose the institutional investor is Fidelity, and Fidelity has $500 million in cash that will be used to buy securities, but not right now. Right now Fidelity wants a safe place to earn interest, but such that the money is available in case the opportunity for buying securities arises. Fidelity goes to Bear Stearns and “deposits” the $500 million overnight for interest. What makes this deposit safe? The safety comes from the collateral that Bear Stearns provides. Bear Stearns holds some asset‐backed securities [with] a market value of $500 millions. These bonds are provided to Fidelity as collateral. Fidelity takes physical possession of these bonds. Since the transaction is overnight, Fidelity can get its money back the next morning, or it can agree to “roll” the trade. Fidelity earns, say, 3 percent.

That is where the robo-signing came in.  Foreclosure defense attorneys armed with the tools of discovery have discovered that robo-signing — involving falsified signatures assigning mortgages back to the trusts allegedly owning them — occurred not just occasionally or randomly but in virtually every case.  Why?  Because the mortgages had to be left free to be bought and sold on a daily basis in the money market by investors.  The investors are not interested in making 30 year loans.  They want something short-term with immediate rights of withdrawal like a deposit account.

The Hazards of Borrowing Short to Lend Long

The problem is that when panicked investors all exercise that right at once, there is no cheap funding available to back the 30 year mortgage loans, rendering the banks insolvent.  And that is what happened on September 15, 2008, when Lehman Brothers, a major investment bank like Bear Stearns, went bankrupt.

According to Representative Paul Kanjorski, speaking on C-SPAN in January 2009, the collapse of Lehman Brothers precipitated a $550 billion run on the money market funds.  A report by the Joint Economic Committee pointed to the fact that the $62 billion Reserve Primary Fund had “broken the buck” (fallen below a stable $1 per share) due to its Lehman investments.  The massive bank run that followed was the dire news that Treasury Secretary Henry Paulson presented to Congress behind closed doors, prompting Congressional approval of Paulson’s $700 billion bank bailout despite deep misgivings.

The sleight of hand that brought the banking system down was that the mortgages backing the money market were supposedly held by trusts that had lent money to homeowners for 15 years or 30 years.  It was the classic “borrowing short to lend long,” a shell game in which banks have engaged for hundreds of years, routinely precipitating bank panics and bank runs when the depositors or the investors all pull their short-term money out at the same time.

The Shadow Banking System Is Still Unregulated

Periodic bank panics were averted in the conventional banking system only when the government agreed to insure the deposits of individual depositors in 1933.  But FDIC insurance covered only $100,000 (now $250,000), and large institutional investors had far more than that to invest.  The shadow banking system, in which deposits were “insured” with mortgage-backed securities, developed in response.  But the shadow banking system is unregulated and is just as prone to another collapse today as it was in 2008.  The Dodd-Frank banking “reforms” barely touched it.  As noted in an article titled “Risky Debt Use on Repo Market Hits 2008 Levels” in today’s Financial Times:

In the repo market, banks pledge their securities as collateral for short-term loans from money managers and other investors.  The market played a key role in the build-up to the 2008 financial crisis. Banks used toxic assets, such as repackaged subprime loans, to secure trillions of dollars worth of cheap funding.

When the US housing bubble burst, the banks’ trading partners refused to accept such securities as collateral and the repo market rapidly contracted.

However, a study by Fitch Ratings says the proportion of bundled debt being used as security in repo transactions has returned to pre-crisis levels.

Using the repackaged loans can increase risk in the repo market, the rating agency says. This is because the securities may be prone to sudden pullbacks such as the one experienced in 2008.

We could be looking at another banking collapse at any time; and to fix the problem, we first need to know what is going on.  The AGs should not agree to drop the curtain on the robo-signing scandal until all the evidence is on the table.  It is not just a matter of punishing the guilty; it is a matter of a banking scheme based on fraud, one that ultimately does not work and has jeopardized the homes, savings and investments of the public not just recently but for hundreds of years.

The Way Out

There is another way to design a banking system.  The deposits of large institutional investors do not need to be backed by sliced and diced pieces of our homes to be “safe” (something that has proven not to be safe at all).  The large institutional investors seeking safety are largely “us” – the pension funds and mutual funds in which we have stored our savings and on which we rely for support when we can no longer work.  Hundreds of years of history have demonstrated that the only reliable guarantor is the government itself.

Our pension funds and mutual funds need a government guarantee just as much as our individual deposits do.  But we don’t want to be guaranteeing the gambling and derivatives schemes of too-big-to-fail, for-profit Wall Street banks playing fast and loose with our money.  Banking and credit need to be public utilities, operated for the benefit of the public in plain sight of the public.

It is absolutely confounding how liberals have repeatedly fallen for this president. He has thrived off of vague pronouncements and innuendo, only making concrete political promises on issues with overwhelming popular support, at which point he generally manufactures some semblance of fight before rolling over dead in quick order. How many years of this before the Michael Moores of the world get it? The problem is not that the president’s hands are tied by an overzealous Republican establishment; rather, he is confined to a contrived role in a rigged political act designed to mimic representative democracy. The script goes like this: he postures as the people’s president, while the opposition scolds him as being a liberal elitist. Then, they bicker about all things innocuous, while carrying on unabated with the core business of shredding the constitution, stifling dissent, and maintaining the Empire. Obama’s new vaguely populist rhetoric and seemingly forceful tone is all a bad rerun. The Washington Post declared this to be the emergence of “Obama 2.0,” , but they got it wrong. It’s all the same Hope and Change Pony Show.

With each year of Obama’s successful duping of the liberal establishment, the center-point of accepted political opinion gets driven further to the right. In this address, he bills his two greatest accomplishments as getting Bin Laden and saving GM: an extrajudicial murder and a bailout conditioned with wage and benefit reductions for future employees. He blithely touted his circumvention of international law and due process in the bin Laden killing. Meanwhile, he goes on to trumpet his saber rattling vis-à-vis Iran, and his illegal use of drones in Pakistan and Yemen, while speaking of an “ironclad – and I mean Ironclad” relationship to the contemptible regime in Israel. It is quite disconcerting to know that respected “liberal” commentators could characterize a speech as “populist” despite all of this dastardly retrograde rhetoric.

The praise did not stop with Michael Moore. David Corn from the once respectable Mother Jones had this to say: “Obama is pitching a patriotic, quasi-populist progressivism (while conceding the need for deficit reduction and government cost-efficiencies).:  Either he doesn’t quite get the concept of “quasi” or we can count him in the ranks of the duped. In his coverage on Twitter he said: “Progressives can get too bogged down in critique. Obama showed how to criticize while reaching higher.” While it is difficult to discern from a 140-letter tweet, the thrust of this statement seems to be that far-reaching critiques are not acceptable. His reasoning goes that ideologues are archaic and inherently divisive. Anyone who breaks with the theme of unity is a party pooper. In taking this line, the president and his supporters conflate reasoned dissent with the knee-jerk rejectionist posture of the outrageous Republican establishment. Those that demand “too much” of the president are viewed with equal contempt by the increasingly base liberal establishment.

What these candy-ass liberals fail to understand is that we cannot be united with a 1% whose recklessness and avidity knows no bounds. The super-rich have unequivocally demonstrated that their interests lie elsewhere. They have spent decades lobbying for deregulation and trade “liberalization” that has allowed them to displace millions of American jobs while reducing the quality of millions of others. Meanwhile, they preyed on working Americans with their sub-prime and Adjustable Rate Mortgages, and then shook the whole house of cards by repackaging those lousy investments into fancy financial instruments, thus provoking a recession that is ongoing for most of the 99% of us. The Occupy Movement grew out of rage against these monsters, not out of any desire to move in with them. A responsive and thoughtful president would be railing against them, not tidily talking about a “togetherness” that the 1% has incessantly rejected.

Nonetheless, liberals will argue that the president adequately addressed inequality with his token references to economic fairness and his advocacy of a Buffet Tax. The latter proposal is quite clearly a ploy on his part, as he knows the Republican congress would never seriously consider it. He gets to posture as a liberal without ever having to actually enact a progressive measure, per the norm. If he really had any desire to equalize the tax code, he could have done it during his first two years, when he had a strong party majority in both houses of Congress. Meanwhile, if he had the determination, he could ram through such legislation in the current climate of populist upheaval, despite the current Congress of stooges and charlatans. However, it would be extremely naïve to expect the president to suddenly cease being the servile sort that he is.

One could reasonably argue that the proposal to establish a “Financial Crimes Unit” amounts to a progressive initiative that is praiseworthy. Indeed, one cannot imagine a Republican president bothering with such a measure. However, Obama is merely building on what has been a very minimal response to the financial crisis thus far. The Dodd-Frank Wall Street Reform bill barely began to scratch the surface: its primary purpose so far being that it provides government with alternative avenues to taxpayer bailouts should banks face liquidity issues in the future. The more far-reaching and prescient reforms, such as resurrection of Glass-Steagall and breaking up the monolithic corporate banks, have not been serious policy considerations by this administration.

That makes two progressive-leaning proposals, delivered in the president’s typically vague form, all set for future abandonment. Meanwhile, you can add his support for fracking and “school choice” to the list of regressive positions in this State of the Union. On the former issue, he calls for an ambitious increase in the refinement of natural gas. Despite widespread documentation of the hazards  posed to drinking water and the preponderance of disease in and around gas fields, Obama decided to tell the nation:

The development of natural gas will create jobs and power trucks and factories that are cleaner and cheaper, proving that we don’t have to choose between our environment and our economy.

On “school choice,” a moniker for school privatization via charters or vouchers, he elicits inspiration from his home-state’s treasured political icon: “I believe what Republican Abraham Lincoln believed: That Government should do for people only what they cannot do better by themselves, and no more. That’s why my education reform offers more competition, and more control for schools and States.” Here, he is merely repeating talking points directly from corporate lobbyists that have used school choice as cover for their efforts to attack public schools, break up teachers unions, and to maliciously profit from the newly burgeoning education “industry.” Obama does suggest willingness to “stop teaching to the test,” though this is probably more of his vacuous pandering to common progressive causes.  He might make a half-hearted effort at some aesthetic change, but will do nothing to stave off the ongoing looting of the public schools. With Arne Duncan, the old Chicago Charter School champion, still serving as Secretary of Education, it is tough to imagine any diversion from the current privatization thrust.

The only rational conclusion from this year’s speech is that this is, indeed, the same old Obama. This is the same unrepentant militarist that was elected in 2008, the same prosecutor of illegal wars in Pakistan, Libya, Somalia and Yemen; the same authoritarian that signed the NDAA, thus codifying his immoral and unconstitutional detention powers; the same murderer of American civilians: the president who has dutifully played his role as supervisor of this descendant and morally decaying power. As this has yet to become a full-fledged dictatorship, the president must appeal to his subjects’ finer sensibilities on occasion. In this, he excels. Even after three years of the same old dog and pony show, he is still proving adept at duping the diffident liberal mainstream.

To the President’s credit, however, he seems to have shifted his position on the settlement in response to protests before his State of the Union address.  In his speech on January 24th, President Obama did not mention the settlement but announced instead that he would be creating a mortgage crisis unit to investigate wrongdoing related to real estate lending.  “This new unit will hold accountable those who broke the law, speed assistance to homeowners, and help turn the page on an era of recklessness that hurt so many Americans,” he said.

The Deeper Question Is Why

Whether massive robo-signing occurred is no longer in issue.  The question that needs to be investigated is why it was being done.  The alleged justification—that the bankers were so busy that they cut corners—hardly seems credible given the extent of the practice.

The robo-signing largely involved assignments of mortgage notes to mortgage servicers or trusts representing the investors who put up the loan money.  Assignment was necessary to give the trusts legal title to the loans.  But assignment was delayed until it was necessary to foreclose on the homes, when it had to be done through the forgery and fraud of robo-signing.  Why had it been delayed?  Why did the banks not assign the mortgages to the trusts when, and as, required by law?

Here is a working hypothesis, suggested by Martin Andelman: securitized mortgages are the “pawns” used in the pawn shop known as the “repo market.”  “Repos” are overnight sales and repurchases of collateral.  Yale economist Gary Gorton explains that repos are the “deposit insurance” for the shadow banking system, which is now larger than the conventional banking system and is necessary for the conventional system to operate.  The problem is that repos require “sales,” which means the mortgage notes have to remain free to be bought and sold.  The mortgages are left unendorsed so they can be used in this repo market.

The Evolution of the Shadow Banking System

Gorton observes that there is a massive and growing demand for banking by large institutional investors – pension funds, mutual funds, hedge funds, sovereign wealth funds – which have millions of dollars to park somewhere between investments.  But FDIC insurance covers only up to $250,000.  FDIC insurance was resisted in the 1930s by bankers and government officials and was pushed through as a populist movement: the people demanded it.  What they got was enough insurance to cover the deposits of individuals and no more.  Today, the large institutional investors want similar coverage.  They want an investment that is secure, that provides them with a little interest, and that is liquid like a traditional deposit account, allowing quick withdrawal.

The shadow banking system evolved in response to this need, operating largely through the repo market. “Repos” are sales and repurchases of highly liquid collateral, typically Treasury debt or mortgage-backed securities—the securitized units into which American real estate has been ground up and packaged, sausage-fashion. The collateral is bought by a “special purpose vehicle” (SPV), which acts as the shadow bank. The investors put their money in the SPV and keep the securities, which substitute for FDIC insurance in a traditional bank. (If the SPV fails to pay up, the investors can foreclose on the securities.) To satisfy the demand for liquidity, the repos are one-day or short-term deals, continually rolled over until the money is withdrawn. This money is used by the banks for other lending, investing or speculating. Gorton writes:

This banking system (the “shadow” or “parallel” banking system)—repo based on securitization—is a genuine banking system, as large as the traditional, regulated banking system.  It is of critical importance to the economy because it is the funding basis for the traditional banking system. Without it, traditional banks will not lend and credit, which is essential for job creation, will not be created.

All Behind the Curtain of MERS

The housing shell game was made possible because it was all concealed behind an electronic smokescreen called MERS (an acronym for Mortgage Electronic Registration Systems, Inc.).  MERS allowed houses to be shuffled around among multiple, rapidly changing owners while circumventing local recording laws.  Title would be recorded in the name of MERS as a place holder for the investors, and MERS would foreclose on behalf of the investors.  Payments would be received by the mortgage servicer, which was typically the bank that signed the mortgage with the homeowner.  The homeowner usually thinks the servicer is the lender, but, in fact, it is an amorphous group of investors.

This all worked until courts started questioning whether MERS, which admitted that it was a mere conduit without title, had standing to foreclose.  Courts have increasingly held that it does not.

Making matters worse for the servicing banks, Fannie Mae sent out a memo telling servicers that in order to be reimbursed under HAMP—a government loan modification program designed to help at-risk homeowners meet their mortgage payments—the servicers would have to produce the paperwork showing the loan had been assigned to the trust.

The hasty solution was a rash of assignments signed by an army of “robosigners,” to be filed in the public records.  But the documents are patent forgeries, making a shambles of county title records.

Complicating all this are tax issues.  Since 1986, mortgage-backed securities have been issued to investors through SPVs called REMICs (Real Estate Mortgage Investment Conduits).  REMICs are designed as tax shelters; but to qualify for that status, they must be “static.”  Mortgages can’t be transferred in and out once the closing date has occurred.  The REMIC Pooling and Servicing Agreement typically states that any transfer significantly after the closing date is invalid.  Yet the newly robo-signed documents, which are required to begin foreclosure proceedings, are almost always executed long after the trust’s closing date.  The whole business is quite complicated, but the bottom line is that title has been clouded not only by MERS but because the trusts purporting to foreclose do not own the properties by the terms of their own documents.

John O’Brien, Register of Deeds for the Southern Essex District of Massachusetts, calls it a “criminal enterprise.”  On January 18th, he called for a full scale criminal investigation, including a grand jury to look into the evidence.  He sent to Massachusetts Attorney General Martha Coakley, U.S. Attorney General Eric Holder and U.S. Attorney Carmen Ortiz over 30,000 documents recorded in the Salem Registry that he says are fraudulent.

From Lending Machines to Borrowing Machine

The bankers have engaged in what amounts to a massive fraud, not necessarily because they started out with criminal intent, but because they have been required to in order to come up with the collateral (in this case real estate) to back their loans.  It is the way our system is set up: the banks are not really creating credit and advancing it to us, counting on our future productivity to pay it off, the way they once did under the deceptive but functional façade of fractional reserve lending.  Instead, they are vacuuming up our money and lending it back to us at higher rates.

“Instead of lending into the economy,” says British money reformer Ann Pettifor, “bankers are borrowing from the real economy.”  She wrote in the Huffington Post in October 2010:

[T]he crazy facts are these: bankers now borrow from their customers and from taxpayers. They are effectively draining funds from household bank accounts, small businesses, corporations, government Treasuries and from e.g. the Federal Reserve. They do so by charging high rates of interest and fees; by demanding early repayment of loans; by illegally foreclosing on homeowners, and by appropriating, and then speculating with trillions of dollars of taxpayer-backed resources.

Not only has the system destroyed county title records, but it is highly vulnerable to bank runs and systemic collapse.  In the shadow banking system, as in the old fractional reserve banking system, the collateral is being double-counted: it is owed to the borrowers and the depositors at the same time.  This allows for expansion of the money supply, but bank runs can occur when the borrowers and the depositors demand their money at the same time.  And unlike the conventional banking system, the shadow banking system is largely unregulated.  It doesn’t have the backup of FDIC insurance to prevent bank runs.

That is what happened in September 2008 following the bankruptcy of Lehman Brothers, a major investment bank.  Gary Gorton explains that it was a run on the shadow banking system that caused the credit collapse that followed.  Investors rushed to pull their money out overnight.  LIBOR—the London interbank lending rate for short-term loans—shot up to around 5%.  Since the cost of borrowing the money to cover loans was too high for banks to turn a profit, lending abruptly came to a halt.

Fixing the System

The question is how to eliminate this systemic risk.  As noted by The Business Insider:

Regulate shadow banking more tightly, and you probably have to also provide government backstops. Shudder. Try to shut the thing down or restrict it and you suck credit out of the system, credit which much of the non-financial “’real” economy uses and needs.

Interestingly, countries with strong public sector banking systems largely escaped the 2008 credit crisis.  These include the BRIC countries—Brazil Russia, India, and China—which contain 40% of the global population and are today’s fastest growing economies.  They escaped because their public sector banks do not need to rely on repos and securitizations to back their loans.  The banks are owned and operated by the ultimate guarantor—the government itself.  The public sector banking model deserves further study.

Whatever the solution, a system that requires the slicing and dicing of mortgages behind an electronic smokescreen so they can be bought and sold as collateral for the pawn shop of the repo market is obviously fraught with perils and is unsustainable.  Please contact your state attorney general and urge him or her not to go through with the robo-signing settlement, which will be granting immunity for crimes that are not yet fully known.  Phone numbers are here.  The surface of this great shadowy second banking system has barely been scratched.  It needs a very thorough investigation.

The World Economic Forum is a Swiss non-profit corporation that brings together some 2,500 “top” global business and political leaders every January in a remote Swiss mountain resort. Along with the G-7, the World Bank, the World Trade Organization and the International Monetary Fund, the World Economic Forum has a strong pro-corporate agenda and is a regular target for anti-corporate globalization protests. The latter movement is a loosely knit network of anti-corporate groups that started in Asia and Europe in the 1990s, in response to the international treaty that created the World Trade Organization (WTO). Its American counterpart was born in Novemeber 1999, when 50,000 people marched in the streets of Seattle and thousands committed civil disobedience to derail the WTO Third Ministerial meeting. Currently the WTO and so-called “Free Trade” treaties, such as NAFTA, receive scant coverage in the mainstream media. Nevertheless labor and environmental activists remain deeply concerned about the power these international treaties give corporations to overturn democratically enacted labor and environmental protections.

Since 2001, grassroots activists from all over the world have been holding a World Social Forum in a developing country (usually Brazil) at the same time as the World Economic Forum. The philosophy behind the World Social Forum is that ordinary people have an even greater need for international conferences than corporate elites. It’s only by coming together and organizing that they can resist efforts by global elites to strip them of the limited democratic and economic rights they still enjoy.

Emphasis on Global Social Unrest

When the Guardian article that accompanied the report stated that Global Risks 2012 focuses mainly on economic turmoil and social unrest (as opposed to globalization and free trade), I was extremely keen to read it. Would it mention Occupy Wall Street? It sure does, right there on page 16 under “Case 1: Seeds of Dystopia”:

Two dominant issues of concern emerged from the Arab Spring, the ‘Occupy’ movements worldwide and recent similar incidents of civil discontent: the growing frustration among citizens with the political and economic establishment, and the rapid public mobilization enabled by greater technological connectivity.

The document is full of other surprises. Unlike the mainstream media, Global Risks 2012 is surprisingly sympathetic towards the Occupy movement. The authors are deeply concerned about “dystopia,” the opposite of utopia, which they define as “a place where life is full of hardship and devoid of hope.” They go on to talk about the danger of declining economic conditions in Western Europe, North America and Japan jeopardizing “social contracts” between states and their citizens. These they define as has historic understandings that workers will be guaranteed access to health care (by North America they must mean Canada – this has never been true in the US) and decent pensions in old age.

They express concern (implying that corporate CEOs should also be concerned) about the link between global recession and increasing rates of poverty, mental illness, substance abuse, suicide, divorce, domestic violence and the abandonment, neglect and abuse of children (page 18).

They talk about the large numbers of unemployed young people around the world being a “lost generation” (page 22). Even more surprisingly, they identify huge income disparity as being one of the most serious global risks. They caution that when “social mobility” (i.e. individual ability to advance socially and economically) is attainable, income disparity can spur people to work harder. When it’s clearly not, as in the current global recession, feelings of powerlessness, disconnectedness and disengagement can “take root.” (page 19).

They conclude the dystopia section with the following warning:

The social unrest that occurred in 2011, from the United States to the Middle East, demonstrated how governments everywhere need to address the causes of discontent before it becomes a violent, destabilizing force. (page 19)

Destructive Corporate Lobbying

Global Risks 2012 also talks about destructive corporate lobbying (my translation – they use more obscure, intellectually lofty language) in trying to enact environmental and health regulations: “By their very nature, the costs involved in implementing safeguards, such as quality standards and risk mitigation practices, may give some individuals, firms or organizations reasons to lobby to minimize them and look for ways around them.” (page 22)

They are equally critical of the “too big to fail” banks: “When losses can be passed on to others – as when banks are defined as “too big to fail” – excessive risk-taking is likely to occur.” (page 22).

They conclude with the argument (making the 2008 banking crisis a case in point) that dangerously lax regulations “in just one jurisdiction could trigger global catastrophe.” (page 22)

How Will CEOs Answer the Discussion Questions?

I have to admit my favorite part of Global Risks 2012 are the “Questions for Stakeholders,” inserted at the end at the end of each section to make sure the corporate elites and the politicians who accompany them to these meetings are paying attention. I would give anything to listen in to the answers JP Morgan CEO Jamie Dimon and Rex Tillerson, CEO of Exxon, give to some of these:

• What steps can be taken to reduce income disparity? (they need to get Dimon to answer this one.)

• How can appropriate regulations be developed so that firms will undertake effective safeguards?

• How can business, government and civil society work together to improve resilience against unforeseen risks? (the report uses the word resilience, which they borrow from the sustainability movement, a lot).

• How can fostering entrepreneurship prevent the seeds of dystopia from taking root? (this wouldn’t be my approach, but at least they admit urgent action is needed)

How Global Risks 2012 Came to Be Written

The World Economic Forum’s Risk Response Network (RRN) was launched in 2004 to provide public and private sector leaders with “an independent, impartial platform to map, measure, monitor, manage and mitigate global risks.” This is the RRN’s seventh annual report. It’s based on surveys completed by 469 international experts in industry, government, academia and civil society about 50 potential global risks across five categories: Economic, Environmental, Geopolitical, Societal and Technological. Risks in each category are rated according to both the potential damage they could inflict and their likelihood of occurrence. In addition, a specific risk in each category is identified as “the center of gravity,” which feeds other risks, both within the specific category and across categories.

How 469 Experts Rated the 50 Risks

• Most likely to occur: chronic fiscal imbalances and severe income disparity.

• Economic “center of gravity” around which many other risks cluster: chronic fiscal imbalances (debt).

• Most likely to occur: rising greenhouse gas emissions

• Environmental “center of gravity” around which many other risks cluster: rising greenhouse gas emissions

• Most likely to occur: critical fragile states and pervasively entrenched corruption

• Geopolitical “center of gravity” around which many other risks cluster: global governance failure

• Most likely to occur: water supply crisis, followed by food shortage crisis

• Societal “center of gravity” around which many other risks cluster: unsustainable population growth (highly controversial, but a growing number of sustainability activists agree with this view)

• Most likely to occur: cyber attacks

• Technological “center of gravity” around which many other risks cluster: critical systems failure

Is There a Split in the Ruling Elite?

It’s clear from the spelling (using “our” instead of “or” and “re” instead of “er” at the end of words) that the authors of Global Risks 2012 are either British or Canadian. I find it extremely hard to imagine a report emphasizing carbon emissions and income inequality coming out of the US. I also think it’s it significant that three of the four companies listed as report “cosponsors” are insurance companies.¹ If Exxon had helped write this document, it would surely minimize the risk of increasing carbon emissions, if it mentioned them at all.

At times there are divisions in the ruling elite – between the banking/insurance and the energy/military sectors – over specific issues. Climate change seems to be one of them. Owing to deregulation, there is significant overlap between insurance companies, which derive most of their income from reinvesting premiums, and other financial institutions. AIG, for example, is supposedly an insurance company but had to be bailed out because they owned a substantial chunk of subprime mortgages.

It’s clearly in the interest of oil, natural gas and coal companies for consumers to continue to buy and burn up as much fossil fuel as possible. Insurance companies, on the other hand, serve their shareholders best by reducing carbon emissions. They already face growing claims losses due to a massive increase in weather-related catastrophes. In this context it makes sense for them to cosponsor a World Economic Forum risk assessment document emphasizing the need for international agreement about reducing carbon emissions. It also helps explain why Wall Street investment banker (and New York mayor) Michael Bloomberg has given a $50 million donation to the Sierra Club’s Anti-Coal Campaign.

1. Marsh and McLennan, Swiss Reinsurance Company, University of Pennsylvania Wharton Center for Risk Management, and Zurich Financial Services.

John O’Brien is Register of Deeds for Southern Essex County, Massachusetts.  He calls his land registry a “crime scene.”  A formal forensic audit of the properties for which he is responsible found that:

• Only 16% of the mortgage assignments were valid.
• 27% of the invalid assignments were fraudulent, 35% were “robo-signed,” and 10% violated the Massachusetts Mortgage Fraud Statute.
• The identity of financial institutions that are current owners of the mortgages could be determined for only 287 out of 473 (60%).
• There were 683 missing assignments for the 287 traced mortgages, representing approximately $180,000 in lost recording fees per 1,000 mortgages whose current ownership could be traced.

At the root of the problem is that title has been recorded in the name of a private entity called Mortgage Electronic Registration Systems (MERS).  MERS is a mere place holder for the true owners, a faceless, changing pool of investors owning indeterminate portions of sliced and diced, securitized properties.  Their identities have been so well hidden that their claims to title are now in doubt.  According to the auditor:

What this means is that . . . the institutions, including many pension funds, that purchased these mortgages don’t actually own them . . . .

The March of the AGs

When Massachusetts Attorney General Martha Coakley went to court in December against MERS and five major banks — Bank of America Corp., JPMorgan Chase, Wells Fargo, Citigroup, and GMAC — John O’Brien said he was thrilled.  Coakley says the banks have “undermined our public land record system through the use of MERS.”

Other attorneys general are also bringing lawsuits.  Delaware Attorney General Beau Biden is going after MERS in a suit seeking $10,000 per violation.  “Since at least the 1600s,” he says, “real property rights have been a cornerstone of our society.  MERS has raised serious questions about who owns what in America.”

Biden’s lawsuit alleges that MERS violated Delaware’s Deceptive Trade Practices Act by:

• Hiding the true mortgage owner and removing that information from the public land records.
• Creating a systemically important, yet inherently unreliable, mortgage database that created confusion and inappropriate assignments and foreclosures of mortgages.
• Operating MERS through its members’ employees, whom MERS confusingly appoints as its corporate officers so that they may act on MERS’ behalf.
• Failing to ensure the proper transfer of mortgage loan documentation to the securitization trusts, which may have resulted in the failure of securitizations to own the loans upon which they claimed to foreclose.

Legally, this last defect may be even more fatal than filing in the name of MERS in establishing a break in the chain of title to securitized properties.  Mortgage-backed securities are sold to investors in packages representing interests in trusts called REMICs (Real Estate Mortgage Investment Conduits).  REMICs are designed as tax shelters; but to qualify for that status, they must be “static.”  Mortgages can’t be transferred in and out once the closing date has occurred.  The REMIC Pooling and Servicing Agreement typically states that any transfer after the closing date is invalid.  Yet few, if any, properties in foreclosure seem to have been assigned to these REMICs before the closing date, in blatant disregard of legal requirements.  The whole business is quite complicated, but the bottom line is that title has been clouded not only by MERS but because the trusts purporting to foreclose do not own the properties by the terms of their own documents.

Courts Are Taking Notice

The title issues are so complicated that judges themselves have been slow to catch on, but they are increasingly waking up and taking notice.  In some cases, the judge is not even waiting for the borrowers to raise lack of standing as a defense.   In two cases decided in New York in December, the banks lost although their motions were either unopposed or the homeowner did not show up, and in one there was actually a default.  No matter, said the court; the bank simply did not have standing to foreclose.

Failure to comply with the terms of the loan documents can make an even stronger case for dismissal.  In Horace vs. LaSalle, Circuit Court of Russell County, Alabama, 57-CV-2008-000362.00 (March 30, 2011), the court permanently enjoined the bank (now part of Bank of America) from foreclosing on the plaintiff’s home, stating:

[T]he court is surprised to the point of astonishment that the defendant trust (LaSalle Bank National Association) did not comply with New York Law in attempting to obtain assignment of plaintiff Horace’s note and mortgage. . . .

[P]laintiff’s motion for summary judgment is granted to the extent that defendant trust . . . is permanently enjoined from foreclosing on the property . . . .

Relief for Counties: Land Banks and Eminent Domain

The legal tide is turning against MERS and the banks, giving rise to some interesting possibilities for relief at the county level.  Local governments have the power of eminent domain: they can seize real or personal property if (a) they can show that doing so is in the public interest, and (b) the owner is compensated at fair market value.

The public interest part is obvious enough.  In a 20-page booklet titled “Revitalizing Foreclosed Properties with Land Banks,” the U.S. Department of Housing and Urban Development (HUD) observes:

The volume of foreclosures has become a significant problem, not only to local economies, but also to the aesthetics of neighborhoods and property values therein. At the same time, middle- to low income families continue to be priced out of the housing market while suitable housing units remain vacant.

The booklet goes on to describe an alternative being pursued by some communities:

To ameliorate the negative effects of foreclosures, some communities are creating public entities — known as land banks — to return these properties to productive reuse while simultaneously addressing the need for affordable housing.

States named as adopting land bank legislation include Michigan, Ohio, Missouri, Georgia, Indiana, Texas, Kentucky, and Maryland.  HUD notes that the federal government encourages and supports these efforts.  But states can still face obstacles to acquiring and restoring the properties, including a lack of funds and difficulties clearing title.

Both of these obstacles might be overcome by focusing on abandoned and foreclosed properties for which the chain of title has been broken, either by MERS or by failure to transfer the promissory note according to the terms of the trust indenture.  These homes could be acquired by eminent domain both free of cost and free of adverse claims to title.  The county would simply need to give notice in the local newspaper of an intent to exercise its right of eminent domain.  The burden of proof would then transfer to the bank or trust claiming title.  If the claimant could not prove title, the county would take the property, clear title, and either work out a fair settlement with the occupants or restore the home for rent or sale.

Even if the properties are acquired without charge, however, counties might lack the funds to restore them.  Additional funds could be had by establishing a public bank that serves more functions than just those of a land bank.  In a series titled “A Solution to the Foreclosure Crisis,” Michael Sauvante of the National Commonwealth Group suggests that properties obtained by eminent domain can be used as part of the capital base for a chartered, publicly-owned bank, on the model of the state-owned Bank of North Dakota.  The county could deposit its revenues into this bank and use its capital and deposits to generate credit, as all chartered banks are empowered to do.  This credit could then be used not just to finance property redevelopment but for other county needs, again on the model of the Bank of North Dakota.  For a fuller discussion of publicly-owned banks, see the Public Banking Institute.

Sauvante adds that the use of eminent domain is often viewed negatively by homeowners.  To overcome this prejudice, the county could exercise eminent domain on the mortgage contract rather than on title to the property.  (The power of eminent domain applies both to real and to personal property rights.)  Title would then remain with the homeowner.  The county would just have a secured interest in the property, putting it in the shoes of the bank.  It could then renegotiate reasonable terms with the homeowner, something banks have been either unwilling or unable to do.  They have to get all the investor-owners to agree, a difficult task; and they have little incentive to negotiate when they can make more money on fees and credit default swaps on contracts that go into default.

Settling with the Investors

What about the rights of the investors who bought the securities allegedly backed by the foreclosed homes?  The banks selling these collateralized debt obligations represented that they were protected with credit default swaps.  The investors’ remedy is against the counterparties to those bets — or against the banks that sold them a bill of goods.

Foreclosure defense attorney Neil Garfield says the investors are unlikely to recover on abandoned and foreclosed properties in any case.  Banks and servicers can earn more when the homes are bulldozed—something that is happening in some counties—than from a sale or workout at a loss.  Not only is more earned on credit default swaps and fees, but bulldozed homes tell no tales.  Garfield maintains that fully a third of the investors’ money has gone into middleman profits rather than into real estate purchases.  “With a complete loss no one asks for an accounting.”

Not only homes and neighborhoods but 400 years of property law are being destroyed by banker and investor greed.  As Barry Ritholtz observes, the ability of a property owner to confidently convey his property is a bedrock of our society.  Bailing out reckless financiers and refusing to hold them accountable has led to a fundamental breakdown in the role of government and the court system.  This can be righted only by holding the 1% to the same set of laws as are applied to the 99%.  Those laws include that a contract for the sale of real estate must be in writing signed by seller and buyer; that an assignment must bear the signatures required by local law; and that forging signatures gives rise to an actionable claim for fraud.

In 2006, Congress passed the Postal Accountability Enhancement Act (PAEA), which forced the USPS to put aside billions of dollars to pay for the health benefits of employees, many of whom hadn’t even been hired yet.  Over a mere 10 year period, the USPS was required to prefund its future health care benefit payments to retirees for the next 75 years, something no other government or private corporation is required to do.  As consumer advocate Ralph Nader observed, if PAEA had never been enacted, USPS would now be facing a $1.5 billion surplus.

The USPS is a profitable, self-funded venture that is not supported by the taxpayers.  It is funded with postage stamps—one of the last vestiges of government-issued money.  Stamps are fungible and can be traded at par; and they are backed, not by mere government “fiat,” but by labor.  One stamp will buy the labor to transport your letter 3000 miles.

The USPS is one of the few businesses the government is allowed to operate in competition with private companies; it is the only U.S. agency that services all its citizens six days per week; and it is perhaps the last form of communication that protects privacy, since tampering with it is against federal law.  In 1999, it employed nearly a million people; and today, it employs over 600,000.  Where are those workers to go, when the post office is no more?

To Downsize or Diversify?

Whatever caused the financial woes of the USPS, there is another way to mitigate the crisis than slashing employee benefits and customer services.  In a December 21 article in Reader Supported News, Tim Fernholz suggested that instead of focusing on cuts, the post office should approach the problem from a business perspective and find a new way to make money.  One way to keep the USPS alive, he says, is for it to include basic banking services in its product line, providing a “public option” in banking:

[R]oughly 9 million Americans don’t have a bank account and 21 million rely largely on fringe financial services like usurious check cashers rather than traditional financial institutions. Giving low-income people access to a safe banking system will firm up their economic futures.

The Proud, Forgotten History of Postal Banking

Banking in post offices is not new.  Many countries, including Germany, France, Italy, Japan, and New Zealand, have a long and successful history of it; and so does the United States.

From 1911 to 1967, the U.S. Postal Savings System provided a safe and efficient place for customers to save and transfer funds.  It issued U.S. Postal Savings Bonds in various denominations that paid annual interest, as well as Postal Savings Certificates and domestic money orders.  The U.S. Postal Savings System was set up early in the 20th century to attract the savings of immigrants accustomed to saving at post offices in their native countries, provide safe depositories for people who had lost confidence in private banks, and furnish more convenient depositories for working people than were provided by private banks.  (Post offices were then open from 8 a.m. to 6 p.m. six days a week, substantially longer than bankers’ hours.)  The postal system paid two percent interest on deposits annually.  The minimum deposit was $1 and the maximum was $2,500.  Savings in the system spurted to $1.2 billion during the 1930s and jumped again during World War II, peaking in 1947 at almost $3.4 billion.

The U.S. Postal Savings System was shut down in 1967, not because it was inefficient but because it was considered unnecessary after private banks raised their interest rates and offered the same governmental guarantees that the postal savings system had.

The Kiwibank Model: Postal Banks to Serve Local Communities

Postal banks are now thriving in New Zealand, not as a historical artifact but as a popular new innovation.  When they were instituted in 2002, it was not to save the post office but to save New Zealand families and small businesses from big-bank predators.  By 2001, Australian mega-banks controlled some 80% of New Zealand’s retail banking.  Profits went abroad and were maximized by closing less profitable branches, especially in rural areas.  The result was to place hardships on many New Zealand families and small businesses.

The New Zealand government decided to launch a state-owned bank that would compete with the Aussies.  They called their new bank Kiwibank after their national symbol, the kiwi bird.  But the government team planning the new bank faced major challenges.  How could they keep costs low while still providing services in communities throughout New Zealand?

Their solution was to open bank branches in post offices.  Kiwibank was established as a subsidiary of the government-owned New Zealand Post.  The Kiwibank website states:

Back in 2002, we launched with a thought: New Zealand needs a better banking alternative—a bank that provides real value for money, that has Kiwi values at heart, and that keeps Kiwi money where it belongs—right here, in New Zealand.

So we set up shop in PostShops throughout the country, putting us in more locations than any other bank in New Zealand literally overnight (without wasting millions on new premises!).

Suddenly, New Zealanders had a choice in banking.  In an early “move your money” campaign, they voted with their feet.  In an island nation of only 4 million people, in its first five years Kiwibank attracted 500,000 customers away from the big banks.  It consistently earns the nation’s highest customer satisfaction ratings, forcing the Australia-owned banks to improve their service in order to compete.

Postal Banking Japan-style: Funding the Government’s Debt with Its Own Bank

Another interesting model is Japan Post Bank, now the largest publicly-owned bank in the world.  Japan Post is also the largest holder of personal savings, making it the world’s largest credit engine.  Most money today originates as bank loans, and deposits are the magic pool from which this credit-money is generated.  Japan Post uses its excess credit power to buy government bonds.  By 2007, it was the holder of one-fifth of the nation’s debt.  As noted by Joe Weisenthal, writing in Business Insider in February 2010:

Because Japan’s enormous public debt is largely held by its own citizens, the country doesn’t have to worry about foreign investors losing confidence.

If the U.S. Postal Service were to add commercial banking to its product line, it too could use its own bank-generated credit to help relieve its debt problems. The USPS is being forced to fund the health care costs of its employees for 75 years into the future, and a large portion of this unreasonable burden is composed of interest charges.  According to German researcher Margrit Kennedy, interest composes on average about 40% of the cost of all goods and services. That suggests that eliminating interest could reduce the USPS debt by about 40%.  If the USPS became a bank, it could use the credit generated from customer deposits either to service its own debt directly—something that would effectively be interest-free, since it would own the bank and would get the profits back—or by buying interest-bearing government bonds.  The interest earned on the bonds could then be used to pay the interest on the USPS debt.

Other government agencies and local governments could improve their balance sheets in the same way.  Public institutions with sizeable capital and revenues can cut their infrastructure costs by about 40% by establishing their own banks, allowing them to avoid a massive toll in interest to private banker middlemen.

The Post Office Deserves to Be Preserved

The U.S. Postal Service is a venerable institution that is older than the Constitution.  It should be saved, and it can be saved.  One way is to support HR 1351, a bill introduced by Rep. Stephen Lynch of Massachusetts to repeal the Postal Accountability Enhancement Act.

Another way is for the post office to combine mail services with teller services, restoring the Postal Savings System of an earlier era.  The result could be not only to save the Post Office but to establish a competitive alternative to a runaway Wall Street banking monopoly that even Congress seems unable to control.

In the modern capitalist era, the ideologies of imperialist rulers vary over time, from the early appeals to “the right” to wealth, power, colonies and grandeur to later claims of a ‘civilizing mission’. More recently imperial rulers have propagated, many diverse justifications adapted to specific contexts, adversaries, circumstances and audiences.

This essay will concentrate on analyzing contemporary US imperialist ideological arguments for legitimizing wars and sanctions to sustain dominance.

Contextualizing Imperial Ideology

Imperialist propaganda varies according to whether it is directed against a competitor for global power, or whether as a justification for applying sanctions, or engaging in open warfare against a local or regional socio-political adversary.

With regard to established imperialist (Europe) or rising world economic competitors (China), US imperialist propaganda varies over time. Early in the 19th century, Washington proclaimed the “Monroe Doctrine”, denouncing European efforts to colonize Latin America, privileging its own imperial designs in that region. In the 20th century when the US imperial policymakers were displacing Europe from prime resource based colonies in the Middle East and Africa, it played on several themes. It condemned ‘colonial forms of domination’ and promoted ‘neo-colonial’ transitions that ended European monopolies and facilitated US multi-national corporate penetration. This was clearly evident during and after World War 2, in the Middle East petrol-countries.

During the 1950s as the US assumed imperial primacy and radical anti-colonial nationalism came to the fore, Washington forged alliances with the declining colonial power to combat a common enemy and to prop up post-colonial powers to combat a common enemy. Even with the post-World War II economic recovery, growth and unification of Europe, it still works in tandem and under US leadership in militarily repressing nationalist insurgencies and regimes. When conflicts and competition occur, between US and European regimes, banks and enterprises, the mass media of each region publish “investigatory findings” highlighting the frauds and malfeasance of its competitors — and US regulatory agencies levy heavy fines on their European counterparts, overlooking similar practices by Wall Street financial firms.

In recent times the rising tide of militarist imperialism and colonial wars fueled by Israeli proxies in the US state has led to some serious divergencies between US and European imperialism. With the exception of England, Europe made a minimum symbolic commitment to the US wars and occupation of Iraq and Afghanistan. Germany and France concentrated on expanding their export markets and economic capacities; displacing the US in major markets and resource sites. The convergence of US and European empires led to the integration of financial institutions and the subsequent common crises and collapse but without any coordinated policy of recovery. US ideologists propagated the idea of a “declining and decaying European Union”, while the European ideologues emphasized the failures of Anglo-American de-regulated, ‘free markets’ and Wall Street swindles.

Imperialist Ideology, Rising Economic Powers and Nationalist Challengers

There is a long history of imperialist “anti-imperialism”, officially sponsored condemnation, exposés and moral indignation directed exclusively against rival imperialists, emerging powers or simply competitors, who in some cases are simply following in the footsteps of the established imperial powers.

English imperialists in their heyday justified their world-wide plunder of three continents by perpetuating the “Black Legend”, of Spanish empire’s “exceptional cruelty” toward indigenous people of Latin America, while engaging in the biggest and most lucrative African slave trade. While the Spanish colonists enslaved the indigenous people, the Anglo-American settlers exterminated them.

In the run-up to World War II, European and US imperial powers, while exploiting their Asian colonies condemned Japanese imperial powers’ invasion and colonization of China. Japan, in turn claimed it was leading Asia’s forces fighting against Western imperialism and projected a post-colonial “co-prosperity” sphere of equal Asian partners.

The imperialist use of “anti-imperialist” moral rhetoric was designed to weaken rivals and was directed to several audiences. In fact, at no point did the anti-imperialist rhetoric serve to “liberate” any of the colonized people. In almost all cases the victorious imperial power only substituted one form colonial or neo-colonial rule for another.

The “anti-imperialism” of the imperialists is directed at the nationalist movements of the colonized countries and at their domestic public. British imperialists fomented uprisings among the agro-mining elites in Latin America promising “free trade” against Spanish mercantilist rule; they backed the “self-determination” of the slave-holding cotton plantation owners in the US South against the Union; they supported the territorial claims of the Iroquois tribal leaders against the US anti-colonial revolutionaries — exploiting legitimate grievances for imperial ends.

During World War II, the Japanese imperialists supported a sector of the nationalist, anti-colonial movement in India against the British Empire. The US condemned Spanish colonial rule in Cuba and the Philippines and went to war to “liberate” the oppressed peoples from tyranny and remained to impose a reign of terror, exploitation and colonial rule.

The imperialist powers sought to divide the anti-colonial movements and create future “client rulers” when and if they succeeded. The use of anti-imperialist rhetoric was designed to attract two sets of groups. A conservative group with common political and economic interests with the imperial power, which shared their hostility to revolutionary nationalists and which sought to accrue greater advantage by tying their fortunes to a rising imperial power. A radical sector of the movement tactically allied itself with the rising imperial power, with the idea of using the imperial power to secure resources (arms, propaganda, vehicles and financial aid) and, once securing power, to discard them. More often than not, in this game of mutual manipulation between empire and nationalists, the former won out, as is the case then and now.

The imperialist “anti-imperialist” rhetoric was equally directed at the domestic public, especially in countries like the US which prized its 18th anti-colonial heritage. The purpose was to broaden the base of empire building beyond the hard line empire loyalists, militarists and corporate beneficiaries. Their appeal sought to include liberals, humanitarians, progressive intellectuals, religious and secular moralists, and other “opinion-makers” who had a certain cachet with the larger public, the ones who would have to pay with their lives and tax money for the inter-imperial and colonial wars.

The official spokespeople of empire publicize real and fabricated atrocities of their imperial rivals, and highlight the plight of the colonized victims. The corporate elite and the hardline militarists demand military action to protect property, or to seize strategic resources; the humanitarians and progressives denounce the “crimes against humanity” and echo the calls “to do something concrete” to save the victims from genocide. Sectors of the Left join the chorus and, finding a sector of victims who fit in with their abstract ideology, plead for the imperial powers to “arm the people to liberate themselves” (sic). By lending moral support and a veneer of respectability to the imperial war, by swallowing the propaganda of “war to save victims” the progressives become the prototype of the “anti-imperialism of the fools”. Having secured broad public support on the bases of “anti-imperialism”, the imperialist powers feel free to sacrifice citizens’ lives and the public treasury, to pursue war, fueled by the moral fervor of a righteous cause. As the butchery drags on and the casualties mount, and the public wearies of war and its cost, progressive and leftist enthusiasm turns to silence or worse, moral hypocrisy with claims that “the nature of the war changed” or “that this isn’t the kind of war that we had in mind …” As if the war makers ever intended to consult the progressives and left on how and why they should engage in imperial wars!

In the contemporary period the imperial “anti-imperialist wars” and aggression have been greatly aided and abetted by well-funded “grass roots” so-called “non-governmental organizations” which act to mobilize popular movements which can “invite” imperial aggression.

Over the past four decades US imperialism has fomented at least two dozen “grass roots” movements which have destroyed democratic governments, or decimated collectivist welfare states or provoked major damage to the economy of targeted countries.

In Chile throughout 1972-73 under the democratically elected government of Salvador Allende, the CIA financed and provided major support — via the AFL-CIO — to private truck owners to paralyze the flow of goods and services. They also funded a strike by a sector of the copper workers union (at the El Tenient mine) to undermine copper production and exports, in the lead up to the coup. After the military took power, several “grass roots” Christian Democratic union officials participated in the purge of elected leftist union activists. Needless to say, in short order the truck owners and copper workers ended the strike, dropped their demands and subsequently lost all bargaining rights!

In the 1980’s the CIA via Vatican channels transferred millions of dollars to sustain the “Solidarity Union” in Poland, making a hero of the Gdansk shipyards worker-leader Lech Walesa, who spearheaded the general strike to topple the Communist regime. With the overthrow of Communism so also went guaranteed employment, social security, and trade union militancy: the neo-liberal regimes reduced the workforce at Gdansk by fifty percent and eventually closed it, giving the boot to the entire workforce. Walesa retired with a magnificent Presidential pension, while his former workmates walked the streets and the new “independent” Polish rulers provided NATO with military bases and mercenaries for imperial wars in Afghanistan and Iraq.

In 2002 the White House, the CIA, the AFL-CIO and NGOs, backed a Venezuelan military-business — trade-union bureaucrat-led “grass roots” coup that overthrew democratically elected President Chavez. In 48 hours, a million strong authentic grass roots mobilization of the urban poor backed by constitutionalist military forces defeated the US backed dictators and restored Chavez to power. Subsequently, oil executives directed a lockout backed by several US-financed NGOs. They were defeated by the workers’ takeover of the oil industry. The unsuccessful coup and lockout cost the Venezuelan economy billions of dollars in lost income and caused a double digit decline in GNP.

The US backed “grass roots” armed jihadists to liberated “Bosnia” and armed the “grass roots” terrorist Kosovo Liberation Army to break-up Yugoslavia. Almost the entire Western Left cheered as, the US bombed Belgrade, degraded the economy and claimed it was “responding to genocide”. Kosovo “free and independent” became a huge market for white slavers, housed the biggest US military base in Europe, with the highest per-capita out migration of any country in Europe.

The imperialist “grass roots” strategy combines humanitarian, democratic, and anti-imperialist rhetoric and paid and trained local NGOs, with mass media blitzes to mobilize Western public opinion and especially “prestigious leftist moral critics” behind their power grabs.

The Consequence of Imperial Promoted “Anti-Imperialist” Movements: Who Wins and Who Loses?

The historic record of imperialist promoted “anti-imperialist” and “pro-democracy” “grass roots movements” is uniformly negative. Let us briefly summarize the results. In Chile ‘grass roots’ truck owners strike led to the brutal military dictatorship of Augusto Pinochet and nearly two decades of torture, murder, jailing and forced exile of hundreds of thousands, the imposition of brutal “free market policies” and subordination to US imperial policies. In summary, the US multi-national copper corporations and the Chilean oligarchy were the big winners and the mass of the working class and urban and rural poor the biggest losers. The US backed “grass roots uprisings” in Eastern Europe against Soviet domination, exchanged Russian for US domination; subordination to NATO instead of the Warsaw Pact; the massive transfer of national public enterprises, banks and media to Western multi-nationals. Privatization of national enterprises led to unprecedented levels of double-digit unemployment, skyrocketing rents and the growth of pensioner poverty. The crises induced the flight of millions of the most educated and skilled workers and the elimination of free public health, higher education and worker vacation resorts.

Throughout the now capitalist Eastern Europe and USSR highly organized criminal gangs developed large scale prostitution and drug rings; foreign and local gangster ‘entrepeneurs’ seized lucrative public enterprises and formed a new class of super-rich oligarchs Electoral party politicians, local business people and professionals linked to Western ‘partners’ were the socio-economic winners. Pensioners, workers, collective farmers, the unemployed youth were the big losers along with the formerly subsidized cultural artists. Military bases in Eastern Europe became the empire’s first line of military attack of Russia and the target of any counter-attack.

If we measure the consequences of the shift in imperialist power, it is clear that the Eastern Europe countries have become even more subservient under the US and the EU than under Russia. Western induced financial crises have devastated their economies; Eastern European troops have served in more imperialist wars under NATO than under Soviet rule; the cultural media are under Western commercial control. Most of all, the degree of imperialist control over all economic sectors far exceeds anything that existed under the Soviets. The Eastern European “grass roots” movement succeeded in deepening and extending the US Empire; the advocates of peace, social justice, national independence, a cultural renaissance and social welfare with democracy were the big losers.

Western liberals, progressives and leftists who fell in love with imperialist-promoted “anti-imperialism” are also big losers. Their support for the NATO attack on Yugoslavia led to the break-up of a multi-national state and the creation of huge NATO military bases and a white slavers paradise in Kosova. Their blind support for the imperial promoted “liberation” of Eastern Europe devastated the welfare state, eliminating the pressure on Western regimes’ need to compete in providing welfare provisions. The main beneficiaries of Western imperial advances via “grass roots” uprisings were the multi-national corporations, the Pentagon and the right-wing free market neo-liberals. As the entire political spectrum moved to the right, a sector of the left and progressives eventually jumped on the bandwagon. The Left moralists lost credibility and support, their peace movements dwindled, and their “moral critiques” lost resonance. The left and progressives who tail-ended the imperial backed “grass roots movements”, whether in the name of “anti-Stalinism”, “pro-democracy”, or “anti-imperialism” have never engaged in any critical reflection; no effort to analyze the long-term negative consequences of their positions in terms of the losses in social welfare, national independence or personal dignity.

The long history of imperialist manipulation of “anti-imperialist” narratives has found virulent expression in the present day. The New Cold War launched by Obama against China and Russia, the hot war brewing in the Gulf over Iran’s alleged military threat, the interventionist threat against Venezuela’s “drug-networks”, and Syria’s “bloodbath” are part and parcel of the use and abuse of “anti-imperialism” to prop up a declining empire. Hopefully, the progressive and leftist writers and scribes will learn from the ideological pitfalls of the past and resist the temptation to access the mass media by providing a ‘progressive cover’ to imperial dubbed “rebels”. It is time to distinguish between genuine anti-imperialism and pro-democracy movements and those promoted by Washington, NATO, and the mass media.

Occupy Wall Street has been both criticized and applauded for not endorsing any official platform.  But there are unofficial platforms, including one titled the 99% Declaration which calls for a “National General Assembly” to convene on July 4, 2012 in Philadelphia.  The 99% Declaration seeks everything from reining in the corporate state to ending the Fed to eliminating censorship of the Internet.  But none of these demands seems to go to the heart of what prompted Occupiers to camp out on Wall Street in the first place – a corrupt banking system that serves the 1% at the expense of the 99%.  To redress that, we need a banking system that serves the 99%.

Occupy San Francisco has now endorsed a plan aimed at doing just that.  In a December 1 Wall Street Journal article titled “Occupy Shocker: A Realistic, Actionable Idea,” David Weidner writes:

[P]rotesters in the Bay Area, especially Occupy San Francisco, have something their East Coast neighbors don’t: a realistic plan aimed at the heart of banks. The idea could be expanded nationwide to send a message to a compromised Washington and the financial industry.

It’s called a municipal bank. Simply put, it would transfer the City of San Francisco’s bank accounts—about $2 billion now spread between such banks as Bank of America Corp., UnionBanCal Corp. and Wells Fargo & Co.—into a public bank. That bank would use small local banks to lend to the community.

The public bank concept is not new.  It has been proposed before in San Francisco and has a successful 90-year track record in North Dakota.  Weidner notes that the state-owned Bank of North Dakota earned taxpayers more than $61 million last year and reported a profit of $57 million in 2008, when Bank of America had a $1.2 billion net loss.  The San Francisco bank proposal is sponsored by city supervisor John Avalos, who has been thinking about a municipal bank for several years.

Weidner calls the proposal “the boldest institutional stroke yet against banks targeted by the Occupy movement.”

Responding to the Critics

He acknowledges that it will be an uphill climb.  In a follow-up article on December 6th, Weidner wrote:

Of course, there are critics. . . . They argue that public banks would put public money at risk.  Would you be surprised to know that most of the critics are bankers?

That’s why you don’t hear them talking about the $100 billion they lost for the California pension funds in 2008.  They don’t talk about the foreclosures that have wrought havoc on communities and tax revenues.  They don’t talk about liar loans and what kind of impact that’s had on the economy, employment and the real estate market — not to mention local and state budgets.

Risk to the taxpayers remains the chief objection of banker opponents.  “There is no need for such lending,” they say.  “We already provide loans to any creditworthy applicant who comes to us.  Why put taxpayer money at risk, lending for every crackpot scheme that some politician wants to waste taxpayer money on?”

Tom Hagan, who pays taxes in Maine, has a response to that argument.  In a December 3rd letter to the editor in the Press Herald (Portland), he maintained there is no need to invest public bank money in risky retail ventures.  The money could be saved for infrastructure projects, at least while the public banking model is being proven.  The salubrious result could be to cut local infrastructure costs in half.  Making his case in conjunction with a Maine turnpike project, he wrote:

Why does Maine pay double for turnpike improvements?

Improvements are funded by bonds issued by the Maine Turnpike Authority, which collects the principal amounts, then pays the bonds back with interest.

Over time, interest payments add up to about the original principal, doubling the cost of turnpike improvements and the tolls that must be collected to pay for them. The interest money is shipped out of state to Wall Street banks.

Why not keep the interest money here in Maine, to the benefit of all Mainers? This could be done by creating a state-owned bank. State funds now deposited in low- or no-interest checking accounts would instead be deposited in the state bank.

Those funds would be used to buy up the authority bonds and municipal bonds issued by the Maine Bond Bank. All of them. Since all interest payments would flow into the state treasury, we would end up paying half what we now pay for our roads, bridges and schools.

North Dakota has profited from a state-owned bank for 90 years. Why not Maine?

The state bank could generate “bank credit” on its books, as all chartered banks are authorized to do.  This credit could then be used to buy the bonds.  The government’s deposits would not be “spent” but would remain in the government’s account, as safe as they are in Bank of America—arguably more so, since the solvency of the public bank would be guaranteed by the local government.

Critics worry about the profligate risk-taking of politicians, but the trusty civil servants at the Bank of North Dakota insist that they are not politicians; they are bankers.  Unlike the Wall Street banks that had to be bailed out by the taxpayers, the Bank of North Dakota invests conservatively.  It avoided the derivatives and toxic mortgage-backed securities that precipitated the credit crisis, and it helped the state avoid the crisis by partnering with local banks, helping them with capital and liquidity requirements.  As a result, the state has had no bank failures in at least a decade.

With intelligent use of the ever-evolving Internet, truly effective public oversight can minimize any cronyism.  California’s pension funds might have avoided losing $100 billion if, instead of gambling in the Wall Street casino, they had invested in infrastructure through the state’s own state bank.

The Constitutional Challenge

In Weidner’s Wall Street Journal article, he raises another argument of opponents—that California law forbids using taxpayer money to make private loans.  That, he said, would have to be changed.

The U.S. Supreme Court, however, has held otherwise.  In 1920, the constitutional objection was raised in conjunction with the Bank of North Dakota and was rejected both by the Supreme Court of North Dakota and the U.S. Supreme Court.  See Green v. Frazier, 253 U. S. 233 (1920), and fuller discussion here.

A municipal bank would be doing with the public’s funds only what Bank of America does now: it would be lending “bank credit” backed by the bank’s capital and deposits.  The difference would be that the local community, not Florida or Europe, would get the loans; and the city of San Francisco, not Bank of America, would get the profits.

California and many other states already own infrastructure banks that use the states’ funds to back loans.  If that use of public monies is legal, and if public funds can be deposited in Bank of America and used as the basis for loans to multi-national corporations, they can be deposited in the Bank of San Francisco and used as the basis for loans to the local community.

Better yet, they can be used to buy municipal bonds.  Investing in municipal bonds would avoid the constitutional issue with “private loans” altogether, since the loans would be to local government.

Sending a Message to Wall Street

The campaign to “move your money” has gotten a groundswell of support, but move your money into what?  Weidner repeats the complaint of critics that private credit unions have gotten too big and threaten commercial banking.  Having greater impact would be to “move our money”—move our local government revenues out of Wall Street banks into our own publicly-owned banks, which could then generate credit for the local economy and public works.

The Fed insisted that the loans were repaid and there have been no losses, but the Bloomberg report said the banks reaped a $13 billion windfall in profits; and “details suggest taxpayers paid a price beyond dollars as the secret funding helped preserve a broken status quo and enabled the biggest banks to grow even bigger.”

The revelations provoked shock and outrage among commentators.  But in a letter to the leaders of the House and Senate Committees focused on the financial services industry, Fed Chairman Ben Bernanke responded on December 6th that the figures were greatly exaggerated.  He said the loans were being double-counted: short-term loans rolled over from day to day were counted as separate cumulative loans rather than as a single extended loan.

The Fed, it seems, was doing only what banks and the money market do for each other every day: making “liquidity” available at very low interest rates.  In 2008, bank liquidity dried up after Lehman Brothers collapsed, and the banks could not get the cheap, ready credit on which their lending scheme depends.  The Fed then stepped in as “lender of last resort,” doing what it had to do to keep the banking scheme going.

Keeping the banking system afloat is all well and good.  What is wrong with the existing scheme is that it allows the Fed to play favorites.  As Alan Grayson observed in a December 5th editorial:

The main, if not the sole, qualification for getting help from the Fed was to have lost huge amounts of money. The Fed bailouts rewarded failure, and penalized success. . . .

During all the time that the Fed was stuffing money into the pockets of failed banks, many Americans couldn’t borrow a dime for a home, a car, or anything else. If the Fed had extended $26 trillion in credit to the American people instead of Wall Street, would there be 24 million Americans today who can’t find a full-time job?

All in the Name of Liquidity

What is this need for “liquidity” that justifies such extraordinary measures on behalf of the banks?  Why do banks need cheap and ready access to funds?  Aren’t they the lenders rather than the borrowers of funds?  Don’t they simply take in deposits and lend them out?

The answer is no.  Today when banks make loans, they extend credit FIRST, then fund the loans by borrowing from the cheapest available source.  If deposits are not available, they borrow from another bank, the money market, or the Federal Reserve.

Rather than loans being created from deposits, loans actually CREATE deposits.  They create deposits when checks are drawn on the borrower’s account and deposited in another bank.  These deposits can then be borrowed back at the Fed funds rate—currently a very low 0.25%.  A bank can thus create money in the form of “bank credit,” lend it to a customer at high interest, and borrow it back at very low interest, pocketing the difference as its profit.

If all this looks like sleight of hand, it is.  The process has been compared to “check kiting,” defined in Barron’s Business Dictionary as:

[An] illegal scheme that establishes a false line of credit by the exchange of worthless checks between two banks. For instance, a check kiter might have empty checking accounts at two different banks, A and B. The kiter writes a check for $50,000 on the bank A account and deposits it in the bank B account. If the kiter has good credit at bank B, he will be able to draw funds against the deposited check before it clears, that is, is forwarded to bank A for payment and paid by bank A. Since the clearing process usually takes a few days, the kiter can use the $50,000 for a few days and then deposit it in the bank A account before the $50,000 check drawn on that account clears.

Setting Things Right

As suspicious as all this appears, the economy actually needs an expandable credit system, and an expandable credit system needs a lender of last resort.  What is wrong with the current scheme is that it discriminates against Main Street in favor of Wall Street.  Banks can borrow very cheaply, while individuals, corporations and governments pay “whatever the market will bear.”  The banker middlemen take their cut in a scheme in which money is actually manufactured in the process of lending it.  The profits are siphoned off to the 1% at the expense of the 99%.

To fix the system, the profits need to be returned to the 99%.  How that could be done was suggested by Thom Hartmann in a recent editorial:

Have the central bank owned by the US government and run by the Treasury Department, so all the profits . . . go directly into the Treasury and you and I pay less in taxes . . . .

For a model on the local level, he pointed to the Bank of North Dakota:

The good people of North Dakota . . . established something very much like this—the Bank of North Dakota—and it’s kept the state in the black, and kept its farmers, manufacturers and students protected from the predations of New York banksters for nearly a century. It’s time for every state to charter their own state bank, just like North Dakota did, and for the Treasury Department to either buy the Fed from the for-profit banks that own it, or simply nationalize it.

We have been distracted here and in Europe by a sudden panic over our “sovereign debt” crises, when the real crisis is that our debt is NOT sovereign.  We are indentured to a Wall Street money machine that creates our money and lends it back to us at interest, money our sovereign government could be creating itself, with full democratic oversight and accountability to the people.  We have forgotten our roots, when the American colonists thrived on a system of money created by the people themselves, debt-free and interest-free.  The continued dominance of the Wall Street money machine depends on that collective amnesia.  The fact that this memory is surfacing again may be the machine’s greatest threat—and our greatest hope as a nation.

As she assumes the role of keystone for the world’s major economies, the Allies who were ranged against her are now knocking at her door asking for assistance or offering gifts – or both. The foreign minister of Poland went public with a passionate plea for Germany to step in and save his country.

Her suitors are not only her former opponents but also past allies like Japan and Italy. And, in a surprising twist, Switzerland’s perennial neutrality — at least in financial matters — has also been breached. The gifts do not come wrapped in goodwill. They are simply efforts by the central banks and governments of the donors to stave off the worst effects of their own short-sighted policies and decisions.

No one will deny that Germany deserves this victory. Time and time again the country has shown its ability to rise phoenix-like from the ashes of apparent total defeat. Half way through the Series Germany’s position looked perilous as she faced financial ruin. In the third quarter she was broken in half. Yet, masterfully, despite setbacks, through rearmament and rebuilding, she revitalized her economy and reenergized her offense. But, as with every successful outcome, she had the benefit of luck and good timing.

The Western Allies and most of their trading partners, who seemed set to coast home to victory in the final moments, are now being overrun by the actions of international bankers and their own greedy but gullible politicians and populations. As a result partly from rash military engagements abroad, the buildup elephantine security structures at home, plus the need to rescue the same selfsame bankers, most are already so heavily into deficit spending they can’t revitalize their “main street” economies. Instead they glibly pretended that nothing is really wrong. Meanwhile Germany continued to protect its people, its manufacturing base and its markets, pushing its annual exports to over €1 trillion, as it waited for the ideal time to grab the prize. That time has now arrived and Germany is ready to collect.

France, once a client state of Germany during the Series, would like to pretend that it is partnering with her in this moment of victory. France’s Presient is bird-dogging the German Chancellor in much the same way as the British Prime Minister trotted after GW Bush prior to the invasion of Iraq. This is wishful thinking, as even a casual review of the circumstances will reveal that France together with most other states in the Euro Zone will soon move to client status. Germany is already controlling those who have already accepted bailouts like Greece and Ireland with little regard for their sovereignty. Italy, one of Europe’s major economies, is now being run by bureaucrats well versed in the Bundesbank’s strict approach to financial affairs. The British PM, not a member of the Euro club and facing a swelling backlash at home against austerity and tighter EU integration, can only watch irrelevantly from the sidelines as another vestige of the UK’s Great Power status moves to Germany.

NATO too has had to rewrite its goals set out by the first NATO secretary-general, Lord “Pug” Ismay, who coined a the mantra according to which the Atlantic bloc should “keep the Russians out, the Americans in and the Germans down.”

The EU summit at which Germany will set out the treaty changes needed for Germany to step in and shore up the Euro is scheduled for Dec 9. Chancellor Angela Merkel could be forgiving for wondering if the meeting should be held in the historic railway carriage at Compiegne that hosted the signing of the armistice ending WWI in 1918 and France’s capitulation to Germany in 1940. But that would probably too hasty. Time enough for that when the signatures are being attached to the EU treaty changes she is demanding and the game is finally over.

People can accept hardship and cuts if they perceive that the load is being shared fairly and justly, with those most able shouldering a heavier load. David Cameron, a month after taking office (June 2010), made his “we are all in this together” speech in which he said:

I want to make sure we go about the urgent task of cutting our deficit in a way that is open, responsible and fair. I want this government to carry out Britain’s unavoidable deficit reduction plan in a way that strengthens and unites the country. I have said before that as we deal with the debt crisis we must take the whole country with us – and I mean it. George Osborne has said that our plans to cut the deficit must be based on the belief that we are all in this together – and he means it…But this government will not cut this deficit in a way that hurts those we most need to help, that divides the country or that undermines the spirit and ethos of our public services. Freedom, fairness, responsibility: those are the values that drive this government, and they are the values that will drive our efforts to deal with our debts and turn this economy around.

I think any objective assessor of reality would see the hollowness of the above rhetoric.

If one is to judge the health of society, two measures stand out. One is the level of unemployment, and the other is income inequality.  The lower these are, the healthier a society is.  The autumn statement fails on both counts.  The actions proposed widen the gap between the rich and the poor, and they increase the level of unemployment.  Society will pay dearly for such short-sighted ideologically driven policies. Research shows that alcoholism, drug addiction, crime, antisocial behaviour, mental illness, and family break ups will rise as a result of these measures.

Its effects on the economy are just as bad.  The unemployed need to be supported by those at work, instead of paying taxes had they kept their jobs. They have very little to spend, thus depressing demand.  This in turn leads to less investment in new businesses and the further contraction of existing businesses. This vicious circle achieves the opposite to what is intended, that is an increase in the structural deficit (the difference between what the government collects in taxes and what it spends).  Loss of jobs in the public sector was not compensated for by job creation in the private sector as predicted by George Osborne.

Meanwhile in the Alice in Wonderland world of the banks, the taxpayer had to rescue them from the folly of their actions to the tune of £850bn.  The government then pumped into their coffers an additional £275bn, in two tranches, conjured up out of thin air, under what is called “Quantitative Easing”.  I am not a fan of QE as I mentioned in a previous piece, but if we are going to do it anyway, why not do something good and useful with it, instead of pumping it into the banks?

What happened to that money? Here is the view of Sir Terry Leahy, the former boss of supermarket Tesco, quoted in the Independent talking about the first tranche of £200bn:

QE created an awful lot of liquidity intended for the real economy, but found a home in markets and speculators looking for quick returns.

This view is supported by a number of economists. Dhaval Joshi of BCA research in a new report, the findings of which are presented in the Guardian, argues that:

QE1 [£200bn] – combined with Bernanke’s much larger US asset purchases – just handed banks lots of extra money which they used to speculate on commodities such as oil, boosting their price, pushing up inflation and making life even harder for cash-strapped consumers.

The rise in the price of oil is being mentioned by the government as one of the reasons that the figures about growth etc. are so wrong. There you have it. Pumping all that money into banks could have caused a substantial part of that rise.

Perhaps someone could explain to us ordinary citizens, why it is that if the government intended that money to help the real economy, it was not put directly into the real economy?  It could have used part of that huge sum to maintain the employment in the public sector, thus keeping the purchasing power of up to three quarters of a million people who would continue to pay taxes.

It could have invested the rest in infrastructure projects and supported innovative high tech projects where Britain has a research lead over China; money is needed to bring systems and products from research to market.  It could have invested to develop renewable green energy systems that would have readymade markets worldwide today, with demand increasing as reserves of fossil fuels are depleted.  All of these would have bequeathed our children and grandchildren a way of earning their living in the future.  Why pump those billions into the economic equivalent of the cosmic black holes, the banks?

Why don’t commentators and pundits on television and radio ask some of these questions?  Where are Evan Davis and Jeremy Paxman when you need them?

The moral of the story for the government is: look after people, keep them employed and the economy will look after itself.

To some people, the European Central Bank seems like a fire department that is letting the house burn down to teach the children not to play with matches.

So wrote Jack Ewing in the New York Times last week.  He went on:

The E.C.B. has a fire hose — its ability to print money. But the bank is refusing to train it on the euro zone’s debt crisis.

The flames climbed higher Friday after the Italian Treasury had to pay an interest rate of 6.5 percent on a new issue of six-month bills . . . the highest interest rate Italy has had to pay to sell such debt since August 1997 . . . .

But there is no sign the E.C.B. plans a major response, like buying large quantities of the country’s bonds to bring down its borrowing costs.

Why not?  According to the November 28th Wall Street Journal, “The ECB has long worried that buying government bonds in big enough amounts to bring down countries’ borrowing costs would make it easier for national politicians to delay the budget austerity and economic overhauls that are needed.”

As with the manufactured debt ceiling crisis in the United States, the E.C.B. is withholding relief in order to extort austerity measures from member governments—and the threat seems to be working.  The same authors write:

Euro-zone leaders are negotiating a potentially groundbreaking fiscal pact . . . [that] would make budget discipline legally binding and enforceable by European authorities. . . . European officials hope a new agreement, which would aim to shrink the excessive public debt that helped spark the crisis, would persuade the European Central Bank to undertake more drastic action to reverse the recent selloff in euro-zone debt markets.

The Eurozone appears to be in the process of being “structurally readjusted” – the same process imposed earlier by the IMF on Third World countries.  Structural demands routinely include harsh austerity measures, government cutbacks, privatization, and the disempowerment of national central banks, so that there is no national entity capable of creating and controlling the money supply on behalf of the people.  The latter result has officially been achieved in the Eurozone, which is now dependent on the E.C.B. as the sole lender of last resort and printer of new euros.

The E.C.B. Serves Banks, Not Governments

The legal justification for the E.C.B.’s inaction in the sovereign debt crisis is Article 123 of the Lisbon Treaty, signed by EU members in 2007.  As Jens Eidmann, President of the Bundesbank and a member of the E.C.B. Governing Council, stated in a November 14 interview:

The eurosystem is a lender of last resort for solvent but illiquid banks. It must not be a lender of last resort for sovereigns because this would violate Article 123 of the EU treaty.

The language of Article 123 is rather obscure, but basically it says that the European central bank is the lender of last resort for banks, not for governments.  It provides:

1.  Overdraft facilities or any other type of credit facility with the European Central Bank or with the central banks of the Member States (hereinafter referred to as ‘national central banks’) in favour of Union institutions, bodies, offices or agencies, central governments, regional, local or other public authorities, other bodies governed by public law, or public undertakings of Member States shall be prohibited, as shall the purchase directly from them by the European Central Bank or national central banks of debt instruments.

2.  Paragraph 1 shall not apply to publicly owned credit institutions which, in the context of the supply of reserves by central banks, shall be given the same treatment by national central banks and the European Central Bank as private credit institutions.

Banks can borrow from the E.C.B. at 1.25%, the minimum rate available for banks.  Member governments, on the other hand, must put themselves at the mercy of the markets, which can squeeze them for “whatever the market will bear”—in Italy’s case, 6.5%.

The Real Reason Eurozone Countries Are Drowning in Debt

Why should banks be able to borrow at 1.25% from the E.C.B.’s unlimited fountain of euros, while the tap is closed for governments?  The conventional argument is that for governments to borrow money created by their own central banks would be “inflationary.”  But private banks create the money they lend just as government-owned central banks do.  Private banks issue money in the form of “bank credit” on their books, and they often do this before they have the liquidity to back the loans.  Then they borrow from wherever they can get funds most cheaply.  When banks borrow from the E.C.B. as lender of last resort, the E.C.B. “prints money” just as it would if it were lending to governments directly.

The burgeoning debts of the Eurozone countries are being blamed on their large welfare states, but these social systems were set up before the 1970s, when European governments had very little national debt.  Their national debts shot up, not because they spent on social services, but because they switched bankers.  Before the 1970s, European governments borrowed from their own central banks.  The money was effectively interest-free, since they owned the banks and got the profits back as dividends.  After the European Monetary Union was established, member countries had to borrow from private banks at interest—often substantial interest.

And the result?  Interest totals for Eurozone countries are not readily accessible; but for France, at least, the total sum paid in interest since the 1970s appears to be as great as the French federal debt itself.  That means that if the French government had been borrowing from its central bank all along, it could have been debt-free today.

The figures are nearly as bad for Canada, and they may actually be worse for the United States.  The Federal Reserve’s website lists the sums paid in interest on the U.S. federal debt for the last 24 years.  During that period, taxpayers paid a total of $8.2 trillion in interest.  That’s more than half the total $15 trillion debt, in just 24 years.  The U.S. federal debt has not been paid off since 1835, so taxpayers could well have paid more than $15 trillion by now in interest.  That means our entire federal debt could have been avoided if we had been borrowing from our own government-owned central bank all along, effectively interest-free.  And that is probably true for other countries as well.

To avoid an overwhelming national debt and the forced austerity measures destined to follow, the Eurozone’s citizens need to get the fire hose of money creation out of the hands of private banks and back into the hands of the people.  But how?

Governments Cannot Borrow from the E.C.B., but Government-owned Banks Can

Interestingly, Paragraph 2 of Article 123 of the Lisbon Treaty carves out an exception to the rule that governments cannot borrow from the E.C.B.  It says that government-owned banks can borrow on the same terms as privately-owned banks.  Many Eurozone countries have publicly-owned banks; and as nationalization of insolvent banks looms, they could soon find themselves with many more.

One solution might be for the publicly-owned banks of Eurozone governments to exercise their right to borrow from the E.C.B. at 1.25%, then use that liquidity to buy up the country’s debt, or as much of it as does not sell at auction.  (The Federal Reserve does this routinely in open market operations in the U.S.)   The government’s securities would be stabilized, keeping speculators at bay; and the government would get the interest spread, since it would own the banks and would get the profits back as dividends.

Taking a Stand in the Class War

In a November 25th article titled “Goldman Sachs Has Taken Over,” Paul Craig Roberts writes:

The European Union, just like everything else, is merely another scheme to concentrate wealth in a few hands at the expense of European citizens, who are destined, like Americans, to be the serfs of the 21^st century.

He observes that Mario Draghi, the new president of the European Central Bank, was Vice Chairman and Managing Director of Goldman Sachs International, a member of Goldman Sachs’ Management Committee, a member of the governing council of the European Central Bank, a member of the board of directors of the Bank for International Settlements, and Chairman of the Financial Stability Board.  Italy’s new prime minister Mario Monti, who was appointed rather than elected, was a member of Goldman Sachs’ Board of International Advisers, European Chairman of the Trilateral Commission (“a US organization that advances American hegemony over the world”), and a member of the Bilderberg group.  And Lucas Papademos, an unelected banker who was installed as prime minister of Greece, was Vice President of the European Central Bank and a member of America’s Trilateral Commission.

Roberts points to the suspicious fact that the German government was unable to sell 35% of its 10-year bonds at its last auction; yet Germany’s economy is in far better shape than that of Italy, which managed to sell all its bonds.  Why?  Roberts suspects an orchestrated scheme to pressure Germany to back off from its demands to make the banks pay a share of their bailout.

Europe is in the process of being “structurally readjusted” by a private banking cartel.  If its people are to resist this silent conquest, they need to rise up and, using the ballot box and public banks, throw out the new banking hegemony before it is too late.

The second half of the essay will detail the politics of CTD, the regime which has moved furthest from the notion of a sovereign representative democracy. We will clarify the differences and similarities between traditional military-civilian and fascist dictatorships and the up-to-date CTD, focusing on the ideology of apolitical expertise and technocratic rule as a preliminary to an exploration of the profoundly colonial hierarchical chain of decision making.

The penultimate section will highlight the reason why the imperial ruling classes and their national collaborators have overturned the pre-existing “democratic” oligarchical ruling formulas of “indirect rule” in favor of a naked power grab. The turn to direct colonial rule (a coup by any other name) was consumated by the major financial ruling classes of Europe and the US.

We will evaluate the socio-economic impact of rule by imperial appointed colonial technocrats, the reason for rule by fiat and force over the previous process of persuasion, manipulation and co-optation.

In the concluding section we will evaluate the polarization of the class struggle in a time of colonial dictatorship, in the context of hollowed out electoral institutions and radical regressive social policies. The essay will address the twin issues of struggle for political freedom and social justice in the face of fiat rule by emerging technocratic colonial rulers.

What is at stake goes beyond the current regime changes to identifying the most basic institutional configurations which will define the life chances, personal and political freedoms of future generations, for decades to come.

Decaying Democracies and the Transition to Oligarchical Democracies

The decay of democracy is evident in every sphere of politics. Corruption is all pervasive, as parties and leaders vie for financial contributions from the wealthy and powerful; congressional and executive positions have a price tag; each piece of legislation is influenced by powerful corporate “lobbies” which spend millions writing the laws and engineering their approval. Prominent influence peddlers like the US felon Jack Abramoff boast that “every congressperson has their price.” The vote of citizens counts for nothing: the politician’s campaign promises have no relation to their behavior in office. Lies and deceptions are considered “normal” in the political process. The exercise of political rights are increasingly under police surveillance and active citizens are subject to arbitrary arrest. The political elite depletes the public treasury subsidizing colonial wars and pays for their military adventures by eliminating basic social programs, public agencies and services.

Legislators engage in vitriolic demagogy in virtual Punch and Judy puppet conflicts as public displays of partisanship while in private they feast together at the public trough. In the face of the discredited legislative institutions and the overt, gross buying and selling of public office, executive officials, elected and appointed, seize legislative and judicial powers.

Decaying democracy evolves into an “oligarchical democracy” as executive officials rule by fiat; overriding democratic rules and ignoring the interests of the majority. An executive junta, of elected and non-elected officials, resolves questions of war and peace, allocates billions of dollars or euros to a financial oligarchy, and reduces living standards of millions of citizens via class-biased “austerity packages.” The legislature abdicates its legislative and oversight function and submits to the executive junta’s “accomplished facts.” The citizenry is assigned the role of passive spectators – even as anger, disgust and hostility spreads and deepens. Isolated voices of dissenting representatives are drowned out by the cacophony of mass media contracted prestigious “experts” and academics shilling for the financial oligarchy and advising the executive junta. No longer do citizens look to the legislatures for relief or redress from the executive siezure and abuse of power. To fortify their absolute power, the oligarchies emasculate the constitutions, citing economic catastrophes and all pervasive “terrorist” threats. A vast and growing police state apparatus, with unlimited powers, enforces constraints on civic and political opposition. As legislative powers are sapped and executive authorities enlarge their sphere of action, the remaining democratic freedoms are curtailed via “bureaucratic restrictions” on time, place, and forms of political action. The purpose is to minimize the critical minority from mobilizing a sympathetic majority. As the economic crises worsen and the bondholders and investors demand higher interest rates, the oligarchy extends and deepens their austerity measures. Inequalities widen, exposing the oligarchical nature of the executive junta. The social bases of the regime narrows. The well-paid skilled workers and middle class employees and professionals begin to feel the acute erosion of wages, salaries, pensions, working conditions, and future career prospects. The narrowing of social support undermines the junta’s claim to democratic legitimacy. Faced with mass discontent and discredit and with strategic sections of the civil bureaucracy in revolt, factional strife breaks out among rival cliques within the “official parties” of government. The “democratic oligarchy” is pushed and pulled in several directions: it decrees social cuts but can only find limited support in implementing them. It decrees regressive taxes but cannot collect them. It launches colonial wars but cannot win them. The executive junta alternates between force and compromise; robust promises to the international bankers and then, under mass pressure, backsliding.

Over time oligarchical democracy is no longer useful as to the financial elite. Its democratic pretensions no longer can deceive the masses. Prolonged elite factional warfare erodes its willingness to impose the financial oligarchy’s full agenda. At this point oligarchical democracy as a political formula has run its course.

The financial elite are ready and willing to discard all pretenses of ruling via democratic oligarchs. They are seen as willing but too weak; too subject to domestic pressure from factional rivals and not willing to proceed to savage cuts in social budgets, even greater reductions in living standards and working conditions.

The real power behind the executive juntas comes to the fore. The international bankers discard the “native junta” and impose non-elected bankers to rule – dubbing their private bankers as technocrats.

The Transition to a Colonial “Technocratic” Dictatorship

The naked rule by foreign bankers is disguised by an ideology which describes it as rule by technocrats who are experts, apolitical and above private interests. The reality behind the technocratic rhetoric is that the officials appointed have a career of working with and for big financial private and international interests. Lucas Papdemos, the appointed Greek Prime Minister, worked for the Federal Reserve Bank of Boston and, as head of the Greek Central Bank, was responsible for cooking the books covering up the fraudulent budgetary accounts leading Greece to financial disaster. Mario Monti, the appointed Prime Minister of Italy was employed by the European Union and Goldman Sachs. These appointments by the banks are based on their total loyalty and unstinting commitments to impose the harshest regressive policies on the working populations of Greece and Italy. The so-called technocrats are not subject to party factions, nor remotely responsive to any social protests. They are free of all political commitments … except one, to secure the payment of the debt to foreign bondholders – especially the loans owed to major European and North American financial institutions. The technocrats are totally dependent on the foreign banks for their appointments and tenure in office. They have not a smattering of a political organizational base in the countries they govern. They rule because, foreign bankers threatened to bankrupt the countries if they were not appointed. They have zero independence, in the sense that the “technocrats” are merely instruments and direct representatives of the Euro-American bankers.

The “technocrats” by the nature of their appointments are colonial officials explicitly appointed at the behest of imperial bankers and sustained by them. Secondly, neither they nor their colonial mentors were elected by the people over whom they govern. They are imposed by economic coercion and political blackmail. Thirdly, the measures they adopt are designed to inflict the maximum pain by totally altering the basic relation-between labor and capital, by maximizing the power of the latter to hire, fire, fix salaries and working conditions. In other words, the technocratic agenda imposes a political and economic dictatorship.

The social institutions and political processes associated with a democratic-capitalist welfare state, corrupted by decadent democracies, eroded by oligarchical democracies are threatened with total demolition by the emerging colonial technocratic dictatorships (CTD). The language of social regression is full of euphemisms but the substance is clear. Social programs regarding public health, education, pensions, and disabilities are slashed or eliminated and the “savings” transferred into tributary payments to foreign bondholders (banks).

Public employees are fired, their retirement age extended and their salaries reduced and their tenure eliminated. Public enterprises are sold to foreign and domestic capitalist oligarchs with services curtailed and employees shed. Employers shred collective bargaining agreements. Workers are fired and hired at the whim of the owners. Vacations, severance pay, starting salaries and overtime pay are drastically reduced. These pro-capitalist regressive policies are dubbed “structural reforms.” Consultative processes are replaced by the dictatorial powers of capital – “legislated” and implemented by the appointed technocrats. Not since the time of Mussolini and fascist rule and the Greek military junta (1967-1973) has such a regressive assault on popular organizations and democratic rights taken place.

Comparing Fascist and Technocratic Dictatorships

The earlier fascist and military dictatorships have much in common with the current technocratic despots regarding the capitalist interests they defend and the social classes they oppress. But there are important differences which disguise the continuities.

The military junta in Greece and Mussolini in Italy seized power by force and violence, outlawed all opposition parties, press trade unions and closed the elected parliament. The current “technocratic” dictatorship is handed power by the political elites of the oligarchical democracy – a “peaceful” transition at least in its initial phase. In contrast to the earlier dictatorships, the current despotic regimes retain the hollowed out and emasculated electoral facades, as rubber stamp entities to provide a kind of “pseudo-legitimacy,” which beguiles the financial press but fools few public citizens.

From the very first day of technocratic rule the key slogans of the organized movements in Italy was, “No to a government of bankers”; while in Greece the slogan that greeted the puppet pragmatist Papdemos was “European Union, IMF, Get Out.”

The earlier dictatorships began as full blown police states, arresting pro-democracy movement activists and trade unionists before pursuing their pro-capitalist policies. The current technocrats first launch their vicious all-out assault on living and working conditions, with parliamentary assent and then in the face of sustained and determined resistance by the “parliaments of the street”, proceed to escalate police state repression by degree … practicing incremental police state rule.

Policies of the Technocratic Dictatorships: Scope, Depth and Method

The dictatorial organization of a technocratic regime is derived from its policies and political mission. In order to impose policies that result in massive transfers of wealth, power and legal rights from labor and households to capital, especially foreign capital, an authoritarian regime is essential, especially in anticipation of sustained resistance. The international financial oligarchy cannot secure “stable and sustainable” long term extraction of wealth with any semblance of democratic governance, even a decaying oligarchic democracy. Hence the last resort for the bankers in the EU and USA is to directly appoint one of their own to push, shove and impose a sequence of comprehensive large scale, long-term regressive changes. The mission of the technocrats is to impose an enduring institutional framework which will guarantee long-term, high interest payments based on decades of impoverishment and popular exclusion.

The mission of the “technocratic dictatorship” is not to put in place a single regressive policy of short duration, such as a salary freeze or dismissal of a few thousand school teachers. Their intent is to convert the entire state apparatus into an efficient press to continuously extract and transfer tax revenues and income from workers and employees to bond holders. To maximize the power and profits of capital over labor, the technocrats grant the capitalists absolute power to fix the terms of labor contracts, as far as hiring, firing, longevity, hours and working conditions.

The technocrats “method of rule” is to have an ear only for the foreign bankers, bondholders and private investors. The decision process is closed and limited to the coterie of bankers and technocrats without the least transparency. Above all, under colonial rules the technocrats must ignore the protestors if possible or, if necessary break heads. Under pressure from the banks, there is no time for mediation, compromise or delays as was the case under decaying and oligarchical democracies.

Ten historic transformations dominate the agenda of the technocratic dictatorships and their colonial mentors.

1) Massive shifts in budgetary allocations from welfare to bond and bank payments.

2) Large scale changes in income policies from wages to profits, interest payments and rents.

3) Highly regressive tax policies, increasing consumer (VAT) and wage taxes and lowering taxes on bondholders and investors.

4) Eliminating employment security (“labor flexibility”), increasing the reserve army of unemployed to lower wages, intensifying the exploitation of employed labor (“higher productivity”).

5) Rewriting labor codes, undermining the balance of power between organized labor and capital. Wages, working conditions and health issues are taken out of the hands of rank and file unionists and put in the hands of technocratic “corporate commissions.”

6) The dismantling of a half century of public enterprises and institutions and privatizing telecommunications, energy, health, education and pension funds. Trillion dollar privatizations are windfall profits on a world historic scale. Private monopolies replace public and provide fewer jobs and services without adding any new productive capacity.

7) The economic axis shifts from production and services for mass consumption in the domestic market, to exports of specialized goods and services to overseas markets. This new dynamic requires lower wages to “compete” internationally but shrinks the domestic market. The new strategy translates into an increase in hard currency earnings from exports to pay the debt to the bondholders but results in greater misery and unemployment for domestic labor. Under the technocratic “model,” prosperity accrues to vulture investors buying lucrative but financially strapped local producers and real estate on the cheap.

8) The technocratic dictatorship by design and policy aims at a “bipolar class structure” in which the bulk of the skilled workers and the middle class is impoverished and suffers downward mobility while enriching a strata of local bondholders and business owners who cash in on interest payments and the low cost of labor.

9) Deregulation of capital, privatization and the centrality of financial capital leads to greater colonial (foreign) ownership of land, banks, strategic economic sectors and “social” services. National sovereignty is replaced by imperial sovereignty in the economy as well as politics.

10) The unified power of colonial technocrats and imperial bondholders dictating policy concentrates power in a non-elected power elite. They rule with a narrow social base and no popular legitimacy. They are politically vulnerable, therefore, constantly dependent on economic threats or physical force.

Three Stages of Technocratic Dictatorial Rule

The historic task of the technocratic dictatorship is to roll-back the political, social and economic advances gained by the working class, public employees and pensioners since the defeat of fascist capitalism in 1945. The unmaking of over sixty years of history is no easy task, least of all in the midst of a deep ongoing socio-economic crises, in which the working class has already experienced severe cuts in wages and benefits and the number of young unemployed (18-30 years) throughout the EU and North America ranges between 25 to 50 percent.

The proposed agenda of the “technocrats” – parroting their colonial mentors in the banks – is ever more severe reductions in living and working conditions.The proposed “austerity” occurs in the face of growing economic inequalities between the wealthy 5% and the bottom 60% between Southern Europe and Northern Europe. Faced with downward mobility and heavy indebtedness, the middle class and especially their ‘educated children’, are outraged by the technocrats call for even greater social cuts. Outrage spreads from the lower middle class to business and professionals on the verge of bankruptcy and loss of status.

The technocratic rulers, constantly play on mass insecurity and fear of a “catastrophic collapse” if their ‘bitter medicine’ is not swallowed by the anguished middle classes who fear the prospect of sinking into the working class or worse.

The technocrats call on the present generation to sacrifice, to commit virtual suicide, to save future generations. With gravity and humble posturing they speak of “equal sacrifices”, a message belied by the firing of tens of thousands of employees and the selling of billions of euros/dollars of the national patrimony to foreign bankers and investors. Lowering public expenditures to pay bondholders and entice private investors erodes any appeal for “national unity” and “equal sacrifice” ..The technocratic regime strives to act decisively and quickly to impose its brutal regressive agenda, the rollback of sixty years of history before the masses have time rise up and bring them down.

To preclude political opposition the technocrats demand “national unity”, (the unity of bankers and oligarchs), the backing of the decadent electoral parties and their leaders and their total submission to the colonial bankers’ demands.

The technocrats’ political trajectory will be short lived given the draconian systemic changes and repressive structures they propose, the best they can accomplish is to dictate and implement policies and then return to their lucrative sanctuaries in the overseas banks.

Technocratic Rule: Stage One

With the unanimous backing of the mass media and the full backing of the powerful bankers, the technocrats take advantage of the downfall of the despised and discredited politicians of the past electoral regimes. They project a clean government image which speaks to a regime which is efficient and competent, capable of decisive action. They promise to put an end to deteriorating living conditions and partisan political paralyses. At the onset of their rule the technocratic dictators exploit the justified popular disgust with privileged “do-nothing” politicians to secure a measure of popular consent or at least passive acquiescence from the majority of the citizens drowning in debt and in search of a “savior.”

It should be noted that among the most politically aware and social conscious minority, the bankers resort to a colonized “technocratic regime” cuts no ice: they immediately identify the technocratic regime as illegitimate deriving powers from foreign bankers. They affirm the rights of citizens and national sovereignty. From the beginning, even under the cloak of emergency powers, the technocrats face a core of mass opposition.

The bankers realistically recognize the technocrats must move quickly and decisively.

Stage Two: Technocrats’ Shock Policies

The technocrats launch 100 days of the most egregious class warfare against the working class since the military/fascist regimes. In the name of the Free Markets, the Bondholder and the Unholy Alliance of political oligarchs and bankers dictate edicts, and laws are passed, immediately firing tens of thousands of public employees. Scores of public enterprises are rushed to the auction block. Job security is abolished and firing without cause becomes the law of the land. Regressive taxes are decreed and households are impoverished. The entire income pyramid is turned on its head. The technocrats widen inequalities and deepen immiseration.

The initial euphoria greeting technocratic rule is replaced by bitter reproaches. The lower middle class looking for a paternal dictatorial resolution of their condition, recognize “another political swindle”. As the technocratic regime races to fulfill its mission to the foreign bankers, the popular mood sours, bitterness spreads even among its ‘passive collaborators’. There are no crumbs from the table of a colonial regime empowered to maximize the outflow of state revenues to bondholders.

The compromised political oligarchy tries to revive their fortunes and “questions” the particularities of the technocratic “tsunami” smashing the social fabric of society. The scale and scope of the dictatorship’s extremist agenda and the ongoing build-up of mass frustrations frightens the political party collaborators, while the bankers urge them on to bigger and deeper social cuts. The technocrats in the face of the burgeoning popular storm begin to cower.

The bankers call for greater backbone and offer new loans for “keeping the course.” The technocrats bunker down – alternating between pleas for time and sacrifice with promises of prosperity “around the corner.” Mostly they rely on constant police mobilization and de facto militarization of civil society.

Mission Accomplished: Civil War or the Return of Oligarchical Democracy?

The outcome of the “experiment” with a colonial dictatorial technocratic regime is difficult to predict. One reason is because the measures adopted are so extreme and extensive, that they unify almost all important social classes (except the top 5%) against them at the same time. The concentration of power in an “appointed” elite further isolates them and unifies most citizens in favor of democracy against colonial submission and unelected rulers. The measures approved by the technocrats face the unlikely prospect of full implementation, especially by civil servants and public employees facing firings, pay cuts and reduced pensions. The across the board cuts undermine “divide and conquer” tactics. Given the scope and depth of the downgrading of the public sector and the indignity of serving a regime clearly under colonial tutelage, it is possible that breaks and fissures will take place in the military and police apparatus especially if they provoke popular uprisings which turn violent. The technocratic juntas cannot ensure that their policies will be implemented. If not, revenues will falter; strikes and protests will scare off predator buyers of public firms. The big squeeze will undermine local business, production will decline the recession will deepen.

Technocratic rule is by its nature transitory. Under threat of a mass revolt the new rulers will flee to their overseas financial sanctuaries. Local oligarchical collaboraters will hasten to augment their billion dollar euro overseas bank accounts in London, New York and Zurich.

The technocratic dictatorship will make every effort to hand power back to the oligarchical democratic politicians with the proviso that they retain the regressive changes in place. Technocratic rule will end up with “paper victories” unless the overseas bankers insist the “return to democracy” operates within the “new order.”

The application of force could boomerang. The technocrats and democratic oligarchs renewed threats of an economic catastrophe for non-compliance will be counter-manded by the reality of real existing misery and mass unemployment. For millions the living catastrophe resulting from technocratic policies will outweigh any future threats. The rebellious majority may choose to rise up and overthrow the old order and take its chances in an independent democratic socialist republic. One of the unforeseen consequences of imposing radical colonial appointed technocratic dictatorship is that it clears the political landscape of parasitic political oligarchies and lays the groundwork for a clean break. It facilitates renouncing the debt and reconstituting the social fabric of an independent democratic republic.

The serious danger is that the discredited politicians of the old order will demagogically attempt to seize the democratic banners of the “anti-dictatorial anti-technocrat” struggle to bring back what Marx called “the old crap of the previous order.” The recycled political oligarchs will adapt to the “restructured” new order of eternal debt payments as part of a deal to maintain the ongoing process of unending social regression. The revolutionary struggle against the colonial technocratic rulers must continue and deepen, to block the restoration of the democratic oligarchs.

The relation of information technology (IT), and more specifically the internet, to politics is a central issue facing contemporary social movements.  Like many previous scientific advances the IT innovations have a dual purpose:  on the one hand, it has accelerated the global flow of capital, especially financial capital and facilitated imperialist ‘globalization’.  On the other hand, the internet has served to provide alternative critical sources of analysis as well as easy communication to mobilize popular movements.

The IT industry has created a new class of billionaires, from Silicon Valley in California to Bangalore, India.  They have played a central role in the expansion of economic colonialism via their monopoly control in diverse spheres of information flows and entertainment.

To paraphrase Marx “the internet has become the opium of the people”.  Young and old, employed and unemployed alike, spend hours passively gazing at spectacles, pornography, video games, online consumerism and even “news” in isolation from other citizens, fellow workers and employees.

In many cases the “overflow” of “news” on the internet has saturated the internet, absorbing time and energy and diverting the ‘watchers’ from reflection and action.  Just as too little and biased news by the mass media distorts popular consciousness, too many internet messages can immobilize citizen action.

The internet, deliberately or not, has “privatized” political life.  Many otherwise potential activists have come to believe that circulating manifestos to other individuals is a political act, forgetting that only public action, including confrontations with their adversaries in public spaces in city centers and in the countryside, is the basis of political transformations.

IT and Financial Capital

Let us remember that the original impetus for the growth of “IT” came from the demands of big financial institutions, investment banks and speculative traders who sought to move billions of dollars and euros with the touch of a finger from one country to another, from one enterprise to another, from one commodity to another.

Internet technology was the motor force for the growth of globalization at the service of financial capital.  In some ways IT played a major role in precipitating the two global financial crises of the past decade (2001-2002, 2008–2009).  The  bubble in IT stocks of 2001 was a result of the speculative promotion of overvalued “software firms” de-linked from the ‘real economy’.  The global financial crash of 2008-2009 and its continuation today, was induced by the computerized packaging of financial swindles and underfunded real estate mortgages.  The ‘virtues’ of the internet, its rapid relay of information in the context of speculator capitalism turned out to be a major contributing factor to the worse capitalist crises since the Great Depression of the 1930s.

The Democratization of the Internet

The internet became accessible to the masses as a market for commercial enterprise and then spread to other social and political uses. Most importantly it became a means of informing the larger public of the exploitation and pillage of countries and people by multi-national banks.  The internet exposed the lies which accompany US and EU imperialist wars in the Middle East and Sothern Asia.

The internet has become contested terrain, a new form of class struggle, engaging  national liberation and pro-democracy movements.  The major movements and leaders from the armed fighters in the mountains of Afghanistan to the pro-democracy activists in Egypt, to the student movements in Chile and including the poor peoples’ housing movement in Turkey, rely on the internet to inform the world of their struggles, programs, state repression and popular victories.  The internet links peoples’ struggles across national boundaries – it is a key weapon in creating a new internationalism to counter capitalist globalization and imperial wars.

To paraphrase Lenin, we could argue that 21st century socialism can be summed up by the equation:  “soviets plus internet = participatory socialism”.

The Internet and Class Politics

We should remember that computerized information techniques are not ‘neutral’ – their political impact depends on their users and overseers who determine who and what class interests they will serve.  More generally the internet must be contextualized in terms of its insertion in public space.

The internet has served to mobilize thousands of workers in China and peasants in India against corporate exploiters and real estate developers.  But computerized aerial warfare has become the NATO weapon of choice to bomb and destroy independent Libya. The US drones which send missiles that kill civilians in Pakistan and Yemen are directed by computer ‘intelligence’.  The location of Colombian guerrillas and the deadly aerial bombings are computerized.  In other words, IT technology has dual uses:  for popular liberation or imperial counter revolution.

Neo-liberalism and Public Space

The discussion of “public space” has frequently assumed that “public” means greater state intervention on behalf of the welfare of the majority; greater regulation of capitalismand increased protection of the environment.  In other words, benign “public” actors are counter-posed to exploitative private market forces.

In the context of the rise of neo-liberal ideology and policies, many progressive writers argue about the “decline of the public sphere”. This argument overlooks the fact that the “public sphere” has increased its role in society, economy and politics on behalf of capital, especially financial capital, and foreign investors.  The “public sphere”, specifically the state, is much more intrusive in civil society as a repressive force, particularly as neo-liberal policies increase inequalities.  Because of the intensification and deepening of the financial crises, the public sphere (the state) has undertaken a massive role in bailing out bankrupt banks.

Because of large scale fiscal deficits provoked by capitalist class tax evasion, colonial war spending and public subsidies to big business, the public sphere (state) imposes class based “austerity” program-cutting social expenditures and prejudicing public employees, pensioners, and private wage and salaried employees.

The public sphere diminished its role in the productive sector of the economy.  However, the military sector has grown with expansion of colonial and imperial wars.

The basic issue underlying any discussion of the public sphere and the social opposition is not its decline or growth but rather the class interests which define the role of the public sphere.  Under neo-liberalism, the public sphere is directed by the use of public treasury to finance bank bailouts, militarism and expanded police state intervention.  A public sphere directed by the “social opposition” (workers, farmers, professionals, employees) would enlarge the scope of public sphere activity with regard to health, education, pensions, environment and employment.

The concept of the “public sphere” has two opposing faces (Janus-like): one facing capital and the military; the other labor/social opposition.  The role of the internet is also subject to this duality: on the one hand the internet facilitates large scale movements of capital and rapid imperial military interventions; on the other hand it provides rapid flow of information to mobilize the social opposition.  The basic question is what kind of information is transmitted to what political actors and for what social interest?

The Internet and the Social Opposition:  The Threat of State Repression

For the social opposition the internet is first and foremost a vital source of alternative critical information to educate and mobilize the “public” – especially among progressive opinion — leaders, professionals, trade unionists and peasant leaders, militants and activists.  The internet is the alternative to the capitalist mass media and its propaganda, a source of news and information that relays manifestos and informs activists of sites for public action.  Because of the internet’s progressive role as an instrument of the social opposition it is subject to surveillance by the repressive police-state apparatus.  For example, in the USA over 800,000 functionaries are employed by the “Homeland Security” police agency to spy on billions of emails, faxes, telephone calls of millions of US citizens.  How effective the policing of tons of information each day is another question.  But the fact is that the internet is not a “free and secure source of information, debate and discussion”.  In fact, as the internet becomes more effective in mobilizing the social movements in opposition to the imperial and colonial state, the greater is the likelihood of police-state intervention under the pretext “combating terrorism”.

The Internet and Contemporary Struggle:  Is it Revolutionary?

It is important to recognize the importance of the internet in detonating certain social movements as well as relativizing its overall significance.

The internet has played a vital role in publicizing and mobilizing “spontaneous protests” like the ‘indignados’ (the indignant protestors) mostly unaffiliated unemployed youth in Spain and the protestors involved in the US “Occupy Wall Street”.  In other instances, for example, the mass general strikes in Italy, Portugal, Greece and elsewhere the organized trade union confederations played a central role and the internet had a secondary impact.

In highly repressive countries like Egypt, Tunisia and China, the internet played a major role in publicizing public action and organizing mass protests.  However, the internet has not led to any successful revolutions – it can inform, provide a forum for debate, and  mobilize, but it cannot provide leadership and organization to sustain political action let alone a strategy for taking state power.  The illusion that some internet gurus foster, that ‘computerized’ action replaces the need for a disciplined, political party, has been demonstrated to be false:  the internet can facilitate movement but only an organized social opposition can provide the tactical and strategic direction which can sustain the movement against state repression and toward successful struggles.

In other words, the internet is not an “end in itself” – the self-congratulatory posture of internet ideologues in heralding a new “revolutionary” information age overlooks the fact that the NATO powers, Israel and their allies and clients now use the internet to plantviruses to disrupt economies, sabotage defense programs and promote ethno-religious uprisings.  Israel sent damaging viruses to hinder Iran’s peaceful nuclear program; the US, France and Turkey incited client social opposition in Libya and Syria.  In a word, the internet has become the new terrain of class and anti-imperialist struggle.  The internet is a means not an end in itself.  The internet is part of a public sphere whose purpose and results are determined by the larger class structure in which it is embedded.

Concluding Remarks:  “Desktop Militants” and Public Intellectuals

The social opposition is defined by public action:  the presence of collectivities in political meetings, individuals speaking at public meetings, activists marching in public squares, militant trade unionists confronting employers, poor people demanding sites for housing and public services from public authorities…

To address an active assembled public meeting, to formulate ideas, programs and propose programs and strategies through political action defines the role of the public intellectual. To sit at a desk in an office, in splendid isolation, sending out five manifestos per minute defines a “desktop militant”.  It is a form of pseudo-militancy that isolates the word from the deed.  Desktop “militancy” is an act of verbal inaction, of inconsequential “activism”, a make-believe revolution of the mind.

The exchange of internet communications becomes a political act when it engages in public social movements that challenge power.  By necessity that involves risks for the public intellectual:  of police assaults in public spaces and economic reprisals in the private sphere.  The desktop “activists” risk nothing and accomplish little.  The public intellectual links the private discontents of individuals to the social activism of the collectivity.  The academic critic comes to a site of action, speaks and returns to their academic office.  The public intellectual speaks and sustains a long-term political educational commitment with the social opposition in the public sphere via the internet and in face to face daily encounters.

I’m not supposed to know anything about foreign policy.

— GOP Presidential candidate Herman Cain

Not everything, mind you, but anything, which would put him on par with the dumbest American living under the heaviest and mossiest rock. Hell, he’s running neck to neck with that boulder. Though Cain knows nothing, he has enough political sense to bluster, “If you mess with Israel you’re messing with the United States of America.”

That’s been the mantra in Washington, Wall Street and Madison Avenue. Iran knows this as well, and that’s why it is, in all likelihood, trying to develop the nuclear bomb, not to strike New York or Washington, but Tel Aviv. It only makes sense, since that’s the only deterrence it has against an American invasion.

Clueless Cain thinks the Iranians have warships off our shore, but it’s America who has Iran surrounded, with troops in Afghanistan and Iraq. The US Fifth Fleet also operates from Bahrain, a mere 120 miles from the Iranian coast. Washington has been itching for a fight with Iran ever since it had the (Muslim) balls to depose the CIA-installed Shah and kept 52 Americans hostage for 444 days. Iran is also the largest Islamic country to openly defy the United States. By the way, it also has a lot of oil and natural gas.

Threatened for three decades by the biggest empire on earth, what can Iran do but strive to aim a nuclear warhead at Israel? You mess with us, we’ll kill your daddy!

A few days ago, I was a guest on Iran’s Press TV to talk about the anti-Wall Street protest. On the same show was Joel Kovel, author of Overcoming Zionism: Creating a Single Democratic State in Israel/Palestine. A year after his book came out, Kovel was fired from Bard College. Seeing a causal effect, Kovel issued a statement charging that he was terminated because of “differences between [himself] and the Bard administration on the issue of Zionism.” At that time, I was teaching creative writing at Bard, so I tried to drag this controversy onto its listserv, but no one, absolutely no one, responded, to my astonishment. Hey, a college teaching job isn’t easy to come by, so why rock the boat? President Botstein will kick your ass. A few months earlier, the same listserv was orgasmic with cheering for Obama, but then again, nearly all of the American Left were. Ah, how idyllic and delightful it is to be a tenured liberal in the waning days of empire!

2011, at another supposedly radical bastion, Berkeley, cops wacked students with the chancellor’s approval. Protesting outrageous tuition hikes, these students correctly blamed banks for their university’s and state’s budget crises, but banks and universities have been in cahoots for a long time now. Schools jack up rates, knowing they can send students to banks for loans, but no matter what one’s major these days, the jobs are simply not there, but one’s debts are, for life!

Is it a surprise, then, that so many of the Occupy Wall Street protesters are recent college graduates? Spat out by the system, they know that they’ve been had. Like investment banks, American colleges are also purveyors of ponzi schemes. Beaten to the ground, flattened, these protesters are suspicious of all hierarchies, of all pyramids, and that’s why they’ve refused to elevate leaders or even to prioritize key issues, but these reluctances must be overcome, I think, for this movement to move forward.

Its success, so far, can be attributed to two crucial decisions, to have an open-ended occupation, not a one-day march, and to target Wall Street. This movement, then, is about the looting and corruption of the money manipulators, so it’s important that the public be educated and constantly reminded about the abuses of the Federal Reserve, Goldman Sachs, Citibank and the rest of the banking cartel.

As Americans endure actual or symbolic homelessness across this land, their government is hankering for yet another war. To distract attention from problems at home, the US wants to attack Iran and/or Syria. This is madness, certainly, but not to the war profiteers. Having bought off all of our politicians, these money masters own the Pentagon and its obscene budget that eats up half of our tax money.

When Michael Avery of Suffolk University pointed out, in a leaked email, that it was irrational to support troops sent overseas by a war-prone country to kill, he was met with considerable abuse and hostility. Unsurprisingly, his school’s president quickly distanced himself from Avery’s lucid remarks by saying that he himself was sending a care package to the troops. So, yes, if you don’t die by the time this box arrives, have a bar of chocolate on me!

How can anyone in his right mind not be against corruption, since corruption is just stealing public money, but unfortunately, many of the 99% are still misled into supporting our military. They cannot see that the Pentagon, like the banks, is also a nexus of corruption, that its main task is not to defend our republic but to funnel money from the 99% to the 1%.

Do not lose sight that our main battle is against the corrupt banking cartel and equally corrupt Pentagon. Much of our financial, political, social and ecological ills can be traced to these monsters. Winter is coming. Time is running out.

Whether the super committee reaches agreement or not, however, the deficit hawks win.  If they agree, either $1.2 trillion gets cut from the budget or taxes go up by that amount; and the committee co-chair has categorically stated taxes are not going up, so that means the budget will be cut.  If agreement is not reached, $1.2 trillion in cuts automatically kick in, split evenly between domestic and military spending.  Either way, the economy will wind up with $1.2 trillion less in the way of purchasing power.  The result will be to reduce demand, kill jobs, and put more people on the streets.

For the deficit hawks, however, it all seems to be going according to plan.  The super committee is characterized as an emergency measure that was rushed through to avoid an arbitrarily imposed August deadline for freezing the debt ceiling, but it has actually been in the works for years.  In 2009, it was called the “Bipartisan Task Force for Responsible Fiscal Action”.  That plan died when its Senate sponsors, Judd Gregg and Kent Conrad, failed to secure 60 votes for passage in the Senate.  The Gregg-Conrad bill was criticized as railroading through legislation that would unconstitutionally slash domestic services without congressional debate, but its task force would actually have been LESS autocratic than the super committee, which has sweeping powers and needs only a simple majority among its 12 members to prevail.

What has been forced out of the debate is whether cutting the budget is a good idea at all.  The Peter Peterson Foundation, which has been pushing “austerity” for years, has finally gotten its way.  Hedge fund magnate Peter G. Peterson was Chairman of the Council on Foreign Relations until 2007 and head of the New York Federal Reserve between 2000 and 2004.  He made his fortune with the controversial Blackstone Group, which he co-founded and chaired for many years.  The Peter Peterson Foundation was established in 2008 with a $1 billion endowment to raise public awareness about U.S. fiscal-sustainability issues related to federal deficits, entitlement programs, and tax policies.  The money was used to spearhead a massive campaign to reduce the runaway federal debt.  Hysteria over the debt then prompted Tea Party newbies in Congress to hold a gun to Congress’ head by arbitrarily capping the debt.

In the campaign to educate us to the debt’s perils, we were repeatedly warned that when foreign lenders decided to pull the plug, the U.S. would have to declare bankruptcy; that we were mortgaging our grandchildren’s futures and selling them into debt-slavery; and that all this was the fault of the citizenry for borrowing and spending too much.  The American people, who are already suffering massive unemployment and cutbacks in government services, would have to sacrifice more and pay the piper more, just as in those debt-strapped countries forced into austerity measures by the IMF.

The fear-mongering, however, is a red herring.  A sovereign nation can always find the money to pay debts owed in its own currency.  The Federal Reserve can buy the debt itself – just as it has been doing.  That alternative would effectively eliminate the problem of interest, since the Fed returns its profits to the government after deducting its costs.

Alternatively, Congress could reclaim the power to issue money from the banks and fund its budget directly.  The U.S. could pay its bills using debt-free U.S. Notes or Greenbacks, just as President Lincoln did to avoid a crippling debt during the Civil War.  Congress could do this without changing any laws. Congress is empowered to “coin money,” and the Constitution sets no limit on the face amount of the coins.  It could issue a few one-trillion dollar coins, deposit them in an account, and start writing checks.

Neither option need inflate prices.  As long as the money is used to purchase goods and services, the result will simply be to increase demand, increasing production.  Prices will not increase until the economy reaches full employment, and at that point any excess in the money supply can be taxed back to the government, keeping prices stable.

The key to all this is that our debt is owed in our own currency – U.S. dollars.  Our government has the power to fix its solvency problems itself, by simply issuing the money it needs to pay off or refinance its debt.  The U.S. federal debt has been carried on the books since 1835.  It has NEVER been paid off during that time but just continues to grow.  This has not hurt the economy, which for most of that period has been among the most vibrant in the world.  The federal debt IS the money supply.  All of our money except coins is created as bank debt.  Historically, when the deficit has been reduced, the money supply has been reduced along with it, throwing the economy into recession.

The real problem with a growing federal debt is the interest on it, which WILL become an insurmountable burden if allowed to grow exponentially.  Interest paid on the federal debt in 2010 was $414 billion, or about one-half of personal income tax receipts.  That’s about as high as we dare let it go.  But this problem can be eliminated either by funding the debt through the nation’s own central bank, effectively interest-free, or by the Treasury issuing the money outright, interest-free.

The burgeoning debt has been blamed on reckless government and consumer spending; but the debt crisis was created, not by a social safety net bought and paid for by the taxpayers, but by a banking system taken over by Wall Street gamblers.  The banking debacle of 2008 caused credit to collapse, businesses to go bankrupt, and unemployment to soar, drastically reducing the federal tax base.  If anyone should be held to account, it is Wall Street; but the bankers were bailed rather than jailed, and the taxpayers got billed for the crime.

We have been deluded into thinking that “fiscal responsibility” is something for our benefit, something we actually need in order to save the country from bankruptcy.  In fact, it has simply been an excuse to impose radical austerity measures on the people, measures that benefit the 1% while locking the 99% in a dungeon of debt peonage.

The popular perception is that the ordinary people have been living “beyond their means”, a false and invidious conventional wisdom which masks the real nature of the crisis. For it is the elites across Europe and the Americas who have benefited most from the European Union, built on Reaganite neoliberalism, which in turn was fashioned to meet the needs of business. The neoliberal policies of all Western governments, “left” or “right” during the past three decades are the direct cause of the current highly skewed income distribution – by some accounts, worse than in any previous era of human history.

The supposed generous patriarch of this big happy family is Germany, with its hard workers and tidy streets. But while the Aesopian Greek hares are told they must tighten their belts and make do with less health and education, the fact that the Greek arms imports continue to grow — importing German weapons and “defence” systems (against what threat?) — is not mentioned. And it is not only weapons, but consumer goods from Germany that have displaced Greek products in the anonymous Euro-market, as Greece increasingly becomes northern Europeans’ decadent playground, albeit with more than its fair share of un- and under-employed.

As long as banks were lending freely to governments to finance this fool’s paradise, the lower classes were not made to feel the pinch, and the system kept chugging along. Now that government debts and bank reserves have approached their limit and reckless banks are going bankrupt, the struggle is on over who should pay for the untenable system. Since the economic elites are also the political elites, naturally they want the broad people to pay with social service cuts, reduced and delayed pensions, regressive sales taxes and the like. The intense propaganda campaign now underway is to convince the poor in the Euro-laggards that they are the guilty ones, not their own elites or the Euro-elites in Frankfurt or Berlin or wherever.

The EU was a project to end the prospect of war in Europe and to gather the broken pieces of shattered empires into a workable collective economic-political force in the world. To a surprising extent it succeeded, but without facing hard choices and a frank debate about who benefits. As the problems sharpen, any sense of collective goodwill evaporates, and chauvinist, even racist parties gain rapidly in popularity, hearkening back to faux-halcyon days of distant imperial privilege. But as history shows, the ability of individual European countries to extract surplus from colonies is not guaranteed indefinitely. The same goes for the ability of Germany to lord it over its Euro-partners. As the knives come out, the very existence of the European project comes into question.

The rich standard of living that Europe has enjoyed over the past few decades is directly a result of first the import of Third World workers (to a large extent Muslim) and then the incorporation of the ex-Socialist bloc after the collapse of the Soviet Union in 1991. As the financial crisis plays itself out, these immigrant workers, the very ones who have served Europeans so well, are now targeted and racially profiled, as the elites try to deflect attention from their own hidden role in the ongoing crisis. This is the First World/Third World extension of the above argument about Euro-laggards, with the victims no longer the Greek hares, but Nigerian and Egyptian immigrants.

A similar tale can be told for the US , with its large immigrant population, its Tea Partiers and Islamophobes, unable or unwilling to face the underlying problems resulting from decades of neoliberal policies. In the Americas, it is China that provides the manufactured goods which are paid for by US treasury bonds piling up in Chinese bank vaults, and no one in particular is accused of being the carefree Aesopian hare — state governments merely use their deficits as the deus ex machina — but the pattern is the same.

As the people who have woken up to the reality are arrested and booted out of Trafalgar Square, Zuccotti Park, Chapman Square (Oakland) and dozens of other city commons around the world, the long cold winter of discontent sets in. However, the problems are going nowhere and the people are just waiting for the next opportunity to express their outrage.

The toppling of governments means nothing in this scenario. Italy’s Silvio Berlusconi and Greece’s George Papandreou only handed over power on the explicit understanding that the “fresh faces” would carry out the austerity plans imposed by the EU heavyweights. Berlusconi’s replacement is 68-year-old, ex-EU commissioner Mario Monti, an economics professor steeped in the dogmas that brought Italy to its current impasse. Papandreou’s replacement is ex-European Central Bank vice president Lucas Papademos who immediately announced, “Our membership of the euro is our only choice.” Not much thinking outside the box from these folks, the very ones who got their people into their present fix.

Some Americans at the top are already awake. The 138 members of “Patriotic Millionaires for Fiscal Strength” (0.005% of all US millionaires) have been lobbying President Barack Obama and congressional leaders for a year now pleading with them: “Please do the right thing, raise our taxes.” Not surprisingly, no response from a president and Congress beholden to the 3.1 million other millionaires — the proverbial 1%.

Occupy Washington DC published their no-brainer proposals 17 November: redistribute income through progressive taxation, end the wars, expand health care, democratise business. This will end the budget deficit overnight, create full employment through stimulating local demand, eventually ending the foreign trade deficit, making America strong and once again the envy of the world. But, of course, Congress is captive to the current military industrial complex, and can and will do nothing.

The slow-motion drift into oblivion is surreal. Clearly momentous changes are in store for both Europe and America, and the sooner thinkers and actors get to work coming to grips with hard, cold reality, the better for the people — and for the elites, who are living on borrowed time, too. How long before the revolution?

I feel the duty to convey to those taking the trouble to read these Reflections the opinion that all of us, with no exception, are obliged to create awareness about the risks that humankind are running in an inexorable manner, towards a final and total catastrophe as the consequence of irresponsible decisions made by politicians who fate, rather than talent or merit, has placed the destiny of humankind in their hands.

Whether they are citizens of their country or not, whether they are followers of some religious belief or unbelievers, no human being in their right mind would agree that their children or closest kin should perish precipitously or as victims of atrocious and torturous misery.

On the heels of the repugnant crimes that are being increasingly committed by NATO under the aegis of the United States and the wealthiest countries in Europe, the gaze of the world focused on the G-20 meeting where the profound economic crisis affecting every nation today should have been analyzed. International opinion, especially in Europe, was awaiting an answer for the profound economic crisis that, with its serious social and even climatic implications, is threatening every inhabitant on the planet. At that meeting, it was being decided whether the Euro would be able to be kept as the common currency for most of Europe and even whether some of the countries would be able to remain in the community.

There was no answer or solution of any kind for the most serious problems of the world economy despite the efforts of China, Russia, Indonesia, South Africa, Brazil, Argentina and other emerging economies, anxious to cooperate with the rest of the world in the search for solutions for the serious economic problems affecting them.

What was unusual was that just when NATO concluded the Libyan operation – after the air attack that injured the constitutional head of that country, destroyed the vehicle carrying him and leaving him at the mercy of the empire’s mercenaries who murdered him and exhibited his body as a war trophy, violating Muslim customs and traditions – the IAEA, a UN body and an institution that ought to stand for world peace, released the political, money-driven and sectarian report putting the world on the brink of war with the use of nuclear weapons that the Yankee empire, in alliance with Great Britain and Israel, has been meticulously preparing against Iran.

After the veni, vidi, vici of the famous Roman emperor more than two thousand years ago, translated to “I came, I saw and he died” broadcast for public opinion by an important television network as soon as the death of Gaddafi had been learned of, there are more than enough words to describe US policy.

Now what is important is the need to create clear awareness in the peoples about the abyss towards which humankind is being led. Twice our Revolution lived through dramatic dangers: in October of 1962, the most critical of all where humankind was on the brink of nuclear holocaust; and in mid-1987 when our forces were facing racist South African troops armed with nuclear weapons that the Israelis had helped them create.

The Shah of Iran also collaborated, along with Israel, with the racist and fascist South African regime.

What is the UN? An organization driven by the United States before the end of World War II. That nation, whose territory was considerably far away from the theatre of war, had incredibly increased its wealth; it accumulated 80% of the world’s gold and under the leadership of Roosevelt, a sincere anti-fascist, it promoted the development of the nuclear weapon that Truman, his successor, a mediocre oligarch, did not hesitate in using against the defenceless cities of Hiroshima and Nagasaki in 1945.

The world’s gold monopoly in United States’ power and the prestige of Roosevelt handed the US the Bretton Woods agreement, assigning it the role of issuing the dollar as the only currency to be used for decades in world trade, with no limiting factor other that it’s being backed by the gold metal.

At the end of that war, the US was also the only country possessing the nuclear weapon, a privilege it did not hesitate in transmitting to its allies and members in the Security Council: Great Britain and France, the two most important colonial powers in the world at that time.

Truman had not even informed the USSR one single word about the atomic weapon before using it. China, at that time governed by Nationalist General Chiang Kai-shek, a pro-Yankee oligarch, could not be excluded from that Security Council.

The USSR, seriously stricken by the war, destruction and the loss of more than 20 million of its sons and daughters in the Nazi invasion, dedicated considerable economic, scientific and human resources to bring its nuclear capacity up to par with that of the United States. Four years later, in 1949, it tested its first nuclear weapon: the H-bomb in 1953; and in 1955 its first megaton bomb. France had its first nuclear weapon in 1960.

There were only three countries that had the nuclear bomb in 1957 when the UN, under the aegis of the Yankees, created the International Atomic Energy Association (IAEA). Does anybody think that US instrument did anything to warn the world about the terrible dangers to which it would expose human society when Israel, unconditional US and NATO ally, located in the very heartland of the world’s most important oil and gas reserves, would become a dangerous and aggressive nuclear power?

Its forces, cooperating with colonial British and French troops, attacked Port Said when Abdel Nasser nationalized the Suez Canal, French property; this forced the Soviet premier to send an ultimatum demanding the ceasing of that aggression that the European allies of the US had no alternative other than to attack.

• To be continued tomorrow.

Commentators and journalists hardly ever ask the two most important questions. Why? How?

The Euro as the currency of seventeen diverse countries with their different cultures, lifestyles, traditions, tax and spend regimes is dead.  The sooner we realise that, the better it will be for everyone.  Research by the Centre for Economic and Business Research (CEBR) predicts a rosier future after a short sharp shock of eurozone collapse.

In an article in the Telegraph, headlined “Collapse of the Euro will help Britain”, the conclusions of the research are presented as:

Britain will be better off in five years’ time if the eurozone breaks up than if the single currency survives the debt crisis, research suggests today.  The disorderly break-up of the euro would mean a short, sharp economic shock and probably a recession, but would be followed by a quicker return to strong economic growth, according to the Centre for Economics and Business Research.  The economists also predict that break-up would free many eurozone members from the deficit-cutting austerity policies that threaten to subdue their growth for years.

The article quotes the research thus:

If it [the eurozone] breaks up the immediate pain is much more intense, but then there is a more stable basis and we would expect that within about 30 months growth will actually be faster than if the eurozone survives in its current form.

I am no economist, but this analysis makes a lot of sense to me and probably to most people in Europe.  In the absence of cogent explanations to the contrary from politicians who have invested a lot of capital in the Euro, and are influenced by self serving institutions and lobbyists, I believe the CEBR conclusions.

The clash between democratic ideals and the straight jacket of the Euro is succinctly put in this scenario by Jackie Ashley in the Guardian:

David Cameron and George Osborne have resigned. They did their best, but were unable to carry support, even in the Tory party, for the devastating attacks on pensions and living standards the markets demand. To prevent a British default, Reginald Pinstripe-Grey, formerly chief economist of Megabank in New York, is to be installed in the Lords as acting prime minister, leading a Government of Unity and Patriotism.  In London, representatives from the EU and German “advisers” will sit alongside the truncated cabinet. British MPs have been warned that any attempt to resist the extreme austerity measures by parliamentary vote will result in the final collapse of the British economy, and anarchy. No elections will be held in the meantime.  Orwellian fantasy? The plot of an unlikely TV drama? For many voters in Greece, and Italy too – despite joy at the disappearance of the idiotic Berlusconi – this effective suspension of democracy feels all too here-and-now.

What is happening in Italy and Greece could well be repeated in Portugal, Spain…etc. The position of the British government is curious and contradictory.  Having congratulated itself for staying out of the eurozone, British politicians, nevertheless, urge other countries to save the Euro.  If it is right for Britain to be out of the euro, surely it is right for other countries to ditch it.

It is one thing for people to enact measures through democratically elected politicians, it is quite another to be told to swallow a medicine that is causing a lot of pain by leaders of other countries and unelected bodies such as the ECB, financiers, and the IMF.

The remarks by Angela Merkel would be more accurate if turned on their head.  The austerity and hardships imposed on people to save the Euro are leading to disharmony, division and hostility between the peoples of Europe.  This is the opposite to the European ideals of unity under the banner of freedom, democracy and human rights.   Now Mrs. Merkel, these are ideals worth fighting for, not the Euro.