Understanding the Nature of the Global Economic Crisis
The
people have been lulled into a false sense of safety under the ruse of
a perceived “economic recovery.” Unfortunately, what the majority of
people think does not make it so, especially when the people making the
key decisions think and act to the contrary. The sovereign debt crises
that have been unfolding in the past couple years and more recently in
Greece, are canaries in the coal mine for the rest of Western
“civilization.” The crisis threatens to spread to Spain, Portugal and
Ireland; like dominoes, one country after another will collapse into a
debt and currency crisis, all the way to America.
In
October 2008, the mainstream media and politicians of the Western world
were warning of an impending depression if actions were not taken to
quickly prevent this. The problem was that this crisis had been a
long-time coming, and what’s worse, is that the actions governments
took did not address any of the core, systemic issues and problems with
the global economy; they merely set out to save the banking industry
from collapse. To do this, governments around the world implemented
massive “stimulus” and “bailout” packages, plunging their countries
deeper into debt to save the banks from themselves, while charging it
to people of the world.
Then
an uproar of stock market speculation followed, as money was pumped
into the stocks, but not the real economy. This recovery has been
nothing but a complete and utter illusion, and within the next two
years, the illusion will likely come to a complete collapse.
The
governments gave the banks a blank check, charged it to the public, and
now it’s time to pay; through drastic tax increases, social spending
cuts, privatization of state industries and services, dismantling of
any protective tariffs and trade regulations, and raising interest
rates. The effect that this will have is to rapidly accelerate, both in
the speed and volume, the unemployment rate, globally. The stock market
would crash to record lows, where governments would be forced to freeze
them altogether.
When
the crisis is over, the middle classes of the western world will have
been liquidated of their economic, political and social status. The
global economy will have gone through the greatest consolidation of
industry and banking in world history leading to a system in which only
a few corporations and banks control the global economy and its
resources; governments will have lost that right. The people of the
western world will be treated by the financial oligarchs as they have
treated the ‘global South’ and in particular, Africa; they will remove
our social structures and foundations so that we become entirely
subservient to their dominance over the economic and political
structures of our society.
This is where we stand today, and is the road on which we travel.
The
western world has been plundered into poverty, a process long underway,
but with the unfolding of the crisis, will be rapidly accelerated. As
our societies collapse in on themselves, the governments will protect
the banks and multinationals. When the people go out into the streets,
as they invariably do and will, the government will not come to their
aid, but will come with police and military forces to crush the
protests and oppress the people. The social foundations will collapse
with the economy, and the state will clamp down to prevent the people
from constructing a new one.
The
road to recovery is far from here. When the crisis has come to an end,
the world we know will have changed dramatically. No one ever grows up
in the world they were born into; everything is always changing. Now is
no exception. The only difference is, that we are about to go through
the most rapid changes the world has seen thus far.
Assessing the Illusion of Recovery
In August of 2009, I wrote an article, Entering the Greatest Depression in History,
in which I analyzed how there is a deep systemic crisis in the
Capitalist system in which we have gone through merely one burst bubble
thus far, the housing bubble, but there remains a great many others.
There
remains as a significantly larger threat than the housing collapse, a
commercial real estate bubble. As the Deutsche Bank CEO said in May of
2009, “It's either the beginning of the end or the end of the
beginning.”
Of
even greater significance is what has been termed the “bailout bubble”
in which governments have superficially inflated the economies through
massive debt-inducing bailout packages. As of July of 2009, the
government watchdog and investigator of the US bailout program stated
that the U.S. may have put itself at risk of up to $23.7 trillion
dollars.
[See: Andrew Gavin Marshall, Entering the Greatest Depression in History. Global Research: August 7, 2009]
In October of 2009, approximately one year following the “great panic” of 2008, I wrote an article titled, The Economic Recovery is an Illusion,
in which I analyzed what the most prestigious and powerful financial
institution in the world, the Bank for International Settlements (BIS),
had to say about the crisis and “recovery.”
The
BIS, as well as its former chief economist, who had both correctly
predicted the crisis that unfolded in 2008, were warning of a future
crisis in the global economy, citing the fact that none of the key
issues and structural problems with the economy had been changed, and
that government bailouts may do more harm than good in the long run.
William White, former Chief Economist of the BIS, warned:
The
world has not tackled the problems at the heart of the economic
downturn and is likely to slip back into recession. [He] warned that
government actions to help the economy in the short run may be sowing
the seeds for future crises.
[See: Andrew Gavin Marshall, The Economic Recovery is an Illusion. Global Research: October 3, 2009]
Crying Wolf or Castigating Cassandra?
While
people were being lulled into a false sense of security, prominent
voices warning of the harsh bite of reality to come were, instead of
being listened to, berated and pushed aside by the mainstream media.
Gerald Celente, who accurately predicted the economic crisis of 2008
and who had been warning of a much larger crisis to come, had been
accused by the mainstream media of pushing “pessimism porn.”[1]
Celente’s response has been that he isn’t pushing “pessimism porn,” but
that he refuses to push “optimism opium” of which the mainstream media
does so outstandingly.
So,
are these voices of criticism merely “crying wolf” or is it that the
media is out to “castigate Cassandra”? Cassandra, in Greek mythology,
was the daughter of King Priam and Queen Hecuba of Troy, who was
granted by the God Apollo the gift of prophecy. She prophesied and
warned the Trojans of the Trojan Horse, the death of Agamemnon and the
destruction of Troy. When she warned the Trojans, they simply cast her
aside as “mad” and did not heed her warnings.
While
those who warn of a future economic crisis may not have been granted
the gift of prophecy from Apollo, they certainly have the ability of
comprehension.
So what do the Cassandras of the world have to say today? Should we listen?
Empire and Economics
To
understand the global economic crisis, we must understand the global
causes of the economic crisis. We must first determine how we got to
the initial crisis, from there, we can critically assess how
governments responded to the outbreak of the crisis, and thus, we can
determine where we currently stand, and where we are likely headed.
Africa
and much of the developing world was released from the
socio-political-economic restraints of the European empires throughout
the 1950s and into the 60s. Africans began to try to take their nations
into their own hands. At the end of World War II, the United States was
the greatest power in the world. It had command of the United Nations,
the World Bank and the IMF, as well as setting up the NATO military
alliance. The US dollar reigned supreme, and its value was tied to
gold.
In
1954, Western European elites worked together to form an international
think tank called the Bilderberg Group, which would seek to link the
political economies of Western Europe and North America. Every year,
roughly 130 of the most powerful people in academia, media, military,
industry, banking, and politics would meet to debate and discuss key
issues related to the expansion of Western hegemony over the world and
the re-shaping of world order. They undertook, as one of their key
agendas, the formation of the European Union and the Euro currency unit.
[See: Andrew
Gavin Marshall, Controlling the Global Economy: Bilderberg, the
Trilateral Commission and the Federal Reserve. Global Research: August
3, 2009]
In
1971, Nixon abandoned the dollar’s link to gold, which meant that the
dollar no longer had a fixed exchange rate, but would change according
to the whims and choices of the Federal Reserve (the central bank of
the United States). One key individual that was
responsible for this choice was the third highest official in the U.S.
Treasury Department at the time, Paul Volcker.[2]
Volcker
got his start as a staff economist at the New York Federal Reserve Bank
in the early 50s. After five years there, “David Rockefeller’s Chase
Bank lured him away.”[3] So in 1957, Volcker went to work at Chase,
where Rockefeller “recruited him as his special assistant on a
congressional commission on money and credit in America and for help,
later, on an advisory commission to the Treasury Department.”[4] In the
early 60s, Volcker went to work in the Treasury Department, and
returned to Chase in 1965 “as an aide to Rockefeller, this time as vice
president dealing with international business.” With Nixon entering the
White House, Volcker got the third highest job in the Treasury
Department. This put him at the center of the decision making process
behind the dissolution of the Bretton Woods agreement by abandoning the
dollar’s link to gold in 1971.[5]
In
1973, David Rockefeller, the then-Chairman of Chase Manhattan Bank and
President of the Council on Foreign Relations, created the Trilateral
Commission, which sought to expand upon the Bilderberg Group. It was an
international think tank, which would include elites from Western
Europe, North America, and Japan, and was to align a “trilateral”
political economic partnership between these regions. It was to further
the interests and hegemony of the Western controlled world order.
That
same year, the Petri-dish experiment of neoliberalism was undertaken in
Chile. While a leftist government was coming to power in Chile,
threatening the economic interests of not only David Rockefeller’s
bank, but a number of American corporations, David Rockefeller set up
meetings between Henry Kissinger, Nixon’s National Security Adviser,
and a number of leading corporate industrialists. Kissinger in turn,
set up meetings between these individuals and the CIA chief and Nixon
himself. Within a short while, the CIA had begun an operation to topple
the government of Chile.
On
September 11, 1973, a Chilean General, with the help of the CIA,
overthrew the government of Chile and installed a military dictatorship
that killed thousands. The day following the coup, a plan for an
economic restructuring of Chile was on the president’s desk. The
economic advisers from the University of Chicago, where the ideas of
Milton Freidman poured out, designed the restructuring of Chile along
neoliberal lines.
Neoliberalism was thus born in violence.
In
1973, a global oil crisis hit the world. This was the result of the Yom
Kippur War, which took place in the Middle East in 1973. However, much
more covertly, it was an American strategem. Right when the US dropped
the dollar’s peg to gold, the State Department had quietly begun
pressuring Saudi Arabia and other OPEC nations to increase the price of
oil. At the 1973 Bilderberg meeting, held six months before the oil
price rises, a 400% increase in the price of oil was discussed. The
discussion was over what to do with the large influx of what would come
to be called “petrodollars,” the oil revenues of the OPEC nations.
Henry
Kissinger worked behind the scenes in 1973 to ensure a war would take
place in the Middle East, which happened in October. Then, the OPEC
nations drastically increased the price of oil. Many newly
industrializing nations of the developing world, free from the shackles
of overt political and economic imperialism, suddenly faced a problem:
oil is the lifeblood of an industrial society and it is imperative in
the process of development and industrialization. If they were to
continue to develop and industrialize, they would need the money to
afford to do so.
Concurrently,
the oil producing nations of the world were awash with petrodollars,
bringing in record surpluses. However, to make a profit, the money
would need to be invested. This is where the Western banking system
came to the scene. With the loss of the dollar’s link to cold, the US
currency could flow around the world at a much faster rate. The price
of oil was tied to the price of the US dollar, and so oil was traded in
US dollars. OPEC nations thus invested their oil money into Western
banks, which in turn, would “recycle” that money by loaning it to the
developing nations of the world in need of financing industrialization.
It seemed like a win-win situation: the oil nations make money, invest
it in the West, which loans it to the South, to be able to develop and
build “western” societies.
However,
all things do not end as fairy tales, especially when those in power
are threatened. An industrialized and developed ‘Global South’ (Latin
America, Africa, and parts of Asia) would not be a good thing for the
established Western elites. If they wanted to maintain their hegemony
over the world, they must prevent the rise of potential rivals,
especially in regions so rich in natural resources and the global
supplies of energy.
It
was at this time that the United States initiated talks with China. The
“opening” of China was to be a Western project of expanding Western
capital into China. China will be allowed to rise only so much as the
West allows it. The Chinese elite were happy to oblige with the
prospect of their own growth in political and economic power. India and
Brazil also followed suit, but to a smaller degree than that of China.
China and India were to brought within the framework of the Trilateral
partnership, and in time, both China and India would have officials
attending meetings of the Trilateral Commission.
So
money flowed around the world, primarily in the form of the US dollar.
Foreign central banks would buy US Treasuries (debts) as an investment,
which would also show faith in the strength of the US dollar and
economy. The hegemony of the US dollar reached around the world.
[See: Andrew
Gavin Marshall, Controlling the Global Economy: Bilderberg, the
Trilateral Commission and the Federal Reserve. Global Research: August
3, 2009]
The Hegemony of Neoliberalism
In
1977, however, a new US administration came to power under the
Presidency of Jimmy Carter, who was himself a member of the Trilateral
Commission. With his administration, came another roughly two-dozen
members of the Trilateral Commission to fill key positions within his
government. In 1973, Paul Volcker, the rising star through Chase
Manhattan and the Treasury Department became a member of the Trilateral
Commission. In 1975, he was made President of the Federal Reserve Bank
of New York, the most powerful of the 12 regional Fed banks. In 1979,
Jimmy Carter gave the job of Treasury Secretary to the former Governor
of the Federal Reserve System, and in turn, David Rockefeller
recommended Jimmy Carter appoint Paul Volcker as Governor of the
Federal Reserve Board, which Carter quickly did.[6]
In
1979, the price of oil skyrocketed again. This time, Paul Volcker at
the Fed was to take a different approach. His response was to
drastically increase interest rates. Interest rates went from 2% in the
late 70s to 18% in the early 1980s. The effect this had was that the US
economy went into recession, and greatly reduced its imports from
developing nations. A the same time, developing nations, who had taken
on heavy debt burdens to finance industrialization, suddenly found
themselves having to pay 18% interest payments on their loans. The idea
that they could borrow heavily to build an industrial society, which
would in turn pay off their loans, had suddenly come to a halt. As the
US dollar had spread around the world in the forms of petrodollars and
loans, the decisions that the Fed made would affect the entire world.
In 1982, Mexico announced that it could no longer service its debt, and
defaulted on its loans. This marked the spread of the 1980s debt
crisis, which spread throughout Latin America and across the continent
of Africa.
Suddenly,
much of the developing world was plunged into crisis. Thus, the IMF and
World Bank entered the scene with their newly developed “Structural
Adjustment Programs” (SAPs), which would encompass a country in need
signing an agreement, the SAP, which would provide the country with a
loan from the IMF, as well as “development” projects by the World Bank.
In turn, the country would have to undergo a neoliberal restructuring
of its country.
Neoliberalism
spread out of America and Britain in the 1980s; through their financial
empires and instruments – including the World Bank and IMF – they
spread the neoliberal ideology around the globe. Countries that
resisted neoliberalism were subjected to “regime change”. This would
occur through financial manipulation, via currency speculation or the
hegemonic monetary policies of the Western nations, primarily the
United States; economic sanctions, via the United Nations or simply
done on a bilateral basis; covert regime change, through “colour
revolutions” or coups, assassinations; and sometimes overt military
campaigns and war.
The
neoliberal ideology consisted in what has often been termed “free
market fundamentalism.” This would entail a massive wave of
privatization, in which state assets and industries are privatized in
order to become economically “more productive and efficient.” This
would have the social effect of leading to the firing of entire areas
of the public sector, especially health and education as well as any
specially protected national industries, which for many poor nations
meant vital natural resources.
Then,
the market would be “liberalized” which meant that restrictions and
impediments to foreign investments in the nation would diminish by
reducing or eliminating trade barriers and tariffs (taxes), and thus
foreign capital (Western corporations and banks) would be able to
invest in the country easily, while national industries that grow and
“compete” would be able to more easily invest in other nations and
industries around the world. The Central Bank of the nation would then
keep interest rates artificially low, to allow for the easier movement
of money in and out of the country. The effect of this would be that
foreign multinational corporations and international banks would be
able to easily buy up the privatized industries, and thus, buy up the
national economy. Simultaneously major national industries may be
allowed to grow and work with the global banks and corporations. This
would essentially oligopolize the national economy, and bring it within
the sphere of influence of the “global economy” controlled by and for
the Western elites.
The
European empires had imposed upon Africa and many other colonized
peoples around the world a system of ‘indirect rule’, in which local
governance structures were restructured and reorganized into a system
where the local population is governed by locals, but for the western
colonial powers. Thus, a local elite is created, and they enrich
themselves through the colonial system, so they have no interest in
challenging the colonial powers, but instead seek to protect their own
interests, which happen to be the interests of the empire.
In
the era of globalization, the leaders of the ‘Third World’ have been
co-opted and their societies reorganized by and for the interests of
the globalized elites. This is a system of indirect rule, and the local
elites becoming ‘indirect globalists’; they have been brought within
the global system and structures of empire.
Following
a Structural Adjustment Program, masses of people would be left
unemployed; the prices of essential commodities such as food and fuel
would increase, sometimes by hundreds of percentiles, while the
currency lost its value. Poverty would spread and entire sectors of the
economy would be shut down. In the “developing” world of Asia, Latin
America and Africa, these policies were especially damaging. With no
social safety nets to fall into, the people would go hungry; the public
state was dismantled.
When
it came to Africa, the continent so rapidly de-industrialized
throughout the 1980s and into the 1990s that poverty increased by
incredible degrees. With that, conflict would spread. In the 1990s, as
the harsh effects of neoliberal policies were easily and quickly seen
on the African continent, the main notion pushed through academia, the
media, and policy circles was that the state of Africa was due to the
“mismanagement” by Africans. The blame was put solely on the national
governments. While national political and economic elites did become
complicit in the problems, the problems were imposed from beyond the
continent, not from within.
Thus,
in the 1990s, the notion of “good governance” became prominent. This
was the idea that in return for loans and “help” from the IMF and World
Bank, nations would need to undertake reforms not only of the economic
sector, but also to create the conditions of what the west perceived as
“good governance.” However, in neoliberal parlance, “good governance”
implies “minimal governance”, and governments still had to dismantle
their public sectors. They simply had to begin applying the illusion of
democracy, through the holding of elections and allowing for the
formation of a civil society. “Freedom” however, was still to maintain
simply an economic concept, in that the nation would be “free” for
Western capital to enter into.
While
massive poverty and violence spread across the continent, people were
given the “gift” of elections. They would elect one leader, who would
then be locked into an already pre-determined economic and political
structure. The political leaders would enrich themselves at the expense
of others, and then be thrown out at the next election, or simply fix
the elections. This would continue, back and forth, all the while no
real change would be allowed to take place. Western imposed “democracy”
had thus failed.
An article in a 2002 edition of International Affairs,
the journal of the Royal Institute of International Affairs (the
British counter-part to the Council on Foreign Relations), wrote that:
In
1960 the average income of the top 20 per cent of the world’s
population was 30 times that of the bottom 20 per cent. By 1990 it was
60 times, ad by 1997, 74 times that of the lowest fifth. Today the
assets of the top three billionaires are more than the combined GNP
[Gross National Product] of all least developed countries and their 600
million people.
This
has been the context in which there has been an explosive growth in the
presence of Western as well as local non-governmental organizations
(NGOs) in Africa. NGOs today form a prominent part of the ‘development
machine’, a vast institutional and disciplinary nexus of official
agencies, practitioners, consultants, scholars and other miscellaneous
experts producing and consuming knowledge about the ‘developing world’.
[.
. . ] Aid (in which NGOs have come to play a significant role) is
frequently portrayed as a form of altruism, a charitable act that
enables wealth to flow from rich to poor, poverty to be reduced and the
poor to be empowered.[7]
The authors then explained that NGOs have a peculiar evolution in Africa:
[T[heir
role in ‘development’ represents a continuity of the work of their
precursors, the missionaries and voluntary organizations that
cooperated in Europe’s colonization and control of Africa. Today their
work contributes marginally to the relief of poverty, but significantly
to undermining the struggle of African people to emancipate themselves
from economic, social and political oppression.[8]
The
authors examined how with the spread of neoliberalism, the notion of a
“minimalist state” spread across the world and across Africa. Thus,
they explain, the IMF and World Bank “became the new commanders of
post-colonial economies.” However, these efforts were not imposed
without resistance, as, “Between 1976 and 1992 there were 146 protests
against IMF-supported austerity measures [SAPs] in 39 countries around
the world.” Usually, however, governments responded with brute force,
violently oppressing demonstrations. However, the widespread opposition
to these “reforms” needed to be addressed by major organizations and
“aid” agencies in re-evaluating their approach to ‘development’:[9]
The
outcome of these deliberations was the ‘good governance’ agenda in the
1990s and the decision to co-opt NGOs and other civil society
organizations to a repackaged programme of welfare provision, a social
initiative that could be more accurately described as a programme of
social control.
The
result was to implement the notion of ‘pluralism’ in the form of
‘multipartyism’, which only ended up in bringing “into the public
domain the seething divisions between sections of the ruling class
competing for control of the state.” As for the ‘welfare initiatives’,
the bilateral and multilateral aid agencies set aside significant funds
for addressing the “social dimensions of adjustment,” which would
“minimize the more glaring inequalities that their policies
perpetuated.” This is where the growth of NGOs in Africa rapidly
accelerated.[10]
Africa
had again, become firmly enraptured in the cold grip of imperialism.
Conflicts in Africa would be stirred up by imperial foreign powers,
often using ethnic divides to turn the people against each other, using
the political leaders of African nations as vassals submissive to
Western hegemony. War and conflict would spread, and with it, so too
would Western capital and the multinational corporation.
Building a ‘New’ Economy
While
the developing world fell under the heavy sword of Western neoliberal
hegemony, the Western industrialized societies experienced a rapid
growth of their own economic strength. It was the Western banks and
multinational corporations that spread into and took control of the
economies of Africa, Latin America, Asia, and with the fall of the
Soviet Union in 1991, Eastern Europe and Central Asia.
Russia
opened itself up to Western finance, and the IMF and World Bank swept
in and imposed neoliberal restructuring, which led to a collapse of the
Russian economy, and enrichment of a few billionaire oligarchs who own
the Russian economy, and who are intricately connected with Western
economic interests; again, ‘indirect globalists’.
As
the Western financial and commercial sectors took control of the vast
majority of the world’s resources and productive industries, amassing
incredible profits, they needed new avenues in which to invest. Out of
this need for a new road to capital accumulation (making money), the US
Federal Reserve stepped in to help out.
The
Federal Reserve in the 1990s began to ease interest rates lower and
lower to again allow for the easier spread of money. This was the era
of ‘globalization,’ where proclamations of a “New World Order” emerged.
Regional trading blocs and “free trade” agreements spread rapidly, as
world systems of political and economic structure increasingly grew out
of the national structure and into a supra-national form. The North
American Free Trade Agreement (NAFTA) was implemented in an “economic
constitution for North America” as Reagan referred to it.
Regionalism
had emerged as the next major phase in the construction of the New
World Order, with the European Union being at the forefront. The world
economy was ‘globalized’ and so too, would the political structure
follow, on both regional and global levels. The World Trade
Organization (WTO) was formed to maintain and enshrine global
neoliberal constitution for trade. All through this time, a truly
global ruling class emerged, the Transnational Capitalist Class (TCC),
or global elite, which constituted a singular international class.
However,
as the wealth and power of elites grew, everyone else suffered. The
middle class had been subjected to a quiet dismantling. In the Western
developed nations, industries and factories closed down, relocating to
cheap Third World countries to exploit their labour, then sell the
products in the Western world cheaply. Our living standards in the West
began to fall, but because we could buy products for cheaper, no one
seemed to complain. We continued to consume, and we used credit and
debt to do so. The middle class existed only in theory, but was in
fact, beholden to the shackles of debt.
The
Clinton administration used ‘globalization’ as its grand strategy
throughout the 1990s, facilitating the decline of productive capital
(as in, money that flows into production of goods and services), and
implemented the rise finance capital (money made on money). Thus,
financial speculation became one of the key tools of economic
expansion. This is what was termed the “financialization” of the
economy. To allow this to occur, the Clinton administration actively
worked to deregulate the banking sector. The Glass-Steagle Act, put in
place by FDR in 1933 to prevent commercial banks from merging with
investment banks and engaging in speculation, (which in large part
caused the Great Depression), was slowly dismantled through the
coordinated efforts of America’s largest banks, the Federal Reserve,
and the US Treasury Department.
Thus,
a massive wave of consolidation took place, as large banks ate smaller
banks, corporations merged, where banks and corporations stopped being
American or European and became truly global. Some of the key
individuals that took part in the dismantling of Glass-Steagle and the
expansion of ‘financialization’ were Alan Greenspan at the Federal
Reserve and Robert Rubin and Lawrence Summers at the Treasury
Department, now key officials in Obama’s economic team.
This
era saw the rise of ‘derivatives’ which are ‘complex financial
instruments’ that essentially act as short-term insurance policies,
betting and speculating that an asset price or commodity would go up or
go down in value, allowing money to be made on whether stocks or prices
go up or down. However, it wasn’t called ‘insurance’ because
‘insurance’ has to be regulated. Thus, it was referred to as
derivatives trade, and organizations called Hedge Funds entered the
picture in managing the global trade in derivatives.
The
stock market would go up as speculation on future profits drove stocks
higher and higher, inflating a massive bubble in what was termed a
‘virtual economy.’ The Federal Reserve facilitated this, as it had
previously done in the lead-up to the Great Depression, by keeping
interest rates artificially low, and allowing for easy-flowing money
into the financial sector. The Federal Reserve thus inflated the
‘dot-com’ bubble of the technology sector. When this bubble burst, the
Federal Reserve, with Allen Greenspan at the helm, created the “housing
bubble.”
The
Federal Reserve maintained low interest rates and actively encouraged
and facilitated the flow of money into the housing sector. Banks were
given free reign and actually encouraged to make loans to high-risk
individuals who would never be able to pay back their debt. Again, the
middle class existed only in the myth of the ‘free market’.
Concurrently,
throughout the 1990s and into the early 2000s, the role of speculation
as a financial instrument of war became apparent. Within the neoliberal
global economy, money could flow easily into and out of countries.
Thus, when confidence weakens in the prospect of one nation’s economy,
there can be a case of ‘capital flight’ where foreign investors sell
their assets in that nation’s currency and remove their capital from
that country. This results in an inevitable collapse of the nations
economy.
This
happened to Mexico in 1994, in the midst of joining NAFTA, where
international investors speculated against the Mexican peso, betting
that it would collapse; they cashed in their pesos for dollars, which
devalued the peso and collapsed the Mexican economy. This was followed
by the East Asian financial crisis in 1997, where throughout the 1990s,
Western capital had penetrated East Asian economies speculating in real
estate and the stock markets. However, this resulted in
over-investment, as the real economy, (production, manufacturing, etc.)
could not keep up with speculative capital. Thus, Western capital
feared a crisis, and began speculating against the national currencies
of East Asian economies, which triggered devaluation and a financial
panic as capital fled from East Asia into Western banking sectors. The
economies collapsed and then the IMF came in to ‘restructure’ them
accordingly. The same strategy was undertaken with Russia in 1998, and
Argentina in 2001.
[See: Andrew Gavin Marshall, Forging a “New World Order” Under a One World Government. Global Research: August 13, 2009]
Throughout
the 2000s, the housing bubble was inflated beyond measure, and around
the middle of the decade, when the indicators emerged of a crisis in
the housing market a commercial real estate bubble was formed. This
bubble has yet to burst.
The 2007-2008 Financial Crisis
In
2007, the Bank for International Settlements (BIS), the most
prestigious financial institution in the world and the central bank to
the world’s central banks, issued a warning that the world is on the
verge of another Great Depression, “citing mass issuance of new-fangled
credit instruments, soaring levels of household debt, extreme appetite
for risk shown by investors, and entrenched imbalances in the world
currency system.”[11]
As
the housing bubble began to collapse, the commodity bubble was
inflated, where money went increasingly into speculation, the stock
market, and the price of commodities soared, such as with the massive
increases in the price of oil between 2007 and 2008. In September of
2007, a medium-sized British Bank called Northern Rock, a major
partaker in the loans of bad mortgages which turned out to be
worthless, sought help from the Bank of England, which led to a run on
the bank and investor panic. In February of 2008, the British
government bought and nationalized Northern Rock.
In
March of 2008, Bear Stearns, an American bank that had been a heavy
lender in the mortgage real estate market, went into crisis. On March
14, 2008, the Federal Reserve Bank of New York worked with J.P. Morgan
Chase (whose CEO is a board member of the NY Fed) to provide Bear
Stearns with an emergency loan. However, they quickly changed their
mind, and the CEO of JP Morgan Chase, working with the President of the
New York Fed, Timothy Geithner, and the Treasury Secretary Henry
Paulson (former CEO of Goldman Sachs), forced Bear Stearns to sell
itself to JP Morgan Chase for $2 a share, which had previously traded
at $172 a share in January of 2007. The merger was paid for by the
Federal Reserve of New York, and charged to the US taxpayer.
In June of 2008, the BIS again warned of an impending Great Depression.[12]
In
September of 2008, the US government took over Fannie Mae and Freddie
Mac, the two major home mortgage corporations. The same month, the
global bank Lehman Brothers declared bankruptcy, giving the signal that
no one is safe and that the entire economy was on the verge of
collapse. Lehman was a major dealer in the US Treasury Securities
market and was heavily invested in home mortgages. Lehman filed for
bankruptcy on September 15, 2008, marking the largest bankruptcy in US
history. A wave of bank consolidation spread across the United States
and internationally. The big banks became much bigger as Bank of
America swallowed Merrill Lynch, JP Morgan ate Washington Mutual, and
Wells Fargo took over Wachovia.
In
November of 2008, the US government bailed out the largest insurance
company in the world, AIG. The Federal Reserve Bank of New York, with
Timothy Geithner at the helm:
[Bought
out], for about $30 billion, insurance contracts AIG sold on toxic debt
securities to banks, including Goldman Sachs Group Inc., Merrill Lynch
& Co., Societe Generale and Deutsche Bank AG, among others. That
decision, critics say, amounted to a back-door bailout for the banks,
which received 100 cents on the dollar for contracts that would have
been worth far less had AIG been allowed to fail.
As Bloomberg
reported, since the New York Fed is quasi-governmental, as in, it is
given government authority, but not subject to government oversight,
and is owned by the banks that make up its board (such as JP Morgan
Chase), “It’s as though the New York Fed was a black-ops outfit for the
nation’s central bank.”[13]
The Bailout
In
the fall of 2008, the Bush administration sought to implement a bailout
package for the economy, designed to save the US banking system. The
leaders of the nation went into rabid fear mongering. The President
warned:
More
banks could fail, including some in your community. The stock market
would drop even more, which would reduce the value of your retirement
account. The value of your home could plummet. Foreclosures would rise
dramatically.
The
head of the Federal Reserve Board, Ben Bernanke, as well as Treasury
Secretary Paulson, in late September warned of “recession, layoffs and
lost homes if Congress doesn’t quickly approve the Bush
administration’s emergency $700 billion financial bailout plan.”[14]
Seven months prior, in February of 2008, prior to the collapse of Bear
Stearns, both Bernanke and Paulson said “the nation will avoid falling
into recession.”[15] In September of 2008, Paulson was saying that
people “should be scared.”[16]
The
bailout package was made into a massive financial scam, which would
plunge the United States into unprecedented levels of debt, while
pumping incredible amounts of money into major global banks.
The
public was told, as was the Congress, that the bailout was worth $700
billion dollars. However, this was extremely misleading, and a closer
reading of the fine print would reveal much more, in that $700 billion
is the amount that could be spent “at any one time.” As Chris Martenson
wrote:
This
means that $700 billion is NOT the cost of this dangerous legislation,
it is only the amount that can be outstanding at any one time. After, say, $100 billion of bad mortgages are disposed of, another $100 billion can be bought. In
short, these four little words assure that there is NO LIMIT to the
potential size of this bailout. This means that $700 billion is a
rolling amount, not a ceiling.
So what happens when you have vague language and an unlimited budget? Fraud and self-dealing. Mark
my words, this is the largest looting operation ever in the history of
the US, and it's all spelled out right in this delightfully brief
document that is about to be rammed through a scared Congress and made
into law.[17]
Further,
the proposed bill would “raise the nation's debt ceiling to $11.315
trillion from $10.615 trillion,” and that the actions taken as a result
of the passage of the bill would not be subject to investigation by the
nation’s court system, as it would “bar courts from reviewing actions
taken under its authority”:
The
Bush administration seeks “dictatorial power unreviewable by the third
branch of government, the courts, to try to resolve the crisis,” said
Frank Razzano, a former assistant chief trial attorney at the
Securities and Exchange Commission now at Pepper Hamilton LLP in
Washington. “We are taking a huge leap of faith.”[18]
Larisa Alexandrovna, writing with the Huffington Post,
warned that the passage of the bailout bill will be the final nails in
the coffin of the fascist coup over America, in the form of financial
fascists:
This
manufactured crisis is now to be remedied, if the fiscal fascists get
their way, with the total transfer of Congressional powers (the few
that still remain) to the Executive Branch and the total transfer of
public funds into corporate (via government as intermediary) hands.
[.
. . ] The Treasury Secretary can buy broadly defined assets, on any
terms he wants, he can hire anyone he wants to do it and can appoint
private sector companies as financial deputies of the US government.
And he can write whatever regulation he thinks [is] needed.
Decisions
by the Secretary pursuant to the authority of this Act are
non-reviewable and committed to agency discretion, and may not be
reviewed by any court of law or any administrative agency.[19]
At
the same time, the US Federal Reserve was bailing out foreign banks of
hundreds of billions of dollars, “that are desperate for dollars and
can’t access America’s frozen credit markets – a move co-ordinated with
central banks in Japan, the Eurozone, Switzerland, Canada and here in
the UK.”[20] The moves would have been coordinated through the Bank for
International Settlements (BIS) in Basle, Switzerland. As Politico
reported, “foreign-based banks with big U.S. operations could qualify
for the Treasury Department’s mortgage bailout.” A Treasury Fact Sheet
released by the US Department of Treasury stated that:
Participating
financial institutions must have significant operations in the U.S.,
unless the Secretary makes a determination, in consultation with the
Chairman of the Federal Reserve, that broader eligibility is necessary
to effectively stabilize financial markets.[21]
So,
the bailout package would not only allow for the rescue of American
banks, but any banks internationally, whether public or private, if the
Treasury Secretary deemed it “necessary”, and that none of the
Secretary’s decisions could be reviewed or subjected to oversight of
any kind. Further, it would mean that the Treasury Secretary would have
a blank check, but simply wouldn’t be able to hand out more than $700
billion “at any one time.” In short, the bailout is in fact, a coup
d’état by the banks over the government.
Many
Congressmen were told that if they failed to pass the bailout package,
they were threatened with martial law.[22] Sure enough, Congress passed
the bill, and the financial coup had been a profound success.
No
wonder then, in early 2009, one Congressman reported that the banks
“are still the most powerful lobby on Capitol Hill. And they frankly
own the place.”[23] Another Congressman said that “The banks run the
place,” and explained, “I will tell you what the problem is - they give
three times more money than the next biggest group. It's huge the
amount of money they put into politics.”[24]
The Collapse of Iceland
On
October 9th, 2008, the government of Iceland took control of the
nation’s largest bank, nationalizing it, and halted trading on the
Icelandic stock market. Within a single week, “the vast majority of
Iceland's once-proud banking sector has been nationalized.” In early
October, it was reported that:
Iceland,
which has transformed itself from one of Europe's poorest countries to
one of its wealthiest in the space of a generation, could face
bankruptcy. In a televised address to the nation, Prime Minister Geir
Haarde conceded: "There is a very real danger, fellow citizens, that
the Icelandic economy in the worst case could be sucked into the
whirlpool, and the result could be national bankruptcy."
An article in BusinessWeek explained:
How
did things get so bad so fast? Blame the Icelandic banking system's
heavy reliance on external financing. With the privatization of the
banking sector, completed in 2000, Iceland's banks used substantial
wholesale funding to finance their entry into the local mortgage market
and acquire foreign financial firms, mainly in Britain and Scandinavia.
The banks, in large part, were simply following the international
ambitions of a new generation of Icelandic entrepreneurs who forged
global empires in industries from retailing to food production to
pharmaceuticals. By the end of 2006, the total assets of the three main
banks were $150 billion, eight times the country's GDP.
In
just five years, the banks went from being almost entirely domestic
lenders to becoming major international financial intermediaries. In
2000, says Richard Portes, a professor of economics at London Business
School, two-thirds of their financing came from domestic sources and
one-third from abroad. More recently—until the crisis hit—that ratio
was reversed. But as wholesale funding markets seized up, Iceland's
banks started to collapse under a mountain of foreign debt.[25]
This
was the grueling situation that faced the government at the time of the
global economic crisis. The causes, however, were not Icelandic; they
were international. Iceland owed “more than $60 billion overseas, about
six times the value of its annual economic output. As a professor at
London School of Economics said, ‘No Western country in peacetime has
crashed so quickly and so badly’.”[26]
What went wrong?
Iceland
followed the path of neoliberalism, deregulated banking and financial
sectors and aided in the spread and ease of flow for international
capital. When times got tough, Iceland went into crisis, as the Observer reported in early October 2008:
Iceland
is on the brink of collapse. Inflation and interest rates are raging
upwards. The krona, Iceland's currency, is in freefall and is rated
just above those of Zimbabwe and Turkmenistan.
[.
. . ] The discredited government and officials from the central bank
have been huddled behind closed doors for three days with still no sign
of a plan. International banks won't send any more money and supplies
of foreign currency are running out.[27]
In 2007, the UN had awarded Iceland the “best country to live in”:
The
nation's celebrated rags-to-riches story began in the Nineties when
free market reforms, fish quota cash and a stock market based on stable
pension funds allowed Icelandic entrepreneurs to go out and sweep up
international credit. Britain and Denmark were favourite shopping
haunts, and in 2004 alone Icelanders spent £894m on shares in British
companies. In just five years, the average Icelandic family saw its
wealth increase by 45 per cent.[28]
As
the third of Iceland’s large banks was in trouble, following the
government takeover of the previous two, the UK responded by freezing
Icelandic assets in the UK. Kaupthing, the last of the three banks
standing in early October, had many assets in the UK.
On
October 7th, Iceland’s Central Bank governor told the media, “We will
not pay for irresponsible debtors and…not for banks who have behaved
irresponsibly.” The following day, UK Chancellor of the Exchequer,
Alistair Darling, claimed that, “The Icelandic government, believe it
or not, have told me yesterday they have no intention of honoring their
obligations here,” although, Arni Mathiesen, the Icelandic minister of
finance, said, “nothing in this telephone conversation can support the
conclusion that Iceland would not honor its obligation.”[29]
On
October 10, 2008, UK Prime Minister Gordon Brown said, “We are freezing
the assets of Icelandic companies in the United Kingdom where we can.
We will take further action against the Icelandic authorities wherever
that is necessary to recover money.” Thus:
Many
Icelandic companies operating in the U.K., in totally unrelated
industries, experienced their assets being frozen by the U.K.
government--as well as other acts of seeming vengeance by U.K.
businesses and media.
The
immediate effect of the collapse of Kaupthing is that Iceland's
financial system is ruined and the foreign exchange market shut down.
Retailers are scrambling to secure currency for food imports and
medicine. The IMF is being called in for assistance.[30]
The
UK had more than £840m invested in Icelandic banks, and they were
moving in to save their investments,[31] which just so happened to help
spur on the collapse of the Icelandic economy.
On
October 24, 2008, an agreement between Iceland and the IMF was signed.
In late November, the IMF approved a loan to Iceland of $2.1 billion,
with an additional $3 billion in loans from Denmark, Finland, Norway,
Sweden, Russia, and Poland.[32] Why the agreement to the loan took so
long, was because the UK pressured the IMF to delay the loan “until a
dispute over the compensation Iceland owes savers in Icesave, one of
its collapsed banks, is resolved.”[33]
In
January of 2009, the entire Icelandic government was “formally
dissolved” as the government collapsed when the Prime Minister and his
entire cabinet resigned. This put the opposition part in charge of an
interim government.[34] In July of 2009, the new government formally
applied for European Union membership, however, “Icelanders have
traditionally been skeptical of the benefits of full EU membership,
fearing that they would lose some of their independence as a small
state within a larger political entity.”[35]
In
August of 2009, Iceland’s parliament passed a bill “to repay Britain
and the Netherlands more than $5 billion lost in Icelandic deposit
accounts”:
Icelanders,
already reeling from a crisis that has left many destitute, have
objected to paying for mistakes made by private banks under the watch
of other governments.
Their
anger in particular is directed at Britain, which used an
anti-terrorism law to seize Icelandic assets during the crisis last
year, a move which residents said added insult to injury.
The
government argued it had little choice but to make good on the debts if
it wanted to ensure aid continued to flow. Rejection could have led to
Britain or the Netherlands seeking to block aid from the International
Monetary Fund (IMF).[36]
Iceland
is now in the service of the IMF and its international creditors. The
small independent nation that for so long had prided itself on a strong
economy and strong sense of independence had been brought to its knees.
In
mid-January of 2010, the IMF and Sweden together delayed their loans to
Iceland, due to Iceland’s “failure to reach a £2.3bn compensation deal
with Britain and the Netherlands over its collapsed Icesave accounts.”
Sweden, the UK and the IMF were blackmailing Iceland to save UK assets
in return for loans.[37]
In
February of 2010, it was reported that the EU would begin negotiations
with Iceland to secure Icelandic membership in the EU by 2012. However,
Iceland’s “aspirations are now tied partially to a dispute with the
Netherlands and Britain over $5 billion in debts lost in the country's
banking collapse in late 2008.”[38]
Iceland
stood as a sign of what was to come. The sovereign debt crisis that
brought Iceland to its knees had new targets on the horizon.
Dubai Hit By Financial Storm
In February of 2009, the Guardian
reported that, “A six-year boom that turned sand dunes into a
glittering metropolis, creating the world's tallest building, its
biggest shopping mall and, some say, a shrine to unbridled capitalism,
is grinding to a halt,” as Dubai, one of six states that form the
United Arab Emirates (UAE), went into crisis. Further, “the real estate
bubble that propelled the frenetic expansion of Dubai on the back of
borrowed cash and speculative investment, has burst.”[39]
Months
later, in November of 2009, Dubai was plunged into a debt crisis,
prompting fears of sparking a double-dip recession and the next wave of
the financial crisis. As the Guardian reported:
Governments
have cut interest rates, created new electronic money and allowed
budget deficits to reach record levels in an attempt to boost growth
after the near-collapse of the global financial system. [. . . ]
Despite having oil, it's still the case that many of these countries
had explosive credit growth. It's very clear that in 2010, we've got
plenty more problems in store.[40]
The
neighboring oil-rich state of Abu Dhabi, however, came to the rescue of
Dubai with a $10 billion bailout package, leading the Foreign Minister
of the UAE to declare Dubai’s financial crisis as over.[41]
In
mid-February of 2010, however, renewed fears of a debt crisis in Dubai
resurfaced; Morgan Stanley reported that, “the cost to insure against a
Dubai default [in mid-February] shot up to the level it was at during
the peak of the city-state's debt crisis in November.”[42] These fears
resurfaced as:
Investors
switched their attention to the Gulf [on February 15] as markets
reacted to fears that a restructuring plan from the state-owned
conglomerate Dubai World would pay creditors only 60 per cent of the
money they are owed.[43]
Again,
the aims that governments seek in the unfolding debt crisis is not to
save their people from a collapsing economy and inflated currency, but
to save the ‘interests’ of their major banks and corporations within
each collapsing economy.
A Sovereign Debt Crisis Hits Greece
In
October of 2009, a new Socialist government came to power in Greece on
the promise of injecting 3 billion euros to reinvigorate the Greek
economy.[44] Greece had suffered particularly hard during the economic
crisis; it experienced riots and protests. In December of 2009, Greece
said it would not default on its debt, but the government added,
“Salaried workers will not pay for this situation: we will not proceed
with wage freezes or cuts. We did not come to power to tear down the
social state.” As Ambrose Evans-Pritchard wrote for the Telegraph in December of 2009:
Greece
is being told to adopt an IMF-style austerity package, without the
devaluation so central to IMF plans. The prescription is ruinous and
patently self-defeating. Public debt is already 113pc of GDP. The
[European] Commission says it will reach 125pc by late 2010. It may top
140pc by 2012.
If
Greece were to impose the draconian pay cuts under way in Ireland (5pc
for lower state workers, rising to 20pc for bosses), it would deepen
depression and cause tax revenues to collapse further. It is already
too late for such crude policies. Greece is past the tipping point of a
compound debt spiral.
Evans-Pritchard
wrote that the crisis in Greece had much to do with the European
Monetary Union (EMU), which created the Euro, and made all member
states subject to the decisions of the European Central Bank, as
“Interest rates were too low for Greece, Portugal, Spain, and Ireland,
causing them all to be engulfed in a destructive property and wage
boom.” Further:
EU
states may club together to keep Greece afloat with loans for a while.
That solves nothing. It increases Greece's debt, drawing out the agony.
What Greece needs – unless it leaves EMU – is a permanent subsidy from
the North. Spain and Portugal will need help too.[45]
Greece’s
debt had soared, by early December 2009, to a spiraling 300-billion
euros, as its “financial woes have also weighed on the euro currency,
whose long-term value depends on member countries keeping their
finances in order.” Further, Ireland, Spain and Portugal were all
facing problems with their debt. As it turned out, the previous Greek
government had been cooking the books, and when the new government came
to power, it inherited twice the federal deficit it had anticipated.[46]
In February of 2010, the New York Times revealed that:
[W]ith
Wall Street’s help, [Greece] engaged in a decade-long effort to skirt
European debt limits. One deal created by Goldman Sachs helped obscure
billions in debt from the budget overseers in Brussels.
Even
as the crisis was nearing the flashpoint, banks were searching for ways
to help Greece forestall the day of reckoning. In early November —
three months before Athens became the epicenter of global financial
anxiety — a team from Goldman Sachs arrived in the ancient city with a
very modern proposition for a government struggling to pay its bills,
according to two people who were briefed on the meeting.
The
bankers, led by Goldman’s president, Gary D. Cohn, held out a financing
instrument that would have pushed debt from Greece’s health care system
far into the future, much as when strapped homeowners take out second
mortgages to pay off their credit cards.[47]
Even
back in 2001, when Greece joined the Euro-bloc, Goldman Sachs helped
the country “quietly borrow billions” in a deal “hidden from public
view because it was treated as a currency trade rather than a loan,
[and] helped Athens to meet Europe’s deficit rules while continuing to
spend beyond its means.” Further, “Greece owes the world $300 billion,
and major banks are on the hook for much of that debt. A default would
reverberate around the globe.” Both Goldman Sachs and JP Morgan Chase
had undertaken similar efforts in Italy and other countries in Europe
as well.[48]
In
early February, EU nations led by France and Germany met to discuss a
rescue package for Greece, likely with the help of the European Central
Bank and possibly the IMF. The issue had plunged the Eurozone into a
crisis, as confidence in the Euro fell across the board, and “Germans
have become so disillusioned with the euro, many will not accept notes
produced outside their homeland.”[49]
Germany
was expected to bail out the Greek economy, much to the dismay of the
German people. As one German politician stated, “We cannot expect the
citizens, whose taxes are already too high, to go along with supporting
the erroneous financial and budget policy of other states of the
eurozone.” One economist warned that the collapse of Greece could lead
to a collapse of the Euro:
There
are enough people speculating on the markets about the possible
bankruptcy of Greece, and once Greece goes, they would then turn their
attentions to Spain and Italy, and Germany and France would be forced
to step in once again.[50]
However,
the Lisbon Treaty had been passed over 2009, which put into effect a
European Constitution, giving Brussels enormous powers over its member
states. As the Telegraph reported on February 16, 2010, the EU stripped Greece of its right to vote at a crucial meeting to take place in March:
The
council of EU finance ministers said Athens must comply with austerity
demands by March 16 or lose control over its own tax and spend policies
altogether. It if fails to do so, the EU will itself impose cuts under
the draconian Article 126.9 of the Lisbon Treaty in what would amount
to economic suzerainty [i.e., foreign economic control].
While
the symbolic move to suspend Greece of its voting rights at one meeting
makes no practical difference, it marks a constitutional watershed and
represents a crushing loss of sovereignty.
"We
certainly won't let them off the hook," said Austria's finance
minister, Josef Proll, echoing views shared by colleagues in Northern
Europe. Some German officials have called for Greece to be denied a
vote in all EU matter until it emerges from "receivership".
The
EU has still refused to reveal details of how it might help Greece
raise €30bn (£26bn) from global debt markets by the end of June.[51]
It
would appear that the EU is in a troubling position. If they allow the
IMF to rescue Greece, it would be a blow to the faith in the Euro
currency, whereas if they bailout Greece, it will encourage internal
pressures within European countries to abandon the Euro.
In early February, Ambrose Evans-Pritchard wrote in the Telegraph
that, “The Greek debt crisis has spread to Spain and Portugal in a
dangerous escalation as global markets test whether Europe is willing
to shore up monetary union with muscle rather than mere words”:
Julian
Callow from Barclays Capital said the EU may to need to invoke
emergency treaty powers under Article 122 to halt the contagion,
issuing an EU guarantee for Greek debt. “If not contained, this could
result in a `Lehman-style’ tsunami spreading across much of the EU.”
[.
. . ] EU leaders will come to the rescue in the end, but Germany has
yet to blink in this game of “brinkmanship”. The core issue is that
EMU’s credit bubble has left southern Europe with huge foreign
liabilities: Spain at 91pc of GDP (€950bn); Portugal 108pc (€177bn).
This compares with 87pc for Greece (€208bn). By this gauge, Iberian
imbalances are worse than those of Greece, and the sums are far
greater. The danger is that foreign creditors will cut off funding,
setting off an internal EMU version of the Asian financial crisis in
1998.[52]
Fear
began to spread in regards to a growing sovereign debt crisis,
stretching across Greece, Spain and Portugal, and likely much wider and
larger than that.
A Global Debt Crisis
In
2007, the Bank for International Settlements (BIS), “the world's most
prestigious financial body,” warned of a coming great depression, and
stated that while in a crisis, central banks may cut interest rates
(which they subsequently did). However, as the BIS pointed out, while
cutting interest rates may help, in the long run it has the effect of
“sowing the seeds for more serious problems further ahead.”[53]
In
the summer of 2008, prior to the apex of the 2008 financial crisis in
September and October, the BIS again warned of the inherent dangers of
a new Great Depression. As Ambrose Evans-Pritchard wrote, “the ultimate
bank of central bankers” warned that central banks, such as the Federal
Reserve, would not find it so easy to “clean up” the messes they had
made in asset-price bubbles.
The
BIS report stated that, “It is not impossible that the unwinding of the
credit bubble could, after a temporary period of higher inflation,
culminate in a deflation that might be hard to manage, all the more so
given the high debt levels.” As Evans-Pritchard explained, “this
amounts to a warning that monetary overkill by the Fed, the Bank of
England, and above all the European Central Bank could prove dangerous
at this juncture.” The BIS report warned that, “Global banks - with
loans of $37 trillion in 2007, or 70pc of world GDP - are still in the
eye of the storm.” Ultimately, the actions of central banks were
designed “to put off the day of reckoning,” not to prevent it.[54]
Seeing
how the BIS is not simply a casual observer, but is in fact the most
important financial institution in the world, as it is where the
world’s central bankers meet and, in secret, decide monetary policy for
the world. As central banks have acted as the architects of the
financial crisis, the BIS warning of a Great Depression is not simply a
case of Cassandra prophesying the Trojan Horse, but is a case where she
prophesied the horse, then opened the gates of Troy and pulled the
horse in.
It
was within this context that the governments of the world took on
massive amounts of debt and bailed out the financial sectors from their
accumulated risk by buying their bad debts.
In
late June of 2009, several months following Western governments
implementing bailouts and stimulus packages, the world was in the
euphoria of “recovery.” At this time, however, the Bank for
International Settlements released another report warning against such
complacency in believing in the “recovery.” The BIS warned of only
“limited progress” in fixing the financial system. The article is worth
quoting at length:
Instead
of implementing policies designed to clean up banks' balance sheets,
some rescue plans have pushed banks to maintain their lending practices
of the past, or even increase domestic credit where it's not warranted.
[.
. . ] The lack of progress threatens to prolong the crisis and delay
the recovery because a dysfunctional financial system reduces the
ability of monetary and fiscal actions to stimulate the economy.
That's because without a solid banking system underpinning financial markets, stimulus measures won't be able to gain traction, and may only lead to a temporary pickup in growth.
A fleeting recovery could well make matters worse, the BIS warns, since further government support for banks is absolutely necessary, but will become unpopular if the public sees a recovery in hand.
And authorities may get distracted with sustaining credit, asset prices
and demand rather than focusing on fixing bank balance sheets.
[.
. . ] It warned that despite the unprecedented measures in the form of
fiscal stimulus, interest rate cuts, bank bailouts and quantitative
easing, there is an “open question” whether the policies will be able
to stabilize the global economy.
And
as governments bulk up their deficits to spend their way out of the
crisis, they need to be careful that their lack of restraint doesn't
come back to bite them, the central bankers said. If governments don't
communicate a credible exit strategy, they will find it harder to place
debt, and could face rising funding costs – leading to spending cuts or significantly higher taxes.[55]
The
BIS had thus endorsed the bailout and stimulus packages, which is no
surprise, considering that the BIS is owned by the central banks of the
world, which in turn are owned by the major global banks that were
“bailed out” by the governments. However, the BIS warned that these
rescue efforts, “while necessary” for the banks, will likely have
deleterious effects for national governments.
The
BIS warned that, “there’s a risk central banks will raise interest
rates and withdraw emergency liquidity too late, triggering inflation”:
Central
banks around the globe have lowered borrowing costs to record lows and
injected billions of dollars [or, more accurately, trillions] into the
financial system to counter the worst recession since World War II.
While some policy makers have stressed the need to withdraw the
emergency measures as soon as the economy improves, the Federal
Reserve, Bank of England, and European Central Bank are still in the
process of implementing asset-purchase programs designed to unblock
credit markets and revive growth.
“The
big and justifiable worry is that, before it can be reversed, the
dramatic easing in monetary policy will translate into growth in the
broader monetary and credit aggregates,” the BIS said. That will
“lead to inflation that feeds inflation expectations or it may fuel yet
another asset-price bubble, sowing the seeds of the next financial
boom-bust cycle.”[56]
Of enormous significance was the warning from the BIS that, “fiscal
stimulus packages may provide no more than a temporary boost to growth,
and be followed by an extended period of economic stagnation.” As the Australian reported in late June:
The
only international body to correctly predict the financial crisis - the
Bank for International Settlements (BIS) - has warned the biggest risk
is that governments might be forced by world bond investors to abandon
their stimulus packages, and instead slash spending while lifting taxes and interest rates.
Further,
major western countries such as Australia “faced the possibility of a
run on the currency, which would force interest rates to rise,” and
“Particularly in smaller and more open economies, pressure on the
currency could force central banks to follow a tighter policy than
would be warranted by domestic economic conditions.” Not surprisingly,
the BIS stated that, “government guarantees and asset insurance have exposed taxpayers to potentially large losses,”
through the bailouts and stimulus packages, and “stimulus programs will
drive up real interest rates and inflation expectations,” as inflation
“would intensify as the downturn abated.”[57]
In
May of 2009, Simon Johnson, former chief economist of the International
Monetary Fund (IMF), warned that Britain faces a major struggle in the
next phase of the economic crisis:
[T]he
mountain of debt that had poisoned the financial system had not
disappeared overnight. Instead, it has been shifted from the private
sector onto the public sector balance sheet. Britain has taken on
hundreds of billions of pounds of bank debt and stands behind
potentially trillions of dollars of contingent liabilities.
If
the first stage of the crisis was the financial implosion and the
second the economic crunch, the third stage – the one heralded by
Johnson – is where governments start to topple under the weight of this
debt. If 2008 was a year of private sector bankruptcies, 2009 and 2010,
it goes, will be the years of government insolvency.
However,
as dire as things look for Britain, “The UK is likely to be joined by
other countries as the full scale of the downturn becomes apparent and
more financial skeletons are pulled from the sub-prime closet.”[58]
In
September of 2009, the former Chief Economist of the Bank for
International Settlements (BIS), William White, who had accurately
predicted the previous crisis, warned that, “The world has not tackled
the problems at the heart of the economic downturn and is likely to
slip back into recession.” He “also warned that government actions to
help the economy in the short run may be sowing the seeds for future
crises.” An article in the Financial Times elaborated:
“Are
we going into a W[-shaped recession]? Almost certainly. Are we going
into an L? I would not be in the slightest bit surprised,” [White]
said, referring to the risks of a so-called double-dip recession or a
protracted stagnation like Japan suffered in the 1990s.
“The only thing that would really surprise me is a rapid and sustainable recovery from the position we’re in.”
The
comments from Mr White, who ran the economic department at the central
banks’ bank from 1995 to 2008, carry weight because he was one of the
few senior figures to predict the financial crisis in the years before
it struck.
Mr
White repeatedly warned of dangerous imbalances in the global financial
system as far back as 2003 and – breaking a great taboo in central
banking circles at the time – he dared to challenge Alan Greenspan,
then chairman of the Federal Reserve, over his policy of persistent
cheap money [i.e., low interest rates].
[.
. . ] Worldwide, central banks have pumped [trillions] of dollars of
new money into the financial system over the past two years in an
effort to prevent a depression. Meanwhile, governments have gone to
similar extremes, taking on vast sums of debt to prop up industries
from banking to car making.
These
measures may already be inflating a bubble in asset prices, from
equities to commodities, he said, and there was a small risk that
inflation would get out of control over the medium term if central
banks miss-time their “exit strategies”.
Meanwhile,
the underlying problems in the global economy, such as unsustainable
trade imbalances between the US, Europe and Asia, had not been
resolved.[59]
In
late September of 2009, the General Manager of the BIS warned
governments against complacency, saying that, “the market rebound
should not be misinterpreted,” and that, “The profile of the recovery
is not clear.”[60]
In September, the Financial Times
further reported that William White, former Chief Economist at the BIS,
also “argued that after two years of government support for the
financial system, we now have a set of banks that are even bigger – and
more dangerous – than ever before,” which also, “has been argued by
Simon Johnson, former chief economist at the International Monetary
Fund,” who “says that the finance industry has in effect captured the
US government,” and pointedly stated: “recovery will fail unless we
break the financial oligarchy that is blocking essential reform.”[61]
In
mid-September, the BIS released a warning about the global financial
system, as “The global market for derivatives rebounded to $426
trillion in the second quarter [of 2009] as risk appetite returned, but
the system remains unstable and prone to crises.” The derivatives rose
by 16% “mostly due to a surge in futures and options contracts on
three-month interest rates.” In other words, speculation is back in
full force as bailout money to banks in turn fed speculative practices
that have not been subjected to reform or regulation. Thus, the
problems that created the previous crisis are still present and
growing:
Stephen
Cecchetti, the [BIS] chief economist, said over-the-counter markets for
derivatives are still opaque and pose "major systemic risks" for the
financial system. The danger is that regulators will again fail to see
that big institutions have taken far more exposure than they can handle
in shock conditions, repeating the errors that allowed the giant US
insurer AIG to write nearly "half a trillion dollars" of unhedged
insurance through credit default swaps.[62]
In
late November of 2009, Morgan Stanley warned that, “Britain risks
becoming the first country in the G10 bloc of major economies to risk
capital flight and a full-blown debt crisis over coming months.” The
Bank of England may have to raise interest rates “before it is ready --
risking a double-dip recession, and an incipient compound-debt spiral.”
Further:
Morgan
Stanley said [the] sterling may fall a further 10pc in trade-weighted
terms. This would complete the steepest slide in the pound since the
industrial revolution, exceeding the 30pc drop from peak to trough
after Britain was driven off the Gold Standard in cataclysmic
circumstances in 1931.[63]
As Ambrose Evans-Pritchard wrote for the Telegraph,
this “is a reminder that countries merely bought time during the crisis
by resorting to fiscal stimulus and shunting private losses onto public
books,” and, while he endorsed the stimulus packages claiming it was
“necessary,” he admitted that the stimulus packages “have not resolved
the underlying debt problem. They have storied up a second set of
difficulties by degrading sovereign debt across much of the world.”[64]
Morgan Stanley said another surprise in 2010 could be a surge in the
dollar. However, this would be due to capital flight out of Europe as
its economies crumble under their debt burdens and capital seeks a
“safe haven” in the US dollar.
In December of 2009, the Wall Street Journal
reported on the warnings of some of the nation’s top economists, who
feared that following a financial crisis such as the one experienced in
the previous two years, “there's typically a wave of sovereign default
crises.” As economist Kenneth Rogoff explained, “If you want to know
what's next on the menu, that's a good bet,” as “Spiraling government
debts around the world, from Washington to Berlin to Tokyo, could set
the scene for years of financial troubles.” Apart from the obvious
example of Greece, other countries are at risk, as the author of the
article wrote:
Also
worrying are several other countries at the periphery of Europe—the
Baltics, Eastern European countries like Hungary, and maybe Ireland and
Spain. This is where public finances are worst. And the handcuffs of
the European single currency, Prof. Rogoff said, mean individual
countries can't just print more money to get out of their debts. (For
the record, the smartest investor I have ever known, a hedge fund
manager in London, is also anticipating a sovereign debt crisis.)
[.
. . ] The major sovereign debt crises, he said, are probably a couple
of years away. The key issue is that this time, the mounting financial
troubles of the U.S., Germany and Japan mean these countries, once the
rich uncles of the world, will no longer have the money to step in and
rescue the more feckless nieces and nephews.
Rogoff
predicted that, “We're going to be raising taxes sky high,” and that,
“we're probably going to see a lot of inflation, eventually. We will
have to. It's the easiest way to reduce the value of those liabilities
in real terms.” Rogoff stated, “The way rich countries default is
through inflation.” Further, “even U.S. municipal bonds won't be safe
from trouble. California could be among those facing a default crisis.”
Rogoff elaborated, “It wouldn't surprise me to see the Federal Reserve
buying California debt at some point, or some form of bailout.”[65]
The
bailouts, particularly that of the United States, handed a blank check
to the world’s largest banks. As another favour, the US government put
those same banks in charge of ‘reform’ and ‘regulation’ of the banking
industry. Naturally, no reform or regulation took place. Thus, the
money given to banks by the government can be used in financial
speculation. As the sovereign debt crisis unfolds and spreads around
the globe, the major international banks will be able to create
enormous wealth in speculation, rapidly pulling their money out of one
nation in debt crisis, precipitating a collapse, and moving to another,
until all the dominoes have fallen, and the banks stand larger,
wealthier, and more powerful than any nation or institution on earth
(assuming they already aren’t). This is why the bankers were so eager
to undertake a financial coup of the United States, to ensure that no
actual reform took place, that they could loot the nation of all it
has, and profit off of its eventual collapse and the collapse of the
global economy. The banks have been saved! Now everyone else must pay.
Edmund Conway, the Economics Editor of the Telegraph, reported in early January of 2010, that throughout the year:
[S]overeign
credit will buckle under the strain of [government] deficits; the
economic recovery will falter as the Government withdraws its fiscal
stimulus measures and more companies will continue to fail. In other
words, 2010 is unlikely to be the year of a V-shaped recovery.[66]
In
other words, the ‘recovery’ is an illusion. In mid-January of 2010, the
World Economic Forum released a report in which it warned that, “There
is now more than a one-in-five chance of another asset price bubble
implosion costing the world more than £1 trillion, and similar odds of
a full-scale sovereign fiscal crisis.” The report warned of a
simultaneous second financial crisis coupled with a major fiscal crisis
as countries default on their debts. The report “also warned of the
possibility of China's economy overheating and, instead of helping
support global economic growth, preventing a fully-fledged recovery
from developing.” Further:
The
report, which in previous years had been among the first to cite the
prospect of a financial crisis, the oil crisis that preceded it and the
ongoing food crisis, included a list of growing risks threatening
leading economies. Among the most likely, and potentially most costly,
is a sovereign debt crisis, as some countries struggle to afford the
unprecedented costs of the crisis clean-up, the report said,
specifically naming the UK and the US.
[.
. .] The report also highlights the risk of a further asset price
collapse, which could derail the nascent economic recovery across the
world, with particular concern surrounding China, which some fear may
follow the footsteps Japan trod in the 1990s.[67]
Nouriel Roubini, one of America’s top economists who predicted the financial crisis, wrote an article in Forbes
in January of 2010 explaining that, “the severe recession, combined
with a financial crisis during 2008-09, worsened the fiscal positions
of developed countries due to stimulus spending, lower tax revenues and
support to the financial sector.” He warned that the debt burden of
major economies, including the US, Japan and Britain, would likely
increase. With this, investors will become wary of the sustainability
of fiscal markets and will begin to withdraw from debt markets, long
considered “safe havens.” Further:
Most
central banks will withdraw liquidity starting in 2010, but government
financing needs will remain high thereafter. Monetization and increased
debt issuances by governments in the developed world will raise
inflation expectations.
As
interest rates rise, which they will have to in a tightening of
monetary policy, (which up until now have been kept artificially low so
as to encourage the spread of liquidity around the world), interest
payments on the debt will increase dramatically. Roubini warned:
The
U.S. and Japan might be among the last to face investor aversion—the
dollar is the global reserve currency and the U.S. has the deepest and
most liquid debt markets, while Japan is a net creditor and largely
finances its debt domestically. But investors will turn increasingly
cautious even about these countries if the necessary fiscal reforms are
delayed.[68]
Governments
will thus need to drastically increase taxes and cut spending.
Essentially, this will amount to a global “Structural Adjustment
Program” (SAP) in the developed, industrialized nations of the West.
Where
SAPs imposed upon ‘Third World’ debtor nations would provide a loan in
return for the dismantling of the public state, higher taxes, growing
unemployment, total privatization of state industries and deregulation
of trade and investment, the loans provided by the IMF and World Bank
would ultimately benefit Western multinational corporations and banks.
This is what the Western world now faces: we bailed out the banks, and
now we must pay for it, through massive unemployment, increased taxes,
and the dismantling of the public sphere.
In February of 2010, Niall Ferguson, a prominent British economic historian, wrote an article for the Financial Times
entitled, “A Greek Crisis Coming to America.” He starts by explaining
that, “It began in Athens. It is spreading to Lisbon and Madrid. But it
would be a grave mistake to assume that the sovereign debt crisis that
is unfolding will remain confined to the weaker eurozone economies.” He
explained that this is not a crisis confined to one region, “It is a
fiscal crisis of the western world,” and “Its ramifications are far
more profound than most investors currently appreciate.” Ferguson
writes that, “the problem is essentially the same from Iceland to
Ireland to Britain to the US. It just comes in widely differing sizes,”
and the US is no small risk:
For
the world’s biggest economy, the US, the day of reckoning still seems
reassuringly remote. The worse things get in the eurozone, the more the
US dollar rallies as nervous investors park their cash in the “safe
haven” of American government debt. This effect may persist for some
months, just as the dollar and Treasuries rallied in the depths of the
banking panic in late 2008.
Yet
even a casual look at the fiscal position of the federal government
(not to mention the states) makes a nonsense of the phrase “safe
haven”. US government debt is a safe haven the way Pearl Harbor was a
safe haven in 1941.
Ferguson
points out that, “The long-run projections of the Congressional Budget
Office suggest that the US will never again run a balanced budget.
That’s right, never.” Ferguson explains that debt will hurt major
economies:
By
raising fears of default and/or currency depreciation ahead of actual
inflation, they push up real interest rates. Higher real rates, in
turn, act as drag on growth, especially when the private sector is also
heavily indebted – as is the case in most western economies, not least
the US.
Although
the US household savings rate has risen since the Great Recession
began, it has not risen enough to absorb a trillion dollars of net
Treasury issuance a year. Only two things have thus far stood between
the US and higher bond yields: purchases of Treasuries (and
mortgage-backed securities, which many sellers essentially swapped for
Treasuries) by the Federal Reserve and reserve accumulation by the
Chinese monetary authorities.[69]
In
late February of 2010, the warning signs were flashing red that
interest rates were going to have to rise, taxes increase, and the
burden of debt would need to be addressed.
China Begins to Dump US Treasuries
US
Treasuries are US government debt that is issued by the US Treasury
Department, which are bought by foreign governments as an investment.
It is a show of faith in the US economy to buy their debt (i.e.,
Treasuries). In buying a US Treasury, you are lending money to the US
government for a certain period of time.
However,
as the United States has taken on excessive debt loads to save the
banks from crisis, the prospect of buying US Treasuries has become less
appealing, and the threat that they are an unsafe investment is
ever-growing. In February of 2009, Hilary Clinton urged China to
continue buying US Treasuries in order to finance Obama’s stimulus
package. As an article in Bloomberg pointed out:
The
U.S. is the single largest buyer of the exports that drive growth in
China, the world’s third-largest economy. China in turn invests surplus
earnings from shipments of goods such as toys, clothing and steel
primarily in Treasury securities, making it the world’s largest holder
of U.S. government debt at the end of last year with $696.2 billion.[70]
The following month, the Chinese central bank announced that they would continue buying US Treasuries.[71]
However, in February of 2009, Warren Buffet, one of the world’s richest individuals, warned against buying US Treasuries:
Buffett
said that with the U.S. Federal Reserve and Treasury Department going
"all in" to jump-start an economy shrinking at the fastest pace since
1982, "once-unthinkable dosages" of stimulus will likely spur an
"onslaught" of inflation, an enemy of fixed-income investors.
"The
investment world has gone from underpricing risk to overpricing it,"
Buffett wrote. "Cash is earning close to nothing and will surely find
its purchasing power eroded over time."
"When
the financial history of this decade is written, it will surely speak
of the Internet bubble of the late 1990s and the housing bubble of the
early 2000s," he went on. "But the U.S. Treasury bond bubble of late
2008 may be regarded as almost equally extraordinary."[72]
In
September of 2009, an article on CNN reported of the dangers if China
were to start dumping US Treasuries, which “could cause longer-term
interest rates to shoot up since bond prices and yields move in
opposite directions,” as a weakening US currency could lead to
inflation, which would in turn, reduce the value and worth of China’s
holdings in US Treasuries.[73]
It
has become a waiting game; an economic catch-22: China holds US debt
(Treasuries) which allows the US to spend to “save the economy” (or
more accurately, the banks), but all the spending has plunged the US
into such abysmal debt from which it will never be able to emerge. The
result is that inflation will likely occur, with a possibility of
hyperinflation, thus reducing the value of the US currency. China’s
economy is entirely dependent upon the US as a consumer economy, while
the US is dependent upon China as a buyer and holder of US debt. Both
countries are delaying the inevitable. If China doesn’t want to hold
worthless investments (US debt) it must stop buying US Treasuries, and
then international faith in the US currency would begin to fall,
forcing interest rates to rise, which could even precipitate a
speculative assault against the US dollar. At the same time, a
collapsing US currency and economy would not help China’s economy,
which would tumble with it. So, it has become a waiting game.
In February of 2010, the Financial Times
reported that China had begun in December of 2009, the process of
dumping US Treasuries, and thus falling behind Japan as the largest
holder of US debt, selling approximately $38.8 billion of US
Treasuries, as “Foreign demand for US Treasury bonds fell by a record
amount”:
The
fall in demand comes as countries retreat from the "flight to safety"
strategy they embarked on at the peak of the global financial crisis
and could mean the US will have to pay more in debt interest.
For
China, the sale of US Treasuries marks a reversal that it signalled
last year when it said it would begin to reduce some of its holdings.
Any changes in its behaviour are politically sensitive because it is
the biggest US trade partner and has helped to finance US deficits.
Alan
Ruskin, a strategist at RBS Securities, said that China's behaviour
showed that it felt "saturated" with Treasury paper. The change of
sentiment could hurt the dollar and the Treasury market as the US has
to look to other countries for financing.[74]
So,
China has given the US a vote of non-confidence. This is evident of the
slippery-slide down the road to a collapse of the US economy, and
possibly, the US dollar, itself.
Is a Debt Crisis Coming to America?
All
the warning signs are there: America is in dire straights when it comes
to its total debt, proper actions have not been taken to reform the
monetary or financial systems, the same problems remain prevalent, and
the bailout and stimulus packages have further exposed the United
States to astronomical debt levels. While the dollar will likely
continue to go up as confidence in the Eurozone economies tumbles, this
is not because the dollar is a good investment, but because the dollar
is simply a better investment (for now) than the Euro, which isn’t
saying much.
The
Chinese moves to begin dumping US Treasuries is a signal that the issue
of American debt has already weighed in on the functions and movements
of the global financial system. While the day of reckoning may be
months if not years away, it is coming nonetheless.
On
February 15, it was reported that the Federal Reserve, having pumped
$2.2 trillion into the economy, “must start pulling that money back.”
As the Fed reportedly bought roughly $2 trillion in bad assets, it is
now debating “how and when to sell those assets.”[75] As the Korea Times
reported, “The problem: Do it too quickly and the Fed might cut off or
curtail the recovery. Wait too long and risk setting off a punishing
round of inflation.”[76]
In
mid-February, there were reports of dissent within the Federal Reserve
System, as Thomas Hoenig, president of the Federal Reserve Bank of
Kansas City, warned that, “The US must fix its growing debt problems or
risk a new financial crisis.” He explained, “that rising debt was
infringing on the central bank’s ability to fulfill its goals of
maintaining price stability and long-term economic growth.” In January,
he was the lone voice at a Fed meeting that said interest rates should
not remain near zero for an “extended period.” He said the worst case
scenario would be for the US government to have to again ask the Fed to
print more money, and instead suggested that, “the administration must
find ways to cut spending and generate revenue,” admitting that it
would be a “painful and politically inconvenient” process.[77]
However,
these reports are largely disingenuous, as it has placed focus on a
superficial debt level. The United States, even prior to the onset of
the economic crisis in 2007 and 2008, had long been a reckless spender.
The cost of maintaining an empire is astronomical and beyond the actual
means of any nation. Historically, the collapse of empires has as much
or more to do with a collapse in their currency and fiscal system than
their military defeat or collapse in war. Also important to note is
that these processes are not mutually exclusive, but are, in fact,
intricately interconnected.
As
empires decline, the world order is increasingly marred in economic
crises and international conflict. As the crisis in the economy
worsens, international conflict and wars spread. As I have amply
documented elsewhere, the United States, since the end of World War II,
has been the global hegemon: maintaining the largest military force in
the world, and not shying away from using it, as well as running the
global monetary system. Since the 1970s, the US dollar has acted as a
world reserve currency. Following the collapse of the USSR, the grand
imperial strategy of America was to dominate Eurasia and control the
world militarily and economically.
[See: Andrew
Gavin Marshall, An Imperial Strategy for a New World Order: The Origins
of World War III. Global Research: October 16, 2009]
Throughout
the years of the Bush administration, the imperial strategy was given
immense new life under the guise of the “war on terror.” Under this
banner, the United States declared war on the world and all who oppose
its hegemony. All the while, the administration colluded with the big
banks and the Federal Reserve to artificially maintain the economic
system. In the latter years of the Bush administration, this illusion
began to come tumbling down. Never before in history has such a large
nation wages multiple major theatre wars around the world without the
public at home being fiscally restrained in some manner, either through
higher taxes or interest rates. In fact, it was quite the opposite. The
trillion dollar wars plunged the United States deeper into debt.
By
2007, the year that Northern Rock collapsed in the UK, signaling the
start of the collapse of 2008, the total debt – domestic, commercial
and consumer debt – of the United States stood at a shocking $51
trillion.[78]
As
if this debt burden was not enough, considering it would be impossible
to ever pay back, the past two years has seen the most expansive and
rapid debt expansion ever seen in world history – in the form of
stimulus and bailout packages around the world. In July of 2009, it was
reported that, “U.S. taxpayers may be on the hook for as much as $23.7
trillion to bolster the economy and bail out financial companies, said
Neil Barofsky, special inspector general for the Treasury’s Troubled
Asset Relief Program.”[79]
That
is worth noting once again: the “bailout” bill implemented under Bush,
and fully supported and sponsored by President-elect Obama, has
possibly bailed out the financial sector of up to $23.7 trillion. How
could this be? After all, the public was told that the “bailout” was
$700 billion.
In
fact, the fine print in the bailout bill revealed that $700 billion was
not a ceiling, as in, $700 billion was not the maximum amount of money
that could be injected into the banks; it was the maximum that could be
injected into the financial system “at any one time.” Thus, it became a
“rolling amount.” It essentially created a back-door loophole for the
major global banks, both domestic and foreign, to plunder the nation
and loot it entirely. There was no limit to the money banks could get
from the Fed. And none of the actions would be subject to review or
oversight by Congress or the Judiciary, i.e., the people.[80]
This
is why, as Obama became President in late January of 2009, his
administration fully implemented the financial coup over the United
States. The man who had been responsible for orchestrating the bailout
of AIG, the buyout of Bear Stearns as a gift for JP Morgan Chase, and
had been elected to run the Federal Reserve Bank of New York by the
major global banks in New York (chief among them, JP Morgan Chase), had
suddenly become Treasury Secretary under Obama. The Fed, and thus, the
banks were now put directly in charge of the looting.
Obama
then took on a team of economic advisers that made any astute economic
observer flinch in terror. The titans of economic crisis and
catastrophe had become the fox in charge of the chicken coop. Those who
were instrumental in creating and constructing the economic crises of
the previous decades and building the instruments and infrastructure
that led to the current crisis, were with Obama, brought in to “solve”
the crisis they created. Paul Volcker, former Chairman of the Federal
Reserve and architect of the 1980s debt crisis, was now a top economic
adviser to Obama. As well as this, Lawrence Summers joined Obama’s
economic team, who had previously been instrumental in Bill Clinton’s
Treasury Department in dismantling all banking regulations and creating
the market for speculation and derivatives which directly led to the
current crisis.
In
short, the financial oligarchy is in absolute control of the United
States government. Concurrently, the military structure of the American
empire has firmly established its grip over foreign policy, as
America’s wars are expanded into Pakistan, Yemen, and potentially Iran.
Make no mistake, a crisis is coming to America, it is only a question of when, and how severe.
Imperial Decline and the Rise of the New World Order
The
decline of the American empire, an inevitable result of its
half-century of exerting its political and economic hegemony around the
world, is not an isolated event in the global political economy. The US
declines concurrently with the rise of what is termed the “New World
Order.”
America
has been used by powerful western banking and corporate interests as an
engine of empire, expanding their influence across the globe. Banks
have no armies, so they must control nations; banks have no products,
so they must control industries; banks have only money, and interest
earned on it. Thus, they must ensure that industry and governments
alike borrow money en masse to the point where they are so indebted,
they can never emerge. As a result, governments and industries become
subservient to the banking interests. Banks achieved this masterful
feat through the construction of the global central banking system.
Bankers
took control first of Great Britain through the Bank of England,
building up the massive might of the British Empire, and spread into
the rest of Europe, creating central banks in the major European
empires. In the 20th Century, the central bankers took control of the
United States through the creation of the Federal Reserve in 1913,
prior to the outbreak of World War I.
[See: Andrew
Gavin Marshall, Global Power and Global Government: Evolution and
Revolution of the Central Banking System. Global Research: July 21, 2009]
Following
World War I, a restructuring of the world order was undertaken. In
part, these actions paved the way to the Great Depression, which struck
in 1929. The Great Depression was created as a result of the major
banks engaging in speculation, which was actively encouraged and
financed by the Federal Reserve and other major central banks.
As
a result of the Great Depression, a new institution was formed, the
Bank for International Settlements (BIS), based in Basle, Switzerland.
As historian Carroll Quigley explained, the BIS was formed to “remedy
the decline of London as the world’s financial center by providing a
mechanism by which a world with three chief financial centers in
London, New York, and Paris could still operate as one.” He explained:
[T]he
powers of financial capitalism had another far-reaching aim, nothing
less than to create a world system of financial control in private
hands able to dominate the political system of
each country and the economy of the world as a whole. This system was
to be controlled in a feudalist fashion by the central banks of the
world acting in concert, by secret agreements arrived at in frequent
private meetings and conferences. The apex of the system was to be the
Bank for International Settlements in Basle, Switzerland, a private
bank owned and controlled by the world’s central banks which were
themselves private corporations.[81]
The
new order that is being constructed is not one in which there is
another single global power, as many commentators suggest China may
become, but rather that a multi-polar world order is constructed, in
which the global political economy is restructured into a global
governance structure: in short, the new world order is to be marked by
the construction of a world government.
This
is the context in which the solutions to the global economic crisis are
being implemented. In April of 2009, the G20 set into motion the plans
to form a global currency, which would presumably replace the US dollar
as the world reserve currency. This new currency would either be
operated through the IMF or the BIS, and would be a reserve currency
whose value is determined as a basket of currencies (such as the
dollar, yen, euro, etc), which would play off of one another, and whose
value would be fixed to the global currency.
This
process is being implemented, through long-term planning,
simultaneously as we see the further emergence of regional currencies,
as not only the Euro, but plans and discussions for other regional
currencies are underway in North America, South America, the Gulf
states, Africa and East Asia.
A 1988 article in the Economist
foretold of a coming global currency by 2018, in which the author wrote
that countries would have to give up monetary and economic sovereignty,
however:
Several
more big exchange-rate upsets, a few more stockmarket crashes and
probably a slump or two will be needed before politicians are willing
to face squarely up to that choice. This points to a muddled
sequence of emergency followed by patch-up followed by emergency,
stretching out far beyond 2018-except for two things. As time passes,
the damage caused by currency instability is gradually going to mount;
and the very trends that will make it mount are making the utopia of
monetary union feasible.[82]
To
create a global currency, and thus a global system of economic
governance, the world would have to be plunged into economic and
currency crises to force governments to take the necessary actions in
moving towards a global currency.
From
1998 onwards, there have been several calls for the formation of a
global central bank, and in the midst of the global economic crisis of
2008, renewed calls and actual actions and efforts undertaken by the
G20 have sped up the development of a “global Fed” and world currency.
A global central bank is being offered as a solution to prevent a
future global economic crisis from occurring.
[See: Andrew
Gavin Marshall, The Financial New World Order: Towards a Global
Currency and World Government. Global Research: April 6, 2009]
In
March of 2008, closely following the collapse of Bear Stearns, a major
financial firm released a report stating that, “Financial firms face a
‘new world order’,” and that major banks would become much larger
through mergers and acquisitions. There would be a new world order of
banking consolidation.[83]
In November of 2008, The National,
a prominent United Arab Emirate newspaper, reported on Baron David de
Rothschild accompanying Prime Minister Gordon Brown on a visit to the
Middle East, although not as a “part of the official party”
accompanying Brown. Following an interview with the Baron, it was
reported that, “Rothschild shares most people’s view that there is a
new world order. In his opinion, banks will deleverage and there will
be a new form of global governance.”[84]
In February of 2009, the Times Online
reported that a “New world order in banking [is] necessary,” and that,
“It is increasingly evident that the world needs a new banking system
and that it should not bear much resemblance to the one that has failed
so spectacularly.”[85] However, what the article fails to point out is
that the ‘new world order in banking’ is to be constructed by the
bankers.
This
process is going hand-in-hand with the formation of a new world order
in global political structures, following the economic trends. As
regionalism was spurred by economic initiatives, such as regional
trading blocs and currency groupings, the political structure of a
regional government followed closely behind. Europe was the first to
undertake this initiative, with the formation of a European trading
bloc, which became an economic union and eventually a currency union,
and which, as a result of the recently passed Lisbon Treaty, is being
formally established into a political union.
[See: Andrew Gavin Marshall, Forging a “New World Order” Under a One World Government. Global Research: August 13, 2009]
The
new world order consists of the formation of regional governance
structures, which are themselves submissive to a global governance
structure, both economically and politically.
‘New Capitalism’
In
the construction of a ‘New World Order’, the capitalist system is under
intense reform. Capitalism has, since its inception, altered its nature
and forms. In the midst of the current global economic crisis, the
construction of the ‘New Capitalism’ is based upon the ‘China model’;
that is, ‘Totalitarian Capitalism’.
Governments
will no longer stand behind the ‘public relations’ – propagandized
illusion of ‘protecting the people’. When an economy collapses, the
governments throw away their public obligations, and act for the
interests of their private owners. Governments will come to the aid of
the powerful banks and corporations, not the people, as “The
bourgeoisie resorts to fascism less in response to disturbances in the
street than in response to disturbances in their own economic
system.”[86] During a large economic crisis:
[The
state] rescues business enterprises on the brink of bankruptcy, forcing
the masses to foot the bill. Such enterprises are kept alive with
subsidies, tax exemptions, orders for public works and armaments. In
short, the state thrusts itself into the breach left by the vanishing
private customers. [. . . ] Such maneuvers are difficult under a
democratic regime [because people still] have some means of defense
[and are] still capable of setting some limit to the insatiable demands
of the money power. [In] certain countries and under certain
conditions, the bourgeoisie throws its traditional democracy
overboard.[87]
Those
who proclaim the actions of western governments ‘socialist’ are misled,
as the ‘solutions’ are of a different nature. Daniel Guerin wrote in Fascism and Big Business
about the nature of the fascist economies of Italy and Germany in the
lead up to World War II. Guerin wrote of the actions of Italian and
German governments to bail out big businesses and banks in an economic
crisis:
It
would be a mistake to interpret this state intervention as ‘socialist’
in character. It is brought about not in the interest of the community
but in the exclusive interest of the capitalists.[88]
Fascist economic policy:
[I]ssues
paper and ruins the national currency at the expense of all the people
who live on fixed incomes from investments, savings, pensions,
government salaries, etc., - and also the working class, whose wages
remain stable or lag far behind the rise in the cost of living. [. . .]
The enormous expenses of the fascist state do not appear in the
official budget, [hiding the inflation].[89]
[. . . ] The hidden inflation produces the same effects as open inflation: the purchasing power of money is lessened.[90]
The
bureaucracy of the fascist state becomes much more powerful in
directing the economy, and is advised by the ‘capitalist magnates’, who
“become the economic high command – no longer concealed, as previously,
but official – of the state. Permanent contact is established between
them and the bureaucratic apparatus. They dictate, and the bureaucracy
executes.”[91] This is exactly the nature of the Treasury Department
and Federal Reserve, most especially since the Obama administration
took office.
In
November of 2008, the National Intelligence Council (NIC) issued a
report in collaboration between all sixteen US intelligence agencies
and major international foundations and think tanks, in which they
assessed and analyzed general trends in the world until 2025. When it
reported on trends in ‘democratization’, discussing the spread and
nature of democracy in the world, the report warned:
[A]dvances
[in democracy] are likely to slow and globalization will subject many
recently democratized countries to increasing social and economic
pressures that could undermine liberal institutions. [. . . ] The
better economic performance of many authoritarian governments could sow
doubts among some about democracy as the best form of government.
[.
. . ] Even in many well-established democracies [i.e., the West],
surveys show growing frustration with the current workings of
democratic government and questioning among elites over the ability of
democratic governments to take the bold actions necessary to deal
rapidly and effectively with the growing number of transnational
challenges.[92]
The
warning from Daniel Guerin is vital to understanding this trend: “The
bourgeoisie resorts to fascism less in response to disturbances in the
street than in response to disturbances in their own economic
system.”[93] Totalitarianism is on the rise, as David Lyon wrote:
The
ultimate feature of the totalitarian domination is the absence of exit,
which can be achieved temporarily by closing borders, but permanently
only by a truly global reach that would render the very notion of exit
meaningless. This in itself justifies questions about the totalitarian
potential of globalization. [. . . ] Is abolition of borders
intrinsically (morally) good, because they symbolize barriers that
needlessly separate and exclude people, or are they potential lines of
resistance, refuge and difference that may save us from the
totalitarian abyss? [I]f globalization undermines the tested,
state-based models of democracy, the world may be vulnerable to a
global totalitarian etatization, [i.e., centralization and control].[94]
In
2007, the British Defense Ministry released a report in which they
analyzed future trends in the world. It stated in regards to social
problems, “The middle classes could become a revolutionary class,
taking the role envisaged for the proletariat by Marx.” Interestingly:
The
thesis is based on a growing gap between the middle classes and the
super-rich on one hand and an urban under-class threatening social
order: ‘The world's middle classes might unite, using access to
knowledge, resources and skills to shape transnational processes in
their own class interest’. Marxism could also be revived, it says,
because of global inequality. An increased trend towards moral
relativism and pragmatic values will encourage people to seek the
‘sanctuary provided by more rigid belief systems, including religious
orthodoxy and doctrinaire political ideologies, such as popularism and
Marxism’.[95]
The
general trend has thus become the reformation of the capitalist system
into a system based upon the ‘China model’ of totalitarian capitalism.
The capitalist class fear potential revolutionary sentiment among the
middle and lower classes of the world. Obama was a well-packaged Wall
Street product, sold to the American people and the people of the world
on the promise of ‘Hope’ and ‘Change.’ Obama was put in place to pacify
resistance.
Prior
to Obama becoming President, the American people were becoming united
in their opposition against not only the Bush administration, but
Congress and the government in general. Both the president and Congress
were equally hated; the people were uniting. Since Obama became
President, the people have been turned against one another:
‘conservatives’ blame the ‘liberals’ and ‘socialists’ for all the
problems, pointing fingers at Obama (who is nothing more than a
figurehead), while those on the left point at the Republicans and
‘conservatives’ and Bush, placing all the blame on them. The right
defends the Republicans; the left defends Obama. The people have been
divided, arguably more so than at any time in recent history.
In
dividing the people against each other, those in power have been able
to quell resistance against them, and have continued to loot and
plunder the nation and people, while using its military might to loot
and plunder foreign nations and people. Obama is not to provide hope
and change for the American people; his purpose was to provide the
illusion of ‘change’ and provide ‘hope’ to the elites in preventing a
purposeful and powerful opposition or rebellion among the people.
Meanwhile, the government has been preparing for the potentiality of
great social and civil unrest following a future collapse or crisis.
Instead of coming to the aid of the people, the government is preparing
to control and oppress the people.
Could Martial Law Come to America?
Processes
undertaken in the American political establishment in previous decades,
and rapidly accelerated under the Bush administration and carried on by
the Obama administration, have set the course for the imposition of a
military government in America. Readily armed with an oppressive state
apparatus and backed by the heavy surveillance state apparatus, the
‘Homeland Security’ state is about controlling the population, not
protecting them.
In
January of 2006, KBR, a subsidiary of the then-Vice President Cheney’s
former corporation, Halliburton, received a contract from the
Department of Homeland Security:
[T]o
support the Department of Homeland Security’s (DHS) U.S. Immigration
and Customs Enforcement (ICE) facilities in the event of an emergency.
[The contract] has a maximum total value of $385 million over a
five-year term, consisting of a one-year based period and four one-year
options, the competitively awarded contract will be executed by the
U.S. Army Corps of Engineers, Fort Worth District. KBR held the
previous ICE contract from 2000 through 2005.
[It
further] provides for establishing temporary detention and processing
capabilities to augment existing ICE Detention and Removal Operations
(DRO) Program facilities in the event of an emergency influx of
immigrants into the U.S., or to support the rapid development of new programs.
[. . . ] The contract may also provide migrant detention support to
other U.S. Government organizations in the event of an immigration
emergency, as well as the development of a plan to react to a national emergency, such as a natural disaster. [emphasis added][96]
Put
simply, the contract is to develop a system of ‘internment camps’
inside the United States to be used in times of ‘emergency’. Further,
as Peter Dale Scott revealed in his book, The Road to 9/11:
On
February 6, 2007, homeland security secretary Michael Chertoff
announced that the fiscal year 2007 federal budget would allocate more
than $400 million to add sixty-seven hundred additional detention beds
(an increase of 32 percent over 2006). [This was] in partial
fulfillment of an ambitious ten-year Homeland Security strategic plan,
code-named Endgame, authorized in 2003, [designed to] remove all
removable aliens [and] potential terrorists.[97]
As
Scott previously wrote, “the contract evoked ominous memories of Oliver
North's controversial Rex-84 ‘readiness exercise’ in 1984. This called
for the Federal Emergency Management Agency (FEMA) to round up and
detain 400,000 imaginary ‘refugees,’ in the context of ‘uncontrolled
population movements’ over the Mexican border into the United States.”
However, it was to be a cover for the rounding up of ‘subversives’ and
‘dissenters’. Daniel Ellsberg, who leaked the ‘Pentagon papers’ in
1971, stated that, “Almost certainly this [new contract] is preparation
for a roundup after the next 9/11 for Mid-Easterners, Muslims and
possibly dissenters.”[98]
In
February of 2008, an article in the San Francisco Chronicle,
co-authored by a former US Congressman, reported that, “Beginning in
1999, the government has entered into a series of single-bid contracts
with Halliburton subsidiary Kellogg, Brown and Root (KBR) to build
detention camps at undisclosed locations within the United States. The
government has also contracted with several companies to build
thousands of railcars, some reportedly equipped with shackles,
ostensibly to transport detainees.”[99]
Further, in February of 2008, the Vancouver Sun reported that:
Canada
and the U.S. have signed an agreement that paves the way for the
militaries from either nation to send troops across each other's
borders during an emergency, but some are questioning why the Harper
government has kept silent on the deal. [. . .] Neither the Canadian
government nor the Canadian Forces announced the new agreement, which
was signed Feb. 14 in Texas [but the] U.S. military's Northern Command,
however, publicized the agreement with a statement outlining how its
top officer, Gen. Gene Renuart, and Canadian Lt.-Gen. Marc Dumais, head
of Canada Command, signed the plan, which allows the military from one
nation to support the armed forces of the other nation in a civil
emergency.
[.
. . ] If U.S. forces were to come into Canada they would be under
tactical control of the Canadian Forces but still under the command of
the U.S. military.[100]
Commenting on the Military Commissions Act of 2006, Yale law and political science professor Bruce Ackerman wrote in the Los Angeles Times
that the legislation “authorizes the president to seize American
citizens as enemy combatants, even if they have never left the United
States. And once thrown into military prison, they cannot expect a
trial by their peers or any other of the normal protections of the Bill
of Rights.” Further, it states that the legislation “grants the
president enormous power over citizens and legal residents. They can be
designated as enemy combatants if they have contributed money to a
Middle Eastern charity, and they can be held indefinitely in a military
prison.” Not only that, but, “ordinary Americans would be required to
defend themselves before a military tribunal without the constitutional
guarantees provided in criminal trials.” Startlingly, “Legal residents
who aren't citizens are treated even more harshly. The bill entirely
cuts off their access to federal habeas corpus, leaving them at the
mercy of the president's suspicions.”[101]
Senator
Patrick Leahey made a statement on February 2007 in which he discussed
the John Warner Defense Authorization Act of 2007, saying:
Last
year, Congress quietly made it easier for this President or any
President to declare martial law. That’s right: In legislation added at
the Administration’s request to last year’s massive Defense
Authorization Bill, it has now become easier to bypass longtime posse
comitatus restrictions that prevent the federal government’s use of the
military, including a federalized National Guard, to perform domestic
law enforcement duties.
He
added that, “posse comitatus [is] the legal doctrine that bars the use
of the military for law enforcement directed at the American people
here at home.” The Bill is an amendment to the Insurrection Act, of
which Leahey further commented:
When
the Insurrection Act is invoked, the President can — without the
consent of the respective governors -- federalize the National Guard
and use it, along with the entire military, to carry out law
enforcement duties. [This] is a sweeping grant of authority to the
President. [. . . ] In addition to the cases of insurrection, the Act
can now be invoked to restore public order after a terrorist attack, a
natural disaster, a disease outbreak, or — and this is extremely broad
— ‘other condition’.[102]
On
May 9, 2007, the White House issued a press release about the National
Security Presidential Directive (NSPD) 51, also known as the “National
Security and Homeland Security Presidential Directive.” This directive:
[P]rescribes
continuity requirements for all executive departments and agencies, and
provides guidance for State, local, territorial, and tribal
governments, and private sector organizations in order to ensure a
comprehensive and integrated national continuity program that will
enhance the credibility of our national security posture and enable a
more rapid and effective response to and recovery from a national
emergency.
The document defines “catastrophic emergency” as, “any
incident, regardless of location, that results in extraordinary levels
of mass casualties, damage, or disruption severely affecting the U.S.
population, infrastructure, environment, economy, or government functions.”
It explains “Continuity of Government” (COG), as “a coordinated effort
within the Federal Government's executive branch to ensure that
National Essential Functions continue to be performed during a
Catastrophic Emergency.” [emphasis added]
The
directive states that, “The President shall lead the activities of the
Federal Government for ensuring constitutional government. In order to
advise and assist the President in that function, the Assistant to the
President for Homeland Security and Counterterrorism (APHS/CT) is
hereby designated as the National Continuity Coordinator.”[103]
Essentially,
in time of a “catastrophic emergency”, the President takes over total
control of the executive, legislative and judicial branches of
government in order to secure “continuity”. In essence, the Presidency
would become an “Executive Dictatorship”.
In late September of 2008, in the midst of the financial crisis, the Army Times,
an official media outlet of the Pentagon, reported that, “Helping
‘people at home’ may become a permanent part of the active Army,” as
the 3rd Infantry Division’s 1st Brigade Combat Team, having spent years
patrolling Iraq, are now “training for the same mission — with a twist
— at home.” Further:
They
may be called upon to help with civil unrest and crowd control or to
deal with potentially horrific scenarios such as massive poisoning and
chaos in response to a chemical, biological, radiological, nuclear or
high-yield explosive, or CBRNE, attack.[104]
None
of the authorizations, bills, executive orders, or contracts related to
the declaration of marital law and suspension of democracy in the event
of an ‘emergency’ have been repealed by the Obama administration.
In fact, as the New York Times
revealed in July 2009, the Obama administration has decidedly left in
place the Bush administration decisions regarding the government
response to a national emergency in ‘Continuity of Government’ (COG)
plans in establishing a ‘shadow government’:
A
shift in authority has given military officials at the White House a
bigger operational role in creating a backup government if the nation’s
capital were “decapitated” by a terrorist attack or other calamity,
according to current and former officials involved in the decision.
The
move, which was made in the closing weeks of the administration of
President George W. Bush, came after months of heated internal debate
about the balance of power and the role of the military in a time of
crisis, participants said. Officials said the Obama administration had
left the plan essentially intact.
Under
the revamped structure, the White House Military Office, which reports
to the office of the White House chief of staff, has assumed a more
central role in setting up a temporary “shadow government” in a crisis.
The
Obama administration announced that their continuity plans were
‘settled’ and they “drew no distance between their own policies and
those left behind by the Bush administration.”[105] In July of 2009, it
was also reported on moves by the Obama administration to implement a
system of ‘preventive detention’. With this, any semblance of
democratic accountability and freedom have been utterly gutted and
disemboweled; the Republic is officially dead:
[‘Preventive
detention’] is to be a permanent, institutionalized detention scheme
with the power vested in the President going forward to imprison people
with no charges.
[.
. . ] Manifestly, this isn't about anything other than
institutionalizing what has clearly emerged as the central premise of
the Obama Justice System: picking and choosing
what level of due process each individual accused Terrorist is
accorded, to be determined exclusively by what process ensures that the
state will always win. If they know they'll
convict you in a real court proceeding, they'll give you one; if they
think they might lose there, they'll put you in a military commission;
if they're still not sure they will win, they'll just indefinitely
imprison you without any charges.
[. . .] It's Kafkaesque show trials in their most perverse form: the outcome is pre-determined (guilty and imprisoned) and only the process changes. That's
especially true since, even where a miscalculation causes someone to be
tried but then acquitted, the power to detain them could still be
asserted.[106]
Society,
and with it, any remaining ‘democracy’ is being closed down. In this
economic crisis, as Daniel Guerin warned decades ago, the financial
oligarchy have chosen to ‘throw democracy overboard’, and have opted
for the other option: totalitarian capitalism; fascism.
In Conclusion
The
current crisis is not merely a failure of the US housing bubble, that
is but a symptom of a much wider and far-reaching problem. The nations
of the world are mired in exorbitant debt loads, as the sovereign debt
crisis spreads across the globe, entire economies will crumble, and
currencies will collapse while the banks consolidate and grow. The
result will be to properly implement and construct the apparatus of a
global government structure. A central facet of this is the formation
of a global central bank and a global currency.
The
people of the world have been lulled into a false sense of security and
complacency, living under the illusion of an economic recovery. The
fact remains: it is only an illusion, and eventually, it will come
tumbling down. The people have been conned into handing their
governments over to the banks, and the banks have been looting and
pillaging the treasuries and wealth of nations, and all the while, and
making the people pay for it.
There never was a story of more woe, than that of human kind, and their monied foe.
Truly,
the people of the world do need a new world order, but not one
determined and constructed by and for those who have created the past
failed world orders. It must be a world order directed and determined
by the people of the world, not the powerful. But to do this, the
people must take back the power.
The
way to achieving a stable economy is along the path of peace. War and
economic crises play off of one another, and are systematically linked.
Imperialism is the driver of this system, and behind it, the banking
establishment as the financier.
Peace
is the only way forward, in both political and economic realms. Peace
is the pre-requisite for social sustainability and for a truly great
civilization.
The
people of the world must pursue and work for peace and justice on a
global scale: economically, politically, socially, scientifically,
artistically, and personally. It’s asking a lot, but it’s our only
option. We need to have ‘hope’, a word often strewn around with little
intent to the point where it has come to represent failed expectations.
We need hope in ourselves, in our ability to throw off the shackles
that bind us and in our diversity and creativity construct a new world
that will benefit all.
No
one knows what this world would look like, or how exactly to get there,
least of all myself. What we do know is what it doesn’t look like, and
what road to steer clear of. The time has come to retake our rightful
place as the commanders of our own lives. It must be freedom for all,
or freedom for none. This is our world, and we have been given the gift
of the human mind and critical thought, which no other living being can
rightfully boast; what a shame it would be to waste it.
Andrew
Gavin Marshall is a Research Associate with the Centre for Research on
Globalization (CRG). He is currently studying Political Economy and
History at Simon Fraser University.
Source > Global Research
Notes
[1] Dan Harris, Pessimism Porn? Economic Forecasts Get Lurid. ABC News: April 9, 2009: http://abcnews.go.com/Technology/story?id=7299825&page=1
Hugo Lindgren, Pessimism Porn. New York Magazine: February 1, 2009: http://nymag.com/news/intelligencer/53858/
[2] Joseph B. Treaster, Paul Volcker: The Making of a Financial Legend. John Wiley and Sons, 2004: page 38
[3] Joseph B. Treaster, Paul Volcker: The Making of a Financial Legend. John Wiley and Sons, 2004: page 36
[4] Joseph B. Treaster, Paul Volcker: The Making of a Financial Legend. John Wiley and Sons, 2004: page 37
[5] Joseph B. Treaster, Paul Volcker: The Making of a Financial Legend. John Wiley and Sons, 2004: page 38
[6] Joseph B. Treaster, Paul Volcker: The Making of a Financial Legend. John Wiley and Sons, 2004: pages 57-60
[7] Firoze
Manji and Carl O’Coill, The Missionary position: NGOs and development
in Africa. International Affairs: Issue 78, Vol. 3, 2002: pages 567-568
[8] Firoze
Manji and Carl O’Coill, The Missionary position: NGOs and development
in Africa. International Affairs: Issue 78, Vol. 3, 2002: page 568
[9] Firoze
Manji and Carl O’Coill, The Missionary position: NGOs and development
in Africa. International Affairs: Issue 78, Vol. 3, 2002: page 578
[10] Firoze
Manji and Carl O’Coill, The Missionary position: NGOs and development
in Africa. International Affairs: Issue 78, Vol. 3, 2002: page 579
[11] Ambrose Evans-Pritchard, BIS warns of Great Depression dangers from credit spree. The Telegraph: June 27, 2009:
http://www.telegraph.co.uk/finance/economics/2811081/BIS-warns-of-Great-Depression-dangers-from-credit-spree.html
[12] Gill Montia, Central bank body warns of Great Depression. Banking Times: June 9, 2008:
http://www.bankingtimes.co.uk/09062008-central-bank-body-warns-of-great-depression/
[13] David Reilly, Secret Banking Cabal Emerges From AIG Shadows: David Reilly. Bloomberg: January 29, 2010: http://www.bloomberg.com/apps/news?pid=20601039&sid=aaIuE.W8RAuU
[14] AP, Bernanke, Paulson: Congress must act now. MSNBC: September 23, 2008: http://www.msnbc.msn.com/id/26850571/
[15] Chris Isidore, Paulson, Bernanke: Slow growth ahead. CNN Money: February 14, 2008: http://money.cnn.com/2008/02/14/news/economy/bernanke_paulson/index.htm
[16] People should be more scared than mad, Paulson says. Politico: September 24, 2008: http://www.politico.com/blogs/thecrypt/0908/People_should_be_more_scared_than_mad_Paulson_says.html
[17] Chris Martenson, What the latest bailout plan means. ChrisMartenson.com: September 21, 2008: http://www.chrismartenson.com/blog/what-latest-bailout-plan-means/5149
[18] Alison Fitzgerald and John Brinsley, Treasury Seeks Authority to Buy $700 Billion Assets. Bloomberg: September 20, 2008: http://www.bloomberg.com/apps/news?pid=20601087&sid=aZ2aFDx8_idM&refer=home
[19] Larisa Alexandrovna, Welcome to the final stages of the coup. Huffington Post: September 29, 2008: http://www.huffingtonpost.com/larisa-alexandrovna/welcome-to-the-final-stag_b_127990.html
[20] Liam Halligan, A default by the US government is no longer unthinkable. The Telegraph: September 20, 2008: http://www.telegraph.co.uk/finance/comment/liamhalligan/3023967/A-default-by-the-US-government-is-no-longer-unthinkable.html
[21] Mike Allen, Exclusive: Foreign banks may get help. Politico: September 21, 2008: http://www.politico.com/news/stories/0908/13690.html
[22] Steve
Watson, Democratic Congressman: Representatives Were Threatened With
Martial Law In America Over Bailout Bill. Infowars.com: October 3,
2008: http://www.infowars.net/articles/october2008/031008Sherman.htm
[23] Ryan Grim, Dick Durbin: Banks "Frankly Own The Place". Huffington Post: April 29, 2009: http://www.huffingtonpost.com/2009/04/29/dick-durbin-banks-frankly_n_193010.html
[24] GRETCHEN MORGENSON and DON VAN NATTA Jr., In Crisis, Banks Dig In for Fight Against Rules. The New York Times: May 31, 2009: http://www.nytimes.com/2009/06/01/business/01lobby.html
[25] Kerry Capell, The Stunning Collapse of Iceland. BusinessWeek: October 9, 2008: http://www.businessweek.com/globalbiz/content/oct2008/gb2008109_947306.htm?chan=globalbiz_europe+index+page_top+stories
[26] Toby Sanger, Iceland's Economic Meltdown Is a Big Flashing Warning Sign. AlterNet: October 21, 2008: http://www.alternet.org/economy/103525/iceland%27s_economic_meltdown_is_a_big_flashing_warning_sign/?comments=view&cID=1038826&pID=1038711
[27] Tracy McVeigh, The party's over for Iceland, the island that tried to buy the world. The Observer: October 5, 2008: http://www.guardian.co.uk/world/2008/oct/05/iceland.creditcrunch
[28] Ibid.
[29] Arsaell Valfells, Gordon Brown Killed Iceland. Forbes: October 16, 2008: http://www.forbes.com/2008/10/16/brown-iceland-britain-oped-cx_av_valfells.html?referer=sphere_related_content&referer=sphere_related_content
[30] Ibid.
[31] Councils 'not reckless with cash'. BBC: October 10, 2008: http://news.bbc.co.uk/1/hi/uk_politics/7660438.stm
[32] Economic programme in cooperation with IMF. The Icelandic Government Information Centre: October 24, 2008: http://www.iceland.org/info/iceland-imf-program/
[33] David Ibison, Iceland's rescue package flounders. The Financial Times: November 12, 2008
[34] David Blair, Financial crisis causes Iceland's government to collapse. The Telegraph: January 27, 2009: http://www.telegraph.co.uk/news/worldnews/europe/iceland/4348312/Financial-crisis-causes-Icelands-government-to-collapse.html
[35] Iceland applies to join European Union. CNN: July 17, 2009: http://www.cnn.com/2009/WORLD/europe/07/17/iceland.eu.application/index.html?iref=newssearch
[36] Omar Valdimarsson, Iceland parliament approves debt bill. Reuters: August 28, 2009: http://www.reuters.com/article/idUSTRE57R3B920090828
[37] Rowena Mason, IMF and Sweden to delay Iceland loans. The Telegraph: January 14, 2010: http://www.telegraph.co.uk/finance/financetopics/financialcrisis/6990795/IMF-and-Sweden-to-delay-Iceland-loans.html
[38] Justyna Pawlak, EU to recommend start of Iceland talks - EU official. Reuters: February 16, 2010: http://www.reuters.com/article/idUSLDE61F25D20100216
[39] Paul Lewis, Dubai's six-year building boom grinds to halt as financial crisis takes hold. The Guardian: February 13, 2009: http://www.guardian.co.uk/world/2009/feb/13/dubai-boom-halt
[40] Larry Elliott and Heather Stewart, Fears of double-dip recession grow as Dubai crashes. The Guardian: November 26, 2009: http://www.guardian.co.uk/business/2009/nov/26/double-dip-recession-dubai-debt
[41] Hugh Tomlinson, UAE minister claims Dubai crisis is over. The Times Online: December 17, 2009: http://business.timesonline.co.uk/tol/business/economics/article6960523.ece
[42] AP, Dubai debt fears resurface as questions linger. Forbes: February 16, 2010: http://www.forbes.com/feeds/ap/2010/02/16/business-financials-ml-dubai-financial-crisis_7359531.html
[43] Alastair Marsh, Markets hit as fears over Dubai debt rekindled. The Independent: February 16, 2010: http://www.independent.co.uk/news/business/news/markets-hit-as-fears-over-dubai-debt-rekindled-1900730.html
[44] Ed Harris, Greece turns to Socialists to fight economic crisis. London Evening Standard: October 5, 2009: http://www.thisislondon.co.uk/standard/article-23752278-greece-turns-to-socialists-to-fight-economic-crisis.do
[45] Ambrose Evans-Pritchard, Greece defies Europe as EMU crisis turns deadly serious. The Telegraph: December 13, 2009: http://www.telegraph.co.uk/finance/comment/ambroseevans_pritchard/6804156/Greece-defies-Europe-as-EMU-crisis-turns-deadly-serious.html
[46] Elena Becatoros, Greece prepares economic crisis plan. The Globe and Mail: December 14, 2009: http://www.theglobeandmail.com/report-on-business/greece-prepares-economic-crisis-plan/article1399496/
[47] LOUISE
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[48] Ibid.
[49] Sam
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[51] Ambrose Evans-Pritchard, Greece loses EU voting power in blow to sovereignty. The Telegraph: February 16, 2010: http://www.telegraph.co.uk/finance/financetopics/financialcrisis/7252288/Greece-loses-EU-voting-power-in-blow-to-sovereignty.html
[52] Ambrose Evans-Pritchard, Fears of 'Lehman-style' tsunami as crisis hits Spain and Portugal. The Telegraph: February 4, 2010: http://www.telegraph.co.uk/finance/financetopics/financialcrisis/7159456/Fears-of-Lehman-style-tsunami-as-crisis-hits-Spain-and-Portugal.html
[53] Ambrose Evans-Pritchard, BIS warns of Great Depression dangers from credit spree. The Telegraph: June 25, 2007: http://www.telegraph.co.uk/finance/economics/2811081/BIS-warns-of-Great-Depression-dangers-from-credit-spree.html
[54] Ambrose Evans-Pritchard, BIS slams central banks, warns of worse crunch to come. The Telegraph: June 30, 2008: http://www.telegraph.co.uk/finance/markets/2792450/BIS-slams-central-banks-warns-of-worse-crunch-to-come.html
[55] Heather Scoffield, Financial repairs must continue: central banks. The Globe and Mail: July 29, 2009: http://v1.theglobeandmail.com/servlet/story/RTGAM.20090629.wcentralbanks0629/BNStory/HEATHER+SCOFFIELD/
[56] Simone Meier, BIS Sees Risk Central Banks Will Raise Interest Rates Too Late. Bloomberg: June 29, 2009: http://www.bloomberg.com/apps/news?pid=20601068&sid=aOnSy9jXFKaY
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[64] Ibid.
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