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Bringing Down the Empire: Challenging the Institutions of Domination

Bringing Down the Empire: Challenging the Institutions of Domination

By: Andrew Gavin Marshall

“Nothing is more powerful than an idea whose time has come.” – Victor Hugo

We have come to the point in our history of our species where an increasing amount of people are asking questions, seeking answers, taking action, and waking up to the realities of our world, to the systems, ideas, institutions and individuals who have dominated, oppressed, controlled, and ensnared humanity in their grip of absolute control. As the resistance to these ideas, institutions, and individuals grows and continues toward taking action – locally, nationally, regionally, and globally – it is now more important than ever for the discussion and understanding of our system to grow in accord. Action must be taken, and is being taken, but information must inform action. Without a more comprehensive, global and expansive understanding of our world, those who resist this system will become increasingly divided, more easily co-opted, and have their efforts often undermined.

So now we must ask the questions: What is the nature of our society? How did we get here? Who brought us to this point? Where are we headed? When will we get to that point? Why is humanity in this place? And what can we do to change the future and the present? These are no small questions, and while they do not have simple answers, the answers can be sought, all the same. If we truly seek change, not simply for ourselves as individuals, not merely for our specific nations, but for the whole of humanity and the entire course of human history, these questions must be asked, and the answers must be pursued.

So, what is the nature of our society?

Our society is one dominated not simply by individuals, not merely by institutions, but more than anything else, by ideas. These three focal points are of course inter-related and interdependent. After all, it is individuals who come up with ideas which are then institutionalized. As a result, over time, the ‘institutionalization of ideas’ affect the wider society in which they exist, by producing a specific discourse, by professionalizing those who apply the ideas to society, by implanting them so firmly in the social reality that they often long outlive the individuals who created them in the first place. In time, the ideas and institutions take on a life of their own, they become concerned with expanding the power of the institutions, largely through the propagation and justification of the ideas which legitimate the institution’s existence. Ultimately, the institution becomes a growing, slow-moving, corrosive behemoth, seeking self-preservation through repression of dissent, narrowing of the discourse, and control over humanity. This is true for the ideas and institutions, whether media, financial, corporate, governmental, philanthropic, educational, political, social, psychological and spiritual. Often the idea which founds an institution may be benevolent, altruistic and humane, but, over time, the institution itself takes control of the idea, makes it rigid and hesitant to reform, and so even the most benevolent idea can become corrupted, corrosive, and oppressive to humanity. This process of the institutionalization of ideas has led to the rise of empires, the growth of wars, the oppression of entire populations, and the control and domination of humanity.

How did we get here?

The process has been a long one. It is, to put it simply, the history of all humanity. In the last 500 years, however, we can identify more concrete and emergent themes, ideas, institutions, individuals and processes which brought us to our current place. Among these are the development of the nation-state, capitalism, and the financial system of banking and central banking. Concurrently with this process, we saw the emergence of racism, slavery, and the transformation of class politics into racial politics. The ideas of ‘social control’ came to define and lay the groundwork for a multitude of institutions which have emerged as dominant forces in our society. Managing the poor and institutionalizing racism are among the most effective means of social control over the past 500 years. The emergence of national education systems played an important part in creating a collective identity and consciousness for the benefit of the state. The slow and steady progression of psychiatry led to the domination of the human mind, and with that, the application of psychology in methods of social engineering and social control.

Though it was in the 19th century that revolutionary ideas and new philosophies of resistance emerged in response to the increasing wealth and domination at the top, and the increasing repression and exploitation of the rest. In reaction to this development, elites sought out new forms of social control. Educational institutions facilitated the rise of a new intellectual elite, which, in turn, redefined the concept of democracy to be an elite-guided structure, defined and controlled by that very same intellectual elite. This led to the development of new concepts of propaganda and power. This elite created the major philanthropic foundations which came to act as “engines of social engineering,” taking a dominant role in the shaping of a global society and world order over the 20th century. Ruthless imperialism was very much a part of this process. By no means new to the modern world, empire and war is almost as old as human social organization. In the late 19th and early 20th centuries, rapid imperial expansion led to the domination of almost the entire world by the Western powers. As the Europeans took control of Africa, the United States took control of the Caribbean, with Woodrow Wilson’s brutal occupations of Haiti and the Dominican Republic.

The two World Wars transformed the global order: old empires crumbled, and new ones emerged. Bankers centralized their power further and over a greater portion of human society. After World War II, the American Empire sought total world domination. It undertook to control the entirety of Latin America, often through coups and brutal state repression, including support to tyrannical dictators. This was done largely in an effort to counter the rise of what was called “radical nationalism” among the peoples of the region.  In the Middle East, the United States sought to control the vast oil reserves in an effort to “control the world.” To do so, the United States had to set itself against the phenomenon of Arab Nationalism. Israel emerged in the context of great powers seeking to create a proxy state for their imperial domination of the region. The birth of Israel was itself marked by a brutal campaign of ethnic cleansing against the domestic Palestinian population, a fact which has scarred forever the image and reality of Israel in the Arab world. The development of the educational system facilitated the imperial expansion, not only in the United States itself, but globally, and largely at the initiative of major foundations like Rockefeller, Carnegie, and Ford.

Who brought us here?

While the ideas and institutions are the major forces of domination in our world, they are all started by individuals. We are ruled, though it may be difficult to imagine, by a small dynastic power structure, largely consisting of powerful banking families, such as the Rothschilds, Rockefellers, and others. The emerged in controlling the financial system, extended their influence over the political system, the educational system, and, through the major foundations, have become the dominant social powers of our world, creating think tanks and other institutions which shape and change the course of society and modern human history. Among these central institutions which extend the domination of these elites and their social group are the Council on Foreign Relations, the Bilderberg Group, and the Trilateral Commission.

Where are we headed, and when will we get there?

We face the possibility of a major global war. Already the Western imperial powers have been interfering in the Arab Spring, attempting to co-opt, control, or outright repress various uprisings in the region, as well as extending their imperial interests by supporting militant and destructive elements in order to implement – through war and destabilization – regime change, such as in Libya. The war threats against Iran continue, not because Iran is seeking a nuclear weapon, but because Iran seeks to continue to develop independent of Western domination and has the capacity to defend itself, an incomprehensible thought for a global empire which believes it has the ‘right’ to absolute world domination. The empire itself is threatened by a ‘Global Political Awakening’ which marks the changing ideas and understandings of humanity about our situation and the possibility for change, even revolutionary if necessary. As the global economic crisis continues to descend into a ‘Great Global Debt Depression,’ we see the increasing development of resistance, leading even to riots, rebellion, and potentially revolution. The middle classes of the West are being plunged into poverty, a condition which the rest of the world has known for far too long, and as a result, the political activation of these classes, along with the radicalization of the student population – left in jobless debt for an eternity – create the conditions for global solidarity and revolution. These conditions also spur on the State to impose more repressive and totalitarian measures of control, even to the possibility of state terror against the domestic population.

Just as the process of resistance and repression increase on a global scale, so too does the process of global centralization and expansion of domination. Through crises, the global elites seek to construct the apparatus of a ‘global government.’ The major think tanks such as the Bilderberg Group have long envisioned and worked toward such a scenario. This ‘new world order’ being constructed is specifically for the benefit of the elite and to the detriment of everyone else, and will inevitably – as by the very nature of institutions – become tyrannical and oppressive. The ‘Technological Revolution’ has thus created two parallel situations: never before has the possibility of absolute global domination and control been so close; yet, never has the potential of total global liberation and freedom been so possible.

Why are we here, and what can we do to change it?

We are here largely due to a lack of understanding of how we have come to be dominated, of the forces, ideas, institutions, and individuals who have emerged as the global oligarchy. To change it, firstly, we need to come to understand these ideas, to understand the origins and ‘underneath’ of all ideas that we even today hold as sacrosanct, to question everything and critique every idea. We need to define and understand Liberty and Power. When we understand these processes and the social world in which we live, we can begin to take more informed actions toward changing this place, and toward charting our own course to the future. We do have the potential to change the course of history, and history will stand in favour of the people over the powerful.

The People’s Book Project seeks to expand this understanding of our world, and the ideas, institutions, and individuals which have come to dominate it, as well as those which have emerged and are still emerging in resistance to it. What is the nature of our society? How did we get here? Who brought us here? Why? Where are we going? When will we get there? And what can we do to change it? These are the questions being asked by The People’s Book Project. The products of this project, entirely funded through donations from readers like you, is to produce a multi-volume book on these subjects and seeking to answer as best as possible, these questions. It is, essentially, a modern history of power, people, and potential. The book itself lays the groundwork for a larger idea, and a plan of action, a method of countering the institutional society, of working toward the empowerment of people, the undermining of power, to make all that we needlessly depend upon irrelevant, to push people toward our true potential as a species, and to inform the action of many so that humanity may learn, discover, try and, eventually, succeed over that which seeks to dominate.

The People’s Book Project depends entirely upon you, the reader, for support, and that support is needed now.

See what others are saying about The People’s Book Project:

The People’s Book Project may be a radical idea for radical times, but it’s an idea whose time has come. With crowd-funding the people finally have the chance to compete with the seemingly unlimited resources of  the financial elite who have traditionally written our history. This  is why I support Andrew Gavin Marshall’s project and hope others will  support it, too. For once the people have the chance to reclaim their own history, and to tell the truth the way it deserves to be told.

James Corbett

The People’s Book Project is a great undertaking for our time. Around the world we have seen a political awakening of the oppressed, exploited, and impoverished that has swept the globe, from Cairo to Melbourne to the imperial capital itself: Washington D.C. The project is so important because by tracing how we got to this point in history and who got us here, it allows us to then use that knowledge to begin to envision and articulate a new global social, political, and economic order and then take concrete steps to see this vision come to fruition.

Devon DB

I am an enthusiastic supporter of the People’s Book Project because our society is in desperate need of creating new Social Architectures.  The Industrial Age is crumbling – but ‘the new’ has yet to be invented.  Thus, we need brilliant young minds to create new possibilities, through the haze of mind numbing commodification of everything.  The People’s Book Project represents incredible discipline and in-depth research by brilliant young minds to discover the futures we need to build together.  Join me in supporting this exploration of our future.

Jack Pearpoint and Lynda Kahn

Please support The People’s Book Project and make a donation today!

Thank you for your support,

Andrew Gavin Marshall

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The Great Global Debt Depression: It’s All Greek To Me

The Great Global Debt Depression: It’s All Greek To Me

July 15, 2011

Introduction

In late June of 2011, the Greek government passed another round of austerity measures, ostensibly aimed at getting Greece “back on track” to economic progress, but in reality, implementing a systematic program of ‘social genocide’ in the name of servicing an endless and illegitimate debt to foreign banks. Right on cue, protests and riots broke out in Athens against the draconian measures, and the state moved in to do what states do best: oppress the people with riot police, tear gas and bashing batons, leaving roughly 300 people injured.

Is Greece simply a case of a country full of lazy people who spent beyond their means and are now paying for their own decadence? Or, is there something much larger at stake – and at play – here? Greece is, in fact, a microcosm of the global economy: mired in excessive debt, economically ruined, increasingly politically repressive and socially explosive. This report takes a look at the case of the Greek debt crisis specifically, and places it within a wider global context. The conclusion is clear: what happens in Greece will happen here.

This report examines the Greek crisis, as well as the larger global economic crisis, including the origins of the housing bubble, the bailouts, the banks, and the major actors and institutions which will come to dominate the stage over the next decade in what will play out as ‘The Great Global Debt Depression.’

An Olympian Debt

With the global economic crisis rampaging throughout the world in 2008, Greece experienced major protests and riots at government reactions to the crisis. The unpopularity of the government led to an election in which a Socialist government came to power in October of 2009 under the premise of promising an injection of 3 billion euros in order to revive the Greek economy.[1] When the government came to power, they inherited a debt that was double that which the previous government had disclosed. This prompted Greece’s entry into a major debt crisis, as the debt was roughly 127% of Greece’s GDP in 2009, and thus, the costs of borrowing rose exponentially.

In April of 2010, Greece had to seek a bailout by the EU and the IMF in order to pay the interest on its debt. However, by taking such a bailout from the EU and IMF, Greece ultimately incurred a larger long-term debt, as the money from these institutions simply added to the overall debt, and thus, actually increased eventual interest payments on that debt. Thus, we see the true nature of debt: a financial form of slavery. Debt is designed in such a way that, like a fly caught in a spider’s web, the more it struggles, the more entangled it gets; the more it struggles to break free, the more it arouses the attention of the spider, which quickly moves in to strike its prey – paralyzed – with its venom, so that it may wrap the fly in its silk and eat it alive. Debt is the silk, the people are the fly, and the spider is the large financial institutions – from the banks to the IMF. The nature of debt is that one is never meant to be able to escape it. Hence, the “solution” for Greece’s debt problem – according to those who decide policy – is for Greece to acquire more debt. Of course, this new debt is used to pay the interest on the old debt (note: it is not used to pay OFF the old debt, just the interest on it). However, the effect this has is that it increases the over-all debt of the nation, which leads to higher interest payments and thus a greater cost of borrowing. This, ultimately, leads to a need to continue borrowing in order to pay off the higher interest payments, and thus, the cycle continues. For all the “bail outs” and aims at addressing Greece’s debt, this prescription inevitably results in greater debt levels than those which induced the debt crisis in the first place.

So why is this the prescription?

Not only does this prescription incur more debt to pay interest on old debt, but the process of borrowing and “consolidating” debt has devastating social and political consequences. For example, in the case of Greece, in order to receive loans from the IMF and EU, Greece was forced to impose “fiscal austerity measures.” This blatantly ambiguous economic nomenclature of “fiscal austerity” is in fact more accurately described in real human terms as “social genocide.” Why is this so?

‘Fiscal Austerity’ means that the state – in this case, Greece – must engage in “fiscal consolidation.” In economic parlance, this implies that the state must cut spending and increase taxes in order to “service” its debt by reducing its annual deficit. Thus, the ‘conditions’ for receiving a loan demand “fiscal austerity” measures being implemented by the debtor nation. This is supposedly a way for the lender to ensure that their loans are met with appropriate measures to deal with the debt. The objective, purportedly, is to reduce expenditure (spending) and increase revenue (income), allowing for more money to pay off the debt. However, as with most economic concepts, the reality is far different than the theoretical implications of “fiscal austerity.”

In fact, ‘fiscal austerity’ is a state-implemented program of social destruction, or ‘social genocide’. Such austerity measures include cutting social spending, which means no more health care, education, social services, welfare, pensions, etc. This directly implies a massive wave of layoffs from the public sector, as those who worked in health care, education, social services, etc., have their jobs eliminated. This, naturally, creates a massive growth in poverty rates, with the jobless and homeless rates climbing dramatically. Simultaneously, of course, taxes are raised drastically, so that in a social situation in which the middle and lower classes are increasingly impoverished, they are then over-taxed. This creates a further drain of wealth, and consumption levels go down, further driving production levels downward, and (local) private businesses cannot compete with foreign multinational conglomerates, and so businesses close and more lay-offs take place. After all, without a market for consumption, there is no demand for production. In a country such as Greece, where the percentage of people in the employ of the state is roughly 25%, these measures are particularly devastating.

Naturally, in such situations, the masses of people – those who are doomed to suffer most – are left greatly impoverished and the middle classes essentially vanish, and are absorbed into the lower class. As social services vanish when they are needed most, life expectancy rates decrease. With few jobs and massive unemployment, many are left to choose between buying food or medicine, if those are even options. Crime rates naturally increase in such situations, as desperate conditions breed desperate actions. This creates, especially among the educated youth who graduate into a jobless market, a ‘poverty of expectations,’ having grown up with particular expectations of what they would have in terms of opportunities, which then vanish quite suddenly. This results in enormous social stress, and often, social unrest: protests, riots, rebellion, and even revolution in extreme circumstances. These are exactly the conditions that led to the uprising in Egypt.

The reflexive action of states, therefore, is to move in to repress – most often quite violently – protests and demonstrations. The aim here is to break the will of the people. Thus, the more violent and brutal the repression, the more likely it is that the people may succumb to the state and consent – even if passively – to their social conditions. However, as the state becomes more repressive, this often breeds a more reactive and radical resistance. When the state oppresses 500 people one day, 5,000 may show up the next. This requires, from the view of the state, an exponentially increased rate of oppression. The risk in this strategy is that the state may overstep itself and the people may become massively mobilized and intensely radicalized and overthrow – or at least overcome – the power of the state. In such situations, the political leadership is often either urged by a foreign power to leave (such as in the case of Egypt’s Mubarak), or flees of their own will (such as in Argentina), in order to prevent a true revolution from taking place. So, while the strategy holds enormous risk, it is often employed because it also contains possible reward: that the state may succeed in destroying the will of the people to resist, and they may subside to the will of the state and thereby consent to their new conditions of social genocide.

Social genocide is a slow, drawn-out and incremental process. Its effects are felt by poor children first, as they are those who need health care and social services more than any other, and are left hungry and unable to go to school or work. They are the ‘forgotten’ of society, and they suffer deeply as such. The reverberations, however, echo throughout the whole of society. The rich get richer and the poor get poorer, while the middle class is absorbed into poverty.

The rich get richer because through economic crises, they consolidate their businesses and receive tax breaks and incentives from the state (as well as often direct infusions of cash investments – bailouts – from the state), purportedly to increase private capital and production. This aspect of “fiscal austerity” is undertaken in the wider context of what is referred to as “Structural Adjustment.”

This term refers to the loans from the World Bank and IMF that began in the late 1970s and early 1980s in their lending to ‘Third World’ nations in the midst of the 1980s debt crisis. Referred to as “Structural Adjustment Programs,” (SAPs) any nation wanting a loan from the World Bank or IMF needed to sign a SAP, which set out a long list of ‘conditionalities’ for the loan. These conditions included, principally, “fiscal austerity measures” – cutting social spending and raising taxes – but also a variety of other measures: liberalization of markets (eliminating any trade barriers, subsidies, tariffs, etc.), supposedly to encourage foreign investment which it was theorized would increase revenue to pay off the debt and revive the economy; privatization (privatizing all state-owned industries), in order to cut state spending and encourage foreign direct investment (FDI), which again – in theory – would create revenue and reduce debt; currency devaluation (which would make foreign dollars buy more for less), again, under the aegis of encouraging investment by making it cheaper for foreign companies to buy assets within the country.

However, the effects that these ‘structural adjustment programs’ had were devastating. Liberalizing markets would eliminate subsidies and protections which were desperately needed in order for these ‘developing’ nations to compete with the industrialized powers of America and Europe (who, in a twisted irony, heavily subsidize their agriculture in order to make it cheaper to foreign markets). For example, a small country in Africa which was dependent upon a particular agricultural export had heavily subsidized this commodity, (which keeps the price low and thus increases its demand as an exported commodity), then was ordered by the IMF and World Bank to eliminate the subsidy. The effect was that foreign agricultural imports, say from the United States or Europe, were cheaper not only in the international market, but also in the nation’s domestic market. Thus, grains imported from America would be cheaper than those grown in neighbouring fields. The effect this had in an increasingly-impoverished nation was that they would become dependent upon foreign imports for food and agriculture (as well as other commodities), while the domestic industries would suffer and be bought out by foreign multinational corporations, thus increasing poverty, as many of these nations were heavily dependent upon their agricultural sectors as they were often still largely rural societies in some respects. This would accelerate urbanization and urban poverty, as people leave the countryside and head to the cities looking for work, where there was none.

Privatization, for its part, would eliminate state-owned industries, which in many developing nations of the post-World War II era, were the major employers of the population. Thus, massive unemployment would result. As foreign multinational corporations – largely American or European – would come in and buy up the domestic industries, they would often cooperate with the dominant domestic corporations and banks – or create domestic subsidiaries of their own – and consolidate the markets and industries. Thus, the effect would be to strengthen a domestic elite and entrench an oligarchy in the nation. The rich would get richer, profiting off of their cooperation and integration with the international economic system, and they would then come to rely ever-more on the state for protection from the masses.

The devaluation of currencies would, while making commodities and investments cheaper for foreign multinationals and banks, simultaneously make it so that for the domestic population, it would require more money to buy less products than before. This is called inflation, and is particularly brutal in the case of buying food and fuel. For a population whose wages are frozen (as a requirement of ‘fiscal austerity’), their income (for those that have an income) does not adjust to the rate of inflation, hence, they make the same dollar amount even though the dollar is worth much less than before. The result is that their income purchases much less than it used to, increasing poverty.

This is ‘Structural Adjustment.’ This is ‘fiscal austerity.’ This is social genocide.

Debt and Derivatives

Greece has a total debt of roughly 330 billion euros (or U.S. $473 billion).[2] So how did this debt get out of control? As it turned out, major U.S. banks, specifically J.P. Morgan Chase and Goldman Sachs, “helped the Greek government to mask the true extent of its deficit with the help of a derivatives deal that legally circumvented the EU Maastricht deficit rules.” The deficit rules in place would slap major fines on euro member states that exceeded the limit for the budget deficit of 3% of GDP (gross domestic product), and that the total government debt must not exceed 60% of GDP.  Greece hid its debt through “creative accounting,” and in some cases, even left out huge military expenditures. While the Greek government pursued its “creative accounting” methods, it got more help from Wall Street starting in 2002, in which “various investment banks offered complex financial products with which governments could push part of their liabilities into the future.” Put simply, with the help of Goldman Sachs and JP Morgan Chase, Greece was able to hide its debt in the future by transferring it into derivatives. A large deal was signed with Goldman Sachs in 2002 involving derivatives, specifically, cross-currency swaps, “in which government debt issued in dollars and yen was swapped for euro debt for a certain period — to be exchanged back into the original currencies at a later date.” The banks helped Greece devise a cross-currency swap scheme in which they used fictional exchange rates, allowing Greece to swap currencies and debt for an additional credit of $1 billion. Disguised as a ‘swap,’ this credit did not show up in the government’s debt statistics. As one German derivatives dealer has stated, “The Maastricht rules can be circumvented quite legally through swaps.”[3]

In the same way that homeowners take out a second mortgage to pay off their credit card debt, Goldman Sachs and JP Morgan Chase and other U.S. banks helped push government debt far into the future through the derivatives market. This was done in Greece, Italy, and likely several other euro-zone countries as well. In several dozen deals in Europe, “banks provided cash upfront in return for government payments in the future, with those liabilities then left off the books.” Because the deals are not listed as loans, they are not listed as debt (liabilities), and so the true debt of Greece and other euro-zone countries was and likely to a large degree remains hidden. Greece effectively mortgaged its airports and highways to the major banks in order to get cash up-front and keep the loans off the books, classifying them as transactions.[4]

Further, while Goldman Sachs was helping Greece hide its debt from the official statistics, it was also hedging its bets through buying insurance on Greek debt as well as using other derivatives trades to protect itself against a potential Greek default on its debt. So while Goldman Sachs engaged in long-term trades with Greek debt (meaning Greece would owe Goldman Sachs a great deal down the line), the firm simultaneously was betting against Greek debt in the short-term, profiting from the Greek debt crisis that it helped create.[5]

This is not an unusual tactic for the company to engage in. As a two-year Senate investigation into Goldman Sachs revealed in April of 2011, “Goldman Sachs Group Inc. profited from the financial crisis by betting billions against the subprime mortgage market, then deceived investors and Congress about the firm’s conduct.”[6] In 2007, as the housing crisis was gaining momentum, Goldman Sachs executives sent emails to each other explaining that they were making “some serious money” by betting against the housing market, a giant bubble which they and other Wall Street firms had helped create. So while the bank had a large exposure (risk) in the housing market, by holding significant derivatives in trading mortgages (mortgage-backed securities, collateralized debt obligations, credit default swaps, etc.), the same bank also used the derivatives market to bet against the housing market as it crashed – a type of self-fulfilling prophecy – which further drove the market down (as speculation does), and thus, Goldman Sachs profited from the crisis it created and made worse.[7]

The derivatives market is a very important feature not only in the housing bubble and bust of 2008, but also in the current Greek crisis, and will remain an important facet of the unfolding global debt crisis. The current global derivatives market was developed in the 1990s. Derivatives are referred to as “complex financial instruments” in which they are traded between two parties and their value is derived (hence: “deriv-ative”) from some other entity, be it a commodity, stock, debt, currency or mortgage, to name a few. There are several types of derivatives. One example is a ‘put option,’ which is betting that a particular stock, commodity or other asset will fall in price over the short term; that way, those who purchase put options will profit from the fall in prices of the asset bet on.

Who Built the Bubble?

One of the most common derivatives is a credit default swap (CDS). These ‘financial instruments’ were developed by JP Morgan Chase in 1994 as a sort of insurance policy. The aim, as JP Morgan at the time had tens of billions of dollars on the books as loans to corporations and foreign governments, was to trade the debt to a third party (who would take on the risk), and would then receive payments from the bank; thus, JP Morgan would be able to remove the risk from its books, freeing up its reserves to make more loans. JP Morgan was the first bank to make it big on credit default swaps, opening the first credit default swaps desk in New York in 1997, “a division that would eventually earn the name ‘the Morgan Mafia’ for the number of former members who went on to senior positions at global banks and hedge funds.” The credit default swaps played a large part in the housing boom:

As the Federal Reserve cut interest rates and Americans started buying homes in record numbers, mortgage-backed securities became the hot new investment. Mortgages were pooled together, and sliced and diced into bonds that were bought by just about every financial institution imaginable: investment banks, commercial banks, hedge funds, pension funds. For many of those mortgage-backed securities, credit default swaps were taken out to protect against default.[8]

Of course, there were a great many players in the financial crisis: bankers, economists, politicians, regulators, etc. The confusion of the situation has allowed all those who are culpable to point the finger at one another and place blame on each other. For example, Jamie Dimon, CEO of JPMorganChase, referred to the government-chartered mortgage lending companies, Fannie Mae and Freddie Mac, as “the biggest disasters of all time,” blaming them for encouraging the banks to make the bad loans in the first place.[9] Of course, he had an ulterior motive in removing blame from himself and the other banks.

There is, however, some truth to his contention, but the situation is more complex. Fannie Mae was created in 1938 after the Great Depression to provide local banks with federal money in order to finance home mortgages with an aim to increase home ownership. In 1968, Fannie Mae was transformed into a publicly held corporation, and in 1970, the government created Freddie Mac to compete with Fannie Mae in providing home mortgages. In 1992, President George H.W. Bush signed the Housing and Community Development Act of 1992, which included amendments to the charters of Fannie Mae and Freddie Mac, stating that they “have an affirmative obligation to facilitate the financing of affordable housing for low- and moderate-income families.”[10]

In 1992, the U.S. Department of Housing and Urban Development (HUD) subsequently became the ‘regulator’ of Fannie Mae and Freddie Mac. In 1995, Bill Clinton’s HUD “agreed to let Fannie and Freddie get affordable-housing credit for buying subprime securities that included loans to low-income borrowers.”[11] In 1996, HUD “gave Fannie and Freddie an explicit target — 42% of their mortgage financing had to go to borrowers with income below the median in their area.”[12] In a 1999 article in the New York Times, it was reported that, “the Fannie Mae Corporation is easing the credit requirements on loans that it will purchase from banks and other lenders.” The action, reported the Times, “will encourage those banks to extend home mortgages to individuals whose credit is generally not good enough to qualify for conventional loans.” It began in 1999 as a pilot program involving 24 banks in 15 markets (including New York), and had hoped to make it nationwide by Spring 2000. The article went on:

Fannie Mae, the nation’s biggest underwriter of home mortgages, has been under increasing pressure from the Clinton Administration to expand mortgage loans among low and moderate income people and felt pressure from stock holders to maintain its phenomenal growth in profits.

In addition, banks, thrift institutions and mortgage companies have been pressing Fannie Mae to help them make more loans to so-called subprime borrowers. These borrowers whose incomes, credit ratings and savings are not good enough to qualify for conventional loans, can only get loans from finance companies that charge much higher interest rates — anywhere from three to four percentage points higher than conventional loans.[13]

The loans going to low-income households increased the rate given to African Americans, as in the conventional loan market, black borrowers accounted for 5% of loans, whereas in the subprime market, they accounted for 18% of loans. The article itself warned that Fannie Mae “may run into trouble in an economic downturn, prompting a government rescue.”[14] In 2000, as housing prices increased, the U.S. Department of Housing and Urban Development (HUD), under Bill Clinton, continued to encourage loans to low-income borrowers.

Just in time, the Federal Reserve (the central bank of the United States) dramatically lowered interest rates and kept them artificially low in order to encourage the lending by mortgage lenders and banks, and to encourage borrowing by low-income individuals and families, essentially lulling them into a false sense of security. This ‘easy money’ flowing from the Federal Reserve’s low interest rates and printing press (as the Fed is responsible for the amount of money pumped into the U.S. economy), oiled the wheels of the mortgage lenders and the banks that were making bad loans to high-risk individuals. In the 1990s, the Federal Reserve under Chairman Alan Greenspan had created the dot-com bubble, which burst (as all bubbles do), and subsequently, in order to avoid a deep recession, Greenspan and the Federal Reserve actively inflated the housing bubble. So, with the dot-com bubble bursting in 2000 (brought to you by Alan Greenspan and the Federal Reserve), Greenspan’s Fed then cut interest rates to historic lows and began pumping out money in order to prevent a downward spiral of the economy, which would later prove to be inevitable. This also encouraged rabid speculation in the derivatives market, in particular by hedge funds, managing money from banks, who engaged in high-risk trades taking advantage of the uniquely low interest rates in order to purchase derivatives which provide more long-term gains, further fuelling a massive speculative bubble.[15]

Transcripts from a 2004 meeting of Federal Reserve officials revealed a debate about whether there was an inflating housing bubble, at which Greenspan stated that dissent should be kept secret so that the debate does not reach a wider audience (i.e., the ‘public’). As he stated, “We run the risk, by laying out the pros and cons of a particular argument, of inducing people to join in on the debate, and in this regard it is possible to lose control of a process that only we fully understand.”[16] In 2005, the Fed officials were openly acknowledging the existence of a bubble, but continued with their policies all the same.[17] In 2005, Alan Greenspan left the Fed to be replaced by Ben Bernanke, who that year told Congress that there was no housing bubble, and that the increases in hosuing prices “largely reflect strong economic fundamentals.”[18]

The bubble was fuelled in a number of ways. The Federal Reserve kept the interest rates at historic lows, which encouraged both lending and borrowing. The Fed also pumped large amounts of money into the economy for the purpose of lending and borrowing. The government-sponsored mortgage companies of Freddie Mac and Fannie Mae encouraged the banks to make bad loans to high-risk individuals (and provided significant funds to do so). The banks, all too happy to make bad loans to high-risk borrowers, then used the derivatives market they created to profit off of those loans (and further inflate the bubble), through trading primarily Credit Default Swaps (CDS). As the Fed’s long-term interest rates were kept artificially low, the banks speculated through the derivatives market that the housing market would continue to grow apace, and massive amounts of speculative money flowed into the housing bubble, which itself further increased confidence of banks and mortgage companies to lend, as well as individuals to borrow. Of course, the reality was that the individuals were high-risk for a reason: because they couldn’t afford to pay. Thus, it was an inevitable result that this massive and ever-increasing bubble built on nothing but bank-created and government-sponsored ‘faith’ was destined to burst.

Of course, when the bubble burst, the major banks were in a unique position to profit immensely from the collapse through speculation, and then, of course, repossess everyone’s homes. In order for financial speculation to be such a menace in the global economy as it is today, the Clinton administration took the bold steps necessary to eradicate the barriers to such destructive financial practices and facilitate the rapid and unregulated growth of the derivatives market. This was termed the “financialization” of the U.S. economy, and de facto, much of the global economy.

The Glass-Steagall Act was put in place by FDR in 1933 in order to establish a barrier between investment banks and commercial banks and to prevent them from engaging in rabid speculative practices (a major factor which created the Great Depression). However, in 1987, the Federal Reserve Board voted to ease many regulations under the act, after hearing “proposals from Citicorp, J.P. Morgan and Bankers Trust advocating the loosening of Glass-Steagall restrictions to allow banks to handle several underwriting businesses, including commercial paper, municipal revenue bonds, and mortgage-backed securities.” Alan Greenspan, in 1987, “formerly a director of J.P. Morgan and a proponent of banking deregulation – [became] chairman of the Federal Reserve Board.” In 1989, “the Fed Board approve[d] an application by J.P. Morgan, Chase Manhattan, Bankers Trust, and Citicorp to expand the Glass-Steagall loophole to include dealing in debt and equity securities in addition to municipal securities and commercial paper.” In 1990, “J.P. Morgan [became] the first bank to receive permission from the Federal Reserve to underwrite securities.”[19]

In 1998, the House of Representatives passed “legislation by a vote of 214 to 213 that allow[ed] for the merging of banks, securities firms, and insurance companies into huge financial conglomerates.” And in 1999, “After 12 attempts in 25 years, Congress finally repeal[ed] Glass-Steagall, rewarding financial companies for more than 20 years and $300 million worth of lobbying efforts.”[20]

[In] the late 1990s, with the stock market surging to unimaginable heights, large banks [were] merging with and swallowing up smaller banks, and a huge increase in banks having transnational branches, Wall Street and its many friends in congress wanted to eliminate the regulations that had been intended to protect investors and stabilize the financial system. Hence the Gramm-Leach-Bliley Act of 1999 repealed key parts of Glass-Steagall and the Bank Holding Act and allowed commercial and investment banks to merge, to offer home mortgage loans, sell securities and stocks, and offer insurance.[21]

The principal adherents for the repeal of Glass-Steagle were Alan Greenspan, as well as Treasury Secretary Robert Rubin (who had been with Goldman Sachs for 26 years prior to entering the Treasury), and Deputy Treasury Secretary Larry Summers (who was previously the Chief Economist of the World Bank). After largely orchestrating the removal of Glass-Steagle, Rubin went on to become an executive at Citigroup and is currently the Co-Chairman of the Council on Foreign Relations; while Summers went on to become President of Harvard University and later, served as Director of the White House National Economic Council for the first couple years of the Obama administration. Larry Summers had sparked controversy when he was Chief Economist of the World Bank, and in 1991, signed a memo in which he endorsed toxic waste dumping in poor African countries, stating, “A given amount of health-impairing pollution should be done in the country with the lowest cost, which will be the country with the lowest wages,” and further, “I think the economic logic behind dumping a load of toxic waste in the lowest-wage country is impeccable and we should face up to that.”[22] The “impeccable logic” Summers referred to was the notion that in countries with the lowest life expectancy, dumping toxic waste is intelligent, because statistically speaking, the population of the country is more likely to die before the long-term health impacts of the toxic waste take effect. Put more bluntly: the poor should be the first to die.

The most prestigious (and arguably most powerful) financial institution in the world is the Bank for International Settlements (BIS). One might say it’s the most powerful institution you never heard of, since it is rarely discussed, even more rarely studied, and barely understood at all. It is, essentially, a global central bank for the world’s central banks, and de facto acts as an independent global banking supervisory body, establishing agreements for the practices of central banks and private banks. In 2004, the BIS established the Basel II accords to manage capital risk by banks. Basel II was “intended to keep banks safe by requiring them to match the size of their capital cushion to the riskiness of their loans and securities. The higher the odds of default, the less they can lend.” However, as the regulations were being implemented in 2008 in the midst of the financial crisis, it lessened the ability of banks to lend, and thus, deepened the financial crisis itself.[23] The BIS, formed in 1930 in the wake of the Great Depression, was created in order 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.” As historian Carroll Quigley wrote:

[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.[24]

In 2007, the BIS released its annual report warning that the world was on the verge of another Great Depression, as “years of loose monetary policy has fuelled a dangerous credit bubble, leaving the global economy more vulnerable to another 1930s-style slump than generally understood.” Among the worrying signs cited by the BIS were “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.” The BIS hinted at the U.S. Federal Reserve when it warned that, “central banks were starting to doubt the wisdom of letting asset bubbles build up on the assumption that they could safely be ‘cleaned up’ afterwards.”[25]

In 2008, the outgoing Chief Economist of the BIS, William White, authored the annual report of the BIS in which he again warned that, “The current market turmoil is without precedent in the postwar period. With a significant risk of recession in the US, compounded by sharply rising inflation in many countries, fears are building that the global economy might be at some kind of tipping point.” In 2007, warned the BIS, global banks had $37 trillion of loans, equaling roughly 70% of global GDP, and that countries were already so indebted that monetization (printing money) could simply sow the seeds of a future crisis.[26]

Bailout the Bankers, Punish the People

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. Advertising the bailout as a $700 billion program, the fine print revealed a more accurate description, saying that $700 billion could be lent out “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.[27]

Further, as the bailout agreement stipulated, it essentially hands the Federal Reserve and the U.S. Treasury total control over the nation’s finances in what has been termed a “financial coup d’état” as all actions and decisions by the Fed and the Treasury Secretary may be done in secret and are not able to be reviewed by Congress or any other administrative or legal agency.[28] Passed in the last months of the Bush administration, the Obama administration further implemented the bailout (and added a stimulus package on top of it).

The banks got a massive bailout of untold trillions, and they were simultaneously consolidating the industry and merging with one another. In 2008, with the collapse of Bear Stearns, JP Morgan Chase bought the failed bank with funds in an agreement organized by the Federal Reserve Bank of New York, whose President at the time was Timothy Geithner (who would go on to become Obama’s Treasury Secretary, managing the major bailout program). As JPMorganChase was the ultimate benefactor of the Bear Stearns purchase by the NYFed, it is perhaps no small coincidence that Jamie Dimon, CEO of JPMorganChase, was on the board of the New York Fed, a privately-owned bank, of which JPMorganChase is itself a major shareholder. JPMorganChase later absorbed Washington Mutual, one of the nation’s largest banks prior to the crisis; Bank of America bought Merrill Lynch; Wells Fargo bought Wachovia; and a host of other mergers and acquisitions took place. Thus, the “too big to fail” banks became much bigger and more dangerous than ever before.

Among the many recipients of bailout funds (officially referred to as the Troubled Asset Relief Program – TARP), were Fannie Mae, AIG (insurance), Freddie Mac, General Motors, Bank of America, Citigroup, JPMorgan Chase, Wells Fargo, Goldman Sachs, Morgan Stanley, and hundreds of others.[29] As the Federal Reserve dished out trillions of dollars in bailouts to banks, many European banks even became recipients of American taxpayer-funded bailouts, including Barclays, UBS, the Royal Bank of Scotland, and Société Générale, among many others.[30] The Federal Reserve bailout of American insurance giant AIG was actually a stealth bailout of foreign banks, as the money went through AIG to the major European banks that had significant risks with AIG, including Société Générale of France, UBS of Belgium, Barclays of the U.K., and Deutsche Bank of Germany.[31] In total, the multi-billion dollar bailout of AIG in 2008 benefited roughly 87 banks and financial institutions, 43 of which were foreign, primarily located in France and Germany, but also in the U.K., Canada, the Netherlands, Denmark, and Switzerland, and on the domestic side much of the funds went to Goldman Sachs, JPMorgan Chase, and Bank of America.[32]

Neil Barofsky, who was until recently, the special inspector general for the TARP bailout program – the individual responsible for attempting to engage in oversight of a secret bailout program – wrote an article for the New York Times upon his resignation from the position in March of 2011, in which he stated that he “strongly disagrees” that the program was successful, saying that:

billions of dollars in taxpayer money allowed institutions that were on the brink of collapse not only to survive but even to flourish. These banks now enjoy record profits and the seemingly permanent competitive advantage that accompanies being deemed “too big to fail.”[33]

In June of 2009, as governments around the world were implementing stimulus packages and bailouts to save the banks and ‘rescue’ their economies, the Bank for International Settlements (BIS) issued a new round of warnings about the state of the global economy. Among them, the BIS warned that, “governments and central banks must not let up in their efforts to revive the global banking system, even if public opinion turns against them,” and that the BIS felt that there had only been “limited progress” in reviving the banking system. The BIS continued:

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… 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.[34]

Further, the BIS warned, “A fleeting recovery could well make matters worse,” as “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.” The BIS concluded that all the various measures to revive the global economy leave an “open question” as to whether or not they will be successful, and specifically, “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.” As the annual report warned, “Getting public finances in order will therefore be the main task of policy makers for years to come.”[35]

The BIS further warned that, “there’s a risk central banks will raise interest rates and withdraw emergency liquidity too late, triggering inflation,” as history shows policy-makers “have a tendency to be late, tightening financial conditions slowly for fear of doing it prematurely or too severely.” As Bloomberg reported:

Central banks around the globe have lowered borrowing costs to record lows and injected billions of dollars 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.”[36]

The BIS report stated that the unprecedented policies of central banks “may be insufficient to put the economy on the path to recovery,” stressing that there was a “significant risk” that the monetary and fiscal stimulus of governments will only lead to “a temporary pickup in growth, followed by a protracted stagnation.”[37]

William White, the former Chief Economist of the BIS, warned in September of 2009 that, “the world has not tackled the problems at the heart of the economic downturn and is likely to slip back into recession,” and he “also warned that government actions to help the economy in the short run may be sowing the seeds for future crises.” White, who accurately predicted the global financial crisis in 2008, stated that we are “almost certainly” going into a double-dip recession and “would not be in the slightest bit surprised” if we were to go into a protracted stagnation. He added: “The only thing that would really surprise me is a rapid and sustainable recovery from the position we’re in.” White, a Canadian economist who ran the economic department at the BIS from 1995 until 2008, had “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.” As the Financial Times reported in 2009:

Worldwide, central banks have pumped thousands of billions [i.e., 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, [White] said, and there was a small risk that inflation would get out of control over the medium term if central banks miss-time their “exist strategies”.

Meanwhile, the underlying problems in the global economy, such as unsustainable trade imbalances between the US, Europe and Asia, had not been resolved, he said.[38]

William White further warned that, “we now have a set of banks that are even bigger – and more dangerous – than ever before.” Simon Johnson, former Chief Economist of the IMF, also warned that the finance industry had effectively captured the US government and that “recovery will fail unless we break the financial oligarchy that is blocking essential reform.”[39]

In 2009, the BIS warned that the market for derivatives still poses “major systemic risks” to the financial system, standing at a total value of $426 trillion (more than the worth of the entire global economy combined) and that, “the use of derivatives by hedge funds and the like can create large, hidden exposures.”[40] In 2010, one independent observer estimated the derivatives market was at roughly $700 trillion.[41] The Bank for International Settlements estimated the market value at $600 trillion in December 2010.[42] In June of 2011, the BIS warned that, “the world’s top 14 derivatives dealers may need extra cash to handle a surge in transaction clearing, especially in choppy markets,” as “world leaders have agreed that chunks of the $600 trillion off-exchange derivatives market must be standardized and cleared by the end of 2012 to broaden transparency and curb risk.” The major institutions that the BIS identified as in need of more funds to handle their derivatives exposure are Bank of America-Merrill Lynch, Barclays Capital, BNP Paribas, Citi, Credit Suisse, Deutsche Bank, Goldman Sachs, HSBC, JP Morgan Chase, Morgan Stanley, RBS, Société Générale, UBS, and Wells Fargo Bank.[43]

In January of 2011, Barofsky, while still Special Inspector General of the TARP bailout program, issued a report which warned that future bailouts of major banks could be “a necessity,” and that, “the government still had not developed objective criteria to measure the amount of systemic risk posed by giant financial companies.”[44] In an interview with NPR, Barofsky stated:

The problem is that the notion of too big to fail – these large financial institutions that were just too big to allow them to go under – since the 2008 bailouts, they’ve only gotten bigger and bigger, more concentrated, larger in size. And what’s really discouraging is that if you look at how the market treats them, it treats them as if they’re going to get a government bailout, which destroys market discipline and really puts us in a very dangerous place.[45]

In June of 2011, Barofsky stated in an interview with Dan Rather that the next crisis may cost $5 trillion, and told Rather, “You should be scared, I’m scared,” and that a coming crisis is inevitable.[46]

Even though the bailouts have already cost the U.S. taxpayers several trillion dollars (which they will pay for through the decimation of their living standards), the IMF in October of 2010 warned that within the coming 24 months (up to Fall 2012), global banks face a $4 trillion refinancing crisis, and that, “governments will have to inject fresh equity into banks – particularly in Spain, Germany and the US – as well as prop up their funding structures by extending emergency support.” The IMF Global Financial Stability Report stated that, “the global financial system is still in a period of significant uncertainty and remains the Achilles’ heel of the economic recovery.” This is especially significant considering that the debts that banks needed to write off between 2007 and 2010 sat at $2.2 trillion, and that benchmark hadn’t even been achieved. Thus, with nearly double that amount needing to be written off in an even shorter time span, it would seem inevitable that the banks will need a massive bailout as “nearly $4 trillion of bank debt will need to be rolled over in the next 24 months.” Further, warned the IMF, “Planned exit strategies from unconventional monetary and financial support may need to be delayed until the situation is more robust, especially in Europe… With the situation still fragile, some of the public support that has been given to banks in recent years will have to be continued.”[47]

In other words, “exit strategies,” meaning harsh draconian austerity measures may need to be delayed in order to give enough time to undertake bailouts of major banks. After all, engineering trillion dollar bailouts of large financial institutions which created a massive global crisis is hard to do at the same time as punishing an entire population through destruction of their living standards and general impoverishment in order to pay off the debt already incurred by governments (which through bailouts essentially ‘buy’ the bad debts of the banks, and hand the taxpayers the bill).

So while many say that the banks need another bailout, one must question whether the first bailout was necessary, as it simply allowed the banks to get bigger, take more risks, and essentially get a government guarantee of future bailouts (not to mention, the massive fraud and illegalities that took place through the bailout mechanism). However, several top economists and financial experts have pointed out that the “too big to fail” banks are actually the largest threat to the economy, and that they are more accurately “too big to exist,” explaining that recovery cannot take place unless they are broken up. Nobel Prize winning economist and former Chief Economist of the World Bank, Joseph Stiglitz, along with former Chief Economist of the IMF, Simon Johnson, both warned Congress that propping up the banks is preventing recovery from taking place. Even the President of the Federal Reserve Bank of Kansas stated that, “policymakers must allow troubled firms to fail rather than propping them up.”[48]

The true aim of the bailouts was to prevent the major banks of the world (all of which are insolvent – unable to pay debts) from collapsing under the weight of their own hubris, and to effectively employ the largest transfer of wealth in human history from major nations (taxpayers) to the bankers and their shareholders. The true cost of the bailouts, a far cry from the IMF’s statement of a couple trillion dollars, was in the tens of trillions. The Federal Reserve itself bailed out the financial industry for over $9 trillion, with $2 trillion going to Merrill-Lynch (which was subsequently acquired by Bank of America), $2 trillion going to Morgan Stanley, $2 trillion going to Citigroup, and less than $1 trillion each for Bear Stearns (which was acquired by JPMorgan Chase), Bank of America, and Goldman Sachs. These details were released by the Federal Reserve and cover 21,000 separate transactions between December 2007 and July of 2010.[49]

The Federal Reserve also undertook a massive bailout of foreign central banks. During the financial crisis, the Fed established a lending program of shipping US dollars overseas through the European Central Bank, the Bank of England, and the Swiss National Bank (among others), and “the central banks, in turn, lent the dollars out to banks in their home countries in need of dollar funding.”[50] The overall bailouts, including those not undertaken by the Fed specifically, but government-implemented, reach roughly $19 trillion, with $17.5 trillion of that going to Wall Street.[51] No surprise there, considering that Neil Barofsky had warned in July of 2009 that the bailout could cost taxpayers as much as $23.7 trillion dollars.[52]

The Federal Reserve Represents the Banks

In February of 2010, the Federal Reserve announced that it would be investigating the role of U.S. banks in Greece’s debt crisis.[53] However, the Washington Post article which reported on the Fed’s ‘investigation’ failed to mention the ‘slight’ conflicts of interest, which essentially have the fox guarding the hen house. What am I referring to? The Federal Reserve System is a quasi-governmental entity, with a national Board of Governors based in Washington, D.C., with the Chairman appointed by the President. Alan Greenspan, one of the longest-serving Federal Reserve Chairmen in its history, was asked in a 2007 interview, “What is the proper relationship – what should be the proper relationship between a Chairman of the Fed and the President of the United States?” Greenspan replied:

Well, first of all, the Federal Reserve is an independent agency, and that means basically that there is no other agency of government which can over-rule actions that we take. So long as that is in place and there is no evidence that the administration, or the Congress, or anybody else is requesting that we do things other than what we think is the appropriate thing, then what the relationships are don’t frankly matter.[54]

Not only is the Federal Reserve unaccountable to the American government, and thereby, the American people, but it is directly accountable to and in fact, owned by the major American and global banks. Thus, the notion that it would ‘investigate’ the illicit activities of banks like Goldman Sachs and J.P. Morgan Chase is laughable at best, and is more likely to resemble a criminal cover-up as opposed to an ‘independent investigation.’

The Federal Reserve System is made up of 12 regional Federal Reserve banks, which are themselves private banks, owned by shareholders, which are made up of the principle banks in their region, who ‘select’ a president to represent them and their interests. The most powerful of these banks, unsurprisingly, is the Federal Reserve Bank of New York, which represents the powerful banks of Wall Street. The current Treasury Secretary, Timothy Geithner, was previously President of the Federal Reserve Bank of New York, where he organized the specific bailouts of AIG and JP Morgan’s purchase of Bear Stearns. The current president of the New York Fed is William Dudley, who previously was a partner and managing director at Goldman Sachs, and is also currently a member of the board if directors of the Bank for International Settlements (BIS). The current chairman of the board of the New York Fed is Lee Bollinger, President of Columbia University, who is also on the board of directors of the Washington Post Company. Until recently, Jeffrey R. Immelt was on the board of directors of the New York Fed, while serving as CEO of General Electric. However, he was more recently appointed by President Obama to head his Economic Recovery Advisory Board, replacing former Federal Reserve Chairman Paul Volcker. Another current member of the board of directors of the New York Fed include Jamie Dimon, Chairman and CEO of JP Morgan Chase.

Not only are the major banks represented at the Fed, but so too are the major corporations, as evidenced by the recent board membership of the CEO of General Electric (which incidentally received significant funds from the bailouts organized by the Fed). However, the Fed also has a number of advisory groups, such as the Community Affairs Advisory Council, which was formed in 2009 and, according to the New York Fed’s website, “meets three times a year at the New York Fed to share ground-level intelligence on conditions in low- and moderate-income (LMI) communities.” The members include individuals from senior positions at Bank of America and Goldman Sachs.[55]

The Economic Advisory Panel is “a group of distinguished economists from academia and the private sector [who] meet twice a year with the New York Fed president to discuss the current state of the economy and to present their views on monetary policy.” Among the institutions represented through individual membership are: Harvard University, Morgan Stanley, Deutsche Bank, Columbia University, American International group (AIG), New York University, Carnegie Mellon University, University of Chicago, and the Peter G. Peterson Institute for International Economics.[56]

Perhaps one of the most important advisory groups is the International Advisory Committee, “established in 1987 under the sponsorship of the Federal Reserve Bank of New York to review and discuss major issues of public policy concern with respect to principal national and international capital markets.” The members include: Lloyd C. Blankfein, Chairman and CEO of Goldman Sachs; William J. Brodsky, Chairman and CEO of the Chicago Board Options Exchange (derivatives); Stephen K. Green, Chairman of HSBC; Marie-Josée Kravis, Senior Fellow and Member of the Board of Trustees of the Hudson Institute (and longtime Bilderberg member); Sallie L. Krawcheck, President of Global Wealth and Investment Management at Bank of America; Michel J.D. Pebereau, Chairman of the Board of BNP Paribas; and Kurt F. Viermetz, retired Vice Chairman of J.P. Morgan.[57]

Another group, the Fedwire Securities Customer Advisory Group, consists of individuals from senior positions at JP Morgan Chase, Citibank, The Bank of New York Mellon, Fannie Mae, Northern Trust, State Street Bank and Trust Company, Freddie Mac, Federal Home Loan Banks, the Depository Trust & Clearing Corporation, and the Assistant Commissioner of the U.S. Department of the Treasury.[58] It is then made painfully clear whose interests the Federal Reserve – and specifically the Federal Reserve Bank of New York – serve. An article from Bloomberg in January of 2010 analyzed the information that was revealed in a Senate hearing regarding the secret bailout of AIG by the New York Fed, which “described a secretive group deploying billions of dollars to favored banks, operating with little oversight by the public or elected officials.” As the author of the article wrote, “It’s as though the New York Fed was a black-ops outfit for the nation’s central bank.”[59]

Who Benefits from the Greek Bailout?

Greece has a total debt of roughly 330 billion euros (or U.S. $473 billion).[60] In the lead-up to the Greek bailout orchestrated by the IMF and European Union in 2010, the Bank for International Settlements (BIS) released information regarding who exactly was in need of a bailout. With the bailout largely organized by France and Germany (as the dominant EU powers), who would be providing the majority of funds for the bailout itself (subsequently charged to their taxpayers), the BIS revealed that German and French banks carry a combined exposure of $119 billion to Greek borrowers specifically, and more than $900 billion to Greece, Spain, Portugal and Ireland combined. The French and German banks account for roughly half of all European banks’ exposure to those euro-zone countries, meaning that the combined exposure of European banks to those four nations is over $1.8 trillion, nearly half of which is with Spain alone. Thus, in the eyes of the elites and the institutions which serve them (such as the EU and IMF), a bailout is necessary because if Greece were to default on its debt, “investors may question whether French and German banks could withstand the potential losses, sparking a panic that could reverberate throughout the financial system.”[61]

In late February of 2010, Greece replaced the head of the Greek debt management agency with Petros Christodoulou. His job was “to procure favorable loans in the financial markets so that Athens can at least pay off its old debts with new debt.” His career went along an interesting path, to say the least, as he studied finance in Athens and Columbia University in New York, and went on to hold senior executive positions at several financial institutions, such as Credit Suisse, Goldman Sachs, JP Morgan, and just prior to heading the Public Debt Management Agency (PDMA), he was treasurer at the National Bank of Greece.[62] Before his 12-year stint at the National Bank of Greece, the largest commercial bank in Greece, he headed the derivatives desk at JP Morgan.[63]

In March of 2010, Greece passed a draconian austerity package in order to qualify for a bailout from the IMF and EU, as they had demanded. In April, Greece officially applied for an emergency loan, and in May of 2010, the EU and the IMF agreed to a $146 billion loan after Greece unveiled a new round of austerity measures (spending cuts and tax hikes). While Greece had already imposed austerity measures in March to even be considered for receivership of a loan, the EU and IMF demanded that they impose new and harsher austerity measures as a condition of the loan (just as the IMF and World Bank forced the ‘Third World’ nations to impose ‘Structural Adjustment Programs’ as a condition of loans). As the Los Angeles Times wrote at the time:

In Greece, workers have been mounting furious protests against the prospect of drastic government cuts. Officials are bracing for a general strike Wednesday over the new austerity plan, which includes higher fuel, tobacco, alcohol and sales taxes, cuts in military spending and the elimination of two months’ annual bonus pay for civil servants. Axing the bonus is a particularly fraught move in a country where as many as one in four workers is employed by the state.[64]

The EU was set to provide 80 billion euros of the 110 billion euro total, and the IMF was to provide the remaining 30 billion euros.[65] Greece was broke, credit ratings agencies (CRAs) were downgrading Greece’s credit worthiness (making it harder and more expensive for Greece to borrow), banks were speculating against Greece’s ability to repay its debt in the derivatives market, and the EU and IMF were forcing the country to increase taxes and cut spending, impoverishing and punishing its population for the bad debts of bankers and politicians. However, in one area, spending continued.

While France and Germany were urging Greece to cut its spending on social services and public sector employees (who account for 25% of the workforce), they were bullying Greece behind the scenes to confirm billions of euros in arms deals from France and Germany, including submarines, a fleet of warships, helicopters and war planes. One Euro-MP alleged that Angela Merkel and Nicolas Sarkozy blackmailed the Greek Prime Minister by making the Franco-German contributions to the bailout dependent upon the arms deals going through, which was signed by the previous Greek Prime Minister. Sarkozy apparently told the Greek Prime Minister Papandreou, “We’re going to raise the money to help you, but you are going to have to continue to pay the arms contracts that we have with you.” The arms deals run into the billions, with 2.5 billion euros simply for French frigates.[66] Greece is in fact the largest purchaser of arms (as a percentage of GDP) in the European Union, and was planning to make more purchases:

Greece has said it needs 40 fighter jets, and both Germany and France are vying for the contract: Germany wants Greece to buy Eurofighter planes — made by a consortium of German, Italian, Spanish and British companies — while France is eager to sell Athens its Rafale fighter aircraft, produced by Dassault.

Germany is Greece’s largest supplier of arms, according to a report published by the Stockholm International Peace Research Institute in March, with Athens receiving 35 percent of the weapons it bought last year from there. Germany sent 13 percent of its arms exports to Greece, making Greece the second largest recipient behind Turkey, SIPRI said.[67]

Thus, France and Germany insist upon French and German arms manufacturers making money at the expense of the standard of living of the Greek people. Financially extorting Greece to purchase weapons and military equipment while demanding the country make spending cuts in all other areas (while increasing the taxes on the population) reveals the true hypocrisy of the whole endeavour, and the nature of who is really being ‘bailed out.’

As Greece was risking default in April of 2010, the derivatives market saw a surge in the trading of Credit Default Swaps (CDS) on Greece, Portugal, and Spain, which increased the expectations of a default, and acts as a self-fulfilling prophecy in making the debt more severe and access to funding more difficult.[68] Thus, the very banks that are owed the debt payments by Greece bet against Greece’s ability to repay its debt (to them), and thus make it more difficult and urgent for Greece to receive funds. In late April of 2010, Standard & Poor’s (a major credit ratings agency – CRA) downgraded Greece’s credit rating to “junk status,” and cut the rating of Portugal as well, plunging both those nations into deeper crisis.[69] Thus, just at a time when the countries were in greater need of funds than before, the credit ratings agencies made it harder for them to borrow by making them less attractive to lenders and investors. Investors wait for the ratings given by CRAs before they make investment decisions or provide credit, and thus they “wield enormous clout in the financial markets.” There are only three major CRAs, Standard & Poor’s (S&P), Moody’s, and Fitch. In relation to the S&P downgrading on Greece’s rating, the Guardian reported:

S&P has effectively said it views Greece as a much riskier place to invest, which increases the interest rate investors will charge the Greek government to borrow money on the open market. But S&P is also implying that the risk of Greece defaulting on its loans has increased, a frightening prospect for bondholders and European politicians.[70]

CRAs also have major conflicts of interest, since they are companies in their own right, and receive funding and share leadership with individuals and corporations who they are responsible for applying credit-worthiness to. For example, Standard and Poor’s leadership includes individuals who have previously worked for JP Morgan, Morgan Stanley, Deutsche Bank, the Bank of New York, and a host of other corporations.[71] Further, S&P is owned by The McGraw-Hill Companies. The executives of McGraw-Hill include individuals past or presently associated with: PepsiCo, General Electric, McKinsey & Co., among others.[72] The Board of Directors includes: Pedro Aspe, Co-Chairman of Evercore Partners, former Mexican Finance Minister and director of the Carnegie Corporation; Sir Winfried Bischoff, the Chairman of Lloyds Banking Group, former Chairman of Citigroup, former Chairman of Schroders; Douglas N. Daft, former Chairman and CEO of the Coca-Cola Company, a director of Wal-Mart, and is also a member of the European Advisory Council for N.M. Rothschild & Sons Limited; William D. Green, Chairman of Accenture; Hilda Ochoa-Brillembourg, President and Chief Executive Officer of Strategic Investment Group, formerly at the World Bank, a director of General Mills and the Atlantic Council, and is an Advisory Board member of the Rockefeller Center for Latin American Studies at Harvard University; Sir Michael Rake, Chairman of British Telecom, and is on the board of Barclays; Edward B. Rust, Jr., Chairman and CEO of State Farm Insurance Companies; among many others.[73]

Moody’s is another of the major Credit Ratings Agencies. Its board of directors includes individuals past or presently affiliated with: Citigroup, the Federal Reserve Bank of Dallas, the Federal Reserve Bank of New York, Barclays, Freddie Mac, ING Group, the Dutch National Bank, and Pfizer, among many others.[74] The Executive team at Moody’s includes individuals past or presently affiliated with: Citigroup, Bank of America, Dow Jones & Company, U.S. Trust Company, Bankers Trust Company, American Express, and Lehman Brothers, among many others.[75]

Fitch Ratings, the last of the big three CRAs, is owned by the Fitch Group, which is itself a subsidiary of a French company, Fimalac. The Chairman and CEO is Marc Ladreit de Lacharrière, who is a member of the Consultative Committee of the Bank of France, and is also on the boards of Renault, L’Oréal, Groupe Casino, Gilbert Coullier Productions, Cassina, and Canal Plus. The board of directors includes Véronique Morali, who is also a member of the board of Coca-Cola, and is a member of the management board of La Compagnie Financière Edmond de Rothschild, a private bank belonging to the Rothschild family. The board includes individuals past or presently affiliated with: Barclays, Lazard Frères & Co, JP Morgan, Bank of France, and HSBC, among many others.[76]

So clearly, with the immense number of bankers present on the boards of the CRAs, they know whose interest they serve. The fact that they are responsible not only for rating banks and other corporations (of which the conflict of interest is obvious), but that they rate the credit-worthiness of nations is also evident of a conflict, as these are nations who owe the banks large sums of money. Thus, lowering their ratings makes them more desperate for loans (and makes the loans more expensive), since the nation is a less attractive investment, loans will be given with higher interest rates, which means more future revenues for the banks and other lenders. As the credit ratings are downgraded, the urgency to pay interest on debt is more severe, as the nation risks losing more investments and capital when it needs it most. To get a better credit rating, it must pay its debt obligations to the foreign banks. Thus, through Credit Ratings Agencies, the banks are able to help strengthen a system of financial extortion, made all the more severe through the use of derivatives speculation which often follows (or even precedes) the downgraded ratings.

So while Greece received the bailout in order to pay interest to the banks (primarily French and German) which own the Greek debt, the country simply took on more debt (in the form of the bailout loan) for which they will have to pay future interest fees. Of course, this would also imply future bailouts and thus, continued and expanded austerity measures. This is not simply a Greek crisis, this is indeed a European and in fact, a global debt crisis in the making.

The Great Global Debt Depression

In March of 2010, prior to Greece receiving its first bailout, the Bank for International Settlements (BIS) warned that, “sovereign debt is already starting to cross the danger threshold in the United States, Japan, Britain, and most of Western Europe, threatening to set off a bond crisis at the heart of the global economy.” In a special report on ‘sovereign debt’ written by the new chief economist of the BIS, Stephen Cecchetti, the BIS warned that, “The aftermath of the financial crisis is poised to bring a simmering fiscal problem in industrial economies to the boiling point,” and further: “Drastic austerity measures will be needed to head off a compound interest spiral, if it is not already too late for some.” In reference to the way in which Credit Ratings Agencies and banks have turned against Greece in ‘the market’, the report warned:

The question is when markets will start putting pressure on governments, not if. When will investors start demanding a much higher compensation [interest rate] for holding increasingly large amounts of public debt? In some countries, unstable debt dynamics — in which higher debt levels lead to higher interest rates, which then lead to even higher debt levels — are already clearly on the horizon.[77]

Further, the report stated that official debt figures in Western nations are incredibly misleading, as they fail to take into account future liabilities largely arising from increased pensions and health care costs, as “rapidly ageing populations present a number of countries with the prospect of enormous future costs that are not wholly recognised in current budget projections. The size of these future obligations is anybody’s guess.”[78]

In all the countries surveyed, the debt levels were assessed as a percentage of GDP. For example, Greece, which was at the time of the report’s publication, at risk of a default on its debt, had government debt at 123% of GDP. In contrast, other nations which currently are doing better (or seemingly so), in terms of market treatment, had much higher debt levels in 2010: Italy had a government debt of 127% of GDP and Japan had a monumental debt of 197% of GDP. Meanwhile, for all the lecturing France and Germany have done to Greece over its debt problem, France had a debt level of 92% of its GDP, and Germany at 82%, with the levels expected to rise to 99% and 85% in 2011, respectively. The U.K. had a debt level of 83% in 2010, expected to rise to 94% in 2011; and the United States had a debt level of 92% in 2010, expected to rise to 100% in 2011. Other nations included in the tally were: Austria with 78% in 2010, 82% in 2011; Ireland at 81% in 2010 and 93% in 2011; the Netherlands at 77% in 2010 and 82% in 2011; Portugal at 91% in 2010 and 97% in 2011; and Spain at 68% in 2010 and 74% in 2011.[79]

Further, the BIS paper warned that debt levels are likely to continue to dramatically increase, as, “in many countries, employment and growth are unlikely to return to their pre-crisis levels in the foreseeable future. As a result, unemployment and other benefits will need to be paid for several years, and high levels of public investment might also have to be maintained.”[80] The report goes on:

Seeing that the status quo is untenable, countries are embarking on fiscal consolidation plans [austerity measures]. In the United States, the aim is to bring the total federal budget deficit down from 11% to 4% of GDP by 2015. In the United Kingdom, the consolidation plan envisages reducing budget deficits by 1.3 percentage points of GDP each year from 2010 to 2013.[81]

However, the paper went on, the austerity measures and “consolidations along the lines currently being discussed will not be sufficient to ensure that debt levels remain within reasonable bounds over the next several decades.” Thus, the BIS suggested that, “An alternative to traditional spending cuts and revenue increases is to change the promises that are as yet unmet. Here, that means embarking on the politically treacherous task of cutting future age-related liabilities.”[82] In short, the BIS was recommending to end pensions and other forms of social services significantly or altogether; hence, referring to the task as “politically treacherous.” The BIS recommended “an aggressive adjustment path” in order to “bring debt levels down to their 2007 levels.”[83] The challenges for central banks, the BIS warned, was that it could spur long-term increases in inflation expectations, and that the uncertainty of “fiscal consolidation” (see: fiscal austerity measures) make it difficult to determine when to raise interest rates appropriately. Inflation acts as a ‘hidden tax’, forcing people to pay more for less, particularly in the costs of food and fuel. Raising interest rates at such a time “would not work, as an increase in interest rates would lead to higher interest payments on public debt, leading to higher debt,” and thus, potentially higher inflation.[84]

In April of 2010, the OECD (Organisation for Economic Co-operation and Development) warned that the Greek crisis was spreading “like Ebola,” and that the crisis was “threatening the stability of the financial system.”[85] In early 2010, the World Economic Forum (WEF) warned that there was a “significant chance” of a second major financial crisis, “and similar odds of a full-scale sovereign fiscal crisis.” The report identified the U.K. and U.S. as having “among the highest debt burdens.”[86]

Nouriel Roubini, a top American economist who accurately predicted the financial crisis of 2008, wrote in 2010 that, “unless advanced economies begin to put their fiscal houses in order, investors and rating agencies will likely turn from friends to foes.” Due to the financial crisis, the stimulus spending, and the massive bailouts to the financial sector, major economies had taken on massive debt burdens, and, warned Roubini, faced a major sovereign debt crisis, not relegated to the euro-zone periphery of Greece, Portugal, Spain, and Ireland, but even the core countries of France and Germany, and all the way to Japan and the United States, and that the “U.S. and Japan might be among the last to face investor aversion.” Thus, concluded Roubini, developed nations “will therefore need to begin fiscal consolidation as soon as 2011-12 by generating primary surpluses, which can be accomplished through a combination of gradual tax hikes and spending cuts.”[87]

In February of 2010, Niall Ferguson, economic historian, Bilderberg member, and official biographer of the Rothschild family, wrote an article for the Financial Times in which he warned that a “Greek crisis” was “coming to America.” Ferguson wrote that far from remaining in the peripheral eurozone nations, the current crisis “is a fiscal crisis of the western world. Its ramifications are far more profound than most investors currently appreciate.” Ferguson wrote that the crisis will spread throughout the world, and that the notion of the U.S. as a “safe haven” for investors is a fantasy, even though the “day of reckoning” is still far away.[88]

In December of 2010, Citigroup’s chief economist warned that, “We could have several sovereign states and banks going under,” and that both Portugal and Spain will need bailouts.[89] In late 2010, Mark Schofield, head of interest rate strategy at Citigroup, “said that a debt overhaul with similarities to the ‘Brady Bond’ solution to the 1980s crisis in Latin America was being extensively discussed in the markets.”[90] This would of course imply a similar response to that which took place during the 1980s debt crisis, in which Western nations and institutions reorganized the debts of ‘Third World’ nations that defaulted on their massive debts, and thus they were economically enslaved to the Western world thereafter.

In January of 2011, the IMF instructed major economies around the world, including Brazil, Japan, and the United States, “to implement deficit cutting plans or risk a repeat of the sovereign debt crisis that has engulfed Greece and Ireland.” At the same time, the Credit Ratings Agency Standard and Poor’s cut Japan’s long-term sovereign debt rating for the first time since 2002. As the Guardian reported:

The IMF said Japan, America, Brazil and many other indebted countries should agree targets for bringing borrowing under control. In an updated analysis on global debt and deficits, it said the pace of deficit reduction across the advanced economies was likely to slow this year, mainly because the US and Japan are preparing to increase their borrowing.[91]

Ireland was recently gripped with a major debt crisis. In 2009, Ireland was officially in an economic depression, and as one commentator asked in the Financial Times, “So will this be known as the Depression of the early 21st century?”[92] With the government of Ireland bailing out its banks in crisis, and descending into its own sovereign debt crisis, the European Union’s newly created European Financial Stability Facility (EFSF) and the IMF agreed to a bailout of Ireland for roughly $136 billion in November of 2010. However, as to be expected, the IMF and the European Central Bank (ECB) stated that the bailout “would be provided under ‘strong policy conditionality’, on the basis of a programme negotiated with the Irish authorities by the [European] Commission and the IMF, in liaison with the ECB.”[93] As part of the bailout, austerity measures were to imposed upon the Irish people, with spending cuts put in place as well as tax increases for the people (but not for corporations).[94]

As a Deutsche Bank executive stated in April of 2011, “the Global Sovereign crisis is probably still in the early stages and is likely to run through most of this decade, and we will be looking at the US for a possible denouement to the unfolding Sovereign issues still to play out globally.”[95]

Debt Crisis or Banking Crisis: Whose Debt is it Anyway?

As of April 2009, EU governments had bailed out their banks to the tune of $4 trillion.[96] In February of 2009, the Telegraph ran an article entitled, “European banks may need 16.3 trillion pound bail-out,” as revealed by a secret European Commission document. However, the figure was so terrifying that the title of the article was quickly changed, and all mention of the number itself was removed from the actual article; yet, a Google search under the original title still brings up the Telegraph report, but when the link is clicked, it is headlined under its new name, “European bank bail-out could push EU into crisis.” To put it into perspective, however, a 16.3 trillion pound bailout is roughly equal to $34.5 trillion. As the secret report stated, “Estimates of total expected asset write-downs suggest that the budgetary costs – actual and contingent – of asset relief could be very large both in absolute terms and relative to GDP in member states.” In other words, the bad debts of the banks require bailouts so enormous that it could threaten the fiscal positions of major nations to do so. However, the report further stated, “It is essential that government support through asset relief should not be on a scale that raises concern about over-indebtedness or financing problems.”[97] In July of 2009, Neil Barofsky, the Special Inspector General for the U.S. bailout (TARP) program, warned that U.S. taxpayers could potentially be on the hook for $24 trillion.[98] Now, while this figure remains unconfirmed, other figures have placed the total cost of the bailout at $19 trillion, with over $17 trillion of that going directly to Wall Street.[99]

In November of 2009, Moody’s reported that global banks face a maturing debt of $10 trillion by 2015, $7 trillion of which will be due by the end of 2012.[100] In April of 2011, the IMF published a report warning that, “Debt-laden banks are the biggest threat to global financial stability and they must refinance a $3.6 trillion ‘wall of maturing debt’ which comes due in the next two years.” The report was specifically referring to European banks, and the report elaborated, “these bank funding needs coincide with higher sovereign refinancing requirements, heightening competition for scarce funding resources.”[101]

The real truth is that the true crisis is “an international banking crisis.”[102] Global banks are insolvent. For over a decade, they inflated massive asset bubbles (such as the housing market) through issuing bad loans to high-risk individuals; they also issued bad loans to nations and helped them hide their real debt in the derivatives market; and all the while they speculated in the derivatives market to both inflate the bubbles and hide the debt, and subsequently to profit off of the collapse of the bubble and sovereign debt crisis. The derivatives market stands at a whopping $600 trillion, with $28 trillion of that inflating the credit default swaps market, the specific market for sovereign debt speculation.[103]

With the onset of the global financial crisis in 2008, major nations moved to bailout these massive banks, thereby keeping them afloat and making them bigger and more dangerous than ever, when they should have simply allowed them to fail and collapse under their own hubris. The effect of the bailouts was to transfer tens of trillions of dollars in bad debts of the banks to the public coffers of nations: private debt became public debt, private liabilities became public liabilities, and thus, the risk was transferred from millionaire and billionaire bankers to the taxpayers. This is often called ‘corporate socialism’ (or ‘economic fascism’) as it privatizes profits and socializes risk. However, the bailouts did not ‘buy’ all the bad debts of banks, as they were specifically focused on the debts related to the housing market. The banks, still insolvent even after the bailouts, hold tens of trillions in bad debts in other asset bubbles such as the commercial real estate bubble (which is arguably larger than the housing bubble[104]), as well as derivatives, and now sovereign debt.

Global financial institutions – such as the IMF – and the major political powers – such as the U.S. and E.U. – continue to serve the interests of bankers over people. Thus, with the onset of the sovereign debt crisis, no one is questioning the legitimacy of the debt, but rather, they are forcing entire nations and populations to impoverish themselves and deconstruct their society in order to get more debt to pay the interest on old – illegitimate – debts to banks which are insolvent and profiting off of their countries plunging into crises. Like a snake wrapping around its victim, the more you struggle, the tighter becomes its hold; with every breath you take, its coils wrap closer and tighter, still. The world is ensnarled in the snake-like grip of global bankers, as they demand that the people of the world pay for their mistakes, their predatory practices, and their own failures.

Greece Gets Another Bailout… for the Bankers

In March of 2011, Moody’s downgraded Greece’s credit rating to a lower rating than that of Egypt, which had recently experienced an uprising which led to the resignation of long-time Egyptian dictator, Hosni Mubarak. The move by Moody’s “prompted investors to dump the debt of other struggling European economies.”[105] In June of 2011, Greece was given the lowest credit rating ever by Standard & Poor’s, saying that Greece is “increasingly likely” to face a debt restructuring and be the first sovereign default in the euro-zone’s history. The S&P specified, “Risks for the implementation of Greece’s EU/IMF borrowing program are rising, given Greece’s increased financing needs and ongoing internal political disagreements surrounding the policy conditions required.” At the same time, the Greek Treasury was attempting to sell $1.8 billion of treasury bills (selling Greek debt) in order to continue meeting financial needs. However, the downgrade by S&P made the treasury bills far less attractive an investment, and thus, pushed Greece into an even deeper crisis. At the same time, credit default swaps surged to record highs on Greece, Portugal, and Ireland. Simultaneously, Greece was seeking a second bailout, and thus, the lower rating would make any potential loans (which would carry extra risk due to the low credit rating) come attached with much higher interest rates, ensuring a continuation of future fiscal and debt crises for the country. In short, the lower credit rating plunged the country into a deeper crisis, though analysts at JP Morgan and other banks stated that the credit ratings agencies were actually following behind the market, as the major banks had already been betting against Greece’s ability to repay its debt (to them, no doubt).[106]

In June, the EU and IMF concluded a harsh audit of Greece’s finances as a condition for getting a further tranche of its previous bailout loan, with Greece “pledging further reforms and a privatisation drive that has put local unions on the warpath again.” The Greek Ministry “said it had discussed with auditors a four-year programme to reduce the Greek public deficit and its debt of some 350 billion euros ($504 billion) through further reform and sweeping, controversial privatizations,” which the IMF, the European Central Bank (ECB) and the EU made “a condition of further aid.” Greece was seeking a further 70 billion euro bailout, and the country announced the implementation of further austerity measures:

It has also pledged to hold a 50-billion-euro sale of state assets including the near-monopoly telecom and electricity operators, the country’s two main ports and one of its best-capitalised banks, Hellenic Postbank.[107]

With major protests, strikes, and riots erupting in Greece against the draconian austerity measures, the economic and social crisis was more deeply enmeshed in a domestic political crisis. The Bank for International Settlements (BIS) published a list of those countries and banks which were the most heavily exposed to Greek debt. The total lending exposure to Greece by 24 nations was over $145 billion, with the exposure of European banks at $136 billion, and non-European banks at nearly $9.5 billion. France had an exposure of $56.7 billion, Germany of $33.9 billion, Italy of $4 billion, Japan of $1.6 billion, the U.K. of $14 billion, the U.S. of $7.3 billion, and Spain at $974 million. Thus, these were the countries with the most to lose in the event of a Greek default.[108]

However, the overall exposure includes lending not only to the country (sovereign debt), but industries, banks, and individuals. France’s overall exposure was highest with $56.7 billion, however, in terms of exposure to sovereign debt specifically, France had an exposure of $15 billion. While Germany had a lower overall exposure at $33.9 billion, German lenders were the most exposed to sovereign debt at $22.7 billion. French banks had a higher overall exposure because $39.6 billion of the $56.7 billion total was loaned to companies and households.[109]

In mid-June 2011, Moody’s warned that it might cut the credit ratings of France’s three largest banks due to their holdings of Greek debt, and placed “BNP Paribas, Crédit Agricole and Société Générale on review for a possible downgrade.”[110]

In June, it was reported that the IMF exerted strong pressure on Germany to give Greece another bailout, threatening to trigger a sovereign default if Germany did not agree to a bailout. As reported in the Guardian: “The fund warned the Germans in recent weeks that it would withhold urgently needed funds and trigger a Greek sovereign default unless Berlin stopped delaying and pledged firmly that it would come to Greece’s rescue.”[111] As part of the new bailout, there would be “unprecedented outside intervention in the Greek economy, including international involvement in tax collection and privatisation of state assets, in exchange for new bail-out loans for Athens.” Further, there would be conditions in the package that would provide incentives for holders of Greek debt (i.e., European banks) to voluntarily extend Greece’s repayment period, by “rolling over” the debt into future bonds (i.e., pushing the debt further down the road), and of course, the package would also include a new round of austerity measures. Much of the funding is expected to come from the sale of state assets, with the IMF and EU providing roughly $43 billion extra.[112]

The major lenders were seen to have a role in the latest Greek bailout, with French banks agreeing to a possible roll-over of Greek debt, meaning that the banks would be extending the maturity of some of their holdings of Greek debt, and that “banks would reinvest most of the proceeds of their holdings of Greek debt maturing between now and 2014 back into new long-term Greek securities.”[113] German banks also agreed to roll over 3.2 billion euros of Greek debt falling due up to and including 2014.[114]

In late June, the Greek government approved another harsh austerity package, prompting more massive protests, strikes, and riots. The second bailout package has been running into significant problems, largely to do with its stipulations for private sector involvement, creating many conflicts between those parties which must agree to the bailout. The ultimate bailout package, expected to be in the range of 80 to 90 billion euros, might not be agreed upon until September. Meanwhile, hedge funds have been speculating in the derivatives market seeking to make financial gains throughout the unfolding crisis.[115]

The Crisis Spreads Through Europe

Portugal descended into a major debt crisis in 2011. In March, the country’s parliament rejected a new austerity package to deal with its debt, and “the market” reacted by moving against the country, as “sovereign bond yields soared to new highs,” with Fitch Ratings downgrading Portugal’s credit rating and Moody’s downgraded the rating of several Spanish banks, which are heavily exposed to Portuguese debt.[116] In April of 2011, Portugal sought the assistance of the EU and IMF and requested a bailout of roughly 80 billion euros. As a condition for such a bailout, Portugal would be forced to impose harsh austerity measures in a ‘Structural Adjustment’ package which “will include structural reforms, spending cuts, a stabilisation programme for the country’s financial sector and ambitious privatisation plans.”[117] As such prospects increase for Portugal’s neighbour Spain, which is considered both “too big to fail” and “too big to bail,” Spain’s government has imposed several rounds of harsh austerity measures.[118]

In May, an agreement was reached to bailout Portugal by the EU and IMF worth roughly $111 billion. As part of the agreement, Portugal had to implement the austerity measures that its parliament had rejected in March, cutting spending (including pensions), while roughly 12 billion euros (or $17.8 billion) of the 78 billion euro bailout would go to banks.[119] In July, Moody’s slashed Portugal’s credit rating to “junk status,” and European bank shares fell sharply, as they are heavily exposed to Portuguese debt. Moody’s warned that Portugal may need a second bailout (just like Greece), which pushed Portugal’s borrowing costs further up, plunging the country and Europe as a whole deeper into a debt crisis.[120]

In July, Moody’s downgraded Portugal’s debt to junk status, increasing fears that Spain and Italy will be targeted next. The downgrade also came with a warning that Portugal may, like Greece, need a second bailout, which pushed European stock markets down, “adding to the woes of Ireland, Spain and Italy as traders dumped their bonds, forcing their interest rates up.”[121] In July, Moody’s downgraded Ireland’s rating to “junk status,” putting it in the same category as Greece and Portugal, and further exacerbating the economic crisis there, and fuelling fears about Spain and Italy.[122]

Italy, with $2.6 trillion in outstanding debt, was plunged into a deep crisis in early July, and began to edge toward a potential need for a bailout.[123] French banks have an exposure of $392.6 billion in Italian debt (both public and private), which is more than double of the German exposure to Italy.[124] Amid the increased fears over Italy’s debt, its borrowing costs soared (plunging it even deeper into crisis). Italy’s government announced the intention to impose an austerity plan to cut 40 billion euros out of its budget.[125] Mario Draghi, governor of the Bank of Italy, endorsed the austerity package, calling it “an important step.” Mario Draghi is incidentally set to take over the position of President of the European Central Bank in November, when Jean-Claude Trichet steps down.[126]

Spanish banks reportedly had an exposure of 100 billion euros in Portuguese debt, meaning that a bailout for Portugal is in fact a bailout for Spanish banks.[127] UK banks were sitting on roughly 100 billion pounds (roughly $150 billion) of exposure to Greek, Portuguese, and Spanish debt, as of April 2010.[128] It was reported in April of 2011 that British banks had an exposure of roughly 33.7 billion euros to Portugal, comparing favourably with French and German exposure, unlike in Ireland, where British banks have the largest exposure of all foreign banks. Though, in total, European banks hold roughly $266 billion in exposure to Portuguese debt.[129]

As the Bank for International Settlements reported in March of 2011, the total exposure by foreign banks to what is referred to as Europe’s ‘PIGS’ (Portugal, Ireland, Greece, and Spain) is roughly $2.5 trillion. Germany has the largest exposure, at $569 billion, the U.K. is next with $431 billion, and France is in third with $380 billion. The British banks have an exposure of $225 billion in Ireland and $152 billion in Spain.[130]

With Italy in crisis, European banks are even more exposed, as their net exposure to Italian sovereign debt (not to be confused with total debt exposure, public and private) is more than their exposure to Greece, Portugal, Ireland, and Spain combined. Exposure to those four nations is roughly $226 billion, while European banks’ exposure to Italy’s sovereign debt is $262 billion, making the threat of a bailout or a potential default all the more pronounced.[131]

The European Central Bank (ECB) itself, through purchasing of government bonds from Europe’s weakest economies, reportedly has an exposure of 444 billion euros (or $630 billion) to Portugal, Italy, Ireland, Greece, and Spain (the PIIGS). As one think tank reported on the figures, “There is a hidden – and potentially huge – cost of the euro zone crisis to taxpayers buried in the ECB’s books.”[132]

Banking on a Depression

In late June of 2011, the BIS “urged Europe to end its dithering and find a permanent solution to the sovereign debt crisis,” and wrote in its annual report: “For well over a year, European policy makers have been scrambling to put together short-term fixes for the hardest-hit countries while debating how to design a viable and credible long-term solution,” adding, “they need to finish the job, once and for all.” Further, the BIS warned, “Governments that put off addressing their fiscal problems run a risk of being punished both suddenly and harshly.”[133]

The BIS further warned that inflation needs to be fought by central banks raising their interest rates, thus making money more expensive, and that “with the scope for rapid growth closing, monetary policy should be quickly brought back to normal and countries should act urgently to close budget deficits.” The recommendation by the BIS was for both emerging market economies (such as China, India, Brazil, etc.) and advanced industrialized economies (Europe, United States), and the BIS “warned policymakers not to expect a normal recovery because much of the pre-crisis growth had been unsustainable and capacity will have been destroyed for ever, particularly in finance and construction.” As the Financial Times reported:

Rising food, energy and other commodity prices underscored the need for central banks around the world to begin raising interest rates, perhaps even more rapidly than they brought them down, said the BIS in its report. “Highly accommodative monetary policies are fast becoming a threat to price stability,” it concluded.

The fact that interest rates have been so low for so long also introduces new risks into the world’s financial system even though these policies were put in train initially by a desire to reduce risk, the report added.

“The persistence of very low interest rates in major advanced economies delays the necessary balance sheet adjustments of households and financial institutions,” the BIS said.[134]

In other words, according to the BIS, it’s time to tighten the grip. Raising interest rates will mean that loans and debt become more expensive for governments, corporations, banks, and individuals. The stated aim of this, according to the BIS, is to reduce inflationary pressure, where money is printed easily and crosses borders easily with near-zero interest rates, making it cheap. The free flow of money (low interest rates) allowed the housing bubble (and other bubbles, such as the commercial real estate bubble) to grow and inflate. Low interest rates are designed to encourage investment and lending, but of course, the major banks that got the bailout money did not increase lending, they increased their executive’s bonuses. Thus, low interest rates were designed to encourage economic growth, which is why they were kept low following the onset of the economic crisis. However, with the major bailouts and stimulus packages, unprecedented amounts of money were pumped into the economy, and as such, the value of the currency being printed goes down (the more there is, the less valuable it becomes). This causes inflation (which acts as a hidden tax on the consumer), because it means that it requires more of the currency to buy less. The prices of food and fuel in particular increase, which is largely detrimental to the middle class consumer, whose wages do not increase with inflation. Thus, they make less when they need to spend more to buy less.

The BIS warned in June of 2010 that the record low interest rates “aimed at spurring economic growth, were keeping households and banks from reducing the huge debts that led to the credit crunch.” Its 2010 annual report warned: “Keeping interest rates near zero for too long, with abundant liquidity, leads to distortions and creates risks for the financial and monetary stability.”[135] Even in its 2009 annual report, the BIS said it feared that central banks would raise their interest rates too late, which would ultimately lead to inflation anyway. As the report stated, keeping the rates low would “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.”[136]

The hesitation to raise interest rates comes from the fact that there has been no economic ‘recovery,’ and thus, raising rates would lead to a protracted stagnation, or a double-dip recession, or perhaps more bluntly, a very deep depression. The raising of interest rates in an attempt to reduce inflation could potentially be irrelevant, as the increased rates would prompt higher interest payments on debts, forcing governments to print more money (or get more bailouts or loans) in order to make their payments, and thus, more money being pumped into the economy would further exacerbate inflation, itself. Already, the Chinese central bank (which is a member of the BIS) raised its interest rates, with India having increased interest rates over the year as well.[137] The European Central Bank also raised its interest rates in July, for the second time this year, to 1.5%, and may be expected to raise it further by the end of the year.[138] The BIS annual report for 2011 stated:

All financial crises, especially those generated by a credit-fuelled property price boom, leave long-lasting wreckage. But we must guard against policies that would slow the inevitable adjustment. The sooner that advanced economies abandon the leverage-led growth that precipitated the Great Recession, the sooner they will shed the destabilising debt accumulated during the last decade and return to sustainable growth. The time for public and private consolidation is now… We should make no mistake here: the market turbulence surrounding the fiscal crises in Greece, Ireland and Portugal would pale beside the devastation that would follow a loss of investor confidence in the sovereign debt of a major economy.[139]

Whether inflation, high interest rates, or a more-deadly combination of both, the average person suffers most. Inflation hits home as wages remain stagnant or are cut (under ‘fiscal austerity measures’), while costs for consumer goods (such as food and fuel) increase. Increased interest rates drain the remaining resources of consumers, who are largely debt-ridden, and will have to make increased payments on their debts. Such a scenario for an individual debtor (say, a middle class consumer), is likely to play out in a scenario similar to Greece: either they go further into debt to pay interest on old debt (like paying off one credit card with another), thus increasing their future liabilities (kicking the can down the road); or, they default and declare bankruptcy, and come under the tutelage of bank supervision, losing all their assets. In a combination of both inflation and high interest rates, the middle class will become totally impoverished, as they are already a class based entirely on debt.

The Plutonomy

A 2005 report from Citigroup coined the term “plutonomy,” to describe countries “where economic growth is powered by and largely consumed by the wealthy few,” and specifically identified the U.K., Canada, Australia, and the United States as plutonomies. Keeping in mind that the report was published three years before the onset of the financial crisis in 2008, the Citigroup report stated that, “asset booms, a rising profit share and favourable treatment by market-friendly governments have allowed the rich to prosper and become a greater share of the economy in the plutonomy countries,” and that, “the rich are in great shape, financially.”[140] As the Federal Reserve reported, “the nation’s top 1% of households own more than half the nation’s stocks,” and “they also control more than $16 trillion in wealth — more than the bottom 90%.” The term ‘Plutonomy’ is specifically used to “describe a country that is defined by massive income and wealth inequality,” and that they have three basic characteristics, according to the Citigroup report:

1. They are all created by “disruptive technology-driven productivity gains, creative financial innovation, capitalist friendly cooperative governments, immigrants… the rule of law and patenting inventions. Often these wealth waves involve great complexity exploited best by the rich and educated of the time.”

2. There is no “average” consumer in Plutonomies. There is only the rich “and everyone else.” The rich account for a disproportionate chunk of the economy, while the non-rich account for “surprisingly small bites of the national pie.” [Citigroup strategist Ajay] Kapur estimates that in 2005, the richest 20% may have been responsible for 60% of total spending.

3. Plutonomies are likely to grow in the future, fed by capitalist-friendly governments, more technology-driven productivity and globalization.[141]

Kapur, who authored the Citigroup report, stated that there were also risks to the Plutonomy, “including war, inflation, financial crises, the end of the technological revolution and populist political pressure,” yet, “the rich are likely to keep getting even richer, and enjoy an even greater share of the wealth pie over the coming years.”[142]

More recently, Moody’s Analytics reported that, “the top 5 percent of American earners are responsible for 35 percent of consumer spending, while the bottom 80 percent engage in only 39.5 percent of consumer outlays,” while “the top 10 percent of earners received 50 percent of all income, while they accounted for only 22 percent of spending.” Much of their money disappeared into the speculative booms, especially the housing boom.[143]

In February of 2011, Ajay Kapur, the author of the Citigroup report who is now with Deutsche Bank, gave an interview in which he explained that, “the world economy is even more dependent on the spending and consumption of the rich,” and that, “Plutonomist consumption is almost 10 times as volatile that of the average consumer.” He further explained that increased debt levels are a sign of plutonomies:

We have an economy today where a large fraction of the population doesn’t pay federal income taxes and, because of demand for entitlements, we have a system of massive representation without taxation. On the other hand, you have plutonomists who protect their turf and the taxation amounts are not enough to pay for everyone’s demand. So I’ve come to the conclusion that budget deficits are biased toward getting bigger and bigger. Budget deficits are going to become a manifestation of a plutonomy.[144]

The plutonomy is largely characterized by a lack of a consuming and vibrant middle class. This is a trend that has been accelerating for several decades, particularly in North America and Britain, where the middle class population is heavily indebted. The middle class has existed as a consumer class, keeping the lower class submissive, and keeping the upper class secure and wealthy by consuming their products, produced with the labour of the lower class. As a Bank of America-Merrill report noted in 2009, the middle class “is over-leveraged.” The report stated, “the consumer debt problem in the economy really is a debt problem for the middle class. The need to work off a chunk of that debt will sap middle-class families’ spending power for perhaps years to come.” Further:

By contrast, the upper 10% of income earners face a much smaller debt burden relative to income and net worth. Those people should have ample spending power to help fuel an economic recovery.

Using 2007 data from the Federal Reserve, BofA Merrill defines the middle class as people in the 40%-to-90% income percentiles. It defines lower-income folks as those in the zero to 40% income percentiles, and the wealthy as those in the top 10%.

Lower-income families account for 40% of the population but just 12% of total consumption, BofA Merrill estimates. The middle class is 50% of the population and nearly as large a share of consumption, at 46%.

That leaves the wealthy to account for a hefty 42% of consumption.

In terms of their debt burdens, neither lower-income families nor the wealthy are constrained the way the middle class is constrained, the report asserts.[145]

The report further asserted that, “the middle-class has suffered more than the wealthy from the housing crash because middle-class families tended to rely more on their homes to build savings through rising equity. Also, the wealthy naturally had a much larger and more diverse portfolio of assets — stocks, bonds, etc.”[146]

In short, when the day comes where the rest of the industrialized world falls into the same trap as Greece, the middle class will be pushed down into the lower class, and a global socio-economic plutonomy will emerge. The middle class cannot survive the perfect storm of fiscal austerity, increased interest rates, inflation and ‘Structural Adjustment.’ We are entering a global age of austerity, where our political leaders commit social genocide for the benefit of the global banks, and at the behest of the institutions that represent them. The IMF and other supranational institutions increase their own powers and authority in order to punish and impoverish large populations. What has been done to the ‘Third World’ – the ‘Global South’ – over the past several decades is now being done to us, in the industrialized North.

In Conclusion

In the face of this massive global social, political, and economic crisis, the reaction of the world’s elite is to further centralize power structures on a global scale, to further remove power from the rest of humanity and move it upwards to a tiny elite. This not only creates massive disparity and inequality, but it establishes the conditions for an incredibly radicalized, restless, and angry world population. As such, the centralized global power structures that elites seek to strengthen and build anew will ultimately be authoritarian, oppressive, and dehumanizing. This is so because the social unrest resulting from this massive global impoverishment will make the apparatus of oppression necessary in order to secure and maintain those very power structures. In short, if the elite do not become oppressive and totalitarian, they will lose their grip on power in the face of massive global social unrest. This will require brutal wars of domination abroad, and ruthless techno-social systems of oppression at home.

The people of the world are faced with a great challenge, unlike any other faced in all of human history. The only way out is realizing that the struggle of one is the struggle of all: freedom for all, or freedom for none. Of course, a true global resistance is a long way down the road. There still remain diverse disputes and ideological differences which maintain disunity. The challenge, then, is to find the common ground for all people, and to move forward despite ideological or other differences, and to work together to find a solution. This is no small challenge.

We will likely see the proliferation of many new ideologies and indeed even a ‘global philosophical revolution’ of sorts, which may seek to unite humanity under the banner of a new human understanding. Such a philosophy would run counter to the elite-driven philosophy focused on power-centralization and global domination, and would – in order to be legitimate – draw from a great many philosophical, theoretical and even spiritual disciplines and beliefs. As such, it is perhaps important to not revert to old – tried and tested – ideological doctrines as the one and only “solution.” For example, there are growing nationalist movements in reaction to the elite-driven doctrine of ‘globalism’, notably in the United States. For a true step forward, we must remain open to and in fact encourage a proliferation of new ideas instead of reverting to the old; to learn from both the failures and successes of old ideas, instead of holding on to a myth of ‘what was’, such as the ‘idea’ of a wonderful, prosperous America for all. This era never truly existed in America’s history, yet the myth remains strong, and is a fundamental driving force behind the resurgent nationalist movement. As such, for many in the anti-globalist movement, criticism of nationalism is instantly thrown into the camp of support for globalism, not allowing room for a critique of both. This is a dangerous situation – ideologically and politically – as true change can only come from self-reflection and understanding. There needs to be room left for new ideas, otherwise we will simply revert to repeating old mistakes.

Indeed, we are entering perhaps the most important historic era in the human story thus far. The notion that there will not be new ideas, philosophies, ideologies and beliefs runs counter to the historical fact that times of social upheaval and rapid political transformation often give rise to new ideas and philosophies. This time around, the world is globalizing, not only in terms of power structures, but also in terms of ideational structures. In this sense, while the elite have never had such an opportunity to impose control over all of humanity, all of humanity has never had such an opportunity to effect an exchange of ideas and information among each other, and thus, solidify a common philosophical solidarity, and ultimately, re-take control of the world, itself.

Andrew Gavin Marshall is an independent researcher and writer based in Montreal, Canada, writing on a number of social, political, economic, and historical issues. He is co-editor of the book, “The Global Economic Crisis: The Great Depression of the XXI Century.” His website is http://www.andrewgavinmarshall.com

Notes

[1]            Ed Harris, Greece turns to Socialists to fight economic crisis, London Evening Standard: 5 October 2009:

http://www.thisislondon.co.uk/standard/article-23752278-greece-turns-to-socialists-to-fight-economic-crisis.do

[2]            LANDON THOMAS Jr., In Greece, Some See a New Lehman, The New York Times, 12 June 2011:

http://www.nytimes.com/2011/06/13/business/global/13euro.html

[3]            Beat Balzli, How Goldman Sachs Helped Greece to Mask its True Debt, Spiegel Online, 8 February 2010:

http://www.spiegel.de/international/europe/0,1518,676634,00.html

[4]            LOUISE STORY, LANDON THOMAS Jr. and NELSON D. SCHWARTZ, Wall St. Helped to Mask Debt Fueling Europe’s Crisis, The New York Times, 13 February 2010:

http://www.nytimes.com/2010/02/14/business/global/14debt.html

[5]            John Carney, Goldman Sachs Shorted Greek Debt After It Arranged Those Shady Swaps, Business Insider, 15 February 2010:

http://www.businessinsider.com/goldman-sachs-shorted-greek-debt-after-it-arranged-those-shady-swaps-2010-2

[6]            Jim Puzzanghera and Nathaniel Popper, Senate panel concludes Goldman Sachs profited from financial crisis, Los Angeles Times, 14 April 2011:

http://articles.latimes.com/2011/apr/14/business/la-fi-crisis-probe-20110414

[7]            Louise Story and Sewell Chan, E-mails suggest Goldman profited in housing collapse, San Francisco Chronicle, 25 April 2010:

http://articles.sfgate.com/2010-04-25/news/20865082_1_goldman-sachs-e-mail-messages-betting

[8]            Matthew Philips, The Monster That Ate Wall Street, Newsweek, 27 September 2008: http://www.newsweek.com/2008/09/26/the-monster-that-ate-wall-street.html

[9]            Bloomberg, Fannie, Freddie ‘biggest disasters’ says JPMorgan Chase chief, The Economic Times, 18 February 2011:

http://articles.economictimes.indiatimes.com/2011-02-18/news/28615139_1_fannie-and-freddie-jamie-dimon-financial-crisis-inquiry-commission

[10]            Cornell, 4501 Congressional Findings, Title 12, Chapter 46, Cornell University Law School:

http://www.law.cornell.edu/uscode/12/usc_sec_12_00004501—-000-.html

[11]            Carol D. Leonnig, How HUD Mortgage Policy Fed The Crisis, The Washington Post, 10 June 2008:

http://www.washingtonpost.com/wp-dyn/content/article/2008/06/09/AR2008060902626.html

[12]            RUSSELL ROBERTS, How Government Stoked the Mania, The Wall Street Journal, 3 October 2008:

http://online.wsj.com/article/SB122298982558700341.html

[13]            STEVEN A. HOLMES, Fannie Mae Eases Credit To Aid Mortgage Lending, The New York Times, 30 September 1999:

http://www.nytimes.com/1999/09/30/business/fannie-mae-eases-credit-to-aid-mortgage-lending.html

[14]            Ibid.

[15]            Tom Abate, Housing, hedge funds spur bubble worries / Some experts fear low interest rates may have pumped too much cash into global markets, San Francisco Chronicle, 22 May 2005:

http://articles.sfgate.com/2005-05-22/business/17374185_1_asset-prices-interest-rates-central-bankers

[16]            Ryan Grim, Greenspan Wanted Housing-Bubble Dissent Kept Secret, Huffington Post, 3 May 2010:

http://www.huffingtonpost.com/2010/05/03/greenspan-wanted-housing_n_560965.html

[17]            Craig Torres, Fed Officials Saw Housing Bubble in 2005, Didn’t Alter Policy, Bloomberg, 14 January 2011:

http://www.bloomberg.com/news/2011-01-14/fed-saw-housing-bubble-in-2005-failed-to-alter-policy-of-rate-increases.html

[18]            Nell Henderson, Bernanke: There’s No Housing Bubble to Go Bust, The Washington Post, 27 October 2005:

http://www.washingtonpost.com/wp-dyn/content/article/2005/10/26/AR2005102602255.html

[19]            PBS, The Long Demise of Glass-Steagall. Frontline:

http://www.pbs.org/wgbh/pages/frontline/shows/wallstreet/weill/demise.html

[20]            Ibid.

[21]            Robert Buzzanco, Bring Back Glass-Steagall? History News Network: October 21, 2008:

http://hnn.us/articles/55548.html

[22]            NYT, Furor on Memo At World Bank, The New York Times, 7 February 1992:

http://www.nytimes.com/1992/02/07/business/furor-on-memo-at-world-bank.html

[23]            Peter Coy, How New Global Banking Rules Could Deepen the U.S. Crisis, Business Week, 17 April 2008:

http://www.businessweek.com/magazine/content/08_17/b4081083014665.htm

[24]            Carroll Quigley, Tragedy and Hope: A History of the World in Our Time (New York: Macmillan Company, 1966), pages 324-325.

[25]            Ambrose Evans-Pritchard, BIS warns of Great Depression dangers from credit spree, The Telegraph, 25 June 2007:

http://www.telegraph.co.uk/finance/economics/2811081/BIS-warns-of-Great-Depression-dangers-from-credit-spree.html

[26]            Ambrose Evans-Pritchard, BIS slams central banks, warns of worse crunch to come, The Telegraph, 30 June 2008:

http://www.telegraph.co.uk/finance/markets/2792450/BIS-slams-central-banks-warns-of-worse-crunch-to-come.html

[27]            Chris Martenson, What the latest bailout plan means. ChrisMartenson.com: September 21, 2008:

http://www.chrismartenson.com/blog/what-latest-bailout-plan-means/5149

[28]            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

[29]            Bailout Recipients, ProPublica:

http://projects.propublica.org/bailout/list/index

[30]            Robin Harding and Tom Braithwaite and Francesco Guerrera, European banks took big slice of Fed aid, The Financial Times, 1 December 2010:

http://www.ft.com/intl/cms/s/0/4dd95e42-fd6d-11df-a049-00144feab49a.html#axzz1R9fhQUVh

[31]            MARY WILLIAMS WALSH, A.I.G. Lists Banks It Paid With U.S. Bailout Funds, The New York Times, 15 March 2009:

http://www.nytimes.com/2009/03/16/business/16rescue.html

[32]            Surojit Chatterjee, TARP funds benefited foreign banks more, says oversight panel, International Business Times, 12 August 2010:

http://www.ibtimes.com/articles/43012/20100812/tarp-funds-benefited-foreign-banks-more-says-oversight-panel.htm

[33]            Neil Barofsky, Where the Bailout Went Wrong, The New York Times, 31 March 2011:

http://www.nytimes.com/2011/03/30/opinion/30barofsky.html

[34]            HEATHER SCOFFIELD, Financial repairs must continue: central banks, The Globe and Mail, 29 June 2009:

http://v1.theglobeandmail.com/servlet/story/RTGAM.20090629.wcentralbanks0629/BNStory/HEATHER+SCOFFIELD/

[35]            Ibid.

[36]            Simone Meier, BIS Sees Risk Central Banks Will Raise Interest Rates Too Late, Bloomberg, 29 June 2009:

http://www.bloomberg.com/apps/news?pid=newsarchive&sid=aOnSy9jXFKaY

[37]            Ibid.

[38]            Robert Cookson and Sundeep Tucker, Economist warns of double-dip recession, The Financial Times, 14 September 2009:

http://www.ft.com/intl/cms/s/0/e6dd31f0-a133-11de-a88d-00144feabdc0.html#axzz1R9fhQUVh

[39]            Robert Cookson and Victor Mallet, Societal soul-searching casts shadow over big banks, The Financial Times, 18 September 2009:

http://www.ft.com/intl/cms/s/0/7721033c-a3ea-11de-9fed-00144feabdc0.html#axzz1R9fhQUVh

[40]            Ambrose Evans-Pritchard, Derivatives still pose huge risk, says BIS, The Telegraph, 13 September 2009:

http://www.telegraph.co.uk/finance/newsbysector/banksandfinance/6184496/Derivatives-still-pose-huge-risk-says-BIS.html

[41]            KATY BURNE, Derivatives-Trading Tally: $700 Trillion (or So), The Wall Street Journal, 6 December 2010:

http://online.wsj.com/article/SB10001424052748703471904576003400646739990.html

[42]            Global OTC derivatives, The Economist, 31 May 2011:

http://www.economist.com/blogs/dailychart/2011/05/derivatives_trade?fsrc=rss

[43]            Huw Jones, BIS-Banks may need more cash to clear derivatives, Reuters, 5 June 2011:

http://uk.reuters.com/article/2011/06/05/bis-clearing-idUKLDE7510HJ20110605

[44]            EDWARD WYATT, Report Says Excessive Risk Remains After Bank Bailout, The New York Times, 13 January 2011:

http://www.nytimes.com/2011/01/14/business/14tarp.html

[45]            Interview by Steve Inskeep, Barofsky: More Bank Bailouts Are Inevitable, NPR, 27 January 2011:

http://www.npr.org/2011/01/27/133264711/Troubled-Asset-Relief-Program-Update

[46]            Dan Rather, Barofsky, Dan Rather Reports, 7 June 2011:

http://www.hd.net/blogs/2011/06/barofsky-more-bailouts/

[47]            Philip Aldrick, Banks’ $4 trillion debts are ‘Achilles’ heel of the economic recovery’, warns IMF, The Telegraph, 5 October 2010:

http://www.telegraph.co.uk/finance/economics/8043800/Banks-4-trillion-debts-are-Achilles-heel-of-the-economic-recovery-warns-IMF.html

[48]            Colin Barr, Let big banks fail, bailout skeptics say, CNN Money, 21 April 2009:

http://money.cnn.com/2009/04/21/news/too.big.fortune/index.htm?postversion=2009042112

[49]            Chris Isidore, Fed made $9 trillion in emergency overnight loans, CNN Money, 1 December 2010:

http://money.cnn.com/2010/12/01/news/economy/fed_reserve_data_release/index.htm

[50]            Jon Hilsenrath, A Closer Look at Europe and the Fed’s Central Bank Swap Program, The Wall Street Journal, 7 May 2010:

http://blogs.wsj.com/economics/2010/05/07/a-closer-look-at-europe-and-the-feds-central-bank-swap-program/

[51]            Matthew Philips, Tracking the $19 Trillion Bailout Funds, Newsweek, 22 September 2009:

http://www.newsweek.com/blogs/wealth-of-nations/2009/09/22/tracking-the-19-trillion-bailout-funds.html

[52]            Dawn Kopecki and Catherine Dodge, U.S. Rescue May Reach $23.7 Trillion, Barofsky Says (Update3), Bloomberg, 20 July 2009:

http://www.bloomberg.com/apps/news?pid=newsarchive&sid=aY0tX8UysIaM

[53]            Neil Irwin and Zachary A. Goldfarb, Probe: Did big U.S. banks contribute to the financial crisis in Greece?, The Washington Post, 26 February 2010:

http://www.washingtonpost.com/wp-dyn/content/article/2010/02/25/AR2010022502183.html

[54]            Greenspan Examines Federal Reserve, Mortgage Crunch, PBS Newshour, 18 September 2007:

http://www.pbs.org/newshour/bb/business/july-dec07/greenspan_09-18.html

[55]            NYFed, Community Affairs Advisory Council, Federal Reserve Bank of New York:

http://www.newyorkfed.org/aboutthefed/ag_community_affairs.html

[56]            NYFed, Economic Advisory Panel, Federal Reserve Bank of New York:

http://www.newyorkfed.org/aboutthefed/ag_economic.html

[57]            NYFed, International Advisory Committee, Federal Reserve Bank of New York:

http://www.newyorkfed.org/aboutthefed/ag_international.html

[58]            NYFed, Fedwire Securities Customer Advisory Group, Federal Reserve Bank of New York:

http://www.newyorkfed.org/aboutthefed/ag_fedwire_securities_customer.html

[59]            David Reilly, Secret Banking Cabal Emerges From AIG Shadows, Bloomberg, 28 January 2010:

http://www.bloomberg.com/news/2010-01-28/secret-banking-cabal-emerges-from-aig-shadows-david-reilly.html

[60]            LANDON THOMAS Jr., In Greece, Some See a New Lehman, The New York Times, 12 June 2011:

http://www.nytimes.com/2011/06/13/business/global/13euro.html

[61]            VANESSA FUHRMANS and SEBASTIAN MOFFETT, Exposure to Greece Weighs On French, German Banks, The Wall Street Journal, 17 February 2010:

http://online.wsj.com/article/SB10001424052748703798904575069712153415820.html

[62]            Manfred Ertel, The 300 Billion Euro Man, Spiegel Online, 31 March 2010:

http://www.spiegel.de/international/europe/0,1518,686604,00.html

[63]            Kerin Hope, Head of Greek debt office replaced, The Financial Times, 19 February 2010:

http://www.ft.com/intl/cms/s/0/964dca2c-1d45-11df-b12e-00144feab49a,s01=2.html#axzz1RRT1aNfQ

[64]            Henry Chu, European countries, IMF offer Greece $146 billion in loans, The Los Angeles Times, 3 May 2010:

http://articles.latimes.com/2010/may/03/world/la-fg-greece-bailout-20100503

[65]            Gabi Thesing and Flavia Krause-Jackson, Greece Faces `Unprecedented’ Cuts as $159B Rescue Nears, Bloomberg, 2 May 2010:

http://www.bloomberg.com/news/2010-05-02/greece-faces-unprecedented-cuts-as-159b-rescue-nears.html

[66]            AFP, France, Germany Forced Greece to Buy Arms: MEP, Defense News, 7 May 2010:

http://www.defensenews.com/story.php?i=4616433

[67]            AP, Despite crisis Greece continues weapons purchases, Jerusalem Post, 28 May 2010:

http://www.jpost.com/International/Article.aspx?id=176792

[68]            Abigail Moses, Greek Contagion Concern Spurs European Sovereign Default Risk to Record, Bloomberg, 26 April 2010:

http://www.bloomberg.com/news/2010-04-26/greek-contagion-concern-spurs-european-sovereign-default-risk-to-record.html

[69]            Ambrose Evans-Pritchard, ECB may have to turn to ‘nuclear option’ to prevent Southern European debt collapse, The Telegraph, 27 April 2010:

http://www.telegraph.co.uk/finance/economics/7640783/ECB-may-have-to-turn-to-nuclear-option-to-prevent-Southern-European-debt-collapse.html

[70]            Richard Wachman, Greece debt crisis: the role of credit rating agencies, The Guardian, 28 April 2010:

http://www.guardian.co.uk/business/2010/apr/28/greece-debt-crisis-standard-poor-credit-agencies

[71]            S&P, Management Profiles:

http://www.standardandpoors.com/about-sp/management-profiles/en/us

[72]            McGraw-Hill Companies, Executive Profiles:

http://www.mcgraw-hill.com/site/about-us/executive-profiles

[73]            S&P, Board of Directors:

http://investor.mcgraw-hill.com/phoenix.zhtml?c=96562&p=irol-govboard

[74]            Moody’s, Board of Directors:

http://ir.moodys.com/governance.cfm

[75]            Moody’s, Management Team:

http://ir.moodys.com/management.cfm

[76]            Fimalac, Board of Directors:

http://www.fimalac.com/board-of-directors.html

[77]            Ambrose Evans-Pritchard, Sovereign debt crisis at ‘boiling point’, warns Bank for International Settlements, The Telegraph, 8 April 2010:

http://www.telegraph.co.uk/finance/economics/7564748/Sovereign-debt-crisis-at-boiling-point-warns-Bank-for-International-Settlements.html

[78]            Ibid.

[79]            Stephen G Cecchetti, M S Mohanty and Fabrizio Zampolli, The Future of Public Debt: Prospects and Implications, BIS Working Papers, No 300, March 2010, page 3.

[80]            Ibid, page 4.

[81]            Ibid, page 9.

[82]            Ibid.

[83]            Ibid, page 12.

[84]            Ibid, page 14.

[85]            Greek debt crisis spreading ‘like Ebola’ and Europe must act now, OECD warns, The Telegraph, 28 April 2010:

http://www.telegraph.co.uk/finance/financialcrisis/7644709/Greek-debt-crisis-spreading-like-Ebola-and-Europe-must-act-now-OECD-warns.html

[86]            Edmund Conway, ‘Significant chance’ of second financial crisis, warns World Economic Forum, The Telegraph, 14 January 2010:

http://www.telegraph.co.uk/finance/financetopics/davos/6990433/Significant-chance-of-second-financial-crisis-warns-World-Economic-Forum.html

[87]            Nouriel Roubini and Arpitha Bykere, The Coming Sovereign Debt Crisis, Forbes, 14 January 2010:

http://www.forbes.com/2010/01/13/sovereign-debt-crisis-opinions-colummnists-nouriel-roubini-arpitha-bykere.html

[88]            Niall Ferguson, A Greek crisis is coming to America, Financial Times, 10 February 2010:

http://www.ft.com/intl/cms/s/0/f90bca10-1679-11df-bf44-00144feab49a.html#axzz1RpfP4VNB

[89]            Ambrose Evans-Pritchard, Citigroup warns of fresh wave of bank failures in Europe, The Telegraph, 21 December 2010:

http://www.telegraph.co.uk/finance/financialcrisis/8217859/Citigroup-warns-of-fresh-wave-of-bank-failures-in-Europe.html

[90]            Sam Fleming and Leo Lewis, Latin American-style cure for euro-zone debt crisis looms, The Australian Business Times, 22 December 2010:

http://www.theaustralian.com.au/business/world/latin-american-style-cure-for-euro-zone-debt-crisis-looms/story-e6frg90o-1225974805041

[91]            Phillip Inman, IMF warns of new sovereign debt crisis for largest economies, The Guardian, 27 January 2011:

http://www.guardian.co.uk/business/2011/jan/27/imf-sovereign-debt-crisis-warning

[92]            Wolfgang Münchau, Our lethargic leaders must work together on the crisis, The Financial Times, 8 February 2009:

http://www.ft.com/intl/cms/s/0/3d51f3ce-f601-11dd-a9ed-0000779fd2ac.html#axzz1RpfP4VNB

[93]            Plan will have policy conditions – ECB, RTE News, 21 November 2010:

http://www.rte.ie/news/2010/1121/imf2-business.html

[94]            Republic of Ireland confirms EU financial rescue deal, BBC News, 22 November 2010:

http://www.bbc.co.uk/news/business-11807730
[95]            Joe Weisenthal, Deutsche Bank: The Global Sovereign Debt Crisis Will Last The Entire Decade, And The US Will Cap It Off, Business Insider, 19 April 2011:

http://www.businessinsider.com/deutsche-bank-on-the-sovereign-debt-crisis-cycle-2011-4

[96]            Elitsa Vucheva, European Bank Bailout Total: $4 Trillion, Bloomberg Businessweek, 10 April 2009:

http://www.businessweek.com/globalbiz/content/apr2009/gb20090410_254738.htm?chan=globalbiz_europe+index+page_top+stories

[97]            Bruno Waterfield, European bank bail-out could push EU into crisis, The Telegraph, 11 February 2009:

http://www.telegraph.co.uk/finance/financialcrisis/4590512/European-banks-may-need-16.3-trillion-bail-out-EC-dcoument-warns.html

[98]            AP, Watchdog sees huge U.S. bill for banks bailout, MSNBC, 20 July 2009:

http://www.msnbc.msn.com/id/32010841/ns/business-us_business/t/watchdog-sees-huge-us-bill-banks-bailout/

[99]            Matthew Philips, Tracking the $19 Trillion Bailout Funds, Newsweek, 22 September 2009:

http://www.newsweek.com/blogs/wealth-of-nations/2009/09/22/tracking-the-19-trillion-bailout-funds.html

[100]            Lee Jones, Banks will owe £6 trillion by 2015 as debt matures, Money Marketing, 10 November 2009:

http://www.moneymarketing.co.uk/investments/news/banks-will-owe-%C2%A36-trillion-by-2015-as-debt-matures/1001908.article

[101]            Agencies, Banks facing $3.6 trillion ‘wall of maturing debt’, IMF Global Financial Stability Report says, The Telegraph, 13 April 2011:

http://www.telegraph.co.uk/finance/economics/8448169/Banks-facing-3.6-trillion-wall-of-maturing-debt-IMF-Global-Financial-Stability-Report-says.html

[102]            IRWIN STELZER, Global Banking Is What’s Really in Crisis, The Wall Street Journal, 27 June 2011:

http://online.wsj.com/article/SB10001424052702304314404576409410834139324.html

[103]            John O’Donnell and Luke Baker, EU hits banks with credit default swap probe, Reuters, 29 April 2011:

http://www.reuters.com/article/2011/04/29/us-eu-antitrust-cds-idUSTRE73S3J020110429

[104]            CNBC, Commercial Real Estate Is Next Bubble to Burst: Tishman, CNBC News, 21 September 2009:

http://www.cnbc.com/id/32952174/Commercial_Real_Estate_Is_Next_Bubble_to_Burst_Tishman

[105]            Richard Blackden, Greek debt price soars as Moody’s cuts credit rating below Egypt, The Telegraph, 7 March 2011:

http://www.telegraph.co.uk/finance/economics/8366707/Greek-debt-price-soars-as-Moodys-cuts-credit-rating-below-Egypt.html

[106]            Jennifer Ryan and Gabi Thesing, Greece Branded With World’s Lowest Credit Rating by S&P on Default Threat, Bloomberg, 13 June 2011:

http://www.bloomberg.com/news/2011-06-13/greece-s-long-term-rating-cut-to-ccc-by-s-p-on-outlook-for-restructuring.html

[107]            AFP, Athens concludes EU-IMF audit: finance ministry, MSN News, 3 June 2011:

http://news.ph.msn.com/business/article.aspx?cp-documentid=4903548

[108]            The countries most exposed to Greek debt, The Telegraph, 15 June 2011:

http://www.telegraph.co.uk/finance/economics/8578337/The-countries-most-exposed-to-Greek-debt.html

[109]            Boris Groendahl, German Banks Top French on $23 Billion Greek Debt, BIS Says, Bloomberg Businessweek, 6 June 2011:

http://www.businessweek.com/news/2011-06-06/german-banks-top-french-on-23-billion-greek-debt-bis-says.html

[110]            Megan Murphy, Kerin Hope, Jennifer Thompson and James Wilson, Greek contagion fears spread to other EU banks, The Financial Times, 15 June 2011:

http://www.ft.com/intl/cms/s/0/ac918946-975a-11e0-9c9d-00144feab49a,s01=1.html#axzz1RpfP4VNB

[111]            Ian Traynor, Hardline IMF forced Germany to guarantee Greek bailout, The Guardian, 17 June 2011:

http://www.guardian.co.uk/business/2011/jun/16/imf-forced-germany-to-guarantee-greek-bailout

[112]            Peter Spiegel, Quentin Peel and Ralph Atkins, Greece set for severe bail-out conditions, The Financial Times, 29 May 2011:

http://www.ft.com/intl/cms/s/0/eb91ba84-8a27-11e0-beff-00144feab49a.html#axzz1NnKIRZX9

[113]            MATTHEW SALTMARSH, French Banks Ready to Help Greek Bailout, The New York Times, 27 June 2011:

http://www.nytimes.com/2011/06/28/business/global/28iht-euro.html

[114]            Quentin Peel and Daniel Schäfer, German banks support Greek debt rollover, The Financial Times, 30 June 2011:

http://www.ft.com/intl/cms/s/0/d0112512-a32f-11e0-8d6d-00144feabdc0.html#axzz1RpfP4VNB

[115]            JULIE CRESWELL, Hedge Funds Seeking Gains in Greek Crisis, The New York Times, 3 July 2011:

http://www.nytimes.com/2011/07/04/business/04bets.html

[116]            Louise Armitstead, Portugal debt crisis: David Cameron holds crisis talks with EU leaders, The Telegraph, 24 March 2011:

http://www.telegraph.co.uk/finance/financialcrisis/8404645/Portugal-debt-crisis-David-Cameron-holds-crisis-talks-with-EU-leaders.html

[117]            AP, Portugal ‘needs £70bn bailout’, The Independent, 8 April 2011:

http://www.independent.co.uk/news/world/europe/portugal-needs-70bn-bailout-2265130.html

[118]            Henry Chu, Europe scrambles to rescue Portugal from debt crisis, Los Angeles Times, 8 April 2011:

http://articles.latimes.com/2011/apr/08/world/la-fg-portugal-debt-20110408

[119]            James G. Neuger and Anabela Reis, Portugal’s $111 Billion Bailout Approved as EU Prods Greece to Sell Assets, Bloomberg, 17 May 2011:

http://www.bloomberg.com/news/2011-05-16/portugal-bailout-approved-as-eu-prods-greece-to-sell-assets.html

[120]            Julia Kollewe, Portugal downgrade hits European bank shares, The Guardian, 6 July 2011:

http://www.guardian.co.uk/business/2011/jul/06/portugal-downgrade-european-bank-shares

[121]            LIZ ALDERMAN and JACK EWING, Europeans Caution Ratings Agencies After the Downgrade of Portugal’s Debt, The New York Times, 6 July 2011:

http://www.nytimes.com/2011/07/07/business/global/07euro.html

[122]            Elysse Morgan, Ireland downgrade fuels Italy, Spain fears, ABC News, 13 July 2011:

http://www.abc.net.au/news/2011-07-13/ireland-downgrade-fuels-italy-spain-fears/2793156?section=business

[123]            John Glover, Italy Is Two Percentage Points From Bailout as Yields Rise, Evolution Says, Bloomberg, 11 July 2011:

http://www.bloomberg.com/news/2011-07-11/italy-is-2-percentage-points-from-a-bailout-as-yields-rise-evolution-says.html

[124]            Fabio Benedetti-Valentini, Italian Debt Risk Puts France’s BNP Paribas, Credit Agricole on Frontline, Blomberg, 13 July 2011:

http://www.bloomberg.com/news/2011-07-12/france-s-bnp-credit-agricole-on-frontline-with-italian-risk.html

[125]            Jeffrey Donovan, Italy Sells 6.75 Billion Euros of Treasury Bills as Borrowing Costs Climb, Bloomberg, 12 July 2011:

http://www.bloomberg.com/news/2011-07-12/italy-s-borrowing-costs-soar-at-6-75-billion-euro-bill-sale-on-contagion.html

[126]            Guy Dinmore and Giulia Segreti, Draghi backs Italian austerity plan, The Financial Times, 13 July 2011:

http://www.ft.com/intl/cms/s/0/d114be22-ad2c-11e0-a24e-00144feabdc0.html#axzz1RpfP4VNB

[127]            Harry Wilson, Spanish banks have €100bn exposure to Portugal, The Telegraph, 8 April 2011:

http://www.telegraph.co.uk/finance/financialcrisis/8435903/Spanish-banks-have-100bn-exposure-to-Portugal.html

[128]            Jill Treanor, Debt crisis: UK banks sitting on £100bn exposure to Greece, Spain and Portugal, The Guardian, 28 April 2010:

http://www.guardian.co.uk/business/2010/apr/28/debt-turmoil-bank-crisis-fears

[129]            Harry Wilson, UK bank exposure to Portugal is less than peers, The Telegraph, 8 April 2011:

http://www.telegraph.co.uk/finance/newsbysector/banksandfinance/8436114/UK-bank-exposure-to-Portugal-is-less-than-peers.html

[130]            Ambrose Evans-Pritchard, Banks have £1.6 trillion exposure to ailing quartet of Greece, Ireland, Portugal and Spain, The Telegraph, 14 March 2011:

http://www.telegraph.co.uk/finance/newsbysector/banksandfinance/8379302/Banks-have-1.6-trillion-exposure-to-ailing-quartet-of-Greece-Ireland-Portugal-and-Spain.html

[131]            Patrick Jenkins and Megan Murphy, Bank contagion fear resurfaces in the Eurozone, The Financial Times, 12 July 2011:

http://www.ft.com/intl/cms/s/0/f3efcbe2-aca7-11e0-a2f3-00144feabdc0.html#axzz1RpfP4VNB

[132]            CNBC, ECB Firefight Leaves It Exposed to Greek Shock, The Financial Times, 7 June 2011:

http://www.cnbc.com/id/43304981/ECB_Firefight_Leaves_It_Exposed_to_Greek_Shock

[133]            Jeff Black, BIS Urges Europe to End Its Debate, Resolve Debt Crisis ‘Once and for All’, Bloomberg, 26 June 2011:

http://www.bloomberg.com/news/2011-06-26/bis-urges-europe-to-end-debate-and-resolve-debt-crisis-once-and-for-all-.html

[134]            Norma Cohen and Chris Giles, Central banks urged to raise rates, The Financial Times, 26 June 2011:

http://www.ft.com/intl/cms/s/0/481e5106-a01f-11e0-a115-00144feabdc0.html#axzz1RpfP4VNB

[135]            Elena Moya, Low interest rates risk relapse into recession, BIS warns, The Guardian, 28 June 2010:

http://www.guardian.co.uk/business/2010/jun/28/raise-interest-rates-avoid-recession

[136]            Simone Meier, BIS Sees Risk Central Banks Will Raise Interest Rates Too Late, Bloomberg, 29 June 2009:

http://www.bloomberg.com/apps/news?pid=newsarchive&sid=aOnSy9jXFKaY

[137]            Aaron Back, Beijing Raises Interest Rates Again, The Wall Street Journal, 7 July 2011:

http://online.wsj.com/article/SB10001424052702303544604576429393824293666.html

[138]            Julia Kollewe, ECB raises interest rates despite debt crisis, The Guardian, 7 July 2011:

http://www.guardian.co.uk/business/2011/jul/07/ebc-raise-interest-rates-debt-crisis

[139]            Jill Treanor, International banking regulator calls for rates to be raised worldwide, The Guardian, 26 June 2011:

http://www.guardian.co.uk/business/2011/jun/26/international-banking-regulator-rates

[140]            We’re living in a plutonomy, The Telegraph, 2 April 2006:

http://www.telegraph.co.uk/finance/2935809/Were-living-in-a-plutonomy.html

[141]            Robert Frank, Plutonomics, The Wall Street Journal, 8 January 2007:

http://blogs.wsj.com/wealth/2007/01/08/plutonomics/

[142]            Ibid.

[143]            Michael Lind, Is America a plutonomy? Salon, 5 October 2010:

http://www.salon.com/news/opinion/feature/2010/10/05/lind_america_plutonomy

[144]            Gus Lubin, Deutsche Bank Says The ‘Global Plutonomy’ Is Stronger Than Ever, And That Means 10X More Volatility, Business Insider, 17 February 2011:

http://www.businessinsider.com/ajay-kapur-plutonomy-2011-2

[145]            Tom Petruno, ‘The consumer isn’t overleveraged — the middle class is’, Los Angeles Times, 14 August 2009:

http://latimesblogs.latimes.com/money_co/2009/08/the-well-heeled-might-be-able-to-save-the-us-economy-from-a-long-period-of-dismal-consumer-spending—-if-only-we-dont.html

[146]            Ibid.

Debt Dynamite Dominoes: The Coming Financial Catastrophe

Debt Dynamite Dominoes: The Coming Financial Catastrophe
Assessing the Illusion of Recovery
Global Research, February 22, 2010

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.

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 STORY, LANDON THOMAS Jr. and NELSON D. SCHWARTZ, Wall St. Helped to Mask Debt Fueling Europe’s Crisis. The New York Times: February 13, 2010: http://www.nytimes.com/2010/02/14/business/global/14debt.html?adxnnl=1&adxnnlx=1266501631-XefUT62RSKhWj6xKSCX37Q

[48]      Ibid.

[49]      Sam Fleming and Kirsty Walker, The euro? It’s a great success, says Mandy as Greece turmoil sends single currency into worst ever crisis. The UK Daily Mail: February 12, 2010: http://www.dailymail.co.uk/news/article-1250094/Greece-debt-crisis-Britons-pay-3-5bn-bailout.html

[50]      Kate Connolly, Greek debt crisis: the view from Germany. The Guardian: February 11, 2010: http://www.guardian.co.uk/world/2010/feb/11/germany-greece-tax-debt-crisis

[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

[57]      David Uren, Bank for International Settlements warning over stimulus benefits. The Australian: June 30, 2009: http://www.theaustralian.com.au/news/bank-for-international-settlements-warning-over-stimulus-benefits/story-0-1225743622643

[58]      Edmund Conway, S&P’s warning to Britain marks the next stage of this global crisis. The Telegraph: May 23, 2009: http://www.telegraph.co.uk/finance/financetopics/recession/5373334/SandPs-warning-to-Britain-marks-the-next-stage-of-this-global-crisis.html

[59]      Robert Cookson and Sundeep Tucker, Economist warns of double-dip recession. The Financial Times: September 14, 2009: http://www.ft.com/cms/s/0/e6dd31f0-a133-11de-a88d-00144feabdc0.html

[60]      Patrick Jenkins, BIS head worried by complacency. The Financial Times: September 20, 2009: http://www.ft.com/cms/s/0/a7a04972-a60c-11de-8c92-00144feabdc0.html?catid=4&SID=google

[61]      Robert Cookson and Victor Mallet, Societal soul-searching casts shadow over big banks. The Financial Times: September 18, 2009: http://www.ft.com/cms/s/0/7721033c-a3ea-11de-9fed-00144feabdc0.html

[62]      Ambrose Evans-Pritchard, Derivatives still pose huge risk, says BIS. The Telegraph: September 13, 2009: http://www.telegraph.co.uk/finance/newsbysector/banksandfinance/6184496/Derivatives-still-pose-huge-risk-says-BIS.html

[63]      Ambrose Evans-Pritchard, Morgan Stanley fears UK sovereign debt crisis in 2010. The Telegraph: November 30, 2009: http://www.telegraph.co.uk/finance/economics/6693162/Morgan-Stanley-fears-UK-sovereign-debt-crisis-in-2010.html

[64]      Ibid.

[65]      Brett Arends, What a Sovereign-Debt Crisis Could Mean for You. The Wall Street Journal: December 18, 2009: http://online.wsj.com/article/SB10001424052748703323704574602030789251824.html

[66]      Edmund Conway, A 2010 sovereign debt crisis could still cause UK banking chaos. The Telegraph: January 4, 2010: http://www.telegraph.co.uk/finance/economics/6928164/A-2010-sovereign-debt-crisis-could-still-cause-UK-banking-chaos.html

[67]      Edmund Conway, ‘Significant chance’ of second financial crisis, warns World Economic Forum. The Telegraph: January 14, 2010: http://www.telegraph.co.uk/finance/financetopics/davos/6990433/Significant-chance-of-second-financial-crisis-warns-World-Economic-Forum.html

[68]      Nouriel Roubini and Arpitha Bykere, The Coming Sovereign Debt Crisis. Forbes: January 14, 2010: http://www.forbes.com/2010/01/13/sovereign-debt-crisis-opinions-colummnists-nouriel-roubini-arpitha-bykere.html

[69]      Niall Ferguson, A Greek crisis is coming to America. The Financial Times: February 10, 2010: http://www.ft.com/cms/s/0/f90bca10-1679-11df-bf44-00144feab49a.html

[70]      Indira A.R. Lakshmanan, Clinton Urges China to Keep Buying U.S. Treasury Securities. Bloomberg: February 22, 2009: http://www.bloomberg.com/apps/news?pid=20601070&sid=apSqGtcNsqSY

[71]      Agencies, China to keep buying US Treasuries: central banker. China Daily: March 23, 2009: http://www.chinadaily.com.cn/bizchina/2009-03/23/content_7606971.htm

[72]      Jonathan Stempel, Buffett says U.S. Treasury bubble one for the ages. Reuters: February 28, 2009: http://uk.reuters.com/article/idUKTRE51R1Q720090228

[73]      Paul R. La Monica, China still likes us … for now. CNN Money: September 16, 2009: http://money.cnn.com/2009/09/16/markets/thebuzz/index.htm

[74]      Alan Rappeport, Foreign demand falls for Treasuries. The Financial Times: February 17, 2010: http://www.ft.com/cms/s/0/f06667d2-1b63-11df-838f-00144feab49a.html

[75]      Barrie McKenna, Fed weighs sale of mortgage securities. CTV: February 17, 2010: http://www.ctv.ca/generic/generated/static/business/article1471824.html

[76]      Dale McFeatters, Fed Plans to Wind Down $2.2 Tril. Stake. Korea Times: February 15, 2010: http://www.koreatimes.co.kr/www/news/opinon/2010/02/160_60822.html

[77]      Alan Rappeport, Lone voice warns of debt threat to Fed. The Financial Times: February 16, 2010: http://www.ft.com/cms/s/0/c918b8dc-1b37-11df-953f-00144feab49a.html

[78]      FIABIC, US home prices the most vital indicator for turnaround. FIABIC Asia Pacific: January 19, 2009: http://www.fiabci-asiapacific.com/index.php?option=com_content&task=view&id=133&Itemid=41

Alexander Green, The National Debt: The Biggest Threat to Your Financial Future. Investment U: August 25, 2008: http://www.investmentu.com/IUEL/2008/August/the-national-debt.html

John Bellamy Foster and Fred Magdoff, Financial Implosion and Stagnation. Global Research: May 20, 2009: http://www.globalresearch.ca/index.php?context=va&aid=13692

[79]      Dawn Kopecki and Catherine Dodge, U.S. Rescue May Reach $23.7 Trillion, Barofsky Says (Update3). Bloomberg: July 20, 2009: http://www.bloomberg.com/apps/news?pid=20601087&sid=aY0tX8UysIaM

[80]      Chris Martenson, What the latest bailout plan means. ChrisMartenson.com: September 21, 2008: http://www.chrismartenson.com/blog/what-latest-bailout-plan-means/5149

[81]      Carroll Quigley, Tragedy and Hope: A History of the World in Our Time (New York: Macmillan Company, 1966), 324-325

[82]      Get ready for the phoenix. The Economist: Vol. 306: January 9, 1988: pages 9-10

[83]      Walden Siew, Banks face “new world order,” consolidation: report. Reuters: March 17, 2008: http://www.reuters.com/article/innovationNews/idUSN1743541720080317

[84]      Rupert Wright, The first barons of banking. The National: November 6, 2008: http://www.thenational.ae/article/20081106/BUSINESS/167536298/1005

[85]      Michael Lafferty, New world order in banking necessary after abject failure of present model. The Times Online: February 24, 2009: http://business.timesonline.co.uk/tol/business/management/article5792585.ece

[86]      Daniel Guerin, Fascism and Big Business. Monad Press, 1973: page 22

[87]      Daniel Guerin, Fascism and Big Business. Monad Press, 1973: page 23

[88]      Daniel Guerin, Fascism and Big Business. Monad Press, 1973: page 215

[89]      Daniel Guerin, Fascism and Big Business. Monad Press, 1973: page 224

[90]      Daniel Guerin, Fascism and Big Business. Monad Press, 1973: page 230

[91]      Daniel Guerin, Fascism and Big Business. Monad Press, 1973: page 239

[92]      NIC, Global Trends 2025: A Transformed World. The National Intelligence Council’s 2025 Project: November, 2008: pages 87:
http://www.dni.gov/nic/NIC_2025_project.html

[93]      Daniel Guerin, Fascism and Big Business. Monad Press, 1973: page 22

[94]      David Lyon, Theorizing surveillance: the panopticon and beyond. Willan Publishing, 2006: page 71

[95]      Richard Norton-Taylor, Revolution, flashmobs, and brain chips. A grim vision of the future. The Guardian: April 9, 2007:
http://www.guardian.co.uk/science/2007/apr/09/frontpagenews.news

[96]      KBR, KBR Awarded U.S. Department of Homeland Security Contingency Support Project for Emergency Support Services. Press Releases: 2006 Archive, January 24, 2006: http://www.kbr.com/news/2006/govnews_060124.aspx

[97]      Peter Dale Scott, The Road to 9/11: Wealth, Empire, and the Future of America. University of California Press: 2007, page 240

[98]      Peter Dale Scott, Homeland Security Contracts for Vast New Detention Camps. Pacific News Service: February 8, 2006:
http://news.pacificnews.org/news/view_article.html?article_id=eed74d9d44c30493706fe03f4c9b3a77

[99]      Lewis Seiler and Dan Hamburg, Rule by Fear or Rule by Law? The San Francisco Chronicle: February 4, 2008:

http://www.sfgate.com/cgi-bin/article.cgi?f=/c/a/2008/02/04/ED5OUPQJ7.DTL

[100]    David Pugliese, Canada-U.S. pact allows cross-border military activity. The  Vancouver Sun: February 23, 2008:

http://www.canada.com/vancouversun/news/story.html?id=ba99826e-f9b7-42a4-9b0a-f82134b92e7e

[101]    Bruce Ackerman, The White House Warden. Los Angeles Times: September 28, 2006: 

http://www.law.yale.edu/news/3531.htm

[102]    Patrick Leahy, Statement Of Sen. Patrick Leahy On Legislation To Repeal Changes To  The Insurrection Act. February 7, 2007:  http://leahy.senate.gov/press/200702/020707.html

[103]    The White House, National Security and Homeland Security Presidential Directive.  Office of the Press Secretary: May 9, 2007:

http://georgewbush-whitehouse.archives.gov/news/releases/2007/05/20070509-12.html

[104]    Gina Cavallaro, Brigade homeland tours start Oct. 1. The Army Times: September 30, 2008: http://www.armytimes.com/news/2008/09/army_homeland_090708w/

[105]    ERIC LICHTBLAU and JAMES RISEN, Power Shifts in Plan for Capital Calamity. The New York Times: July 27, 2009: http://www.nytimes.com/2009/07/28/us/politics/28continuity.html

[106]    Glen Greenwald, First steps taken to implement preventive detention, military commissions. Salon: July 21, 2009: http://www.salon.com/opinion/greenwald/2009/07/21/detention/index.html

Forging a “New World Order” Under a One World Government

Forging a “New World Order” Under a One World Government
Global Power and Global Government: Part 4
Global Research, August 13, 2009

This article is Part 4 in the series, “Global Power and Global Government,” published by Global Research.

Part 1: Global Power and Global Government: Evolution and Revolution of the Central Banking System
Part 2: Origins of the American Empire: Revolution, World Wars and World Order
Part 3: Controlling the Global Economy: Bilderberg, the Trilateral Commission and the Federal Reserve



Globalization and the New World Order

The 1990s saw the emergence of what was called the New World Order. This was a term that emerged in the early 1990s to describe a more unipolar world, addressing the collapse of the Soviet Union and the newfound role of the United States as the sole and unchallenged global power. The New World Order was meant to represent a new phase in the global political economy in which world authority rested in one place, and for the time, that place was to be the United States.

This era saw the continual expansion and formation of regional blocs, with the formation of the European Union, the signing of the North American Free Trade Agreement (NAFTA) and the creation of the WTO. The World Trade Organization was officially formed in 1995, as the successor to the General Agreements on Tariffs and Trade (GATT), which was formed in 1944 at the Bretton-Woods Conference. The WTO manages the international liberal trading order.

The first Director-General of the WTO was Peter D. Sutherland, who was previously the director general of GATT, former Attorney General of Ireland, and currently is Chairman of British Petroleum and Goldman Sachs International, as well as being special representative of the United Nations secretary-general for migrations. He is also a member of the board of the Royal Bank of Scotland Group, the Foundation Board of the World Economic Forum, goodwill ambassador to the United Nations Industrial Development Organisation, is a member of the Bilderberg Group, and is European Chairman of the Trilateral Commission, and he was presented with the Robert Schuman Medal for his work on European Integration and the David Rockefeller Award of the Trilateral Commission.[1] Clearly, the WTO was an organ of the western banking elite to be used as a tool in expanding and institutionalizing their control over world trade.

The European Superstate

In 1992, the Maastricht Treaty was signed, which officially formed the European Union in 1993. In 1994, the European Monetary Institute (EMI) was formed, with the European Central Bank (ECB) being formed in 1998, and the single European currency, the Euro, debuting in 1999. In 2004, the European Constitution was to be signed by all 25-member states of the EU, which was a treaty to establish a constitution for the entire European Union.

The Constitution was a move towards creating a European superstate, creating an EU foreign minister, and with it, coordinated foreign policy, with the EU taking over the seat of Britain on the UN Security Council, representing all EU member states, forcing the nations to “actively and unreservedly” follow an EU foreign policy; set out the framework to create an EU defence policy, as an appendage to or separate from NATO; the creation of a European Justice system, with the EU defining “minimum standards in defining offences and setting sentences,” and creates common asylum and immigration policy; and it would also hand over to the EU the power to “ensure co-ordination of economic and employment policies”; and EU law would supercede all law of the member states, thus making the member nations relative to mere provinces within a centralized federal government system.[2]

Vaclav Klaus, President of the Czech Republic, had stated that he feared that the concept of a stronger and more centralized European Union, as “the developments in the E.U. are really dangerous with regard to moving out of a free society and moving more and more toward masterminding control and regulation,” and that, “We [the Czech Republic] spent a half-century under communist eyes. We are more sensitive than some other West Europeans. We feel things, we see things, we touch things that we don’t like. For us, the European Union reminds us of COMECON [Moscow’s organization for economic control of the Soviet bloc].” He elaborated saying that the similarity with COMECON is not ideologically based, but in its structure, “The decisions are made not in your own country. For us who lived through the communist era, this is an issue.”[3]

The Constitution was largely written up by Valéry Giscard d’Estaing, former President of the French Republic from 1974 to 1981. Giscard d’Estaing also happens to be a member of the Bilderberg Group, the Trilateral Commission, and is also a close friend of Henry Kissinger, having co-authored papers with him. In 2005, French and Dutch voters answered the referendums in their countries, in which they rejected the EU Constitution, which required total unanimity in order to pass.

In 2007, a move was undertaken to introduce what was called the Lisbon Treaty, to be approved by all member-states. Giscard d’Estaing wrote an article for the Independent in which he stated that, “The difference between the original Constitution and the present Lisbon Treaty is one of approach, rather than content.” He described the process of creating the Lisbon Treaty: “It was the legal experts for the European Council who were charged with drafting the new text. They have not made any new suggestions. They have taken the original draft constitution, blown it apart into separate elements, and have then attached them, one by one, to existing treaties. The Treaty of Lisbon is thus a catalogue of amendments. It is unpenetrable for the public.” The main difference was that the word “constitution” was removed and banished from the text.[4]

The Telegraph reported that though the Treaty dropped the word “constitution,” it remained the same in “giving the EU the trappings of a global power and cutting national sovereignty.” It contained plans to create an EU President, who “will serve a two and half year term but unlike democratic heads of state he or she will be chosen by Europe’s leaders not by voters” and “will take over key international negotiations from national heads of government.” The Constitution’s “Foreign Minister” becomes the “High Representative,” who “will run a powerful EU diplomatic service and will be more important on the global and European stage than national foreign ministers.” It sets out to create an “Interior Ministry” which will “centralise databases holding fingerprints and DNA,” and “make EU legislation on new police and surveillance powers.” The ability for EU nations to use vetoes will end, and the Treaty “includes a clause hardwiring an EU “legal personality” and ascendancy over national courts.”[5]

One country in Europe has it written into its constitution that it requires a referendum on treaties, and that country is Ireland. In June of 2008, the Irish went to vote on the Treaty of Lisbon, after weeks and months of being badgered by EU politicians and Eurocrats explaining that the Irish “owe” Europe a “Yes” vote because of the benefits the EU had bestowed upon Ireland. History will show, however, that the Irish don’t take kindly to being bossed around and patronized, so when they went to the polls, “No” was on their lips and on their ballots. The Irish thus rejected the Lisbon Treaty.

North American Integration

The Canada-US Free Trade Agreement of 1989, was signed by President George HW Bush and Canadian Prime Minister Brian Mulroney. The FTA had devastating consequences for the people of Canada and the United States, while enriching the corporate and political elite. For example, GDP growth decreased, unemployment increased the most since the Great Depression,[6] and meanwhile, Brian Mulroney entered the corporate world, of which he now sits as a board member of Barrick Gold Corporation, as well as sitting on the International Advisory Board of the Council on Foreign Relations,[7] of which David Rockefeller remains on as Honorary Chairman.

In 1990, the private sector lobbying groups and think tanks began the promotion of the North American Free Trade Agreement (NAFTA) to expand the Canada-US Free Trade Agreement to include Mexico. NAFTA was signed by then Canadian Prime Minister Jean Chrétien, US President George H.W. Bush and Mexican President Carlos Salinas, in 1993, and went into effect in 1994. It was negotiated during a time in which Mexico was undergoing liberal economic reforms, so NAFTA had the effect of cementing those reforms in an “economic constitution for North America.”[8]

David Rockefeller played a role in the push for NAFTA. In 1965, he had founded the Council for Latin America (CLA), which, as he wrote in a 1966 article in Foreign Affairs, was to mobilize private enterprise throughout the hemisphere “to stimulate and support economic integration.” The CLA, David wrote, “provides an effective channel of cooperation between businessmen in the United States and their counterparts in the countries to the south. It also offers a means of continuing communication and consultation with the White House, the State Department and other agencies of our government.”[9]

The CLA later changed its name to the Council of the Americas (CoA) and maintains a very close relationship with the Americas Society, founded at the same time as the CLA, of which David Rockefeller remains to this day as Chairman of both organizations. As David wrote in his autobiography, Memoirs, in the lead up to NAFTA, the Council of the Americas sponsored a Forum of the Americas, which was attended by President George H.W. Bush, which resulted in the call for a “Western Hemisphere free trade area.”[10]

In 1993, David Rockefeller wrote an article for the Wall Street Journal, in the run up to NAFTA, in which he advocated for the signing of NAFTA as essential, describing it as a vital step on the road to fulfilling his life long work, and that, “Everything is in place — after 500 years — to build a true “new world” in the Western Hemisphere,” and further, that “I truly don’t think that “criminal” would be too strong a word to describe an action on our part, such as rejecting Nafta, that would so seriously jeopardize all the good that has been done — and remains to be done.”[11]

In 1994, Mexico entered into a financial crisis, often referred to as the Mexican peso crisis. The 1980s debt crisis, instigated by the Federal Reserve’s interest rate hikes on international loans, caused Mexico to default on its loans. The IMF had to enter the scene with its newly created Structural Adjustment Programs (SAPs) and reform Mexico’s economy along neoliberal economic policies.

In the late 1980s, “the United States accounted for 73 percent of Mexico’s foreign trade,”[12] and when NAFTA came into effect in 1994, it “immediately opened US and Canadian markets to 84 percent of Mexican exports.”[13] Mexico even became a member of the World Trade Organization (WTO). The peso crisis, which began at the end of 1994, with the ascension of Mexican President Zedillo, went into 1995, and the US organized a bailout worth $52 billion.[14] The bailout did not help the Mexican economy, as it was simply funneled into paying back loans to banks, primarily American banks, and the “crisis in 1995 was declared [by the IMF to be] over as soon as the banks and international lenders started to get repaid; but five years after the crisis, workers were just getting back to where they were beforehand.”[15]

In 2002, Robert Pastor, Director of the Center for North American Studies at the American University in Washington, D.C., prepared a report that he presented to the Trilateral Commission meeting of that same year. The report, A North American Community: A Modest Proposal to the Trilateral Commission, advocated a continuation of the policy of “deep integration” in North America, recommending, “a continental plan for infrastructure and transportation, a plan for harmonizing regulatory policies, a customs union, [and] a common currency.”[16] The report advocated the formation of a North American Community and Pastor wrote that, “a majority of the public in all three countries is prepared to join a larger North American country.”[17]

In 2003, prior to Paul Martin becoming Prime Minister of Canada, the Canadian Council of Chief Executives (CCCE), formerly the BCNI, published on their website, a press release in which they, “urged Paul Martin to take the lead in forging a new vision for North America.” Thomas d’Aquino, CEO of the Council, “urged that Mr. Martin champion the idea of a yearly summit of the leaders of Canada, Mexico and the United States in order to give common economic, social and security issues the priority they deserve in a continental, hemispheric and global context.” Among the signatories to this statement were all the Vice Chairmen of the CCCE, including David Emerson, who would go on to join Martin’s Cabinet.[18]

The CCCE then launched the North American Security and Prosperity Initiative, advocating “redefining borders, maximizing regulatory efficiencies, negotiation of a comprehensive resource security pact, reinvigorating the North American defence alliance, and creating a new institutional framework.”[19]

The Independent Task Force on the Future of North America was then launched in 2005, composed of an alliance and joint project between the CCCE in Canada, the Council on Foreign Relations (CFR) in the United States, and the Mexican Council on Foreign Relations in Mexico. A press release was given on March 14, 2005, in which it said, “The chairs and vice-chairs of the Independent Task Force on the Future of North America today issued a statement calling for a North American economic and security community by 2010.”[20]

On March 23, 2005, a mere nine days following the Task Force press release, the leaders of Canada, the US, and Mexico, (Paul Martin, George W. Bush, and Vicente Fox, respectively), announced “the establishment of the Security and Prosperity Partnership of North America,” which constituted a course of “action into a North American framework to confront security and economic challenges.”[21]

Within two months, the Independent Task Force on the Future of North America released their final report, Building a North American Community, proposing the continuation of “deep integration” into the formation of a North American Community, that “applauds the announced ‘Security and Prosperity Partnership of North America,’ but proposes a more ambitious vision of a new community by 2010 and specific recommendations on how to achieve it.”[22]

At the 2006 meeting of the SPP, the creation of a new group was announced, called the North American Competitiveness Council (NACC), made up of corporate leaders from all three countries who produce an annual report and advise the three governments on how to implement the SPP process of “deep integration”. The Secretariat in Canada is the CCCE, and the Secretariat of the group in the US is made up of the US Chamber of Commerce and the Council of the Americas.[23] The Council of the Americas was founded by David Rockefeller, of which he is still Honourary Chairman, and other board members include individuals from J.P. Morgan, Merck, McDonald’s, Ford, the Federal Reserve Bank of New York, General Electric, Chevron, Shell, IBM, ConocoPhillips, Citigroup, Microsoft, Pfizer, Wal-Mart, Exxon, General Motors, Merrill Lynch, Credit Suisse and the US Department of Treasury.[24]

The process of integration is still underway, and the formation of a North American Community is not far off, only to be followed by a North American Union, modeled on the structure of the European Union, with talk of a North American currency being formed in the future,[25] which was even proposed by Canada’s former Governor of the Bank of Canada.[26]

The New World Order in Theory

In a 1997 article of Foreign Affairs, the journal of the Council on Foreign Relations, Anne-Marie Slaughter discussed the theoretical foundations of the New World Order. Building on George HW Bush’s proclamation of a New World Order in 1991, Slaughter wrote that many saw this as “the promise of 1945 fulfilled, a world in which international institutions, led by the United Nations, guaranteed international peace and security with the active support of the world’s major powers.” However, this concept, she explained, was largely infeasible, as “It requires a centralized rule-making authority, a hierarchy of institutions, and universal membership.” Instead, she explains the emergence of what she called a “new medievalism” as opposed to liberal internationalism. “Where liberal internationalists see a need for international rules and institutions to solve states’ problems, the new medievalists proclaim the end of the nation-state,” where “The result is not world government, but global governance. If government denotes the formal exercise of power by established institutions, governance denotes cooperative problem- solving by a changing and often uncertain cast.”[27]

However, Slaughter challenges the assumptions of both the liberal internationalists and the new medievalists, and states that, “The state is not disappearing, it is disaggregating into its separate, functionally distinct parts. These parts—courts, regulatory agencies, executives, and even legislatures—are networking with their counterparts abroad, creating a dense web of relations that constitutes a new, transgovernmental order,” and that, “transgovernmentalism is rapidly becoming the most widespread and effective mode of international governance.”[28] Slaughter was Dean of the Woodrow Wilson School of Public and International Affairs at Princeton University from 2002-2009, is currently Director of Policy Planning for the United States Department of State, and has previously served on the board of the Council on Foreign Relations.

Reconstructing Class Structure Under a World Government

Bank of Canada Governor Mark Carney, a former executive with Goldman Sachs, stated in his speech at the International Economic Forum of the Americas, that, “Globalized product, capital, and labour markets lie at the heart of the New World Order to which we should aspire. However, the next wave of globalization needs to be more firmly grounded and its participants more responsible,” and that, “Within our economies, major stock adjustments in inventories, labour, and capital will be required.” It is worth quoting him at length in saying:

Although global demand and trade levels appear to be approaching bottom, and inventory and labour adjustments have already been substantial, there is still more to come. Unemployment will likely rise further across the G-7, with the sharpest increases still to come in those economies with the least-flexible labour markets. Uncertainty over the employment outlook will weigh on consumption in most major economies for some time. The capital stock adjustment process will take longer, and global investment growth is likely to remain negative well into 2010. This will serve as a significant drag on global growth and can be expected to reduce potential growth in most major economies.[29] [Emphasis added]

In terms of labour adjustments within the New World Order, there are some important and vital factors to take into account. Primary among these concerns is the notion of transnational classes. Capitalism largely functions through class divides, with the ruling class owning the means of production, which, as a class, is subject to its own hierarchy over which those that control and issue currencies preside.

In Western, industrialized nations, there has been a large middle class which thrives on consumption, enriching the upper class bourgeoisie, while the lower class, (or proletariat in Marxist terms), consists of the labour class. In non-western, industrialized nations, generally referred to as the “Third World”, “developing world” or the “Global South” (consisting of Latin America, Africa, and parts of Asia), there is a greater divide in terms in class lines, where there is a ruling class, and a labour class, largely remaining vacant of a vast, educated middle class. Class structures vary from country to country and region to region.

However, in the past several decades, the reality of class structures has been undergoing drastic changes, and with this, the structure of labour has changed. In the past few decades, a concurrent class restructuring has been taking place, in which the middle classes of the world descend into debt bondage while the upper classes of the world have began a process of transnationalizing. What we have witnessed and are witnessing with recent events, is the transnationalization of class structures, and with that, labour forces.

Social Constructivism

A fascinating theoretical school of thought within the field of Global Political Economy is that of Social Constructivism. Social Constructivists argue that, “The social and political world, including the world of international relations, is not a physical entity or material object that is outside human consciousness. Consequently, the study of international relations must focus on the ideas and beliefs that inform the actors on the international scene as well as the shared understandings between them.” Expanding upon this idea:

The international system is not something ‘out there’ like the solar system. It does not exist on its own. It exists only as an intersubjective awareness among people; in that sense the system is constituted by ideas, not by material forces. It is a human invention or creation not of a physical or material kind but of a purely intellectual and ideational kind. It is a set of ideas, a body of thought, a system of norms, which has been arranged by certain people at a particular time and place.

Examples of socially constructed structures within the global political economy are national borders, as they have no physical line, but are rather formed by a shared understanding between various actors as to where the border is. The nation itself is a social construct, as it has no physical, over-arching form, but is made up of a litany of shared values, ideas, concepts, institutions, beliefs and symbols. Thus, “If the thoughts and ideas that enter into the existence of international relations change, then the system itself will change as well, because the system consists in thoughts and ideas. That is the insight behind the oft-repeated phrase by constructivist Alexander Wendt: ‘anarchy is what states make of it’.”[30]

Class Structure and Social Constructivism

William I. Robinson and Jerry Harris write in Science & Society Journal, that, “One process central to capitalist globalization is transnational class formation, which has proceeded in step with the internationalization of capital and the global integration of national productive structures. Given the transnational integration of national economies, the mobility of capital and the global fragmentation and decentralization of accumulation circuits, class formation is progressively less tied to territoriality.”[31] They argued that a Transnational Capitalist Class (TCC) has emerged, “and that this TCC is a global ruling class. It is a ruling class because it controls the levers of an emergent transnational state apparatus and of global decision making.”[32] This class has no borders, and is composed of the technocratic, media, corporate, banking, social and political elite of the world.

As Jackson and Sorenson point out in relation to social constructivist theory, “If ‘anarchy is what states make of it’ there is nothing inevitable or unchangeable about world politics,” and that, “The existing system is a creation of states and if states change their conceptions of who they are, what their interests are, what they want, etc. then the situation will change accordingly.” As an example, they stated that states could decide “to reduce their sovereignty or even to give up their sovereignty. If that happened there would no longer be an international anarchy as we know it. Instead, there would be a brave new, non-anarchical world – perhaps one in which states were subordinate to a world government.”[33]

As Robinson and Harris explain in their essay, with the rise of the Transnational Capitalist Class (TCC), there is also a rise in the apparatus of a Transnational State (TNS), which is “an emerging network that comprises transformed and externally integrated national states, together with the supranational economic and political forums; it has not yet acquired any centralized institutional form.”[34] Among the economic apparatus of the TNS we see the IMF, World Bank, WTO and regional banks. On the political side we see the Group of 7, Group of 22, United Nations, OECD, and the European Union. This was further accelerated with the Trilateral Commission, “which brought together transnationalized fractions of the business, political, and intellectual elite in North America, Europe, and Japan.” Further, the World Economic Forum has made up an important part of this class, and, I might add, the Bilderberg Group. Robinson and Harris point out that, “Studies on building a global economy and transnational management structures flowed out of think tanks, university centers, and policy planning institutes in core countries.”[35]

The TNS apparatus has been a vital principle of organization and socialization for the transnational class, “as have world class universities, transnationally oriented think tanks, the leading bourgeois foundations, such as Harvard’s School of International Business, the Ford [and Rockefeller] and the Carnegie Foundations, [and] policy planning groups such as the Council on Foreign Relations.” These “elite planning groups are important forums for integrating class groups, developing new initiatives, collective strategies, policies and projects of class rule, and forging consensus and a political culture around these projects.”[36]

Robinson and Harris identify the World Economic Forum as “the most comprehensive transnational planning body of the TCC and the quintessential example of a truly global network binding together the TCC in a transnational civil society.”[37] I would take issue with this, and instead propose the Bilderberg Group, of which they make no mention in their article, as THE quintessential transnational planning body of the TCC, as it is composed of the elite of the elite, totally removed from public scrutiny, and acts as “a secretive global think-tank” of the world’s 130 most powerful individuals.[38]

Many Bilderberg critics will claim that the group acts as a “secret world government” or as the organization “that makes all the key decisions for the world.” However, this is not the case. Bilderberg is simply the most influential planning body, sitting atop a grand hierarchy of various planning bodies and institutions, and is itself a key part of the apparatus of the formation of a Transnational State, but is not, in and of itself, a “world government.” It is a global think tank, which holds the concept of a “world government” in high regard and often works to achieve these ends, but it should not be confused with being the end it seeks.

The economic crisis is perhaps the greatest “opportunity” ever given to the TCC in re-shaping the world order according to their designs, ideals and goals. Through destruction, comes creation; and for these high-placed individuals within the TCC, destruction is itself a form of creation.

In terms of reshaping labour and class structures, the economic crisis provides the ground on which a new global class structure will be built. A major problem for the Transnational Capitalist Class and the formation of a Transnational State, or world government, is the lack of continuity in class structures and labour markets throughout the world. A transnational ruling class, or “Superclass” as David Rothkopf referred to it in his book of the same name (and is, himself, a member of the Superclass), has emerged. It has no borders, yet has built a general continuity and consensus of goals among its members, albeit there are differences and conflicts within the class, but they are based upon the means of achieving the stated ends, rather than on the ends itself. There is not dissent within the ruling class on the aims of achieving a world governing body; the dissent is in how to achieve this, and in terms of what kind of structure, theoretical and philosophical leanings, and political orientation such a government would have.

To achieve these ends, however, all classes must be transnationalized, not simply the ruling class. The ruling class is the first class to be transnationalized, because transnationalization was the goal of the ruling classes based in the powerful Western European nations, (and later in the United States), that started the process of transnationalization or internationalization. Now that there is an established “Superclass” of a transnational composition, the other classes must follow suit. The middle class is targeted for elimination in this sense, because most of the world has no middle class, and to fully integrate and internationalize a middle class, this would require industrialization and development in places such as Africa, and certain places in Asia and Latin America, and would represent a massive threat to the Superclass, as it would be a valve through which much of their wealth and power would escape them. Their goal is not to lose their wealth and power to a transnational middle class, but rather to extinguish the notion of a middle class, and transnationalize a lower, uneducated, labour oriented class, through which they will secure ultimate wealth and power.

The economic crisis serves these ends, as whatever remaining wealth the middle class holds is in the process of being eliminated, and as the crisis progresses, or rather, regresses, and accelerates, the middle classes of the world will suffer, while a great percentage of lower classes of the world, poverty-stricken even prior to the crisis, will suffer the greatest, most probably leading to a massive reduction in population levels, particularly in the “developed” or “Third World” states.

Many would take issue with such a thesis as being an objective of the Transnational Capitalist Class, as capitalism needs a large population, specifically a middle class population, in order to have a market of consumers for their products. Though this is true with how we presently understand the capitalist system and structure, we must also take note that capitalism, itself, is always changing and redefining itself. Through a social constructivist perspective, which I would argue, is very apt in this analysis, such a notion is not inconceivable, as if the capitalist class were to redefine capitalism itself, capitalism itself would change.

It must be addressed that there would be a great many individuals within the TCC or Superclass (Rothkopf estimates the number at 6,000 individuals within the ruling class), who would take issue with eliminating their base for profit making, however, as a total restructuring of the capitalist system and global political economy as a whole is undertaken, the TCC itself is not immune to such drastic and rapid changes itself. In fact, it would be unimaginable to think that it would remain as it currently is.

Rothkopf explains that with 6,000 members of the Superclass, that equals roughly one member of the superclass for every 1 million people in the world. As the composition, class structures, and numbers of the world population drastically alter over the next years and decades, so too will the superclass itself. It too, will be subject to a “cleansing” so to speak, in which the big players will collapse and consolidate many of the smaller players.

The Monetary Structure of a Global Government

A Global Currency

Following the April 2009 G20 Summit, leaders issued a communiqué which set the groundwork for the creation of a global currency to replace the US dollar as the world reserve currency. The communiqué stated that, “We have agreed to support a general SDR allocation which will inject $250bn (£170bn) into the world economy and increase global liquidity.” SDRs, or Special Drawing Rights, are “a synthetic paper currency issued by the International Monetary Fund.” As the Telegraph reported, “the G20 leaders have activated the IMF’s power to create money and begin global “quantitative easing”. In doing so, they are putting a de facto world currency into play. It is outside the control of any sovereign body. Conspiracy theorists will love it.”[39]

In 1988, the Economist featured an article called “Get Ready for the Phoenix,” which said, “THIRTY years from now, Americans, Japanese, Europeans, and people in many other rich countries and some relatively poor ones will probably be paying for their shopping with the same currency. Prices will be quoted not in dollars, yen or D-marks but in, let’s say, the phoenix. The phoenix will be favoured by companies and shoppers because it will be more convenient than today’s national currencies, which by then will seem a quaint cause of much disruption to economic life in the late twentieth century.” The article, written in the wake of the 1987 stock market crash, stated that, “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.”[emphasis added][40]

Paul Volcker, former Governor of the Federal Reserve System, said in 2000, that, “If we are to have a truly global economy, a single world currency makes sense,” and a member of the Executive Board of the European Central Bank reaffirmed Volcker’s comment, stating that, “we might one day have a single world currency. Maybe European integration, in the same way as any other regional integration, could be seen as a step towards the ideal situation of a fully integrated world. If and when this world will see the light of day is impossible to say. However, what I can say is that this vision seems as impossible now to most of us as a European monetary union seemed 50 years ago, when the process of European integration started.”[41]

A Central Bank of the World

Jeffrey Garten has written several articles calling for the creation of a global central bank, or a “global fed.” Garten was former Dean of the Yale School of Management, former Undersecretary of Commerce for International Trade in the Clinton administration, previously served on the White House Council on International Economic Policy under the Nixon administration and on the policy planning staffs of Secretaries of State Henry Kissinger and Cyrus Vance of the Ford and Carter administrations, former Managing Director at Lehman Brothers, and is a member of the Council on Foreign Relations.

In 1998, he wrote an article for the New York Times stating that the world “needs a global central bank,” and that, “An independent central bank with responsibility for maintaining global financial stability is the only way out. No one else can do what is needed: inject more money into the system to spur growth, reduce the sky-high debts of emerging markets, and oversee the operations of shaky financial institutions. A global central bank could provide more money to the world economy when it is rapidly losing steam.”[42]

Following the outbreak of the current financial crisis, Garten wrote an article for the Financial Times in which he called for the “establishment of a Global Monetary Authority to oversee markets that have become borderless.”[43] In October of 2008, he wrote an article for Newsweek stating that, “leaders should begin laying the groundwork for establishing a global central bank.” He explained that, “There was a time when the U.S. Federal Reserve played this role [as governing financial authority of the world], as the prime financial institution of the world’s most powerful economy, overseeing the one global currency. But with the growth of capital markets, the rise of currencies like the euro and the emergence of powerful players such as China, the shift of wealth to Asia and the Persian Gulf and, of course, the deep-seated problems in the American economy itself, the Fed no longer has the capability to lead single-handedly.”[44]

Regionalism

Building upon the model of the European Union, the world is being divided into large continental regional blocs, with regional monetary systems and governments. This will make up the managed blocs of a global government, and mark a significant process in the “hard road to world order,” as Richard N. Gardner called it, in which national sovereignty is eroded piece by piece. Regionalism marks the current phase of the move to the formation of a global government. Friedrich List critiqued liberal cosmopolitanism, stating that economic integration had never preceded political integration, however the elites have and are successfully challenging this notion. In the New World Order, economic integration is preceding political integration into a world governance structure.

The European Union began as a series of free trade agreements, became a monetary union, and is in the process of being formed into a single continental superstate. North American integration began with a series of free trade agreements, defense and security agreements, and is in the process of moving towards monetary and bureaucratic integration into a North American Community. A Union and North American superstate are not far in the distance. A North American currency is openly discussed and proposed by leading think tanks, billionaire investors, as well as the Governor of the Bank of Canada. The likely name of such a currency is the Amero.[45]

Meanwhile, globally, markets are heavily integrating. In 2007, it was reported that the European Union and the United States were beginning the process of transatlantic economic integration.[46] In 2008, it was announced that, “Canadian and European officials say they plan to begin negotiating a massive agreement to integrate Canada’s economy with the 27 nations of the European Union,” under “deep economic integration negotiations,” and “The proposed pact would far exceed the scope of older agreements such as NAFTA.”[47] This, essentially, is a means of integrating with the North American Community before the Community is officially formed; an act of pre-emptive integration.

In 2007, the Council on Foreign Relations journal, Foreign Affairs, ran an article titled, “The End of National Currency.” Discussing the volatility of national currencies, the article stated that, “The right course is not to return to a mythical past of monetary sovereignty, with governments controlling local interest and exchange rates in blissful ignorance of the rest of the world. Governments must let go of the fatal notion that nationhood requires them to make and control the money used in their territory. National currencies and global markets simply do not mix; together they make a deadly brew of currency crises and geopolitical tension and create ready pretexts for damaging protectionism. In order to globalize safely, countries should abandon monetary nationalism and abolish unwanted currencies, the source of much of today’s instability.”

Further, “Monetary nationalism is simply incompatible with globalization. It has always been, even if this has only become apparent since the 1970s, when all the world’s governments rendered their currencies intrinsically worthless.” The author states that, “Since economic development outside the process of globalization is no longer possible, countries should abandon monetary nationalism. Governments should replace national currencies with the dollar or the euro or, in the case of Asia, collaborate to produce a new multinational currency over a comparably large and economically diversified area.”[48]

In 2008, the Union of South American Nations (UNASUR) was formed, “a regional body aimed at boosting economic and political integration in the region,”[49] which will “seek a common currency as part of the region’s integration efforts,” as well as a common central bank.[50]

The Gulf Cooperation Council, a regional bloc of Arab Middle Eastern governments, is pursuing economic integration in the form of a common central bank and a common currency.[51] Similarly, there has been much discussion of an Asian Monetary Union and East Asian economic integration, specifically being touted as a solution to the prevention of future economic crises in East Asia like that which hit it in 1997.[52] Integration would be modeled upon the East Asian regional block of ASEAN (Association of Southeast Asian Nations), and in 2008, “ASEAN bank deputy governors and financial deputy ministers have met in Vietnam’s central Da Nang city, discussing issues on the financial and monetary integration and cooperation in the region.”[53] Further, Africa is being organized as a regional bloc under the African Union, and is also pursuing regional economic integration, and has even set the agenda for the creation of a continental African central bank and the formation of a single African currency.[54]

In 2006, the Bank for International Settlements “suggested ditching many national currencies in favour of a small number of formal currency blocks based on the dollar, euro and renminbi or yen.”[55]

Constructing the Political Structure of a Global Government

Strobe Talbott, Deputy Secretary of State in the Clinton administration from 1994 to 2001, is also a member of the Council on Foreign Relations and the Trilateral Commission and is currently President of the Brookings Institution, a prominent US think tank. In 1992, before becoming Deputy Secretary of State, he wrote an article for Time Magazine originally titled, “The Birth of the Global Nation,” which has now, in the Time Magazine archives, been renamed “America Abroad.” In the article, he states that within the next 100 years, “nationhood as we know it will be obsolete; all states will recognize a single, global authority. A phrase briefly fashionable in the mid-20th century — “citizen of the world” — will have assumed real meaning by the end of the 21st.”

Interestingly, Talbott endorses the social constructivist perspective of nation-states and international order, stating that, “All countries are basically social arrangements, accommodations to changing circumstances. No matter how permanent and even sacred they may seem at any one time, in fact they are all artificial and temporary. Through the ages, there has been an overall trend toward larger units claiming sovereignty and, paradoxically, a gradual diminution of how much true sovereignty any one country actually has.”

He explained that empires “were a powerful force for obliterating natural and demographic barriers and forging connections among far-flung parts of the world,” and following that, “Empire eventually yielded to the nation-state,” and that, “The main goal driving the process of political expansion and consolidation was conquest. The big absorbed the small, the strong the weak. National might made international right. Such a world was in a more or less constant state of war.” Talbott states that, “perhaps national sovereignty wasn’t such a great idea after all.”

He continued, saying that, “it has taken the events in our own wondrous and terrible century to clinch the case for world government. With the advent of electricity, radio and air travel, the planet has become smaller than ever, its commercial life freer, its nations more interdependent and its conflicts bloodier.” Further, “Each world war inspired the creation of an international organization, the League of Nations in the 1920s and the United Nations in the ’40s.” He explained, “The plot thickened with the heavy-breathing arrival on the scene of a new species of ideology — expansionist totalitarianism — as perpetrated by the Nazis and the Soviets. It threatened the very idea of democracy and divided the world. [Thus] The advocacy of any kind of world government became highly suspect.” However, as Talbott points out, Soviet expansion led the way for NATO expansion, and “The cold war also saw the European Community pioneer the kind of regional cohesion that may pave the way for globalism.”

On top of that, “the free world formed multilateral financial institutions that depend on member states’ willingness to give up a degree of sovereignty. The International Monetary Fund can virtually dictate fiscal policies, even including how much tax a government should levy on its citizens. The General Agreement on Tariffs and Trade regulates how much duty a nation can charge on imports. These organizations can be seen as the protoministries of trade, finance and development for a united world.” In addressing crises, Talbott wrote that, “Globalization has also contributed to the spread of terrorism, drug trafficking, AIDS and environmental degradation. But because those threats are more than any one nation can cope with on its own, they constitute an incentive for international cooperation.” Thus, out of crisis, comes opportunity; out of chaos comes order.

In prescribing a solution, Talbott postulates that, “The best mechanism for democracy, whether at the level of the multinational state or that of the planet as a whole, is not an all-powerful Leviathan or centralized superstate, but a federation, a union of separate states that allocate certain powers to a central government while retaining many others for themselves.”[56]

In a 1974 issue of Foreign Affairs, Richard N. Gardner wrote about the formation of the New World Order. Gardner, a former American ambassador to the United Nations, Italy and Spain, is also a member of the Trilateral Commission. In his article, The Hard Road to World Order, Gardner wrote that, “The quest for a world structure that secures peace, advances human rights and provides the conditions for economic progress—for what is loosely called world order—has never seemed more frustrating but at the same time strangely hopeful.”[57] He explained that, “few people retain much confidence in the more ambitious strategies for world order that bad wide backing a generation ago—‘world federalism,’ ‘charter review,’ and “world peace through world law’.” Further, “The same considerations suggest the doubtful utility of bolding a [UN] Charter review conference.”[58]

Gardner wrote, “If instant world government, Charter review, and a greatly strengthened International Court do not provide the answers, what hope for progress is there? The answer will not satisfy those who seek simple solutions to complex problems, but it comes down essentially to this: The hope for the foreseeable future lies, not in building up a few ambitious central institutions of universal membership and general jurisdiction as was envisaged at the end of the last war, but rather in the much more decentralized, disorderly and pragmatic process of inventing or adapting institutions of limited jurisdiction and selected membership to deal with specific problems on a case-by-case basis, as the necessity for cooperation is perceived by the relevant nations.”

He then stated, “In short, the “house of world order” will have to be built from the bottom up rather than from the top down. It will look like a great “booming, buzzing confusion,” to use William James’ famous description of reality, but an end run around national sovereignty, eroding it piece by piece, will accomplish much more than the old-fashioned frontal assault.”[59]

In the 2001 issue of Foreign Affairs, Richard Falk and Andrew Strauss wrote an article titled, “Toward Global Parliament.” They wrote that, “International governance is no longer limited to such traditional fare as defining international borders, protecting diplomats, and proscribing the use of force. Many issues of global policy that directly affect citizens are now being shaped by the international system. Workers can lose their jobs as a result of decisions made at the WTO or within regional trade regimes.”[60] In 2006, a UN report stated that, “the nation-state is an old-fashioned concept that has no role to play in a modern globalised world.”[61]

Further, “As with citizen groups, elite business participation in the international system is becoming institutionalized. The best example is the World Economic Forum in Davos, Switzerland. In the 1980s, the WEF transformed itself from an organization devoted to humdrum management issues into a dynamic political forum. Once a year, a thousand of the world s most powerful business executives get together with another thousand of the world’s senior policymakers to participate in a week of roundtables and presentations. The WEF also provides ongoing arenas for discussion and recommendations on shaping global policy.” They continue in explaining that, “The Davos assembly and overlapping networks of corporate elites, such as the International Chamber of Commerce, have been successful in shaping compatible global policies. Their success has come in the expansion of international trade regimes, the modest regulation of capital markets, the dominance of neoliberal market philosophy, and the supportive collaboration of most governments, especially those of rich countries.”[62]

In explaining the purpose of a global parliament, essentially to address the “democratic deficit” created by international organizations, the authors wrote that, “Some business leaders would certainly oppose a global parliament because it would broaden popular decision-making and likely press for transnational regulations. But others are coming to believe that the democratic deficit must be closed by some sort of stakeholder accommodation. After all, many members of the managerial class who were initially hostile to such reform came to realize that the New Deal—or its social-democratic equivalent in Europe—was necessary to save capitalism. Many business leaders today similarly agree that democratization is necessary to make globalization politically acceptable throughout the world.” Essentially, its purpose would be to give globalization “grassroots acceptance and legitimacy.”[63]

David Rothkopf, a scholar at the Carnegie Endowment for International Peace, former Deputy Undersecretary of Commerce for International Trade in the Clinton administration, former managing director of Kissinger and Associates, and a member of the Council on Foreign Relations, recently wrote a book titled, Superclass: The Global Power Elite and the World They are Making. As a member of that “superclass,” his writing should provide a necessary insight into the construction of this “New World Order.” He states that, “In a world of global movements and threats that don’t present their passports at national borders, it is no longer possible for a nation-state acting alone to fulfill its portion of the social contract.” He wrote that, “progress will continue to be made,” however, it will be challenging, because it “undercuts many national and local power structures and cultural concepts that have foundations deep in the bedrock of human civilization, namely the notion of sovereignty.” He further wrote that, “Mechanisms of global governance are more achievable in today’s environment,” and that these mechanisms “are often creative with temporary solutions to urgent problems that cannot wait for the world to embrace a bigger and more controversial idea like real global government.”[64]

Jacques Attali, founder and former President of the European Bank for Reconstruction and Development, and economic adviser to French President Nicholas Sarkozy, interviewed on EuroNews, said that, “either we’re heading towards a world government or we’re going to put national issues first.” The interviewer stated that the idea of world government will frighten many people, to which Attali responded, “Indeed, that’s only to be expected, because it seems like a fantasy. But there is already global authority in many areas,” and that, “even if it’s hard to think of a European government at the moment, which is there, but very weak, Europe can at least press on its experience to the world. If they’re not capable of creating an economic framework along side a political framework, then they’re never going to do it on a global scale. And then the world economic model will break up, and we’ll be back to the Great Depression.”[65]

In December of 2008, the Financial Times published an article titled, “And Now for A World Government,” in which the author, former Bilderberg attendee, Gideon Rachman, wrote that, “for the first time in my life, I think the formation of some sort of world government is plausible,” and that, “A ‘world government’ would involve much more than co-operation between nations. It would be an entity with state-like characteristics, backed by a body of laws. The European Union has already set up a continental government for 27 countries, which could be a model. The EU has a supreme court, a currency, thousands of pages of law, a large civil service and the ability to deploy military force.”

He stated that, “it is increasingly clear that the most difficult issues facing national governments are international in nature: there is global warming, a global financial crisis and a ‘global war on terror’.” He wrote that the European model could “go global” and that a world government “could be done,” as “The financial crisis and climate change are pushing national governments towards global solutions, even in countries such as China and the US that are traditionally fierce guardians of national sovereignty.” He quoted an adviser to French President Nicolas Sarkozy as saying, “Global governance is just a euphemism for global government,” and that the “core of the international financial crisis is that we have global financial markets and no global rule of law.” However, Rachman states that any push towards a global government “will be a painful, slow process.” He then states that a key problem in this push can be explained with an example from the EU, which “has suffered a series of humiliating defeats in referendums, when plans for ‘ever closer union’ have been referred to the voters. In general, the Union has progressed fastest when far-reaching deals have been agreed by technocrats and politicians – and then pushed through without direct reference to the voters. International governance tends to be effective, only when it is anti-democratic. [Emphasis added]”[66]

In November of 2008, the United States National Intelligence Council (NIC), the US intelligence community’s “center for midterm and long-term strategic thinking,” released a report that it produced in collaboration with numerous think tanks, consulting firms, academic institutions and hundreds of other experts, among them are the Atlantic Council of the United States, the Wilson Center, RAND Corporation, the Brookings Institution, American Enterprise Institute, Texas A&M University, the Council on Foreign Relations and Chatham House in London.[67]

Outlining the global trends that the world will be going through up to the year 2025, the report states that the financial crisis “will require long-term efforts to establish a new international system.” It suggests that as the “China-model” for development becomes increasingly attractive, there may be a “decline in democratization” for emerging economies, authoritarian regimes, and “weak democracies frustrated by years of economic underperformance.” Further, the dollar will cease to be the global reserve currency, as there would likely be a “move away from the dollar.”[68]

Further, the dollar will become “something of a first among equals in a basket of currencies by 2025. This could occur suddenly in the wake of a crisis, or gradually with global rebalancing.”[69] The report elaborates on the construction of a new international system, stating that, “By 2025, nation-states will no longer be the only – and often not the most important – actors on the world stage and the ‘international system’ will have morphed to accommodate the new reality. But the transformation will be incomplete and uneven.” Further, it would be “unlikely to see an overarching, comprehensive, unitary approach to global governance. Current trends suggest that global governance in 2025 will be a patchwork of overlapping, often ad hoc and fragmented efforts, with shifting coalitions of member nations, international organizations, social movements, NGOs, philanthropic foundations, and companies.” It also notes that, “Most of the pressing transnational problems – including climate change, regulation of globalized financial markets, migration, failing states, crime networks, etc. – are unlikely to be effectively resolved by the actions of individual nation-states. The need for effective global governance will increase faster than existing mechanisms can respond.”[70]

The report discusses regionalism, and stated that, “Asian regionalism would have global implications, possibly sparking or reinforcing a trend toward three trade and financial clusters that could become quasi-blocs (North America, Europe, and East Asia).” These blocs “would have implications for the ability to achieve future global World Trade Organization agreements and regional clusters could compete in the setting of trans-regional product standards for IT, biotech, nanotech, intellectual property rights, and other ‘new economy’ products.”[71]

In discussing democracy and democratization, the report stated that, “advances are likely to slow and globalization will subject many recently democratized countries to increasing social and economic pressures that could undermine liberal institutions.” This is largely because “the better economic performance of many authoritarian governments could sow doubts among some about democracy as the best form of government.  The surveys we consulted indicated that many East Asians put greater emphasis on good management, including increasing standards of livings, than democracy.” Further, “even in many well-established democracies, 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.”[72] In other words, “well established democracies,” such as those in Western Europe and North America, will, through successive crises (climate, finance, war), erode and replace their democratic systems of government with totalitarian structures that are able to “take the bold actions necessary” to deal with “transnational challenges.”

David Rockefeller wrote in his book, Memoirs, that, “For more than a century ideological extremists at either end of the political spectrum have seized upon well-publicized incidents such as my encounter with Castro to attack the Rockefeller family for the inordinate influence they claim we wield over American political and economic institutions. Some even believe we are part of a secret cabal working against the best interests of the United States, characterizing my family and me as ‘internationalists’ and of conspiring with others around the world to build a more integrated global political and economic structure–one world, if you will. If that’s the charge, I stand guilty, and I am proud of it.” (Empahsis added) [73]

The Global Economic Crisis in Context

The current global economic crisis has its roots not in the Bush administration, which is linear and diluted thinking at best, but in the systematic nature of the global capitalist system. Crisis is not separate from capital; crisis is capitalist expansion. In addressing the foundations of the economic crisis, neo-Marxist theory can help explain much of the actions and functions that led to the crisis.

In 2006, Walden Bello wrote an article for Third World Quarterly, in which he explained that, “The crisis of globalisation and over-accumulation is one of the three central crises that are currently eroding US hegemony. The other two are the over-extension of US military power and the crisis of legitimacy of liberal democracy.” He explained that, “Monetary manipulation, via the high interest rate regime initiated by Federal Reserve Chief Paul Volcker in the late 1980s, while directed at fighting inflation, was also geared strategically at channeling global savings to the USA to fuel economic expansion. One key consequence of this momentous move was the Third World debt crisis of the early 1980s, which ended the boom of the economies of the South and led to their resubordination to the Northern capitalist centres.”[74]

The economic foundations of the current crisis were laid in the “Clinton globalist project.” As Bello explained, “The administration embraced globalisation as its ‘Grand Strategy’—that is, its fundamental foreign policy posture towards the world.” Further, “The dominant position of the USA allowed the liberal faction of the US capitalist class to act as a leading edge of a transnational ruling elite in the process of formation—a transnational elite alliance that could act to promote the comprehensive interest of the international capitalist class.”[75]

Bello then explained that, “the dominant dynamic of global capitalism during the Clinton period—one that was the source of its strength as well as its Achilles’ Heel—was not the movement of productive capital but the gyrations of finance capital.” The dominance of finance capital was “a result of the declining profitability of industry brought about by the crisis of overproduction. By 1997 profits in US industry had stopped growing. Financial speculation, or what one might conceptualise as the squeezing of value from already created value, became the most dynamic source of profitability.” This was termed “financialization,” and it had many components that composed its structure and led way for its dominance. Among these were the “Elimination of restrictions dating back to the 1930s that had created a Chinese Wall between investment banking and commercial banking in the USA opened up a new era of rapid consolidation in the US financial sector.”[76]

Specifically, this is in reference to the repealing of the Glass-Steagall Act, put in place in 1933 in response to the actions that created the Great Depression, which undertook banking reforms, specifically those designed to limit speculation. In 1987, the Federal Reserve Board voted to ease regulations under Glass-Steagall, after hearing “proposals from Citicorp, J.P. Morgan and Bankers Trust advocating the loosening of Glass-Steagall restrictions to allow banks to handle several underwriting businesses, including commercial paper, municipal revenue bonds, and mortgage-backed securities.” And, “In August 1987, Alan Greenspan — formerly a director of J.P. Morgan and a proponent of banking deregulation – [became] chairman of the Federal Reserve Board.” In 1989, “the Fed Board approve[d] an application by J.P. Morgan, Chase Manhattan, Bankers Trust, and Citicorp to expand the Glass-Steagall loophole to include dealing in debt and equity securities in addition to municipal securities and commercial paper.” In 1990, “J.P. Morgan [became] the first bank to receive permission from the Federal Reserve to underwrite securities.”

In 1998, the House of Representatives passed “legislation by a vote of 214 to 213 that allow[ed] for the merging of banks, securities firms, and insurance companies into huge financial conglomerates.” And in 1999, “After 12 attempts in 25 years, Congress finally repeal[ed] Glass-Steagall, rewarding financial companies for more than 20 years and $300 million worth of lobbying efforts.”[77]

It was in “the late 1990s, with the stock market surging to unimaginable heights, large banks merging with and swallowing up smaller banks, and a huge increase in banks having transnational branches, Wall Street and its many friends in congress wanted to eliminate the regulations that had been intended to protect investors and stabilize the financial system. Hence the Gramm-Leach-Bliley Act of 1999 repealed key parts of Glass-Steagall and the Bank Holding Act and allowed commercial and investment banks to merge, to offer home mortgage loans, sell securities and stocks, and offer insurance.”[78]

One of the architects of the repeal of Glass-Steagall was Clinton Treasury Secretary Robert Rubin. Rubin spent 26 years with Goldman Sachs before entering the Treasury. Robert Rubin worked closely with Alan Greenspan to oppose the regulation of derivatives, and was backed up by his Deputy Treasury Secretary, Lawrence Summers. Rubin, upon leaving the Treasury, went to work as an executive with Citigroup.[79] Robert Rubin is currently the Co-Chairman of the Council on Foreign Relations. Lawrence Summers was a former Chief Economist for the World Bank before being Deputy Treasury Secretary in the Clinton administration. He then became President of Harvard University, and is now Director of the White House National Economic Council in the Obama administration. The current Treasury Secretary, Timothy Geithner, was former President of the Federal Reserve Bank of New York, and is also a Robert Rubin protégé.

The Clinton years saw the rise of derivatives, which are financial instruments (or contracts), the prices of which are derived from one or more underlying assets, indexes, or other items. The value of a derivative changes as the value of the underlying asset changes. They are used to hedge risks but also as instruments of speculation. Derivatives, “which monetised and traded risk in the exchange of a whole range of commodities,” are a key factor that led to the economic crisis.

Another cause of the crisis was “The creation of massive consumer credit to fuel consumption, with much of the source of this capital coming from foreign investors,” which “created a dangerous gap between the consumers’ debt and their income, opening up the possibility of consumer collapse or default that would carry away both consumers and their creditors.” Further, the stock market’s role in driving growth played a part in paving the way for a financial crisis. “Stock market activity drove, in particular, the so-called technology sector, creating a condition of ‘virtual capitalism’ whose dynamics were based on the expectation of future profitability rather than on current performance, which was the iron rule in the ‘real economy’.”[80]

The Federal Reserve, under Alan Greenspan, initially created the dot-com bubble, providing liquidity for speculation into the stock market and “virtual capitalism,”[81] and when that dot-com bubble burst, as all bubbles do, Greenspan and the Fed created the housing bubble by cutting interests rates and offering more Adjustable Rate Mortgages (AMRs), with Fannie Mae and Freddie Mac encouraging banks to make the high-risk loans.[82]

Speculation had proven itself to be a powerful weapon of finance capital. In the 1990s, this was first exemplified by “a speculative attack on the peso that had investors in panic cashing their pesos for dollars, leading to the devaluation and collapse of the Mexican economy in 1994,” and later in “East Asia in 1997. One hundred billion dollars in speculative capital flooded into the region between 1994 and 1997 as countries liberalised their capital accounts.” This speculative money flowed into real estate and the stock market, which resulted in over-investment, and “Smelling crisis in the air, hedge funds and other speculators targeted the Thai baht, Korean won and other currencies, triggering a massive financial panic that led to the drastic devaluation of these currencies and laid low Asia’s tiger economies. In a few short weeks in the summer of 1997 some $100 billion rushed out of the Asian economies, leading to a drastic reversal of the sizzling growth that had marked those economies in the preceding decade. In less than a month, some 21 million Indonesians and one million Thais found themselves thrust under the poverty line.”[83] This was known as the East Asian Financial Crisis.

This crisis “helped precipitate the Russian financial crisis in 1998, as well as financial troubles in Brazil and Argentina that contributed to the spectacular unraveling of Argentina’s economy in 2001 and 2002, when the economy that had distinguished itself as the most faithful follower of the IMF’s prescriptions of trade and financial liberalisation found itself forced to declare a default on $100 billion of its $140 billion external debt.”[84]

The current crisis is not over. The parallels between the current crisis and the Great Depression are frightening. This trend of building speculative bubbles is reminiscent of the 1920s stock market speculation-driven bubble; built by the Federal Reserve, which eased interest rates, provided liquidity to the banks and actively encouraged speculation. Bubbles that were created then burst.

In 1932, Congressman Louis T. McFadden stated before the Congress that the Federal Reserve banks are not government agencies, but “are private credit monopolies which prey upon the people of the United States for the benefit of themselves and their foreign customers; foreign and domestic speculators and swindlers; and rich and predatory money lenders.”[85] Following the creation of the Fed in 1913, Congressman Charles A. Lindbergh said, “From now on, depressions will be scientifically created.” Indeed, he was right. The current crisis, likely leading to a Great Depression, is being used as the primary means through which a global government is being constructed.

In 2007, UK Prime Minister Gordon Brown called for a new world order in reforming the UN, World Bank, IMF and G7.[86] When the bank Bear Stearns collapsed, due to its heavy participation in the mortgage securities market, the Federal Reserve purchased the bank for JP Morgan Chase, whose CEO sits on the board of the New York Federal Reserve Bank. Shortly after this action, a major financial firm released a report saying that banks face a “new world order” of “consolidation and acquisitions.”[87]

In October of 2008, Gordon Brown said that we “must have a new Bretton Woods – building a new international financial architecture for the years ahead.” He continued in saying that, “we must now reform the international financial system around the agreed principles of transparency, integrity, responsibility, good housekeeping and co-operation across borders.” An article in the Telegraph reported that Gordon Brown would want “to see the IMF reformed to become a ‘global central bank’ closely monitoring the international economy and financial system.”[88] In an op-ed for the Washington Post, Gordon Brown wrote that the “new Bretton Woods” should build upon the concept of  “global governance.”[89] There were also calls for a “global economic policeman,” perhaps in the form of the Bank for International Settlements (BIS).[90] In November of 2008, it was reported that Baron David de 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.”[91]

Out of the ashes of the financial crisis, a new world order will emerge in constructing a global government.

Notes

[1]        Membership, Peter Sutherland. The Trilateral Commission: October 2007: http://www.trilateral.org/membship/bios/ps.htm

[2]        Daily Mail, EU Constitution – the main points. The Daily Mail: June 19, 2004: http://www.dailymail.co.uk/news/article-307249/EU-Constitution–main-points.html

[3]        Time, 10 Questions For Vaclav Klaus. Time Magazine: March 13, 2005: http://www.time.com/time/magazine/article/0,9171,1037613,00.html

[4]        Valéry Giscard d’Estaing, Valéry Giscard d’Estaing: The EU Treaty is the same as the Constitution. The Independent: October 30, 2007: http://www.independent.co.uk/opinion/commentators/valeacutery-giscard-destaing-the-eu-treaty-is-the-same-as-the-constitution-398286.html

[5]        Bruno Waterfield, Lisbon Treaty resurrects the defeated EU Constitution. The Telegraph: June 13, 2008: http://www.telegraph.co.uk/news/newstopics/eureferendum/2123045/EU-Treaty-Lisbon-Treaty-resurrected-defeated-EU-Constitution.html

[6]        Mel Hurtig, The Vanishing Country: Is It Too Late to Save Canada? (McClelland & Stewart Ltd., 2002), page 365

[7]        CFR, Brian Mulroney. About US, Leadership and Staff: International Advisory Board: http://www.cfr.org/bios/9841/brian_mulroney.html

[8]        Robert O’Brien and Marc Williams, Global Political Economy: Evolution and Dynamics, 2nd ed. (Palgrave Macmillan: 2007), page 226

[9]        David Rockefeller, What Private Enterprise Means to Latin America. Foreign Affairs: Vol. 44, No. 3 (April, 1966): page 411

[10]      David Rockefeller, Memoirs. New York: Random House: 2002: Pages 436-437

[11]      David Rockefeller, A hemisphere in the balance. The Wall Street Journal: October 1, 1993

[12]      Alexander Dawson, First World Dreams: Mexico Since 1989. Fernwood Books, 2006: Pages 8-9

[13]      Alexander Dawson, First World Dreams: Mexico Since 1989. Fernwood Books, 2006: Page 29

[14]      Alexander Dawson, First World Dreams: Mexico Since 1989. Fernwood Books, 2006: Page 120

[15]      Joseph Stiglitz, Globalization and its Discontents. W.W. Norton & Co.: 2003: page 121

[16]      Robert Pastor, A North American Community: A Modest Proposal to the Trilateral Commission. The Trilateral Commission: Toronto, Ontario: November 1-2, 2002: www.american.edu/internationalaffairs/cnas/PastorTrilateral.pdf : page 4

[17]      Robert Pastor, A North American Community: A Modest Proposal to the Trilateral Commission. The Trilateral Commission: Toronto, Ontario: November 1-2, 2002: www.american.edu/internationalaffairs/cnas/PastorTrilateral.pdf : page 6

[18]      News and Information, Paul Martin Urged to Take the Lead in Forging a New Vision for North American Cooperation. CCCE: November 5, 2003: http://www.ceocouncil.ca/en/view/?document_id=38&type_id=1

[19]      CCCE, North American Security and Prosperity. http://www.ceocouncil.ca/en/north/north.php

[20]      News and Information, Trinational Call for a North American Economic and Security Community by 2010. CCCE: March 14, 2005: http://www.ceocouncil.ca/en/view/?document_id=395

[21]      Office of the Press Secretary, Joint Statement by President Bush, President Fox, and Prime Minister Martin. The White House: March 23, 2005: http://www.whitehouse.gov/news/releases/2005/03/20050323-2.html

[22]      CFR, Building a North American Community. Independent Task Force on the Future of North America: May 2005: http://www.cfr.org/publication/8102/building_a_north_american_community.html

[23]      Issues Center, North American Competitiveness Council (NACC). US Chamber of Commerce: http://www.uschamber.com/issues/index/international/nacc.htm

[24]      CoA, Board of Directors. The Council of the Americas: http://coa.counciloftheamericas.org/page.php?k=bod

[25]      Herbert Grubel, Fix the Loonie. The Financial Post: January 18, 2008:

http://www.nationalpost.com/opinion/story.html?id=245165

Herbert Grubel, The Case for the Amero. The Fraser Institute: September 1, 1999:

http://www.fraserinstitute.org/Commerce.Web/publication_details.aspx?pubID=2512

Thomas Courchene and Richard Harris, From Fixing to Monetary Union: Options for  North American Currency Integration. C.D. Howe Institute, June 1999:

http://www.cdhowe.org/display.cfm?page=research-fiscal&year=1999

Consider a Continental Currency, Jarislowsky Says. The Globe and Mail: November  23, 2007:

http://www.theglobeandmail.com/servlet/story/LAC.20071123.RDOLLAR23/TPStory/?query=%22Steven%2BChase%22b

[26]      Barrie McKenna, Dodge Says Single Currency ‘Possible’. The Globe and Mail: May 21, 2007

[27]      Anne-Marie Slaughter, The Real New World Order. Foreign Affairs: September/October, 1997: pages 183-184

[28]      Anne-Marie Slaughter, The Real New World Order. Foreign Affairs: September/October, 1997: pages 184-185

[29]      Mark Carney, Remarks by Mark Carney, Governor of the Bank of Canada to the International Economic Forum of the Americas / Conference of Montreal. The Bank of Canada: June 11, 2009: http://www.bankofcanada.ca/en/speeches/2009/sp110609.html

[30]      Robert Jackson and Georg Sørensen, Introduction to International Relations: Theories and Approaches, Third Edition, OUP 2006: page 162

[31]      William I. Robinson and Jerry Harris, Towards a Global Ruling Class? Globalization and the Transnational Capitalist Class. Science & Society, Vol. 64, No. 1, Spring 2000: pages 11-12

[32]      William I. Robinson and Jerry Harris, Towards a Global Ruling Class? Globalization and the Transnational Capitalist Class. Science & Society, Vol. 64, No. 1, Spring 2000: page 12

[33]      Robert Jackson and Georg Sørensen, Introduction to International Relations: Theories and Approaches, Third Edition, OUP 2006: page 258

[34]      William I. Robinson and Jerry Harris, Towards a Global Ruling Class? Globalization and the Transnational Capitalist Class. Science & Society, Vol. 64, No. 1, Spring 2000: page 27

[35]      William I. Robinson and Jerry Harris, Towards a Global Ruling Class? Globalization and the Transnational Capitalist Class. Science & Society, Vol. 64, No. 1, Spring 2000: page 28

[36]      William I. Robinson and Jerry Harris, Towards a Global Ruling Class? Globalization and the Transnational Capitalist Class. Science & Society, Vol. 64, No. 1, Spring 2000: page 29

[37]      William I. Robinson and Jerry Harris, Towards a Global Ruling Class? Globalization and the Transnational Capitalist Class. Science & Society, Vol. 64, No. 1, Spring 2000: page 30

[38]      Glen McGregor, Secretive power brokers meeting coming to Ottawa? Ottawa Citizen: May 24, 2006: http://www.canada.com/topics/news/world/story.html?id=ff614eb8-02cc-41a3-a42d-30642def1421&k=62840

[39]      Ambrose Evans-Pritchard, The G20 moves the world a step closer to a global currency. The Telegraph: April 3, 2009: http://www.telegraph.co.uk/finance/comment/ambroseevans_pritchard/5096524/The-G20-moves-the-world-a-step-closer-to-a-global-currency.html

[40]      Get ready for the phoenix. The Economist: Vol. 306: January 9, 1988: pages 9-10

[41]      ECB, The euro and the dollar – new imperatives for policy co-ordination. Speeches and Interviews: September 18, 2000: http://www.ecb.int/press/key/date/2000/html/sp000918.en.html

[42]      Jeffrey E. Garten, Needed: A Fed for the World. The New York Times: September 23, 1998: http://www.nytimes.com/1998/09/23/opinion/needed-a-fed-for-the-world.html

[43]      Jeffrey Garten, Global authority can fill financial vacuum. The Financial Times: September 25, 2008: http://www.ft.com/cms/s/0/7caf543e-8b13-11dd-b634-0000779fd18c.html?nclick_check=1

[44]      Jeffrey Garten, We Need a Bank Of the World. Newsweek: October 25, 2008: http://www.newsweek.com/id/165772

[45]      Andrew Gavin Marshall, North-American Monetary Integration: Here Comes the Amero. Global Research: January 20, 2008: http://www.globalresearch.ca/index.php?context=va&aid=7854

[46]      Commission Européenne, EU and US to sign up to transatlantic economic integration plan at Washington Summit on 30 April. UN: April 27, 2007: http://www.eu-un.europa.eu/articles/fr/article_6987_fr.htm

[47]      Andrew Coyne, The crossroads of international trade. Macleans: September 18, 2008: http://www2.macleans.ca/tag/council-of-canadians/

[48]      Benn Steil, The End of National Currency. Foreign Affairs: Vol. 86, Issue 3, May/June 2007: pages 83-96

[49]      BBC, South America nations found union. BBC News: May 23, 2008: http://news.bbc.co.uk/2/hi/americas/7417896.stm

[50]      CNews, South American nations to seek common currency. China View: May 26, 2008: http://news.xinhuanet.com/english/2008-05/27/content_8260847.htm

[51]      AME Info, GCC: Full steam ahead to monetary union. September 19, 2005: http://www.ameinfo.com/67925.html

John Irish, GCC Agrees on Monetary Union but Signals Delay in Common Currency. Reuters: June 10, 2008: http://www.arabnews.com/?page=6&section=0&article=110727&d=10&m=6&y=2008

Forbes, TIMELINE-Gulf single currency deadline delayed beyond 2010. Forbes: March 23, 2009: http://www.forbes.com/feeds/afx/2009/03/24/afx6204462.html

Agencies, ‘GCC need not rush to form single currency’. Business 24/7: March 26, 2009: http://www.business24-7.ae/articles/2009/3/pages/25032009/03262009_4e19de908b174f04bfb3c37aec2f17b3.aspx

[52]      Barry Eichengreen, International Monetary Arrangements: Is There a Monetary Union in Asia’s Future? The Brookings Institution: Spring 1997: http://www.brookings.edu/articles/1997/spring_globaleconomics_eichengreen.aspx

atimes.com, After European now Asian Monetary Union? Asia Times Online: September 8, 2001: http://www.atimes.com/editor/CI08Ba01.html

ASEAN, China, Japan, SKorea, ASEAN Makes Moves for Asian Monetary Fund. Association of Southeast Asian Nations: May 6, 2005: http://www.aseansec.org/afp/115.htm

Reuven Glick, Does Europe’s Path to Monetary Union Provide Lessons for East Asia? Federal Reserve Bank of San Francisco: August 12, 2005: http://www.frbsf.org/publications/economics/letter/2005/el2005-19.html

AFP, Asian Monetary Fund may be needed to deal with future shocks. Channel News Asia: July 2, 2007: http://www.channelnewsasia.com/stories/afp_world_business/view/285700/1/.html

AFX News Limited, East Asia monetary union ‘feasible’ but political will lacking – ADB. Forbes: September 19, 2007: http://www.forbes.com/feeds/afx/2007/09/19/afx4133743.html

[53]      Lin Li, ASEAN discusses financial, monetary integration. China View: April 2, 2008: http://news.xinhuanet.com/english/2008-04/02/content_7906391.htm

[54]      Paul De Grauwe, Economics of Monetary Union. Oxford University Press, 2007: pages 109-110

Heather Milkiewicz and Paul R. Masson, Africa’s Economic Morass—Will a Common Currency Help? The Brookings Institution: July 2003: http://www.brookings.edu/papers/2003/07africa_masson.aspx

John Gahamanyi, Rwanda: African Central Bank Governors Discuss AU Financial Institutions. The New Times: August 23, 2008: http://allafrica.com/stories/200808230124.html

Eric Ombok, African Union, Nigeria Plan Accord on Central Bank. Bloomberg: March 2, 2009: http://www.bloomberg.com/apps/news?pid=20601116&sid=afoY1vOnEMLA&refer=africa

Ministry of Foreign Affairs, AFRICA IN THE QUEST FOR A COMMON CURRENCY. Republic of Kenya: March 2009: http://www.mfa.go.ke/mfacms/index.php?option=com_content&task=view&id=346&Itemid=62

[55]      Edmund Conway, UK policy blamed for soaring debt levels. The Telegraph: February 20, 2006: http://www.telegraph.co.uk/finance/2932605/UK-policy-blamed-for-soaring-debt-levels.html

[56]      Strobe Talbott, America Abroad. Time Magazine: July 20, 1992: http://www.time.com/time/magazine/article/0,9171,976015,00.html

[57]      Richard N. Gardner, The Hard Road to World Order. Foreign Affairs: April, 1974: page 556

[58]      Richard N. Gardner, The Hard Road to World Order. Foreign Affairs: April, 1974: page 557

[59]      Richard N. Gardner, The Hard Road to World Order. Foreign Affairs: April, 1974: page 558

[60]      Richard Falk and Andrew Strauss, Toward Global Parliament. Foreign Affairs: January/February, 2001: page 213

[61]      Philip Thornton, UN unveils plan to release untapped wealth of…$7 trillion (and solve the world’s problems at a stroke). The Independent: January 30, 2006: http://www.independent.co.uk/news/world/politics/un-unveils-plan-to-release-untapped-wealth-of7-trillion-and-solve-the-worlds-problems-at-a-stroke-525173.html

[62]      Richard Falk and Andrew Strauss, Toward Global Parliament. Foreign Affairs: January/February, 2001: page 215

[63]      Richard Falk and Andrew Strauss, Toward Global Parliament. Foreign Affairs: January/February, 2001: page 218

[64]      David Rothkopf, Superclass: The Global Power Elite and the World They are Making. (Toronto: Penguin Books, 2008), pages 315-316

[65]      EuroNews, European Elections. Jacques Attali: the euronews interview: April 6, 2009: http://www.euronews.net/2009/06/04/jacques-attali-the-euronews-interview/

[66]      Gideon Rachman, And now for a world government. The Financial Times: December 8, 2008: http://www.ft.com/cms/s/0/7a03e5b6-c541-11dd-b516-000077b07658.html

[67]      NIC, Global Trends 2025: A Transformed World. The National Intelligence Council’s 2025 Project: November, 2008: Acknowledgements: http://www.dni.gov/nic/NIC_2025_project.html

[68]      NIC, Global Trends 2025: A Transformed World. The National Intelligence Council’s 2025 Project: November, 2008: pages 11-12:  http://www.dni.gov/nic/NIC_2025_project.html

[69]      NIC, Global Trends 2025: A Transformed World. The National Intelligence Council’s 2025 Project: November, 2008: pages 94:  http://www.dni.gov/nic/NIC_2025_project.html

[70]      NIC, Global Trends 2025: A Transformed World. The National Intelligence Council’s 2025 Project: November, 2008: pages 81:  http://www.dni.gov/nic/NIC_2025_project.html

[71]      NIC, Global Trends 2025: A Transformed World. The National Intelligence Council’s 2025 Project: November, 2008: pages 83:  http://www.dni.gov/nic/NIC_2025_project.html

[72]      NIC, Global Trends 2025: A Transformed World. The National Intelligence Council’s 2025 Project: November, 2008: pages 87:  http://www.dni.gov/nic/NIC_2025_project.html

[73]      David Rockefeller, Memoirs. Random House, New York, 2002: page 405

[74]      Walden Bello, The Capitalist Conjuncture: Over-accumulation, Financial Crises, and the retreat from globalization. Third World Quarterly: Vol. 27, No. 8: 2006: pages 1346-1348

[75]      Walden Bello, The Capitalist Conjuncture: Over-accumulation, Financial Crises, and the retreat from globalization. Third World Quarterly: Vol. 27, No. 8: 2006: pages 1348-1349

[76]      Walden Bello, The Capitalist Conjuncture: Over-accumulation, Financial Crises, and the retreat from globalization. Third World Quarterly: Vol. 27, No. 8: 2006: page 1350

[77]      PBS, The Long Demise of Glass-Steagall. Frontline: http://www.pbs.org/wgbh/pages/frontline/shows/wallstreet/weill/demise.html

[78]      Robert Buzzanco, Bring Back Glass-Steagall? History News Network: October 21, 2008: http://hnn.us/articles/55548.html

[79]      PETER S. GOODMAN, Taking Hard New Look at a Greenspan Legacy. The New York Times: October 8, 2008: http://www.nytimes.com/2008/10/09/business/economy/09greenspan.html?_r=1

[80]      Walden Bello, The Capitalist Conjuncture: Over-accumulation, Financial Crises, and the retreat from globalization. Third World Quarterly: Vol. 27, No. 8: 2006: page 1350

[81]      Bill Virgin, et. al, The Insider: Dot-com boom just another of ‘Greenspan’s Bubbles’. Seattle PI: February 10, 2008: http://seattlepi.nwsource.com/business/350766_theinsider11.html?source=rss

[82]      Richard C. Cook, They Did It On Purpose: The Housing Bubble & Its Crash were Engineered by the US Government, the Fed & Wall Street. Global Research: October 23, 2008: http://www.globalresearch.ca/index.php?context=va&aid=10654

[83]      Walden Bello, The Capitalist Conjuncture: Over-accumulation, Financial Crises, and the retreat from globalization. Third World Quarterly: Vol. 27, No. 8: 2006: pages 1351-1352

[84]      Walden Bello, The Capitalist Conjuncture: Over-accumulation, Financial Crises, and the retreat from globalization. Third World Quarterly: Vol. 27, No. 8: 2006: page 1352

[85]      Louis T. McFadden, Congressional Record. June 10, 1932: pages 12595-12596 http://www.scribd.com/doc/16502353/Congressional-Record-June-10-1932-Louis-T-McFadden

[86]      Larry Elliott, Brown calls for overhaul of UN, World Bank and IMF. The Guardian: January 17, 2007: http://www.guardian.co.uk/business/2007/jan/17/globalisation.internationalaidanddevelopment

[87]      Andrea Ricci, Banks face “new world order,” consolidation: report. Reuters: March 17, 2008: http://www.reuters.com/article/innovationNews/idUSN1743541720080317

[88]      Robert Winnett, Financial Crisis: Gordon Brown calls for ‘new Bretton Woods’. The Telegraph: October 13, 2008: http://www.telegraph.co.uk/finance/financetopics/financialcrisis/3189517/Financial-Crisis-Gordon-Brown-calls-for-new-Bretton-Woods.html

[89]      Gordon Brown, Out of the Ashes. The Washington Post: October 17, 2008: http://www.washingtonpost.com/wp-dyn/content/article/2008/10/16/AR2008101603179.html

[90]      Gordon Rayner, Global financial crisis: does the world need a new banking ‘policeman’? The Telegraph: October 8, 2008: http://www.telegraph.co.uk/finance/financetopics/financialcrisis/3155563/Global-financial-crisis-does-the-world-need-a-new-banking-policeman.html

[91]      Rupert Wright, The first barons of banking. The National: November 6, 2008: http://www.thenational.ae/article/20081106/BUSINESS/167536298/1005

Global Power and Global Government: Evolution and Revolution of the Central Banking System

Global Power and Global Government: Evolution and Revolution of the Central Banking System
Part 1
Global Research, July 21, 2009

Introduction

Humanity is on the verge of entering into the most tumultuous period in our history. The prospects of a global depression, the likes of which have never been seen before; a truly global war, on a scale never before imagined; and societal collapse, for which nations of the world are building totalitarian police states to control populations; are increasing by the day. The major global trend forecasters are sounding the alarms on economic depression, war, a return to fascism and a total reorganization of society.   Through crisis, we are seeing the reorganization of the global political economy, and the transformation of capitalism into a totalitarian capitalist world government. Capitalism has never stayed the same through its history; it has always changed and will continue to do so. Its changes are explained and analyzed through political-economic theory, both mainstream theory and critical. The changes are undertaken over years, decades and centuries. The next phase of capitalism is one in which the world moves to a state-controlled economic system, much like China, of totalitarian capitalism.

The global political economy itself is being reorganized into a world government body, consisting of one center of global power where the socio-political-economic power of the world is centralized in one institution. This is not a conspiracy theory; it is a reality. Nor is this a subject confined to the realm of “internet conspiracy theorists,” but in fact, the concept of world government originates and evolves throughout the history of capitalism and the global political economy. Mainstream and critical political-economic theory has addressed the concept of world government for centuries.

The notion of a world government has such a long history, as the forces driving the world into such a structure intertwine with the history of the modern global political economy itself. The purpose of this report is to examine the history of the global political economy in taking steps toward forming a world government, in both theory and practice.

How did we get here and where are we going?

Why Study Theory?

Within the academic realm of Political Science, specifically the field of Global Political Economy (GPE), it is essential to understand the various theoretical perspectives of political economy so as to understand the actions and directions taken within the global political economy, and how capitalism has been and continues to be reorganized and altered. Theory provides the foundation upon which actors are understandable and actions are undertaken. As the political economist Robert Cox once stated, “Theory is always for someone and for some purpose.” It is important to understand and analyze the theoretical leanings of those making changes in the global political economy, in order to understand the changes being made, specifically the theoretical foundations of a world government. As well as this, it is important to examine critical theory in how it interprets both how and why a world government is being constructed.

Mercantilism

The history of political economic theory shows a continued fascination with the concept of constructing such a cosmopolitan or global community. The earliest forms of western Global Political Economy theorists lie in the early mercantilist period, and with the emergence of Liberal theory, following Adam Smith’s Wealth of Nations, mercantilist writers such as Friedrich List and Alexander Hamilton wrote critiques of the underlying Liberal concepts. List wrote in Political and Cosmopolitical Economy that Smith dispersed with the idea of a “national economy” in which nation’s determined economic conditions, and instead advocated replacing the “national” economy with a “cosmopolitical or world-wide economy.” List discusses the perspective of Jean-Baptiste Say (J.B. Say), a French liberal economist, saying that Say “openly demands that we should imagine the existence of a universal republic in order to comprehend the idea of general free trade.”[1]

List states that, “If, as the prevailing school [of political-economic thought] requires, we assume a universal union or confederation of nations as the guarantee for an everlasting peace, the principle of international free trade seems to be perfectly justified,” however, this prevailing thought “assumes the existence of a universal union and a state of perpetual peace, and deduces therefrom the great benefits of free trade. In this manner it confounds effects with causes.” List elaborates in explaining that, “Among the provinces and states which are already politically united, there exists a state of perpetual peace; from this political union originates their commercial union.” Further, “All examples which history can show are those in which the political union has led the way, and the commercial union has followed. Not a single instance can be adduced in which the latter has taken the lead, and the former has grown up from it.”[2]

It must be addressed that List is a mercantilist theorist. This means that he views the realm of the political and economic as an interacting realm in which they are intertwined and merged, however, the political realm remains above the economic, which is subject to the dictates of the political element. Liberal theorists believe that the political and economic realms are separate, and that they should be separated, so that political elements interact separately and without influence over the economic realm, which itself acts independently and separately of the political. This is the foundation for the ideas of the “free market” and the oft-quoted Adam Smith phrase, “the invisible hand of the free market,” which was only mentioned once in his entire volume of the Wealth of Nations. The ascension of liberal theorists marked a separation in the academic and theoretical studies, in which Political Economy was separated as a field, and saw the emergence of Political Science and Economics as separate studies.

As political economist Robert Cox stated, “Theory is always for someone and for some purpose.” The purpose of this separation was to compartmentalize academic thought and separate the realms of politics and economy, so as to better control both – as the banking interests, which dominated both the realms of politics and economics since the late 1600s, continued to view the world in terms of political-economic theory. It was a strategy of “divide and conquer,” in which theory and academia was divided in order to conquer and control thought on both sides. This separation continues to this day, as even the field of Political Economy is placed underneath and subjective to Political Science, whereas it would make more sense that Political Science and Economics would be under the umbrella of Political Economy. Again, compartmentalize thought and then the control of discussion and debate becomes much easier.

What List was arguing in his essay was a critique of the liberal concept of a cosmopolitical society, in which all nations are united in a world federation. Naturally, this was not the case in that era, it was an incorrect and dubious assumption on the part of liberal theorists. List explained that never before had economic or commercial interdependence and union led to a political union. List postulated that history showed that political union had to precede an economic union. However, List was writing in the first half of the 19th century, and history has changed the course of events and Political Economic theory. I would argue that the major banking interests, essentially made up of a dynasty of banking families (the Rothschilds, Warburgs, and later the Morgans and Rockefellers, among many others), decided to chart a different course, in which they would pursue a strategy in which economic union would be incrementally undertaken with the aim of constructing a political union to follow in its footsteps.

Central Banking

Thus, liberal economic theory came to the forefront, championed by the global hegemonic power of the day, Great Britain, which was firmly under the control of the banking dynasties. In 1694, the Bank of England was formed as a private central bank, which would issue the currency of the nation, lending it to the government and industry at interest, which would be paid back to the Bank of England’s shareholders, made up of these private banking dynasties.[3] The 16th to the 19th centuries was the period in which both the nation-state and capitalism emerged, soon followed by central banking in the late 1600s. This is when the origins of what was known as a “world economy” took place. Mercantilist economic theory dominated this period, in which the economy was secondary and submissive to the political structure of nations.

Liberal theorists rose in opposition to this. Adam Smith wrote the Wealth of Nations in 1776, the same year that the American colonies revolted against the British imperial forces in the country, and ultimately gained independence from the British Empire. Among many of the primary motivating factors for the Revolution were the British military presence in the American colonies, acting above the law; a heavy imposition of colonial taxes, particularly on tea and other imports from foreign nations such as France, in an effort to promote the mercantilist assumptions that the colony should only survive and trade with the metropole (imperial hegemon) – which extracts the resources of the nation in trade for material goods to that nation, creating a dependence upon the colonial power. Arguably one of the primary motivations for the Revolution was the control of currency by a foreign imperial power, with the ability to control inflation and devaluation, essentially controlling the entire economic conditions of the colony from abroad. The Founding Fathers of the United States understood the necessity of controlling one’s own currency if one was to preserve sovereignty and independence.

Following Britain’s humiliating defeat, which was aided by the French who supported the American revolt, European banking interests suffered a significant blow against their mercantilist expansion. Capitalism functions in that it constantly needs to expand and consume more. Central banking functions in a very similar, although much more dubious manner, in which it needs to expand its control over industry, nations and people through the expansion of debt, continually needing to bring more individuals, nations and industries under debt bondage. Debt is the source of all power and wealth for the central banking system – as they do not actually produce any tradable good, such as industry; nor do they provide any necessary service, such as government. Interest on debt is the source of income and authority for the central banking system, and thus, it needs to continually advance credit and expand debt. Thus, the loss of the American colonies as a source of expansionary credit and debt was a massive blow to their entrenched interests.

The European banking interests quickly learned their lesson regarding not falling under the imperial hubris of believing people of a given region or nation could never defeat imperial might and armies. Revolution had become a great threat to the entrenched capitalist, and particularly, banking interests.

Within a decade of the American Revolutionary War, which ended in 1783, another nation was going down the road of revolutionary zeal, in part inspired by the American example. However, this nation was no colony, but rather a mercantilist imperial power, and thus, its loss would be too great a loss to allow. In 1788, the French Monarchy was bankrupt, and as tensions grew between the increasingly desperate people of France and the aristocratic and particularly monarchic establishment, European bankers decided to pre-empt and co-opt the revolution. In 1788, prominent French bankers refused “to extend necessary short-term credit to the government,”[4] and they arranged to have shipments of grain and food to Paris “delayed” which triggered the hunger riots of the Parisians.[5] This sparked the Revolution, in which a new ruling class emerged, driven by violent oppression and political and actual terrorism. However, its violence grew, and with that, so too did discontentment with the Revolutionary Regime, and its stability and sustainability was in question. Thus, the bankers threw their weight behind a general in the Revolutionary Army named Napoleon, whom they entrusted to restore order. Napoleon then gave the bankers his support, and in 1800, created the Bank of France, the privately owned central bank of France, and gave the bankers authority over the Bank. The bankers owned its shares, and even Napoleon himself bought shares in the bank.[6]

The bankers thus sought to control commerce and government and restore order to their newly acquired and privately owned and operated empire. However, Napoleon continued with his war policies beyond the patience of the bankers, which had a negative impact upon commercial activities,[7] and Napoleon himself was interfering in the operations of the Bank of France and even declared that the Bank “belongs more to the Emperor than to the shareholders.”[8] With that, the bankers again shifted their influence, and remained through regime change.[9]

The Rothschilds ascended to the throne of international banking with the Battle of Waterloo. After having established banking houses in London, Paris, Frankfurt, Vienna and Naples, they profited off of all sides in the Napoleonic wars.[10] The British patriarch, Nathan Rothschild, was known for being the first with news in London, ahead of even the monarchy and the Parliament, and so everyone watched his moves on the stock market during the Battle of Waterloo. Following the battle, Nathan got the news that the British won over 24 hours before the government itself had news, and he quietly went into the London Stock Exchange and sold everything he had, implying to those watching that the British lost. A panic selling ensued, in which everyone sold stock, stock prices crumbled, and the market crashed. What resulted was that Rothschild then bought up the near-entire British stock market for pennies on the dollar, as when news arrived of the British victory at Waterloo, Rothschild’s newly acquired stocks soared in value, as did his fortune, and his rise as the pre-eminent economic figure in Britain.[11]

As Goergetown University History professor, Carroll Quigley wrote in his monumental Tragedy and Hope, “The merchant bankers of London had already at hand in 1810-1850 the Stock Exchange, the Bank of England, and the London money market,” and that:

In time they brought into their financial network the provincial banking centers, organized as commercial banks and savings banks, as well as insurance companies, to form all of these into a single financial system on an international scale which manipulated the quantity and flow of money so that they were able to influence, if not control, governments on one side and industries on the other.[12]

The period from 1815 to 1914 was known as the British Imperial Century, in which they adopted the liberal economic concepts of Adam Smith, and manipulated and distorted them for their own imperial ambitions. Mercantilism was still strong in practice, but rode under the banner of a liberal economic order, “free markets” and the “invisible hand.” The “invisible hand” was in fact, connected to a body made up of government and industry, molding the “free market” according to its designs, and the body was controlled by the brain, the central bank, the Bank of England. Markets were hardly “free” and the hand was visible to those who could see the rest of the body.

The Liberal Revolution

It was during this British imperial century that other nations, such as Germany and the United States, were pursuing mercantilist economic practices in order to protect their own nations from the British free-trade imperialism. It was in this context that mercantilist theorists such as Alexander Hamilton in the United States, and Friedrich List in Germany were writing in criticism of liberal economic theory.

Mercantilism was dominant in political-economic theory until the mid 19th century when the ‘liberal revolution’ manifested, largely in critical opposition to mercantilism. In liberal economic theory, the economic realm is autonomous and separate from the political realm, and functions according to its own logic. Within this theory, politics and economics, though separate spheres, are still connected, but remain independent of one another. Whereas mercantilists see the state as the primary actor in the global political economy, liberals see the individual (both producer and consumer) as being the major actor.

Mercantilists see the international arena as inherently conflictual, justifying their policies of colonialism and empire building in an international arena in which if one state does not colonize foreign lands and extract resources, another state will, and thus, will deprive the state that does not create an empire of resources and economic growth. In this sense, mercantilists view the world in terms of a zero-sum gain, in which the progress of one state requires the regression of another. Liberal theorists argue that the international arena, made up of individuals, constitutes a positive-sum gain, in which all individuals act according to self-interest, and in doing so, benefit everyone, and foster cooperation and interdependence. In this sense, the international arena is not inherently conflictual, but rather a cooperative and interdependent sphere in which order and stability is upheld by international regimes – such as the British liberal imperial order and the gold standard it instituted.

Where mercantilists view history as an amalgamation of conflicts and decisions made by states, liberal theorists view history as the sum of the unintended consequences of actions made by private individuals and activities. This implies almost an inherently natural progression of history – that it is not shaped by powerful forces in any designed or intended way, but is merely a natural response and reaction to the actions of individuals. This ties into the liberal concept of the natural state of a liberal economic order, bringing in the idea of the “invisible hand of the free market” which will determine economic activities.

Adam Smith’s notion of the “invisible hand” has been used to advance the idea that private individuals who seek personal wealth and gain through self-interest will unintentionally aid the interests of all of society. However, the “invisible hand” was mentioned merely once in Smith’s monumental Wealth of Nations, and was taken out of context. Smith was discussing how “Every individual naturally inclines to employ his capital in the manner in which it is likely to afford the greatest support to domestic industry, and to give revenue and employment to the greatest number of people of his own country.” In addition to employing “his capital in the support of domestic industry,” the private individual would “direct that industry that its produce may be of the greatest value.” Therefore, the individual “neither intends to promote the public interest, nor knows how much he is promoting it.” Smith explains that:

“By preferring the support of domestic to that of foreign industry, he intends only his own security; and by directing that industry in such a manner as its produce may be of the greatest value, he intends only his own gain, and he is in this, as in many other cases, led by an invisible hand to promote an end which was no part of his intention.”[13]

Smith had conceptualized the “invisible hand” as the “natural inclination” of an individual to promote domestic interests, yet the phrase has been manipulated to promote the concept of a “self regulating market” in which the less regulation and restrictions there are, the better all society will be, because industry will naturally benefit all people. The manipulation of this phrase has taken the notion of the “invisible hand” away from the actions of individuals and transferred it to promoting non-regulation of economic activities. That is a far cry from Smith’s contention.

Smith even stated in the Wealth of Nations that, “People of the same trade seldom meet together, even for merriment and diversion, but the conversation ends in a conspiracy against the public, or in some contrivance to raise prices. It is impossible indeed to prevent such meetings, by any law which either could be executed, or would be consistent with liberty and justice. But though the law cannot hinder people of the same trade from sometimes assembling together, it ought to do nothing to facilitate such assemblies; much less to render them necessary.”[14]

In discussing regulation regarding wages for workers and resolving equity issues between the employers, or “masters” and the labour class of “workers,” Smith explained that, “Whenever the legislature attempts to regulate the differences between masters and their workmen, its counselors are always the masters. When the regulation, therefore, is in favour of the workmen, it is always just and equitable; but it is sometimes otherwise when in favour of the masters.” Further, “When masters combine together in order to reduce the wages of their workmen, they commonly enter into a private bond or agreement, not to give more than a certain wage under a certain penalty. Were the workmen to enter into a contrary combination of the same kind, not to accept a certain wage under a certain penalty [such as a union], the law would punish them very severely; and if it dealt impartially, it would treat the masters in the same manner.”[15]

These quotes by Adam Smith tend to fly in the face of the common perceptions and usage of Smith’s ideas, proving that liberal economy in practice is a far cry from the intent of its original theorist.

In the 1870s, the notion of a “liberal economic order” was challenged as the major European empires undertook an incredible extension of their imperial presence across the globe, itself a mercantilist practice – the idea of obtaining colonies in order to extract its resources, create a captive market for the imperial nations manufactured goods, and deprive its economic competitors of access to that market. Between 1878 and 1913, European empires extended their control over much of the world, specifically with the Scramble for Africa, in which all of Africa, save Ethiopia, was colonized by European powers.

This “new imperialism,” as it was known, proliferated throughout Europe following the rapid expansion of banking throughout the continent, and the pre-eminence of international financiers over governments.[16] The growth of the continent-wide banking networks “fed the growth of colonial empires” as it stimulated a system in which “creating debt that then had to be serviced by the purchase of more infrastructure,” and expansion of territory.[17] This led European nations to undertake a massive imperial effort across much of the globe, to find and control foreign markets and expand their capital.

The Emergence of Marxism

In the 19th century, the rise of critical IPE (International/Global Political Economy) theories emerged in opposition to the growing dominance of Liberal IPE. The most profound of these criticisms arose from Karl Marx. Marxism, as Marx’s critical theory came to be known, put an extensive focus on the relations of classes within society, as the class that owns the means of production is the central and most powerful class, subverting the other classes to a submissive position. Marxists also view capitalism as being inherently exploitative. Within this theory, the political and economic realms are not seen as separate spheres of action, but are seen as intertwined and internally related. Within this theory, the purpose of the state is not to serve the interests of the broader population that inhabits it, but to secure, maintain and advance the interests of the capitalist class. Marxist theorists also put emphasis on the nature of war and conflict as being intrinsically related to the expansionary nature of capitalism, which is one of the primary roles of states in advancing the interests of the capitalist ruling class.

Marx defines what he perceives as capitalism: a system which is governed by capital, which is money that has been invested in order to generate more money; production, which is dominant within capitalist society, is designed for sale, not use – in that, it moves beyond subsistence and into what we refer to today as materialism and consumption; labour is commodified, thus people, through their labour, themselves become a tradable commodity; exchange occurs with money; ownership of the means of production is in the hands of the capitalist class; and competition between various capitalist forces is the logic of interaction.

Marx places a large focus on the circuit of capital, in how money transforms into capital. Money (M), is invested in purchasing a Commodity (C), and then into Labour Power (LP) and the Mean of Production (MP), which make up the Production circuit (P), which produces a new Commodity (C1), which is then sold, creating expanding money (M1), or earned profits. Capital, thus, is money that is invested into production. Marx postulates that the inherent exploitative nature of capitalism is most apparent in the Production circuit, specifically with Labour Power.

Diverging From Marx

M –> L –> I –> M1 –> LID –> DB

M = Money

L = Loan

I = Interest

M1 = New Money

LID = new money Loaned to debtor to pay Interest on Debt

DB = debtor falls into Debt Bondage; owned by creditor

Through the Marxist perspective of exploitation, there is no labour to exploit within the Circuit of Debt, so where does exploitation come into play? Exploitation comes into the process in that the debt (or loan) issued, is designed to exploit whoever the debtor is, be it an individual, a nation, or a corporation. Within this paradigm, class structure, although playing a significant part of the process of overall exploitation and exercise of power within the capitalist system is not the only, or arguably, even primary target of control and oppression within capitalism, as we know it. The target is the individual, the nation, and industry to the submission of the predatory nature of the central banking system.

The central banking system has, from its inception, acted in ways which monopolize industry (thus negating Adam Smith’s concept of a “free market” and “competition”); militarize nations (financing wars and conquest, imperialism); merging the interests of both the economic and political realms into a holistic ruling class (modeled upon the dual nature of a central bank itself – holding the authority and power of a government body, but representing the interests and submitting to the ownership of private individuals). Thus, the ruling class itself is a social construct which this tiny elite formed, hardly capable of the numbers to be termed a class, especially since class is most often defined in national terms, whereas this elite is international in nature.

The central bank of a nation finances monopoly industry and imperial states, both of which are created out of debt bondage to the central bank. Both the commercial/industrial elites and political elites merge their interests – the state will pursue imperial policies that have the effect of benefiting industry, while industry will support the building of a strong, powerful state (and provide a cozy job for the political elite upon leaving the public sector). This makes up the ruling class of a nation, the capitalists, or owners of the means of production, merging with the political rulers of the nation. One does not represent or overpower the other, but rather, both serve the interests and are owned through interest, by a tiny international elite.

One must ask: What would capitalism look like if it were not for the advent of the central banking system?

Accumulation by Dispossession

In discussing Marxist theory, I am not advocating a total support of its theoretical discussion and perspective. However, it is vital to address, as historically and presently, it has served as a very powerful source of criticism against the capitalist system and its importance cannot be underestimated. Having said that, it is also important to address in that it does, as a theory, identify many accurate and important aspects of how the capitalist system functions. For that reason, many of the critiques have been and are currently prescient and justified.

In Marxist theory, the nature of accumulation plays a very important part, in that it holds a dual character. One is known as accumulation as expanded reproduction, which is concerned with commodity markets and production (the circuit of capital), where money is made through the labour process. The other nature of accumulation is accumulation by dispossession, which is usually framed in terms of relations between capitalist and non-capitalist modes of production. This is accumulation derived from dispossessing someone of something. The Atlantic slave trade was an example of accumulation by dispossession, as Africans were dispossessed of their lives and freedom. Colonialism is another example, where resources are extracted, dispossessing the nation of its own resources.

Perhaps it would be helpful to expand upon Marx’s ideas of accumulation by dispossession in regards to the central banking system. Central banking, not falling into the circuit of capital, and thus, accumulation as expanded reproduction, better represents an example of accumulation by dispossession. Money is given in loans at interest, to which the debtor is never meant to fully repay, and is dispossessed of its freedom and wealth through interest payments and debt bondage. Debt is just another word for slavery, therefore, the central banking system itself, functions through a system of accumulation by dispossession.

However, conventional understanding of accumulation by dispossession describes it as an interaction between capitalist and non-capitalist modes of production, where the capitalist mode will dispossess the non-capitalist mode of production. Central banking, however, is the pinnacle of the capitalist system, and ultimately, the primary source and avenue of its power, so it can hardly be said to be an interaction between capitalist and non-capitalist modes, as it is an interaction between central banks and ALL modes of production which need money – including the entirety of the capitalist system. Thus, industry/commerce, governments/nations, and individuals/people, are dispossessed of their freedom through debt bondage. This cannot simply be predicated in terms of class warfare or class-centric theory, but rather, an assault against all individuals, individuality, and freedom, in any and all forms. It is within this context that class structures are created, so as to play off one against the other – to compartmentalize people into classes, and thus, better control and manipulate the masses. It is a strategy of dividing and conquering people. Class, including the upper capitalist class, is constructed in an effort to conform thought within each class, and thus direct collective action of that class accordingly. The freethinking individual is the target in all cases. Individuality is to be removed from commerce, government, and society as a whole.

The Communist Manifesto

In the Communist Manifesto, published in 1848, Marx proclaims in the opening subtitle that, “The history of all society hitherto is the history of class struggles.” However, if class itself is a construct of powerful individuals, albeit throughout human history, can it not be argued instead that the history of all society is the history of the struggle of the individual against collectivity and control? Class itself is a collective grouping designed to control a mass of people, whether it is upper class or lower class. Individuals are stifled within all classes, and thus, the history of class struggles itself, is a history of the struggle between the free thinking individual and the collective form of control.

Within the Communist Manifesto, Marx (and Engels) outlined an initial program for an “advanced” nation to undertake in order to create a Communist system, with ten major points. (1) Abolition of property in land and application of all rents of land to public purposes; (2) A heavy progressive or graduated income tax; (3) Abolition of all right of inheritance; (4) Confiscation of the property of all emigrants and rebels; (5) Centralization of credit in the hands of the state, by means of a national bank with state capital and an exclusive monopoly; (6) Centralization of the means of communication and transport in the hands of the state; (7) Extension of factories and instruments of production owned by the state – the bringing into cultivation of waste lands, and the improvement of the soil generally in accordance with a common plan; (8) Equal liability of all to labour – Establishment of industrial armies, especially for agriculture; (9) Combination of agriculture with manufacturing industries – gradual abolition of the distinction between town and country by a more equable distribution of the population over the country; and (10) Free education for all children in public schools – Abolition of children’s factory labour in its present form [and] Combination of education with industrial production.[18]

Of particular importance is number 5, in which a central bank is advocated. If nations have the ability to create and issue a currency through a Treasury department or even on a more regional or local level, why centralize and monopolize creation of a currency to a central bank? It should be noted that the recommendation was to have it centralized “in the hands of the state,” however, central banks are today, still widely perceived as being within the purview of governmental authority, while acting and functioning totally outside of it and above it. Imposing a tax on one’s income (2), also seems to promote the commodification of labour, in that instead of industry exploiting one’s labour and extracting a profit from it, that becomes the job of the state. All property would be owned by the state (1), and virtually the entire economy is subject to the control of the state. Even education, while free, is directed by the state. With the “Confiscation of the property of all emigrants and rebels,” what room is there for dissenting thought in such a society? Dissent would not be encouraged within the “free education” system. In fact, conformity would be enshrined. Is this not a form of “accumulation by dispossession” in which the individual is dispossessed of free thought and action and submitted to the will of and restricted thinking allowed by the state? Within this paradigm the state accumulates power and authority by dispossessing people of individuality in thought and expression.

The Communist Manifesto ends with the declaration of, “Workers of all countries, Unite!” This, in and of itself, promotes class divisions within society, placing focus on the need for an international mobilization of the global working class to rise up against the capitalist class. Marx outlines that any successful workers’ revolution must be international.[19] Thus, this promotes the cosmopolitical notion of an international community, at least in initial terms of a transnational class system. Essentially, Marx argues that as capitalism expands, what we will later term “Globalizes,” so too must the working class of the world “globalize” and “internationalize.” In a sense, this makes Marx, himself, an early globalist theorist, in promoting the concept of an international class uprising against the capitalist class. Ultimately, would this not simply replace the tyranny of one class for the tyranny of another? Throw out the capitalists and bring in the communists! Substituting one form of oppression for another is hardly a change in the right direction. In both systems, the individual suffers and free thought is stifled.

Though much Marxist criticism is extremely pointed in analyzing the functions and structure of the capitalist system, such theory itself, even though critical, must be critically examined.

Retaking America

The history of the United States from its founding through the 19th century to the early 20th century, was marked by a continual political battle revolving around the creation of a central bank of the United States. Mercantilists such as Alexander Hamilton, who was the first Treasury Secretary, were in favour of such a bank, and his advice won over George Washington, much to the dismay of Thomas Jefferson, who was a strong opponent to central banking. However, “[Alexander] Hamilton, believing that government must ally itself with the richest elements of society to make itself strong, proposed to Congress a series of laws, which it enacted, expressing this philosophy,” and that, “A Bank of the United States was set up as a partnership between the government and certain banking interests,”[20] which lasted until the charter expired in 1811.

Again, during the tenure of Andrew Jackson (1829-1837), the primary political struggle was with the entrenched financial interests both domestic and from abroad (namely Western Europe), on the issue of creating a central bank of the US. Andrew Jackson stood in firm opposition to such a bank, saying that, “the bank threatened the emerging order, hoarding too much economic power in too few hands,” and referred to it as “The Monster.”[21] Congress passed the bill allowing for the creation of a Second Bank of the United States, however, Andrew Jackson vetoed the bill, much to the dismay of the banking interests.

It was in the later half of the 1800s that “European financiers were in favor of an American Civil War that would return the United States to its colonial status, they admitted privately that they were not necessarily interested in preserving slavery,” as it had become unprofitable.[22] The Civil War was not based upon the liberation of slaves, it was, as Howard Zinn described it, a clash “of elites,” with the northern elite wanting “economic expansion – free land, free labor, a free market, a high protective tariff for manufacturers, [and] a bank of the United States. [Whereas] The slave interests opposed all that.”[23] The Civil War, which lasted from 1861 until 1865, resulted in hundreds of thousands of deaths, during which, “Congress also set up a national bank, putting the government into partnership with the banking interests, guaranteeing their profits.”[24]

As Lincoln himself stated:

The money powers prey on the nation in times of peace and conspire against it in times of adversity. The banking powers are more despotic than monarchy, more insolent than autocracy, more selfish than bureaucracy. They denounce as public enemies all who question their methods or throw light upon their crimes.

I have two great enemies, the Southern Army in front of me, and the bankers in the rear. Of the two, the one at my rear is my greatest foe. As a most undesirable consequence of the war, corporations have been enthroned, and an era of corruption in high places will follow. The money power will endeavor to prolong its reign by working upon the prejudices of the people until the wealth is aggregated in the hands of a few, and the Republic is destroyed.[25]

Throughout much of the 1800s and into the 1900s, the United States suffered several economic crises, one of the most significant of which was the Great Depression of 1873. As Howard Zinn explained:

The crisis was built into a system which was chaotic in its nature, in which only the very rich were secure. It was a system of periodic crises – 1837, 1857, 1873 (and later: 1893, 1907, 1919, 1929) – that wiped out small businesses and brought cold, hunger, and death to working people while the fortunes of the Astors, Vanderbilts, Rockefellers, Morgans, kept growing through war and peace, crisis and recovery. During the 1873 crisis, Carnegie was capturing the steel market, Rockefeller was wiping out his competitors in oil.[26]

Massive industrial consolidation by a few oligarchic elites was the rule of the day, as J.P. Morgan expanded total control over railroad and banking interests, and John D. Rockefeller took control of the oil market, and expanded into banking. Zinn explained that, “The imperial leader of the new oligarchy was the House of Morgan. In its operations it was ably assisted by the First National Bank of New York (directed by George F. Baker) and the National City Bank of New York (presided over by James Stillman, agent of the Rockefeller interests). Among them, these three men and their financial associates occupied 341 directorships in 112 corporations. The total resources of these corporations in 1912 was $22,245,000,000, more than the assessed value of all property in the twenty-two states and territories west of the Mississippi River.”[27]

These banking interests, particularly those of Morgan, were very much allied with European banking interests. On the European side, specifically in Britain, the elite were largely involved in the Scramble for Africa at this time. Infamous among them was Cecil Rhodes, who made his fortune in the diamond and gold mining in Africa, as “With financial support from Lord Rothschild and Alfred Beit, he was able to monopolize the diamond mines of South Africa as De Beers Consolidated Mines and to build up a great gold mining enterprise as Consolidated Gold Fields.”[28] Interestingly, “Rhodes could not have won his near-monopoly over South African diamond production without the assistance of his friends in the City of London: in particular, the Rothschild bank, at that time the biggest concentration of financial capital in the world.”[29] As historian Niall Ferguson explained, “It is usually assumed that Rhodes owned De Beers, but this was not the case. Nathaniel de Rothschild was a bigger shareholder than Rhodes himself; indeed, by 1899 the Rothschilds’ stake was twice that of Rhodes.”[30]

Cecil Rhodes was also known for his radical views regarding America, particularly in that he would “talk with total seriousness of ‘the ultimate recovery of the United States of America as an integral part of the British Empire’.”[31] Rhodes saw himself not simply as a money maker, but primarily as an “empire builder.” As historian Carroll Quigley explained, in 1891, three British elites met with the intent to create a secret society. The three men were Cecil Rhodes, William T. Stead, a prominent journalist of the day, and Reginald Baliol Brett, a “friend and confidant of Queen Victoria, and later to be the most influential adviser of King Edward VII and King George V.” Within this secret society, “real power was to be exercised by the leader, and a ‘Junta of Three.’ The leader was to be Rhodes, and the Junta was to be Stead, Brett, and Alfred Milner.”[32]

In 1901, Rhodes chose Milner as his successor within the society, of which the purpose was, “The extension of British rule throughout the world, the perfecting of a system of emigration from the United Kingdom and of colonization by British subjects of all lands wherein the means of livelihood are attainable by energy, labour, and enterprise . . . [with] the ultimate recovery of the United States of America as an integral part of a British Empire, the consolidation of the whole Empire, the inauguration of a system of Colonial Representation in the Imperial Parliament which may tend to weld together the disjointed members of the Empire, and finally the foundation of so great a power as to hereafter render wars impossible and promote the best interests of humanity.”[33] Essentially, it outlined a British-led cosmopolitical world order, one global system of governance under British hegemony. Among key players within this group were the Rothschilds and other banking interests.[34]

In the early 20th century, European and American banking interests achieved what they had desired for over a century within America, the creation of a privately owned central bank. It was created through collaboration of American and European bankers, primarily the Morgans, Rockefellers, Kuhn, Loebs and Warburgs.[35] After the 1907 banking panic in the US, instigated by JP Morgan, pressure was placed upon the American political establishment to create a “stable” banking system. In 1910, a secret meeting of financiers was held on Jekyll Island, where they planned for the “creation of a National Reserve Association with fifteen major regions, controlled by a board of commercial bankers but empowered by the federal government to act like a central bank – creating money and lending reserves to private banks.”[36] President Woodrow Wilson followed the plan almost exactly as outlined by the Wall Street financiers, and added to it the creation of a Federal Reserve Board in Washington, which the President would appoint.[37] The Federal Reserve, or Fed, “raised its own revenue, drafted its own operating budget and submitted neither to Congress,” while “the seven governors shared power with the presidents of the twelve Reserve Banks, each serving the private banks in its region,” and “the commercial banks held stock shares in each of the twelve Federal Reserve Banks.”[38]

The retaking of the United States by international banking interests was achieved with barely a whimper of opposition. Where the British Empire failed in taking the United States militarily, international bankers succeeded covertly through the banking system. The Federal Reserve also had the effect of cementing an alliance between New York and London bankers.[39]

Notes

[1]        George T. Crane, Abla Amawi, The Theoretical evolution of international political economy. Oxford University Press US, 1997: pages 48-49

[2]        George T. Crane, Abla Amawi, The Theoretical evolution of international political economy. Oxford University Press US, 1997: pages 50-51

[3]        John Kenneth Galbraith, Money: Whence it Came, Where it Went (Boston: Houghton Mifflin Company, 1975), 31

[4]        Donald Kagan, et. al., The Western Heritage. Volume C: Since 1789: Ninth edition: (Pearson Prentice Hall: 2007), 596

[5]        Curtis B. Dall, F.D.R. : My Exploited Father-in-Law. (Institute for Historical Review: 1982), 172

[6]        Carroll Quigley, Tragedy and Hope: A History of the World in Our Time (New York: Macmillan Company, 1966), 515

Robert Elgie and Helen Thompson, ed., The Politics of Central Banks (New York: Routledge, 1998), 97-98

[7]        Carroll Quigley, Tragedy and Hope: A History of the World in Our Time (New York: Macmillan Company, 1966), 516

[8]        Robert Elgie and Helen Thompson, ed., The Politics of Central Banks (New York: Routledge, 1998), 98-99

[9]        Carroll Quigley, Tragedy and Hope: A History of the World in Our Time (New York: Macmillan Company, 1966), 516

[10]      Sylvia Nasar, Masters of the Universe. The New York Times: January 23, 2000: http://query.nytimes.com/gst/fullpage.html?res=9C04E3D6123AF930A15752C0A9669C8B63

BBC News. The Family That Bankrolled Europe. BBC News: July 9, 1999

http://news.bbc.co.uk/1/hi/uk/389053.stm

[11]      New Scientist. Waterloo Windfall. New Scientist Magazine: Issue 2091, July 19, 1997

http://www.newscientist.com/article/mg15520913.300-waterloo-windfall.html

BBC News. The Making of a Dynasty: The Rothschilds. BBC News: January 28, 1998

http://news.bbc.co.uk/2/hi/uk_news/50997.stm

[12]      Carroll Quigley, Tragedy and Hope: A History of the World in Our Time (New York: Macmillan Company, 1966), 51

[13]      Adam Smith, The Wealth of Nations. U. of Chicago Edition, 1976: Vol. IV, ch. 2: 477

[14]      Adam Smith, An inquiry into the nature and causes of the wealth of nations. Regnery Gateway, 1998: page 152

[15]      Adam Smith, An inquiry into the nature and causes of the wealth of nations. Regnery Gateway, 1998: pages 166-167

[16]      Patricia Goldstone, Aaronsohn’s Maps: The Untold Story of the Man who Might Have Created Peace in the Middle East. (Harcourt Trade, 2007), 29-30

[17]      Patricia Goldstone, Aaronsohn’s Maps: The Untold Story of the Man who Might Have Created Peace in the Middle East. (Harcourt Trade, 2007), 31

[18]      Karl Marx, Friedrich Engels, Philip Gasper (ed.), The Communist manifesto: a road map to history’s most important political document. Haymarket Books, 2005: pages 70-71

[19]      Karl Marx, Friedrich Engels, Philip Gasper (ed.), The Communist manifesto: a road map to history’s most important political document. Haymarket Books, 2005: page 67

[20]      Howard Zinn, A People’s History of the United States. Harper Perennial: New York, 2003: page 101

[21]      Michael Waldman, My Fellow Americans: The Most Important Speeches of America’s Presidents, from George Washington to George W. Bush. Longman Publishing Group: 2004: page 25

[22]      Dr. Ellen Brown, Today We’re All Irish: Debt Serfdom Comes to America. Global Research: March 15, 2008: http://www.globalresearch.ca/index.php?context=viewArticle&code=BRO20080315&articleId=8349

[23]      Howard Zinn, A People’s History of the United States. Harper Perennial: New York, 2003: page 189

[24]      Howard Zinn, A People’s History of the United States. Harper Perennial: New York, 2003: page 238

[25]      Steve Bachman, Unheralded Warnings from the Founding Fathers to You. Gather: June 19, 2007:  http://www.gather.com/viewArticle.jsp?articleId=281474977031677

[26]      Howard Zinn, A People’s History of the United States. Harper Perennial: New York, 2003: page 242

[27]      Howard Zinn, A People’s History of the United States. Harper Perennial: New York, 2003: page 323

[28]      Carroll Quigley, Tragedy and Hope: A History of the World in Our Time (New York: The Macmillan Company, 1966), 130

[29]      Niall Ferguson, Empire: The Rise and Demise of the British World Order and the Lessons for Global Power (New York: Basic Books, 2004), 186

[30]      Niall Ferguson, Empire: The Rise and Demise of the British World Order and the Lessons for Global Power (New York: Basic Books, 2004), 186-187

[31]      Niall Ferguson, Empire: The Rise and Demise of the British World Order and the Lessons for Global Power (New York: Basic Books, 2004), 190

[32]      Carroll Quigley, The Anglo-American Establishment. GSG & Associates, 1981: page 3

[33]      Carroll Quigley, The Anglo-American Establishment. GSG & Associates, 1981: page 33

[34]      Carroll Quigley, The Anglo-American Establishment. GSG & Associates, 1981: page 34

[35]      Murray N. Rothbard, Wall Street, Banks, and American Foreign Policy. World Market Perspective: 1984: http://www.lewrockwell.com/rothbard/rothbard66.html

[36]      William Greider, Secrets of the Temple: How the Federal Reserve Runs the Country. (New York: Simon and Schuster, 1987), 276

[37]      William Greider, Secrets of the Temple: How the Federal Reserve Runs the Country. (New York: Simon and Schuster, 1987), 277

[38]      William Greider, Secrets of the Temple: How the Federal Reserve Runs the Country. (New York: Simon and Schuster, 1987), 50

[39]      William Engdahl, A Century of War: Anglo-American Oil Politics and the New World Order. (London: Pluto Press, 2004), 51