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“Crisis is an Opportunity”: Engineering a Global Depression to Create a Global Government

“Crisis is an Opportunity”: Engineering a Global Depression to Create a Global Government
Global Research, October 26, 2010
Problem, Reaction, Solution: “Crisis is an Opportunity”

In May of 2010, Dominique Strauss-Kahn, Managing Director of the IMF, stated that, “crisis is an opportunity,” and called for “a new global currency issued by a global central bank, with robust governance and institutional features,” and that the “global central bank could also serve as a lender of last resort.” However, he stated, “I fear we are still very far from that level of global collaboration.”[1] Well, perhaps not so far as it might seem.

The notion of global governance has taken an evolutionary path to the present day, with the principle global political and economic actors and institutions incrementally constructing the apparatus of a global government. In the modern world, global governance is an inter-lapping, intersecting, and intertwined web of international organizations, think tanks, multinational corporations, nations, NGOs, philanthropic foundations, military alliances, intelligence agencies, banks and interest groups. Globalization – a term which was popularized in the late 1980s to refer to the global spread of multinational corporations – has laid the principle ideological and institutional foundations for this process. Global social, economic and political integration do not occur at an equal pace; rather, economic integration and governance on a global level has and will continue to be ahead of the other sectors of human social interaction, in both the pace and degree of integration. In short, global economic governance will set the pace for social and political global governance to follow.

In 1885, Friedrich List, a German mercantilist economic theorist wrote that when it came to the integration of a “universal union or confederation of nations,” that “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] The twentieth century thus changed the historical trend, with undertaking economic integration – union – which is then followed by political integration. The best example of this is the European Union, which started out as a series of trade agreements (1951), eventually leading to an economic community (1957), followed by an economic union (1993), followed by a currency union (2002), and with the recent Lisbon Treaty, is now in the process of implementing the apparatus of a political union (2009). While this same regional governance model is occurring on a global scale in Africa, South America, East Asia, the Gulf Arab states, and with North American and Euro-American integration, it is simultaneously taking place on a global level. With the establishment of the World Trade Organization (WTO) in 1995, global trade systems were institutionally integrated, while the major global economic institutions of the IMF and World Bank, as well as others including the Bank for International Settlements (BIS), accelerated their management of the global economy.

The process of globalization has firmly established a globally integrated economic system, and now the global economic crisis is facilitating the implementation of global economic governance: to create the economic apparatus of a global government, including a global central bank and a global currency. This process is exponentially accelerated through economic crises, which create the need, desire, urgency and means of establishing a structure of global economic governance, purportedly under the guise of “preventing economic crises” and “maintaining” the global economy.

The same institutions and actors responsible for creating the crisis, are then given the job of determining the solution, and are then given the power and means of implementing it: problem, reaction, solution. They create a problem to incur a particular reaction for which they then propose a predetermined solution. When pressure needs to be applied to individual states that are not following dictates of the institutions of global governance, the market is turned against them in a barrage of economic warfare, often in the form of currency speculation and derivatives trading. The result of this economic warfare against a nation is that it must then turn to these same global institutions to come to its rescue: problem, reaction, solution.

The global economic crisis, really having only just begun, will in years to come spiral into a Great Global Debt Depression, plunging the entire world into the greatest economic catastrophe ever known. This will be the ultimate catalyst, the most pervasive crisis, and most commanding ‘opportunity’ to implement the formation of a global government. In 1988, the Economist ran an article entitled, “Get Ready for the Phoenix,” in which it postulated that by the year 2018, there will be a global currency, which it termed the “Phoenix.” The mention of a phoenix is not to go unnoticed, as symbolically, a phoenix dies and from its ashes a new phoenix emerges. It is the symbol of destruction as a form of creation; the ultimate incarnation of crisis as an opportunity. The article in the Economist acknowledged this meaning, with the idea that economic and monetary collapse will likely lead to the formation of a global currency, stating 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.” Further:

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… The phoenix would probably start as a cocktail of national currencies, just as the Special Drawing Right is today. In time, though, its value against national currencies would cease to matter, because people would choose it for its convenience and the stability of its purchasing power.[3]

This further reinforces the notion of crisis as an opportunity, and established the desire to form a global currency far before any crises that prompted official calls for one. In 2000, Paul Volcker, former Chairman of the Federal Reserve, stated that, “if we are to have a truly global economy, a single world currency makes sense,” and a European Central Bank executive stated that, “we might one day have a single world currency,” in “a step towards the ideal situation of a fully integrated world.”[4] In 1998, Jeffrey Garten, , former Undersecretary of Commerce for International Trade in the Clinton administration, former Managing Director at Lehman Brothers and member of the Council on Foreign Relations, wrote an article for the New York Times in which he called for the creation of a “global Fed” and said that, “the world needs an institution that has a hand on the economic rudder when the seas become stormy. It needs a global central bank.”[5]

The Global Economic Crisis As a Pretext for Global Governance

With the onset of the global economic crisis in 2008, powerful political and economic figures began making the call for constructing systems of global governance to manage and “prevent” crises. In September of 2008, in the midst of the financial crisis, Garten wrote an article for the Financial Times renewing his call for a global central bank, which he termed a “Global Monetary Authority.”[6] A month later, Garten wrote a piece for Newsweek saying that, “leaders should begin laying the groundwork for establishing a global central bank.”[7] In the same month, John Mack, CEO of Morgan Stanley said that, “it may take continued international coordination to fully unlock the credit markets and resolve the financial crisis, perhaps even by forming a new global body to oversee the process.”[8]

In October of 2008, then Prime Minister of the UK, Gordon Brown, called for “a new Bretton Woods – building a new international financial architecture for the years ahead,” and that he would want “to see the IMF reformed to become a ‘global central bank’ closely monitoring the international economy and financial system.”[9] In the same month, Brown wrote an op-ed for the Washington Post in which he said that this ‘new Bretton-Woods’ should work towards “global governance.”[10]

That month, the world’s central bankers met in Washington D.C., of which the principle question they faced was “whether it is time to establish a global economic ‘policeman’ to ensure the crash of 2008 can never be repeated,” and that any organization with the power to police the global economy would have to include representatives of every major country – a United Nations of economic regulation.” A former governor of the Bank of England stated that the answer might be in the form of the Bank for International Settlements (BIS), the central bank to the world’s central banks, which compared to the IMF, “is more independent and much better placed to deal with this if it is given the power to do so.”[11]

The first major summit of the G20 – the group of the 20 largest economies in the world – was in November of 2008, in the midst of the financial crisis. The G20 was to replace the G8 in the management of the global economy. The member nations are the United States, Canada, France, Germany, Italy, the United Kingdom, the European Union, Australia, Russia, Japan, South Korea, Turkey, Mexico, Indonesia, Saudi Arabia, Brazil, South Africa, Argentina, India and China. The World Bank and IMF also work directly with the G20, as does the Bank for International Settlements.

In March of 2009, Russia suggested that the G20 meeting in April should  “consider the possibility of creating a supra-national reserve currency or a ‘super-reserve currency’,” and to consider the IMF’s Special Drawing Rights (SDRs) in this capacity.[12] A week later, China’s central bank governor proposed the creation of a global currency controlled by the IMF, replacing the US dollar as the world reserve currency, also using the IMF’s SDRs as the reserve currency basket against which all other currencies would be fixed.[13]

Days after this proposal, the US Treasury Secretary Timothy Geithner, former President of the New York Federal Reserve Bank, told the Council on Foreign Relations that, in response to a question about the Chinese proposal, “we’re actually quite open to that suggestion.  But you should think of it as rather evolutionary, building on the current architectures, than — rather than — rather than moving us to global monetary union.”[14]

In late March a UN panel of economists recommended the creation of a new global currency reserve that would replace the US-dollar, and that it would be an “independently administered reserve currency.”[15]

Following the April 2009 G20 summit, “plans were announced for implementing the creation of a new global currency to replace the US dollar’s role as the world reserve currency.” Point 19 of the communiqué released by the G20 at the end of the Summit stated, “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.”[16] The Washington Post reported that the IMF is poised to transform “into a veritable United Nations for the global economy”:

It would have vastly expanded authority to act as a global banker to governments rich and poor. And with more flexibility to effectively print its own money, it would have the ability to inject liquidity into global markets in a way once limited to major central banks, including the U.S. Federal Reserve… the IMF is all but certain to take a central role in managing the world economy. As a result, Washington is poised to become the power center for global financial policy, much as the United Nations has long made New York the world center for diplomacy.[17]

In April of 2010, the IMF released a report in which it explained that while SDRs will aid in ‘stabilizing’ the world economy, “a more ambitious reform option would be to build on the previous ideas and develop, over time, a global currency,” but that this is “unlikely to materialize in the foreseeable future absent a dramatic shift in appetite for international cooperation.”[18] Of course, the exacerbation of a global economic crisis – a new great depression – could spur such a “dramatic shift in appetite for international cooperation.”

While the IMF is pushed to the forefront of the global currency agenda, the Bank for International Settlements (BIS) remains as the true authority in terms of ‘global governance’ overall. As the IMF’s magazine, Finance and Development, stated in 2009, “the Bank for International Settlements (BIS), established in 1930, is the central and the oldest focal point for coordination of global governance arrangements.”[19] Jean-Claude Trichet, President of the European Central Bank (ECB), gave a speech at the Council on Foreign Relations in April of 2010 in which he explained that, “the significant transformation of global governance that we are engineering today is illustrated by three examples”:

First, the emergence of the G20 as the prime group for global economic governance at the level of ministers, governors and heads of state or government. Second, the establishment of the Global Economy Meeting of central bank governors under the auspices of the BIS as the prime group for the governance of central bank cooperation. And third, the extension of Financial Stability Board membership to include all the systemic emerging market economies.[20]

In concluding his speech, Trichet emphasized that, “global governance is of the essence to improve decisively the resilience of the global financial system.”[21] The following month, Trichet spoke at the Bank of Korea, where he said, “central bank cooperation is part of a more general trend that is reshaping global governance, and which has been spurred by the global financial crisis,” and that, “it is therefore not surprising that the crisis has led to even better recognition of their increased economic importance and need for full integration into global governance.” Once again, Trichet identified the BIS and its “various fora” – such as the Global Economy Meeting and the Financial Stability Board – as the “main channel” for central bank cooperation.[22]

The Great Global Debt Depression

As commentators and governments praised the ‘economic recovery’, the world entered into a massive global debt crisis, a veritable ‘Great Global Debt Depression,’ in which the major industrialized nations of the world, having taken on excessive debts due to bailouts, stimulus packages and decades of imperial expenditures and war-mongering. The debt trap used to enslave the ‘global south’ has come home to roost. The first stage of the ‘Great Global Debt Depression’ began in Greece, where the country was so indebted that it needed to seek help in the form of an IMF ‘bailout’ simply to pay the interest on its debt. For nearly a decade, Greece’s government colluded with major Wall Street firms such as Goldman Sachs and J.P. Morgan Chase to hide its true debt in the derivatives market, so when a new government came to power in October of 2009, it inherited a debt twice as large as it had anticipated, at 300 billion euros.[23]

In early 2010, Greece sought a bailout from the European Union (European Central Bank – ECB) and the IMF in order to pay the annual interest fee on its debt. The ECB and IMF agreed to a loan in April.[24] Greece, however, had been pressured by both the EU and the IMF that in order to receive a loan, it must implement “fiscal austerity measures” in order to reduce its deficit, and also to convince “global markets” that it could reduce its deficit. Greece had implemented two austerity packages that included massive social spending cuts and increases in taxes. Yet, this seemed to not be enough for the EU, IMF or global markets.[25] As Greece was imposing ‘fiscal austerity’ and seeking international loans, ‘global markets’ had turned against the country, as derivatives – particularly Credit Default Swaps (CDS) – were being used to bet that Greece would default on its debt, thus plunging the country further into crisis. Many of the banks participating in this speculative assault were the very same ones that helped Greece hide its debt in the first place. Thus, if Greece defaults on its debt, the speculators who bet against Greece stand to profit, and as these trades become popular, it makes it more difficult for Greece to borrow the money it needs to pay its interest. As one expert explained, “It’s like buying fire insurance on your neighbor’s house — you create an incentive to burn down the house.”[26]

J.P. Morgan Chase, Goldman Sachs, and several other leading banks helped hide the debt for several nations across Europe, which all began to enter into a debt crisis.[27] Interestingly, banks rapidly expanded their use of the derivatives trade not only in Greece, but Spain and Portugal as well, “as worries about those countries’ debts moved markets around the world.” Subsequently, “European banks including the Swiss giants Credit Suisse and UBS, France’s Société Générale and BNP Paribas and Deutsche Bank of Germany have been among the heaviest buyers of swaps insurance.” The reason for this: “those countries are the most exposed. French banks hold $75.4 billion worth of Greek debt, followed by Swiss institutions, at $64 billion,” and “German banks’ exposure stands at $43.2 billion.”[28] J.P. Morgan Chase, Goldman Sachs, and other US banks are also participating in the derivatives assault against Greece, which may be “pushing Greece toward financial collapse.”[29] Thus, we have a situation in which major global banks helped governments acquire expansive debts (and hide it from their balance sheets), and then the countries enter into a debt crisis. As they impose fiscal austerity measures to reduce their deficits, and seek help from central banks and the IMF to pay their interest, these same global banks speculate against the debts, thus pushing the nations further into crisis, exacerbating the social crisis, and forcing further and more expansive ‘austerity measures.’ The interest payments on the debt are, as an added insult, to be paid to these same global banks, which hold most of the debt of these nations. In short, the debt crisis is amounting to a form of financial warfare and social genocide, implemented by the major global banks, the central banking system (which they control), and the international organizations that serve their interests.

A working paper issued by the Bank for International Settlements (BIS) in March of 2010 explained that the West is facing a massive debt crisis, and that the United Kingdom and United States – along with other nations such as Spain and Ireland – took on massive debt in the past three years, making the debt crises in Italy and Greece “comparatively small.”[30] Further, investors are expected “to demand a higher risk premium for holding the bonds issued by a highly indebted country.”[31] In other words, the BIS warned that speculators would likely undertake a ‘market’ assault against indebted nations, further exacerbating the debt crisis and increasing pressure to impose ‘fiscal austerity’, or commit ‘social genocide’. In September of 2009, the derivatives market had rebounded to $426 trillion, and continued to pose “major systemic risks” for the financial system.[32]

Nouriel Roubini, an economist who had predicted the 2008 financial crisis, warned in March of 2010 that, “the recent difficulties of Greece are part of the iceberg. Markets have already targeted Greece, Spain, Portugal, Great Britain, Ireland and Iceland. They could deal with other countries, including Japan and the United States.”[33] Renowned economist Kenneth Rogoff (who accurately predicted the 2008 economic crisis) had also warned that a global debt crisis is on the horizon, which “could set the scene for years of financial troubles.”[34]

In 2010, the World Economic Forum warned of the potential of a “full-scale sovereign fiscal crisis” – a global debt crisis – possibly accompanied by a second major financial crisis.[35] Jürgen Stark, an executive member of the European Central Bank warned in April of 2010 that, “We may already have entered into the next phase of the crisis: a sovereign debt crisis,” which could spread across the EU, to the U.K., United States, and Japan.[36] Economic historian (and Bilderberg participant) Niall Ferguson warned of a “Greek Crisis Coming to America,” and a “fiscal crisis of the western world,” which will spread from Greece, throughout Europe, and to the U.S. and Japan.[37]

Structural Adjustment in the West

As the nations of the West took on enormous debts by giving the banks money (effectively buying the bad debt of the banks), and with decades of imperialism building massive foreign debts, the West and notably America, are entering into a period in which they will be subjected to the same or similar forms of ‘structural adjustment’ as they have inflicted upon the rest of the world. With the G20 promising to impose “fiscal austerity,” public sector jobs will be lost, state-owned assets and infrastructure privatized, taxes raised, interest rates will soar (eventually), and liberalized markets will be expanded and institutionalized, not least so that major global banks will be able to profit off of the subsequent collapse of nations through the financial weapon of speculation. The middle classes will vanish and poverty will reign supreme, while the rich become immeasurably richer and more powerful. Naturally, people will rise up, take to the streets, protest, demonstrate, riot, even rebel and revolt. As sure as the people will resist, the state will repress with police, the military and the ‘Homeland Security State’ apparatus of surveillance and control. Make no mistake: this is the ‘Thirdworldization’ of the West: the ‘Post-Industrial Revolution.’

In early June of 2010, the G20 finance ministers and central bank governors met in Seoul, South Korea, in a meeting with significantly less media coverage than the later G20 leaders summit in Toronto, and significantly more importance to the state of the world economy. The communiqué released by the finance minister and central bankers following the summit stated that G20 nations needed to speed up the process of “fiscal consolidation” (see ‘fiscal austerity’).[38] The IMF presented a report at the meeting recommending the adoption of “adjustment policies” to presumably aid in economic growth.[39] There was no mention, however, of how similar “adjustment policies” failed to deliver growth to the developing world over the previous 30 years, and in fact, spread poverty and economic despair instead.

After the G20 leaders meeting in late June of 2010, leaders of the world’s largest economies agreed on a timetable to impose ‘fiscal austerity’ measures to cut their deficits and halt the growth of their debts. The plan entailed cutting deficits in half by 2013.[40] In June, Germany had announced massive austerity cuts to spending, spurring protests in the streets.[41] Simon Johnson, former Chief Economist at the IMF, stated that fiscal austerity would likely result in “exacerbating developing world-type problems in the United States – and to creating the conditions for another financial crisis.”[42] The chief economist of the major global bank HSBC, stated in May of 2010 that, “at the very least, governments need to pursue a multi-year period of fiscal austerity,” and ultimately, “fiscal positions will become intolerable politically, economically and financially.”[43]

Fiscal austerity will imply massive cuts in social spending, which will do to the developed world what they did to the ‘developing’ world: health, education and social services will be cut, with public employees in those and other sectors fired, creating a massive new wave of unemployed people. Simultaneously, taxes will be dramatically increased, particularly on the middle and lower classes, which would then be more impoverished than ever before. However, fiscal austerity is not the only condition of “structural adjustment,” as many other measures will be taken, advancing on current trends, including further expanding and institutionalizing trade liberalization, as well as selling off public assets in major privatization schemes. Since the West largely privatized all the state-owned industries in the dawn of the neoliberal era, the remaining areas of privatization are largely in infrastructure projects such as roads, airports and ports. However, in America, this will be undertaken by individual states and cities desperate for cash and ‘investment’. Thomas Osborne, head of infrastructure and privatization at UBS bank, said in May of 2009 that, “privatization will eventually take hold,” but it will be done in “a more incremental approach.”[44]

In September of 2010, the Chicago Council on Global Affairs released a report on infrastructure privatization. The Council represents and is run by various officials from J.P. Morgan Chase & Co., CME Group (the world’s largest derivatives exchange), the Federal Reserve Bank of Chicago, Bank One Corporation, McKinsey and Company, Goldman Sachs, Boeing, Northern Trust, United Airlines, the Chicago Board of Trade, and a host of other corporate, financial and banking interests, and the board even includes the First Lady, Michelle Obama.[45] In the report sponsored by the Chicago Council, it stated that, “the trend toward infrastructure privatization is happening not just in the United States, but globally.”[46] Ultimately, the report found that, “financial realities mean that the privatization of infrastructure will continue.”[47] In defining infrastructure, the report identified roads, bridges, port facilities, water treatment plants, electric transmission lines, and railways, as well as hospitals, prisons, “and other communal assets that serve the public interest.”[48]

On this note, sovereign wealth funds (SWFs) from around the world are buying up American infrastructure. Sovereign wealth funds are state-owned investment funds of stocks, bonds, financial assets, resources and property. Some of the world’s largest SWFs are those of the United Arab Emirates, Saudi Arabia, Norway, China, South Korea, Kuwait, and Russia. As the “recovery” edges into the oblivion of the Great Global Debt Depression, SWFs are buying up American infrastructure, including:

A toll highway in Indiana. The Chicago Skyway. A stretch of highway in Florida. Parking meters in Nashville, Pittsburgh, Los Angeles, and other cities. A port in Virginia. And a whole bevy of Californian public infrastructure projects, all either already leased or set to be leased for fifty or seventy-five years or more in exchange for one-off lump sum payments of a few billion bucks at best, usually just to help patch a hole or two in a single budget year.

America is quite literally for sale, at rock-bottom prices, and the buyers increasingly are the very people who scored big in the oil bubble. Thanks to Goldman Sachs and Morgan Stanley and the other investment banks that artificially jacked up the price of gasoline over the course of the last decade, Americans delivered a lot of their excess cash into the coffers of sovereign wealth funds like the Qatar Investment Authority, the Libyan Investment Authority, Saudi Arabia’s SAMA Foreign Holdings, and the UAE’s Abu Dhabi Investment Authority.[49]

This process is also underway in Canada, as the Ontario government in 2009 considered selling off “all or part” of its Crown corporations to reduce the provincial deficit, and it hired CIBC and Goldman Sachs to write a blueprint for possible privatizations.[50] Further, there are increased calls – globally – for advancing the agenda of the privatization of water, a scheme which the World Bank has pushed on several countries around the world, resulting in enormous costs – in economic, political and social terms – to the poorest people, and enormous profits for the handful of global water conglomerates. Organized around the International Water Association and the World Water Council, the major water conglomerates, the World Bank and the UN have been promoting water privatization schemes across the ‘developing’ world and increasingly within the West as a means to ‘solving’ the world water crisis. As we have seen, however, from the cases of water privatization in places like Bolivia, South Africa, El Salvador, and several others, it is the poor who suffer the most, and it will be the same whether it is in Angola or America.

Debt Slavery

While nations of the West begin to impose fiscal austerity on their populations and social structures, the harsh effects will come with time, as nations have maintained extremely low interest rates, thus keeping the ‘cost’ of money cheap. However, as the Bank for International Settlements (BIS) report of June 2010 stated, “both fiscal and monetary policy may have to be tightened at the same time.” This means that, according to the BIS, interest rates must rise along with fiscal austerity measures. It was, lest we forget, the extremely high interest rates in the late 70s and early 80s that set off the 1980s debt crisis, as nations with large foreign debts could no longer afford to pay their annual interest payments, thus needing to turn to the IMF and World Bank for ‘assistance’ in the form of ‘structural adjustment programs’. The massive stimulus spending and bailouts will create the likely scenario of causing inflation, making prices rise dramatically. To fight inflation, nations can raise interest rates, which then make the currency more expensive, and thus, reduces the rates of inflation.

As central banks around the world injected billions and trillions of dollars into the financial system, they kept interest rates extremely low in order to encourage the flow of money. In the 2009 annual report of the BIS, it warned that this policy could create massive inflation, so interest rates will have to be raised eventually. The major question is ‘when’ they will rise; if it’s too late, inflation could get out of control, if it’s too early, it could destroy the ‘recovery.’[51] So as the 2010 annual report of the BIS calls for simultaneous fiscal and monetary tightening, this could be potentially disastrous, possibly “pushing the global economy into depression.”[52] The effect of high interest rates, while potentially decreasing the rate of inflation, will increase the cost of the annual debt payments nations must make, thus exacerbating and feeding the ‘fiscal austerity’ measures imposed to reduce spending. This would reverberate onto the average person, as interest rates on all debts, including their personal debts would also increase. While fiscal austerity will increase taxes, increase poverty, and deconstruct the middle class, high interest rates would bleed them dry. However, inflation itself acts as a hidden tax, increasing the cost of consumer goods such as food and fuel, as the currency depreciates in value. This is also a major cost to the vanishing middle class. It seems that either way, the average person is in the crosshairs of a system of economic terrorism. It’s the epitome of a ‘Catch-22’; you’re damned if you do, and you’re damned if you don’t.

Raising interest rates during a time of fiscal austerity, however, is particularly destructive to the average person. Notably, “fiscal and monetary tightening were tried in tandem in the early 1930s and it didn’t work then.”[53] In other words, it helped plunge the world into the Great Depression. Today, however, it would be significantly worse, as now we have the reality of mortgages, credit card debt, derivatives, student debt, etc. These things did not exist at the onset of the Great Depression, so today it would result in the ‘Greatest Depression.’ It’s a debt trap, and everyone is caught in it. If states don’t raise interest rates, the ‘market’ may turn against them, as major global banks, hedge funds and currency speculators may ‘lose confidence’ in a nation’s currency, and flee the currency, thus plunging it in value, leading to potentially hyperinflation (as was experienced in Weimar Germany and Zimbabwe), which also has the effect of devastating a nation and plundering the wealth of its people.

While increasing interest rates is done in the name of reducing the debt at a quicker pace, it ultimately has the opposite effect. It essentially creates a condition in which a nation is permanently indebted, and the cumulative debt increases annually. This occurs due to a nation struggling to pay its annual interest on the debt, and so it seeks the ‘assistance’ of the IMF and international creditors to provide a quick loan to the country to pay the interest. The IMF provides a loan, which is instantly redirected to pay the creditors, and the loan amount that the IMF provided is then added to the overall national debt. Thus, rising interest rates will increase the annual interest payments, because the debt itself has enlarged. The nation will need the ‘assistance’ of another loan – more debt – to pay interest on its overall debt, which then continues to rise. This is how the nations of the ‘Third World’ became so indebted: accumulating more debt to pay interest on old debt, which then creates new debt, requiring more debt to pay the interest on the accumulated debt, and on and on and on. Meanwhile, the ‘structural adjustment programs’ (SAPs) were implemented under the ‘conditions’ of IMF and World Bank loans and ‘assistance’ to deconstruct the social foundations of a nation, eliminate the middle class and exacerbate poverty, presumably in order to help reduce the deficit. This now appears to be the fate of the ‘First World’ industrialized nations. While the BIS annual report called for increasing interest rates, an internal working paper written by the Chief Economist of the BIS in March of 2010 warned that, “fighting rising inflation by tightening monetary policy would not work, as an increase in interest rates would lead to higher interest payments on public debt, leading to higher debt.”[54]

Ultimately, talk about whether or not to increase interest rates, and how to impose fiscal austerity are misleading. This is because these discussions operate on the basis that these debts are legitimate. The legal doctrine of ‘odious debt’ stipulates that sovereign debt incurred without the consent of the people and not benefiting the people is odious and should not be transferable to a successor government. In other words, if a debt doesn’t benefit the people, it’s illegitimate and should not be repaid. If this principle was applied to the ‘Third World’, it could be safely said that the IMF, World Bank, and Western nations would effectively lose their control of the global south. It is through the mechanism of debt that modern imperialism functions most effectively. Naturally, the correct economic path to take for an actual recovery would be to declare all these major debts illegitimate – of the ‘Third World’, and of the Western world – as the debts of the West were incurred from financing foreign imperial adventures, and the debt of the ‘rest’ is the result of that imperialism.

Through the economic crisis, the debts incurred were largely done so in terms of buying the bad debts of the banks that created the crisis, thus, they too are illegitimate. Even the ‘stimulus’ money was indebted in order to solve a financial crisis created by a corrupt minority around the world. Credit card debts and student debts exacerbate poverty, and if there are no jobs for students in a broken economy, their debt is illegitimate. Since credit card debt was incurred to finance consumption and allow people to live beyond their means, there is a notion of responsibility on the part of the debtor, however, because credit card companies target the indebted and have essentially ‘captured’ the middle class, and now they must pay through their own impoverishment, people have been misled, and the debt ultimately did not benefit them; thus, it too is illegitimate. If our governments, the banks, the corporations and all creditors have colluded together to seek personal profit and gain, while impoverishing us and the rest of the world in the process, all the world’s debts to these institutions, actors and nations is odious and should not be repaid. Taking this stance, however, would not get you far in the world of economics or politics, as you would be advocating for the end of financial, economic, social and political imperialism and power structures; not a particularly popular position from the perspective of the powerful.

So the debates and discussions will rage on; when to raise interest rates, how to impose fiscal austerity, how to create ‘recovery’; all the while global political and economic institutions, states and actors will be working to impoverish you and destroy the foundations of society upon which you stand.

Third World America

As a further indication of the coming ‘third world’ status of America, in June of 2008, in the midst of the financial crisis, the United States Federal Reserve was audited by the IMF for the first time in history. As part of the investigation, “the Fed, the Securities and Exchange Commission (SEC), the major investment banks, mortgage banks and hedge funds will be asked to hand over confidential documents to the IMF team.”[55]

Simon Johnson, former Chief Economist at the IMF, wrote an article in May of 2009 explaining that the problem with most third world nations (“emerging market economies”) is that the governments are so closely tight-knit with the corporate and banking elite that they form a financial oligarchy, and that this is essentially the same problem in the United States. He wrote that, “the finance industry has effectively captured our government,” and “recovery will fail unless we break the financial oligarchy that is blocking essential reform.”[56]

In March of 2009, an article appeared in the Washington Post written by Desmond Lachman, a fellow at the American Enterprise Institute, a previous emerging market strategist at Salomon Smith Barney and deputy director of the IMF’s Policy and Review Department, in which he referred to America as the “world’s scariest emerging market.” In other words, America resembles a third world debtor nation, from its corrupt banking elite, to the inept political class, and a massive foreign debt, America “is coming to resemble Argentina, Russia and other so-called emerging markets, both in what led us to the crisis, and in how we’re trying to fix it.”[57]

Towns, cities, and states across America are resorting to drastic actions to reduce their debts, such as closing fire stations, scaling back trash collection, turning off street lights, ending bus services and public transportation, cutting back on library hours or closing them altogether, school districts cutting down the school day, week or year, and it was reported in September of 2010 that “local governments will eliminate roughly half a million employees in the next fiscal year, with public safety, public works, public health, social services, and parks and recreation hardest hit by the cutbacks.” Simultaneously, this is occurring with a dramatic increase in the rate of privatizations or “public-private partnerships” in which even libraries are being privatized.[58]

Structural Adjustment and “Social Explosion”

The imposition of ‘structural adjustment’ in the ‘Third World’ resulted in an explosion of social unrest, as the rural poor, the urban poor, and the urban middle class would come together to protest these policies,[59] and “between 1976 and 1992 there were 146 protests against IMF-supported austerity measures in 39 countries around the world. These took the form of political demonstrations, strikes and riots.”[60] As “fiscal austerity” and ‘structural adjustment’ are imposed on the West, we can expect the same results to occur. In fact, this process has already begun.

At the onset of the global economic crisis in 2008, the IMF warned that governments of the west could see “violent unrest on the streets,” as “violent protests could break out in countries worldwide if the financial system was not restructured to benefit everyone rather than a small elite.”[61] A cynical statement of the IMF, considering it is one of the central institutions that supports and upholds the interests of that “small elite.” In early 2009, Eastern Europe was already experiencing social unrest in opposition to austerity packages, and Latvia experienced the largest protests since the mass rallies against Soviet rule in the late 1980s.[62]

Similar tensions were felt across Western Europe throughout 2009, notably in France where massive strikes and protests were taking place, and several commentators were saying that civil unrest in places like Iceland and Eastern Europe were “a sign of things to come: a new age of rebellion.”[63] On May 1, 2009, major protests and riots broke out in Germany, Greece, Turkey, France and Austria, and there were further protests and riots that broke out in Russia, Italy, Spain, and some politicians were even discussing the threat of revolution.[64] In February of 2009, Dennis Blair, the Director of National Intelligence in the newly formed Obama administration (the highest intelligence position in the country), told the U.S. Congress what constituted the major ‘national security’ threats to the United States, explaining that the ‘economic crisis’ is a greater threat than terrorism:

I’d like to begin with the global economic crisis, because it already looms as the most serious one in decades, if not in centuries… Economic crises increase the risk of regime-threatening instability if they are prolonged for a one- or two-year period… And instability can loosen the fragile hold that many developing countries have on law and order, which can spill out in dangerous ways into the international community.[65]

In the same month, the highest-ranking general in the United States, Adm. Michael Mullen, Chairman of the Joint Chiefs of Staff, ranked “the financial crisis as a higher priority and greater risk to security than current wars in Iraq and Afghanistan.” He explained, “It’s a global crisis. And as that impacts security issues, or feeds greater instability, I think it will impact on our national security in ways that we quite haven’t figured out yet.”[66] Again, in the same month, the head of the World Trade Organization (WTO) warned that, “the global economic crisis could trigger political unrest equal to that seen during the 1930s.” He elaborated, “the crisis today is spreading even faster (than the Great Depression) and affects more countries at the same time.”[67]

In February of 2009, renowned economic historian and Harvard professor, Niall Ferguson, predicted a “prolonged financial hardship, even civil war, before the ‘Great Recession’ ends,” and that, “the global crisis is far from over, [it] has only just begun.” He elaborated:

There will be blood, in the sense that a crisis of this magnitude is bound to increase political as well as economic [conflict]. It is bound to destabilize some countries. It will cause civil wars to break out, that have been dormant. It will topple governments that were moderate and bring in governments that are extreme. These things are pretty predictable.[68]

In May of 2009, the head of the World Bank warned that, “the global economic crisis could lead to serious social upheaval,” as “there is a risk of a serious human and social crisis with very serious political implications.”[69] Zbigniew Brzezinski, former National Security Adviser, co-founder of the Trilateral Commission and a key architect of ‘globalization’ warned that, “There’s going to be growing conflict between the classes and if people are unemployed and really hurting, hell, there could be even riots!”[70]

In December of 2009, Moody’s – one of the world’s major credit ratings agencies – warned that “future tax rises and spending cuts could trigger social unrest in a range of countries from the developing to the developed world,” resulting in “political and social tension.”[71] In March of 2010, Moody’s warned that the U.S., U.K., Germany, France, Spain and other Western nations could likely see “social unrest” as a result of imposing ‘fiscal austerity’, which “will test social cohesion.”[72]

An article in the Financial Times in May of 2010 warned of the emergence of “an age of rage,” in which the initial shock of an economic downturn subsides, and social unrest emerges, as there is usually a lag between an economic collapse and “social fury,” and that it will ultimately be “a test of the strength of democratic institutions in a time of extreme fiscal stress.”[73]

In September of 2010, the IMF chief Dominique Strauss-Kahn said that America and Europe, in the midst of the worst jobs crisis since the Great Depression, face an “explosion of social unrest.” Speaking at the summit of the International Labour Federation, Strauss-Kahn stated, “the labour market is in dire straits. The Great Recession has left behind a waste land of unemployment,” and that, “the Great Recession has left gaping wounds. High and long-lasting unemployment represents a risk to the stability of existing democracies.” The Chief Economist of the IMF, Olivier Blanchard, explained that, “long-term unemployment is alarmingly high: in the US, half the unemployed have been out of work for over six months, something we have not seen since the Great Depression.”[74]

On September 29, 2010, massive protests took place across Europe against the austerity measures being imposed by European governments, with a general strike called in Spain, virtually shutting down Spain’s transportation system. Further, roughly 100,000 protesters “staged the biggest Brussels march in a decade and riot police barricaded EU headquarters as marchers from 30 countries joined the backlash against brutal spending cuts.”[75]

These protests continued throughout October of 2010, particularly in France, where millions of people went on strike, protested, and in some cases, rioted against President Sarkozy’s fiscal austerity plans, turning him into the most unpopular president in more than 50 years.[76]

The G20 Korea Summit

To further accelerate the process of global economic governance, it is essential for the principle economic institutions and powers to integrate China fully into this system. China is already a signatory to the World Trade Organization, having opened up its banking sector to foreign investment, with its economy fully integrated with and largely dependent upon the West, it is pivotal to include China in the system of global governance. China is represented in the Bank for International Settlements (BIS), which the IMF referred to as “the central and the oldest focal point for coordination of global governance arrangements.”[77] The board of directors of the BIS has 19 members, comprising the Governors of the central banks of Belgium, France, Germany, Italy and the United Kingdom and the Chairman of the Board of Governors of the US Federal Reserve System, as well as the Governors of the central banks of Brazil, Canada, China, Japan, the Netherlands, Sweden and Switzerland and the President of the ECB (European Central Bank). China is also represented in the G20, of which the President of the European Central Bank, Jean-Claude Trichet, referred to as “the prime group for global economic governance at the level of ministers, governors and heads of state or government.”[78] In 2009, China and India were invited as official members of the Trilateral Commission,[79] an international think tank created by David Rockefeller and Zbigniew Brzezinski in 1973 with the aim of creating a “community of industrial nations” comprising Western Europe, North America and Japan, essentially with the aim of managing the process of globalization.

In November of 2010, the G20 is to be hosted by South Korea, where they will meet to again advance the process of global governance and global social genocide. Prior to the official meeting of heads of state, a much more important preliminary meeting took place between the finance ministers and central bank governors of the G20 nations. This took place in late October of 2010 in Seoul, South Korea, at a time when the world is immersed in a global currency war. The currency war involves several major nations, from America, to Brazil and China, seeking to depreciate their currency in order to make exports more attractive, so their central banks (all of which cooperate on global governance at the BIS), buy and sell each others’ currencies, attempting to decrease the value of their own currency while increasing the value of competitor currencies. In short, it’s a race to the bottom. To convince China to appreciate its currency, incentives must be given. If China is to be following the dictates of the global financial powers, its economic weight in the world demands that China be better represented and more involved in the governance of these institutions. This means that if China is being integrated into a system of global governance, it must be invited to the management table.

The G20 agreed on implementing an historic reform in the IMF, where for the first time since its creation in 1944, the management structure of the IMF has been [slightly] altered. The significance is that European countries have agreed to give up two of their seats on the 24-member executive board, making room for China and India, and more than 6 per cent of IMF voting power will be transferred to underrepresented countries at the fund. As the Financial Times reported:

After the changes take effect, Brazil, Russia, India and China will be all included in the fund’s 10 biggest shareholders. The US, with a 17.67 per cent share of IMF quotas, will retain its veto power for the fund’s key decisions as they will continue to require a super-majority of 85 per cent.[80]

This is important to note as it clearly indicates that America still remains the ‘Godfather’ of the global financial system. The IMF requires 85% of voters to agree on any changes or decisions, and since the U.S. has 17.67% of the shares, if the U.S. votes against anything, the IMF cannot go forward, giving the U.S. veto power over the IMF. Yet these changes still represent an incremental effort to bring China within this system of global governance. At the same time, a top Chinese banker stated that, “the yuan should be included in the basket of currencies that constitute the International Monetary Fund’s Special Drawing Rights.”[81] This would give China a more direct stake in the formation of a global currency, of which its central bank governor is already a firm supporter.

Conclusion

Herman Von Rompuy became President of the European Union in 2009, a new position established by the Lisbon Treaty passed the same year. Rompuy was selected as President following his attendance at a meeting of the Bilderberg Group.[82] Shortly after being given the position, Von Rompuy gave a speech in which he declared that 2009 is “the first year of global governance.”[83] As Denis Healey, a founding member and former member of the Steering Committee of the Bilderberg Group for over 30 years, stated in 2001, “To say we were striving for a one-world government is exaggerated, but not wholly unfair. Those of us in Bilderberg felt we couldn’t go on forever fighting one another for nothing and killing people and rendering millions homeless. So we felt that a single community throughout the world would be a good thing.”[84]

So while institutions and organizations of global governance continue to grant themselves more power and expand their control and authority over the world, the people of the world must wake up to this process and seek to stem and stall its advancement. A global government would represent the people of the world even less than they are already not represented through their national governments. Institutions of global governance are totally unaccountable to the people, totally undemocratic, and are inherently totalitarian. As Gideon Rachman wrote for the Financial Times in December of 2008, “for the first time in my life, I think the formation of some sort of world government is plausible.” While articulating the need for a global government, modeling it on the European Union “going global,” he examined the setbacks that the EU had in this process, suggesting the same is likely in the process for global government. Specifically, he identified that whenever the people were involved in the process, they would act to stall or reject the process of integration. Thus, Rachman concluded, the European 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.”[85] In other words, if we want global governance, we must kill democracy in the process.

What this implies then, is that the people have the potential to prevent this process from taking place, but only if they become directly involved in rejecting it. This means that people’s movements need to stop recognizing the legitimacy of these international organizations and institutions, complaining only that they are not included in discussions, and instead demand that they be dismantled altogether in favour of forming new governance arrangements – political, economic and social – that actively represent and empower the people over the entrenched powers. This is no simple task, in fact, it is likely the greatest, most monumental and challenging task that has ever faced humanity. So it seems necessary that the people not waste their time, not waste their votes, voices, or ideas, and work together to promote true progressive and humane change. There is hope in humanity yet, but so long as we allow the powerful to accumulate more power for themselves, we cannot expect things to get better for the majority. We must take advantage of our freedoms in order to fight for and preserve them. We can either be free thinkers, directing the course of our own lives, or we can be slaves to bankers.


Notes

[1]        Dominique Strauss-Kahn, Concluding Remarks by Dominique Strauss-Kahn, Managing Director of the International Monetary Fund, at the High-Level Conference on the International Monetary System, Zurich, 11 May 2010:
http://www.imf.org/external/np/speeches/2010/051110.htm

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

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

[4]        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

[5]        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

[6]        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

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

[8]        CNBC, Morgan’s Mack: Firm Was Excessively Leveraged. CNBC: October 16, 2008:
http://www.cnbc.com/id/27216678

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

[10]      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

[11]      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

[12]      Itar-Tass, Russia proposes creation of global super-reserve currency. ITAR-TASS News Agency: March 16, 2009:
http://www.itar-tass.com/eng/level2.html?NewsID=13682035&PageNum=0

[13]      Jamil Anderlini, China calls for new reserve currency. The Financial Times: March 23, 2009:
http://www.ft.com/cms/s/0/7851925a-17a2-11de-8c9d-0000779fd2ac.html

[14]      CFR, A Conversation with Timothy F. Geithner. Council on Foreign Relations Transcripts: March 25, 2009:
http://www.cfr.org/publication/18925/

[15]      UN backs new new global currency reserve. The Sunday Telegraph: March 29, 2009:
http://www.news.com.au/business/story/0,27753,25255091-462,00.html

[16]      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

[17]      Anthony Faiola, A Bigger, Bolder Role Is Imagined For the IMF, The Washington Post, 20 April 2009:
http://www.washingtonpost.com/wp-dyn/content/article/2009/04/19/AR2009041902242.html?hpid=topnews

[18]      Izabella Kaminska, IMF blueprint for a global currency – yes really, Financial Times Blog, 4 August 2010:
http://ftalphaville.ft.com/blog/2010/08/04/306346/imf-blueprint-for-a-global-currency-yes-really/

[19]      Amar Bhattacharya, A Tangled Web, Finance and Development, March 2009, Vol. 46, No. 1:
http://www.imf.org/external/pubs/ft/fandd/2009/03/bhattacharya.htm

[20]      Jean-Claude Trichet, Global Governance Today, Keynote address by Mr Jean-Claude Trichet, President of the European Central Bank, at the Council on Foreign Relations, New York, 26 April 2010:
http://www.bis.org/review/r100428b.pdf

[21]      Ibid.

[22]      Jean-Claude Trichet, Central bank cooperation after the global financial crisis, Video address by Jean-Claude Trichet, President of the European Central Bank, at the Bank of Korea International Conference 2010, Seoul, 31 May 2010:
http://www.ecb.int/press/key/date/2010/html/sp100531.en.html

[23]      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
; 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/; 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

[24]      Richard Wray, EU ministers agree Greek bailout terms. The Guardian: April 11, 2010:
http://www.guardian.co.uk/world/2010/apr/11/eu-greece-bailout-terms

[25]      Economist, Now comes the pain. The Economist: March 4, 2010:
http://www.economist.com/world/europe/displaystory.cfm?story_id=15603267

[26]      Nelson D. Schwartz and Eric Dash, Banks Bet Greece Defaults on Debt They Helped Hide. The New York Times: February 24, 2010:
http://www.nytimes.com/2010/02/25/business/global/25swaps.html?ref=business

[27]      Louise Story, Wall St. was partner in Greece’s debt crisis. The Boston Globe: February 14, 2010:
http://www.boston.com/news/world/europe/articles/2010/02/14/wall_street_helped_greece_land_deeper_in_debt/

[28]      Nelson D. Schwartz and Eric Dash, Banks Bet Greece Defaults on Debt They Helped Hide. The New York Times: February 24, 2010:
http://www.nytimes.com/2010/02/25/business/global/25swaps.html?ref=business

[29]      Barrie McKenna and Joanna Slater, Role of banks eyed in Greek debt crisis. The Globe and Mail: February 25, 2010:
http://www.theglobeandmail.com/report-on-business/role-of-banks-eyed-in-greek-debt-crisis/article1481750/

[30]      Stephen G. Cecchetti, M.S. Mohanty and Fabrizio Zampolli, The Future of Public Debt: Prospects and Implications. BIS Working Papers, No 300, Monetary and Economic Department, March 2010: page 2

[31]      Ibid, page 12.

[32]      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

[33]      Report on Business, Is Japan hurtling toward a debt crisis? The Globe and Mail: April 14, 2010:
http://www.theglobeandmail.com/report-on-business/economy/is-japan-hurtling-toward-a-debt-crisis/article1534498/

[34]      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

[35]      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

[36]      Nina Koeppen, ECB Official Warns of Potential Sovereign Debt Crisis. The Wall Street Journal: April 15, 2010:
http://blogs.wsj.com/economics/2010/04/15/ecb-official-warns-of-potential-sovereign-debt-crisis/

[37]      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

[38]      G20 communique after meeting in South Korea, Reuters, 5 June 2010:
http://www.reuters.com/article/idUSTRE6540VN20100605

[39]      David Lawder, Global rebalancing policies need coordination-IMF, Reuters, 5 June 2010:
http://www.reuters.com/article/idUSN0514799020100605

[40]      Sewell Chan and Jackie Calmes, World Leaders Agree on Timetable for Cutting Deficits, The New York Times, 27 June 2010:
http://www.nytimes.com/2010/06/28/business/global/28summit.html

[41]      Toby Helm, Ian Traynor and Paul Harris, Europe embraces the cult of austerity – but at what cost? The Observer, 13 June 2010:
http://www.guardian.co.uk/business/2010/jun/13/europe-embraces-cult-of-austerity

[42]      Simon Johnson, Fiscal Austerity and America’s Future, The New York Times Economix Blog, 26 August 2010:
http://economix.blogs.nytimes.com/2010/08/26/fiscal-austerity-and-americas-future/

[43]      Izabella Kaminska, Bible code, finance edition, The Financial Times Blog, 18 May 2010:
http://ftalphaville.ft.com/blog/2009/05/18/55977/bible-code-finance-edition/

[44]      Joseph A. Giannone, UBS banker sees next U.S. privatizations smaller, Reuters, 6 May 2009:
http://www.reuters.com/article/idUSTRE54562G20090506

[45]      CCGA, Board of Directors, The Chicago Council on Global Affairs:
http://www.thechicagocouncil.org/dynamic_page.php?id=117

[46]      Emerging Leaders Perspectives, No Free Money: Is the Privatization of Infrastructure in the Public Interest? The Chicago Council on Global Affairs, September 2010: p. 4

[47]      Ibid, page 7.

[48]      Ibid, page 11.

[49]      Matt Taibbi, Exclusive Excerpt: America on Sale, From Matt Taibbi’s ‘Griftopia’, Rolling Stone, 18 October 2010:
http://www.rollingstone.com/politics/news/17390/222206?RS_show_page=0

[50]      Andrew Willis and Boyd Erman, Ontario ponders sale of Crown corporations to beat down deficit, The Globe and Mail, 15 December 2009:
http://www.theglobeandmail.com/report-on-business/ontario-ponders-sale-of-crown-corporations-to-beat-down-deficit/article1401807/

[51]      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

[52]      Ambrose Evans-Pritchard, BIS plays with fire, demands double-barrelled monetary and fiscal tightening, The Telegraph, 28 June 2010:
http://www.telegraph.co.uk/finance/comment/ambroseevans_pritchard/7859800/BIS-plays-with-fire-demands-double-barrelled-monetary-and-fiscal-tightening.html

[53]      Ibid.

[54]      Stephen G. Cecchetti, M.S. Mohanty and Fabrizio Zampolli, The Future of Public Debt: Prospects and Implications. BIS Working Papers, No 300, Monetary and Economic Department, March 2010: page 14

[55]      Gabor Steingart, The Shrinking Influence of the US Federal Reserve, Der Spiegel, 26 June 2008:
http://www.spiegel.de/international/world/0,1518,562291,00.html

[56]      Simon Johnson, The Quiet Coup, The Atlantic, May 2009:
http://www.theatlantic.com/magazine/archive/2009/05/the-quiet-coup/7364/

[57]      Desmond Lachman, Welcome to America, the World’s Scariest Emerging Market, The Washington Post, 29 March 2009:
http://www.washingtonpost.com/wp-dyn/content/article/2009/03/25/AR2009032502226.html

[58]      Luiza Ch. Savage, Third World America, Macleans, 14 September 2010:
http://www2.macleans.ca/2010/09/14/third-world-america/

[59]      Juha Y. Auvinen, “IMF Intervention and Political Protest in the Third World: A Conventional Wisdom Refined,” Third World Quarterly, Vol. 17, No. 3, (1996), p. 377

[60]      Firoze Manji and Carl O’Coill, “The Missionary Position: NGOs and Development in Africa,” International Affairs, Vol. 78, No. 3, (2002), p. 578

[61]      Angela Balakrishnan, IMF chief issues stark warning on economic crisis. The Guardian: December 18, 2008:
http://www.guardian.co.uk/business/2008/dec/16/imf-financial-crisis

[62]      Jason Burke, Eastern Europe braced for a violent ‘spring of discontent’. The Observer: January 18, 2009:
http://www.guardian.co.uk/world/2009/jan/18/eu-riots-vilinius
; Philip P. Pan, Economic Crisis Fuels Unrest in E. Europe. The Washington Post: January 26, 2009:
http://www.washingtonpost.com/wp-dyn/content/article/2009/01/25/AR2009012502516.html

[63]      Adrian Michaels, Europe’s winter of discontent. The Telegraph: January 27, 2009:
http://www.telegraph.co.uk/comment/personal-view/4363750/Europes-winter-of-discontent.html
; Ian Traynor, Governments across Europe tremble as angry people take to the streets. The Guardian: January 31, 2009:
http://www.guardian.co.uk/business/2009/jan/31/global-recession-europe-protests
; Ben Hall, French workers stage strike in protest at job losses and reforms. The Financial Times: January 29, 2009:
http://www.ft.com/cms/s/0/71c25576-eda6-11dd-bd60-0000779fd2ac.html
; Roger Boyes, World Agenda: riots in Iceland, Latvia and Bulgaria are a sign of things to come. The Times: January 21, 2009:
http://www.timesonline.co.uk/tol/news/world/europe/article5559773.ece

[64]      Henry Samuel, Riots across Europe fuelled by economic crisis. The Telegraph: May 1, 2009:
http://www.telegraph.co.uk/news/worldnews/europe/5258634/Riots-across-Europe-fuelled-by-economic-crisis.html

[65]      Stephen C. Webster, US intel chief: Economic crisis a greater threat than terrorism. Raw Story: February 13, 2009:
http://rawstory.com/news/2008/US_intel_chief_Economic_crisis_greater_0213.html

[66]      Tom Philpott, MILITARY UPDATE: Official: Financial crisis a bigger security risk than wars. Colorado Springs Gazette: February 1, 2009:
http://www.gazette.com/articles/mullen-47273-military-time.html

[67]      AFP, WTO chief warns of looming political unrest. AFP: February 7, 2009:
http://www.google.com/hostednews/afp/article/ALeqM5gpC1Q4gXJfp6EwMl1rMGrmA_a7ZA

[68]      Heather Scoffield, ‘There will be blood’. The Globe and Mail: February 23, 2009:
http://www.theglobeandmail.com/report-on-business/article973785.ece

[69]      BBC, World Bank warns of social unrest. BBC News: May 24, 2009:
http://news.bbc.co.uk/2/hi/business/8066037.stm

[70]      Press TV, Economic Crisis: Brzezinski warns of riots in US. Global Research: February 21, 2009:
http://www.globalresearch.ca/index.php?context=va&aid=12392

[71]      Edmund Conway, Moody’s warns of ‘social unrest’ as sovereign debt spirals, The Telegraph, 15 December 2009:
http://www.telegraph.co.uk/finance/economics/6819470/Moodys-warns-of-social-unrest-as-sovereign-debt-spirals.html

[72]      Ambrose Evans-Pritchard, Moody’s fears social unrest as AAA states implement austerity plans. The Telegraph: March 15, 2010:
http://www.telegraph.co.uk/finance/economics/7450468/Moodys-fears-social-unrest-as-AAA-states-implement-austerity-plans.html

[73]      Simon Schama, The world teeters on the brink of a new age of rage, The Financial Times, 22 May 2010:
http://www.ft.com/cms/s/0/45796f88-653a-11df-b648-00144feab49a.html

[74]      Ambrose Evans-Pritchard, IMF fears ‘social explosion’ from world jobs crisis, The Telegraph, 13 September 2010:
http://www.telegraph.co.uk/finance/financetopics/financialcrisis/8000561/IMF-fears-social-explosion-from-world-jobs-crisis.html

[75]      Roddy Thomson, European cities hit by anti-cuts protests, AFP, 29 September 2010:
http://www.google.com/hostednews/afp/article/ALeqM5iGPFQn-DOcZkJmTK5anC4nfopDZA?docId=CNG.a9e7345890360219e1ae3413e8fe2974.8b1

[76]      Peter Allen, Nicolas Sarkozy most unpopular French president in more than 50 years, The Telegraph, 25 October 2010:
http://www.telegraph.co.uk/news/worldnews/europe/france/8086078/Nicolas-Sarkozy-most-unpopular-French-president-in-more-than-50-years.html

[77]      Amar Bhattacharya, A Tangled Web, Finance and Development, March 2009, Vol. 46, No. 1:
http://www.imf.org/external/pubs/ft/fandd/2009/03/bhattacharya.htm

[78]      Jean-Claude Trichet, Global Governance Today, Keynote address by Mr Jean-Claude Trichet, President of the European Central Bank, at the Council on Foreign Relations, New York, 26 April 2010:
http://www.bis.org/review/r100428b.pdf

[79]      About the Trilateral Commission, The Pacific Asia Group, The Trilateral Commission:
http://www.trilateral.org/go.cfm?do=Page.View&pid=13

[80]      Song Jung-a, G20 agrees historic reform of IMF, Financial Times, 23 October 2010:
http://www.ft.com/cms/s/0/816ee036-dea2-11df-9b4a-00144feabdc0.html?ftcamp=rss

[81]      China Bureau, China Banker Urges IMF To Include Yuan In SDR Basket – Report, Wall Street Journal, 25 October 2010:
http://online.wsj.com/article/BT-CO-20101025-700112.html

[82]      Ian Traynor, Who speaks for Europe? Criticism of ‘shambolic’ process to fill key jobs. The Guardian, 17 November 2009:
http://www.guardian.co.uk/world/2009/nov/17/top-european-job-selection-process

[83]      Herman Von Rompuy, Speech Upon Accepting the EU Presidency, BBC News, 22 November 2009:
http://www.youtube.com/watch?v=pzm_R3YBgPg

[84]      Jon Ronson, Who pulls the strings? (part 3), The Guardian, 10 March 2001:
http://www.guardian.co.uk/books/2001/mar/10/extract1

[85]      Gideon Rachman, And now for a world government, Financial Times, 8 December 2010:
http://us.ft.com/ftgateway/superpage.ft?news_id=fto120820081424026754

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

Entering the Greatest Depression in History

Entering the Greatest Depression in History
More Bubbles Waiting to Burst
Global Research, August 7, 2009
Introduction

While there is much talk of a recovery on the horizon, commentators are forgetting some crucial aspects of the financial crisis. The crisis is not simply composed of one bubble, the housing real estate bubble, which has already burst. The crisis has many bubbles, all of which dwarf the housing bubble burst of 2008. Indicators show that the next possible burst is the commercial real estate bubble. However, the main event on the horizon is the “bailout bubble” and the general world debt bubble, which will plunge the world into a Great Depression the likes of which have never before been seen.

Housing Crash Still Not Over

The housing real estate market, despite numbers indicating an upward trend, is still in trouble, as, “Houses are taking months to sell. Many buyers are having trouble getting financing as lenders and appraisers struggle to figure out what houses are really worth in the wake of the collapse.” Further, “the overall market remains very soft […] aside from speculators and first-time buyers.” Dean Baker, co-director of the Center for Economic and Policy Research in Washington said, “It would be wrong to imagine that we have hit a turning point in the market,” as “There is still an enormous oversupply of housing, which means that the direction of house prices will almost certainly continue to be downward.” Foreclosures are still rising in many states “such as Nevada, Georgia and Utah, and economists say rising unemployment may push foreclosures higher into next year.” Clearly, the housing crisis is still not at an end.[1]

The Commercial Real Estate Bubble

In May, Bloomberg quoted Deutsche Bank CEO Josef Ackermann as saying, “It’s either the beginning of the end or the end of the beginning.” Bloomberg further pointed out that, “A piece of the puzzle that must be calculated into any determination of the depth of our economic doldrums is the condition of commercial real estate — the shopping malls, hotels, and office buildings that tend to go along with real- estate expansions.” Residential investment went down 28.9 % from 2006 to 2007, and at the same time, nonresidential investment grew 24.9%, thus, commercial real estate was “serving as a buffer against the declining housing market.”

Commercial real estate lags behind housing trends, and so too, will the crisis, as “commercial construction projects are losing their appeal.” Further, “there are lots of reasons to suspect that commercial real estate was subject to some of the loose lending practices that afflicted the residential market. The Office of the Comptroller of the Currency’s Survey of Credit Underwriting Practices found that whereas in 2003 just 2 percent of banks were easing their underwriting standards on commercial construction loans, by 2006 almost a third of them were relaxing.” In May it was reported that, “Almost 80 percent of domestic banks are tightening their lending standards for commercial real-estate loans,” and that, “we may face double-bubble trouble for real estate and the economy.”[2]

In late July of 2009, it was reported that, “Commercial real estate’s decline is a significant issue facing the economy because it may result in more losses for the financial industry than residential real estate.  This category includes apartment buildings, hotels, office towers, and shopping malls.” Worth noting is that, “As the economy has struggled, developers and landlords have had to rely on a helping hand from the US Federal Reserve in order to try to get credit flowing so that they can refinance existing buildings or even to complete partially constructed projects.” So again, the Fed is delaying the inevitable by providing more liquidity to an already inflated bubble. As the Financial Post pointed out, “From Vancouver to Manhattan, we are seeing rising office vacancies and declines in office rents.”[3]

In April of 2009, it was reported that, “Office vacancies in U.S. downtowns increased to 12.5 percent in the first quarter, the highest in three years, as companies cut jobs and new buildings came onto the market,” and, “Downtown office vacancies nationwide could come close to 15 percent by the end of this year, approaching the 10-year high of 15.5 percent in 2003.”[4]

In the same month it was reported that, “Strip malls, neighborhood centers and regional malls are losing stores at the fastest pace in at least a decade, as a spending slump forces retailers to trim down to stay afloat.” In the first quarter of 2009, retail tenants “have vacated 8.7 million square feet of commercial space,” which “exceeds the 8.6 million square feet of retail space that was vacated in all of 2008.” Further, as CNN reported, “vacancy rates at malls rose 9.5% in the first quarter, outpacing the 8.9% vacancy rate registered in all of 2008.” Of significance for those that think and claim the crisis will be over by 2010, “mall vacancies [are expected] to exceed historical levels through 2011,” as for retailers, “it’s only going to get worse.”[5] Two days after the previous report, “General Growth Properties Inc, the second-largest U.S. mall owner, declared bankruptcy on [April 16] in the biggest real estate failure in U.S. history.”[6]

In April, the Financial Times reported that, “Property prices in China are likely to halve over the next two years, a top government researcher has predicted in a powerful signal that the country’s economic downturn faces further challenges despite recent positive data.” This is of enormous significance, as “The property market, along with exports, were leading drivers of the booming Chinese economy over the past decade.” Further, “an apparent rebound in the property market was unsustainable over the medium term and being driven by a flood of liquidity and fraudulent activity rather than real demand.” A researcher at a leading Chinese government think tank reported that, “he expected average urban residential property prices to fall by 40 to 50 per cent over the next two years from their levels at the end of 2008.”[7]

In April, it was reported that, “The Federal Reserve is considering offering longer loans to investors in commercial mortgage-backed securities as part of a plan to help jump-start the market for commercial real estate debt.” Since February the Fed “has been analyzing appropriate terms and conditions for accepting commercial mortgage-backed securities (CMBS) and other mortgage assets as collateral for its Term Asset-Backed Securities Lending Facility (TALF).”[8]

In late July, the Financial Times reported that, “Two of America’s biggest banks, Morgan Stanley and Wells Fargo … threw into sharp relief the mounting woes of the US commercial property market when they reported large losses and surging bad loan,” as “The disappointing second-quarter results for two of the largest lenders and investors in office, retail and industrial property across the US confirmed investors’ fears that commercial real estate would be the next front in the financial crisis after the collapse of the housing market.” The commercial property market, worth $6.7 trillion, “which accounts for more than 10 per cent of US gross domestic product, could be a significant hurdle on the road to recovery.”[9]

The Bailout Bubble

While the bailout, or the “stimulus package” as it is often referred to, is getting good coverage in terms of being portrayed as having revived the economy and is leading the way to the light at the end of the tunnel, key factors are again misrepresented in this situation.

At the end of March of 2009, Bloomberg reported that, “The U.S. government and the Federal Reserve have spent, lent or committed $12.8 trillion, an amount that approaches the value of everything produced in the country last year.” This amount “works out to $42,105 for every man, woman and child in the U.S. and 14 times the $899.8 billion of currency in circulation. The nation’s gross domestic product was $14.2 trillion in 2008.”[10]

Gerald Celente, the head of the Trends Research Institute, the major trend-forecasting agency in the world, wrote in May of 2009 of the “bailout bubble.” Celente’s forecasts are not to be taken lightly, as he accurately predicted the 1987 stock market crash, the fall of the Soviet Union, the 1998 Russian economic collapse, the 1997 East Asian economic crisis, the 2000 Dot-Com bubble burst, the 2001 recession, the start of a recession in 2007 and the housing market collapse of 2008, among other things.

On May 13, 2009, Celente released a Trend Alert, reporting that, “The biggest financial bubble in history is being inflated in plain sight,” and that, “This is the Mother of All Bubbles, and when it explodes […] it will signal the end to the boom/bust cycle that has characterized economic activity throughout the developed world.” Further, “This is much bigger than the Dot-com and Real Estate bubbles which hit speculators, investors and financiers the hardest. However destructive the effects of these busts on employment, savings and productivity, the Free Market Capitalist framework was left intact. But when the ‘Bailout Bubble’ explodes, the system goes with it.”

Celente further explained that, “Phantom dollars, printed out of thin air, backed by nothing … and producing next to nothing … defines the ‘Bailout Bubble.’ Just as with the other bubbles, so too will this one burst. But unlike Dot-com and Real Estate, when the “Bailout Bubble” pops, neither the President nor the Federal Reserve will have the fiscal fixes or monetary policies available to inflate another.” Celente elaborated, “Given the pattern of governments to parlay egregious failures into mega-failures, the classic trend they follow, when all else fails, is to take their nation to war,” and that, “While we cannot pinpoint precisely when the ‘Bailout Bubble’ will burst, we are certain it will. When it does, it should be understood that a major war could follow.”[11]

However, this “bailout bubble” that Celente was referring to at the time was the $12.8 trillion reported by Bloomberg. As of July, estimates put this bubble at nearly double the previous estimate.

As the Financial Times reported in late July of 2009, while the Fed and Treasury hail the efforts and impact of the bailouts, “Neil Barofsky, special inspector-general for the troubled asset relief programme, [TARP] said that the various US schemes to shore up banks and restart lending exposed federal agencies to a risk of $23,700bn  [$23.7 trillion] – a vast estimate that was immediately dismissed by the Treasury.” The inspector-general of the TARP program stated that there were “fundamental vulnerabilities . . . relating to conflicts of interest and collusion, transparency, performance measures, and anti-money laundering.”

Barofsky also reports on the “considerable stress” in commercial real estate, as “The Fed has begun to open up Talf to commercial mortgage-backed securities to try to influence credit conditions in the commercial real estate market. The report draws attention to a new potential credit crunch when $500bn worth of real estate mortgages need to be refinanced by the end of the year.” Ben Bernanke, the Chairman of the Fed, and Timothy Geithner, the Treasury Secretary and former President of the New York Fed, are seriously discussing extending TALF (Term Asset-Backed Securities Lending Facility) into “CMBS [Commercial Mortgage-Backed Securities] and other assets such as small business loans and whether to increase the size of the programme.” It is the “expansion of the various programmes into new and riskier asset classes is one of the main bones of contention between the Treasury and Mr Barofsky.”[12]

Testifying before Congress, Barofsky said, “From programs involving large capital infusions into hundreds of banks and other financial institutions, to a mortgage modification program designed to modify millions of mortgages, to public-private partnerships using tens of billions of taxpayer dollars to purchase ‘toxic’ assets from banks, TARP has evolved into a program of unprecedented scope, scale, and complexity.” He explained that, “The total potential federal government support could reach up to 23.7 trillion dollars.”[13]

Is a Future Bailout Possible?

In early July of 2009, billionaire investor Warren Buffet said that, “unemployment could hit 11 percent and a second stimulus package might be needed as the economy struggles to recover from recession,” and he further stated that, “we’re not in a recovery.”[14] Also in early July, an economic adviser to President Obama stated that, “The United States should be planning for a possible second round of fiscal stimulus to further prop up the economy.”[15]

In August of 2009, it was reported that, “THE Obama administration will consider dishing out more money to rein in unemployment despite signs the recession is ending,” and that, “Treasury secretary Tim Geithner also conceded tax hikes could be on the agenda as the government worked to bring its huge recovery-related deficits under control.” Geithner said, “we will do what it takes,” and that, “more federal cash could be tipped into the recovery as unemployment benefits amid projections the benefits extended to 1.5 million jobless Americans will expire without Congress’ intervention.” However, any future injection of money could be viewed as “a second stimulus package.”[16]

The Washington Post reported in early July of a Treasury Department initiative known as “Plan C.” The Plan C team was assembled “to examine what could yet bring [the economy] down and has identified several trouble spots that could threaten the still-fragile lending industry,” and “the internal project is focused on vexing problems such as the distressed commercial real estate markets, the high rate of delinquencies among homeowners, and the struggles of community and regional banks.”

Further, “The team is also responsible for considering potential government responses, but top officials within the Obama administration are wary of rolling out initiatives that would commit massive amounts of federal resources.” The article elaborated in saying that, “The creation of Plan C is a sign that the government has moved into a new phase of its response, acting preemptively rather than reacting to emerging crises.” In particular, the near-term challenge they are facing is commercial real estate lending, as “Banks and other firms that provided such loans in the past have sharply curtailed lending,” leaving “many developers and construction companies out in the cold.” Within the next couple years, “these groups face a tidal wave of commercial real estate debt — some estimates peg the total at more than $3 trillion — that they will need to refinance. These loans were issued during this decade’s construction boom with the mistaken expectation that they would be refinanced on the same generous terms after a few years.”

However, as a result of the credit crisis, “few developers can find anyone to refinance their debt, endangering healthy and distressed properties.” Kim Diamond, a managing director at Standard & Poor’s, stated that, “It’s not a degree to which people are willing to lend,” but rather, “The question is whether a loan can be made at all.” Important to note is that, “Financial analysts said losses on commercial real estate loans are now the single largest cause of bank failures,” and that none of the bailout efforts enacted “is big enough to address the size of the problem.”[17]

So the question must be asked: what is Plan C contemplating in terms of a possible government “solution”? Another bailout? The effect that this would have would be to further inflate the already monumental bailout bubble.

The Great European Bubble

In October of 2008, Germany and France led a European Union bailout of 1 trillion Euros, and “World markets initially soared as European governments pumped billions into crippled banks. Central banks in Europe also mounted a new offensive to restart lending by supplying unlimited amounts of dollars to commercial banks in a joint operation.”[18]

The American bailouts even went to European banks, as it was reported in March of 2009 that, “European banks declined to discuss a report that they were beneficiaries of the $173 billion bail-out of insurer AIG,” as “Goldman Sachs, Morgan Stanley and a host of other U.S. and European banks had been paid roughly $50 billion since the Federal Reserve first extended aid to AIG.” Among the European banks, “French banks Societe Generale and Calyon on Sunday declined to comment on the story, as did Deutsche Bank, Britain’s Barclays and unlisted Dutch group Rabobank.” Other banks that got money from the US bailout include HSBC, Wachovia, Merrill Lynch, Banco Santander and Royal Bank of Scotland. Because AIG was essentially insolvent, “the bailout enabled AIG to pay its counterparty banks for extra collateral,” with “Goldman Sachs and Deutsche bank each receiving $6 billion in payments between mid-September and December.”[19]

In April of 2009, it was reported that, “EU governments have committed 3 trillion Euros [or $4 trillion dollars] to bail out banks with guarantees or cash injections in the wake of the global financial crisis, the European Commission.”[20]

In early February of 2009, the Telegraph published a story with a startling headline, “European banks may need 16.3 trillion pound bail-out, EC document warns.” Type this headline into google, and the link to the Telegraph appears. However, click on the link, and the title has changed to “European bank bail-out could push EU into crisis.” Further, they removed any mention of the amount of money that may be required for a bank bailout. The amount in dollars, however, nears $25 trillion. The amount is the cumulative total of the troubled assets on bank balance sheets, a staggering number derived from the derivatives trade.

The Telegraph reported that, “National leaders and EU officials share fears that a second bank bail-out in Europe will raise government borrowing at a time when investors – particularly those who lend money to European governments – have growing doubts over the ability of countries such as Spain, Greece, Portugal, Ireland, Italy and Britain to pay it back.”[21]

When Eastern European countries were in desperate need of financial aid, and discussion was heated on the possibility of an EU bailout of Eastern Europe, the EU, at the behest of Angela Merkel of Germany, denied the East European bailout. However, this was more a public relations stunt than an actual policy position.

While the EU refused money to Eastern Europe in the form of a bailout, in late March European leaders “doubled the emergency funding for the fragile economies of central and eastern Europe and pledged to deliver another doubling of International Monetary Fund lending facilities by putting up 75bn Euros (70bn pounds).” EU leaders “agreed to increase funding for balance of payments support available for mainly eastern European member states from 25bn Euros to 50bn Euros.”[22]

As explained in a Times article in June of 2009, Germany has been deceitful in its public stance versus its actual policy decisions. The article, worth quoting in large part, first explained that:

Europe is now in the middle of a perfect storm – a confluence of three separate, but interconnected economic crises which threaten far greater devastation than Britain or America have suffered from the credit crunch: the collapse of German industry and employment, the impending bankruptcy of Central European homeowners and businesses; and the threat of government debt defaults from loss of monetary control by the Irish Republic, Greece and Portugal, for instance on the eurozone periphery.

Taking the case of Latvia, the author asks, “If the crisis expands, other EU governments – and especially Germany’s – will face an existential question. Do they commit hundreds of billions of euros to guarantee the debts of fellow EU countries? Or do they allow government defaults and devaluations that may ultimately break up the single currency and further cripple German industry, as well as the country’s domestic banks?” While addressing that, “Publicly, German politicians have insisted that any bailouts or guarantees are out of the question,” however, “the pass has been quietly sold in Brussels, while politicians loudly protested their unshakeable commitment to defend it.”

The author addressed how in October of 2008:

[…] a previously unused regulation was discovered, allowing the creation of a 25 billion Euros “balance of payments facility” and authorising the EU to borrow substantial sums under its own “legal personality” for the first time. This facility was doubled again to 50 billion Euros in March. If Latvia’s financial problems turn into a full-scale crisis, these guarantees and cross-subsidies between EU governments will increase to hundreds of billions in the months ahead and will certainly mutate into large-scale centralised EU borrowing, jointly guaranteed by all the taxpayers of the EU.

[…] The new EU borrowing, for example, is legally an ‘off-budget’ and ‘back-to-back’ arrangement, which allows Germany to maintain the legal fiction that it is not guaranteeing the debts of Latvia et al. The EU’s bond prospectus to investors, however, makes quite clear where the financial burden truly lies: “From an investor’s point of view the bond is fully guaranteed by the EU budget and, ultimately, by the EU Member States.”[23]

So Eastern Europe is getting, or presumably will get bailed out. Whether this is in the form of EU federalism, providing loans of its own accord, paid for by European taxpayers, or through the IMF, which will attach any loans with its stringent Structural Adjustment Program (SAP) conditionalities, or both. It turned out that the joint partnership of the IMF and EU is what provided the loans and continues to provide such loans.

As the Financial Times pointed out in August of 2009, “Bank failures or plunging currencies in the three Baltic nations – Latvia, Lithuania and Estonia – could threaten the fragile prospect of recovery in the rest of Europe. These countries also sit on one of the world’s most sensitive political fault-lines. They are the European Union’s frontier states, bordering Russia.” In July, Latvia “agreed its second loan in eight months from the IMF and the EU,” following the first one in December. Lithuania is reported to be following suit. However, as the Financial Times noted, the loans came with the IMF conditionalities: “The injection of cash is the good news. The bad news is that, in return for shoring up state finances, the new IMF deal will require the Latvian government to impose yet more pain on its suffering population. Public-sector wages have already been cut by about a third this year. Pensions have been sliced. Now the IMF requires Latvia to cut another 10 per cent from the state budget this autumn.”[24]

If we are to believe the brief Telegraph report pertaining to nearly $25 trillion in bad bank assets, which was removed from the original article for undisclosed reasons, not citing a factual retraction, the question is, does this potential bailout still stand? These banks haven’t been rescued financially from the EU, so, presumably, these bad assets are still sitting on the bank balance sheets. This bubble has yet to blow. Combine this with the $23.7 trillion US bailout bubble, and there is nearly $50 trillion between the EU and the US waiting to burst.

An Oil Bubble

In early July of 2009, the New York Times reported that, “The extreme volatility that has gripped oil markets for the last 18 months has shown no signs of slowing down, with oil prices more than doubling since the beginning of the year despite an exceptionally weak economy.” Instability in the oil and gas prices has led many to “fear it could jeopardize a global recovery.” Further, “It is also hobbling businesses and consumers,” as “A wild run on the oil markets has occurred in the last 12 months.” Oil prices reached a record high last summer at $145/barrel, and with the economic crisis they fell to $33/barrel in December. However, since the start of 2009, oil has risen 55% to $70/barrel.

As the Times article points out, “the recent rise in oil prices is reprising the debate from last year over the role of investors — or speculators — in the commodity markets.” Energy officials from the EU and OPEC met in June and concluded that, “the speculation issue had not been resolved yet and that the 2008 bubble could be repeated.”[25]

In June of 2009, Hedge Fund manager Michael Masters told the US Senate that, “Congress has not done enough to curb excessive speculation in the oil markets, leaving the country vulnerable to another price run-up in 2009.” He explained that, “oil prices are largely not determined by supply and demand but the trading desks of large Wall Street firms.” Because “Nothing was actually done by Congress to put an end to the problem of excessive speculation” in 2008, Masters explained, “there is nothing to prevent another bubble in oil prices in 2009. In fact, signs of another possible bubble are already beginning to appear.”[26]

In May of 2008, Goldman Sachs warned that oil could reach as much as $200/barrel within the next 12-24 months [up to May 2010]. Interestingly, “Goldman Sachs is one of the largest Wall Street investment banks trading oil and it could profit from an increase in prices.”[27] However, this is missing the key point. Not only would Goldman Sachs profit, but Goldman Sachs plays a major role in sending oil prices up in the first place.

As Ed Wallace pointed out in an article in Business Week in May of 2008, Goldman Sachs’ report placed the blame for such price hikes on “soaring demand” from China and the Middle East, combined with the contention that the Middle East has or would soon peak in its oil reserves. Wallace pointed out that:

Goldman Sachs was one of the founding partners of online commodities and futures marketplace Intercontinental Exchange (ICE). And ICE has been a primary focus of recent congressional investigations; it was named both in the Senate’s Permanent Subcommittee on Investigations’ June 27, 2006, Staff Report and in the House Committee on Energy & Commerce’s hearing last December. Those investigations looked into the unregulated trading in energy futures, and both concluded that energy prices’ climb to stratospheric heights has been driven by the billions of dollars’ worth of oil and natural gas futures contracts being placed on the ICE—which is not regulated by the Commodities Futures Trading Commission.[28]

Essentially, Goldman Sachs is one of the key speculators in the oil market, and thus, plays a major role in driving oil prices up on speculation. This must be reconsidered in light of the resurgent rise in oil prices in 2009. In July of 2009, “Goldman Sachs Group Inc. posted record earnings as revenue from trading and stock underwriting reached all-time highs less than a year after the firm took $10 billion in U.S. rescue funds.”[29] Could one be related to the other?

Bailouts Used in Speculation

In November of 2008, the Chinese government injected an “$849 billion stimulus package aimed at keeping the emerging economic superpower growing.”[30] China then recorded a rebound in the growth rate of the economy, and underwent a stock market boom. However, as the Wall Street Journal pointed out in July of 2009, “Its growth is now fuelled by cheap debt rather than corporate profits and retained earnings, and this shift in the medium term threatens to undermine China’s economic decoupling from the global slump.” Further, “overseas money has been piling into China, inflating foreign exchange reserves and domestic liquidity. So perhaps it is not surprising that outstanding bank loans have doubled in the last few years, or that there is much talk of a shadow banking system. Then there is China’s reputation for building overcapacity in its industrial sector, a notoriety it won even before the crash in global demand. This showed a disregard for returns that is always a tell-tale sign of cheap money.”

China’s economy primarily relies upon the United States as a consumption market for its cheap products. However, “The slowdown in U.S. consumption amid a credit crunch has exposed the weaknesses in this export-led financing model. So now China is turning instead to cheap debt for funding, a shift suggested by this year’s 35% or so rise in bank loans.”[31]

 In August of 2009, it was reported that China is experiencing a “stimulus-fueled stock market boom.” However, this has caused many leaders to “worry that too much of the $1-trillion lending binge by state banks that paid for China’s nascent revival was diverted into stocks and real estate, raising the danger of a boom and bust cycle and higher inflation less than two years after an earlier stock market bubble burst.”[32]

The same reasoning needs to be applied to the US stock market surge. Something is inherently and structurally wrong with a financial system in which nothing is being produced, 600,000 jobs are lost monthly, and yet, the stock market goes up. Why is the stock market going up?

The Troubled Asset Relief Program (TARP), which provided $700 billion in bank bailouts, started under Bush and expanded under Obama, entails that the US Treasury purchases $700 billion worth of “troubled assets” from banks, and in turn, “that banks cannot be asked to account for their use of taxpayer money.”[33]

So if banks don’t have to account for where the money goes, where did it go? They claim it went back into lending. However, bank lending continues to go down.[34] Stock market speculation is the likely answer. Why else would stocks go up, lending continue downwards, and the bailout money be unaccounted for?

What Does the Bank for International Settlements (BIS) Have to Say?

In late June, the Bank for International Settlements (BIS), the central bank of the world’s central banks, the most prestigious and powerful financial organization in the world, delivered an important warning. It stated that, “fiscal stimulus packages may provide no more than a temporary boost to growth, and be followed by an extended period of economic stagnation.”

The BIS, “The only international body to correctly predict the financial crisis … 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,” as the annual report of the BIS “has for the past three years been warning of the dangers of a repeat of the depression.” Further, “Its latest annual report warned that countries such as Australia faced the possibility of a run on the currency, which would force interest rates to rise.” The BIS warned that, “a temporary respite may make it more difficult for authorities to take the actions that are necessary, if unpopular, to restore the health of the financial system, and may thus ultimately prolong the period of slow growth.”

Of immense import is the BIS warning that, “At the same time, government guarantees and asset insurance have exposed taxpayers to potentially large losses,” and explaining how fiscal packages posed significant risks, it said that, “There is a danger that fiscal policy-makers will exhaust their debt capacity before finishing the costly job of repairing the financial system,” and that, “There is the definite possibility that stimulus programs will drive up real interest rates and inflation expectations.” Inflation “would intensify as the downturn abated,” and the BIS “expressed doubt about the bank rescue package adopted in the US.”[35]

The BIS further warned of inflation, saying that, “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]

Major investors have also been warning about the dangers of inflation. Legendary investor Jim Rogers has warned of “a massive inflation holocaust.”[37] Investor Marc Faber has warned that, “The U.S. economy will enter ‘hyperinflation’ approaching the levels in Zimbabwe,” and he stated that he is “100 percent sure that the U.S. will go into hyperinflation.” Further, “The problem with government debt growing so much is that when the time will come and the Fed should increase interest rates, they will be very reluctant to do so and so inflation will start to accelerate.”[38]

Are We Entering A New Great Depression?

In 2007, it was reported that, “The Bank for International Settlements, the world’s most prestigious financial body, has warned that 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.” Further:

The BIS, the ultimate bank of central bankers, pointed to a confluence a worrying signs, 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.

[…] In a thinly-veiled rebuke to the US Federal Reserve, the BIS said 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 – which was more or less the strategy pursued by former Fed chief Alan Greenspan after the dotcom bust.[39]

In 2008, the BIS again warned of the potential of another Great Depression, as “complex credit instruments, a strong appetite for risk, rising levels of household debt and long-term imbalances in the world currency system, all form part of the loose monetarist policy that could result in another Great Depression.”[40]

In 2008, the BIS also said 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,” and that all central banks have done “has been to put off the day of reckoning.”[41]

In late June of 2009, the BIS reported that as a result of stimulus packages, it has only seen “limited progress” and that, “the prospects for growth are at risk,” and further “stimulus measures won’t be able to gain traction, and may only lead to a temporary pickup in growth.” Ultimately, “A fleeting recovery could well make matters worse.”[42]

The BIS has said, in softened language, that the stimulus packages are ultimately going to cause more damage than they prevented, simply delaying the inevitable and making the inevitable that much worse. Given the previous BIS warnings of a Great Depression, the stimulus packages around the world have simply delayed the coming depression, and by adding significant numbers to the massive debt bubbles of the world’s nations, will ultimately make the depression worse than had governments not injected massive amounts of money into the economy.

After the last Great Depression, Keynesian economists emerged victorious in proposing that a nation must spend its way out of crisis. This time around, they will be proven wrong. The world is a very different place now. Loose credit, easy spending and massive debt is what has led the world to the current economic crisis, spending is not the way out. The world has been functioning on a debt based global economy. This debt based monetary system, controlled and operated by the global central banking system, of which the apex is the Bank for International Settlements, is unsustainable. This is the real bubble, the debt bubble. When it bursts, and it will burst, the world will enter into the Greatest Depression in world history.

Notes

[1]        Barrie McKenna, End of housing slump? Try telling that to buyers, sellers and the unemployed. The Globe and Mail: August 6, 2009:
http://www.theglobeandmail.com/report-on-business/end-of-housing-slump-try-telling-that-to-buyers-sellers-and-the-unemployed/article1240418/

[2]        Gene Sperling, Double-Bubble Trouble in Commercial Real Estate: Gene Sperling. Bloomberg: May 9, 2009:
http://www.bloomberg.com/apps/news?pid=20601110&sid=a.X91SkgOd8g

[3]        AL Sull, Commercial Real Estate – The Other Real Estate Bubble. Financial Post: July 23, 2009:
http://network.nationalpost.com/np/blogs/fpmagazinedaily/archive/2009/07/23/commercial-real-estate-the-other-real-estate-bubble.aspx

[4]        Hui-yong Yu, U.S. Office Vacancies Rise to Three-Year High, Cushman Says. Bloomberg: April 16, 2009:
http://www.bloomberg.com/apps/news?pid=20601087&sid=aegH6dXG8H8U

[5]        Parija B. Kavilanz, Malls shedding stores at record pace. CNN Money: April 14, 2009:
http://money.cnn.com/2009/04/10/news/economy/retail_malls/index.htm

[6]        Ilaina Jonas and Emily Chasan, General Growth files largest U.S. real estate bankruptcy. Reuters: April 16, 2009:
http://www.reuters.com/article/businessNews/idUSTRE53F68P20090417

[7]        Jamil Anderlini, China property prices ‘likely to halve’. The Financial Times: April 13, 2009:
http://www.ft.com/cms/s/0/9a36b342-280e-11de-8dbf-00144feabdc0.html

[8]        Reuters, Fed Might Extend TALF Support to Five Years. Money News: April 17, 2009:
http://moneynews.newsmax.com/financenews/talf/2009/04/17/204120.html?utm_medium=RSS

[9]        Francesco Guerrera and Greg Farrell, US banks warn on commercial property. The Financial Times: July 22, 2009:
http://www.ft.com/cms/s/0/3a1e9d86-76eb-11de-b23c-00144feabdc0.html

[10]      Mark Pittman and Bob Ivry, Financial Rescue Nears GDP as Pledges Top $12.8 Trillion. Bloomberg: March 31, 2009:
http://www.bloomberg.com/apps/news?pid=20601087&sid=armOzfkwtCA4

[11]      Gerald Celente, The “Bailout Bubble” – The Bubble to End All Bubbles. Trends Research Institute: May 13, 2009:
http://geraldcelentechannel.blogspot.com/2009/05/gerald-celente-bubble-to-end-all.html

[12]      Tom Braithwaite, Treasury clashes with Tarp watchdog on data. The Financial Times: July 20, 2009:
http://www.ft.com/cms/s/0/ab533a38-757a-11de-9ed5-00144feabdc0.html

[13]      AFP, US could spend 23.7 trillion dollars on crisis: report. Agence-France Presse: July 20, 2009:
http://www.google.com/hostednews/afp/article/ALeqM5iuL1HParBuO4WyHJIxw6rlOKdz-A

[14]      John Whitesides, Warren Buffett says second stimulus might be needed. Reuters: July 9, 2009:
http://www.reuters.com/article/pressReleasesMolt/idUSTRE5683MZ2009070

[15]      Vidya Ranganathan, U.S. should plan 2nd fiscal stimulus: economic adviser. Reuters: July 7, 2009:
http://www.reuters.com/article/newsOne/idUSTRE56611D20090707

[16]      Carly Crawford, US may increase stimulus payments to rein in unemployment. The Herald Sun: August 3, 2009:
http://www.news.com.au/heraldsun/story/0,21985,25873672-664,00.html

[17]      David Cho and Binyamin Appelbaum, Treasury Works on ‘Plan C’ To Fend Off Lingering Threats. The Washington Post: July 8, 2009:
http://www.washingtonpost.com/wp-dyn/content/article/2009/07/07/AR2009070702631.html?hpid=topnews

[18]      Charles Bremner and David Charter, Germany and France lead €1 trillion European bailout. Times Online: October 13, 2009:
http://business.timesonline.co.uk/tol/business/industry_sectors/banking_and_finance/article4937516.ece

[19]      Douwe Miedema, Europe banks silent on reported AIG bailout gains. Reuters: March 8, 2009:
http://www.reuters.com/article/topNews/idUSTRE5270YD20090308

[20]      Elitsa Vucheva, European Bank Bailout Total: $4 Trillion. Business Week: April 10, 2009:
http://www.businessweek.com/globalbiz/content/apr2009/gb20090410_254738.htm?chan=globalbiz_europe+index+page_top+stories

[21]      Bruno Waterfield, European bank bail-out could push EU into crisis. The Telegraph: February 11, 2009:
http://www.telegraph.co.uk/finance/financetopics/financialcrisis/4590512/European-banks-may-need-16.3-trillion-bail-out-EC-dcoument-warns.html

[22]      Ian Traynor, EU doubles funding for fragile eastern European economies. The Guardian: March 20, 2009:
http://www.guardian.co.uk/world/2009/mar/20/eu-imf-emergency-funding

[23]      Anatole Kaletsky, The great bailout – Europe’s best-kept secret. The Times Online: June 4, 2009:
http://www.timesonline.co.uk/tol/comment/columnists/anatole_kaletsky/article6426565.ece

[24]      Gideon Rachman, Europe prepares for a Baltic blast. The Financial Times: August 3, 2009:
http://www.ft.com/cms/s/0/b497f5b6-8060-11de-bf04-00144feabdc0.html

[25]      JAD MOUAWAD, Swings in Price of Oil Hobble Forecasting. The New York Times: July 5, 2009:
http://www.nytimes.com/2009/07/06/business/06oil.html

[26]      Christopher Doering, Masters says signs of oil bubble starting to appear. Reuters: June 4, 2009:
http://www.reuters.com/article/Inspiration/idUSTRE55355620090604

[27]      Javier Blas and Chris Flood, Analyst warns of oil at $200 a barrel. The Financial Times: May 6, 2008:
http://us.ft.com/ftgateway/superpage.ft?news_id=fto050620081414392593

[28]      Ed Wallace, The Reason for High Oil Prices. Business Week: May 13, 2009:
http://www.businessweek.com/lifestyle/content/may2008/bw20080513_720178.htm

[29]      Christine Harper, Goldman Sachs Posts Record Profit, Beating Estimates. Bloomberg: July 14, 2009:
http://www.bloomberg.com/apps/news?pid=20601087&sid=a2jo3RK2_Aps

[30]      Peter Martin and John Garnaut, The great China bailout. The Age: November 11, 2008:
http://business.theage.com.au/business/the-great-china-bailout-20081110-5lpe.html

[31]      Paul Cavey, Now China Has a Credit Boom. The Wall Street Journal: July 30, 2009:
http://online.wsj.com/article/SB10001424052970204619004574319261337617196.html

[32]      Joe McDonald, China’s stimulus-fueled stock boom alarms Beijing. The Globe and Mail: August 2, 2009:
http://www.globeinvestor.com/servlet/story/RTGAM.20090802.wchina02/GIStory/

[33]      Matt Jaffe, Watchdog Refutes Treasury Claim Banks Cannot Be Asked to Account for Bailout Cash. ABC News: July 19, 2009:
http://abcnews.go.com/Business/Politics/story?id=8121045&page=1

[34]      The China Post, Bank lending slows down in U.S.: report. The China Post: July 28, 2009:
http://www.chinapost.com.tw/business/americas/2009/07/28/218141/Bank-lending.htm

[35]      David Uren. Bank for International Settlements warning over stimulus benefits. The Australian: June 30, 2009:
http://www.theaustralian.news.com.au/story/0,,25710566-601,00.html

[36]      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

[37]      CNBC.com, We Are Facing an ‘Inflation Holocaust’: Jim Rogers. CNBC: October 10, 2008:
http://www.cnbc.com/id/27097823

[38]      Chen Shiyin and Bernard Lo, U.S. Inflation to Approach Zimbabwe Level, Faber Says. Bloomberg: May 27, 2009:
http://www.bloomberg.com/apps/news?pid=20601110&sid=avgZDYM6mTFA

[39]      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

[40]      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/

[41]      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

[42]      HEATHER SCOFFIELD, Financial repairs must continue: central banks. The Globe and Mail: June 29, 2009:
http://v1.theglobeandmail.com/servlet/story/RTGAM.20090629.wcentralbanks0629/BNStory/HEATHER+SCOFFIELD/

Origins of the American Empire: Revolution, World Wars and World Order

Origins of the American Empire: Revolution, World Wars and World Order
Global Power and Global Government: Part 2
Global Research, July 28, 2009

This essay is Part 2 of “Global Power and Global Government.” Part 1, “The Evolution and Revolution of the Central Banking System”  published by Global Research can be viewed here:


Russia, Oil and Revolution

By the 1870s, John D. Rockefeller’s Standard Oil Empire had a virtual monopoly over the United States, and even many foreign countries. In 1890, the King of Holland gave his blessing for the creation of an international oil company called Royal Dutch Oil Company, which was mainly founded to refine and sell kerosene from Indonesia, a Dutch colony. Also in 1890, a British company was founded with the intended purpose of shipping oil, the Shell Transport and Trading Company, and it “began transporting Royal Dutch oil from Sumatra to destinations everywhere,” and eventually, “the two companies merged to become Royal Dutch Shell.”[1]

Russia entered into the Industrial Revolution later than any other large country and empire of its time. By the 1870s, “Russia’s oil fields, including those in Baku, were challenging Standard Oil’s supremacy in Europe. Russia’s ascendancy in natural resources disrupted the strategic balance of power in Europe and troubled Britain.” Britain thus attempted to begin oil explorations in the Middle East, specifically in Persia (Iran), first through Baron Julius de Reuter, the founder of Reuters News Service, who gained exploration rights from the Shah of Iran.[2] Reuter’s attempt at uncovering vast quantities of oil failed, and a man named William Knox D’Arcy took the lead in Persia.

By the middle of the 19th century, “the Rothschilds were the richest family in the world, perhaps in all of history. Their five international banking houses comprised one of the first multinational corporations.” Alfonse de Rothschild was “heavily invested in Russian oil at least forty years before William Knox D’Arcy began tying up Persian oil concessions for the British. Russian oil, which in the 1860s was already emerging as the European rival to the American monopoly Standard Oil, was the Baron [Rothschild]’s pet project.” In the early 1880s, “almost two hundred Rothschild refineries were at work in Baku,” Russia’s oil rich region.[3]

By the mid-1880s, “the Rothschilds were poised to become the chief oil supplier, not only to Europe but to the Far East,” however, “the Baku-Batum railroad was already proving inadequate to transport the volume of oil being produced. Another route was needed, and came in the form of the recently opened Suez Canal, which shortened the journey to the Far East by four thousand miles. Palestine was suddenly of interest to the Rothschilds as it provided access to the Suez.”[4] When the Egyptian government was bankrupt in 1874, British Prime Minister Benjamin Disraeli turned to his close friends, the Rothschilds, “for the colossal cash advance necessary” to buy shares in the Suez Canal Company.[5] By this time, the Rothschilds were already principle shareholders in the Bank of France,[6] and the Bank of England, sitting alongside other notable shareholders such as Baring Brothers, Morgan Grenfell and Lazard Brothers.[7]

The Rothschilds “had long been involved in developing Czarist Russia’s nascent industry and banking system, while that country’s growing network of railroads was largely financed by Rothschild-managed loans.”[8] When the Czar died, he was succeeded by his son, Czar Nicholas II, who instituted anti-Semitic pogroms, discriminating against Jews, which had the effect of stimulating a massive emigration of Jews out of Russia and Eastern Europe and into Western Europe. However, these East European and Russian Jewish émigrés grew up in a newly industrializing nation in which the tyranny of the government and collusion between it and powerful financial and industrial interests left the great majority of people dispossessed and incited more socialist tendencies in thought and action.

The English Rothschilds were very alarmed “when the socialist tendencies of the émigrés contributed to a massively disruptive tailors’ strike in the East End of London in 1888. A young Georgian communist who would become known to the world as Joseph Stalin was already organizing laborers to strike at the Rothschild oil interests in Batum.” The British Rothschilds were very concerned with this wave of Jewish immigrants into Western Europe and Britain, as they were intensely anti-Czarist and progressively socialist, and the Rothschilds were known for their heavy collaboration with the Czarist regimes of Russia. One potential solution considered to the problem of increased socialist-leaning Jewish immigrants in Britain was to institute restrictions on immigration. However, this would likely backlash, in the sense that it would be viewed as comparable to expulsion. So, Edmond Rothschild began his personal campaign to create a Jewish homeland in Palestine in order to create a release valve for Jewish émigrés to put their political action behind a new cause, and to promote them emigrating to Palestine, and out of Western Europe.[9]

On top of this, as the pre-eminent Zionist in Britain, his proposal for the creation of a Jewish homeland in Palestine served major economic interests of the Rothschilds and of the British Empire, in that several years prior, Rothschild bought the Suez Canal for the British, and it was the primary transport route for Russian oil. Palestine, thus, would be a vital landmass as a protectorate for British and Rothschild imperial-economic interests.

The Rothschilds, despite their overtly pro-Zionist and pro-Jewish rhetoric, did not stop their support of the Russian regime and economic activities within anti-Semitic Russia. In 1895, the Rothschilds, then one of the world’s leading producers and distributors of oil, “had gone so far as to co-sign an agreement with rival producers – including America’s Standard Oil [of Rockefeller interests] – to divide up world markets. It never took effect, presumably because of the opposition of the Russian government.” In 1902, the Rothschilds “entered into a partnership with Royal Dutch and Shell (soon to become a single global company) to form the Asiatic Petroleum Company for exploiting the fields of Southern Russia.”[10]

In the early 1900s, the Rothchilds were the primary oil interests in Russia, second in the world only to the Rockefellers. As industrialization was under way, conditions worsened for the great majority of Russian people. This spurred protests and riots, and a “young Stalin himself led the agitation against the Caucasian oil industry in general, [and] the Rothschilds in particular. Mass action by oil workers in Baku [the major oil fields in Russia] in 1903 was the spark that set off the first general strike across the Russian landmass.” Then with the Russian loss in the Russo-Japanese War of 1904, and further protests, came the Revolution of 1905. In the following years, the Rothschilds sold their Russian oil interests to Royal Dutch Shell, gaining significant shares in the international oil company.[11]

The specter of political and social instability within Russia was high and did not go without notice from international banking, oil, and industrial interests. Naturally, the international banking houses were keeping a close eye on developments within Russia. The Rothschilds had to lessen their overt involvement with Russia, as they could not maintain such a relationship with the most anti-Jewish nation in the world at the time, while also claiming to be the primary advocates of Jewish aspirations for a homeland. This is why they sold their Russian oil interests to Royal Dutch Shell, but then gained significant shares in the company itself. So while publicly cutting their ties with Russia, they still held massive interests in its industrial capacity. Following the Russo-Japanese War, the Rothschilds “refused to participate in underwriting a major loan, this at a time when Russia desperately needed funds to stabilize the regime.”[12]

So, in 1906, John D. Rockefeller stepped in to aid Czarist Russia, and offered $200,000,000, or “400,000,000 rubles for a concession for railroads from Tashkend to Tomsk and from Tehita to Polamoshna and a grant of land on both sides of the prospective lines.”[13] These international financiers were still clearly intent upon maintaining their interests within Russia.

However, the Russian governments refusal to allow the deal between the Rockefellers and Rothschilds and other major oil monopolies to divide up the world’s oil reserves, may well have spurred discontent among these powerful interests. If Russia refused to allow them to control all the oil and have a right to all oil, did this mean that Russia was planning on building a domestic oil industry? If this were the case, it could pose a threat to all the entrenched economic and financial interests, particularly those of the Rockefellers and Rothschilds, as Russia’s significant oil reserves and resources would allow it to possibly even surpass the United States in industrialization. Further, Czarist Russia became an increasingly unstable investment environment, controlled by an increasingly unpredictable monarchy.

The 1917 October Revolution “inspired workers’ uprisings in the oil fields against low wages and harsh working conditions. In 1919, Azerbaijan took advantage of the political unrest to declare sovereignty over the Baku fields. That same year SONJ [Standard Oil of New Jersey] made an agreement with the Azerbaijani government to purchase undeveloped land for exploration in the Baku region. Amidst the chaos, foreign oil companies rushed into Russia hoping to collect concessions at reduced rates. The Nobel brothers sold much of their operations to SONJ (today ExxonMobil) to build an alliance in 1920.”[14]

Antony C. Sutton, economist, historian and author, as well as research fellow at Stanford University’s Hoover Institution, wrote in Wall Street and the Bolshevik Revolution, that both fascist and communist systems are “based on naked, unfettered political power and individual coercion. Both systems require monopoly control of society. While monopoly control of industries was once the objective of J.P. Morgan and J.D. Rockefeller, by the late nineteenth century the inner sanctums of Wall Street understood that the most efficient way to gain an unchallenged monopoly was to ‘go political’ and make society go to work for the monopolists,” and that, “the totalitarian socialist state is a perfect captive market for monopoly capitalists, if an alliance can be made with the socialist powerbrokers.”[15] Thus, the major money powers of the west decided to put their money behind the creation of a totalitarian communist state in Russia, in order to create a captive economy, which they could exploit and remove from competititon.

When the Revolution began, Trotsky was in New York, and was immediately granted an American passport by President Wilson, and then given a Russian entry permit and a British transit visa, in order to return to Russia and “carry forward” the revolution.[16] Trotsky, while traveling, was arrested in Canada, but was released as a result of British intervention.[17]

Trotsky traveled on board a ship in 1917, leaving New York, along with an interesting cast of fellow passengers, including “other Trotskyite revolutionaries, Wall Street financiers, American Communists, and a man named Charles Crane. Charles Richard Crane, former chairman of the Democratic Party’s finance committee, whose son, Richard Crane, was an assistant to U.S. Secretary of State Robert Lansing, played a significant part in what occurred in Russia. Former U.S. Ambassador to Germany, William Dodd, said that Crane, “did much to bring on the [Alexander] Kerensky revolution which gave way to Communism.” Kerensky was the second Prime Minister in the Russian Provisional Government, which followed the collapse of the Czarist government, and preceded the Bolshevik. Crane also thought that the Kerensky government “is the revolution in its first phase only.”[18]

The Revolution occurred in the midst of World War I, which broke out in 1914, and had all the major European powers at war. Morgan and Rockefeller interests, organized in Wall Street and centralized in the Federal Reserve Bank of New York, the most powerful of all the regional Federal Reserve Banks, used “the Red Cross Mission as its operational vehicle” in Russia at the time of the Bolshevik Revolution. The Red Cross Mission in Russia got its endowment from wealthy people such as J.P. Morgan, Mrs. E. H. Harriman, Cleveland H. Dodge, and Mrs. Russell Sage, and “in World War I the Red Cross depended heavily on Wall Street, and specifically the Morgan firm.” When the American Red Cross set up a mission to Russia, “William Boyce Thompson, director of the Federal Reserve Bank of New York, had ‘offered to pay the entire expense of the commission’.”[19] All expenses were paid for by William Boyce Thompson, who was a major stockholder in Chase National Bank, whose President had Thompson appointed head of the New York Fed.[20]

The Mission was primarily made up of lawyers, financiers, their assistants, people affiliated with Standard Oil and the Rockefeller’s National City Bank.[21] The Mission supported through a loan, the Provisional government of Alexander Kerensky, yet, William B. Thompson of the New York Fed “made a personal contribution of $1,000,000 to the Bolsheviki for the purpose of spreading their doctrine in Germany and Austria.” Interestingly, when the Bolsheviks took control, “The National City Bank branch in Petrograd had been exempted from the Bolshevik nationalization decree – the only foreign or domestic Russian bank to have been so exempted.”[22] Ultimately, the Red Cross mission in Russia “was in fact a mission of Wall Street financiers to influence and pave the way for control, through either Kerensky or the Bolshevik revolutionaries, of the Russian market and resources.”[23]

The American International Corporation (AIC), was “created in 1915 to develop domestic and foreign enterprises, to extend American activities abroad, and to promote the interests of American and foreign bankers, business and engineering.” It was created and controlled by Morgan, Stillman and Rockefeller interests, and its directors were affiliated with National City Bank (Rockefeller), the Carnegie Foundation, General Electric, the DuPont family, New York Life Insurance, American Bankers Association and the Federal Reserve Bank of New York. Members of its board financially supported the Bolsheviks and urged the US State Department to recognize the Bolshevik government.[24]

In 1920, Russian gold was being siphoned through Sweden, where it was melted down and stamped with the Swedish mint, funneled through the Federal Reserve Bank of New York and into Kuhn, Loeb & Company and Guaranty Trust Company (Morgan), two of the primary banking interests behind the creation of the Federal Reserve System. [25] During the civil war in Russia between the Reds and the Whites, while Wall Street financiers were aiding the Bolsheviks quietly, they also began to finance Aleksandr Kolchak (of the Whites) with millions of dollars, in order to ensure that whoever emerged victorious in the war, Wall Street would win.[26]

As Antony Sutton wrote, “Russia, then and now, constituted the greatest potential competitive threat to American industrial and financial supremacy,” and that, “The gigantic Russian market was to be converted into a captive market and a technical colony to be exploited by a few high-powered American financiers and the corporations under their control.”[27]

Eventually, the Bolsheviks emerged victorious, and Wall Street won. Under Stalin’s Five-Year Plans in the early 1930s, Soviet industrialization “required Western technology and expertise,” and in a “frequently overlooked contribution” that came “from abroad,” American firms aided in the industrialization of the USSR, including Ford, General Electric and DuPont,[28] with Standard Oil, General Electric, Austin Co., General Motors, International Harvester, and Caterpillar Tractor trading heavily with the Soviet Union.[29]

Standard Oil bought “gargantuan quantities of Red Oil,” General Electric received a $100,000,000 contract from the Soviet Union to build “the four largest hydroelectric generators in the world,” Austin Co., got a $50,000,000 contract to erect the City of Austingrad, “complete with tractor and automobile factories involving an additional $30,000,000 contract for parts and technical assistance with Ford Motor Corp.” On top of this, “Other [Soviet] business friends are General Motors, DuPont de Nemours, International Harvester, John Deere Co., Caterpillar Tractor, Radio Corp. and the U. S. Shipping Board, which sold the Reds a fleet of 25 cargo steamers.” Banks with close ties to the Russian economy included Chase National, National City Bank and Equitable Trust, all of which are either Rockefeller or Morgan interests.[30]

World War Restructures World Order

In the midst of World War I, a group of American scholars were tasked with briefing “Woodrow Wilson about options for the postwar world once the kaiser and imperial Germany fell to defeat.” This group was called, “The Inquiry.” The group advised Wilson mostly through his trusted aide, Col. Edward M. House, who was Wilson’s “unofficial envoy to Europe during the period between the outbreak of World War I in 1914 and the intervention by the United States in 1917,” and was the prime driving force in the Wilson administration behind the establishment of the Federal Reserve System.[31]

“The Inquiry” laid the foundations for the creation of the Council on Foreign Relations (CFR), the most powerful think tank in the US, and “The scholars of the Inquiry helped draw the borders of post World War I central Europe.” On May 30, 1919, a group of scholars and diplomats from Britain and the US met at the Hotel Majestic, where they “proposed a permanent Anglo-American Institute of International Affairs, with one branch in London, the other in New York.” When the scholars returned from Paris, they were met with open arms by New York lawyers and financiers, and together they formed the Council on Foreign Relations in 1921. The “British diplomats returning from Paris had made great headway in founding their Royal Institute of International Affairs.” The Anglo-American Institute envisioned in Paris, with two branches and combined membership was not feasible, so both the British and American branches retained national membership, however, they would cooperate closely with one another.[32] They were referred to, and still are, as “Sister Institutes.”[33]

The Milner Group, the secret society formed by Cecil Rhodes, “dominated the British delegation to the Peace Conference of 1919; it had a great deal to do with the formation and management of the League of Nations and of the system of mandates; it founded the Royal Institute of International Affairs in 1919 and still controls it.”[34] There were other groups founded in many countries representing the same interests of the secret Milner Group, and they came to be known as the Round Table Groups, preeminent among them were the Royal Institute of International Affairs (Chatham House), the Council on Foreign Relations in the United States, and parallel groups were set up in Canada, Australia, New Zealand, South Africa and India.[35]

World War I had marked a monumental period in history in what can be understood as “transitional imperialism.” What I mean by this is that historically, periods of imperial decline and transition (that is, the rise or fall of an empire or empires), are often marked by increased international violence and war.

World War I was the result of the culmination of imperial ambitions by various powers. This was the natural result of the wave of “New Imperialism” that swept the industrialized world in the 1870s. In 1879, the German Empire and Austria-Hungary created the Dual Alliance to combat growing Russian influence in the Balkans with the decline of the Ottoman Empire. Italy joined in 1882, making it the Triple Alliance. In 1892, the Franco-Russia Alliance was made, which was a military alliance between France and the Russian Empire to counteract the German Empire’s supremacy over Europe. In 1904, the Entente Cordiale, a series of agreements between France and Britain, was agreed upon in order to maintain a balance of power in Europe. In 1907, the Anglo-Russia Entente was formed in an effort to end their long-running Great Game by setting the boundaries of their imperial control over Afghanistan, Persia and Tibet. It also acted as a balance to the growing German Empire’s might and influence in Europe. After the signing of the Anglo-Russian Entente, the Triple Entente was cemented between Britain, Russia and France as a significant counter to the Triple Alliance.

The decline of the Ottoman Empire had been a long and slow process. The Ottoman Empire dated back to 1299, and lasted until 1923. “From 1517 until the end of World War I, a period of 400 years, the Ottoman Empire was the ruling power in the central Middle East. Ottoman administrative institutions and practices shaped the peoples of the modern Middle East and left a legacy that endured after the empire’s disappearance.”[36]

In the late 16th century, “Ottoman raw materials, normally channeled into internal consumption and industry, were increasingly exchanged for European manufactured products. This trade benefited Ottoman merchants but led to a decline in state revenues and a shortage of raw materials for domestic consumption. As the costs of scarce materials rose, the empire suffered from inflation, and the state was unable to procure sufficient revenues to meet its expenses. Without these revenues, the institutions that supported the Ottoman system, especially the armed forces, were undermined.” This was largely done through commercial treaties known as Capitulations. The first Capitulation “was negotiated with France in 1536; it allowed French merchants to trade freely in Ottoman ports, to be exempt from Ottoman taxes, and to import and export goods at low tariff rates. In addition, the treaty granted extraterritorial privileges to French merchants by permitting them to come under the legal jurisdiction of the French consul in Istanbul, thus making them subject to French rather than Ottoman-Islamic law. This first treaty was the model for subsequent agreements signed with other European states.”[37]

The Ottoman state had been sufficiently weakened by the early 20th century, which happened to be the same time period that Europeans, particularly the British, were looking at Middle East oil to fuel their empires. The major European alliances sought to take advantage of this weakened Ottoman position. In 1909, Austria-Hungary annexed Bosnia-Herzegovina, inciting the anger of the Russia Empire. The First Balkan War was fought between 1912 and 1913, in which Serbia, Montenegro, Greece and Bulgaria fought the Ottoman Empire. The settlement that followed angered Bulgaria, which then began to engage in territorial disputes with Serbia and Romania. Bulgaria then attacked Greece and Serbia in 1913, followed by Romania and the Ottoman Empire declaring war against Bulgaria, which was the Second Balkan War.

This further destabilized the region, and Austria-Hungary grew wary of the growing influence of Serbia. When Austrian Archduke Franz Ferdinand was assassinated in 1914, Austria delivered an ultimatum to Serbia, where the assassin was from, and then declared war. The Russian Empire mobilized for war the next day, with German mobilization following behind, and France behind it. Germany then declared war on Russia, and World War I was under way.

The end of the Great War saw the disillusion of the Ottoman Empire, breaking up its territory, which was carved up between France and Britain at the Paris Peace Conference. The German Empire and Austro-Hungarian Empires also officially ended as a result of the war, for which Germany was given the sole blame for the war and punished through the Versailles reparations. The Russian Empire ended with the Bolshevik Revolution, which resulted in Russia pulling out of the war in 1917, the same year the United States entered the war. The Great War turned the United States into a powerful nation in the world, becoming a leading creditor nation with significant international influence. The British and French maintained their empires, though they were in decline. However, they attempted to maintain significant control over the Middle East.

World War I was thus the culmination of a massive build-up of imperial nations seeking expanded influence and markets for their capital. Entering the War, there were many empires, leaving it, there were two dominant European Empires (France and Britain) and an emerging new force in the world, the United States.

The Great Depression

The modern banking system manufactures money out of nothing. The process is perhaps the most astounding piece of sleight of hand that was ever invented. Banking was conceived in inequity and born in sin . . . Bankers own the earth. Take it away from them but leave them the power to create money, and, with a flick of a pen, they will create enough money to buy it back again . . . Take this great power away from them, and all great fortunes like mine will disappear, for then this would be a better and happier world to live in. . . . But, if you want to continue to be the slaves of bankers and pay the cost of your own slavery, then let bankers continue to create money and control credit.[38]

– Sir Josiah Stamp, Director of the Bank of England, 1927

Benjamin Strong, Governor of the Federal Reserve Bank of New York, and Montagu Norman, Governor of the Bank of England, who worked closely together throughout the 1920s, decided to “use the financial power of Britain and the United States to force all the major countries of the world to go on the gold standard and to operate it through central banks free from all political control, with all questions of international finance to be settled by agreements by such central banks without interference from governments.” These men were not working for the governments and nations of whom they purportedly represented, but “were the technicians and agents of the dominant investment bankers of their own countries, who had raised them up and were perfectly capable of throwing them down.”[39]

In the 1920s, the United States experienced a stock market boom, which was a result of the commercial banks providing “funds for the purchase of stock and took the latter as collateral,” creating a massive wave of underwriting and purchasing of securities. The stock market speculation that followed was the result of the banks “borrowing substantially from the Federal Reserve. Thus the Federal Reserve System was helping to finance the great stock market boom.”[40]

In 1927, a meeting took place in New York City between Montagu Norman of the Bank of England, Hjalmar Schacht, President of the Reichsbank, the German central bank of the Weimar Republic; Charles Rist, Deputy Governor of the Bank of France and Benjamin Strong of the New York Fed. The topic of the meeting was the “persistently weak reserve position of the Bank of England. This, the bankers thought, could be helped if the Federal Reserve System would ease interest rates to encourage lending. Holders of gold would then seek the higher returns from keeping their metal in London.” The Fed obliged.[41]

The Bank of England had a weak reserve position because of Britain’s position as champion of the gold standard. Foreign central banks, including the Bank of France, were transferring their exchange holdings into gold, of which the Bank of England did not have enough to supply.  So the Fed lowered its discount rate, and began buying securities to equal French gold purchases. Money in the US, then, “was going increasingly into stock-market speculation rather than into production of real wealth.”[42]

In early 1929, the Federal Reserve board of governors “called upon the member banks to reduce their loans on stock-exchange collateral,” and took other actions with the publicly pronounced aim of reducing “the amount of credit available for speculation.” Yet, it had the reverse effect, as “the available credit went more and more to speculation and decreasingly to productive business.” On September 26, 1929, London was hit with a financial panic, and the Bank of England raised its bank rate, causing British money to leave Wall Street, “and the over inflated market commenced to sag,” leading to a panic by mid-October.[43]

The longest-serving Federal Reserve Chairman, Alan Greenspan, wrote that the Fed triggered the speculative boom through its pumping excess credit into the economy (sound familiar?), and eventually this resulted in the American and British economies collapsing due to the massive imbalances produced. Britain then “abandoned the gold standard completely in 1931, tearing asunder what remained of the fabric of confidence and inducing a world-wide series of bank failures. The world economies plunged into the Great Depression of the 1930’s.”[44]

The Bank for International Settlements

In 1929, the Young Committee was formed to create a program for the settlement of German reparations payments that emerged out of the Versailles Treaty, written at the Paris Peace talks in 1919. The Committee was headed by Owen D. Young, founder of Radio Corporation of America (RCA), as a subsidiary of General Electric. He was also President and CEO of GE from 1922 until 1939, co-author of the 1924 Dawes Plan, was appointed to the Board of Trustees of the Rockefeller Foundation in 1928, and was also, in 1929, deputy chairman of the New York Federal Reserve Bank. When Young was sent to Europe in 1929 to form the program for German reparations payments he was accompanied by J.P Morgan, Jr.[45]

What emerged from the Committee was the creation of the Young Plan, which “was assertedly a device to occupy Germany with American capital and pledge German real assets for a gigantic mortgage held in the United States.” Further, the Young Plan “increased unemployment more and more,” allowing Hitler to say he would “do away with unemployment,” which, “really was the reason of the enormous success Hitler had in the election.”[46]

The Plan went into effect in 1930, following the stock market crash. Part of the Plan entailed the creation of an international settlement organization, which was formed in 1930, and known as the Bank for International Settlements (BIS). It was purportedly designed to facilitate and coordinate the reparations payments of Weimar Germany to the Allied powers. However, its secondary function, which is much more secretive, and much more important, was to act as “a coordinator of the operations of central banks around the world.” Described as “a bank for central banks,” the BIS “is a private institution with shareholders but it does operations for public agencies. Such operations are kept strictly confidential so that the public is usually unaware of most of the BIS operations.”[47]

The BIS was established “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.”[48] As Carroll Quigley 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.[49]

The BIS was founded by “the central banks of Belgium, France, Germany, Italy, the Netherlands, Japan, and the United Kingdom along with three leading commercial banks from the United States, including J.P. Morgan & Company, First National Bank of New York, and First National Bank of Chicago. Each central bank subscribed to 16,000 shares and the three U.S. banks also subscribed to this same number of shares.” However, “Only central banks have voting power.”[50]

In a letter dated November 21, 1933, President Franklin Roosevelt told Edward M. House, “The real truth .. is, as you and I know, that a financial element in the larger centers has owned the Government ever since the days of Andrew Jackson – and I am not wholly excepting the administration of W[oodrow]. W[ilson]. The country is going through a repetition of Jackson’s fight with the Bank of the United States – only on a far bigger and broader basis.”[51]

Banking on Hitler

Throughout the 1930s, with the loans provided through the Dawes and Young Plans, Germany was able to create a few dominant industrial cartels, which were all financed by Wall Street bankers and industrialists.[52] These cartels provided the basis for and main financial backing of the Nazi regime. Collaboration between the German Nazi industry and American industry and finance continued, specifically with Morgan and Rockefeller interests, as well as Ford and DuPont. The Morgan-Rockefeller international banks and companies associated with them “were intimately related to the growth of Nazi industry.”[53] Rockefeller’s Standard Oil Empire “was of critical assistance in helping Nazi Germany prepare for World War II.”[54] On top of this, the Rockefeller Foundation was also pivotal in not only funding the racist and elitist eugenics movement in the United States, but played a pivotal part in bringing the eugenics ideology to Nazi Germany, facilitating the beliefs that brought about the Holocaust.[55]

Hjalmar Schacht, the President of the Reichsbank throughout Weimar Germany, stayed on as President of the German central bank from 1933 until 1939, and was thus a central figure in Nazi Germany, being a major driver being the German plans for reindustrialization, redevelopment and rearmament. Hitler, in 1934, made Schacht his Minister of Economics.

Central banks across Europe began to purchase Nazi gold, which was smuggled and melted down and re-stamped in Switzerland, (much like was done with Soviet gold). Sweden, Spain, Portugal, Argentina, Turkey, France, Great Britain, Poland, Hungary, and the United States all “traded with the Nazis with gold transferred by the BIS.” This was done as a collaborative effort among central banks, as “the BIS did enter into gold and currency transactions with Nazi Germany through its participation with the Reichsbank.” Schacht wielded his significant influence and “had become instrumental in placing high-ranking Nazi officials and foreign collaborators on the BIS Board of Directors.”[56]

Empire, War and the Rise of the New Global Hegemon

World War Two also marked a period of massive imperial transition. The build-up of the Third Reich led to Nazi imperialism throughout Europe and North Africa and the Japanese Empire expanded into China. At the end of the War, the British and French Empires were all but vanished, holding onto remaining colonies in Africa and Asia. The Soviet Union was devastated and Germany, with much of Europe, was in ruins. What emerged from this war that was most significant was the rise of a new empire, the American Empire. America’s intervention into the war and expansion into Europe as a liberating force allowed it to set up bases throughout Europe as well as in Japan on the Pacific. The Soviet Union, having taken Europe from the East, expanded its influence and dominance across Eastern Europe. Following Churchill’s speech that an “Iron Curtain” had fallen across Europe, the Cold War was underway. Thus, World War II ended the age of many European empires, even of those in decline, and created a bi-polar world, which was divided between the USSR and the USA.

Following World War II, the US, as the only major nation in the world whose industrial base survived the devastation of the war, assumed the position of global hegemon. It began to set up the infrastructure, both national and international, to assume the position of global superpower, exerting its hegemony across the globe. The crown had been passed from the British Empire to the American Empire. Ultimately, both were and are owned and controlled by the same interests, primarily represented through the central banks and the private banking interests that make up the dominant shareholders.

Before America had even entered the war in late 1941, the Council on Foreign Relations (CFR), the American branch of the round table groups Carroll Quigley discussed as having originated from the secret society of Cecil Rhodes, was planning on America entering the war. The CFR had essentially captured US foreign policy firmly in the grips of the banking elite. The establishment of the Federal Reserve (1913) ensured that the United States would become indebted to and owned by international banking interests, and thus, act in their interest. The Fed financed the US role in World War I, provided the credit for speculation, which led to the Great Depression, and massive consolidation for the interests that own the Federal Reserve System. It then financed US entry into World War II.

The CFR, established six years after the Federal Reserve was created, worked to promote an internationalist agenda on behalf of the international banking elite. It was to alter America’s conceptualization of its place within the world – from isolationist industrial nation to an engine of empire working for international banking and corporate American interests. Where the Fed took control of money and debt, the CFR took control of the ideological foundations of such an empire – encompassing the corporate, banking, political, foreign policy, military, media, and academic elite of the nation into a generally cohesive overall world view. By altering one’s ideology to that of promoting such an internationalist agenda, the big money that was behind it would ensure one’s rise through government, industry, academia and media. The other major think tanks and policy institutions in the United States are also represented at the CFR. They are constitutive of divisions within the elite, however, such divisions are predicated on the basis of how to use American imperial power, where to use it, on what basis to justify it, and other various methodological differences. The divide amongst elites was never on the questions of: should we use American imperial power, why has America become an Empire, or should there even be an empire? If one takes such considerations to heart and questions these concepts, be it within the foreign policy establishment, intelligence, military, academia, finance, corporate world, or media; chances are, such a person is not a member of the CFR.

The CFR effectively undertook a policy coup d’état over American foreign policy with the Second World War. When war broke out, the Council began a “strictly confidential” project called the War and Peace Studies, in which top CFR members collaborated with the US State Department in determining US policy, and the project was entirely financed by the Rockefeller Foundation.[57] The post-War world was already being designed by members of the Council, who would go into government in order to enact these designs.

The policy of “containment” towards the Soviet Union that would define American foreign policy for nearly half a century was envisaged in a 1947 edition of Foreign Affairs, the academic journal of the Council on Foreign Relations. So too were the ideological foundations for the Marshall Plan and NATO envisaged at the Council on Foreign Relations, with members of the Council recruited to enact, implement and lead these institutions.[58] The Council also played a role in the establishment and promotion of the United Nations,[59] which was subsequently built on land bought from John D. Rockefeller, Jr.[60]

The Rise of the American Empire and Keynesian Political Economy

Within liberal political economy, a prominent individual and British economist, John Maynard Keynes, undertook the process of evolving liberal theory into what later became known as Keynesian economics. Following in the footsteps of the dominance of the liberal order, in which the economic and political realms were viewed as separate, and necessarily so, Keynes sought to re-imagine the political-economic relationship. His work was largely influenced by the events leading up to and following the Great Depression, which was largely seen as a failure of the liberal economic order. Keynes wanted to combine state and market forces, not rejecting the liberal notion of the “invisible hand,” however, relegated that to a more distinct area, and imagined a broader role for the state in the economy.

Keynes advocated for the state to act, or invest, when private individuals would not, in an effort to stave off financial or economic crises. Thus, Keynes would argue, the state strengthens the market. A Marxist theorist would likely point to this as an example of how the state, within a capitalist society, functions as an institutional organ which protects the interests of the capitalist class. Keynes advocated a liberal international order composed of free markets, however he recommended state intervention domestically, particularly to protect jobs and control inflation.

Keynesian political economic theory served in large part as a basis for the creation of the Bretton-Woods System, established in 1944, and his concept of embedded liberalism (promotion of liberal international economy, and state intervention in domestic economy), reigned supreme until the 1970s.

In 1944, representatives of the 44 Allied nations met for the Bretton Woods conference (the United Nations Monetary and Financial Conference) in New Hampshire, in an effort to reorganize and regulate the international financial and monetary order following the war. The UK was represented by John Maynard Keynes; with the American contingent represented by Harry Dexter White, an American economist and senior US Treasury department official.  It was out of this conference that the International Monetary Fund (IMF), the International Bank for Reconstruction and Development (IBRD), now part of the World Bank, and the General Agreement on Tariffs and Trade (GATT), now institutionalized in the World Trade Organization (WTO), originated. They were designed to be the institutionalized economic foundations of exerting American hegemony across the globe; they were, in essence, engines of economic empire.

In 1947, President Harry Truman signed the National Security Act, which created the position of Secretary of Defense overseeing the entire military establishment, and the Joint Chiefs of Staff; as well as created the CIA modeled on its war time incarnation of the Office of Strategic Services (OSS); and the Act also created the National Security Council, headed by a National Security Adviser, and designed to give the President further advice on foreign affairs issues separate from the State Department. Essentially, the Act created the basis for the national security state apparatus for empire building.

The founding of the CIA was urged by the War and Peace Studies Project of the Council on Foreign Relations in the early 1940s, and the architects of the CIA, designing the shape and organization of the Agency, as well as its functions; were all Wall Street lawyers, largely made up of members of the Council on Foreign Relations. The Deputy Directors of the CIA for the first two decades were all “from the same New York legal and financial circles.”[61]

Notes

[1]        Edwin Black, Banking on Baghdad: Inside Iraq’s 7,000-Year History of War, Profit, and Conflict. John Wiley & Sons, Inc.: 2004: page 105

[2]        Edwin Black, Banking on Baghdad: Inside Iraq’s 7,000-Year History of War, Profit, and Conflict. John Wiley & Sons, Inc.: 2004: page 107

[3]        Patricia Goldstone, Aaronsohn’s Maps: The Untold Story of the Man who Might Have Created Peace in the Middle East. Harcourt Trade, 2007: pages 21-22

[4]        Patricia Goldstone, Aaronsohn’s Maps: The Untold Story of the Man who Might Have Created Peace in the Middle East. Harcourt Trade, 2007: page 22

[5]        Niall Ferguson, Empire: The Rise and Demise of the British World Order and the Lessons for Global Power. Perseus, 2002: pages 193-194

[6]        Carroll Quigley, Tragedy and Hope: A History of the World in Our Time. The MacMillan Company: 1966: page 56

[7]        Carroll Quigley, Tragedy and Hope: A History of the World in Our Time. The MacMillan Company: 1966: pages 499-500

[8]        Herbert R. Lottman, Return of the Rothschilds: The Great Banking Dynasty Through Two Turbulent Centuries. I.B. Tauris, 1995: page 81

[9]      Patricia Goldstone, Aaronsohn’s Maps: The Untold Story of the Man who Might Have Created Peace in the Middle East. Harcourt Trade, 2007: pages 22-23

[10]      Herbert R. Lottman, Return of the Rothschilds: The Great Banking Dynasty Through Two Turbulent Centuries. I.B. Tauris, 1995: pages 141-142

[11]      Herbert R. Lottman, Return of the Rothschilds: The Great Banking Dynasty Through Two Turbulent Centuries. I.B. Tauris, 1995: pages 143-144

[12]      Herbert R. Lottman, Return of the Rothschilds: The Great Banking Dynasty Through Two Turbulent Centuries. I.B. Tauris, 1995: pages 141-142

[13]      NYT, Rockefeller To Aid Czar? New York Times: March 6, 1906

[14]      Toyin Falola and Ann Genova, The Politics of the Global Oil Industry. Greenwood Publishing Group, 2005: page 215

[15]      Antony C. Sutton, Wall Street and the Bolshevik Revolution. Buccaneer Books, New York, 1974: pages 16-17

[16]      Antony C. Sutton, Wall Street and the Bolshevik Revolution. Buccaneer Books, New York, 1974: page 25

[17]      Antony C. Sutton, Wall Street and the Bolshevik Revolution. Buccaneer Books, New York, 1974: page 34

[18]      Antony C. Sutton, Wall Street and the Bolshevik Revolution. Buccaneer Books, New York, 1974: pages 25-26

[19]      Antony C. Sutton, Wall Street and the Bolshevik Revolution. Buccaneer Books, New York, 1974: pages 71-73

[20]      Antony C. Sutton, Wall Street and the Bolshevik Revolution. Buccaneer Books, New York, 1974: pages 89-90

[21]      Antony C. Sutton, Wall Street and the Bolshevik Revolution. Buccaneer Books, New York, 1974: pages 73-77

[22]      Antony C. Sutton, Wall Street and the Bolshevik Revolution. Buccaneer Books, New York, 1974: pages 82-83

[23]      Antony C. Sutton, Wall Street and the Bolshevik Revolution. Buccaneer Books, New York, 1974: page 87

[24]      Antony C. Sutton, Wall Street and the Bolshevik Revolution. Buccaneer Books, New York, 1974: pages 127-135

[25]      Antony C. Sutton, Wall Street and the Bolshevik Revolution. Buccaneer Books, New York, 1974: pages 159-161

[26]      Antony C. Sutton, Wall Street and the Bolshevik Revolution. Buccaneer Books, New York, 1974: pages 166-167

[27]      Antony C. Sutton, Wall Street and the Bolshevik Revolution. Buccaneer Books, New York, 1974: pages 172-173

[28]      Michael Kort, The Soviet Colossus: History and Aftermath. M.E. Sharpe, 2001: page 202

[29]      Time, Russia & Recognition. Time Magazine: August 18, 1930: http://www.time.com/time/magazine/article/0,9171,789203,00.html

[30]      Time, Everybody’s Red Business. Time Magazine: June 9, 1930: http://www.time.com/time/magazine/article/0,9171,739474-5,00.html

[31]      H.W. Brands, “He Is My Independent Self”. The Washington Post: June 11, 2006: http://www.washingtonpost.com/wp-dyn/content/article/2006/06/08/AR2006060801104.htm

[32]      CFR, Continuing the Inquiry. History of CFR: http://www.cfr.org/about/history/cfr/inquiry.html

[33]      Chatham House, CHATHAM HOUSE (The Royal Institute of International Affairs):  Background. Chatham House History: http://www.chathamhouse.org.uk/about/history/

[34]      Carroll Quigley, The Anglo-American Establishment. GSG & Associates, 1981: page 5

[35]      Carroll Quigley, Tragedy and Hope: A History of the World in Our Time. The MacMillan Company: 1966: pages 132-133

[36]      William L. Cleaveland, A History of the Modern Middle East (Boulder: Westview Press, 2004), 37-38

[37]      William L. Cleaveland, A History of the Modern Middle East (Boulder: Westview Press, 2004), 49-50

[38]      Ellen Hodgson Brown, Web of Debt. Third Millennium Press: 2007: Page 2

[39]      Carroll Quigley, Tragedy and Hope: A History of the World in Our Time. The MacMillan Company: 1966: pages 326-327

[40]      John Kenneth Galbraith, Money: Whence it Came, Where it Went (Boston: Houghton Mifflin Company, 1975), 173

[41]      John Kenneth Galbraith, Money: Whence it Came, Where it Went (Boston: Houghton Mifflin Company, 1975), 174-175

[42]      Carroll Quigley, Tragedy and Hope: A History of the World in Our Time. The MacMillan Company: 1966: page 342

[43]      Carroll Quigley, Tragedy and Hope: A History of the World in Our Time. The MacMillan Company: 1966: page 344

[44]      Alan Greenspan, “Gold and Economic Freedom” in Capitalism: The Unknown Ideal. (New York: Signet, 1967), 99-100

[45]      Time, HEROES: Man-of-the-Year. Time Magazine: Jan 6, 1930: http://www.time.com/time/magazine/article/0,9171,738364-1,00.html

[46]      Antony C. Sutton, Wall Street and the Rise of Hitler. G S G & Associates Pub, 1976: pages 15-16

[47]      James Calvin Baker, The Bank for International Settlements: evolution and evaluation. Greenwood Publishing Group, 2002: page 2

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

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

[50]      James Calvin Baker, The Bank for International Settlements: evolution and evaluation. Greenwood Publishing Group, 2002: page 6

[51]      Melvin Urofsky and Paul Finkelman, A March of Liberty: A Constitutional History of the United States Volume II From 1877 to the Present 2nd Edition. Oxford University Press, 2002: pp. 674

[52]      Antony C. Sutton, Wall Street and the Rise of Hitler. G S G & Associates Pub, 1976: pages 17-19

[53]      Antony C. Sutton, Wall Street and the Rise of Hitler. G S G & Associates Pub, 1976: pages 19-20

[54]      Antony C. Sutton, Wall Street and the Rise of Hitler. G S G & Associates Pub, 1976: page 51

[55]      Edwin Black, Eugenics and the Nazis — the California connection. The San Francisco Chronicle: November 9, 2003: http://www.sfgate.com/cgi-bin/article.cgi?file=/chronicle/archive/2003/11/09/ING9C2QSKB1.DTL

[56]      James Calvin Baker, The Bank for International Settlements: evolution and evaluation. Greenwood Publishing Group, 2002: page 202

[57]      CFR, War and Peace. CFR History: http://www.cfr.org/about/history/cfr/war_peace.html

[58]      William P. Bundy, The History of Foreign Affairs. The Council on Foreign Relations, 1994: http://www.cfr.org/about/history/foreign_affairs.html

[59]      CFR, War and Peace. CFR History: http://www.cfr.org/about/history/cfr/war_peace.html

[60]      UN, 1945-1949. Sixty Years: A Pictorial History of the United Nations: http://www.un.org/issues/gallery/history/1940s.htm

[61]      Peter Dale Scott, The Road to 9/11: Wealth, Empire, and the Future of America. (Berkeley: University of California Press, 2007), 12