Andrew Gavin Marshall

Home » Posts tagged 'housing bubble'

Tag Archives: housing bubble

Global Power Project, Part 7: Banking on Influence with Citigroup

Global Power Project, Part 7: Banking on Influence with Citigroup

By: Andrew Gavin Marshall

Originally posted at Occupy.com

Euro-banknotes-100-dollar-slide

Part 1: Exposing the Transnational Capitalist Class

Part 2: Identifying the Institutions of Control

Part 3: The Influence of Individuals and Family Dynasties

Part 4: Banking on Influence with JPMorgan Chase

Part 5: Banking on Influence With Goldman Sachs

Part 6: Banking on Influence With Bank of America

In the second quarter of 2013, the third-largest U.S. bank by assets, Citigroup, posted a 42% increase in profits which CEO Michael Corbat praised as a “well balanced” result of “cost cutting” programs, including the firing of 11,000 workers.

This big bank has a sordid history of predatory profiteering and criminal activity, not unlike all the other large banks. In the early 20th century, what was then National City Bank was the main bank for the Rockefeller Standard Oil interests. Over ensuing decades and mergers it eventually came to be Citibank, and in the late 1990s, Citigroup. At that time, the bank was dealing with accusations that it had aided in the laundering of roughly $100 million in payoffs by Mexican drug cartels.

In 2000, the mega-bank was accused of abusing borrowers and clients through predatory lending practices. The bank aroused further controversy by helping Enron evade financial rules which allowed the company to hide its real financial reporting from government regulators. In 2005, Citigroup paid a $2 billion settlement to Enron investors who had filed a class-action lawsuit against the bank for helping Enron hide billions of dollars in debt.

A 2005 report by Citigroup created the term ‘plutonomy’ to describe the modern state capitalist system in which there is only the rich “and everyone else”; an economy in which the rich increasingly become the consuming class, driven to a significant degree by “disruptive technology-driven productivity gains, creative financial innovation, [and] capitalist friendly cooperative governments.”

Referencing the United States, the U.K., Australia and Canada as modern plutonomies, Citigroup global strategist Ajay Kapur noted, “The Plutonomy is here, is going to get stronger, its membership is swelling,” and while the “risks” of plutonomies include “war, inflation, financial crises, the end of the technological revolution and populist political pressure,” Kapur noted that “the rich are likely to keep getting even richer, and enjoy an even greater share of the wealth pie over the coming years.” Indeed, Citigroup would ensure that this was the case.

In the 1990s, Bill Clinton’s Treasury Secretary Robert Rubin helped to deregulate Wall Street and allow for massive mergers and the proliferation of dangerous financial instruments in the derivatives market, which helped create the future housing crisis. After leaving the White House, Rubin became an adviser to Citigroup, and ultimately the bank’s chairman, where he helped push the mega-bank further down the path taken by Morgan Stanley and Goldman Sachs to build up an unprecedented housing bubble. When the inevitable happened, Citigroup owned tens of billions of dollars in bad debts. Meanwhile, Robert Rubin was appointed as an economic adviser to the transition team for President Obama.

Citigroup was subsequently bailed out by the federal government, that is, the U.S. taxpayer, and became the largest single recipient of bailout funds totaling some $476.2 billion in cash and guarantees. Citigroup was essentially put into receivership by the government, which decided to reward the bank after its highly effective and efficient participation in the destruction of the economy. The U.S. Treasury eventually sold the last of its shares in Citigroup in 2010.

Since that time, the bank has been quietly settling civil complaints and lawsuits, further proving that criminal activity by major financial institutions comes down to a cost-benefit analysis: if the cost of committing massive crimes is less than the benefit of engaging in such criminal activity, there is little incentive to obey the law rather than pay comparably lower fines after breaking it.

Between 2003 and 2011, the Securities and Exchange Commission (SEC) accused Citigroup of securities fraud five separate times, with the bank agreeing to pay settlements in each case, amounting to a slap on the wrist from the SEC. As a Bloomberg report stated bluntly, for Citigroup “obeying the law is too damn hard.” Or rather, simply, it is unnecessary.

In 2011, Citigroup paid a $285 million settlement with the SEC for defrauding investors. In 2012, the bank paid another settlement of $590 million for defrauding investors, though it made sure not to admit guilt as the payment was “solely to eliminate the uncertainties, burden and expense of further protracted litigation.” In 2013, Citigroup agreed to pay a further $968 million to Fannie Mae over the bad mortgage loans it sold to the company in the run-up to the financial crisis.

But before you assume that Citigroup simply defrauded investors and other institutions, know this: the bank also undertook foreclosures on hundreds of U.S. military members during the financial crisis, often while the military personnel were in Iraq or Afghanistan. After illegally foreclosing on military personnel while they were overseas fighting wars for the America’s imperialists and profiteers, Citigroup made a later appearance in Iraq, announcing in 2013 that it would be the first U.S. bank to open a branch in Bagdad “as major international oil groups as well as industrial and construction companies are looking to invest in Iraq.”

Iraq is just the latest hub of overseas criminal financial activities for Citigroup, which has meanwhile been struggling to “comply” with anti-money laundering laws after also participating in the largest financial scam in history: the Libor rate-rigging scandal. At the same time, the bank has been dooming the European Union’s crisis countries (namely Greece) to a faster decline, issuing self-fulfilling reports that suggest the region is headed for further crisis, thus reducing investor confidence and pushing the crisis-hit economies into even deeper crisis.

In sum, Citigroup’s fraudulent lifestyle – with its increased quarterly profits – is one more example of how the institutions of the financial system function as criminal conglomerates on a scale far surpassing any Mafia on record. And of course, for such criminal activity to go unpunished, the institution cannot exist in isolation. In fact, like all other big banks, Citigroup is heavily integrated in the national – and increasingly international – structure of elite institutions, with cross-membership between major corporations, think tanks, governmental positions, media and educational institutions.

Thirty-seven individuals on the executive committee and board of directors of Citigroup were examined for the Global Power Project. The most represented institution was the Council on Foreign Relations, with six individual affiliations, followed by Morgan Stanley, Banco Nacional de Mexico (Banamex), American Express, the Foreign Policy Association, IBM, the Brookings Institution, the Metropolitan Museum of Art, Yale University, and Stanford University, among many others.

William R. Rhodes

William R. Rhodes

Meet the Elites

On the board of directors of Citigroup is Franz B. Humer, the chairman of Roche Holding, a major pharmaceutical conglomerate. Humer also sits on the International Advisory Council of JPMorgan Chase, and is chairman of INSEAD, chairman of Diageo Plc, a member of the international advisory board of Allianz SE, a member of the board of Jacobs Holdings, and a member of the European Round Table of Industrialists (which advises EU leaders on promoting policies beneficial to large corporate and financial interests). Humer also serves, comfortingly, as chairman of the International Centre for Missing and Exploited Children.

Judith Rodin, the president of the Rockefeller Foundation, is on the board of Citigroup. Rodin also served as the President of the University of Pennsylvania from 1994-2004, after which she remained as President Emerita. A former Provost of Yale University, Rodin also serves as a director of Comcast Corporation, AMR Corporation, the World Trade Memorial Foundation and Carnegie Hall. She is a member of the Council on Foreign Relations and a former honorary director of the Brookings Institution. Additionally, Rodin is a member of the board of the Alliance for a Green Revolution in Africa (AGRA) – a joint venture between the Rockefeller Foundation and the Bill & Melinda Gates Foundation to promote the advancement of GMOs in Africa – and she served as a member of the High Level Panel of the African Development Bank. Rodin currently serves as a member of the international advisory council of the Mary Robinson Foundation, a member of the American Academy of Arts and Sciences, the American Philosophical Society, and the Institute of Medicine of the National Academy of Sciences. She is also a participant in the World Economic Forum, the Global Humanitarian Forum, the Clinton Global Initiative’s “poverty alleviation track,” and she is a board member of Obama’s White House Council for Community Solutions.

Another member of the Citigroup board is Ernesto Zedillo, the former President of Mexico from 1994 to 2000, who was pivotal in implementing the North American Free Trade Agreement (NAFTA), much to the benefit of big banks and corporations, and to the detriment of poor and working people. Zedillo had previously served a number of positions in the Mexican government, including deputy director of the Bank of Mexico. Currently, Zedillo is the director of the Center for the Study of Globalization and an International Economics and Politics professor at Yale University. He is a member of the Group of Thirty, on the board of directors of Alcoa and Procter & Gamble, and on the international advisory boards of both BP, Rolls-Royce and ACE Ltd.. He is additionally an adviser to the Credit Suisse Research Institute, a member of the Foundation Board of the World Economic Forum, a former member of the Trilateral Commission, the former chairman of the Global Development Network, a former chair of the High Level Commission on Modernization of the World Bank Group Governance, a former member of the international advisory board of the Council on Foreign Relations and the Coca-Cola Company, a former member of the Global Development Program Advisory Panel of the Bill & Melinda Gates Foundation, and he is currently a member of the board of the Peterson Institute for International Economics.

William R. Rhodes, another Citigroup board member, serves as a senior advise to Citi and is president and CEO of William R. Rhodes Global Advisors. A director of the Private Export Funding Corporation, Rhodes is a senior adviser to the World Economic Forum, the global management firm Oliver Wyman, vice chairman of the National Committee on U.S.-China Relations, a director of the Korea Society and the U.S.-China Business Council, a member of Korean President Lee’s Council of Global Advisors, a member of the international advisory board of the National Bank of Kuwait, a senior adviser to the Dalian Government in China, a member of the private sector advisory board of the Inter-American Development Bank, a member of the international policy committee of the U.S. Chamber of Commerce, a member of the board of the Foreign Policy Association, and a trustee of the Asia Society and the Economic Club of New York. Rhodes is also a member of the Council on Foreign Relations, the Group of Thirty, the Lincoln Center Consolidated Corporate Fund Leadership Committee, the Metropolitan Museum of Art Business Committee, and he sits on the advisory council of the Brazilian American Chamber of Commerce. He is a former vice chairman of the Institute of International Finance, a chairman emeritus of the Americas Society and the Council of the Americas, a director of the U.S.-Russia Business Council and the U.S.-Hong Kong Business Council, a chairman of the U.S.-Korea Business Council, a trustee and member of the board of governors of the New York Presbyterian Hospital, a chairman of the board of trustees of the Northfield Mount Hermon School, and a member of the board of overseers of the Watson Institute for International Studies at Brown University.

Like all the big banks, Citigroup is heavily integrated with other dominant institutions in American and international society, which helps explain why the bank can break so many laws and get away with it. It’s not simply financial weight that makes this bank “too big to fail” and “too big to jail.” It’s the institutional affiliations that also help make it that way.

Deathstar_citi

Andrew Gavin Marshall is a 26-year old researcher and writer based in Montreal, Canada. He is Project Manager of The People’s Book Project, chair of the Geopolitics Division of The Hampton Institute, research director for Occupy.com‘s Global Power Project, and hosts a weekly podcast show with BoilingFrogsPost.

 

The Maple Spring and the Mafiocracy: Struggling Students versus “Entitled Elites”

The Maple Spring and the Mafiocracy: Struggling Students versus “Entitled Elites”

By: Andrew Gavin Marshall

It says a great deal about our society when hundreds of thousands of students – already largely indebted, a significant portion of whom live well below the poverty line, who already work what few jobs exist for a generation forgotten before we leave home – take to the streets in protest and are portrayed as “entitled”, “spoiled brats” as they attempt to “negotiate” their very chance of having a future in this society… with a government that supports and works with organized crime, which is beholden to an economic elite, and which supports only those who can already support themselves.

There is something deeply wrong with a society in which students who struggle for a very chance in life are insulted, degraded, beaten, arrested, humiliated and denigrated. First, we were told for years that we were “lazy” and “apathetic”: Generation MTV, Generation iPod, a techno-savvy but reality-detached deluge of pseudo-humanoids. We were seen as concerned only with ‘self’, worshipping of wealth, and with celebrities like Paris Hilton and whatever Car-crashian disaster is on reality TV this week, who could blame people for thinking this? Our media raised us. Television raised us. Advertising raised us. Public relations agencies raised us. They have told us what to wear, how to behave, what to drink, what to eat, what to listen to, dance to, sing to, who to speak to, who to admire, who to hate, what to spend time thinking about, what to be concerned about, what and how to think and be. We were set up to be Generation Obscurity.

But then, something changed: our circumstances.

For those of us who grew up middle class, we started to have a harder time getting by. We worked while we were in high school, but that was okay, the extra money was nice. But then we graduated and it was time to begin our lives. So we either worked full time, or went to school, and probably work part-time. School is expensive, and whether you live in Quebec, the rest of Canada, the United States, or a great host of many other places, school is more expensive for us than it was for our parents. Our minimum wage might seem higher, but the cost of living has soared since our parents were getting their first few jobs, so in real terms, we earn much less. So we lived and often continue to live at home while we go to school or even while we work. With rent so high, and cities so expensive, who can afford their own space in this crazy kind of place? School was still too expensive, even as we worked and as our parents helped however they could. After all, they were and are struggling too. So we got student loans. And now we’re deep in debt.

Suddenly, our world was thrown into a deep economic crisis. Most of us don’t know how this came to be, or who is responsible, all we know is that we only did what we were told to do: consume. And what did that do for us? We’re in debt. All we know is that even though we didn’t cause this global crisis, we are being held responsible for it. All we know is that we are told we are in a “recovery,” but we don’t feel like it. How many people truly feel more financially secure now than they did in 2007? Do you? I don’t!

But now we are told that we are in a “recovery” because those who caused the economic crisis are doing much better. In fact, many of them are doing better than ever! During the crisis, our government’s said we had to “bail out” the banks that had colluded with the governments to create the crisis in the first place. We were scared, so we sat back and watched as our governments gave banks blank checks. First, I should add, our governments worked with the banks in passing (or dismantling) laws and regulations, implemented policies, undertook joint programs, spent enormous sums of money between them, as our political leaders left office to sit in bank boardrooms, and as bankers left the private vaults to the public treasury. This relationship between big business, big banks, and big government (most emblematic in the central banking system, in which private banks with public powers control the very value of our currencies), is what created the economic crisis. And when that crisis erupted, those same governments gave those same banks more money than ever before, to ensure that they were rewarded for creating such a massive global crisis. At the same time, the governments then gave themselves even more power over the economy and their own social and political environments, all the while ensuring that the banks and corporations were involved in every decision, and would benefit from every outcome. So those who caused the crisis rewarded themselves with more money and more power than they had when they created the crisis in the first place.

At the same time, we, the people, have to pay for everything. We have to pay with increased taxes (remember, that bailout money has to come out of YOUR pockets), with rising prices for food and fuel, with inflated property prices (if they weren’t already collapsing, in which case, we face potential foreclosure), with increased debt – not even to consume, but simply to subsist – with decreased jobs, with unemployment, with increased homelessness, increased reliance upon food stamps, increased welfare and state assistance (which comes with intense scrutiny of your personal finances and life), and now, with austerity: further tax increases, less social services and support, mass layoffs and pay-cuts, decreased support for health care and education, increased tuition, and increased struggles. But remember, we have to suffer under austerity so that our governments can pay for all the rewards they gave to the banks for… making us suffer.

This is called “Capitalism.”

Now, take Canada as an example. Canada is perhaps the best example to use in this situation because, let’s face it: we have one of the better “reputations” among Western nations of the world (though largely undeserving), we are seen as peaceful (though we are now always at war), and compared to the rest of the industrialized West, we fared through the economic crisis much better than most. Our banks, in fact – with five Big Banks that dominate the economy – are consistently rated as among the world’s “strongest banks.” In April of 2012, Moody’s Investors Service rated Canada’s banks as the “safest in the world.” And we better believe Moody’s, because they failed to predict the economic crisis itself, and as their CEO even admitted when questioned about the agency being funded by Wall Street firms, “potential conflicts exist regardless of who pays.” For four years in a row, the World Economic Forum has rated Canada’s banking system as the most sound in the world. Even the Canadian Bankers Association praises Canada’s banks. Imagine that!

Unfortunately for their self-congratulations, it was recently revealed that Canada’s banks actually received a “secret bailout” in 2008, for a total of $114 billion, or $3,400 for every Canadian man, woman, and child. The bailouts took place between 2008 and 2010, funded by the Bank of Canada, the United States Federal Reserve, and the Canada Mortgage and Housing Corp. The government continues to deny it gave the banks a bailout, instead, our Finance Minister insists, it was just “liquidity support,” which means… the government did not “bail out” the banks with public money, it just gave the banks public money… in “support.” Call it what you will, they gave them $114 billion. Mark Carney, the Governor of the Bank of Canada (our central bank), and a former executive with Goldman Sachs (what’s not to love?), even admitted that the Bank of Canada gave tens of billions of dollars to our private banks. The U.S. Federal Reserve provided $33 billion to Canada’s big banks, while the official numbers of what the Bank of Canada provided remain a “secret,” as the government has refused to respond to Access to Information requests on the subject. Available information, however, points to $41 billion given to our banks by the Bank of Canada by December of 2008. Even some foreign banks had access to money from the Bank of Canada. Thus, Canada’s big five banks – Royal Bank of Canada, T.D. Bank, Scotiabank, the Bank of Montreal and CIBC – received collectively over $114 billion in “bailouts.” Oh, excuse me, I mean, “liquidity support.” And now, these same banks have inflated a major housing bubble in Canada which is eerily similar to that which existed in the United States in 2007, with housing prices dangerously high, and the average household debt at $103,000. But don’t worry, these big five banks made “record profits” in 2011. So naturally, with record profits for banks, and record debt for Canadians, the banks have decided to increase their fees on you! And then their profits continued to increase! Naturally, the executives have been giving themselves bigger bonuses than ever.

This is called an “economic recovery.”

And remember, it’s the students in Québec who are “entitled.” People call the students “spoiled” and “entitled” because they pay less than $2,500 for tuition every year, and are trying to prevent a situation in which they will be paying roughly $4,000 per year. But the big banks, making record profits, got the equivalent of $3,400 from every single man, woman, and child in Canada. But that’s not called “entitlement,” that’s called Capitalism.

So, the banks are doing better than ever, and this means we are in a “recovery.” According to our governments and media, it doesn’t matter what situation you are in, only what situation RBC, CIBC, BMO, Scotiabank and TD are in. Starting in the year 2000, Canada’s corporations and banks started having their taxes cut significantly by the government, whether Liberal or Conservative. In 2000, corporate taxes were at 28%, and by 2006 it was at 21%. In the beginning of 2012, corporate taxes in Canada were at 15%. This was all, of course, done to create “jobs.” That is, after all, what we were told by our politicians who insisted it was the right thing to do. At the moment, Canada has a rather significant unemployment rate, and a much higher youth unemployment rate. In 2006, the unemployment rate for Canadians was 4.6%, and today it is at 7.3%. In 2006, the unemployment rate for Canadian youth between the ages of 15 and 24 was at 8.4%, but by 2012, that has increased to 13.8%. In the same period of time, corporate taxes were cut from 22% to 15%, with the stated purpose of creating “jobs.” Now, the unemployment numbers are themselves misleading, because they only actually refer to those who are on some form of government assistance, such as welfare or employment insurance. The rest of the unemployed are not counted. While the corporate tax cuts did not lead to more jobs, but rather, less… they did lead to more money for the corporations and banks. By 2011, Canadian corporations and banks had hoarded $477 billion in cash reserves as money that was saved from taxation. For every percentage decrease in corporate taxes, the government loses $2 billion in potential revenue. In response, the government turns to austerity measures, which means that you have to suffer and pay for everything, especially your own poverty. Poverty is, after all, very expensive.

In 2012, these record profit-making corporations are getting an extra $2.85 billion in additional income tax savings. Even as Stephen Harper cut the taxes further, he acknowledged that the corporations weren’t actually investing their saved money in “jobs” but that it was just “money sitting on the sidelines.” Since 2007, the cash reserves of Canada’s corporations have grown by 27.3%, reaching $583 billion in Canadian currency, and $276 billion in foreign currencies. So what can we conclude from this? Well, when politicians and corporations and banks say that they are pursuing a particular policy to create “jobs,” what they really mean is to create “profits.” So when a politician says, “We need to cut corporate taxes so that they can invest in jobs,” what is really being said is that, “We need to cut corporate taxes so that they can make profits.” This makes more sense, because this is what actually happens. So it’s not so much that politicians lie, but rather that they just speak a different language. So take note, and I guarantee this is a very accurate method, in political-speak: “jobs” = “profits.” So now when you listen to your [s]elected officials blather on, you’ll actually be able to understand what they are saying.

Oh, and in case you forgot, remember: it’s Québec students who are “entitled” and “spoiled brats.” Just making sure you remember that.

In Canada, we have a situation in which total national student debt is at $20 billion, and with tuition increases, this too will increase dramatically. But don’t worry, increased tuition costs and increased student debt is good for the banks, because they provide a lot of the loans and own the debt, and collect the interest and keep you in their pockets for the rest of your life. And remember, if the banks are doing well, the economy is doing well. You don’t matter… at all. Okay, so total student debt in Canada is at $20 billion, with the average student graduating with $27,000 in debt, few job prospects, high unemployment rates, and in a major social and economic crisis, but the Canadian government is buying 65 F-35 fighter jets from the U.S. military contractor, Lockheed Martin, worth a total of $25 billion. So, we can bail out our banks to the tune of $114 billion, and we can spend $25 billion buying military machines to go bomb and kill poor people around the world, but students shackled with $20 billion in debt must be shackled with more. And if they try to do anything about the increases in tuition, and thus, the increases in their debt, Canadian politicians and the media refer to them as “entitled,” “spoiled brats.”

Here are a few numbers to show the current divide between the rich and everyone else in Canada, what we are told is a hallmark of a flourishing democracy and recovering economy:

– the 100 best paid CEOs made an average of $6.6 million, which is 155 times the average wage for Canadians at $42,988

– the tax rate for the richest Canadians dropped from 43% in 1981 to 29% in 2010

– in Quebec, the richest 10% made 24% more in 2006 than in 1976, while the poorest made 10% less

– with average student debt in Québec at $13,000 and $27,000 in the rest of Canada, the cost of “free education” in Québec would be less than 1% of the government’s budget

– for every $1,000 fee hike in tuition, the proportion of poor students drops by 19%, thus making education inaccessible for poor people

– with youth unemployment in Canada between 14-20%, and total student debt amounting to $20 billion, the percentage of students defaulting on government loans is at 14%

– the percentage of Canadians between 20 and 24 living with their parents is 73%

– the percentage of Canadians 25 to 29 living with their parents is 33%

This is called “democracy.”

With Jean Charest as Québec’s premier, attempting to nearly double student tuition from an average of over $2,000 to nearly $4,000, it might be interesting to look at what Charest paid for his education. Charest studied in Sherbrooke in the late 1970s, where he would have paid $500 for tuition, less than $2,000 in today’s dollars. In 1978, the minimum wage (for those students who needed to work to pay their tuition) in Québec was $3.50/hour. In today’s dollars, that would equal $12/hour, while the actual minimum wage in Québec today is $10/hour. Therefore, wrote McGill University professor Michael Hilke, “it was easier for students to pay for college back then.” But Charest calls us “entitled.”

In point 7 of my article, “Ten Points Everyone Should Know About the Quebec Student Movement,” I provided sources and information regarding the deeply interconnected relationship between the government of Québec, especially with Charest’s Liberal Party in power, the corrupt construction industry, and the Mafia. Politicians, especially the Liberal Charest government currently in power, provide over-estimated public funds to the construction industry to do what costs significantly less in other provinces, and to build bridges and roads that fall apart, and it just so happens that the construction industry is owned by the Mafia. While public contracts are not the main source of revenue for the Mafia (who can compete with illicit drugs? … well, except for the oil and arms industries), getting massively over-estimated public funds allows the Mafia-connected construction businesses to throw fundraisers for the politicians and keep them in power. Thus, the interaction between the Mafia and the government is a mutually beneficial relationship, where money flows back and forth, designed to keep each party in power. But it’s unfair to blame Charest and the Liberal Party for collusion with the Mafia; they are simply carrying on a long political tradition of governments working with organized crime. So, the government supports organized crime and opposes organized students. Ultimately, both organized crime and organized polities serve the same interests. Can you guess whose? I’ll save you the effort, it’s really quite simple, and it’s not exclusive to Canada, this is a global phenomenon: follow the money.

Canada is a market leader in many aspects of the global trade in illegal drugs. In a 2009 report form the UN Office on Drugs and Crime, Canada was revealed to be the leading supplier of ecstasy to North America, and one of the world’s major producers and shippers of methamphetamine for various markets around the world, which is so significant that it was revealed that 83% of all the meth seized in Australia came from Canada, whereas in Japan it was 62%. In 2006, only 5% of the meth produced in Canada was exported. In 2007, it was at 20%. That’s pretty impressive! In 2007, 50% of the ecstasy produced in Canada was exported, primarily to the United States, Australia, and Japan. In 2007, Canada was identified by Japan as the largest single source for seized ecstasy tablets, followed by the Netherlands, Germany, and Belgium. But it’s not Canada’s fault, we are simply partaking in an already well-established global drug trade, the most profitable trade in the world following oil and arms.

This of course is a result of our governments having undertaken prohibition against illicit drugs, just as the United States had done with alcohol, which history shows, didn’t work very well. Alcohol prohibition gave an incredible boost to the Mafia and organized crime in the United States and elsewhere, and of course, included in its silky spider web were corrupt cops, politicians, and financiers. When something is “illegal” it becomes far more expensive, and thus, far more profitable. So our governments have decided to continue their policies of prohibition for illicit drugs: to keep profits up, to support organized crime, to participate in organized crime, to keep the money flowing, keep the prisons full, and to declare a mythical “war on drugs” which accomplishes nothing but further militarization designed to wipe out the competition. So Latin American countries must suffer under our increased military and repressive presence. A few months prior to the NATO invasion and occupation of Afghanistan in 2001, the Taliban had eradicated the opium trade in one year, wiping out the world’s largest opium crop. Following the invasion in October of 2001, and the installation of a puppet president Hamid Karzai in December of 2001, the new Afghan government began colluding with drug lords and opium production began to accelerate. In fact, the drug trade in Afghanistan reaches record highs nearly every year since the invasion. Between 2011 and 2012, opium production in Afghanistan increased by another 61%. In 2009, the New York Times reported that one of Afghanistan’s most powerful drug lords was the brother of Afghan President Hamid Karzai, and that he also happened to be working for the CIA at the same time. The CIA has a sordid history with the drug trade, from Indochina in the 1960s, to Afghanistan and the Iran-Contra affair in the 1980s. More recently, in 2007 there was an under-reported incident in which a CIA plane which had been used for rendition flights (i.e., kidnapping and torture) had crashed in Mexico with 3.3. tones of cocaine on board, carrying Colombian cocaine for the major Mexican drug cartel, the Sinaloa cartel.

Since 2006, the government of Mexico has been waging a massive “drug war” against several of the large drug cartels in the country. This war has been financially and materially supported by the U.S., which has been providing arms, equipment, and intelligence assistance to the Mexican army. The war has been incredibly violent, and widely under-reported in our media north of Mexico. From 2006 to 2011, there were between 45-60,000 deaths related to the drug war. In 2009, the Mexican drug lord – Joaquin “El Chapo” Guzman Loera – who heads the largest drug cartel, the Sinaloa cartel, made Forbes’ billionaires list. Journalists in Mexico who cover the war repeatedly get tortured and murdered. Within a six-month period in 2010, more than 11,000 migrants were abducted by drug cartels, either to extort money or to be used as forced labour. An investigative report by NPR in 2010 revealed a deeper and darker side of the story: the war is “rigged.” As the United States gives billions of dollars to Mexico in military and judicial aid, the Mexican government works to support the Sinaloa cartel by destroying the competition. Testimony of top Sinaloa cartel traffickers in court revealed further links between the cartel and the Mexican army. Whether through bribes or other means, including the major participants themselves passing from high-ranking police and military positions directly into the cartels, the relationship between the Mexican government and the cartels, especially the Sinaloa cartel, runs deep. The drug trade through Mexico, which is heavily implicated in bringing cocaine from Colombia to the United States, produces profits of tens of billions every year. Even a top Mexican army general and a former deputy minister of defense have now been implicated in ties to drug cartels, something which is not new in Mexico.

A small scandal emerged for the United States government in 2011 when it was revealed that a U.S. operation “allowed weapons from the U.S. to pass into the hands of suspected gun smugglers.” Codenamed Operation Fast and Furious, it was run by the U.S. Bureau of Alcohol, Tobacco, Firearms and Explosives (ATF), which admitted “that 1,765 guns were sold to suspected smugglers during a 15-month period of the investigation.” A gun dealer in Arizona reported that he was concerned that his guns were being sold to drug cartels, fuelling the violence that has now killed over 55,000 people, and when he expressed these fears, he “was encouraged by federal agents to continue the sales.” Internal emails released from the ATF revealed that the bureau’s top officials were regularly briefed on the gun-running operation. It was later revealed that many Mexican drug cartel figures who were being targeted by the ATF also happened to be “informants” for the FBI and the Drug Enforcement Agency (DEA), who kept the ATF “in the dark” about their relationship with the cartels. At least six Mexican drug cartel figures were also on the payroll of the FBI. Some ATF agents have blown the whistle on the operation, stating that it went back as far as 2008, and that they were “ordered to let U.S. guns go to Mexico.” Memos from 2010 revealed that several top U.S. officials in the Department of Justice, including Attorney General Eric H. Holder Jr, regularly received updates about the operation. Three National Security officials in the White House also received updates. One of Mexico’s top drug traffickers, the right-hand man of the leader of the Sinaloa cartel, claimed in court testimony that he “was working all along as a confidential informant for U.S. agents,” specifically for the U.S. Drug Enforcement Agency (DEA). U.S. weapons smuggling to Mexico is no small operation, as roughly 70% of the weapons seized in Mexico came from the United States.

In Congressional testimony, an ATF agent reported that the ATF was working on Operation Fast and Furious in cooperation with the DEA and the Internal Revenue Service (IRS). To add to that, an insider at the CIA revealed that the Central Intelligence Agency (aka: the Cocaine Import Agency), “had a strong hand in creating, orchestrating and exploiting Operation Fast and Furious.” Over fears that the Zetas cartel could totally usurp control of the Mexican government, the CIA reportedly intervened in support of the Sinaloa cartel, with its close ties to the Mexican military. In a report with the Washington Times, it was revealed that the CIA would allow the Sinaloa cartel to smuggle cocaine into the United States on a 747 cargo plane, and in turn, the CIA approached the ATF to create Operation Fast and Furious, ensuring that the trade “wasn’t one-way,” so that arms were funneled into Mexico from the U.S. as drugs were funneled into the U.S. from Mexico, all with CIA support. Meanwhile, according to the New York Times, undercover DEA agents were laundering millions of dollars in drug money for the Mexican cartels in the United States.

Within Mexico, the drug money spreads all across the economy, into skyscrapers, casinos, beach resorts, restaurants, the construction industry, and of course, political campaigns. But the 55,000 deaths in Mexico in the past six years have been good for the United States, particularly for gun sales and big banks. In fact, internal investigations revealed that Wachovia Bank, now a part of Wells Fargo, one of the largest banks in the United States, laundered billions of dollars in drug money for Mexican cartels, even as they were receiving bailout money from the United States government. It was not only Wachovia, but also Bank of America that has been implicated in laundering Mexican drug money, worth up to $378.4 billion. Other banks have been implicated as well, in both the United States and Europe. The UN revealed in 2009 that drug money actually saved the major banks, as roughly $352 billion in drug money was absorbed into the financial system during the worst of the economic crisis in 2008.

So what do we make of all this?

We are told that this is called “democracy” and a “strong economy.” We are told that this is the “best system in the world,” which benefits everyone… just not you.

I prefer to use another word to describe it: Mafiocracy.

Now, I did not come up with this word, but it applies, and I can think of no better word to describe the relationship between big business, big banks, government and organized crime. So we are faced with a Mafiocracy, whether in Afghanistan, Colombia, Mexico, the United States, or even in Québec. With collusion so deep and embedded between organized crime, state agencies, politicians, and financiers, it’s almost problematic to refer to organized crime as somehow separate, since it isn’t. So let’s call it what it is: a Mafiocracy. A local Mafiocracy, such as the one which exists in Québec between the local Mafia, the local government, and the local economic elite, is inter-related with the global Mafiocracy, atop of which sit the Kings of Capital and the High Priests of Globalization. We are in the age of Globalization, and the Mafiocracy has been significantly globalized and energized. As the Mafiocracy gets stronger, democracy gets weaker, until it is altogether gone and dead, without even a memory remaining.

The first time I heard the term “Mafiocracy” was in an incredible documentary about Argentina, entitled, “Social Genocide,” covering the country’s recent history of military dictatorships supported by the U.S., followed by the age of neoliberalism with liberal democratic governments more corrupt than the dictatorships that preceded them, with an elite so extravagant it would be almost comically-absurd if it wasn’t so disturbing. The film documents the relationship between democratically-elected leaders, narco-trafficking, organized crime, international terrorism, Western banking institutions, the IMF and World Bank, corruption feeding off of the national debt, the privatization of public wealth, and all the while demanding the population pay for the Mafiocracy through austerity and “structural adjustment,” what is translated in real terms into “Social Genocide.” When the people stood up in December of 2001, Argentina’s president declared a state of siege, which was responded to by the population who took their pots and pans out into the streets across the country and to the Plaza de Mayo in Buenos Aires, and they banged their pots and pans in the midst of police confrontations that killed 26 people, eventually forcing the president to flee from the city by helicopter. The Mafiocracy demanded the people suffer for its own excesses, for its wealth and power, and imposed a rigid, organized, structured and systematic program of “Social Genocide”: what economists, politicians and pundits refer to as “fiscal austerity” and “structural adjustment.” The people took their pots and pans into the streets and said ‘No More!”

Sound familiar?

For more than 100 days, hundreds and thousands of students in Québec have been on strike against a plan to increase tuition by roughly 75%. The Mafiocracy government, after two months of refusing to speak to the students and instead used state violence and repression against them, finally agreed to sit down and talk in April. They then cancelled the negotiations and threw out a new “proposal” which would actually increase the tuition hike. Obviously, this insulting gesture was rejected. Then there were other negotiations in early May, while the riot police were outside nearly killing a few students by shooting them in the face and head with rubber bullets, the government pressured the student leaders to sign a sham of an agreement, with extra pressure coming from the major union leaders, who only exist today because of their willingness to engage and collude with the Mafiocracy – particularly the government and big business – and so they told the students it was the best deal they would get. The deal did not include a decrease in the tuition increases. This entire process has taken place in the midst of a national media campaign against the student movement, which increased and evolved into a social movement, an anti-austerity movement, and at times, even a small rebellion against the Mafiocracy. The media framed the striking students as “spoiled brats” who were “whining and crying” about a loss of “entitlements.” The latest negotiations broke down last week. Why? Because after four days of negotiations, the only “compromise” the government engaged in, was to agree to reduce the overall tuition increases by $1. Yes, you read correctly: ONE DOLLAR.

This is what it means to negotiate with a Mafiocracy.

But the students continue to march, continue to inspire, and the movement – the Maple Spring – continues to expand beyond the students, far beyond the issue of tuition, and far beyond Québec. People walk through the streets, every day and every night, in defiance of a law passed by the Mafiocracy government which criminalized spontaneous protests. People step outside and bang their pots and pans, walk through the streets, through rain storms and sun shine, hot or cold. People are aware that they could again be pepper sprayed, tear gassed, smoke bombed, beaten with batons, trampled with horses, driven into with cars, shot with rubber bullets, or arrested en masse. But still, they go. And across Canada, and in fact, far beyond, people are taking their pots and pans and stepping out into their streets in solidarity.

Remember that description we once heard for the system of government we were supposed to be living under: “of, by, and for the people”? Is that the Mafiocracy? We were a generation reviled for our trivial technological obsessions, entertainment enslavement, and absolute apathy. So we defy those stereotypes and step out into the streets, day after day. We are no longer apathetic, and now we are called “spoiled” and “entitled.” But that’s okay; people – especially those in power, who speak through the media – always fear what they do not understand. Now the social gatherings of youth are not necessarily at bars and clubs, but in protests and casseroles (marching with pots and pans). Regardless of the outcome, we have come to realize that we are a powerful force when united, that we have to physically, intellectually, and emotionally put ourselves on the line to struggle for what is right. We realized that when our options are to either suffer or struggle, the choice is easy. We have a long way ahead of us, we struggle, we persevere, we protest, we push, we persist, we have not yet prevailed, but we are linking up with people – especially youth – across Canada and around the world. We are using the technology which in one sense had enslaved us to obscurity and apathy, and are now using it to mobilize and organize more than ever before.

We have taken the first steps which are required in a global struggle of people against a global Mafiocracy. We follow in the footsteps of those who have walked before us, whether they are in Egypt, Tunisia, Greece, Spain, Iceland, or Chile. They cannot fight our fight for us, but we can all fight together. Our struggle is global, though we may experience it in the local. With every step forward, we realize the global implications of what we are starting to do, and the world is starting to watch. The people are waking up, walking out, and trying to reshape society so that it does not simply benefit the few at the expense of the many.

This is called Democracy.

 

For more information on the ‘Maple Spring’, see:

The Québec Student Strike: From ‘Maple Spring’ to Summer Rebellion?

What Really Happened at the Montréal May Day Protest? From Peaceful Protest to Police Brutality

Ten Points Everyone Should Know About the Quebec Student Movement

From the Chilean Winter to the Maple Spring: Solidarity and the Student Movements in Chile and Quebec

Quebec Steps Closer to Martial Law to Repress Students: Bill 78 is a “Declaration of War on the Student Movement”

Writing About the Student Movement in Québec: You’re Damn Right I’m “Biased”! … Confessions of a Non-Neutral Observer

Andrew Gavin Marshall is an independent researcher and writer based in Montreal, Canada, writing on a number of social, political, economic, and historical issues. He is also Project Manager of The People’s Book Project. He also hosts a weekly podcast show, “Empire, Power, and People,” on BoilingFrogsPost.com.

Canada’s Economic Collapse and Social Crisis: Class War and the College Crisis, Part 5

Canada’s Economic Collapse and Social Crisis: Class War and the College Crisis, Part 5

By: Andrew Gavin Marshall

Hundreds of thousands of students take to the streets in Québec to protest tuition increases

Part 1: The “Crisis of Democracy” and the Attack on Education

Part 2: The Purpose of Education: Social Uplift or Social Control?

Part 3: Of Prophets, Power, and the Purpose of Intellectuals

Part 4: Student Strikes, Debt Domination, and Class War in Canada

Part 6: The Québec Student Strike: From ‘Maple Spring’ to Summer Rebellion?

What are the Spending Priorities of the Government?

In the debate raging over increased costs of tuition in Quebec, increased debt loads of the federal and provincial governments, the need to reduce costs – impose “fiscal austerity” – and find “solutions” to these problems, very little context is given. As students fight back against increased fees, the counter argument simply states that people must pay for their education, that governments must reduce their deficits, and therefore, cuts in spending and increases in tuition are necessary, though undesirable. But how necessary are they? Where is the government putting its money?

The question really comes down to one of priorities and approach. What are the spending priorities of the government, for people in need or for the benefit of the rich? What is the government’s approach to spending in terms of addressing a major social and economic crisis, to treat symptoms or address the cause? A great deal is revealed about the moral, ethical and humanitarian considerations of a state in terms of how and where it spends its money. Canada is no exception.

First, let’s start with Canada’s debt. In October of 2011, it was reported that Canada’s combined federal and provincial debt equaled roughly $1.1 trillion. This raised calls from the business community in Canada stating that, “It’s time for governments across Canada to get more serious about controlling and reducing debt.” In other words: time for fiscal austerity! (i.e., cutting social spending and increasing costs and taxes) This debt load amounts to roughly 58% of government GDP (that is, 58% of yearly tax revenues), as opposed to Greece, with a debt-to-GDP ratio of 160%.[1]

An interesting issue to note is that the Bank of Canada (Canada’s central bank) was created in 1934 as a private bank, and it was transformed into a government-owned bank in 1938, and was then able to lend to the government without interest, and thus, “the Bank is ultimately owned by the people of Canada.” The job of the Bank is to manage monetary policy, by issuing the currency and setting interest rates. Canada had a unique central bank, as most other central banks were founded and maintained as private banks (responsible to private shareholders), such as the Bank of England (1694), the Bank of France (1801), and the Federal Reserve Bank of the United States (1913). It was responsible for financing Canada’s war machine during World War II, railways, the St. Lawrence seaway, the TransCanada Highway, schools, hospitals, healthcare, pensions, and social security, all with no interest attached. Between 1940 and 1974, Canada had a national debt below $18 billion. In 1974, all of this changed as Canada sunk into its neoliberal abyss, when private banks (the “big five” in Canada) essentially took over the function of lending to the government, and at high interest rates, with Canada paying over $61 billion per year on interest to private banks alone. Between 1981 and 1995, the Canadian government collected $619 billion in income tax, but because the debt was owed to private banks, instead of being interest-free with the Bank of Canada, during that same period of time, the Canadian government paid the private banks $428 billion in interest payments.[2]

Interest payments on Canada’s debt account for roughly 15% of Canada’s revenues. Statistics Canada provides information up until 2009 on the Canadian government’s expenditures and revenues. In 2009, the federal government’s expenditures amounted to $243 billion, with $26 billion spent on health care, $88 billion on social services, $5.8 billion on education, and $18.6 billion on debt charges.[3]

So, while cuts are being made to social programs and education (fiscal austerity), they are increasing dramatically to the military, defense, and police. In 2000, Canada spent $10 billion on defense, and that rose to $21.8 billion in 2011. In 2008, Canada’s Conservative government set out a plan to increase defense spending over the following 20 years, setting the goal at $490 billion in total defense spending over that period. Included in the plans are the purchase of 65 F-35 fighter jets from Lockheed Martin, the American war profiteering corporation, to a possible dollar amount of $30 billion or more.[4] So there is money for the war machine, to support an increasingly imperialistic foreign policy, and as the ever-present appendage lap-dog to the American Empire to the south.

And since Canada has its lowest crime rate since the 1970s, naturally the ever-pragmatic Conservative government is seeking to rapidly accelerate the construction of prisons and expansion of police forces. The government’s proposed changes to the criminal system seek to “create a flood of Canadians into the prison system.”[5] The government identified prisons, police, and the purposely-Orwellian classification of “public safety” as the biggest winners in increased budget allocations for 2011, seeking to build more prisons and hire hundreds more police officers.[6] At the same time, the government is slashing benefits to seniors and old-age pensioners. According to the Parliamentary Budget Office, prison costs are expected to rise from $4.4 billion in 2011 to $9.5 billion in 2015-16. When the Conservatives came to power in 2006, prison costs amounted to $1.6 billion per year.[7] So while the government spends billions on corporate tax cuts, fighter jets, police and prisons, it is simultaneously planning on cutting spending for old age pensioners and social security programs.[8]

As the government cuts between 11-22,000 federal public sector jobs, the Canadian Forces (military), RCMP (police), and the overall ‘national security’ establishment will not suffer such cuts, and in fact, will gain employees. Ultimately, under the plans of the Conservative government, between 60,000 and 70,000 jobs could vanish across the country to implement $8 billion in spending cuts.[9]

While spending on health care exceeded $200 billion in 2011, it amounted to $5,800 per person in Canada. While this system – of what is often called ‘socialized healthcare’ – is portrayed by Americans as costly and wasteful, it is far cheaper than the American corporatized – or privatized – health “care” system. The average spending on health care for OECD countries – as a percentage of GDP – is 9.5%: Canada spent 11.4% of its GDP on healthcare in 2009, compared to the United States, which spent 17.4% of its GDP on healthcare; with the Netherlands spending at 12% of GDP, France at 11.8% and Germany at 11.6%. In terms of spending per capita (that is, the cost of healthcare spread out evenly to each individual within the country), Canada spends $4,363 (U.S. dollars) per person on healthcare, with the OECD average at $3,223, and compared to the United States at $7,960 per capita. The irony here, of course, is that a for-profit health system is far more costly than a ‘socialized’ healthcare system, despite the common claims to the contrary.[10]

So naturally, the Federal Government, in the midst of – and on the precipice of a far greater – economic crisis, decides that the best courses of action are to increase unemployment by firing tens of thousands of people, reduce social spending so that they are left with less support in their newfound poverty, and continue to privatize everything. Of course, this inevitably leads to social unrest, protests, even rebellion. Quebec is a great example, as it seems that the anti-tuition strikes and protests are getting more dramatic with each passing week. As the reality of our situation settles in over the course of the next year and years, the protests and resistance will exacerbate and grow nation-wide (along with the development of similar movements around the world). Thus, we may properly understand the impetus of the government to increase spending on police, the military, “public safety” (national security/police state) and prisons: as typical state responses to social crises, throw money at the systems, structures and institutions of oppression so that when the people begin to rise up, the state may have the force available to push them down, oppress them, and imprison them.

The Government of Quebec, which is doubling tuition costs over the next five years, has a current debt of $184 billion or 55.5% of GDP.  Quebec’s current budget, released in March of 2012, projects spending of $70.9 billion, with 42.5% of the budget allocated to healthcare and social services, 22.5% on education and culture, 11.6% on debt servicing, 3.5% on families and seniors, and 19.9% on “other.” Total expenditures on education, leisure, and sports amount to less than $16 billion, with $1.3 billion being allocated to Quebec’s corporations, $5 billion going to manufacturing, while $8.2 billion of the budget is going to pay the interest on the debt. Meanwhile, the government was announcing major investments in mining, aiming to produce a surplus, with $1 billion in investments in mining and hydrocarbon industries, as part of Quebec’s ‘Plan Nord,’ The Plan includes the creation of Resources Québec, a new Crown corporation that will oversee a $1.2-billion equity portfolio, designed to “help develop the north and exploit the province’s abundant mineral resources.” The government, in turn, is expecting $4 billion in mining royalties over the next decade. The forestry, tourism, and agribusiness industries are also getting support from the government, creating partnerships between big business, government, and unions. Quebec provides a great deal of corporate welfare. In 2007, Quebec ranked first among Canadian provinces in how much corporate welfare was doled out, at $6 billion, followed by Ontario at $2.1 billion, Alberta at $1.2 billion, and British Columbia at over $1 billion.[11] So, there’s no more money for education, but there’s plenty of money to throw at multi-billion dollar corporations.

For all the screaming and wailing governments engage in over the costs of social programs and benefits for the public, there’s very little discussion over the expenditures of governments which go to corporations, not to mention, tax cuts. Beginning in 2000, under Prime Minister Jean Chrétien, the Canadian federal government began implementing massive corporate tax cuts, which “allowed Canadian companies to amass some $477 billion in cash reserves,” with corporate taxes going from 28% in 2000, to 21% when the Conservatives came to power in 2006, to 15% at the beginning of 2012. While the tax cuts were supposedly to encourage job creation, in reality, the cuts “allowed companies to hoard cash, pay out larger dividends to shareholders and beef up executive salaries.” For each percentage point in a decrease of corporate taxes, the federal government loses $2 billion in potential revenue. Thus, the total loss from the new tax cuts amounts to $26 billion. A report from the Canadian Labour Congress explained, “The government has been borrowing money to pay for its corporate tax giveaways. Now, to pay for tax breaks, the government is planning to make massive cuts to public services, such as meat inspection, that are essential to Canadians.”[12]

So while students, seniors, and the poor suffer, Canadian corporations are doing marvelously well. Reports from Statistics Canada show that Canadian corporations are “sitting on more than $583 billion in Canadian currency and deposits, and more than $276 billion in foreign currency.” The cash reserves of these companies have climbed 27.3% since 2007, back when Canada’s economy was “booming,” and 9% of the increase in reserves was since last year. Not including financial corporations and banks, Canadian companies saw their cash reserves increase by $33 billion in the last quarter of 2011. While Canadian household debt has doubled since 1990, corporate taxes have been cut almost in half in the same amount of time. Canadian provinces have been lowering corporate taxes as well. Back in 2000, Canada’s combined federal and provincial corporate tax rate was the highest of the OECD countries, at 43%. Today, it’s around the world average of 26%. So while Canadian corporations sit on hundreds of billions of unused dollars, the Canadian government is continuing to give them more money to put in their bank accounts, which then reduces the government budget by billions each year, and the Canadian people are then expected to pay for this corporate welfare through reduced social services, loss of public sector jobs, increased tuition costs and increased debt.[13]

Corporate welfare is dolled out by provincial governments as well. In 2011, the Province of Quebec and Quebec City each provided $200 million to build a new hockey arena for a for-profit hockey team. Ontario is also a corporate welfare haven, as between 2003 and 2005, the province gave $422 million to GM, Ford, Toyota and Chrysler, and in 2009, the province participated in a Canada-Ontario $15.3 billion bailout of GM and Chrysler. The last year that government statistics are available, in 2008, Ontario spent $2.7 billion on corporate welfare, while Quebec spent $6 billion.[14] Between 1991 and 2009, the government of Ontario gave $27.7 billion in tax dollars to corporations.[15] Meanwhile, the Government of Quebec increased taxes in 2010, and the provincial sales tax increased by 2% since then, along with an increased gas tax, and of course, tuition increases.[16]

This system is, by definition, corporatist. A corporatist system (alternatively referred to as “corporate socialism” or “economic fascism”) is one in which profit is privatized and risk is socialized. In other words, the state ensures that corporations profit and become more powerful and dominant, while the people have to foot the bill and suffer for it. As Benito Mussolini reportedly stated, “Fascism should more appropriately be called corporatism, for it is the merger of state and corporate power.” It is no surprise then, that as the state becomes more supportive to the suckling-pig-like-corporate cancers of our society, they also become more oppressive and totalitarian. The very circumstances demand it.

The Big Five Banks Declare War on the People

In early March of 2012, it was reported that Canada’s big five banks (Royal Bank, CIBC, TD, Scotiabank, Bank of Montreal) have recorded “sky-high profits” of $7 billion in the first quarter alone (from November 2011 to January 2012), an average increase of 5.8% since last year. Much of the profits, especially for CIBC, “were mostly due to higher volumes of personal and commercial loans,” or, in other words: debt for people and corporations.[17] Canadian banks are, on the whole, doing better than ever. They are consistently rated as the “world’s soundest” banks by the World Economic Forum, and are even adding some jobs, while U.S. banks cut theirs.[18]

A recent report released by CIBC stated that corporate Canada is as “fit as a fiddle,” as “a health check on Canada’s corporate sector shows businesses across the country passing with flying colours.” In fact, according to economists from CIBC, Canada’s corporate sector has never been better. The major indices of corporate ‘health’ are: “debt-to-equity ratios, cash to credit ratios, profit margins, returns on equity, returns on capital.” The economists concluded that, “even with public sector retrenchment under way, and indications that consumers may not have the same appetite to spend as earlier in the recovery, corporate Canada could be positioned to pick up the mantle and drive economic growth in the years ahead.”[19] So naturally while Canada’s corporations are as “fit as a fiddle” and the public at large is dominated by debt, the government – both federal and provincial – seek to extend more benefits to corporations (tax cuts and state subsidies), while extending hardships to the majority of Canadians (increased taxes, reduced social spending, increased costs). Again, it’s about priorities.

The banking sector in Canada itself is becoming two-tiered, where the big five banks are vacating the inner cities, and so-called “fringe banks” are becoming the choice banks for poor and low-income Canadians. Professor Jerry Buckland wrote that, “There is something ethically troublesome about a situation where low-income people are paying high fees for low-quality services and middle-income people are paying low fees for high-quality services.” Unexpected fees, bad banking hours, lack of ID, and other constraints have pushed lower income groups away from the big five and toward the ‘fringe banks’ which also charge big fees but are more accessible. However, the combination of the big five leaving the inner cities and the fringe banks charging high fees and interest rates, “exacerbate poverty and create a two-tiered banking system.”[20]

Canada’s big five banks are rolling in money. CIBC reported $835 million in profits for the first quarter, up 9.4% from last year; Royal Bank reported first quarter profits of $1.86 billion; TD Bank had profits of $1.48 billion; Scotiabank had first quarter profits of $1.44 billion, a 15.2% increase from last year; and the Bank of Montreal recorded profits of $1.11 billion, up 34.5% from last year.[21]

So why are Canada’s banks doing so well? It’s simple: because people are in debt, and getting deeper into debt. As the Globe and Mail reported, “Mortgages and credit card spending have fuelled bank profits for years.”[22] So now what? Well, Royal Bank of Canada and TD both announced in March of 2012 that they will begin to increase their interest rates on mortgages, which means that they are seeking to further sap the wealth and deflate the future potential of the average Canadian household. But the increase in interest rates will increase bank profits, so it’s a good thing for Royal Bank and TD, never mind that it’s bad for everyone else. The other major Canadian banks will likely follow suit in raising their interest rates. The chief economist at TD Bank estimated that, “more than one million Canadian households, or about 10 per cent of those that currently have debt, will have to devote 40 per cent or more of their income to making their monthly debt payments if rates rise by two-to-three points to more normal levels.”[23]

A Bubble Waiting to Burst?

So what is the Canadian mortgage and housing market doing? Well, it’s replicating the disaster seen in the United States just prior to the 2008 crash. Canada’s banking regulator, the Office of the Superintendent of Financial Institutions warned that Canadian banks were offering mortgages very similar to the U.S. subprime loans and that these pose an “emerging risk” to Canadian banks. Now the regulator didn’t just come out and say this, because that might be helpful. Instead, this information was released to Bloomberg news via a Freedom of Information law request, which revealed that Canadian mortgages “have some similarities to non-prime loans in the U.S. retail lending market.” In 2009, Canada’s housing market began to soar with record-low interest rates on mortgages. This is one of the primary reasons why Bank of Canada governor (and former Goldman Sachs executive) Mark Carney warned that household debt is the greatest threat to Canada’s economic stability.[24]

The state of the Canadian population is abysmal. The average debt for a Canadian household is over $100,000, and the average Canadian household spends 150% of their income. This means that for every $1,000 earned, $1,500 is owed. These debt figures are primarily made up of mortgages, but also student debt, credit card debt, and other lines of credit. A 2011 report indicated that, “17,400 households were behind in their mortgage payments by three or more months in 2010, up by 50 per cent since the recession began. Credit card delinquencies and bankruptcy rates also remain higher than before the recession.”[25]

In March of 2012, the Bank of Canada warned that household debt “remains the biggest domestic risk” to Canada’s economy. While part of the Bank’s role is to set interest rates, it has kept interest rates very low (at 1%) in order to encourage lending (and indeed, families have become more indebted as a result). Yet, the Bank says, interest rates will have to rise eventually. Economists at Canada’s major banks (CIBC, RBC, BMO, TD, and ScotiaBank) naturally support such an inevitability, as one BMO economist stated, “while rates are unlikely to increase in the near term, the next move is more likely to be up rather than down, and could well emerge sooner than we currently anticipate.” The chief economist at CIBC stated that, “markets will pick up on the slightly improved change in tone on the economy, and might move forward the implied date for the first rate hike.” This translates into: the economy is doing well for the big banks, therefore they will demand higher interest rates on debts, and plunge the Canadian population into poverty; the “invisible hand of the free market” in action.[26]

The Canadian housing market is in a major bubble, “with a run-up in prices, high ownership rates and overbuilding.” A majority of Canadian mortgages are financed through the Canada Mortgage and Housing Corporation (CMHC), the equivalent of Fannie Mae and Freddie Mac in the United States (which both went bust in the 2008 crash). The CMHC has an outstanding balance of $132 billion in mortgage-backed securities, $202 billion in Canada Mortgage Bonds, and last year issued a debt of $41.3 billion (compared to $6.5 billion in 2001). The big five banks generally provide the remaining mortgages (again, just like in the U.S.). A spokeswoman for the Canadian Bankers Association, however, reassured those who somehow still trust bankers that Canadian banks “carefully manage risk in their mortgage portfolios.” Home sales are increasing – another indication of the growing bubble – by 9.5% last year alone, while home prices increased by 7.2%. CIBC reported that Canadian homes are overvalued (that is, their prices are artificially inflated) by 10%, and the heads of the Bank of Montreal and Royal Bank both warned in late 2011 that, “condominium markets in Toronto and Vancouver are at risk of correction,” which is to say, a crash.[27]

The problem is especially large in Vancouver, which was recently rated as the most expensive city to live in across North America, followed Los Angeles and New York. Vancouver is now the 37th most expensive city in the world, whereas just last year it was ranked as 72nd. The average price for a detached bungalow in Vancouver increased by 17% from the previous year to $1.02 million. The average cost of a condominium in Vancouver rose 5.1% to $513,500 and the “average priced home in Vancouver is now 11.2 times the average family income, a figure many economists call unsustainable.”[28] In certain areas of Vancouver, such as Richmond, West Vancouver and the West End, housing prices have soared nearly 80% in the past five years, and 27% just in the past year alone. This has been raising fears of a housing bubble in Vancouver, and indeed it should be.[29]

In January of 2012, Bank of Canada governor warned – in very subtle and vague terms – that Canada’s property market is “probably overvalued,” meaning that it is heavily overvalued. Canadian Finance Minister Jim Flaherty also hinted that something is rotten in the state of Denmark, stating, “We watch the housing market carefully and we are prepared to intervene if necessary.” So is it a bubble? Yes! In fact, the Bank of Nova Scotia recently reported that, “At 13 years and counting, Canada’s current housing boom is one of the longest-lasting in the world.” The price of Canadian homes has increased by over 85% since 1998, with a slight stagnant period in 2008, and then continued to rise in 2009, growing by a further 20%. It is no coincidence that household debt has increased as well, with the debt burden of Canadian families at 153% of their income, which is “almost as much debt as American households had at the peak of their bubble.” In fact, the Economist magazine estimated that the Canadian housing market is overvalued by more than 70% (which is to say, it’s probably much higher than that). One of the major American banks, Merrill Lynch, issued a report indicating that the Canadian housing market is rife with “overvaluation, speculation and over supply.” According to an international survey of housing affordability, Vancouver is the second-least affordable city in the world.[30]

It seems that 2012 will be the year the housing market bubble begins to pop, with the economy slowing down, unemployment rising, and job creation has virtually stalled, according to CIBC, which explained that, “the job market is currently weaker than any non- recessionary period.” Canada is not alone, of course, as the United States and Ireland were just the beginning. It is expected that the U.K., Australia, Belgium, France, New Zealand, Spain, and Sweden are all set to follow suit. Within Canada, however, British Columbia and Ontario will be the most affected. But don’t worry, the Canadian banking sector will survive the pop, because it is actually the Canadian government which owns 75% of the mortgages, meaning that this will then pass to Canadian taxpayers, not the poor disadvantaged millionaire and billionaire bankers.[31] Besides, the risk they have will probably be bailed out by our government. As our Finance Minister stated, “we are prepared to intervene if necessary,” which means that they will take all the bad debts of the banks, and then hand them to YOU.

An economist at the Bank of Montreal said not to worry, however, because Canada’s housing market isn’t a bubble, “it’s a balloon,” and therefore, she predicted, “Canada’s housing market is expected to deflate slowly rather than pop.”[32] The argument, however, is one based upon faith: faith that the banks won’t increase interest rates by too much, faith that Canadian household debt won’t inflict as much harm as American household debt, and faith that one can compete in verbal and mental gymnastics in such a way as to convincingly refer to a bubble as a “balloon.” It should be noted that up until the burst of the American housing bubble, all the major players were denying that a bubble even existed.

Patti Croft, a recently retired chief economist from the Royal Bank of Canada warned the Canadian Parliament in January of 2012 that, “the risk of a housing bubble was among Canada’s biggest issues.” The Bank of Canada’s extremely low interest rate (of 1%) has stimulated this growth, just as the Federal Reserve in the United States helped stimulate the housing bubble there through historically low interest rates. The result of such low rates is an excess of speculative actions in the housing market, driving prices up. Croft warned that, “the greater concern is the looming housing bubble that we see, particularly in cities like Toronto and Vancouver, because I think that is where the speculative excesses lie.”[33]

In March, TD Bank warned that Canada’s housing bubble posed a “clear and present danger” to Canada’s economy, and singled out Vancouver as “the market with the greatest risk of a housing price correction.”[34] The effects of the bubble are already evident, as British Columbia is increasingly losing people who are moving to other provinces due to the high cost of living.[35]

It should be noted that, even though this housing bubble in Canada has been inflated since the late 1990s, it is only being talked about, admitted as even existing (though some make absurd claims about magical “balloons”), and acknowledged NOW. This is dangerous. The fact that it is now being acknowledged by top banks, the finance minister, the Bank of Canada and other major international organizations and banks, implies that they are now preparing for it to burst, and are thus positioning themselves to profit from the coming collapse. Remember, this is not a strange idea: during the housing bubble collapse in the United States, all the big banks which helped create it then bet against the market and profited off of its collapse, not to mention, they were then rewarded by the federal government with trillions of dollars in bailouts for their outstanding accomplishments in causing the crisis in the first place. Criminals are rewarded, and victims are punished. That is for a simple reason: government is organized crime.

Canada’s youth are in a major crisis. The youth unemployment rate in Canada is at 14.7%, compared to an overall unemployment rate of 7.4%, with 27,000 less jobs for young Canadians than last year. As one economist explained, “In addition to the fact that youths are facing competition from their own age cohorts, they are now facing competition from people who just lost their jobs during the recession and have 20 years of experience in the workforce.” Further, the economist added, “the whole process of trying to get to where you wanted to be when you got out of university takes years longer than it used to. Taking a lower wage than you were initially expecting has significant repercussions for your long-term career.” A one percent increase in unemployment rates leads to a six-to-seven percent decrease in salary, and thus, “It can take anywhere from 10 upwards to 15 years to close that gap of reduced wages. So your lifetime earnings are substantially lower, for the simple fact that you graduated at the wrong time.” The real rates of unemployed are actually much higher than the stated 14% “because a lot of young people aren’t collecting Unemployment Insurance or welfare.” Thus, it is 14% of Canadian youths who are on Unemployment Insurance or welfare, and the statistics don’t include the rest of the unemployed youth population of Canada.[36]

As for the net unemployment rate of Canadians at 7.4%, this too is misleading, because the statistics don’t include the number of Canadians who have simply given up on the job search, amounting to 38,000 Canadians in the past year. The province of Manitoba created 600 new jobs in 2011, while cutting 10,000 jobs in the same amount of time. The Canadian economy has cut 37,000 jobs just since October of 2011, and it’s only going to get worse. While there are 27,000 less jobs for Canadian youth than there were last year, this number grows to 300,000 less jobs for youth than there were in 2008.[37]

The Canadian federal budget, released in late March, set out the government’s priorities for the coming year. Students and youth, who are among the most in need of help, were basically left out of the budget, naturally, since they are not multinational corporations, bankers, or billionaires. What money is going to schools is marked for industry-related research (i.e., a corporate subsidy), and as Finance Minister Jim Flaherty explained, “The plan’s measures focus on the drivers of growth: innovation, business investment, people’s education and skills that will fuel the new wave of job creation.” Again, it’s important to note that when politicians use the terms “jobs” or “job creation,” what they actually mean is “profit” and “profit creation,” invariably for corporations and banks. In regards to education:

The Conservatives placed a clear emphasis on partnerships between businesses and universities when it came to research funding: among their plans, they intend to dedicate $14 million over two years to double the Industrial Research and Development Internship Program, which currently supports 1,000 graduate students in conducting research at private-sector firms.[38]

While the Canadian government announced funding of “$500 million over five years to support modernization of research infrastructure on campuses through the Canada Foundation for Innovation,” as well as through other research granting councils, the funding will actually be reallocated from other areas of education financing, what are deemed “lower-priority programs,” which means that they do not directly support corporate or industrial profit-making potential. The government will also cut 19,200 jobs from the public sector.[39]

The federal government’s budget estimates a $5.2 billion cut in spending, as well as increasing the limit on Old Age Security from 65 to 67, meaning that older people will have to work longer before getting any benefits.[40] That will give the government just enough time to steal everyone’s pension and hand them to corporations before the people actually need them. So while the government cuts social spending, ignores the needs of Canada’s youth, and fires tens of thousands of workers – this is what economists call “fiscal austerity” – it simultaneously is increasing its spending and support to Canada’s corporations (who are already as “fit as a fiddle”), with “direct spending and incentives to help firms expand, invest and export, as well as measures designed to shed some of the shackles on their growth.” The chief economist at TD Bank stated, “They are trying to create a favourable environment in which businesses can grow.” So while the government provides a meager $50 million to help students find jobs, it hands out billions to corporations. The increased funding for research at universities is also specifically designed to produce products to go onto the market; so again, education funding is being further railroaded into merging business and higher education.[41]

These moves are obviously not taken on the initiative of government alone, but are lobbied for by the corporate and financial elite, whether directly through interest groups, or indirectly through think tanks. The Canadian Council of Chief Executives (CCCE) – formerly the Business Council on National Issues (BCNI) – is an interest group made up of the top 150 CEOs in Canada, and which directly lobbies the government to serve their interests. They played a major role in the efforts to create NAFTA and to pursue the agenda of North American integration, as well as a plethora of other free trade deals. However, their “interests” extend beyond trade, and they seek to lobby the government to serve their interests across the whole society.

The current President and CEO of the CCCE is John P. Manley, former Deputy Prime Minister of Canada, former Minister of Finance, Industry, and Foreign Affairs. He was the co-chair of a Council on Foreign Relations Task Force on the Future of North America (which set the agenda for the Security and Prosperity Partnership and North American integration). He is also on the board of directors of CIBC and a number of other corporations and non-profits. The Vice Chairman of the board of directors of the CCCE is of course, Paul Desmarais Jr. (of the powerful Desmarais family, who essentially OWN Canada’s politicians and Prime Ministers), and other board members include: William A. Downe, CEO of BMO Financial Group; Gordon Nixon, CEO of Royal Bank of Canada; and a number of other leading corporate executives.

The CEOs of the following companies and business organizations are all represented in the CCCE: Air Canada, Astral Media, Barrick Gold Corporation, BCE Inc and Bell Canada, BMO Financial group, BNP Paribas (Canada), Bombardier, the Canadian Chamber of Commerce, Canadian Manufacturers and Exporters, Canadian Oil Sands Limited, Canadian Pacific Railway, Canfor Corporation, Cargill Limited, Chevron Canada, CIBC, CN, Deloitte & Touche LLP, Desjardins Group, Dow Chemical Canada, E.I. du Pont Canada Company, Encana Corporation, Ford Motor Company of Canada, GE Canada, GlaxoSmithKline, the Great-West Life Assurance Company, HSBC Bank Canada, Hudson’s Bay Company, IBM Canada, Imperial Oil Limited, Manulife Financial Corporation, McCain Foods Limited, Microsoft Canada, National Bank of Canada, Pfizer Canada, Power Corporation of Canada, Power Financial Corporation, Royal Bank of Canada, Scotiabank, SNC-Lavalin Group, Standard Life Assurance Company, Sun Life Financial, Suncor Energy, TD Bank Group, TELUS, TransCanada Corporation, The Woodbridge Company Limited, among many others.

Back in October of 2010, John Manley spoke to the Association of Universities and Colleges of Canada on the issue of making Canada “a leader in the knowledge economy.” Manley stated that Canada needed to ensure that “more of our academic discoveries successfully ‘cross the chasm’ to commercial success,” referring to the need to market what is done in university laboratories. Manley stated that, “there is a need for closer collaboration between post-secondary education institutions and the business community,” as, he explained: “Business-university collaboration is key to Canada’s ability to compete more effectively, to enhance our quality of life and to provide better opportunities for tomorrow’s graduates.” Manley elaborated:

All of us have an interest in achieving stronger partnerships between post-secondary institutions and the private sector, and in overcoming the barriers to commercialization of university research – barriers ranging from “hard” issues of funding and intellectual property ownership, to less tangible considerations such as differences in expectations, culture and behaviour between academia and the private sector.[42]

With the release of the Canadian federal budget for 2012, the CCCE of course praised the budget as “taking steps to promote job creation and business investment.” John Manley stated, “By restraining the growth in public spending, reducing regulatory overlap, improving Canada’s immigration system and enhancing support for business-driven research, the government is helping to build a stronger and more competitive Canadian economy.”[43]

Economists from Canada’s major banks had a good deal to say about the budget. Economists from TD Bank explained that, “When combined, the various measures included in today’s budget are aimed at improving productivity and boosting private sector growth, at a time when public spending is being constrained,” and that, of course, this is a good thing. An economist at CIBC praised “the path towards fiscal balance,” as “the 2012 budget was as much about Canada’s longer term prospects as it was about squeezing spending.” Economists at the National Bank of Canada praised the budget’s decision to raise the old age security pension eligibility from 65 to 67 years, “While it is a step in the right direction, it could have been implemented earlier.” Economists at Royal Bank of Canada stated that the Canadian government “has delivered on its promise of guiding the Canadian economy towards improved fiscal performance in what are generally difficult economic times globally.” Meanwhile, the National Pensioner and Senior Citizens Federation declared that, “Today’s budget tabled by Finance Minister Flaherty confirmed the worst for our children and grandchildren… This government has attacked the retirement security of future generations as it looks years ahead for dollars to finance other priorities… There was nothing for seniors, not even a discarded penny for the poorest living in poverty.”[44]

But then, that’s the point, isn’t it? Why would you seek to help the elderly and the poor and needy when you can help the multinational corporations and global banks, and thus, when you leave government, get a secure position on their boards (as John Manley did), and live the rest of your days as a jet-setting, globe-trotting, high-rolling elite? As a politician, you get no personal benefit or profit from supporting or serving the poor or the majority, you must only serve a tiny elite, and then your place is ensured among them.

Make no mistake: Canada’s Big Five Banks, the corporations they control, and the federal and provincial governments, which they collectively OWN, have declared class war on the people of Canada. The agenda is simple: get the population of Canada indebted, which is to say, enslaved; then, increase interest rates, cut social spending, increase unemployment, increase tuition, increase consumer costs, increase taxes, and at the same time, give more support and money to corporations and banks, and decrease their taxes. Then, build prisons, fund the military and the police and the police state apparatus of surveillance and control, so that when the people wake up to the fact that their future is being stolen from them, you can put them in their place: under the boot.

So the question for Canadian is this: will you acknowledge the class war taking place against you, your friends, and your families and fellow brothers and sisters, and then seek to fight back; or, will you continue to go into credit card debt, further into student debt, get mortgages and passively accept subservience to a system which treats you like a slave, sub-human degenerates, and superfluous, that is, useless and expendable. It is a question of passive acceptance of an evil system, or active resistance to forge ahead and creatively construct a humane society. The question is for all; the answer is yours alone.

Andrew Gavin Marshall is an independent researcher and writer based in Montreal, Canada, writing on a number of social, political, economic, and historical issues. He is also Project Manager of The People’s Book Project. He also hosts a weekly podcast show, “Empire, Power, and People,” on BoilingFrogsPost.com.

Notes

[1]            Rachel Mendleson, “Canada’s Public Debt Hits $1.1 Trillion, But That May Not Be As Bad As It Sounds,” The Huffington Post, 3 October 2011:

http://www.huffingtonpost.ca/2011/10/03/canada-debt-cfib-road-to-greece_n_992480.html

[2]            Bill Woollam And Will Abram, Bank of Canada the answer to tax, debt issue, The Citizen, 23 March 2012:

http://www.canada.com/Bank+Canada+answer+debt+issue/6347095/story.html

[3]            StatsCan, Federal government revenue and expenditures, Statistics Canada:

http://www40.statcan.ca/l01/cst01/govt49b-eng.htm

[4]            Brian Stewart, “$30B fighter jets just the start of defence-spending boom,” CBC News, 6 April 2011:

http://www.cbc.ca/news/canada/story/2011/04/06/f-vp-brian-stewart-navy.html

[5]            Editors, “A tough-on-crime bill that goes too far,” Maclean’s, 25 August 2011:

http://www2.macleans.ca/2011/08/25/a-tough-on-crime-bill-that-goes-too-far/

[6]            David Akin, Prisons, police top feds’ spending priorities, Toronto Sun, 1 March 2011:

http://www.torontosun.com/news/canada/2011/03/01/17455551.html

[7]            Barbara Yaffe, Prison spending trumps seniors for Harper government, The Vancouver Sun, 29 February 2012:

http://www.vancouversun.com/news/Prison+spending+trumps+seniors+Harper+government/6227615/story.html

[8]            Les Whittington, “Federal Budget 2012: Government not backing down on plan for cuts to Old Age Security,” The Star, 2 February 2012:

http://www.thestar.com/news/canada/politics/article/1125296–federal-budget-2012-government-not-backing-down-on-future-old-age-security-changes-jim-flaherty-says

[9]            Kathryn May, At least 11,000 local PS jobs on line, study argues, Ottawa Citizen, 23 January 2012:

http://www.ottawacitizen.com/news/least+local+jobs+line+study+argues/6035339/story.html#ixzz1kKdIfxO4

[10]            OECD, OECD Health Data 2011: How Does Canada Compare? Organisation for Economic Cooperation and Development.

[11]            Rhéal Séguin, “Hobbled by debt, Quebec to table budget amid rising public anger,” The Globe and Mail, 19 March 2012:

http://www.theglobeandmail.com/news/politics/hobbled-by-debt-quebec-to-table-budget-amid-rising-public-anger/article2374622/?utm_medium=Feeds%3A%20RSS%2FAtom&utm_source=Politics&utm_content=2374622

Canadian Press, “Quebec 2012-2013 Budget: Read the full document here,” Global Montreal, 20 March 2012:

http://www.globalmontreal.com/Pages/Story.aspx?id=6442604662

Corinne Smith, “Quebec budget curbs spending, explores mining,” CBC News, 20 March 2012:

http://www.cbc.ca/news/business/story/2012/03/19/quebec-budget-2012-2013.html

Quebec budget analysis, CBC News, 20 March 2012:

http://www.cbc.ca/news/canada/montreal/story/2012/03/19/quebec-2012-budget-analysis.html

Roberto Rocha, “Quebec budget highlights,” Montreal Gazette, 22 March 2012:

http://www.montrealgazette.com/travel/Highlights+2012+Quebec+budget/6331845/story.html

Tasha Kheiriddin, “The new ‘Quebec model,’ same as the old,” The National Post, 22 March 2012:

http://www.nationalpost.com/opinion/columnists/Quebec+model+same/6340173/story.html

[12]            Daniel Tencer, “Canada’s Corporate Tax Cuts Prompt Companies To Hoard Cash, Not Hire, CLC Says,” The Huffington Post, 25 January 2012:

http://www.huffingtonpost.ca/2012/01/25/canada-corporate-tax-rate-canadian-labour-congress_n_1231089.html#s638444&title=1_George_Weston

[13]            Canadian Press, “Businesses Getting Billions In Tax Cuts Despite Rising Corporate Cash Reserves,” The Huffington Post, 4 January 2012:

http://www.huffingtonpost.ca/2012/01/01/tax-cuts-corporations-canada_n_1178382.html

[14]            Mark Milke, “How corporate welfare undermines core services,” Troy Media, 25 February 2011:

http://www.troymedia.com/blog/2011/02/25/how-corporate-welfare-undermines-core-services/

[15]            Mark Milke, “Corporate welfare is a costly shell game,” Financial Post, 28 December 2011:

http://opinion.financialpost.com/2011/12/28/corporate-welfare-is-a-costly-shell-game/

[16]            Rhéal Séguin, “Hobbled by debt, Quebec to table budget amid rising public anger,” The Globe and Mail, 19 March 2012:

http://www.theglobeandmail.com/news/politics/hobbled-by-debt-quebec-to-table-budget-amid-rising-public-anger/article2374622/?utm_medium=Feeds%3A%20RSS%2FAtom&utm_source=Politics&utm_content=2374622

[17]            Grant Robertson, “CIBC joins big banks’ profit parade,” The Globe and Mail, 8 March 2012:

http://www.theglobeandmail.com/globe-investor/cibc-joins-big-banks-profit-parade/article2362579/

[18]            Sean B. Pasternak and Ilan Kolet, “Canadian Banks Gain Jobs, Profit as U.S. Lenders Cut Back,” Bloomberg, 20 March 2012:

http://www.bloomberg.com/news/2012-03-20/canadian-banks-gain-jobs-profit-as-u-s-lenders-cut-back.html

[19]            Tim Kiladze, “Corporate Canada’s finances ‘fit as a fiddle’,” The Globe and Mail, 27 March 2012:

http://www.theglobeandmail.com/globe-investor/investment-ideas/streetwise/corporate-canadas-finances-fit-as-a-fiddle/article2382736/

[20]            Mary Agnes Welch, “’Unbanked’ residents of inner-cities paying price, author finds,” The Montreal Gazette, 19 March 2012:

http://www.montrealgazette.com/news/canada/Unbanked+residents+inner+cities+paying+price+author+finds/6326315/story.html

[21]            “How Canada’s Big Five banks stack up,” The Globe and Mail, 8 March 2012:

http://www.theglobeandmail.com/globe-investor/how-canadas-big-five-banks-stack-up/article2363455/

[22]            Grant Robertson, “Lending is a bright spot for Canadian banks,” The Globe and Mail, 4 March 2012:

http://www.theglobeandmail.com/report-on-business/lending-is-a-bright-spot-for-canadian-banks/article2358252/?utm_medium=Feeds%3A%20RSS%2FAtom&utm_source=Home&utm_content=2358252

[23]            CBC, “RBC, TD hike 5-year mortgage rates,” CBC News, 26 March 2012:

http://www.cbc.ca/news/business/story/2012/03/26/rbc-mortgage-rate.html

[24]            Andrew Mayeda, “Canada’s Subprime Crisis Seen With U.S.-Styled Loans: Mortgages,” Bloomberg, 30 January 2012:

http://www.bloomberg.com/news/2012-01-30/canada-s-subprime-crisis-seen-with-u-s-styled-loans-mortgages.html

[25]            CTV News Staff, “Average Canadian family debt hits $100,000,” CTV News, 17 February 2011:

http://www.ctv.ca/CTVNews/Canada/20110217/family-debt-110217/

[26]            Gordon Isfeld, “Bank of Canada says household debt ‘biggest risk’ to economy,” The Leader Post, 9 March 2012:

http://www.leaderpost.com/business/Bank+Canada+says+household+debt+biggest+risk+economy/6274564/story.html

[27]            Andrew Mayeda, “Canada’s Subprime Crisis Seen With U.S.-Styled Loans: Mortgages,” Bloomberg, 30 January 2012:

http://www.bloomberg.com/news/2012-01-30/canada-s-subprime-crisis-seen-with-u-s-styled-loans-mortgages.html

[28]            Peter Meiszner, “Vancouver now the most expensive city in North America,” Global News, 14 February 2012:

http://www.globaltvbc.com/vancouver+now+the+most+expensive+city+in+north+america/6442580994/story.html

[29]            CTV, “Is Vancouver’s housing bubble about to burst?,” CTV BC, 26 September 2011:

http://www.ctvbc.ctv.ca/servlet/an/local/CTVNews/20110926/bc_story_housing_bubble_110926?hub=BritishColumbiaHome

[30]            Erica Alini, “What happens when Canada’s housing bubble pops?” Maclean’s, 26 January 2012:

http://www2.macleans.ca/2012/01/26/what-happens-when-canadas-housing-bubble-pops/

[31]            Ibid.

[32]            Robert Hiltz, “Housing bubble is really a balloon: BMO’s Sherry Cooper,” The Vancouver Sun, 30 January 2012:

http://www.vancouversun.com/business/Housing+bubble+really+balloon+Sherry+Cooper/6073335/story.html

[33]            Derek Abma, “Under-used labour, pending housing bubble, problems for Canada: panel,” Vancouver Sun, 26 January 2012:

http://www.vancouversun.com/business/Under+used+labour+pending+housing+bubble+problems+Canada+panel/6056952/story.html

[34]            CBC, “Housing bubble a danger to economy, TD says,” CBC News, 16 March 2012:

http://www.cbc.ca/news/canada/ottawa/story/2012/03/16/td-overvaluation-debt.html

[35]            Wendy Stueck, “Storm clouds forming over Vancouver’s real-estate market,” The Globe and Mail, 16 March 2012:

http://www.theglobeandmail.com/news/national/british-columbia/storm-clouds-forming-over-vancouvers-real-estate-market/article2372362/

[36]            Claire Penhorwood, “Canada’s youth face job crunch,” CBC News, 26 March 2012:

http://www.cbc.ca/news/canada/story/2012/03/19/f-canada-youth-unemployment.html

[37]            Julian Beltrame, “Jobless picture in Canada grim,” Winnipeg Free Press, 10 March 2012:

http://www.winnipegfreepress.com/business/jobless-picture-in-canada-grim-142188733.html

[38]            Emma Godmere, “Students largely left out of federal budget,” Canadian University Press, 29 March 2012:

http://cupwire.ca/articles/52529

[39]            Ibid.

[40]            Tamsin McMahon, “Top five things you need to know about the budget,” Maclean’s, 29 March 2012:

http://www2.macleans.ca/2012/03/29/top-five-things-you-need-to-know-about-the-budget/

[41]            Julian Beltrame, “Federal budget passes the stimulus baton from government to business,” Winnipeg Free Press, 29 March 2012:

http://www.winnipegfreepress.com/business/federal-budget-passes-the-stimulus-baton-from-government-to-business-144958375.html

[42]            John Manley, “Notes for an Address by the Honourable John Manley,” The Association of Universities and Colleges of Canada, 27 October 2010.

[43]            CCCE, “Fiscally responsible 2012 budget includes targeted measures to improve Canadian competitiveness, CEOs say,” Canadian Council of Chief Executives, 29 March 2012:

http://www.ceocouncil.ca/news-item/fiscally-responsible-2012-budget-includes-targeted-measures-to-improve-canadian-competitiveness-ceos-say

[44]            Michael Babad, “Jim Flaherty’s budget: Pennywise or attack on our kids’ pensions?,” The Globe and Mail, 30 March 2012:

http://www.theglobeandmail.com/report-on-business/top-business-stories/jim-flahertys-budget-pennywise-or-attack-on-our-kids-pensions/article2386823/?from=sec434

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

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

July 15, 2011

Introduction

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

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

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

An Olympian Debt

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

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

So why is this the prescription?

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

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

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

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

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

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

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

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

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

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

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

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

Debt and Derivatives

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

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

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

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

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

Who Built the Bubble?

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

[T]he powers of financial capitalism had another far-reaching aim, nothing less than to create a world system of financial control in private hands able  to dominate the political system of each country and the economy of the world as a whole. This system was to be controlled in a feudalist fashion by the central banks of the world acting in concert, by secret agreements arrived at in frequent private meetings and conferences. The apex of the system was to be the Bank for International Settlements in Basle, Switzerland, a private bank owned and controlled by the world’s central banks which were themselves private corporations.[24]

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

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

Bailout the Bankers, Punish the People

In the fall of 2008, the Bush administration sought to implement a bailout package for the economy, designed to save the US banking system. The leaders of the nation went into rabid fear mongering. Advertising the bailout as a $700 billion program, the fine print revealed a more accurate description, saying that $700 billion could be lent out “at any one time.” As Chris Martenson wrote:

This means that $700 billion is NOT the cost of this dangerous legislation, it is only the amount that can be outstanding at any one time.  After, say, $100 billion of bad mortgages are disposed of, another $100 billion can be bought.  In short, these four little words assure that there is NO LIMIT to the potential size of this bailout. This means that $700 billion is a rolling amount, not a ceiling.

So what happens when you have vague language and an unlimited budget?  Fraud and self-dealing.  Mark my words, this is the largest looting operation ever in the history of the US, and it’s all spelled out right in this delightfully brief document that is about to be rammed through a scared Congress and made into law.[27]

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

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

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

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

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

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

Instead of implementing policies designed to clean up banks’ balance sheets, some rescue plans have pushed banks to maintain their lending practices of the past, or even increase domestic credit where it’s not warranted… The lack of progress threatens to prolong the crisis and delay the recovery because a dysfunctional financial system reduces the ability of monetary and fiscal actions to stimulate the economy… without a solid banking system underpinning financial markets, stimulus measures won’t be able to gain traction, and may only lead to a temporary pickup in growth.[34]

Further, the BIS warned, “A fleeting recovery could well make matters worse,” as “further government support for banks is absolutely necessary, but will become unpopular if the public sees a recovery in hand. And authorities may get distracted with sustaining credit, asset prices and demand rather than focusing on fixing bank balance sheets.” The BIS concluded that all the various measures to revive the global economy leave an “open question” as to whether or not they will be successful, and specifically, “as governments bulk up their deficits to spend their way out of the crisis, they need to be careful that their lack of restraint doesn’t come back to bite them.” As the annual report warned, “Getting public finances in order will therefore be the main task of policy makers for years to come.”[35]

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

Central banks around the globe have lowered borrowing costs to record lows and injected billions of dollars into the financial system to counter the worst recession since World War II. While some policy makers have stressed the need to withdraw the emergency measures as soon as the economy improves, the Federal Reserve, Bank of England, and European Central Bank are still in the process of implementing asset-purchase programs designed to unblock credit markets and revive growth.

“The big and justifiable worry is that, before it can be reversed, the dramatic easing in monetary policy will translate into growth in the broader monetary and credit aggregates,” the BIS said. That will “lead to inflation that feeds inflation expectations or it may fuel yet another asset-price bubble, sowing the seeds of the next financial boom-bust cycle.”[36]

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

William White, the former Chief Economist of the BIS, warned in September of 2009 that, “the world has not tackled the problems at the heart of the economic downturn and is likely to slip back into recession,” and he “also warned that government actions to help the economy in the short run may be sowing the seeds for future crises.” White, who accurately predicted the global financial crisis in 2008, stated that we are “almost certainly” going into a double-dip recession and “would not be in the slightest bit surprised” if we were to go into a protracted stagnation. He added: “The only thing that would really surprise me is a rapid and sustainable recovery from the position we’re in.” White, a Canadian economist who ran the economic department at the BIS from 1995 until 2008, had “warned of dangerous imbalances in the global financial system as far back as 2003 and – breaking a great taboo in central banking circles at the time – he dared to challenge Alan Greenspan, then chairman of the Federal Reserve, over his policy of persistent cheap money.” As the Financial Times reported in 2009:

Worldwide, central banks have pumped thousands of billions [i.e., trillions] of dollars of new money into the financial system over the past two years in an effort to prevent a depression. Meanwhile, governments have gone to similar extremes, taking on vast sums of debt to prop up industries from banking to car making.

These measures may already be inflating a bubble in asset prices, from equities to commodities, [White] said, and there was a small risk that inflation would get out of control over the medium term if central banks miss-time their “exist strategies”.

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

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

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

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

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

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

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

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

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

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

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

The Federal Reserve Represents the Banks

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

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

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

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

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

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

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

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

Who Benefits from the Greek Bailout?

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

The Great Global Debt Depression

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

Greece Gets Another Bailout… for the Bankers

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

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

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

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

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

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

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

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

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

The Crisis Spreads Through Europe

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

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

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

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

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

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

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

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

Banking on a Depression

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

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

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

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

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

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

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

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

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

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

The Plutonomy

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

In Conclusion

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

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

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

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

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

Notes

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

[14]            Ibid.

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

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

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

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

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

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

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

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

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

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

[20]            Ibid.

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

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

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

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

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

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

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

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

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

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

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

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

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

[28]            Larisa Alexandrovna, Welcome to the final stages of the coup. Huffington Post: September 29, 2008:

http://www.huffingtonpost.com/larisa-alexandrovna/welcome-to-the-final-stag_b_127990.html

[29]            Bailout Recipients, ProPublica:

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

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

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

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

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

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

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

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

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

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

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

[35]            Ibid.

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

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

[37]            Ibid.

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

[71]            S&P, Management Profiles:

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

[72]            McGraw-Hill Companies, Executive Profiles:

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

[73]            S&P, Board of Directors:

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

[74]            Moody’s, Board of Directors:

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

[75]            Moody’s, Management Team:

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

[76]            Fimalac, Board of Directors:

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

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

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

[78]            Ibid.

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

[80]            Ibid, page 4.

[81]            Ibid, page 9.

[82]            Ibid.

[83]            Ibid, page 12.

[84]            Ibid, page 14.

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

[142]            Ibid.

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

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

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

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

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

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

[146]            Ibid.