As U.S. corporate profits soar to record highs, food stamps for the neediest were quietly cut. The politicians who are demanding endless cuts to social programs — Democrats and Republicans alike — insist that the U.S. is broke, all the while conveniently ignoring the mountains of tax-free wealth piling up in the pockets of the super rich.
This newest flood of cash for the nation’s wealthiest 1% is a blatant government subsidy: the Federal Reserve continues to pump out an extra $75 billion a month, the vast majority of which fattens the already-bursting overseas bank accounts of the rich. Since Obama has been president this pro-corporate policy has helped funnel 95 percent of the nation’s new income to the wealth-soaked rich.
And while it’s true that the global super rich have an estimated $32 trillion [!] stashed away abroad in off shore tax havens, an even newer way to avoid taxes has gripped the endlessly-greedy minds of U.S.-based billionaires.
Instead of shielding themselves behind the classic ‘C’ corporation structure — and all the burdensome taxes and regulations associated with it — two-thirds of new corporations have “evolved” into pseudo-legal “partnership” structures, commonly referred to as “pass throughs,” the idea being that the corporate-partnership instantly passes the profits through to the shareholders, no corporate tax necessary.
The most common form of pass throughs are “innovative” variations of a Limited Liability Company, a tax structure created in 1975 for narrowly regulated purposes. But now rich investors are performing accounting and legalistic somersaults to exploit the tax structure, practices that were illegal before the regulators were “captured” by the big banks.
The pro-billionaire Economist magazine recently discussed the pass through fad:
“A mutation in the way companies are financed and managed will change the distribution of the wealth they create…The corporation is becoming the distorporation…More businesses are now twisting themselves into forms that allow them to qualify as pass throughs.”
So, for example, imagine that nine rich guys get together and call themselves a pass through corporation of some variety. They do this because they want to avoid personal liability in case things go awry. Their partnership only buys and sells stocks and goes on to make billions, while paying zero corporate taxes. When their risky bets go bust and the partnership is sued by hoodwinked investors, the company instantly declares bankruptcy, since all profits were quickly “passed through.” The partners (the nine guys) cheerfully go home to swim through their sea of cash.
In real life shady pass throughs make massive wealth. Richard Kinder, who co-founded the biggest pass through, named Kinder Morgan, personally received $376 million in dividends last year alone [!], according to the Economist.
The pass through fad is on track to becoming the dominant way that the super rich get together to make huge amounts of money — pass throughs were 63 percent of all corporate profits in 2008, and are likely higher now, since many of the big private-equity companies making a killing by the cheap fed dollars are organized under pass through umbrella structures.
There is a huge society-wide risk for this type of behavior, which resembles the reckless gambling that destroyed the economy in 2008. As an ever-larger share of wealth is poured into these risky, non-regulated vehicles, the potential grows for them to self-destruct and pull down the broader economy with them. Pass throughs — which include most private-equity firms — function “efficiently” when the government is handing them cheap money; when interest rates go up, the pass throughs go bust, with predictable outcomes.
“But wait,” the billionaire will protest, “we pay individual taxes, which help fund social services.” Not necessarily. If the billionaire investor paid their legal obligation of “capital gains” taxes, they’d already be paying far less than the average worker. But the pass-through billionaires excel at avoiding all taxes. The Economist again:
“For a [pass through] partner a payout can be considered merely a return of capital rather than a profit, and consequently no tax is due until the sale of the underlying security. When tied to nuances of estate law, this may mean no tax at all.”
This type of blatantly criminal behavior used to be actually illegal, but as Wall Street bought Congress, the rules were either bent or ignored.
The Economist explains:
“The limitations on becoming [a pass through] seem to be tied more to legal dexterity [!] and influence [buying politicians] than any underlying principle. Politicians want to extend the benefits of [pass through] partnerships to industries they have come to favor either on the basis of ideology [of the corporate type], or astute lobbying [bribery], or a bit of both.”
The rest of society is affected because public services are being starved of funds, while these new pass throughs face vastly less regulation than the standard C corporations, and push wealth inequality to new heights while threatening a deeper recession.
Historically, government began regulating corporations because everyone realized the profound effects these institutions were having on the rest of society; the nation was becoming more unequal, the labor force more exploited and the environment torn to shreds.
As the super wealthy organized themselves into corporations they took most of society’s wealth with them; government realized that a semi-functioning country would need to tax these institutions and regulate their behavior, since the “natural” behavior of the capitalist — greed — was capable of pushing the rest of society into the dregs.
The new pass through fad is also indicative of the current state of U.S. capitalism; instead of investing profits in a company to buy machines or hire new workers, all the cash is either sitting in overseas bank accounts, or is being instantly funneled, via pass throughs, into the hands of ever-richer billionaires, who are proving to everyone that there is no bounds to the amount of cash they can accumulate. Where there are barriers to accumulation (regulations and taxes), they will supersede them while paying politicians of both major parties to ignore it or make it legal.
This dynamic occurs, in part, because the wealthy are basically refusing to invest in the real economy, as they fear the unstable economic conditions are not safe enough to make long term investments, which they believe won’t yield long term higher rates of profits. Safer to speculate on risky stocks, pocket the money and be the first one out when things go bust, as they did in 2008.
Of course the big name C corporations are up to their eyes in fraud too. Apple made big news when it only paid 2 percenttaxes on $74 billion in profits, by “declaring” its profits in Ireland, a corporate tax haven.
This occurs while other giant companies simply use clever accounting tricks to pay zero taxes, including giants like WellsFargo, Boeing, Verizon and General Electric. In fact, General Electric even finagled a rebate.
When it comes to oversea tax havens, it’s estimated that the U.S. national budget is annually starved of $280 billion in tax revenue.
Politicians have been struggling with ways to deal with the problem, since even in their mind some amount of tax collection needs to happen, if only to fund the military, provide more subsidies to corporations, and please the public by appearing to try to reduce the billionaire’s obscene behavior.
One popular idea among the politicians is to declare a corporate “tax holiday,” where the trillions of off-shore profits can be ceremoniously brought back to the U.S. while the feds look the other way. The idea is that, once the money is actually back in the U.S., the wealthy will want to spend it on something which will eventually help the economy — trickle down economics at its finest.
What seems certain to happen is that lowering corporate taxes will be a central piece of any “grand bargain” that eventually emerges, since there is a clear bi-partisan consensus that corporations need to pay lower taxes.
Some argue that if corporate taxes are low enough — and regulations removed — the corporations will reward the nation by not stockpiling their profits abroad and not creating pass through loopholes.
Of course all of this implies that the wealthy have a stranglehold over the U.S. economy. It’s telling that politicians want to deal with corporate tax evasion by lowering the corporate tax rate, instead of actually sending the IRS after them and throwing them in jail, as they do with working and middle class people.
The above dynamics create an ever-increasing wealth inequality that claws at the thinning strings holding society together. The bankruptcy and social disintegration of Detroit is a foreshadowing event for the rest of the country, unless this dynamic is stopped.
When the next crash happens the nation will have learned its lessons: the big banks and wealthy investors who destroyed the economy in 2008 are back at it, encouraged by Obama’s pro-corporate behavior and the Federal Reserve’s money flooding.
It’s becoming increasingly obvious that breaking the power of the super wealthy is the first step towards balancing the budget, job growth, protecting the safety net, and creating a semblance of a rational society. Until then the U.S. will lurch from one crisis to another, while blaming everyone but the real culprits.
Acute water shortages, aquifers exhausted, contaminated rivers…
Few Americans understand what their children face within 37 years with the addition of 100 million immigrants to the United States of America. The ramifications of passage of mass Amnesty Bill S.744 guarantee devastating consequences to our country. I hope, as you read this series, you understand that your children will become victims of your apathy and inaction.
Instead of this crisis standing front and center at the national leadership and media levels—America’s population predicament remains the most ignored, evaded and suppressed issue of our time.
I’m not exactly certain why we stand in denial of the effects of adding 100 million immigrants. You could ask the average American on the street about the implications of S744 and he or she wouldn’t possess the slightest idea of what you’re talking about.
As a reminder validating the reason for this series: demographic experts project the United States adding 100 million immigrants to this country by 2050—a scant 37 years from now. All totaled, since we reached 300 million in October of 2007, we will add 138 million people by 2050 to total 438 million people—enough to duplicate 20 of our top cities’ populations to our country. That 100 million people will have to be watered, fed, housed, transported and provided medical services. The enormity of it transcends understanding. The Pew Research Center, U.S. Population Projections by Fogel/Martin and the U.S. Census Bureau document those demographic facts.
Today in America, seven states suffer water shortages in 2013: Florida, Georgia, Texas, New Mexico, Arizona, Nevada and California. They may be able to water their populations at this time, but they stand on the edge of acute water shortages.
Florida sustains 18 million people in 2013, but demographic projections show them doubling to 36 million within 37 years—all of it because of legal immigration. Texas, at 26 million, expects to hit 36 million by 2050. The whopper granddaddy of them all: California holds 38 million on their way to 58 million.
What amazes me: no one whispers a word. Somebody with a brain in the media or government must be pulling their hair out while wondering why the media always reports “downstream” or after the catastrophic event already occurred.
But when the “Water footprint” disaster hits, we will have already added 100 million immigrants. At that point, everyone becomes victims.
(We pollute our drinking water with trash and chemicals all over the planet. Notice the mountain of plastic debris; but you can’t see the chemical contamination within the water. Not until, of course, you contract cancer.) Photography www.lightstalkers.org
“Without sustainability, ’severe’ water scarcity by 2050” By Andrew Nusca
“Today, 36% of the global population — approximately 2.4 billion people — already live in water-scarce regions and 22% of the world’s GDP ($9.4 trillion at 2000 prices) is produced in water-short areas,” said Nusca. “Moreover, 39% of current global grain production is not sustainable in terms of water use.
“According to IFPRI’s analysis, current “business as usual” water management practices and levels of water productivity will put at risk approximately $63 trillion, or 45 percent of the projected 2050 global GDP (at 2000 prices), equivalent to 1.5 times the size of today’s entire global economy. Moreover, 4.8 billion people (52 percent of the world population) will be exposed to severe water scarcity by 2050.”
(This is the kind of water contamination I have seen in my world travels. Many beaches around the world feature knee deep plastic trash. Worse, most of it sinks to the bottom and disrupts ocean, river and lake eco-systems. Yet, not one world leader or corporations calls for a 25 cent deposit-return law.) Photography by www.lightstalkers.org
As their water shortages slam home, where do you think they flee? Answer: first world countries.
Interestingly enough: these figures stand for our current 7.1 billion humans. Projections show another 3.1 billion added to that to reach 10 billion by 2050.
Something will happen and it won’t be pretty.
- 1 out of 6 people in the world lack access to clean water – that equals 1.1 billion people
- 9 million people will die this year from lack of access to clean water
- Every 15 seconds a child dies from water related illness
Exactly how do we Americans think we will escape those realities by adding 100 million immigrants?
(Imagine millions gallons of chemicals being dumped into America’s lakes and streams 24/7 because that’s what’s happening. Leaking gas tanks from gas stations and individual oil dumps poison our ground water. Dairy, beef, pig and chicken farms cause enormous ground water pollution. Add another 100 million immigrants and we face humongous consequences that will become irreversible and unsolvable.) Photography by www.wikipedia.org
Facts about Pollution from Livestock Farms
Livestock pollution and public health
- California officials identify agriculture, including cows, as the major source of nitrate pollution in more than 100,000 square miles of polluted groundwater.
- In 1996 the Centers for Disease Control established a link between spontaneous abortions and high nitrate levels in Indiana drinking water wells located close to feedlots.
- Manure from dairy cows is thought to have contributed to the disastrous Cryptosporidiumcontamination of Milwaukee’s drinking water in 1993, which killed more than 100 people, made 400,000 sick and resulted in $37 million in lost wages and productivity.
Water expert Ken Midkiff said, “In just a few short decades in the US, we have depleted our water supply. In the eastern states, which once had an abundance of water, bitter disputes and legal battles have become commonplace over water shortages caused by overpopulation. In the western states, where water has always been in short supply, population growth in dry areas has led to water shortages that threaten to severely restrict or perhaps even bar further growth.”
How do you “bar growth” by adding over 100 million people to America inside of four decades?
Just imagine with me: within 37 years, endless immigration will add 20 million immigrants to California. Anyone want to guess the outcome of that many people on the water supplies?
Water is essential for all dimensions of life. Over the past few decades, use of water has increased, and in many places water availability is falling to crisis levels. More than eighty countries, with forty percent of the world’s population, are already facing water shortages, while by year 2020 the world’s population will double. The costs of water infrastructure have risen dramatically. The quality of water in rivers and underground has deteriorated, due to pollution by waste and contaminants from cities, industry and agriculture. Ecosystems are being destroyed, sometimes permanently. Over one billion people lack safe water, and three billion lack sanitation; eighty per cent of infectious diseases.
Paul Craig Roberts thinks the Fed has backed itself into corner. A rise in interest rates would strengthen the dollar, give the dollar new life as world reserve currency, and halt the movement into gold, but a rise in rates would collapse the bond and stock markets and reduce the value of derivatives on the banks’ balance sheets. I asked Dr. Roberts if the Fed would sacrifice the dollar in order to save the banks and what the effect would be on Washington’s power viv-a-vis the rest of the world. His answers to these three questions suggest that Washington’s days of financial hegemony and world leadership are numbered.
Mike Whitney: Is the US dollar at risk of losing its position as reserve currency? How would this loss affect US leadership and other countries?
Paul Craig Roberts: In a way the dollar has already lost its reserve currency status, but this development has not yet been officially realized; nor has it hit the currency markets. Consider that the BRICS (Brazil, Russia, India, China, and South Africa) have announced their intention to abandon the use of the US dollar for the settlement of trade imbalances between themselves, instead settling their accounts in their own currencies. (There is now a website, the BRICSPOST, that reports on the developing relations between the five large countries.) There are also reports that Australia and China and Japan and China are going to settle their trade accounts without recourse to the dollar.
Different explanations are given. The BRICS imply that they are tired of US financial hegemony and have concerns about the dollar’s stability in view of Washington’s excessive issuance of new debt and new money to finance it. China, Australia, and Japan have cited the avoidance of transaction fees associated with exchanging their currencies first into US dollars and then into the other currencies. They say it is a cost-saving step to reduce transaction costs. This may be diplomatic cover for discarding the US dollar.
The October 2013 US government partial shutdown and (exaggerated) debt default threat resulted in the unprecedented currency swap agreements between the Chinese central bank and the European central bank and between the Chinese central bank and the Bank of England. The reason given for these currency swaps was necessary precaution against dollar disruption. In other words, US instability was seen as a threat to the international payments system. The dollar’s role of reserve currency is not compatible with the view that precautions must be taken against the dollar’s possible failure or disruption. China’s call for “a de-Americanized world” is a clear sign of growing impatience with Washington’s irresponsibility.
To summarize, there has been a change in attitudes toward the US dollar and acceptance of US financial hegemony. As the October deficit and debt ceiling crisis has not been resolved, merely moved to January/February, 2014, a repeat of the October impasse would further erode confidence in the dollar.
Regardless, most countries have come to the conclusion that not only has the US abused the reserve currency role, but also the power of Washington to impose its will and to act outside of law stems from its financial hegemony and that this financial power is more difficult to resist than Washington’s military power.
As the world, including US allies, made clear by standing up to Washington and blocking Washington’s military attack on Syria, Washington’s days of unchallenged hegemony are over. From China, Russia, Europe, and South America voices are rising against Washington’s lawlessness and recklessness. This changed attitude toward the US will break up the system of dollar imperialism.
Mike Whitney: How is the Federal Reserve’s Quantitative Easing impacting the dollar and financial instruments?
Paul Craig Roberts: The Federal Reserve’s policy of creating large amounts of new money in order to support the balance sheets of “banks too big to fail” and to finance continuing large budget deficits is another factor undermining the dollar’s reserve currency role. The liquidity that the Federal Reserve has pumped into the financial system has created enormous bubbles in bond and stock markets. US bond prices are so high as to be incompatible with the Federal Reserve’s balance sheet and massive creation of new dollars.
Moreover, central banks and some investors have realized that the Federal Reserve is locked into the policy of supporting bond prices. If the Federal Reserve ceases to support bond prices, interest rates will rise, the prices of debt-related derivatives on the banks’ balance sheets will fall, and the stock and bond markets would collapse. Therefore, a tapering off of quantitative easing risks a financial panic.
On the other hand, continuing the policy of supporting bond prices further erodes confidence in the US dollar. Vast amounts of dollars and dollar-denominated financial instruments are held all over the world. Holders of dollars are watching the Federal Reserve dilute their holdings by creating 1,000 billion new dollars per year. The natural result of this experience is to lighten up on dollar holdings and to look for different ways in which to hold reserves.
The Federal Reserve can print money with which to purchase bonds, but it cannot print foreign currencies with which to purchase dollars. As concerns over the dollar rise, the dollar’s exchange value will fall as more dollars are sold in currency markets. As the US is import-dependent, this will translate into higher domestic prices. Rising inflation will further spook dollar holders.
According to recent reports, China and Japan have together reduced their holdings of US Treasuries by some $40 billion. This is not a large sum compared to the size of the market, but it is a change from continuing accumulation. In the past, Washington has been able to count on China and Japan recycling their trade surpluses with the US into US Treasury debt. If foreign willingness to acquire Treasury debt declines and the federal budget deficit does not, the Federal Reserve would have to increase quantitative easing, thus putting even more pressure on the dollar.
In other words, in order to avoid an immediate crisis, the Federal Reserve has to continue a policy that will produce a crisis down the road. It is either a financial crisis now or a dollar crisis later.
Eventually, the Federal Reserve’s hand will be forced. As the dollar’s exchange value declines, so will the value of dollar-denominated financial instruments regardless of how many bonds the Federal Reserve purchases.
Mike Whitney: How is China likely to respond to America’s changing economic position?
Paul Craig Roberts: When I met with Chinese policymakers in 2006, I advised them that there was a limit to how long they could rely on the US consumer market as jobs offshoring was destroying it. I pointed out that China’s large population provided policymakers with the potential for an enormous economy. They replied that the one-child policy, which had been necessary in early years to keep population from outrunning social infrastructure, was blocking the development of a domestic consumer economy. As peasant farmers no longer could rely on multiple children for old age insurance, they hoarded their earnings in order to provide for their old age. Chinese policymakers said that they intended to develop a social security system that would give the population confidence to spend more of their earnings. I do not know to what extent China has moved in this direction.
Since 2006 the Chinese government has let the yuan appreciate 25% or 33%, depending on the choice of base. The increase in the currency’s exchange value has not hurt exports or the economy. Moreover, the US no longer manufactures many of the items for which it is dependent on China, and other developing countries do not have the combination of the technology that US corporations have given to China and China’s large excess supply of labor. So it is unlikely that China faces any threat to its development except for US policies designed to cut China off from resources, such as the new US military focus on the Pacific announced by the Obama regime.
China’s large dollar holdings are the consequence of the technological prowess that China acquired from Western corporations offshoring jobs to China. What is important to China is the technology and business know-how, which they have now acquired. The paper wealth represented by dollar holdings is not the important factor.
China could destabilize the US dollar by converting its holdings into dollar currency and dumping the dollars into the exchange markets. The Federal Reserve would not be able to arrange currency swaps with other countries large enough to buy up the dumped dollars, and the dollar’s exchange value would fall. Such an action could be a Chinese response to military encirclement by Washington.
In the absence of a confrontation, the Chinese government is more likely to gradually convert its dollars into gold, other currencies and real assets such as oil and mineral deposits and food businesses.
Quantitative easing is rapidly increasing the supply of dollars, but as other countries move to other arrangements for settling their trade imbalances, the demand for dollars is not rising with the supply. Thus, the dollar’s price must fall. Whether the fall is slow over time or sudden due to an unanticipated Black Swan event remains to be seen.
“Pro-Israel Policy groups such as AIPAC work with unlimited funding to divert US policy in the region ( Middle East )” Jack Straw, Member of Parliament and former Foreign Secretary of the British Labor Party
“The United States should drop a nuclear bomb on Iran to spur the country to end its nuclear program” Sheldon Adelson, biggest donor to the Republican Party and major fundraiser for pro-Israel political action committees, speech at Yeshiva University, New York City, October 22, 2013.
The question of war or peace with Iran rests with the policies adopted by the White House and the US Congress. The peace overtures by newly elected Iranian President Rohani have resonated favorably around the world, except with Israel and its Zionist acolytes in North America and Europe . The first negotiating session proceeded without recrimination and resulted in an optimistic assessment by both sides. Precisely because of the initial favorable response among the participants, the Israeli government escalated its propaganda war against Iran . Its agents in the US Congress, the mass media and in the Executive branch moved to undermine the peace process. What is at stake is Israel’s capacity to wage proxy wars using the US military and its NATO allies against any government challenging Israeli military supremacy in the Middle East, its violent annexation of Palestinian territory and its ability to attack any adversary with impunity.
To understand what is at stake in the current peace negotiations one must envision the consequences of failure: Under Israeli pressure, the US announced that its ‘military option’ could be activated – resulting in missile strikes and a bombing campaign against 76 million Iranians in order to destroy their government and economy. Teheran could retaliate against such aggression by targeting US military bases in the region and Gulf oil installations resulting in a global crisis. This is what Israel wants.
We will begin by examining the context of Israel ’s military supremacy in the Middle East . We will then proceed to analyze Israel ’s incredible power over the US political process and how it shapes the negotiation process today, with special emphasis on Zionist power in the US Congress.
The Context of Israeli Military Supremacy in the Middle East
Since the end of World War II , Israel has bombed, invaded and occupied more countries in the Middle East and Africa than previous colonial power, except the US . The list of Israel ’s victims includes: Palestine , Syria , Lebanon , Egypt , Iraq , Jordan , Sudan and Yemen . If we include countries where Israel has launched quasi-clandestine terrorist attacks and assassinations, the list would be greatly expanded to include a dozen countries in Europe and Asia – including the US through its Zionist terror network.
Israel ’s projection of military power, its capacity for waging offensive wars at will, is matched by its near-total impunity. Despite their repeated violations of international law, including war crimes, Israel has never been censored at an international tribunal or subjected to economic sanctions because the US government uses its position to veto UN Security Council resolutions and pressure its NATO-EU allies.
Israel’s military supremacy has less to do with the native techno-industrial ‘brilliance’ of its war-mongers and more to do with the transfers and outright theft of nuclear, chemical and biological technology and weapons from the US (Grant Smith “Ten Explosive US Government Secrets of Israel” IRMEP). Overseas Zionists in the US and France have played a strategic (and treasonous) role in stealing and illegally shipping nuclear technology and weapon components to Israel, according to an investigation by former CIA Director Richard Helms.
Israel maintains huge nuclear, chemical, and biological weapon stockpiles refusing any access to international arms inspectors and is not obliged to abide by the non-proliferation treaty, because of US diplomatic intervention. Under pressure from the local ‘Zionist power configuration’ (ZPC), the US government has blocked any action which might constrain Israel ’s production of weapons of mass destruction. In fact the US continues to provide Israel with strategic weapons of mass destruction for use against its neighbors – in violation of international law.
US military aid and technology transfers to Israel exceed $100 billion dollars over the past half century. US diplomatic and military intervention was crucial in rescuing Israel from defeat during the 1973 war. US President Lyndon Johnson’s refusal to defend the unarmed intelligence ship, the USS Liberty in 1967, after it had been bombed and napalmed by Israeli fighter planes and warships in international waters, constituted a tremendous victory for Israel thanks to Johnson’s Zionist advisers. Because of its impunity, even in killing American servicemen, Israel has been given a free hand to wage aggressive wars to dominate its neighbors, commit acts of terrorism and assassinate its adversaries throughout the world without fear of retaliation.
Israel ’s uncontested military superiority has converted several of its neighbors to quasi-client collaborators: Egypt and Jordan have served as de facto allies, along with the Gulf monarchies, helping Israel repress the region’s nationalist and pro-Palestinian movements.
The most decisive factor in the rise and consolidation of Israel ’s power in the Middle East has not been its military prowess but its political reach and influence via its Zionist agents in the US . Washington ’s wars against Iraq and Libya , and its current support of the mercenary assault against Syria , have destroyed three major secular nationalist opponents of Israel ’s hegemonic ambitions.
As Israel accumulates more power in the region, expanding its colonization of Palestinian territory, it looks eastward toward destroying the last remaining obstacle to its colonial policies: Iran .
For at least two decades, Israel has directed its overseas agents – (the ZPC) – to destroy the government of Iran by destabilizing its society, assassinating its scientists, bombing its military establishments and laboratories and strangling its economy.
After the ZPC successfully pushed the US into war against Iraq in 2003 – literally shredding its complex secular society and killing over a million Iraqis – it turned its sights on destroying Lebanon (Hezbollah) and the secular government of Syria as a way to isolate Iran and prepare for an attack. While thousands of Lebanese civilians were slaughtered in 2006, Israel ’s attack of Lebanon failed, despite the support of the US government and the ZPC’s wild propaganda campaign. Hysterical at its failure and to ‘compensate’ for its defeat at the hands of Hezbollah and to ‘boost morale’, Israel invaded and destroyed much of Gaza (2008/9) – the world’s largest open air prison camp.
Lacking military capacity to attack Iran on its own, Israel directed its agents to manipulate the US government to start a war with Teheran. The militarist leaders in Tel Aviv have unleashed their political assets (ZPC) throughout the US to work to destroy Iran – the last formidable adversary to Israel supremacy in the Middle East .
The Israeli-ZPC strategy is designed to set the stage for a US confrontation with Iran , using its agents in the Executive branch as well as its ongoing corruption, bribery and control of the US Congress. ZPC control over the mass media enhances its propaganda campaign: Everyday the New York Times and the Washington Post publish articles and editorials promoting Israel ’s war agenda. The ZPC uses the US State Department to force other NATO states to likewise confront Iran .
Israel’s Proxy War with Iran: US Political Pressure, Economic Sanctions and Military Threats
Alone, Israel’s ‘war’ with Iran would not amount to much more than its cyber sabotage, the periodical assassinations of Iranian scientists using its paid agents among Iranian terrorist groups and non-stop brow-beating from Israeli politicians and their ‘amen crowd’. Outside of Israel , this campaign has had little impact on public opinion. Israel’s ‘was’ on Iran depends exclusively on its capacity to manipulate US policy using its local agents and groups who dominate the US Congress and through the appointments of officials in key positions in the Departments of Treasury, Commerce, and Justice , and as Middle East ‘advisors’. Israel cannot organize an effective sanction campaign against Iran ; nor could it influence any major power to abide by such a campaign. Only the US has that power. Israel ’s dominance in the Middle East comes entirely from its capacity to mobilize its proxies in the United States who are assigned the task of securing total submission to Israel ’s interests from elected and appointed government officials – especially in regard to Israel ’s regional adversaries.
Strategically placed, ‘dual US-Israeli citizens’ have used their US citizenship to secure high security positions in the Government directly involved in policies affecting Israel . As Israelis, their activities are in line with the dictates of Tel Aviv. In the Bush administration (2001-2008) high placed ‘Israel Firsters’ dominated the Pentagon (Paul Wolfowitz, Douglas Feith), Middle East Security (Martin Indyk, Dennis Ross), the Vice President’s office (‘Scooter’ Libby), Treasury (Levey) and Homeland Security (Michael Chertoff). In the Obama administration the ‘Israel Firsters’ include Dennis Ross, Rahm Emanuel, David Cohen, Secretary of Treasury Jack “Jake the Snake” Lew, Secretary of Commerce Penny Pritzker and Michael Froman as Trade Representative among others.
Israel ’s Proxy Power within the Executive branch is matched by its dominance of the US Congress. Contrary to some critics, Israel is neither an ‘ally’ or ‘client’ of the US . Evidence of the gross asymmetry of the relation abounds over the past half century. Because of these powerful proxies in Congress and the Executive branch, Israel has received over $100 billion dollar tribute from the US over the past 30 years, or $3 billion plus a year. The US Pentagon has transferred the most up-to-date military technology and engaged in several wars on Israel ’s behalf. The US Treasury has imposed sanctions against potentially lucrative trading and investment partners in the Middle East ( Iran , Iraq and Syria ) depriving US agricultural and manufacturing exporters and oil companies of over $500 billion in revenues. The White House sacrificed the lives of over 4,400 US soldiers in the Iraq War – a war promoted by Israel ’s proxies at the behest of Israel ’s leaders. The State Department has rejected friendly and profitable relations with over 1.5 billion Muslims by backing the illegal settlement of over half million Jewish colonists on military-occupied Palestinian land in the West Bank and Jerusalem .
The strategic question is how and why this one-sided relation between the US and Israel persists for so long, even as it goes counter to so many strategic and elite US interests? The more immediate and pressing question is how this historically lopsided relation effects contemporary US-Iran sanctions and nuclear negotiations?
Iran and the Peace Negotiations
Undoubtedly the newly elected Iranian President and his Foreign Minister are prepared to negotiate an end to hostilities with the US by making major concessions ensuring the peaceful use of nuclear energy. They have stated they are open to reducing or even ending the production of highly enriched uranium; reducing the number of centrifuges and even allowing intrusive, unannounced inspections, among other promising proposals. The Iranian government proposes a roadmap with end goals as part of the initial agreements. The European Union’s Foreign Secretary Lady Ashton has commented favorably on the initial meeting.
The US Administration has given conflicting signals following the Iranian overtures and the opening meeting. Some individual comments are guardedly positive; others are less encouraging and rigid. Administration Zionists like Jack ‘Jake’ Lew, the Treasury Secretary, insists sanctions will remain until Iran meets all US (read ‘Israeli’) demands. The US Congress, bought and controlled by the ZPC, rejects the promising Iranian overtures and flexibility, insisting on military ‘options’ or the total dismantling of Iran’s legal and peaceful nuclear program – ZPC positions designed to sabotage the negotiations. To that end, Congress has passed new, more extreme, economic sanctions to strangle the Iran ’s oil economy.
How Israel’s Political Action Committees Control the US Congress and Prepare War with Iran
The Zionist Power Configuration uses its financial firepower to dictate Congressional policy on the Middle East and to ensure that the US Congress and Senate do not stray one iota from serving Israel ’s interests. The Zionist instrument used in the purchase of elected officials in the US is the political action committee (PAC).
Thanks to a 2010 US Supreme Court decision, Super PACs-linked to Israel spend enormous sums to elect or destroy candidates – depending on the candidate’s political work on behalf of Israel . As long as these funds do not go directly to the candidate, these Super PACs do not have to reveal how much they spend or how it is spent. Conservative estimates of ZPC- linked direct and indirect funds to US legislators run close to $100 million dollars over the past 30-year. The ZPC channels these funds to legislative leaders and members of Congressional committees dealing with foreign policy, especially sub-committee chairpersons dealing with the Middle East . Unsurprisingly, the largest Congressional recipients of ZPC money are those who have aggressively promoted Israel ’s hard-line policies. Elsewhere around the world, such large scale payoffs for legislative votes would be considered blatant bribery and subject to felony prosecution and imprisonment for both parties. In the US , the purchase and sale of a politician’s vote is called ‘lobbying’ and is legal and open. The legislative branch of the US government has come to resemble a high-price brothel or white slavers’ auction – but with the lives of thousands at stake.
The ZPC has purchased the alliance of US Congress people and Senators on a massive scale: Of 435 members of the US House of Representatives (sic), 219 have received payments from the ZPC in exchange for their votes on behalf of the state of Israel . Corruption is even more rampant among the 100 US Senators, 94 of whom have accepted pro-Israel PAC and Super PAC money for their loyalty to Israel . The ZPC showers money on both Republicans and Democrats, thus securing incredible (in this era of Congressional deadlock), near unanimous (‘bipartisan’) votes in favor of the ‘Jewish State’, including its war crimes, like the bombing of Gaza and Lebanon as well as the annual $3 billion dollar plus US tax-payer tribute to Tel Aviv. At least 50 US Senators have each collected between $100 thousand and $1 million in ZPC money over the past decades . In exchange, they have voted for over $100 billion in tribute payments to Israel … in addition to other ‘services and payments’. The members of the US Congress are cheaper: 25 legislators have received between $238,000 and $50,000, while the rest got peanuts. Regardless of the amount, the net result is the same: Congressional member pick up their script from their Zionist mentors in the PACs, Super PACs and AIPAC and back all of Israel ’s wars in the Middle East and promote US aggression on behalf of Israel .
The most outspoken and influential legislators get the biggest chunk of Zionist payola: Senator Mark Kirk (Bombs over Teheran!) tops the ‘pigs at the trough’ list with $925,000 in ZPC payoffs, followed by John McCain (Bombs over Damascus!) with $771,000, while Senators Mitch McConnell, Carl Levin, Robert Menendez, Richard Durban and other Zionophilic politicos are not shy about holding out their little begging bowls when the pro-Israel PAC bagmen arrive! Florida Congresswoman Ileana Ros-Lehtinen tops the ‘House’ list with $238,000 for her 100% pro-Israel record as well as for being more war-mongering than even Netanyahu! Eric Cantor got $209,000 for championing ‘wars for Israel ’ with American lives while cutting Social Security payments to US seniors in order to increase military aid to Tel Aviv. House Minority Whip Steny Hoyer, got $144,000 for ‘whipping the few wobbly’ Democrats back into Israel ’s ‘camp’. House Majority Leader John Boehner was paid $130,000 to do the same among the Republicans.
The ZPC has spent huge amounts to punish and destroy a dozen or so dissident legislators who had stood up to Israel ’s wars and grotesque human rights record. The ZPC has poured millions into individual campaigns, not only financing opposition candidates who pledged allegiance to the Israel but mounting scurrilous character assassinations of Israel’s critics in office. These campaigns have been mounted in the most obscure parts of the US , including in majority African-American districts, where local Zionist interests and influence are otherwise absolutely nil.
There are no comparable PACs, Super PACs, party leaders, or civic organization that can contest the power of Israel ’s Fifth Column. According to documents archived by the courageous researcher, Grant Smith of IRMEP, when it comes to Israel , the US Justice Department has adamantly refused to enforce its own federal laws requiring the prosecution of US citizens who fail to register as foreign agents while working for a foreign country – at least since 1963. On the other hand, the ZPC, through the so-call ‘Anti-Defamation League’, has successfully pressured the Justice Department, the FBI and NSA to investigate and prosecute law-abiding, patriotic US citizens critical of Israel ’s land grabs in Palestine and the Zionist corruptors of the US political system on behalf of their foreign master.
The corruption and degradation of US democracy is made possible by the equally compromised and corrupted ‘respectable press’. Media critic, Steve Lendman, has pointed out the direct link between Israel and the mass media in his investigation of the New York Times. The leading (‘fair and balanced’) journalists reporting on Israel have strong family and political ties to that country and their articles have been little more than propaganda. Times reporter Ethan Bronner, whose son served in the Israel Defense Forces, is a long-time apologist for the Zionist state. Times reporter Isabel Kershner, whose ‘writing’ seem to come straight out of the Israeli Foreign Office, is married to Hirsh Goodman an adviser to the Netanyahu regime on ‘security affairs’. The Times bureau chief in Jerusalem, Jodi Rudoren, lives comfortably in the ancestral home of a Palestinian family dispossessed from that ancient city.
The Times unflinching pro-Israel posture provides a political cover and justification for the corrupted US politicians as they beat the war drums for Israel . It is no surprise that the New York Times, like the Washington Post, is deeply engaged in disparaging and denouncing the current US-Iran negotiations – and providing ample space for the one-sided rhetoric of Israeli politicians and their US mouthpieces, while studiously excluding the more rational, pro-rapprochement voices of experienced former US diplomats, war-weary military leaders and representatives of the US business and academic communities.
To understand Congress’ hostility to the nuclear negotiations with Iran and their efforts to scuttle them through the imposition of ridiculous new sanctions, it is important to get to the source of the problem, namely the statements of key Israeli politicians, who set the line of march for their US proxies.
In late October, 2013, Former Israeli Defense Intelligence Chief Amos Yadlin spoke of ‘having to choose between ‘the bomb’ or the bombing’ – a message which immediately resonated with the 52 Presidents of the Major American Jewish Organizations (Daily Alert, October 24, 2013). On October 22, 2013, Israel ’s Intelligence Minister Yuval Steinitz, called for harsh new sanctions on Iran and insisted that the US use them as leverage to demand that Iran agree to entirely abandon its peaceful nuclear energy and enrichment program. Defense Minister Moshe Ya’alon affirmed that ‘ Israel will not accept any deal that allows Iran to enrich uranium’. It is Israel ’s position to threaten war (via the US ) if Iran does not submit to unconditional surrender of its nuclear program. This defines the position of all the major pro-Israel PACs, Super PACs and AIPAC. They in turn proceed to dictate policy to their ‘lick-spittles’ in the US Congress. As a result, Congress passes even more extreme economic sanctions on Iran in order to sabotage the ongoing negotiations.
Those who have received the biggest Zionist pay-offs from the pro-Israel PACs are the most vociferous: Senator Mark Kirk ($925,379), author of a previous sanctions bill, demands that Iran end its entire nuclear and ballistic missile program (!) and declared that the US Senate “should immediately move forward with a new round of economic sanctions targeting all remaining Iranian government revenue and reserves” (Financial Times, 10/18/13, p. 6). The US House of Representatives (sic) has already passed a bill sharply limiting Iran ’s ability to sell its main export, oil. Once again, the Israel- ZPC – Congressional axis seeks to impose Israel ’s war agenda on the American people! In late October 2013, Secretary of State Kerry was ‘grilled’ for 7 hours by Israeli Prime Minister Netanyahu with the craven Kerry promising to promote Israel ’s agenda on dismantling Iran ’s nuclear enrichment program.
To counter the campaign to strangle Iran ’s oil economy, promoted by Israel ’s flunkeys in the Congress, the Iranian government has offered generous contracts to the US and EU oil companies (Financial Times 10/29/2013, p 1). Existing nationalist provisions are being removed. Under the new terms, foreign companies book reserves or take equity stakes in Iranian projects. Iran hopes to attract at least $100 billion dollars in investments over the next three years. This stable country boasts the world’s largest gas and the fourth largest oil reserves. Because of the current US ( Israel )-imposed sanctions, production has fallen from 3.5 million barrels per day in 2011 to 2.58 million barrels per day in 2013. The question is whether ‘Big Oil’, the giant US and EU companies have to power to challenge the ZPC-stranglehold over US-EU sanction policy. So far, the ZPC has dominated this critical policy and marginalized ‘Big Oil’ using threats, blackmail and coercion against US policymakers. This has effectively shut out US companies from the lucrative Iranian market.
As the US and the 5 other countries attempt to negotiate with Iran , they face enormous obstacles overcoming Israel ’s power over the US Congress. Over past decades Israel ’s agents have bought the loyalties of the vast majority of Congress people, training them to recognize and obey the whistles, signals and script from the war mongers in Tel Aviv.
This ‘Axis of War’, has inflicted enormous damage on the world resulting in the deaths of millions of victims of US wars in the Middle East, Southwest Asia and North Africa . The gross corruption and widely recognized bankruptcy of the US legislative system is due to its slavish submission to a foreign power. What remains in Washington is a debased vassal state despised by its own citizens. If the ZPC controlled Congress succeeds once again in destroying the negotiations between the US and Iran via new war-like resolutions, we, the American people, will have to pay an enormous price in lives and treasure.
The time to act is now. It is time to stand up and expose the role played by the Israeli PACs, Super PACs and the 52 Major American Jewish Organization in corrupting Congress and turning “our” elected representatives into flunkeys for Israel’s wars. There has been a deafening silence from our noted critics –few alternative media critics have attacked Israel ’s power over the US Congress. The evidence is openly available, the crimes are undeniable. The American people need real political leaders with the courage to root out the corrupted and corruptors and force their elected members in the House and Senate to represent the interest of the American people.
A Flimsy Piece of Worn Out Script…
“If the dollar does indeed lose its role as leading international currency, the cost to the United States would probably extend beyond the simple loss of seigniorage, narrowly defined. We would lose the privilege of playing banker to the world, accepting short-term deposits at low interest rates in return for long-term investments at high average rates of return. When combined with other political developments, it might even spell the end of economic and political hegemony.”
– Economist Menzie Chinn, “Will the Dollar Remain the World’s Reserve Currency in Five Years?”, CounterPunch 2009
Barack Obama’s economic recovery has been a complete bust. Unemployment is high, the economy is barely growing, and inequality is greater than anytime on record. On top of that, inflation has dropped to 1.2 percent, private sector hiring continues to disappoint and, according to Gallup’s “Economic Confidence” survey, households and consumers remain “deeply negative”. More tellingly, the Federal Reserve’s emergency program dubbed QE– which was designed to mitigate the fallout from the 2008 stock market crash and subsequent recession–is still operating at full-throttle five years after Lehman Brothers defaulted. This is inexcusable. It’s an admission that US policymakers have no idea what they’re doing.
Why is it so hard to get the economy up and running? Everyone knows that spending generates growth, so if the private sector (consumers and businesses) can’t spend the public sector (the government) must spend. That’s how sluggish economies shake off recession, through growth.
Spend, spend, spend and spend some more. That’s how you grow your way out of a slump. There’s nothing new or original about this. This isn’t some cutting-edge, state-of-the-art theory. It’s settled science. Economics 101.
So is it any wonder why the rest of the world is losing confidence in the US? Is it any wonder why China and Japan have slashed their purchases of US debt? Get a load of this from Reuters:
“China and Japan led an exodus from U.S. Treasuries in June after the first signals the U.S. central bank was preparing to wind back its stimulus, with data showing they accounted for almost all of a record $40.8 billion of net foreign selling of Treasuries….
China, the largest foreign creditor, reduced its Treasury holdings to $1.2758 trillion, and Japan trimmed its holdings for a third straight month to $1.0834 trillion. Combined, they accounted for about $40 billion in net Treasury outflows.” (“China, Japan lead record outflow from Treasuries in June”, Reuters)
While things have improved since August, the selloff is both ominous and revealing. Foreign trading partners are losing confidence in US stewardship because of policymakers erratic behavior. Here’s how former Fed chairman Paul Volcker summed it up:
“We have lost a coherent successful governing model to be emulated by the rest of the world. Instead, we’re faced with broken financial markets, underperformance of our economy and a fractious political climate.”
Naturally, this loss of confidence is going to hurt the dollar vis a vis its position as the world’s reserve currency. But don’t kid yourself, China and Japan want to be the top-dog either. They’re fine with the way things are right now. The problem is, it’s looking more and more like the US is not up-to-the-task anymore given the irresponsible way it conducts its business. And we’re not talking about the government shutdown either, although that circus sideshow certainly lifted a few eyebrows in capitals around the world. Foreign leaders have come to expect these tedious outbursts from the lunatic fringe in Congress. But, the fact is, the government shutdown fiasco had very little effect on the bond market. The benchmark 10-year US Treasury shrugged off congress’s screwball antics with a wave of the hand. No big deal. Not so the talk of “tapering” by the Fed, which sent 10-year yields soaring more than 100 basis points to 3 percent in less that a month. Tapering put the fear of god in everyone. The sudden jolt to mortgage rates was enough to put the kibosh on new and existing homes sales putting a swift end to Bernanke’s dream of reflating the housing bubble. The rising long-term rates threatened to push the economy back into recession and wipe out five years of zero rates and pump priming in the blink of an eye. That’s why China and Co. started to jettison USTs. They figured if the Fed was going to scale back its asset purchases, rates would rise, and they’d be left with a whole shedload of US paper that would be worth less than what they paid for it. So they got out while the gettin’ was good.
So don’t believe the media’s fairytale that Bernanke postponed tapering because the economy still looked weak. That’s nonsense. It was the selloff in USTs that slammed on the brakes. The Fed actually wants to reduce its purchases because there are humongous bubbles emerging in financial assets everywhere. But how to do it without triggering another crash, that’s the question. The Fed has distorted prices across the board, which is why the main stock indices are climbing to new highs every day on the back of an economy that has less people in the workforce than it did 10 years ago. What a joke. And people wonder why foreign lenders are getting nervous?
What China wants from the United States is simple. They want proof that the US hasn’t lost its mind. That’s all. “Just show us that you still know how to fix the economy and run the system.” Is that too much to ask?
Unfortunately, Washington doesn’t think it needs to answer to anyone. We’re Numero Uno, le grand fromage. “What we say goes!”
Okay. But the only thing that’s going is the US’s reputation, it’s economic dominance, it’s behemoth debt market, and its reserve currency status. Not because the world is rebelling, but because the US is imploding. “Stupid” is a disease that has spread to every part of the body politic. The country is run by crackpots who implement counterproductive policies that weaken demand, boost unemployment, shrink growth leave the rest of the world scratching their heads in bewilderment. This is from Bloomberg:
“While government debt was a haven as the U.S. endured the worst recession in seven decades, primary dealers such as Barclays Plc (BARC) and Goldman Sachs Group Inc. say the gains this month show the Fed’s $85 billion of monthly bond purchases are masking the risk of owning fixed-income securities as the recovery in America takes hold.
“Treasuries are just not worth the risk,” Thomas Higgins, the Boston-based global macro strategist at Standish Mellon Asset Management Co., which oversees $167 billion of fixed-income investments, said in a telephone interview on Oct. 23.” (Bloomberg)
Not worth the risk, indeed, which is why the dollar is getting pummeled mercilessly at the same time. This is from Reuters:
“The dollar fell towards a nine-month low against a basket of currencies on Monday, with more investors selling on growing confidence the Federal Reserve will keep policy accommodative….
Most expect the central bank to delay withdrawing stimulus until March 2014…. The longer the Fed keeps policy accommodative, the more U.S. yields stay anchored, making the dollar less attractive to hold.” (Reuters)
So the dollar isn’t looking too hot either, is it, which is why China and Japan have started to reconsider their holdings. This is from Businessweek:
“U.S. government debt has already lost some of its appeal among foreign investors. They were net sellers of Treasuries for five-straight months ended August, disposing of $133 billion in that span, last week’s Treasury data showed.
The streak is the longest since 2001 as China, the largest overseas U.S. creditor, reduced its holdings to $1.268 trillion, the least since February….With the economy recovering from the depths of that recession, Treasuries may be more vulnerable to a selloff this time.” (“Treasuries Risk Shown as Fed Distorts Correlation to Stocks”, Businessweek)
Of course, there’s going to be a selloff. Why wouldn’t there be? And probably a panic too to boot.
Look, it’s simple: If the biggest buyer of US Treasuries (The Fed) signals that its either going to scale back its purchases or reduce its stockpile of USTs, then what’s going to happen?
Well, the supply of USTs will increase which will lower prices on US debt and push up rates. Supply and demand, right?
So, if the other participants in the market (aka China and Japan) think the Fed is about to taper, they’re going to try to sell before other investors race for the exits.
The question is: What’s that going to do to the dollar?
And the answer is: The dollar going to get hammered.
The US gov going to have to borrow at higher rates which could tip the economy back into recession. Also, the US could lose the ”exorbitant privilege” of exchanging colored pieces of paper for valuable goods and services produced by human sweat and toil. Isn’t that what’s really at stake?
Of course, it is. The entire imperial system is balanced on a flimsy piece of worn scrip with a dead president’s face on it. All that could change in the blink of an eye if people lose faith in US stewardship of the system.
But, what exactly would the US have to do for foreign countries to ditch the dollar? Here’s how economist and author Menzie Chinn answered that question in an interview in CounterPunch in 2009:
“If the US administration were to pursue highly irresponsible policies, such as massive deficit spending for many years so as to push output above full employment levels, or if the Fed were to delay too long an ending to quantitative easing, then the dollar could lose its position.” (“Will the Dollar Remain the World’s Reserve Currency in Five Years?” An Interview With Economist Menzie Chinn, Counterpunch)
Funny how Chinn anticipated the problems with winding down QE way back in 2009, isn’t it? His comments sound downright prophetic given Wall Street’s strong reaction.
But we keep hearing that China is stuck with the US and has to keep buying Treasuries or its currency will rise and kill its exports. Is that true or will China eventually split with the dollar?
Menzie Chinn again:
“It is true that each Asian central bank stands to lose considerably, in the value of its current holdings, if dollar sales precipitate a dollar crash. But we agree with Barry Eichengreen that each individual participant will realize that it stands to lose more if it holds pat than if it joins the run, when it comes to that. Thus if the United States is relying on the economic interests of other countries, it cannot count on being bailed out indefinitely.” (Counterpunch)
Well, that sounds a bit worrisome. But maybe China won’t notice that we’re governed by morons who’ve forgotten how to fix the economy or generate demand for their products. Any chance of that?
No chance at all, in fact, China already has already started its transition away from the dollar. Here’s the scoop from former chief economist for Morgan Stanley Asia, Stephen S. Roach:
“China has made a conscious strategic decision to alter its growth strategy. Its 12th Five-Year Plan, enacted in March 2011, lays out a broad framework for a more balanced growth model that relies increasingly on domestic private consumption. These plans are about to be put into action….
Rebalancing is China’s only option…..With rebalancing will come a decline in China’s surplus saving, much slower accumulation of foreign-exchange reserves, and a concomitant reduction in its seemingly voracious demand for dollar-denominated assets. Curtailing purchases of US Treasuries is a perfectly logical outgrowth of this process…..
For China, this is not a power race. It should be seen as more of a conscious strategy to do what is right for China as it confronts its own daunting growth and development imperatives in the coming years.” (“China gets a wake-up call from US”, Stephen S. Roach, Project Syndicate via bangkokpost.com)
In other words, “No hard feelings, Uncle Sam. We just don’t need your fishwrap currency anymore.”
No matter how you cut it, the dollar is going to be facing stiff headwinds in the days ahead. If Roach’s analysis is correct, we can expect a gradual move away from the buck leading to a persistent erosion of US economic and political power.
The end of dollar hegemony means America’s “unipolar moment” may be drawing to a close.
Iran to Follow?
Damascus – Additional easing of Syrian sanctions is expected by mid-November according to staff at the US Treasury Department’s Office of Financial Asset Control (OFAC).
Pressure on Obama from Putin is part of the ‘price tag’ for Russia’s role in bailing out the American president, whose chemical weapons ‘redline’ became something of an albatross. But another reason for the relaxation is that the White House believes it needs to communicate to Damascus that prospects for better relations, and possibly even some cooperation, are not completely dead, despite the 32-month crisis still raging in the Syrian Arab Republic.
This second easing of sanctions will show more balance and neutrality than those of last June, which were perceived as supporting Saudi and Gulf aid to the rebels while weakening the Assad government just as the Syrian Army had begun gaining back ground from the rebels. At that time, licenses for exports of certain goods related to reconstruction of infrastructure were allowed in areas held by the rebels. Specifically, OFAC indicated that license applications would be accepted for commodities, technology and software related to water supply and sanitation, agricultural production and food processing, power generation, oil and gas production, construction and engineering, transportation, and educational infrastructure. Most benefited would be rebel-controlled areas.
No doubt it is with a deep patriotic spirit of wanting to help out their fellow Americans, that the US Treasury Departments heavily pro-Zionist OFAC asks US citizens to “consult our Frequently Asked Questions (FAQ) to find answers to your most commonly-asked questions about how Syrian and Iranian sanctions may affect your own families and your business.”
That is unlikely to be easy given the obfuscatory legalize of the sanctions texts.
There are currently three types of sanctions that the U.S. government has imposed against Syria. The most comprehensive sanction, called the Syria Accountability Act (SAA) of 2004, prohibits the export of most goods containing more than 10% U.S.-manufactured component parts to Syria. Another sanction, resulting from the USA Patriot Act, was levied specifically against the Commercial Bank of Syria in 2006. The third type of sanction contains many Executive Orders from the President that specifically deny certain Syrian citizens and entities access to the U.S. financial system due to their participation in proliferation of weapons of mass destruction, association with Al Qaida, the Taliban or Osama bin Laden; or destabilizing activities in Iraq and Lebanon.
Syria Accountability and Lebanese Sovereignty Restoration Act
In May 2004, the President signed E.O. 13338 implementing the Syria Accountability and Lebanese Sovereignty Restoration Act (SAA) which imposes a series of sanctions against Syria for its support for terrorism, involvement in Lebanon, weapons of mass destruction programs, and the destabilizing role it is playing in Iraq.
In addition, the Treasury Department’s Statement of Policy indicated that OFAC would consider on a case-by-case basis applications to permit certain services in the agricultural sector, as well as in the Syrian telecommunication industry, enabling private citizens better access to the Internet, while certain petroleum transactions benefiting rebel forces were also authorized. OFAC also revised Syria General License 11 and replaced it with General License 11A authorizing NGOs to engage in activities to preserve the cultural heritage of the country, including museums, historic buildings and archaeological sites.
The new lifting of sanctions, tentatively scheduled to be announced next month, will help the Assad government because international banking and trade prohibitions are expected to be reduced. At the same time, US officials are discussing with their Russian “partners” a number of proposals that would acknowledge the right of the Syrian people to choose who to support in next year’s Presidential elections without Washington insisting that Syrian President Bashar Assad step down as part of a “transition to democracy.”
In addition, the White House is telling Congressional leaders, loudly enough for all to hear, that the president’s recent waiving of restrictions on supplying arms to Syrian rebels was much more limited than depicted in mainstream media reports. In fact, the waiver—on certain portions of the Arms Export Control Act—authorizes only specific transfers to “vetted” members of the opposition and to NGOs in Syria. The defense items to be provided are described as those “necessary for the conduct of …operations inside or related to Syria, or to prevent the preparation, use, or proliferation of Syria’s chemical weapons.” Who was to be responsible for “vetting” the opposition members was not specified, nor were the particular articles detailed. But significantly the White House claims this is not a general waiver, but rather one with regard to a single specific contemplated transaction. Defense companies do not now have a blanket license to ship their wares to the Syrian opposition. This is because Section 40(g) of the Arms Export Control Act, 22 U.S.C. § 2780 (g), specifically gives the President authority to waive the provisions of the Act with respect to a specific transaction should he find that the waiver is “essential to the national security interests of the United States” and should he make the requisite report on the waiver to Congress. His determination on that finding directs the Secretary of State to make the required report to Congress.
The main opposition to White House plans to lessen the civilian targeting sanctions comes, as usual, from the US Congressional Zionist lobby. Israel’s supporters in Congress seek to prevent any lessening of US sanctions—against Iran first, and Syria second. Two days of talks are about to begin in Vienna between experts from the P5+1 (the United States, Russia, China, Britain, France, and Germany) and their Iranian counterparts, who will discuss technical issues relating to Tehran’s nuclear program and international sanctions. The meeting will help lay the groundwork for the next round of diplomatic negotiations, scheduled to take place in Geneva on November 7-8, and it is anticipated that the White House will accede to EU and Russian proposals to send a reciprocal good faith response to Tehran by lifting some of the sanctions targeting Iranian civilians. Although the P5+1 and Tehran have agreed to keep the contents of their negotiations secret, the general aim of the talks has been for Iran to reduce its capacity to enrich uranium and certain other nuclear activities in return for relief from the sanctions regime, which is strangling the nation’s economy. The main hurdles include verification of any concessions Iran makes and the sequencing of any reduction in sanctions.
Signs of progress were visible earlier this week in comments made after separate talks between Iran and the International Atomic Energy Agency. In a rare joint statement, both sides called the talks “very productive”—a significant departure from eleven previous meetings in recent years, all of which failed to achieve progress in resolving what the IAEA has called the “possible military dimensions” of Iran’s nuclear program. The new joint statement also indicates that a document discussed in past meetings has been set aside and a new approach taken.
Eager as it is for negotiations to succeed, the Obama administration has also echoed the Zionist lobby’s contention that “no deal is better than a bad deal.” Yet if the talks fail, international support for sanctions will likely begin to fall apart, reducing U.S. leverage even further.
The world is watching, particularly U.S. allies in Europe and Asia, as well as regional “friends” like Jordan, the United Arab Emirates, and Saudi Arabia. Though reportedly interested in lifting some of the sanctions on Syria and Iran, the White House is facing stiff opposition from Tel Aviv and Riyadh, with both governments criticizing the US for its lack of resolve in Syria and its presumed conciliatory attitude toward Iran.
Secretary of State John Kerry is reportedly slated to continue meetings with Saudi-Israeli officials in an attempt to tamp down their growing angst.
“4,594,000 Mortgages Going Unpaid in the United States.”
Buying a house is a lot like buying a car. If you don’t look under the hood, you could wind up with a lemon. Only with housing, it’s not as simple as checking the dipstick or looking for oil under the rear axle. No, smart home buyers check the data to see what’s really going on. That’s the best way to cut through the hype and separate the fact from the fiction.
Lately, interest rates have been inching higher while prices have been rising. The combination of the two has put the kibosh on sales leading to a more generalized slowdown. But sluggish sales and higher rates don’t tell the whole story. For that, we need to take a peak under the hood and see what the cheerleaders in the media have been hiding from view. And what they’ve been hiding is nearly 5 million homeowners who’ve stopped paying their mortgages altogether. That’s no small matter. Here’s the story from DS News:
“Lender Processing Services provided the media with a “first look” at the company’s mortgage performance statistics for the month of September….LPS counts a total of 3,266,000 mortgages nationwide that are 30 or more days past due but not yet in foreclosure. That tally represents 6.46 percent of all outstanding mortgages…..
Of the more than 3 million delinquent loans, LPS says 1,331,000 have missed at least three payments but haven’t started the foreclosure process. Another 1,328,000 mortgages are currently winding their way through foreclosure pipelines, according to LPS’ data….
Yikes. Now, that doesn’t necessarily mean that it’s a bad time to buy a house, but one should at least be aware of the fact that there’s a gargantuan stockpile of backlogged homes just waiting to flood the market once the banks get their act together. Of course, maybe that day will never come, right? After all, we’re already 5 years into this thing and the banks are actually dragging the process out longer today than ever before. Maybe you don’t believe that. Maybe you think that there’s actually a shortage of supply which is why prices have been going up for the last year or so. Okay, but why not withhold judgment until you check this out. This is from an article at Housingwire titled “Prolonged liquidation timelines shake up home prices”:
“Timelines on distressed inventory continue to drag on, while elevated mortgage loss severities continue to offset positive gains on home prices…..
Liquidations increased 32.2 months for the third quarter, up from 31.1 months for the second quarter, and also up from 28.3 months a year ago. In aggregate, timelines have increased every quarter since the fourth quarter of 2008 and remain at historical highs…
Nonetheless, the most seasoned inventory continues to prove difficult to liquidate, skewing aggregate timelines higher.
“The percentage of distressed mortgages that are five or more years delinquent has tripled just in the last year,” Nelson said.” (“Prolonged liquidation timelines shake up home prices”, Housingwire)
Read that last line over a couple times and let it sink in: “The percentage of distressed mortgages that are five or more years delinquent has tripled just in the last year.”
That doesn’t sound like the “Happy days are here again” refrain we’ve been hearing in the media, does it? It sounds like the banks still haven’t even dumped the subprimes they’ve had on their books for 5-long years. In fact, the article alludes to that very fact. Here’s the money-quote: “Subprime loss severities have remained flat with timelines in excess of 34 months and home price gains lower than the national average.”
The banks are still writing down the losses on subprime mortgages? What a farce.
Now, I know the article was written in opaque business-journal-type gibberish that makes it hard to understand, but just consider what the author is saying: “Liquidations increased 32.2 months for the third quarter… up from 28.3 months a year ago.” So the banks are actually taking LONGER to process the gunk on their books than even last year. Why would they do that? Why would they drag out the process longer than they had to?
1– Because they don’t have the money to cover the losses.
2–Because they don’t want to dump more homes on the market and push down prices.
3–Because the Fed is lending them money at zero rates so they can roll over their prodigious debtpile at no cost to themselves.
So, you see, the whole system has been rejiggered to accommodate a handful of underwater, zombie institutions who wouldn’t know how to make an honest buck in a normal business transaction if it was staring them in the face.
Back to housing: So there’s a humongous shadow inventory of distressed homes that have yet to reach the market. And the banks are dragging their feet to keep prices artificially high. Everyone knows this now, in fact, even CNN ran a story on the topic last week. Here’s a clip:
“Foreclosure sounds like the end of the line, but actual eviction can take months or years — even after the bank has repossessed a home. RealtyTrac estimates that 47% of the nation’s foreclosed homes are currently occupied. The percentage actually tops 60% in some hot housing markets, like Miami and Los Angeles.
Those still living in repossessed homes include both former owners and renters. Either way, their time in the homes is mortgage and rent free….
And banks may be in no rush to kick people out. They will take their time in markets with a lot of homes for sale and depressed prices. Plus, letting homeowners stick around can help protect homes from abuse.” (“Half of nation’s foreclosed homes still occupied”, CNN Money)
What’s funny about this article is that the banks have been fighting tooth-n-nail for the last year for the Consumer Financial Protection Bureau (CFPB) to ease lending standards on their Qualified Mortgage (QM) rule so they can blow up the system again and leave us all with another 5 or 6 million foreclosures. What’s that saying about “old dogs and new tricks”?
There’s no point in going over the same material over and over again. People who follow the market already know that mortgage applications are down, rates are up, sales are down, prices are up, etc, etc, etc. But potential homebuyers should at least know that this is the weirdest housing market of all time. The extent of the manipulation is simply mindboggling. It’s a stretch to call it a market at all since the fundamentals have been tossed out and replaced with fake rates, fake inventory, fake mortgage modification programs, and fake demand. For example, get a load of this from RealtyTrac:
1—”All-cash purchases nationwide represented 49 percent of all residential sales in September…..
2–September had the highest percentage of institutional investor purchases of any month since RealtyTrac began tracking in January 2011. ….
3–“The housing market continues to skew in favor of investors, particularly deep-pocketed institutional investors, and other buyers paying with cash,” said Daren Blomquist, vice president at RealtyTrac. (“Institutional Investor Purchases Reach New High in September with 14 Percent of all U.S. Residential Sales”, RealtyTrac)
Does that sound like a normal market to you?
Whatever happened to firsttime homebuyers who used to make up the bulk of housing sales?
You know what happened to them, don’t you? They’re either buried under a mountain of student debt from which they will never emerge or stuck in crappy part-time jobs that don’t pay enough to even meet the monthly rent, right? These people will probably never own a home; it’s just not in the cards, which is why firsttime homebuyers are following the Dodo into extinction.
And the same rule applies to “move up” buyers, too. Move up buyers are the folks who use the equity in their first home to buy a nicer home in a better neighborhood. Move up buyers used to be the second biggest buyer of homes in the US, but not any more. They’re struggling too, mainly because housing prices are still below their 2006 peak (which means many of these people are either still underwater on their mortgages) or because they have zero equity in the homes.
So, who’s buying all the houses?
Speculators. People who have no intention of moving into the homes they buy. That’s what keeps the recovery going. And that’s what low interest rates and QE-pump priming achieves; it transforms markets that are a critical part of a thriving economy into an annex of the Wall Street Casino where houses are flipped in a frenzy of speculation like credit default swaps or some equally dodgy debt instrument. This is the world Bernanke has created, a topsy-turvy world of lightening-fast trades that blows up every 5 or 6 years.
I mean, think of it: 49 percent of all residential sales in September were all-cash purchases.
And where are all these deep-pocket buyers coming from?
Wall Street, of course. The big boys have switched from junk bonds and farmland to housing, which should be expected given the ocean of liquidity the Fed has pumped into the financial markets. Naturally, there’s been some spillover into housing which is creating a new regime of credit bubbles. Booyah, Bernanke, you’ve done it again!
Are you surprised? Are you surprised that institutional investors are snapping up these foreclosures like hotcakes even though there are 4.5 million more in the pipeline? That must mean that the banks made some kind of deal with the PE guys that they wouldn’t dump their houses on the market without giving them a heads up first, right? (wink, wink)
Of course, it’s right. It’s all rigged. You know it, I know it, everyone knows it. The whole bloody country is owned by a credit monopoly that never gets tired of fleecing us.
That’s just what they do.
Torture, or what our government calls “enhanced interrogation”, is not a tactic so much as a darkly artistic process. The subject of this process has something that the torturer wants; it might be information, or a forced confession to a crime the subject did not commit, but most often, torture is designed to gain nothing more than psychological compliance.
The goal is to manipulate the subject into believing that submission is the only possible future, and that such submission is inevitable regardless of the will of the victim. The torturer often builds himself up as a kind of parent figure for the subject – becoming the only entity that can supply shelter, water, food, and comfort. The torturer is taskmaster and abuser, but also caregiver in the twisted relationship dynamic. A schizophrenic balance is struck in which the subject longs for the outside world and a return to the pleasures of the past (making him desperate and malleable), but he also partially accepts his prison walls as home (giving him a false faith that compliance will lead to a safer and more predictable tomorrow).
Until this compliance is achieved, the subject is exposed to endless and erratic crisis events in which his body is damaged, his mind is deprived of sense, perception, and sleep, and his life is overtly threatened. He may receive brief moments of rest, but these are designed only to make the next torture session even more raw and painful. If the subject does not understand how the process works, or if he doesn’t have a strong sense of his own identity, then he will quickly lose track of reality. Every moment becomes a waking nightmare, a warped and gruesome carnival, and life becomes nothing more than an absurd and obscure experiment barely worth living.
It is my belief based on substantial evidence that America, as a nation and a culture, is now being held hostage and tortured into submission on a grand scale using economic terror by the elitist establishment which dominates BOTH major political parties. The goal? To push our society to conform completely with the concepts of globalization, bureaucratic micro-management, and greatly reduced living standards. We are being conditioned to accept defeat and failure, and like children, to cry out for a parental authority to save us in our state of helplessness and fear, even if that authority was the cause of our fear from the very beginning.
The Thin Thread Of The American Economic Fantasy
In the past three months the U.S. has flirted with total fiscal collapse three times. The first event came in August with market rumors that the Federal Reserve was nearing a “consensus” on plans to cut QE stimulus measures, causing panic amongst investors who now realize that the ONLY pillar still holding our fiscal edifice together is endless fiat currency creation by the Fed. Markets began a paradigm which is now the “new normal”; plummeting whenever good economic news hits the mainstream on the fear that the central bank will tighten policy, and skyrocketing when bad economic news hits the mainstream on the assumption that the Fed will continue printing. It is official – lackluster employment reports are something to cheer, and overall systemic crisis is good for stocks:
The possibility of a Fed taper has shown us clearly that any action by the private bank to reduce or remove quantitative easing will result in a market panic and implosion. If the globalists within the Fed apparatus decide one day soon that they want to bring the U.S. to its knees, destroy the dollar, and introduce a new world reserve currency, they can do it with little more than a word proclaiming QE over, or unsuccessful. So far, they keep the life support machine running…
The second event came with the drive by the Obama Administration to turn their covert war in Syria into a full blown invasion. Despite presumptions by many naysayers that Russia and China wouldn’t lift a finger to aid the Assad regime, both nations staunchly opposed action by the U.S. in the region and tensions neared critical mass. Make no mistake, a WWIII level event could have easily erupted, and some Americans seem to remain oblivious to the danger.
China and Russia maintain vast influence in global markets. The EU, for instance, is utterly dependent on Russian natural gas exports for their energy needs. The U.S. economy could be annihilated within weeks by an announcement by China to dump their treasury holdings or the dollar as the world reserve currency. This is just a taste of the financial risks associated with a new war in the Middle East, and military risks add even more potential calamity. Anyone who believes that Chinese or Russian views on American political or military behavior “do not matter” is living in a deluded cartoon-land.
The third event came with the recent debt ceiling debate and government shutdown. One-third of the U.S. population is disturbingly dependent on scraps from the government’s table, and any mention of cuts to entitlement programs (or social security, which government treats exactly like an entitlement program) causes immediate and militant finger pointing. Democrats have been especially vicious in their accusations and rhetoric, consistently referring to Constitutional conservatives and “Tea Party” legislators as “extremists”, “traitors”, and even “domestic enemies”:
I happen to take a slightly different view to a majority of independent analysts in that I believe the establishment is just as likely to push America into deliberate default as it is to push America into infinite debt and inflationary collapse. The end result will be exactly the same regardless of the path taken, and we have yet another opportunity to dance on the edge of oblivion coming in three to four months when the debt debate starts all over again.
The point is, our financial system has become so unbalanced and internally diseased that if ANY event follows through to culmination, whether political, economic, or international, the economy WILL shatter. The past three month are a resounding testament to this fact.
The “De-Americanization’ Of The Global Economy
In my article ‘How The Dollar Will Be Replaced’, published in 2012, I summarized the Catch-22 nature of America’s debt problem which I have been warning about since 2006, and how this will eventually end in the abandonment of the dollar as the world reserve currency. To this day, and in the face of overwhelming evidence that the dollar is doomed, some people still refuse to grasp reality.
In the midst of the latest debt debate China has made clear it’s intentions through state run media to end its relationship with the greenback, not just to form a Chinese-centric reserve currency system, but a global currency system centered on a “new world order”:
Last year China surpassed the U.S. as the world’s largest importer and exporter, making its currency, the Yuan, more desirable than the greenback as a reserve in the long term. Since 2010, China has been quietly but quickly establishing multiple bilateral trade agreements with numerous countries dropping the dollar as the primary purchasing mechanism. China has accumulated massive gold stores and is set to become the world’s largest holder of gold in the next two years. In the past year, China has also surpassed the U.S. as the number one importer of oil, making it a more valued market for the Middle East and causing many to question the dollar’s relevance as the petro-currency:
Saudi Arabia, America’s primary ally and foothold in the global oil market, is now openly calling for an end to traditional agreements and a separation from the U.S. because of the lack of military action in Syria. This too does not bode well for the dollar’s petro-status. Like a chess maneuver, it would seem we have been cornered by the globalists on oil. If we invade Syria or Iran we risk losing petro-status. If we do not invade Syria or Iran, we still risk losing petro-status:
In response to the dismal debt ceiling extension and the uncertainty underlying the new debate coming in the next few months, China’s ratings agency, Dagong, has downgraded U.S. treasury bonds yet again:
Three near-crisis events in only three months have signaled a severe acceleration in what the Chinese call the “de-Americanization” of the global economy. All of the financial shifts taking place since the derivatives implosion of 2008, as well as those rushing like white-water rapids through the global system in the wake of the debt ceiling debate, are gravitating towards ONE outcome – the destruction of the dollar, and the introduction of a new global currency (the SDR) controlled the the IMF.
Russia’s Vladimir Putin has called for a global currency run by the IMF to replace the dollar:
China has called for a global currency run by the IMF to replace the dollar:
Elitists within the U.S. have called for a global currency run by the IMF to replace the Dollar:
Hell, even the Vatican has called for a global currency run by a “global public authority” to replace the dollar:
There is a world-wide strategy in motion to end the dollar, and with it, America as we know it today. The only question is, how many more near-disasters will we have to experience before the trigger event takes place?
The Torture Continues
With so many near misses culminating so close together, it may be wise to consider what could happen in the the next three months while we wait for debt debate theater part duex. Like a prisoner in Abu Ghraib, America is trapped, waiting for the next humiliation, the next degradation, or the next session of pain. Are we merely being acclimated to the idea of incessant crisis? Are we learning to become apathetic at the edge of the chasm? Or, are we being driven to madness, mass-madness, by a concert of elitist interrogators seeking our acquiescence?
Again, the central purpose of torture is to acquire consent. Not just extorted consent, but voluntary consent. It is not enough for the torturer to force the subject to obey, he wants the subject to EMBRACE his servitude. To gladly abandon all hope. To see his captor as his only salvation.
The globalist establishment wants us to beg them to save us from the tortures they create. If we never give them this, they will never win.
Source: Brandon Smith | Alt-Market
A controversial report released this month by the International Monetary Fund outlines schemes to have big-spending governments with out-of-control debts plunder humanity’s wealth using a mix of much higher taxes and outright confiscation. The goal: Prop up Big Government. Because people and their assets are generally mobile, the radical IMF document, dubbed “Taxing Times,” also proposes measures to prevent them from escaping before they can be fleeced. Of course, the real problems — debt-based fiat currency, lawless bank bailouts, and a cartel-run monetary system — are virtually ignored.
Pointing to absurd and rising levels of government debt, as well as increasing income inequality, the IMF document suggests there are few remaining options for desperate policymakers to explore. Two that are mentioned include “repudiating public debt” — in other words, defaulting on government bonds — or “inflating it away” by having privately owned central banks conjure even more gargantuan amounts of fiat currency into existence at interest. Both of those plots, of course, would still represent a massive transfer of wealth.
However, even though it hides behind the passive voice, the IMF preference for dealing with the debt problems appears to be simply confiscating the wealth more directly. “The sharp deterioration of the public finances in many countries has revived interest in a capital levy, a one-off tax on private wealth, as an exceptional measure to restore debt sustainability,” the report claims. “The appeal is that such a tax, if it is implemented before avoidance is possible, and there is a belief that it will never be repeated, does not distort behavior (and may be seen by some as fair).”
Reducing government debt ratios to “pre-crisis levels” seen at the end of 2007 — before the multi-trillion-dollar banker bailouts and ramping up of the lawless currency printing at central banks — will require “sizeable” tax rates, the IMF continues. Citing a sample of 15 euro-area nations, the report claims that all households with positive net wealth — anyone with more assets than debt, in essence — would have to surrender about 10 percent of it. Because many people who lived responsibly and saved would try to avoid the looting of their wealth, drastic measures must be considered to stop them.
“There is a surprisingly large amount of experience to draw on, as such levies were widely adopted in Europe after World War I and in Germany and Japan after World War II,” the IMF report notes. “This experience suggests that more notable than any loss of credibility was a simple failure to achieve debt reduction, largely because the delay in introduction gave space for extensive avoidance and capital flight, in turn spurring inflation [sic].”
By proposing the outright confiscation of middle-class wealth, analysts say the IMF is essentially acknowledging that simply looting “the rich” will not be enough to even restore government debt to “sustainable” levels. Still, the non-establishment “rich” would face by far the most ferocious assaults on their assets under the schemes outlined in the radical IMF report, which was promptly celebrated by Big Government-supporting politicians.
Noting that financial wealth and people are mobile, the document suggests that there “may be a case” for confiscating varying amounts of wealth using various means — all depending on how easy it would be for people to protect the assets in question from legalized looting. “Substantial progress likely requires enhanced international cooperation to make it harder for the very well-off to evade taxation by placing funds elsewhere,” the report says matter-of-factly.
Taxes on the “rich” of around 60 percent to 70 percent, according to the IMF, would likely be the rate at which the most plunder could be extracted for desperate governments. “A revenue-maximizing approach to taxing the rich effectively puts a weight of zero on their well-being,” the report explains, calling that notion “contentious.” “If one attaches less weight to those with the highest incomes, the vote would be to increase the top marginal rate.”
Private companies that try to reduce their already-crushing tax burdens using “tax planning schemes,” as the report calls them, are also in the IMF crosshairs for increased wealth confiscation. In a section headlined “Tricks of the Trade,” for example, the document blasts business efforts to provide services directly from “low-tax jurisdictions” as “abusive.”
In essence, the IMF and other taxpayer-funded international institutions hope to see a stronger global regulatory regime to ensure maximum wealth extraction via corporate taxation, too. “The chance to review international tax architecture seems to come about once a century; the fundamental issues should not be ducked,” the report argues.
The devastating consequences of squandering ever-greater amounts of productive capital on government programs, of course, are largely overlooked. Meanwhile, the unspoken assumption underpinning the radical ideas is essentially that companies exist to produce wealth for governments to spend — rather than value for shareholders and consumers as has traditionally been the case.
Looking past the bureaucratic language, the IMF caveats, its effort to hide behind the passive voice, and the thinly disguised attempt to make the heist sound palatable to the public because not everyone would be fleeced just yet, the message becomes clear. What the IMF is really saying is that the proposed massive confiscation of wealth must be adopted quickly and quietly — before people have a chance escape it.
Among other schemes discussed in the report is “harmonizing” taxes across jurisdictions, a longtime globalist goal pushed by more than a few establishment-run international institutions. To ensure that governments can extract as much wealth as possible from the productive sector of the economy, more cooperation between them is supposedly needed to eliminate tax competitionamong jurisdictions. After all, if one government sets lower tax rates to attract businesses and capital, other regimes are being deprived of what the IMF appears to believe is rightfully theirs to seize.
While the report has largely escaped the attention of the establishment media, analysts who dug into it were shocked. “It may all sound far-fetched to you now, and most people will still cling on to the idea that ‘they wouldn’t do such a thing’,” noted Raul Meijer in an analysis posted on Market Oracle, suggesting that the Cyprus heist would likely serve as a “blueprint” for future looting — as EU officials promised. “But that the IMF proposes it at all, and so openly, suggests that they might, if only they can figure out how.”
Writing in Forbes, meanwhile, Competitive Enterprise Institute Fellow Bill Frezza highlighted three major takeaways from the report. The first point is that IMF economists understand that even if 100 percent of assets belonging to the “1 percent” were expropriated, there would not be enough to fund today’s governments. “That means that all households with positive net wealth — everyone with retirement savings or home equity — would have their assets plundered under the IMF’s formulation,” Frezza explained.
The second major takeaway, he continued, is that such a “repudiation of private property” would still not be enough to pay off the debts of Western governments or to fund their budgets going forward. Instead, it would merely “restore debt sustainability,” as the IMF put it, allowing governments to keep borrowing until the next crisis strikes — “for which stronger measures will be required, of course.”
Lastly, Frezza explained, if the political class fails to “muster the courage to engage in this kind of wholesale robbery,” the only alternatives offered by the IMF were debt repudiation or hyperinflation. “Structural reform proposals for the Ponzi-scheme entitlement programs that are bankrupting us are nowhere to be seen,” he added.
Concluding, Frezza painted a dire picture of what the future may hold if the would-be looters are not restrained. “Yes, this is where the bankruptcy of the modern entitlement state is taking us — capital controls and exit restrictions so the proverbial four wolves and a lamb can vote on what’s for dinner,” he wrote. “That’s the only way to keep citizens worried about ending up on the menu from voting with their feet.”
In another devastating analysis of the latest IMF report, which was released in mid-October, Ryan Bourne, head of economic research at the Centre for Policy Studies, blasted it for being filled with “left wing” ideas. “The IMF is playing with fire by giving intellectual backing to punitive taxation,” he said. “Underlying these policies is an ideological assumption that wealth is a collective resource, with governments the benevolent seekers of the common good, whose ability to provide services is undermined by an eroding tax base…. These policies should be anathema to anyone valuing individual freedom, growth and long-term fiscal responsibility.”
For IMF boss Christine Lagarde, however, what the would-be global wealth confiscators are demanding is simply part of formulating a “just” fiscal policy. “It’s clearly something finance ministers are interested in, it’s something that is necessary for the right balance of public finances,” the former French finance boss was quoted as saying during a panel discussion this month. “There are lot[s] of wasted opportunities.”
Of course, the IMF report glosses over the fact that the overwhelming majority of policy changes among advanced economies in recent years went in the direction of tax increases. It also ignored the screaming gorilla in the room: the flawed monetary system and the ludicrous government spending spree at the root of the financial crisis and the ongoing economic problems plaguing the world.
There may be good explanations for that. Despite receiving generous taxpayer-funded salaries and perks, for example, IMF bureaucrats do not pay the exorbitant income taxes they are demanding for everyone else. Meanwhile, the controversial global institution has already been playing a key role in recent heists — with the confiscation of people’s savings in Cyprus among the most stunning examples.
Even more important, perhaps, is the fact that the IMF is being openly groomed to serve as a global central bank in charge of aplanetary currency. It already issues the proto-global currency known as Special Drawing Rights, but the establishment has much bigger plans in mind, as The New American magazine has documented extensively. If liberty, prosperity, and national sovereignty are to be preserved, the radical looting schemes advanced by the IMF and other planetary institutions must be resisted in favor of real reforms.
Alex Newman is a correspondent for The New American, covering economics, politics, and more. He can be reached firstname.lastname@example.org.
Source: The New American
“Repo has a flaw: It is vulnerable to panic, that is, ‘depositors’ may ‘withdraw’ their money at any time, forcing the system into massive deleveraging. We saw this over and over again with demand deposits in all of U.S. history prior to deposit insurance. This problem has not been addressed by the Dodd-Frank legislation. So, it could happen again.” – Gary B. Gorton, Professor of Management and Finance, Yale School of Management (lifted from Repowatch)
Subprime mortgages did not cause the financial crisis, nor did the housing bubble or Lehman Brothers. The financial crisis originated in a corner of the shadow banking system called the repo market. That’s where the bank run occurred that froze the secondary market, sent prices on mortgage-backed assets plunging, and pushed the financial system into a death spiral. In the Great Crash of 2008, repo was ground zero, the epicenter of the global catastrophe. As analyst David Weidner noted in the Wall Street Journal, “The repo market wasn’t just a part of the meltdown. It was the meltdown.”
Regrettably, the Federal Reserve’s nontraditional monetary policies (ZIRP and QE) have succeeded in restoring the repo market to it’s precrisis level of activity, but without implementing any of the changes that would have made the system safer. Repo is as vulnerable and crisis-prone today as it was when the French bank PNB Paribas stopped redemptions in its off-balance sheet operations in 2007 kicking off the tumultuous bank run that would eventually implode the entire system and push the economy into the deepest slump since the Great Depression. By failing to rein in repo, the Fed has ensured that financial crises will be a regular feature in the future occurring every 15 or 20 years as was the case before banks were more strictly regulated and government backstops were put in place. Repo returns us to Wild West “anything goes” banking.
Why would the Fed be so reckless and pave the way for another disaster? We’ll get to that in a minute, but first, let’s give a brief explanation of repo and how the system works.
Repo is short for repurchase agreement. The repo market is where primary dealers sell securities with an agreement for the seller to buy back the securities at a later date. This sounds more complicated than it is. What’s really going on is the seller (primary dealers) are getting short-term loans from money market funds, securities firms, banks etc in order to maintain a position in securities in which they’re suppose to make markets. So, repo is like a loan that’s secured with collateral. (ie–the securities) It is a “funding mechanism”.
What touched off the Crash of 2008, was the discovery that the collateral that was being used for repo funding was “toxic”, that is, the securities were not Triple A after all, but subprime mortgage-backed gunk that would only fetch pennies on the dollar. So, when PNB Paribas stopped redemptions in its off-balance sheet operations on August 9, 2007, the rout began. Cash-heavy investors (like money markets) turned off the lending spigot, which reduced trillions of dollars of MBS to junk-status, precipitated massive fire sales of distressed assets that were dumped on the market pushing prices further and further down wiping out trillions in equity and reducing the financial system to a smoldering pile of rubble. That’s why the Fed stepped in, backstopped the system with explicit guarantees for both regulated and unregulated financial institutions and set about to reflate financial asset prices to their precrisis highs.
Newly appointed Fed chairman Janet Yellen summarized what happened in the panic in a speech she gave earlier this year. She said:
“The trigger for the acute phase of the financial crisis was the rapid unwinding of large amounts of short-term wholesale funding that had been made available to highly leveraged and/or maturity-transforming financial firms.”
In other words, the crisis began in repo. Unfortunately, Wall Street has fended off all attempts to fix the system, because repo is a particularly lucrative area of activity. And we are talking serious money here, too. Tri-party repo alone–which is a small subset of the larger repo market–represents “about $1.6 trillion in outstanding repos daily.” That means that the prospect of a big dealer dumping his portfolio of securities on the market at a moment’s notice igniting another panic, is never far away.
Why do banks borrow in the unregulated, shadow system instead of conducting their business in the light of day where regulators can check the quality of the underlying collateral, oversee the various transactions on public trading platforms, and make sure that capital requirements are maintained?
It’s because the banks want to deploy all their capital, leverage up to their eyeballs and play fast-and-loose with the rules. Here’s what the New York Fed has to say on the topic:
“One clear motivation for intermediation outside of the traditional banking system is for private actors to evade regulation and taxes. The academic literature documents that motivation explains part of the growth and collapse of shadow banking over the past decade…
Regulation typically forces private actors to do something which they would otherwise not do: pay taxes to the official sector, disclose additional information to investors, or hold more capital against financial exposures. Financial activity which has been re-structured to avoid taxes, disclosure, and/or capital requirements, is referred to as arbitrage activity.” (“Shadow Bank Monitoring“, Federal Reserve Bank of New York Staff Reports, September, 2013)
In other words, the banks are conducting their operations in the shadows because it’s cheaper. That’s what this is all about. Here’s more from the same report:
“While the fundamental reason for commercial bank runs is the sequential servicing constraint, for shadow banks the effective constraint is the presence of fire sale externalities. In a run, shadow banking entities have to sell assets at a discount, which depresses market pricing. This provides incentives to withdraw funding—before other shadow banking depositors arrive.”
Okay, so when there’s a run on the local bank, the bank may have to offload some of its illiquid assets (real estate, commercial property, etc) to meet the increased demand of depositors who want their money, but they can also rely on government backing. (deposit insurance). But with shadow banking–like repo– it’s a bit different; the problem is fire sales. For example, when repo lenders–like the big money markets–demanded more collateral from the banks in exchange for short-term funding; the banks were forced to dump more of their assets en masse pushing prices lower, eroding their equity and leaving many of the banks deep in the red. This is how the panic wiped out Wall Street and cleared the way for the $700 TARP bailout. It all started in repo.
The point is, had the system been adequately regulated with the appropriate safeguards in place, there would have been no fire sales, no panic, and no crisis. Regulators would have made sure that the underlying collateral was legit, that is, they would have made sure that the subprime borrowers were creditworthy and able to repay their loans. They would have made sure that repo borrowers (the banks) had sufficient capital to meet redemptions if problems arose. And regulators would have limited excessive leveraging of the securitized assets.
Regulation works. It provides safety, stability, and security as opposed to panic, bankruptcy and severe recession which is the scenario that Wall Street’s profiteers seem to prefer. Now check this out from the NY Fed:
“While leveraged lending collapsed in 2008 from a peak of $680 billion in 2007, it has rebounded very quickly, and is now at record levels of volume, projected to be larger than $1 trillion in 2013…” (NY Fed)
How’s that for progress, eh? So, Bernanke’s reflation efforts have effectively restored the same shabby, poorly designed system to its former glory putting all of us at risk again. Here’s more:
“One area of concern, however, is the significant increase in the fraction of covenant lite loans, which have increased dramatically from 0 percent in 2010 to 60 percent in 2013. This deterioration in loan underwriting has come hand-in-hand with an increased presence of retail investors in the leveraged loan market, through both CLOs and prime funds, as relatively sophisticated investors, like banks and hedge funds, are exiting the asset class.” (New York Fed)
Great. So now we are seeing the same problems that emerged in 2004 and 2005 with subprime mortgages, that is, there’s so much liquidity in the system–thanks to the Fed’s zero rates and QE– that investors are dabbling in all-types of risky garbage that you wouldn’t normally touch with a 10 foot dungpole. Check this out from Testosterone Pit:
“Shadow banking loans are estimated to have reached $15 trillion in the US. And among them is a particularly hot category: lending to highly leveraged companies with junk credit ratings. … the NY Fed found that these loans are increasingly issued in a loosey-goosey manner, with low underwriting standards. And issuance has soared…
Layered into these crappy and risky loans are the crappiest and riskiest of all loans, namely “covenant-lite” loans. Their covenants are so watered down and so full of holes that investors have few if any protections in case of default. If the Fed ever allows reality to set, and these companies stumble under their load of debt or can’t refinance it at ridiculously low rates, investors can kiss their money goodbye.” …
these desperate small investors…have unknowingly made a quantum leap in risk – allowing the smart money, which hears the hot air hissing from the credit bubble, to bail out. This must be one of the proudest moments in Chairman Bernanke’s glorious tenure.” (“Fed: Hedge Funds, Banks Sell Crappiest Debt To Small Investors (Before Credit Bubble Blows Up) ” Testosterone Pit)
Nice, eh? So the big boys are planning to vamoose before the whole house of cards comes tumbling down. Meanwhile, Mom and Pop are about to get reamed for the umpteenth time when the Fed “tapers” and these covenant lite IEDs blow up in their face taking another sizable chunk out of their retirement savings. Way to go, Bernanke. Here’s more from the NY Fed report:
“Shadow credit transformation increased from only 5 percent of total credit transformation in 1945 to a peak amount of 60 percent in 2008 before declining to 55 percent in 2011.”
So now the shadow players are generating more than half of all the nation’s credit via their dodgy, unregulated operations. Why? So a handful of ravenous banks can make bigger profits.
According to the Financial Stability Board (FSB) “credit intermediation that takes place in an environment where prudential regulatory standards and supervisory oversight are either not applied or are applied to a materially lesser or different degree than is the case for regular banks engaged in similar activities.” (FSB, 2011).
Read that over again. What they’re saying is that it’s a completely ridiculous, insane system. We’ve given the banks this outrageous privilege of creating private money out of thin air, (credit) and they spit in our face. They won’t even follow a few simple rules that would make the process safer for everyone. Keep in mind, that Dodd Frank does nothing to remedy the problems in repo.
One last thing (from the NY Fed):
“Intermediaries create liquidity in the shadow banking system by levering up the collateral value of their assets. However, the liquidity creation comes at the cost of financial fragility as fluctuations in uncertainty cause a flight to quality from shadow liabilities to safe assets. The collapse of shadow banking liquidity has real effects via the pricing of credit and generates prolonged slumps after adverse shocks.”
Repeat: “liquidity creation comes at the cost of financial fragility as fluctuations in uncertainty cause a flight to quality from shadow liabilities to safe assets.”
Can you believe it? The Fed doesn’t even try to deny what’s going on. They admit that letting the banks ratchet up their leverage increases “financial fragility ” which could precipitate another crash. (“flight to quality from shadow liabilities to safe assets.”) In other words, the Fed KNOWS the system is nuts, just like they know that it’s only a matter of time before the whole bloody thing blows up again and the economy goes off the cliff. Still, they’re not going to lift a finger to change the system.
You know why.
Because a few fatcats at the top like the way things are now, that’s why.
If that doesn’t make your blood boil, I don’t know what will.
After the U.S. government shutdown you’d expect Republicans and Democrats to remain at each others’ throats, so different was their vision for the country, or so it appeared.
In reality, however, only a bit of the political theater was reserved for “Tea Party” Republicans to invest in their political future by denouncing Obamacare, which they know will enrage millions of people forced to buy shoddy corporate health care; many of these future victims of Obamacare will become diehard Teapartiers.
But the real intent behind the government shutdown was lost on the mute American media. The Republicans were once again allowed to use the threat of government default to steer the Obama administration to the right — the right-leaning tail wagging the dog of government in the direction of a “Grand Bargain” to cut “entitlement” programs such as Social Security, Medicare, and other public services.
But like real dogs, government body and tail cannot be separated: the Democrats are allowing themselves to be “wagged” because they fully agree with the Republican’s neoliberal agenda.
The essence of neoliberalism can be reduced to the following: government should be used exclusively to help big business and the wealthy with tax cuts, subsidies, privatizations, anti-labor laws, etc., while all government programs that help working and poor people should be eliminated. It’s really that simple.
In practice, Obama’s neoliberalism is blatant: after bailing out the banks he continues to approve of the printing of thousands of billions of Federal Reserve dollars to give to the wealthy and big banks who are racking in record profits, while the jobs crisis is ignored and public services slashed on a state by state level without hope of a government bailout.
Since Obama has been in office, a shocking 95 percent of income gains went to the richest 1%. This is not the blind hand of the free market, but government policy, which can be adjusted to reflect the priorities of working people.
Obama dodges responsibility for his neoliberal policies by giving empty speeches about “hope” and whining about the very wealth inequality that he creates via policy. He gives speeches to labor unions about how it’s “unfair” that the rich just happen to be getting richer, while working people continue to suffer. Working people learned long ago to ignore Obama’s “progressive” blather, while the leaders of national unions drink in his words as if gulping from the Holy Grail.
The first steps of the coming Grand Bargain have already been taken: the “sequester” — massive cuts to national social programs including Medicare — have been extended as a result of government shutdown “negotiations.” And now the media is casually reporting that a Grand Bargain that further “reduces entitlements” is inevitable, but it will be only a “small” bargain, so no need to worry.
The New York Times reports:
“Republicans on Capitol Hill are determined to mitigate those [military sequester] cuts by spreading them among various social programs, like education and Social Security…”
Obama has said several times that he’s more than prepared to use Social Security as a bargaining chip in his Grand Bargain.
At a time when more services are needed, they will be cut instead. Aside from the suffering it will cause millions of people, a “small” Grand Bargain will also create a precedent for even more “bargains” in the future, since the first step in creating negative social change is often the hardest, but once the foot is in the door the process accelerates.
Neoliberalism has already advanced on a state-by-state basis in the U.S., with Democrat and Republican governors in bi-partisan agreement that has drastically cut education and other social services, attacked the wages and benefits of state workers, while lowering the state taxes on the wealthy and corporations.
Large scale neoliberalism on a national level — like the coming Grand Bargain — is sometimes referred to as a “structural reform,” meaning that a major component of a nation’s economic policy is shifted, or eliminated.
For example, Social Security and Medicare are two bedrock social programs that constitute a major piece of U.S. budget spending, affecting hundreds of millions of people.
The attacks on Social Security, Medicare, and public education are neoliberal-style ”structural reforms,” essentially a corporate attempt to change the underlying social compact of U.S. society that was created under Franklin D. Roosevelt and expanded under Lyndon Johnson’s “Great Society” programs.
How was the U.S. social compact formed? Like all social policy, it was a reflection of power, specifically the balance of forces between the corporate and working classes in the U.S. In the 1930s and 1940s, massive strike waves led to an ever-larger unionized workforce that repeatedly flexed its muscles by demanding living wages, health care, and other social programs.
These demands were backed up by waging mass demonstrations and industry-wide actions along with sympathy strikes. After WWII a third of the U.S. workforce was organized in labor unions, which shifted the entire labor market in favor of all working people, while also shifting the ground on which national social policy was created. A semblance of democracy was not possible without recognizing the demands of the powerfully organized working class.
When arch-conservative Richard Nixon famously declared “we’re all Keynesians now,” he was merely recognizing the balance of power that existed in the U.S. political system, and the unwillingness of the elites to challenge this social pact for fear of the destabilizing effects that would result.
This Keynesian consensus was essentially a truce declared in the U.S. class war, where the power of both sides — capital and labor — were balanced, both independently strong enough to repel attacks from the other. In response, Nixon’s economic policies make Obama seem like a right-wing neoliberal fanatic.
But while Nixon agreed to the Keynesian consensus at home, he gave his blessing to the radical right-wing economist Milton Freidman to “reform” the economy of Chile under the bloody dictator, Pinochet, whom the U.S. brought to power over the corpse of the democratically elected President Salvador Allende, as well as the thousands of his supporters who were butchered. Chile was essentially a neoliberal experiment that, if successful, would be transferred to the United States.
Due to the Keynesian consensus, Milton Freidman’s radical pro-corporate doctrine was at the time viewed as right-wing fanaticism, which it is. Now, however, with labor’s faltering power, the corporations feel confident enough to flex their muscles unhindered. To enhance their new power they needed an accompanying ideology — Friedman’s neoliberalism, free market capitalism unleashed.
Margaret Thatcher and Ronald Reagan’s “revolution” ushered in the neoliberal transformation of the U.S. after seeing the “success” of the Chilean economy. Chile successfully increased corporate profit rates by removing “barriers” to profits, such as trade unions, socialists, and any democratic voice that opposed the “restructuring” of the Chilean economy to reflect the interests of the rich, finally unshackled from the “constraints” of wealth accumulation. Reagan and Thatcher followed in lock-step, targeting unions for destruction, lowering tax rates for the rich, and preaching the virtue of neoliberal “trickle down” economics.
Implementing the neoliberal shock doctrine breaks the social contract and thus ends the truce of the class war. The first shots were fired by Reagan and the onslaught has continued under the two Bush’s as well as under Bill Clinton. The 2008 recession has pushed both parties to double down on neoliberalism as their solution to the ongoing economic crisis.
Naomi Klein’s book, “The Shock Doctrine,” tells in gruesome detail the brutality that has accompanied the “implementation” of neoliberal reforms across the globe over the last 30 years. And while the U.S. has slow played this process since 2008, U.S. politicians are slated to follow the example of the European Union elites by accelerating the cuts on a national level.
The labor and community groups that have tried to deal with the corporate attack by hiding from it still have time to unite their forces to fight for full funding for a national jobs program, expanded Social Security, Medicare for all, accessible, quality public education, and other public services, all to be paid for by taxing the rich and corporations.
Obama has no one to blame but himself:
He was the one who campaigned, in 2008, on Hope and Change. He was the one who deployed high-flying rhetoric to promise a new day in Washington politics.
He was the one who said he was going elevate the level of discourse and make government transparent. He positioned himself as a new kind of leader. He was the one who turned his candidacy into a religious experience.
He was the one who convinced voters he stood above the fray, as a man and as a symbol, and on that basis they boarded his train and rode it all the way.
He was the one who, inheriting a desperate economy, made his signature move upon gaining office:
Not jobs. Not prosecutions of corporate and banking criminals.
He made devastating choices for all Americans.
He was and is the one who has presided over a sinking economic ship.
Given his proclivity for big and bigger government, he could have launched a serious public program, one which really put people back to work, repairing the infrastructure of the nation. But even this was beyond him.
And getting out of the way and letting Americans expand their small businesses, and supporting them with the same intensity of rhetoric he used to win his election? Out of the question. Not in the playbook. Not for a second.
His big play out of the gate, Obamacare, shocked his closest advisers. They assumed jobs would be his number-one priority. They were dead wrong.
And what about “post-racial” America? That was not only a dud, it was a disaster. Division and polarization are the order of the day.
How about dependence, and government as the solver of all problems, as the beneficent giver? How has that worked out? How can it possibly work out? America is going to become one big Sweden? Really?
It’s one thing for a Clinton or a Bush to lie and skate and divert and play the usual horrific games. But Obama set himself up as a man who was fundamentally different. That was his ace. That was how he won the Presidency. That was what people bought into.
So he falls further, even as his media supporters keep launching blizzards of lies to prop him up.
Many of his loyal followers believe “powerful forces” have fenced Obama in and sabotaged his efforts to work positive transformations. If so, then as a transcendent figure, he should step forward and use his oratorical powers to expose the criminal enterprise that surrounds the Presidency. He should speak directly to the American people and lay it on the line.
Or else he confesses that he is, in fact, another Clinton, another Bush.
The public loves fairy tales and myths, but considering the shape this country is in, that fascination is wearing very thin. It isn’t going to sustain the next three years of Obama in the White House.
The Matrix Revealed
90 million people are out of the work force. 50 million are on food stamps. Recovery? Is the President really going to keep pushing that narrative?
Admitting the truth might, as a long shot, create a platform from which Obama could launch a real campaign to restore jobs…but faking the unemployment crisis has been his chosen path.
The government Obamacare website is a shambles. It doesn’t appear that a simple fix is possible, which means chaos will continue for many months, perhaps longer. Private insurance companies are canceling hundreds of thousands of policies.
The last seven years of American political life have added up to a disaster. Blaming it all on Congressional gridlock, on delaying the ability of the White House to invent trillions more in debt at the drop of a hat, isn’t working.
So many actions and omissions of madness…it leaves us with the reasonable conclusion that Obama’s Presidency was designed from the outset to flame out and fail.
And the principal target was the economy.
The President, fresh off an election victory in 2008, and in that glow, could have used his monumental leverage to put people back to work. He could have hammered on it day and night. He could have rallied support and energized the country.
But now…what do we have? Welfare America to the nth degree. Beyond what anyone thought was possible. And media traitors are backing it.
For decades, for more than a hundred years, power has been in the wrong place.
It belongs with you and with me.
Source: Jon Rappoport
When is a debt ceiling not a ceiling? When it has been removed. That is the solution that was enacted on Wednesday night to fund the government for the next 90 days. This will last from Oct. 17, 2013 until Feb. 7, 2014. This has some very dangerous implications for Americans. It means as of right now there is no debt ceiling and the federals can spend as much as they like. With all of the previous spending by DHS, and the impending economic crash that we face in the near future, it is terrifying to think what the federals might buy in the next 90 days that they can use against American citizens.
With this scenario in place the writing is on the wall and foreigners can read it well even if Americans cannot. The dumping of treasuries will likely increase substantially over the next few months as the collapse becomes evident to everyone but Americans. This is the end game and most people don’t even know they are in it.
With the debt ceiling removed even temporarily, the government has the ability to overspend and when the ceiling is reinstated in 90 days any new debt over the current limit will not be debatable. The limit will automatically have to be raised to that amount. That is why President Obama answered “no” when asked if there would be a renewed debt debate next year. He knows he can bypass it. When the time comes for the House to raise the debt limit they will either have to raise it to encompass the additional spending or not raise it and possibly trigger a default. Either way the Democrats can blame the Republicans for the additional debt increase or a default.
It could go something like this. The government decides how much extra money they will need until after the elections next year and borrow it now. The money is dispersed into the usual slush funds until needed to avoid any new debt debates before the election. The Republicans will lose the ability to stop uncontrolled government growth next year and the Democrats will deprive them of any debt debates before Nov. This will give the Democrats a big edge in the elections and could allow them to take some seats in the house. Not that changing from one party to the other will change anything, it will just determine how fast we collapse.
By this time next year I suspect the Petrodollar will be on life support if not completely dead and high inflation will be rearing its’ ugly head. The governments answer to this will be price controls which will lead to shortages. Then things go downhill fast from there. That’s if we actually make it to next fall without a serious incident in the U.S. before then.
These are truly perilous times for the U.S. and everyone should prepare as they deem appropriate. The west line has shifted and we are now on the trailing edge of history. If we are to survive as a nation and prosper again we must learn to operate with a smaller more efficient economy as others before us have done. This will entail a smaller more localized economy with more small producers and a stable medium of exchange. The only alternative is to become a failed third world nation with no future.
When you ask someone why they climbed the mountain some will say, because it’s there. I wanted to know if I could do it. It is the same drive that makes people want to win at sports.
Why do preppers prep? What is the point? If something so catastrophic happens that the world is drastically changed or destroyed, why would we want to survive to live anymore?
Dieing is easy. All you have to do is give up and quit. It’s living that is so hard. One of the hardest things a person can do is to wake up in the morning and get out of bed when they know the world is stacked against them. So why do it?
There are three types of people in the world. Those that can do, those that are afraid to do, and those that don’t know what they should do.
I’m the kind of person that will take the time to hammer out a bent piece of metal even if I don’t need it and could easily go buy another one. I like a challenge and I like the feeling of accomplishment when I succeed.
Last year I was working on one of my vehicles when it bent some of the pushrods almost into an S. I could have run down to the parts store and bought new ones but being the cheapskate that I am and loving a challenge, I decided to try to straighten them out. I managed to straighten out 3 but had to buy one new one that was too far gone. They were not expensive but I saw it as a challenge.
About 20 years ago we had a bad winter storm that left several inches of ice on the road. I had to drive 15 miles on these icy roads to get home. About 2 miles from home I rounded a turn and the truck began to slide. My small Chevy 4×4 slid sideways and the front end dropped into a deep ditch until the chassis was touching the ground. I could push up the opposite side of the ditchbank a few inches but could not get enough traction to back out.
A short time later a neighbor came by and a couple of guys tried to help push it out with no success. They said I would need to call a tow truck and offered me a ride. I declined and said I would keep trying. A few minutes after they left I finally stopped and analyzed my situation a little more. I knew I needed to get the front end up and get some traction, but how. I then went into the woods and found a few small logs and threw them behind the wheels. I pushed up the opposite bank a few inches allowing the logs to roll into the bottom of the ditch. When I rolled back the truck pulled itself out of the ditch with little effort.
The point of this story is that I decided I would get it out and would not stop until I had exhausted every possible idea. You don’t know what you are capable of unless you try.
I think preppers are willing to go to extremes and prepare not because they fear death or hardship but because they are willing to explore their absolute limits. They want to know if they are capable of overcoming the obstacle just because it’s there and they have more fear of walking away not knowing than of trying and failing. Some in business might call it the drive to succeed and others might call it the drive to win.
Everyone has their limits and some will prevail when others fail but in the end, the act of trying and not giving up is what’s important. That is what prepping is about to me. If I see a potential obstacle in my future I will try to prepare to overcome it then move on but if I fail and the worst happens I will have a clear conscience. That is what prepping is. Being prepared to face a challenge and giving yourself every chance to overcome it.
When people ridicule those that see potential danger and prepare to overcome it, it is like someone looking at Mt. Everest and saying, oh it’s just a little hill no different than all the others we have crossed, and then they proceed to walk up it with no supplies or equipment. Experience is a virtue that preppers relish and others simply scoff at, at their own peril. To a prepper, the future is a Mt. Everest with no visible top that they are prepared to climb.
Why do people prep for catastrophic situations? Because it’s there.
Source: Project Chesapeake
There is a new normal in America: our government may shut down, but our wars continue. Congress may not be able to pass a budget, but the U.S. military can still launch commando raids in Libya and Somalia, the Afghan War can still be prosecuted, Italy can be garrisoned by American troops (putting the “empire” back in Rome), Africa can be used as an imperial playground (as in the late nineteenth century “scramble for Africa,” but with the U.S. and China doing the scrambling this time around), and the military-industrial complex can still dominate the world’s arms trade.
In the halls of Congress and the Pentagon, it’s business as usual, if your definition of “business” is the power and profits you get from constantly preparing for and prosecuting wars around the world. “War is a racket,” General Smedley Butler famously declared in 1935, and even now it’s hard to disagree with a man who had two Congressional Medals of Honor to his credit and was intimately familiar with American imperialism.
War Is Politics, Right?
Once upon a time, as a serving officer in the U.S. Air Force, I was taught that Carl von Clausewitz had defined war as a continuation of politics by other means. This definition is, in fact, a simplification of his classic and complex book, On War, written after his experiences fighting Napoleon in the early nineteenth century.
“Forever war is forever profitable.”
The idea of war as a continuation of politics is both moderately interesting and dangerously misleading: interesting because it connects war to political processes and suggests that they should be fought for political goals; misleading because it suggests that war is essentially rational and so controllable. The fault here is not Clausewitz’s, but the American military’s for misreading and oversimplifying him.
Perhaps another “Carl” might lend a hand when it comes to helping Americans understand what war is really all about. I’m referring to Karl Marx, who admired Clausewitz, notably for his idea that combat is to war what a cash payment is to commerce. However seldom combat (or such payments) may happen, they are the culmination and so the ultimate arbiters of the process.
War, in other words, is settled by killing, a bloody transaction that echoes the exploitative exchanges of capitalism. Marx found this idea to be both suggestive and pregnant with meaning. So should we all.
Following Marx, Americans ought to think about war not just as an extreme exercise of politics, but also as a continuation of exploitative commerce by other means. Combat as commerce: there’s more in that than simple alliteration.
In the history of war, such commercial transactions took many forms, whether as territory conquered, spoils carted away, raw materials appropriated, or market share gained. Consider American wars. The War of 1812 is sometimes portrayed as a minor dust-up with Britain, involving the temporary occupation and burning of our capital, but it really was about crushing Indians on the frontier and grabbing their land. The Mexican-American War was another land grab, this time for the benefit of slaveholders. The Spanish-American War was a land grab for those seeking an American empire overseas, while World War I was for making the world “safe for democracy” — and for American business interests globally.
Even World War II, a war necessary to stop Hitler and Imperial Japan, witnessed the emergence of the U.S. as the arsenal of democracy, the world’s dominant power, and the new imperial stand-in for a bankrupt British Empire.
Korea? Vietnam? Lots of profit for the military-industrial complex and plenty of power for the Pentagon establishment. Iraq, the Middle East, current adventures in Africa? Oil, markets, natural resources, global dominance.
In societal calamities like war, there will always be winners and losers. But the clearest winners are often companies like Boeing and Dow Chemical, which provided B-52 bombers and Agent Orange, respectively, to the U.S. military in Vietnam. Such “arms merchants” — an older, more honest term than today’s “defense contractor” — don’t have to pursue the hard sell, not when war and preparations for it have become so permanently, inseparably intertwined with the American economy, foreign policy, and our nation’s identity as a rugged land of “warriors” and “heroes” (more on that in a moment).
War as Disaster Capitalism
Consider one more definition of war: not as politics or even as commerce, but as societal catastrophe. Thinking this way, we can apply Naomi Klein’s concepts of the “shock doctrine” and “disaster capitalism” to it. When such disasters occur, there are always those who seek to turn a profit.
Most Americans are, however, discouraged from thinking about war this way thanks to the power of what we call “patriotism” or, at an extreme, “superpatriotism” when it applies to us, and the significantly more negative “nationalism” or “ultra-nationalism” when it appears in other countries. During wars, we’re told to “support our troops,” to wave the flag, to put country first, to respect the patriotic ideal of selfless service and redemptive sacrifice (even if all but 1% of us are never expected to serve or sacrifice).
We’re discouraged from reflecting on the uncomfortable fact that, as “our” troops sacrifice and suffer, others in society are profiting big time. Such thoughts are considered unseemly and unpatriotic. Pay no attention to the war profiteers, who pass as perfectly respectable companies. After all, any price is worth paying (or profits worth offering up) to contain the enemy — not so long ago, the red menace, but in the twenty-first century, the murderous terrorist.
Forever war is forever profitable. Think of the Lockheed Martins of the world. In their commerce with the Pentagon, as well as the militaries of other nations, they ultimately seek cash payment for their weapons and a world in which such weaponry will be eternally needed. In the pursuit of security or victory, political leaders willingly pay their price.
Call it a Clausewitzian/Marxian feedback loop or the dialectic of Carl and Karl. It also represents the eternal marriage of combat and commerce. If it doesn’t catch all of what war is about, it should at least remind us of the degree to which war as disaster capitalism is driven by profit and power.
For a synthesis, we need only turn from Carl or Karl to Cal — President Calvin Coolidge, that is. “The business of America is business,” he declared in the Roaring Twenties. Almost a century later, the business of America is war, even if today’s presidents are too polite to mention that the business is booming.
America’s War Heroes as Commodities
Many young people today are, in fact, looking for a release from consumerism. In seeking new identities, quite a few turn to the military. And it provides. Recruits are hailed as warriors and warfighters, as heroes, and not just within the military either, but by society at large.
Yet in joining the military and being celebrated for that act, our troops paradoxically become yet another commodity, another consumable of the state. Indeed, they become consumed by war and its violence. Their compensation? To be packaged and marketed as the heroes of our militarized moment. Steven Gardiner, a cultural anthropologist and U.S. Army veteran, has written eloquently about what he calls the “heroic masochism” of militarized settings and their allure for America’s youth. Put succinctly, in seeking to escape a consumerism that has lost its meaning and find a release from dead-end jobs, many volunteers are transformed into celebrants of violence, seekers and givers of pain, a harsh reality Americans ignore as long as that violence is acted out overseas against our enemies and local populations.
Such “heroic” identities, tied so closely to violence in war, often prove poorly suited to peacetime settings. Frustration and demoralization devolve into domestic violence and suicide. In an American society with ever fewer meaningful peacetime jobs, exhibiting greater and greater polarization of wealth and opportunity, the decisions of some veterans to turn to or return to mind-numbing drugs of various sorts and soul-stirring violence is tragically predictable. That it stems from their exploitative commodification as so many heroic inflictors of violence in our name is a reality most Americans are content to forget.
You May Not Be Interested in War, but War Is Interested in You
As Russian revolutionary Leon Trotsky pithily observed, “You may not be interested in war, but war is interested in you.” If war is combat and commerce, calamity and commodity, it cannot be left to our political leaders alone — and certainly not to our generals. When it comes to war, however far from it we may seem to be, we’re all in our own ways customers and consumers. Some pay a high price. Many pay a little. A few gain a lot. Keep an eye on those few and you’ll end up with a keener appreciation of what war is actually all about.
No wonder our leaders tell us not to worry our little heads about our wars — just support those troops, go shopping, and keep waving that flag. If patriotism is famously the last refuge of the scoundrel, it’s also the first recourse of those seeking to mobilize customers for the latest bloodletting exercise in combat as commerce.
Just remember: in the grand bargain that is war, it’s their product and their profit. And that’s no bargain for America, or for that matter for the world.
The wackos that believe that Barack Hussein Obama is a political rock star are blind to reality. It would be one thing if eccentric characteristics shaped such opinions of social outcasts, but when entire segments of the MTV population speak in a PBS lisp, the liberal popular culture has drunk the kool aid. The zombie rage in flicks is no accident. Converting entire generations of lost souls into National Civilian Service Corps NSA informants is an effortless task, when government schooled illiterates adore Barry Soetoro. Turning a constitutional republic into a collectivist gulag is only possible, when the greater fool principle becomes the law of the land.
By objective standards, Obama is a dismal failure as leader of the free world and defender of the underprivileged. The African-American community voice Tavis Smiley states: ‘Black People Will Have Lost Ground in Every Single Economic Indicator’ Under Obama. “The data is going to indicate sadly that when the Obama administration is over, black people will have lost ground in every single leading economic indicator category.”In spite of this, rational assessment, Obama is a commissar inspiration for commie comrades that indulge in the excesses of elitism power consolidation. The Wall Street moneychanger mentors that picked this CIA trained nobody for the assignment of nation self-annihilation, also funded the Russian Revolution and underwrote the Nazi Third Reich. Therefore, it should surprise no one educated in unfeigned factual history that the target of the last obstacle of globalist control, the residual defiance within the United States of America, is Obama’s assignment.
A good primer to understand the psyops disinformation career of the tutored revolutionary student is the video, Know Saul Alinsky and you Know Barack Obama and his Regime.
For all the unfortunate activists who missed the joy, intensity and exhilaration of street demonstration and Chicago police brutality of the 1968 Democratic convention, just remember that Alinsky, a committed Communist dedicated the forward of his book, Rules for Radicals to Lucifer. A little ironic, just recall those satanic images from the History Channel’s hit series ‘The Bible‘. Now ask which Alinsky pupil most fits the portrait?
Below is Appendix E from Matthew Vadum’s book, Subversion Inc.: How Obama’s ACORN Red Shirts are Still Terrorizing and Ripping Off American Taxpayers.
Contrary to popular belief, Saul Alinsky did not state only 13 rules in his seminal community organizing work, Rules for Radicals. He had 24 rules.
Saul Alinsky describes 24 rules in Rules for Radicals. Of those 24 rules, 13 are rules of “power tactics”:
1. “Power is not only what you have but what the enemy thinks you have.”
2. “Never go outside the experience of your people.”
3. “Wherever possible go outside of the experience of the enemy.”
4. “Make the enemy live up to their own book of rules.”
5. “Ridicule is man’s most potent weapon.”
6. “A good tactic is one that your people enjoy.”
7. “A tactic that drags on too long becomes a drag.”
8. “Keep the pressure on, with different tactics and actions, and utilize all events of the period for your purpose.”
9. “The threat is usually more terrifying than the thing itself.”
10. “The major premise for tactics is the development of operations that will maintain a constant pressure upon the opposition.”
11. “If you push a negative hard and deep enough it will break through into its counterside.”
12. “The price of a successful attack is a constructive alternative.”
13. “Pick the target, freeze it, personalize it, and polarize it.”
The remaining 11 rules Alinsky describes are concerned with “the ethics of means and ends”:
1. “One’s concern with the ethics of means and ends varies inversely with one’s personal interest in the issue … Accompanying this rule is the parallel one that one’s concern with the ethics of means and ends varies inversely with one’s distance from the scene of conflict.”
2. “The judgment of the ethics of means is dependent upon the political position of those sitting in judgment.”
3. “In war the end justifies almost any means.”
4. “Judgment must be made in the context of the times in which the action occurred and not from any other chronological vantage point.”
5. “Concern with ethics increases with the number of means available and vice versa.”
6. “The less important the end to be desired, the more one can afford to engage in ethical evaluations of means.”
7. “Generally success or failure is a mighty determinant of ethics.”
8. “The morality of a means depends upon whether the means is being employed at a time of imminent defeat or imminent victory.”
9. “Any effective means is automatically judged by the opposition as being unethical.”
10. “You do what you can with what you have and clothe it with moral garments.”
11. “Goals must be phrased in general terms like ‘Liberty, Equality, Fraternity,’ ‘Of the Common Welfare,’ ‘Pursuit of Happiness,’ or ‘Bread and Peace.’”
If you come to appreciate the utter disregard of moral principles and ethical values, the Machiavelli manifestation of the habitual lies out of the Obama administration, stands as sound demonic practices.
John Fund elaborates in Still the Alinsky Playbook, on this theme.
“Alinsky argued for moral relativism in fighting the establishment: “In war the end justifies almost any means. . . . The practical revolutionary will understand [that] in action, one does not always enjoy the luxury of a decision that is consistent both with one’s individual conscience and the good of mankind.
Where did Alinsky get this amorality? Clues can be found in a Playboy magazine interview he gave in 1972, just before his death.
Alinsky recalled that he “learned a hell of a lot about the uses and abuses of power from the mob,” and that he applied that knowledge “later on, when I was organizing.” The Playboy interviewer asked, “Didn’t you have any compunction about consorting with — if not actually assisting — murderers?” Alinsky replied: “None at all, since there was nothing I could do to stop them from murdering. . . . I was a nonparticipating observer in their professional activities, although I joined their social life of food, drink, and women. Boy, I sure participated in that side of things — it was heaven.”
Thus, when Obama sets loose ACORN affiliates to do the dirty work in electoral campaigns, he is just following Alinsky’s deceit model. Let the hip-hop in the street urbanity video RULES FOR RADICALS – Obama’s Bible and Saul Alinsky, explain further.Mr. Funds adds:
“What exactly are the connections between Obama and Saul Alinsky’s thought? In 1985, the 24-year-old Obama answered a want ad from the Calumet Community Religious Conference, run by Alinsky’s Chicago disciples. Obama was profoundly influenced by his years as a community organizer in Chicago, even if he ultimately rejected Alinsky’s disdain for electoral politics and, like Hillary Clinton, chose to work within the system. “Obama embraced many of Alinsky’s tactics and recently said his years as an organizer gave him the best education of his life,” wrote Peter Slevin of the Washington Post in 2007. That same year, The New Republic’s Ryan Lizza found Obama still “at home talking Alinskian jargon about ‘agitation’” and fondly recalling organizing workshops where he had learned Alinsky concepts such as “being predisposed to other people’s power.”
In The Rule for Radicals that Alinsky Skipped, author J. Robert Smith analyses the destructive results of believing in your own supremacy. Not that much difference from old Serpent’s rebellion.
“For Mr. Obama and his Alinsky fellows, it’s one thing to sport a mask to gull voters and whoever else needs gulling; it’s another thing to get caught up in the web of your own lies.
Barack Obama has fallen prey to his own and his handlers’ propaganda; to wit, that he’s a Nubian sun god come to earth to minister to the little people. His reasoning and decisions are as unerring as a pope’s (ex cathedra might be inadequate to describe Barack’s authority, though, since it originates with himself and not the office). The president was cocooned and nurtured by race-based preferences from his adolescence on. He came to adulthood primed for hubris. And hubris — well, hoary hubris, it may finally be a-coming for Barack.”
It is crucial to put into proper perspective that Obama has coordinated political chaos, works to the advantage of the establishment elites, who benefit from the final obliteration of free market enterprise. Totalitarian governance hinges upon the dependence of zombie dupes, who follow their fearless leader into hell, as an obedient pledge of submission. Obama is the servant of the globalist creed and the revolutionary policies that his minions are implementing directly further the strangle hold over the economy.
The Corporatism Fascist merging with the Tyrannous State is the terminal objective that will cause the New World Order to complete its ultimate goal. Alinsky‘s spirit hovering over the satanic disciple of darkness, is the Obama credo. Obama-mania followers are a flock of fools.
President Barack Obama is determined to prevail in his battle with GOP congressional leaders on the debt ceiling issue, but not for the reasons stated in the media. Obama is less concerned with the prospect of higher interest rates and frustrated bondholders than he is with the big Wall Street banks who would be thrust back into crisis if there is no resolution before October 17. Absent a debt ceiling deal, the repurchase market–known as repo–would undergo another deep-freeze as it did in 2008 when Lehman Brothers defaulted triggering a run on the Reserve Primary Fund which had been exposed to Lehman’s short-term debt. The frenzied selloff sparked a widespread panic across global financial markets pushing the system to the brink of collapse and forcing the Federal Reserve to backstop regulated and unregulated financial institutions with more than $11 trillion in loans and other obligations. The same tragedy will play out again, if congress fails lift the ceiling and reinforce the present value of US debt.
Repo is at the heart of the shadow banking system, that opaque off-balance sheet underworld where maturity transformation and other risky banking activities take place beyond the watchful eye of government regulators. It is where banks exchange collateralized securities for short-term loans from investors, mainly large financial institutions. The banks use these loans to fund their other investments boosting their leverage many times over to maximize their profits. The so called congressional reforms, like Dodd Frank, which were ratified after the crisis, have done nothing to change the basic structure of the market or to reign in excessive risk-taking by undercapitalized speculators. The system is as wobbly and crisis-prone ever, as the debt ceiling fiasco suggests. The situation speaks to the impressive power of the bank cartel and their army of lawyers and lobbyists. They own Capital Hill, the White House, and most of the judges in the country. The system remains the same, because that’s the way the like it.
US Treasuries provide the bulk of collateral the banks use in acquiring their short-term funding. If the US defaults on its debt, the value that collateral would fall precipitously leaving much of the banking system either underwater or dangerously undercapitalized. The wholesale funding market would grind to a halt, and interbank lending would slow to a crawl. The financial system would suffer its second major heart attack in less than a decade. This is from American Banker:
As banking policy analyst Karen Shaw Petrou describes it, Treasury obligations are the “water” in the financial system’s plumbing.
“They’re the global reserve currency and they are perceived to be the most secure thing you can own,” said Petrou, managing partner of Federal Financial Analytics. “That is why it is pledged as collateral. … The very biggest banks fear that a debt ceiling breach breaks the pipes.”….
Rob Toomey, managing director and associate general counsel at the Securities Industry and Financial Markets Association, said institutions are concerned about whether Treasury bonds that default are no longer transferable between market participants.
“Essentially, whatever the size is of the obligation that Treasury is unable to pay, that kind of liquidity would just disappear from the market for whatever time the payment is not made,” Toomey said.”
By some estimates, the amount of liquidity that would be drained from the system immediately following a default would be roughly $600 billion, enough to require emergency action by either the Fed or the US Treasury. Despite post-crisis legislation that forbids future bailouts, the government would surely ride to rescue committing taxpayer revenues once again to save Wall Street.
Keep in mind, the US government does not have to default on its debt to trigger a panic in the credit markets. Changing expectations can easily produce the same result. If the holders of US Treasuries (USTs) begin to doubt that the debt ceiling issue will be resolved, then they’ll sell their bonds prematurely to avoid greater losses. That, in turn, will push up interest rates which will strangle the recovery, slow growth, and throw a wrench in the repo market credit engine. We saw an example of how this works in late May when the Fed announced its decision to scale-back its asset purchase. The fact that the Fed continued to buy the same amount of USTs and mortgage-backed securities (MBS) didn’t stem the selloff. Long-term rates went up anyway. Why? Because expectations changed and the market reset prices. That same phenom could happen now, in fact, it is happening now. The Financial Times reported on Wednesday that “Fidelity Investments, the largest manager of money market funds… had sold all of its holdings of US Treasury bills due to mature towards the end of October as a “precautionary measure.”
This is what happens when people start to doubt that US Treasuries will be liquid cash equivalents in the future. They ditch them. And when they ditch them, rates go up and the economy slips into low gear. (Note: “China and Japan together hold more than $2.4 trillion in U.S. Treasuries” Bloomberg)
Now the media has been trying to soft-peddle the implications of the debt ceiling standoff by saying, “No one thinks that holders of USTs won’t get repaid.”
While this is true, it’s also irrelevant. The reason that USTs are the gold standard of financial assets, is because they are considered risk-free and liquid. That’s it. If you have to wait to get your money, then the asset you purchased is not completely liquid, right?
And if there is some doubt, however small, that you will not be repaid in full, then the asset is not really risk free, right?
This is what the Fidelity flap is all about. It’s about the erosion of confidence in US debt. It’s about that sliver of doubt that has entered the minds of investors and changed their behavior. This is a significant development because it means that people in positions of power are now questioning the stewardship of the present system. And that trend is going to intensify when the Fed begins to reduce its asset purchases later in the year, because winding down QE will precipitate more capital flight, more currency volatility and more emerging market runaway inflation. That’s going to lead to more chin scratching, more grousing and more resistance to US stewardship of the system. None of this bodes well for Washington’s imperial aspirations or for the world’s reserve currency, both of which appear to be living on borrowed time.
The media has done a poor job of explaining what’s really at stake. While, it’s true that higher interest rates would make consumer loans more expensive and put the kibosh on the housing recovery, that’s not what the media cares about. Not really. What they care about is the looming massacre in shadow banking where USTs are used as collateral to secure short-term loans by the banks so they can increase their leverage by many orders of magnitude. In other words, the banks are using USTs to borrow gobs of money from money markets and financial institutions so they can finance their other dodgy investments, derivatives contracts and ancillary casino-type operations. If there’s a default, the banks will have to come up with more capital for their scams that are leveraged at 40 or 50 to 1. This systemwide margin call would trigger a deflationary spiral that would domino through the entire system unless the Fed stepped in and, once again, provided a giant backstop in the form of blank check support. Here’s how Tim Fernholz sums it up over atDaily Finance:
“…Many informed people are worried” (about) “A freeze in the tri-party repo market, akin to the cascade of troubles that followed the Lehman Brothers bankruptcy in 2008.”….
In 2008, more than a third of that collateral was mortgage-backed securities. When Lehman went bankrupt, its lenders began a “fire sale” of the securities it used as collateral, which drove down the value of other mortgage-backed securities, which led to more fire sales. This dynamic would eventually lead to a freeze in the repo markets, which, at the time, provided $2.6 trillion in funding to the banks each day…..
Today, most of the collateral in use is U.S. Treasuries and “agency securities” — mortgage-backed securities guaranteed by the U.S. government:
… if the ugly day of a default comes, lenders may simply stop accepting U.S. debt as collateral. That will have the effect of sucking some $600 billion in liquidity out of the banking system. Unable to get funding for Treasurys, securities dealers would be pressured to sell them-or other assets-to find new funding, creating a fire sale dynamic…..
And, of course, this scenario is only about how the Treasurys work in the repo markets. U.S. debt is used as collateral for derivatives swaps and numerous other transactions; if they are suddenly worth less than expected, lenders can be expected to demand more collateral up front, putting even more pressure on the financial system. That’s why pressure is building to raise the ceiling before the world’s largest economy enters a scenario with so much uncertainty.”
Repeat: “That’s why pressure is building to raise the ceiling before the world’s largest economy enters a scenario with so much uncertainty”.
So the Obama team isn’t worried that Joe Homeowner won’t be able to refi his mortgage or that the economy might slip back into recession. They just don’t want to see Wall Street take it in the shorts again. That’s what this is all about, the banks. Because the banks are still up-to-their-eyeballs in red ink. Because they still don’t have enough capital to stay solvent if the wind shifts. Because all the Dodd Frank reforms are pure, unalloyed bullsh** that haven’t fixed a bloody thing. Because the risks of another panic are as great as ever because the system is the same teetering, unregulated cesspit it was before. Because the banks are still financing their sketchy Ponzi operations with OPM (other people’s money), only now, the Fed’s over-bloated balance sheet is being used to prop up this broken, crooked system instead of the trillions of dollars that was extracted from credulous investors on subprime mortgages, liars loans and other, equally-fraudulent debt instruments.
Can you see that?
This is why the media is pushing so hard to end the debt ceiling standoff; to preserve this mountainous stinkpile of larceny, greed and corruption run by a criminal bank Mafia and their political lackeys on Capital Hill. That’s what this is all about.