Sourcebook on 9/11 and its Aftermath
The Big Picture
27 Nov. 2007
Table of Contents
I think a lot of time what we’ve done as a movement is we talk about September 11th, what happened? Well, there was a controlled demolition. People talk about the Pentagon. People talk about the hijackers training at U.S. Air Force bases. People talk about the insider stock trades. People talk about the thousands of different points that, when we look at it suggests, not only that what the government is telling us is a complete lie, but that what actually appears to be happening is a pattern, a pattern of terrorism created by government agencies, to mind control you, to really mind control the world, to make you think that there is a threat, a threat of the other, and that if we don’t fight this threat, if we don’t invade, if we don’t create a police state, if we don’t take over the world’s oil, we will all perish. So I think we’ve done a good job of fleshing out the research points of how 9/11 happened, but I think we need to look a little bit more into why it happened and where do we go from here. …
Cheney and his faction are talking about nuclear war against
And that’s why I am saying, false-flag terrorism, my thesis is that it emerges out of desperation. This is not a show of strength, this is a show of a U.S. empire on the brink of collapse, a U.S. economy that is collapsing and the twilight of U.S. hegemony, the twilight of British hegemony, the breakdown of the Anglo-American finance system that has run the world for hundreds of years. The Federal Reserve is in big trouble. The Bank of England is in big trouble. The derivatives are in big trouble. And our military is in enormous trouble. So I’m going to hope to flesh these topics out today.
Now the big question is not how does false-flag terrorism happen. We’ve done a great job with that. I’m not saying stop the research. I’m saying why does it happen? Well, in the specific case of 9/11, here are just some of the reasons I am going to flesh out today. I believe there is a stalled agenda. They have not done very well with the Free Trade of the Americas Agreement. They’re not doing a tremendous job in implementing CAFTA [Central American Free Trade Agreement]. They wanted to have the New World Order, the global government, by the year 2000. They are behind schedule. There’s an economic crisis right now where the dollar is in collapse so bad that the government is trying to prop it up. And of course we’re seeing NATO weakness with the emergence of
They wanted the Middle Eastern and Central Asian hydrocarbons; that means, liquified natural gas and oil. It’s true this is a war for oil. … This is also a war for
It’s also a breakdown of the Federal Reserve and the debt-industrial complex that ties into the dollar breakdown and the death of the petrodollar….
They’re trying to push a North American union, calling it the Security and Prosperity Agreement. It’s going to make you secure, free, and prosperous. And they use this Orwellian language to push basically the dissolution of the
Spiking government drug dealing. The police state. And the prison-industrial complex. When you talk about drugs, they play both ends. They’ll ship the drugs in and then have a Wackenhut prison make you work for 70 cents an hour. And this is a war being waged on the working class through the Drug War.
And it’s most importantly an end game against
It is World War III coming together. I’m going to show you how the chess pieces are coming together. How the chess pieces are going to play out. New technology. You want to know who is behind 9/11, I’m going to show you the factions. …
There’s a problem though. The [Iraqi] civil war has gotten out of control. They don’t have total control. They thought that they can engineer this civil war and these Arabs will be at each others’ throats. Well, now they don’t know which side to play. …
I think it’s out of control for [the neocons]. I don’t think that these guys are masterminds. I think the neocons are fumblers. … What they are is incompetent. They are evil. They’ll take their means to any point. But I don’t think they’re overwhelmingly competent. …
We are living on the brink of the Apocalypse right now. We are circling the edge of the Apocalypse. (Daniel Abrahamson speaking to Project for a New American Citizen, April 15, 2007, on video downloaded from http://video.google.com/videoplay?docid=8545414779301935419, 8 Aug. 2007.)
World events since the attacks of September 11, 2001 have not only been predicted, but also planned, orchestrated and – as their architects would like to believe – controlled. The current Central Asian war is not a response to terrorism, nor is it a reaction to Islamic fundamentalism. It is in fact, in the words of one of the most powerful men on the planet, the beginning of a final conflict before total world domination by the
This position is corroborated by Dr. Johannes B. Koeppl, Ph.D. a former German defense ministry official and advisor to former NATO Secretary General Manfred Werner. On November 6, he told FTW, “The interests behind the Bush Administration, such as the CFR, The Trilateral Commission – founded by Brzezinski for David Rockefeller – and the Bliderberger [Ed.: Bilderberg] Group have prepared for and are now moving to implement open world dictatorship within the next five years. They are not fighting against terrorists. They are fighting against citizens.” (Michael Ruppert, “A War in the Planning for Four Years,” Wilderness Publications, November 2001, from Global Research, http://globalresearch.ca/articles/RUP111B.html, downloaded 8 August 2007. A full discussion of Brzezinski’s view of “the grand chessboard,” which is well worth consulting, can be found in the Supplement.)
David Ray Griffin: there are just lots of mysteries about Flight 93 and 77 and the Pentagon strikes.
Just reading what we can learn from available information, we will never know the full truth, not even close to it. So our primary claim is not that we know the truth. The primary claim is that there are so many questions that demand a real, official investigation.
I have focused my attention on what we’re certain of, that the official story is false. We’re not certain of what happened to 93 or 77 or at the Pentagon and to some extent at the Towers.
Q: What could be the motive of our leaders to orchestrate such events?
DRG: As soon as the
We could have the first borderless empire in history. We’ll be greater than Alexander the Great or Genghis Khan or the Roman Empire or the
Second, the transformation of the military technologically, which really means the weaponization of space.
Third, we need to get control of the world’s oil, so Central Asia and the Middle East, and of course
Fourth, they wanted to revise the doctrine of pre-emptive strikes. According to international law up until then, you could not launch legally a pre-emptive strike on a country unless you had very good evidence that it was just about to launch a pre-emptive strike on you, and this strike had to be so imminent that there was no time to take it to the UN Security Council. So they said this was archaic, paying attention to international law, we should be able to attack any country we want to, basically.
The fifth requirement would be a kind of new Pearl Harbor that would get the American people ready to support these policies: the spending and be willing to accept pre-emptive strikes on other countries and so on. So 9/11 did all that. Gave them everything they wanted. We’re talking about billions even trillions of dollars, when you put it in terms of decades of spending.
That very day they increased military spending $40 billion, which is spending money. And by now we’ve upped it to over $200 billion. They don’t even count what they spend on
So you can’t imagine stronger motivation. The two major motivations for war have always been the political motivation of imperial lust, just the desire to win in battle and rule over other people; and the dominant motivation of at least the kind of people who’ve gone into politics and the military.
And then the other big motivation is economic, which in our day, partly is just lining their own pockets, partly it’s keeping the military spending going which means funding all these corporations that build things for the military, such as General Electric, Halliburton obviously and then all the ones that produce military equipment, tanks and all that stuff.
But also getting control of the world’s resources as they’re winding down. That’s where the oil in particular, oil and natural gas, come in.
So did the
Massive attention has now been given - and rightly so - to the reasons why
We now know that a blueprint for the creation of a global Pax Americana was drawn up for Dick Cheney (now vice-president), Donald Rumsfeld (defence secretary), Paul Wolfowitz (Rumsfeld's deputy), Jeb Bush (George Bush's younger brother) and Lewis Libby (Cheney's chief of staff). The document, entitled Rebuilding America's Defences, was written in September 2000 by the neoconservative think tank, Project for the New American Century (PNAC).
The plan shows Bush's cabinet intended to take military control of the Gulf region whether or not Saddam Hussein was in power. It says "while the unresolved conflict with
The PNAC blueprint supports an earlier document attributed to Wolfowitz and Libby which said the
The document also calls for the creation of "
Finally - written a year before 9/11 - it pinpoints
First, it is clear the
It had been known as early as 1996 that there were plans to hit
Fifteen of the 9/11 hijackers obtained their visas in
Instructive leads prior to 9/11 were not followed up. French Moroccan flight student Zacarias Moussaoui (now thought to be the 20th hijacker) was arrested in August 2001 after an instructor reported he showed a suspicious interest in learning how to steer large airliners. When
All of this makes it all the more astonishing - on the war on terrorism perspective - that there was such slow reaction on September 11 itself. The first hijacking was suspected at not later than 8.20am, and the last hijacked aircraft crashed in
Was this inaction simply the result of key people disregarding, or being ignorant of, the evidence? Or could US air security operations have been deliberately stood down on September 11? If so, why, and on whose authority? The former
Nor is the
The catalogue of evidence does, however, fall into place when set against the PNAC blueprint. From this it seems that the so-called "war on terrorism" is being used largely as bogus cover for achieving wider
In fact, 9/11 offered an extremely convenient pretext to put the PNAC plan into action. The evidence again is quite clear that plans for military action against
Some have seen the
The conclusion of all this analysis must surely be that the "global war on terrorism" has the hallmarks of a political myth propagated to pave the way for a wholly different agenda - the
Today by exploiting the terrible tragedy of 11 September 2001, the Republican Bush Jr. administration has set forth to steal a hydrocarbon empire from the Muslim states and peoples living in Central Asia and the Persian Gulf under the bogus pretexts of (1) fighting a war against international terrorism; and/or (2) eliminating weapons of mass destruction; and/or (3) the promotion of democracy. Only this time the geopolitical stakes are infinitely greater than they were a century ago: control and domination of two-thirds of the world’s hydrocarbon resources. The Bush Jr. administration has already targeted the remaining hydrocarbon resources of Africa, Latin America, and
Iraqi Prime Minister Nouri al-Maliki went before the media on Tuesday to announce that his cabinet had “unanimously” approved US-backed draft legislation covering the future development of
The legislation embodies the criminal aims and objectives of the
While the oil law has a number of implications, the most fundamental is that it would end the Iraqi state monopoly in the development of oil fields. While the Iraqi people will still constitutionally “own” the resources, foreign oil companies will gain contracts that give exclusive rights to exploration and production for periods as long as 20 years. The law leaves open the possibility for “production-sharing agreements” (PSAs) which guarantee the investing company against losses and lead to even higher rates of return.
Importantly, as far as
The propaganda surrounding the oil law is completely cynical. It is universally presented in
It is this prize that has cost the lives of over 700,000 Iraqis and close to 4,000 occupation troops and left the country’s infrastructure devastated.
The centrality of the oil law to the objectives of the
Little progress had been made until this week. The Kurdish, Shiite and Sunni parties that previously dominated the cabinet continued to wrangle over aspects of the proposed law, as each has sought to secure a portion of the economic spoils. Without cabinet approval, the legislation could not be placed before parliament.
Over the past two months, however, two of the legislation’s key opponents—the Shiite Sadrist movement led by Moqtada al-Sadr and the Iraqi Accordance Front coalition of Sunni Arab parties—have withdrawn their ministers from the cabinet in protest against the occupation and the government. Maliki exploited this on Tuesday to push through the legislation in a session attended by just 24 out of 37 ministers.
President Bush was so pleased with the result that he rang Maliki personally to congratulate him. Maliki is gambling that the Sadrist and Sunni boycotts will enable the oil law to be rammed through the parliament as well. The sessions slated to debate the bill this week are unlikely to be attended by more than 150 out of the 275 legislators elected in December 2005. On top of more than 80 boycotters, dozens of Iraqi politicians live outside the country due to the lack of security. A number of previous sessions have lapsed after failing to reach the required quorum of 138.
The law’s passage through parliament is far from certain, however. The fact that the legislation was not tabled yesterday, as promised, suggests that the horse-trading, arm-twisting and pay-offs is continuing to ensure its acceptance by the remaining factions attending parliament. According to the latest reports, it will be presented today and sent to a committee of review for at least a week. (James Cogan, “Under sustained
sends oil law to parliament,” World Socialist Web Site, 5 July 2007, downloaded from http://www.wsws.org/articles/2007/jul2007/oil-j05.shtml6 August 2007.)
For all Cheney’s apocalyptic rhetoric about the Iranian threat, the Bush administration’s targeting of
The purpose of any
The Anglo-American oil companies are indelibly behind Cheney's "contingency plan" to wage war on
There is continuity in US Middle East war plans, from the Democrats to the Republicans. The essential features of Neoconservative discourse were already in place under the
"The broad national security interests and objectives expressed in the President's National Security Strategy (NSS) and the Chairman's National Military Strategy (NMS) form the foundation of the United States Central Command's theater strategy. The NSS directs implementation of a strategy of dual containment of the rogue states of
On the other hand, the countries inhabited by Muslims, including the Middle East, North Africa, Central Asia, West and Central Africa, Malaysia, Indonesia and Brunei, possess approximately 80 percent of the World's oil and gas reserves.
The "war on terrorism" and the hate campaign directed against Muslims, which has gained impetus in recent months, bears a direct relationship to the "
5. The Real Objective Of This War Is Oil
The oil lies in Muslim lands. The objective is to take possession of the oil, transform countries into territories and redraw the map of the
The overriding motivation for this political smokescreen is that the
This is leading to increasing dependence on foreign oil supplies for both the
A report from the commission on
Nor has the
‘The balance in the internal White House debate over
Similar evidence exists in regard to
The so-called "war on terrorism" is being used largely as bogus cover for achieving wider
Not only did O'Neill give Suskind his time, he gave him 19,000 internal documents.
“Everything's there: Memoranda to the President, handwritten "thank you" notes, 100-page documents. Stuff that's sensitive,” says Suskind, adding that in some cases, it included transcripts of private, high-level National Security Council meetings. “You don’t get higher than that.”
And what happened at President Bush's very first National Security Council meeting is one of O'Neill's most startling revelations.
“From the very beginning, there was a conviction, that Saddam Hussein was a bad person and that he needed to go,” says O’Neill, who adds that going after Saddam was topic "A" 10 days after the inauguration - eight months before Sept. 11.
“From the very first instance, it was about
As treasury secretary, O'Neill was a permanent member of the National Security Council. He says in the book he was surprised at the meeting that questions such as "Why Saddam?" and "Why now?" were never asked.
"It was all about finding a way to do it. That was the tone of it. The president saying ‘Go find me a way to do this,’" says O’Neill. “For me, the notion of pre-emption, that the
And that came up at this first meeting, says O’Neill, who adds that the discussion of
He got briefing materials under this cover sheet. “There are memos. One of them marked, secret, says, ‘Plan for post-Saddam
Based on his interviews with O'Neill and several other officials at the meetings, Suskind writes that the planning envisioned peacekeeping troops, war crimes tribunals, and even divvying up
He obtained one Pentagon document, dated March 5, 2001, and entitled "Foreign Suitors for Iraqi Oilfield contracts," which includes a map of potential areas for exploration.
“It talks about contractors around the world from, you know, 30-40 countries. And which ones have what intentions,” says Suskind. “On oil in
During the campaign, candidate Bush had criticized the Clinton-Gore Administration for being too interventionist: "If we don't stop extending our troops all around the world in nation-building missions, then we're going to have a serious problem coming down the road. And I'm going to prevent that."
“The thing that's most surprising, I think, is how emphatically, from the very first, the administration had said ‘X’ during the campaign, but from the first day was often doing ‘Y,’” says Suskind. “Not just saying ‘Y,’ but actively moving toward the opposite of what they had said during the election.” (“Bush Sought ‘Way’ To Invade
http://www.cbsnews.com/stories/2004/01/09/60minutes/main592330.shtml, 16 Aug. 2007.)
Now here’s something I learned from the book Rise of the Vulcans by James Mann. I mentioned this, the new doctrine of pre-emption, which is really a doctrine of preventive warfare. But people don’t understand, prevention sounds like a good thing, sounds better than pre-emption. So I call it the doctrine of preventive pre-emption warfare, which means that we see that some country may cause us trouble somewhere down the line — maybe five or 10 years from now — but we decide it would be easier to get rid of their weapons now than later, so we’ll just go ahead and attack them now.
That was the new doctrine that was signed into existence in a document called ”National Security Strategy of United States of America 2002.” And in the cover letter to that document the president himself says, “We can no longer wait until our enemies have gotten ready to attack us, we’ve got to act offensively.” (“Interview with David Ray Griffin,” Whole Life Times, downloaded from http://wholelifetimes.com/2006/09/griffin0609.html, 7 August 2007.)
According to international law up until then, you could not launch legally a pre-emptive strike on a country unless you had very good evidence that it was just about to launch a pre-emptive strike on you, and this strike had to be so imminent that there was no time to take it to the UN Security Council. So they said this was archaic, paying attention to international law, we should be able to attack any country we want to, basically.
The [next] requirement would be a kind of new Pearl Harbor that would get the American people ready to support these policies: the spending and be willing to accept pre-emptive strikes on other countries and so on. So 9/11 did all that. Gave them everything they wanted. We’re talking about billions even trillions of dollars, when you put it in terms of decades of spending. (“Interview with David Ray Griffin,” Whole Life Times, downloaded from http://wholelifetimes.com/2006/09/griffin0609.html, 7 August 2007.)
In the past few months, as the situation in
The key players behind the redirection are Vice-President Dick Cheney, the deputy national-security adviser Elliott Abrams, the departing Ambassador to Iraq (and nominee for United Nations Ambassador), Zalmay Khalilzad, and Prince Bandar bin Sultan, the Saudi national-security adviser. While Rice has been deeply involved in shaping the public policy, former and current officials said that the clandestine side has been guided by Cheney. …
The policy shift has brought
The new strategy “is a major shift in American policy—it’s a sea change,” a
Martin Indyk, a senior State Department official in the Clinton Administration who also served as Ambassador to
Flynt Leverett, a former Bush Administration National Security Council official, told me that “there is nothing coincidental or ironic” about the new strategy with regard to
This administration has made a policy change, a decision that they are going to put all of the pressure they can on the Shiites, that is the Shiite regime in Iran, the Shiite - and they are also doing everything they can to stop Hezbollah - which is Shiite, the Hezbollah organization from getting any control or any more of a political foothold in Lebanon.
… I quote … Hassan Nasrallah, the head of Hezbollah, and he described it this way, as "fitna (ph)," the Arab word for "civil war." As far as he is concerned, we are interested in recreating what is happening in
They call it the "
My government, which arrests al Qaeda every place it can find them and send - some of them are in Guantanamo and other places, is sitting back while the Lebanese government we support, the government of Prime Minister Siniora, is providing arms and sustenance to three jihadist groups whose sole function, it seems to me and to the people that talk to me in our government, to be there in case there is a real shoot-'em-up with Hezbollah and we really get into some sort of serious major conflict between the Sunni government and Hezbollah, which is largely Shia, who are basically - or as you know, there is a coalition headed by Hezbollah that is challenging the government right now, demonstrations, sit-ins.
There has been some violence. So
All of this should be investigated by Congress, by the way, and I trust it will be. In my talking to membership - members there, they are very upset that they know nothing about this. And they have great many suspicions.
We are simply in a situation where this president is really taking his notion of executive privilege to the absolute limit here, running covert operations, using money that was not authorized by Congress, supporting groups indirectly that are involved with the same people that did 9/11, and we should be arresting these people rather than looking the other way. (Seymour Hersh, “Bush Funneling Money to Al Qaeda-related Groups,” ThinkProgress.com, 25 Feb. 2007, reproduced in Global Research, 26 Feb. 2007.)
An attack on Iran would be calamitous on many levels: our military is already strained to its limits, our forces in Iraq would be left wide-open to counterattack, the home front would be susceptible to terror attacks by Iranian special forces, and the missile batteries arrayed across the Iranian mountains overlooking the Persian Gulf would wreak devastating havoc on our fleet.
Sober heads see an attack on
This would be sage advice if Mr. Bush were the one doing the thinking. These days, all the thinking and management is being done by Dick Cheney, and if this Libby trial comes to pose a danger to his standing, all the sober analysis by policy experts may turn to dust. Nothing is more dangerous, after all, than a cornered animal. . (William Rivers Pitt, “A Cornered Animal,” Truthout.org, 26 Jan. 2007.)
Unless Congress immediately impeaches Bush and Cheney, a year from now the
Many attentive people believe that the reason the Bush administration will not bow to expert advice and public opinion and begin withdrawing US troops from
Too much is going wrong for the Bush administration: the failure of its Middle East wars, Republican senators jumping ship, Turkish troops massed on northern Iraq's border poised for an invasion to deal with Kurds, and a majority of Americans favoring the impeachment of Cheney and a near-majority favoring Bush's impeachment. The Bush administration desperately needs dramatic events to scare the American people and the Congress back in line with the militarist-police state that Bush and Cheney have fostered. (Paul Craig Roberts, “Impeach Now Or Face the End of Constitutional Democracy,” CounterPunch, July 16, 2007, downloaded from http://counterpunch.org/roberts07162007.html, 6 August 2007.)
The Pentagon is continuing intensive planning for a possible bombing attack on
In the past month, I was told by an Air Force adviser on targeting and the Pentagon consultant on terrorism, the Iran planning group has been handed a new assignment: to identify targets in Iran that may be involved in supplying or aiding militants in Iraq. Previously, the focus had been on the destruction of
Two carrier strike groups—the Eisenhower and the Stennis—are now in the
Code named by US military planners as TIRANNT, "Theater Iran Near Term" has identified several thousand targets inside
According to the Kuwait-based Arab Times, an attack on
Revealed last April by William Arkin, a former
"In early 2003, even as
... Under TIRANNT, Army and U.S. Central Command planners have been examining both near-term and out-year scenarios for war with
Consistent with CENTCOM's 1995 "sequencing" of theater operations, the plans to target
Concurrently, the various parallel components of TIRANNT were put in place including the Marines "Concept of Operations":
The Marines, meanwhile, have not only been involved in CENTCOM's war planning, but have been focused on their own specialty, "forcible entry." In April 2003, the Corps published its "Concept of Operations" for a maneuver against a mock country that explores the possibility of moving forces from ship to shore against a determined enemy without establishing a beachhead first. Though the Marine Corps enemy is described only as a deeply religious revolutionary country named Karona, it is -- with its Revolutionary Guards, WMD and oil wealth -- unmistakably meant to be
Various scenarios involving
The day-to-day planning for dealing with
US preparations for an air strike against
The present military build-up in the Gulf would allow the
Neo-conservatives, particularly at the Washington-based American Enterprise Institute, are urging Mr Bush to open a new front against
Robert Gates, the new
But Vincent Cannistraro, a Washington-based intelligence analyst, shared the sources' assessment that Pentagon planning was well under way. "Planning is going on, in spite of public disavowals by Gates. Targets have been selected. For a bombing campaign against nuclear sites, it is quite advanced. The military assets to carry this out are being put in place."
He added: "We are planning for war. It is incredibly dangerous." (Ewan MacAskill, “Target
The planning of aerial bombings of
While its contents remain classified, the presumption is that NSPD 35 pertains to the stockpiling and deployment of tactical nuclear weapons in the
It may be pure and fanciful speculation, but it has to be said that half the military and political establishment believes that an attack on
So what is the truth? You won't get much of it from either the White House or
The naval buildup has been coordinated with the planned air attacks on
In November 2004, US Strategic Command conducted a major exercise of a "global strike plan" entitled "Global Lightening". The latter involved a simulated attack using both conventional and nuclear weapons against a "fictitious enemy" [
CONPLAN is the operational plan pursuant to the Global Strike Plan. It is described as "an actual plan that the Navy and the Air Force translate into strike package for their submarines and bombers,'
CONPLAN 8022 is 'the overall umbrella plan for sort of the pre-planned strategic scenarios involving nuclear weapons.'
'It's specifically focused on these new types of threats --
The use of tactical nuclear weapons is contemplated under CONPLAN 8022 alongside conventional weapons, as part of the Bush administration's preemptive war doctrine. In May 2004, National Security Presidential Directive NSPD 35 entitled Nuclear Weapons Deployment Authorization was issued. While its contents remains classified, the presumption is that NSPD 35 pertains to the deployment of tactical nuclear weapons in the
In a recent article, Seymour Hersh (New Yorker) has suggested that the plan to nuke
According to Hersh's assessment the use of tactical nuclear weapons directed against the Natanz facilities is considered as "politically unacceptable" because it would "vent fatal radiation for miles." The Air Force now contemplates dropping large "bunker-buster" bombs on Natanz to "generate sufficient concussive force to accomplish what a tactical nuclear warhead would achieve, but without provoking an outcry over what would be the first use of a nuclear weapon in a conflict since
It should be understood that even in the case of limited aerial attacks with conventional warheads, the result would be a
Defense Secretary Donald H. Rumsfeld has approved the military's most ambitious plan yet to fight terrorism around the world and retaliate more rapidly and decisively in the case of another major terrorist attack on the
The long-awaited campaign plan for the global war on terrorism, as well as two subordinate plans also approved within the past month by Rumsfeld, are considered the Pentagon's highest priority, according to officials familiar with the three documents who spoke on the condition of anonymity because they were not authorized to speak about them publicly.
Details of the plans are secret, but in general they envision a significantly expanded role for the military -- and, in particular, a growing force of elite Special Operations troops -- in continuous operations to combat terrorism outside of war zones such as Iraq and Afghanistan. Developed over about three years by the Special Operations Command (SOCOM) in
A third plan sets out how the military can both disrupt and respond to another major terrorist strike on the
This plan details "what terrorists or bad guys we would hit if the gloves came off. The gloves are not off," said one official, who asked not to be identified because of the sensitivity of the subject. (italics added. (
An operational plan to wage aerial attacks on
Vice President Dick Cheney has ordered USSTRATCOM to draft a "contingency plan", which "includes a large-scale air assault on
USSTRATCOM would have the responsibility for overseeing and coordinating this military deployment as well as launching the military operation. (For details, Michel Chossudovsky, Nuclear War against Iran, Jan 2006 ).
In January 2005 a significant shift in USSTRATCOM's mandate was implemented. USSTRATCOM was identified as "the lead Combatant Command for integration and synchronization of DoD-wide efforts in combating weapons of mass destruction." To implement this mandate, a brand new command unit entitled Joint Functional Component Command Space and Global Strike , or JFCCSGS was created.
Overseen by USSTRATCOM, JFCCSGS would be responsible for the launching of military operations "using nuclear or conventional weapons" in compliance with the Bush administration's new nuclear doctrine. Both categories of weapons would be integrated into a "joint strike operation" under unified Command and Control.
"The Defense Department is upgrading its nuclear strike plans to reflect new presidential guidance and a transition in war planning from the top-heavy Single Integrated Operational Plan of the Cold War to a family of smaller and more flexible strike plans designed to defeat today's adversaries. The new central strategic war plan is known as OPLAN (Operations Plan) 8044.... This revised, detailed plan provides more flexible options to assure allies, and dissuade, deter, and if necessary, defeat adversaries in a wider range of contingencies....
One member of the new family is CONPLAN 8022, a concept plan for the quick use of nuclear, conventional, or information warfare capabilities to destroy--preemptively, if necessary--"time-urgent targets" anywhere in the world. Defense Secretary Donald Rumsfeld issued an Alert Order in early 2004 that directed the military to put CONPLAN 8022 into effect. As a result, the Bush administration's preemption policy is now operational on long-range bombers, strategic submarines on deterrent patrol, and presumably intercontinental ballistic missiles (ICBMs)."
The operational implementation of the Global Strike would be under CONCEPT PLAN (CONPLAN) 8022, which now consists of "an actual plan that the Navy and the Air Force translate into strike package for their submarines and bombers,' (Japanese Economic Newswire, 30 December 2005, For further details see Michel Chossudovsky, Nuclear War against Iran, op. cit.).
CONPLAN 8022 is 'the overall umbrella plan for sort of the pre-planned strategic scenarios involving nuclear weapons.'
'It's specifically focused on these new types of threats --
The various components of the military operation are firmly under US Command, coordinated by the Pentagon and US Strategic Command Headquarters (USSTRATCOM) at the Offutt Air Force base in Nebraska.
The actions announced by
US military sources have confirmed that an aerial attack on
American air strikes on
Military planners could tailor their target list to reflect the preferences of the Administration by having limited air strikes that would target only the most crucial facilities ... or the United States could opt for a far more comprehensive set of strikes against a comprehensive range of WMD related targets, as well as conventional and unconventional forces that might be used to counterattack against US forces in Iraq (See Globalsecurity.org at http://www.globalsecurity.org/military/ops/iran-strikes.htm
In November, US Strategic Command conducted a major exercise of a "global strike plan" entitled "Global Lightening". The latter involved a simulated attack using both conventional and nuclear weapons against a "fictitious enemy".
Following the "Global Lightening" exercise, US Strategic Command declared an advanced state of readiness (See our analysis below)
While Asian press reports stated that the "fictitious enemy" in the Global Lightening exercise was
A preemptive nuclear attack using tactical nuclear weapons would be coordinated out of US Strategic Command Headquarters at the Offutt Air Force base in Nebraska, in liaison with US and coalition command units in the Persian Gulf, the Diego Garcia military base, Israel and Turkey.
Under its new mandate, USSTRATCOM has a responsibility for "overseeing a global strike plan" consisting of both conventional and nuclear weapons. In military jargon, it is slated to play the role of "a global integrator charged with the missions of Space Operations; Information Operations; Integrated Missile Defense; Global Command & Control; Intelligence, Surveillance and Reconnaissance; Global Strike; and Strategic Deterrence.... "
In January 2005, at the outset of the military build-up directed against
To implement this mandate, a brand new command unit entitled Joint Functional Component Command Space and Global Strike, or JFCCSGS was created.
JFCCSGS has the mandate to oversee the launching of a nuclear attack in accordance with the 2002 Nuclear Posture Review, approved by the US Congress in 2002. The NPR underscores the pre-emptive use of nuclear warheads not only against "rogue states" but also against
Since November, JFCCSGS is said to be in "an advance state of readiness" following the conduct of relevant military exercises. The announcement was made in early December by U.S. Strategic Command to the effect that the command unit had achieved "an operational capability for rapidly striking targets around the globe using nuclear or conventional weapons." The exercises conducted in November used "a fictional country believed to represent
"The new unit [JFCCSGS] has 'met requirements necessary to declare an initial operational capability' as of Nov. 18. A week before this announcement, the unit finished a command-post exercise, dubbed Global Lightening, which was linked with another exercise, called Vigilant Shield, conducted by the North American Aerospace Defence Command, or NORAD, in charge of missile defense for North America.
'After assuming several new missions in 2002, U.S. Strategic Command was reorganized to create better cooperation and cross-functional awareness,' said Navy Capt. James Graybeal, a chief spokesperson for STRATCOM. 'By May of this year, the JFCCSGS has published a concept of operations and began to develop its day-to-day operational requirements and integrated planning process.'
'The command's performance during Global Lightning demonstrated its preparedness to execute its mission of proving integrated space and global strike capabilities to deter and dissuade aggressors and when directed, defeat adversaries through decisive joint global effects in support of STRATCOM,' he added without elaborating about 'new missions' of the new command unit that has around 250 personnel.
Nuclear specialists and governmental sources pointed out that one of its main missions would be to implement the 2001 nuclear strategy that includes an option of preemptive nuclear attacks on 'rogue states' with WMDs. (Japanese Economic Newswire, 30 December 2005)
CONCEPT PLAN (CONPLAN) 8022
JFCCSGS is in an advanced state of readiness to trigger nuclear attacks directed against
The operational implementation of the Global Strike is called CONCEPT PLAN (CONPLAN) 8022. The latter is described as "an actual plan that the Navy and the Air Force translate into strike package for their submarines and bombers,' (Ibid).
CONPLAN 8022 is 'the overall umbrella plan for sort of the pre-planned strategic scenarios involving nuclear weapons.'
'It's specifically focused on these new types of threats --
The mission of JFCCSGS is to implement CONPLAN 8022, in other words to trigger a nuclear war with
The Commander in Chief, namely George W. Bush would instruct the Secretary of Defense, who would then instruct the Joint Chiefs of staff to activate CONPLAN 8022.
CONPLAN is distinct from other military operations. it does not contemplate the deployment of ground troops.
CONPLAN 8022 is different from other war plans in that it posits a small-scale operation and no "boots on the ground." The typical war plan encompasses an amalgam of forces -- air, ground, sea -- and takes into account the logistics and political dimensions needed to sustain those forces in protracted operations.... The global strike plan is offensive, triggered by the perception of an imminent threat and carried out by presidential order.) (William Arkin, Washington Post, May 2005) (Michel Chossudovsky, “Nuclear War against
The Pentagon, acting under instructions from Vice President Dick Cheney’s office, has tasked the United States Strategic Command (STRATCOM) with drawing up a contingency plan to be employed in response to another 9/11-type terrorist attack on the
Are we to understand that US, British and Israeli military planners are waiting in limbo for a Second 9/11, to extend the war beyond the borders of
Cheney's proposed "contingency plan" did not focus on preventing a Second 9/11. The Cheney plan is predicated on the presumption that Iran would be behind a Second 9/11 and that punitive bombings could immediately be activated, prior to the conduct of an investigation, much in the same way as the attacks on Afghanistan in October 2001, allegedly in retribution for the alleged support of the Taliban government to the 9/11 terrorists. It is worth noting that one does not plan a war in three weeks: the bombing and invasion of
"At a deeper level, it implies that “9/11-type terrorist attacks” are recognized in Cheney’s office and the Pentagon as appropriate means of legitimizing wars of aggression against any country selected for that treatment by the regime and its corporate propaganda-amplification system.... (Keefer, February 2006 )
In a timely statement, barely a few days following the onslaught of the bombing of
In April 2006, Defense Secretary Donald H. Rumsfeld launched a far-reaching military plan to fight terrorism around the World, with a view to retaliating in the case of a second major terrorist attack on
"Defense Secretary Donald H. Rumsfeld has approved the military's most ambitious plan yet to fight terrorism around the world and retaliate more rapidly and decisively in the case of another major terrorist attack on the
The long-awaited campaign plan for the global war on terrorism, as well as two subordinate plans also approved within the past month by Rumsfeld, are considered the Pentagon's highest priority, according to officials familiar with the three documents who spoke on the condition of anonymity because they were not authorized to speak about them publicly.
Details of the plans are secret, but in general they envision a significantly expanded role for the military -- and, in particular, a growing force of elite Special Operations troops -- in continuous operations to combat terrorism outside of war zones such as Iraq and Afghanistan. Developed over about three years by the Special Operations Command (SOCOM) in
This plan is predicated on the possibility of a Second 911 and the need to retaliate if and when the
"A third plan sets out how the military can both disrupt and respond to another major terrorist strike on the
This plan details "what terrorists or bad guys we would hit if the gloves came off. The gloves are not off," said one official, who asked not to be identified because of the sensitivity of the subject. (italics added, WP 23 April 2006)
The presumption of this military document, is that a Second 911 attack "which is lacking today" would usefully create both a "justification and an opportunity" to wage war on "some known targets [
The announcement on August 10 by the British Home Office of a foiled large scale terror attack to simultaneously blow up as many as ten airplanes, conveys the impression that it is the Western World rather than the
Realities are twisted upside down. The disinformation campaign has gone into full gear. The British and
Press reports in the Middle East confirm that the planned air strikes are by no means limited to
Three strike groups including the Stennis, the Eisenhower and the Nimitz are being deployed in the
The US-led naval deployment (involving a massive deployment of military hardware) is taking place in two distinct theaters: the Persian Gulf and the Eastern Mediterranean.
The militarization of the Eastern Mediterranean is broadly under the jurisdiction of NATO in liaison with
The naval armada in the Persian Gulf is largely under
In this context, the Israeli led war on
The naval buildup is coordinated with the air attacks. (Michel Chossudovsky, “The Criminalization of US Foreign Policy. From the Truman Doctrine to the Neo-Conservatives,” Global Research, 5 February 2007.)
[Torin Wolf’s] s insight as a combat nurse reveals that the actual amount of dead troops numbers around 15,000-17,000, not the 3,500 we have been told. “If you get shot in combat – Bam! Clock goes off. If you die in transit [to a hospital out of
Asked whether the decision to invade
"The decisions we've made with respect to
"We walk out of here on January 20th of '09, and I think we'll be able to hold our heads high knowing we did the best we could for the country. That's what counts more than anything else," he said. (“
Cheney also has the option of attacking into
If Musharraf was harboring Osama, why would al Qaeda declare war against Musharraf? The answer is what it has always been: “al Qaeda” is a troupe of agents provocateurs founded by the CIA and the British, and remains so until this day. Webster G. Tarpley, “Cheney determined to strike in US with WMD this summer; only impeachment and removal, or a general strike, can stop him,” Online Journal, 23 July 2007, downloaded from http://onlinejournal.com/artman/publish/article_2220.shtml, 6 August 2007.)
My government has a secret unit that since December of 2001 has been disappearing people just like the Brazilians and the Argentineans did. Rumsfeld decided after 9/11 that he could not wait. The president signed a secret document…There's a team of people, they fly in unmarked planes, they fly in Gulfstreams, they have their own choppers, they don't carry American passports, and they just grab people. (Bonnie Azab Powell, “Investigative journalist Seymour Hersh spills the secrets of the
While his critics may call him a "muckraker" and unpatriotic, on Friday night it was obvious that Hersh takes the crumbling of
"My parents were immigrants," Hersh said. "They came here because
Death is not the "item" in the news. It is the death of the myth of American justice and freedom. So now we can all breathe freely as we see the true nature of the animal before us. Even those who continued to insist on living in doubt can deny it no longer. (Mirza Yawar Baig, “The Black Bull [Saddam] dies today,” Information Clearing House, 30 Dec. 2006, downloaded from http://www.european911citizensjury.com/07.htm, 12 Aug. 2007.)
When it comes to financial magic, the government of the
Consider the proud trumpeting that came from
In fact, the
But politicians of both parties use happy numbers to distract American voters. Democrats routinely criticize the Republican administration for crippling deficits, but they politely use the least-damaging figure, the $162.8 billion. Why? Because references to more-realistic accounting would reveal vastly greater numbers and implicate both parties.
You can understand how this is done by taking a close look at a single statement on
Combine those two figures and you get the unified budget, that $162.8 billion. In the past eight years there's been two years of reported surpluses and six years of reported deficits. Altogether, the total reported deficit has run $1.3 trillion.
Some numbers don't add up
But if you examine another figure, the gross
That's $2 trillion more than the reported $1.3 trillion in deficits over the period. Can you spell "Enron"?
In other words, while the reported deficits averaged $164 billion over the past eight years,
How could this happen?
Easy. The U.S. Treasury Department simply credits the Social Security, Medicare and other trust funds with interest payments in the form of new Treasury obligations. No cash is actually paid. The trust funds magically increase in value with a bookkeeping entry. It represents money the American government owes itself.
So what happens if the funny money is taken away?
When the imaginary interest payments are included, Social Security and Medicare are running at a tranquilizing surplus (that $181.5 billion mentioned earlier). But measure actual cash, and the surplus disappears.
In 2005, for instance, the U.S. Social Security Disability Income program started to run at a cash loss. 2007 is the first year that Medicare Part A (the hospital insurance program) benefits exceeded income.
The same thing will happen to the U.S. Social Security retirement-income program in six to nine years, depending on which of the trustees' estimates you use. During the same period, the expenses of Medicare Part B and Part D, which are paid out of general tax revenue, will rise rapidly.
Despite this, the U.S. Social Security Administration writes workers every year advising them that the program will have a problem 34 years from now, not six or nine years. In fact, the real problem is already here. It will be a big-time problem in less than a decade.
Count on it. (Scott Burns, “U.S. government tricks hide trillions in debt: Every year, tens or even hundreds of billions of dollars are quietly added to the U.S. national debt -- on top of the deficits that we hear about. What's going on?,” Sympatico.MSN, 21 Nov. 2007, downloaded from http://finance.sympatico.msn.ca/Investing/Insight/Article.aspx?cp-documentid=5750084.)
It’s a Bloodbath. That’s the only way to describe it.
On Friday the Dow Jones took a 280 point nosedive on fears that that losses in the subprime market will spill over into the broader economy and cut into GDP.
Ever since the two Bears Sterns hedge funds folded a couple weeks ago the stock market has been writhing like a drug-addict in a detox-cell. Yesterday’s sell-off added to last week’s plunge that wiped out $2.1 trillion in value from global equity markets.
We are now beginning to feel the first tremors from the massive credit expansion which began 6 years ago at the Federal Reserve. The trillions of dollars which were pumped into the global economy via low interest rates and increased money supply have raised the nominal value of equities, but at great cost. Now, stocks will fall sharply and businesses will fail as volatility increases and liquidity dries up. Stagnant wages and a declining dollar have thrust the country into a deflationary cycle which has---up to this point---been concealed by Greenspan’s “cheap money” policy. Those days are over. Economic fundamentals are taking hold. The market swings will get deeper and more violent as the Fed’s massive credit bubble continues to unwind. Trillions of dollars of market value will vanish overnight. The stock market will go into a long-term swoon.
Ludwig von Mises summed it up like this:
"There is no means of avoiding the final collapse of a boom brought about by credit expansion. The question is only whether the crisis should come sooner as a result of a voluntary abandonment of further credit expansion, or later as a final and total catastrophe of the currency system involved." (Thanks to the Daily Reckoning)
It doesn’t matter if the “underlying economy is strong” (as Henry Paulson likes to say). That’s nonsense. Trillions of dollars of over-leveraged bets are quickly unraveling which has the same effect as taking a wrecking ball down Wall Street.
This week a third Bear Stearns fund shuttered its doors and stopped investors from withdrawing their money. Bear’s CFO, Sam Molinaro, described the chaos in the credit market as the worst he'd seen in 22 years. At the same time, American Home Mortgage Investment Corp---the 10th-largest mortgage lender in the
This is big news, mainly because AHM is the first major lender OUTSIDE THE SUBPRIME MORTGAGE BUSINESS to go belly-up. The contagion has now spread through the entire mortgage industry—Alt-A, piggyback, Interest Only, ARMs, Prime, 2-28, Jumbo,—the whole range of loans is now vulnerable. That means we should expect far more than the estimated 2 million foreclosures by year-end. This is bound to wreak havoc in the secondary market where $1.7 trillion in toxic CDOs have already become the scourge of Wall Street.
Some of the country’s biggest banks are going to take a beating when AHM goes under. Bank of America is on the hook for $1.3 billion, Bear Stearns $2 billion and Barclay’s $1 billion. All told, AHM’s mortgage underwriting amounted to a whopping $9.7 billion. (Apparently, AHM could not even come up with a measly $300 million to cover existing deals on mortgages! Where’d all the money go?) This shows the downstream effects of these massive mortgage-lending meltdowns. Everybody gets hurt.
AHM’s stock plunged 90% IN ONE DAY. Jittery investors are now bailing out at the first sign of a downturn. Wall Street has become a bundle of nerves and the problems in housing have only just begun. Inventory is still building, prices are falling and defaults are steadily rising; all the necessary components for a full-blown catastrophe.
AHM warned investors on Tuesday that it had stopped buying loans from a variety of originators. 2 other mortgage lenders announced they were going out of business just hours later. The lending climate has gotten worse by the day. Up to now, the banks have had no trouble bundling mortgages off to Wall Street through collateralized debt obligations (CDOs). Now everything has changed. The banks are buried under MORE THAN $300 BILLION worth of loans that no one wants. The mortgage CDO is going the way of the Dodo. Unfortunately, it has attached itself to many of the investment banks on its way to extinction.
And it’s not just the banks that are in for a drubbing. The insurance companies and pension funds are loaded with trillions of dollars in “toxic waste” CDOs. That shoe hasn’t even dropped yet. By the end of 2008, the economy will be on life-support and Wall Street will look like the
Think I’m kidding?
Already the big investment banks are taking on water. Merrill Lynch has fallen 22% since the start of the year. Citigroup is down 16% and Lehman Bros Holdings has dropped 22%. According to Bloomberg News: “The highest level of defaults in 10 years on subprime mortgages and a $33 billion pileup of unsold bonds and loans for funding acquisitions are driving investors away from debt of the New York-based securities firms. Concerns about credit quality may get worse because banks promised to provide $300 billion in debt for leveraged buyouts announced this year……Bear Stearns Cos., Lehman Brothers Holdings Inc., Merrill Lynch & Co. and Goldman Sachs Group Inc., are as good as junk.”
We’ve never seen an economic tsunami like this before. The dollar is falling, employment and manufacturing are weakening, new car sales are off for the seventh straight month, consumer spending is down to a paltry 1.3%, and oil is hitting new highs every day as it marches inexorably towards a $100 per barrel.
So, where’s the silver lining?
Apart from the 2 million-plus foreclosures, and the 80 or so mortgage lenders who have filed for bankruptcy; a growing number of investment firms are feeling the pinch from the turmoil in real estate. Bear Stearns; Basis Capital Funds Management, Absolute Capital, IKB Deutsche Industrial Bank AG, Commerzbank AG, Sowood Capital Management, C-Bass, UBS-AG, Caliber Global Investment and Nomura Holdings Inc.—are all either going under or have taken a major hit from the troubles in subprime. The list will only grow as the weeks go by. (Check out these graphs to understand what’s really going on in the housing market. http://www.recharts.com/reports/CSHB031207/CSHB031207.html?ref=patrick.net
The problems in real estate are not limited to residential housing either. The credit crunch is now affecting deals in commercial real estate, too. Low-cost, low-documentation, “covenant lite” loans are a thing of the past. Banks are finally stiffening their lending requirements even though the horse has already left the barn. Commercial mortgage-backed securities are now nearly as tainted as their evil-twin, residential mortgage-backed securities (RMBS). There’s no market for these turkeys. The banks are returning to traditional lending standards and simply don’t want to take the risk anymore.
Leveraged Buy Outs (LBOs) have been a dependable source of market liquidity. But not any more. In the last quarter, there was $57 billion in LBOs. In the first month of this quarter that amount dropped to less than $2 billion. That’s quite a tumble. The Wall Street Journal’s Dennis Berman summed it up like this: “the Street is scrambling to finance some $220 billion of leveraged buy out deals” (but) the “mood has gone from
Berman nailed it. The investment banks took great pleasure in their profligate lending; raking in the lavish fees for joining mega-corporations together in conjugal bliss. Then someone took the punch bowl. Now the banking giants are scratching their heads-- wondering how they can unload $220B of toxic-debt onto wary investors. It won’t be easy.
“The banks and brokers are in the bull’s eye,” said Kevin Murphy. “There’s article after article not only on subprime, but also banks sitting on leveraged buy out loans.” (WSJ) Credit protection on bank debt is soaring just as investor confidence is on the wane. In fact, the VIX index (The “fear gauge”) which measures market volatility--- has surged 60% in the last week alone. The increased volatility means that more and more investors will probably ditch the stock market altogether and head for the safety of US Treasuries.
But, that just presents a different set of problems. After all, what good are US Treasuries if the dollar continues to plummet? No one will put up with 5% or 6% return on their investment if the dollar keeps sliding 10% to 15% per year. It would be wiser to one’s move money into foreign investments where the currency is stable.
And, that is (presumably) why Treasury Secretary Paulson is in
Credit Crunch: Whose ox gets gored?
When money gets tight; anyone who is “over-extended” is apt to get hurt. That means that the maxed-out hedge fund industry will continue to get clobbered. At current debt-to-investment ratios, the stock market only has to fall about 10% for the average hedge fund to take a 50% scalping. That’s more than enough to put most funds under water for good. The carnage in Hedgistan will likely persist into the foreseeable future.
That might not bother the robber-baron fund-managers who’ve already extracted their 2% “pound of flesh” on the front end. But it’s a rotten deal for the working stiff who could lose his entire retirement in a matter of hours. He didn’t realize that his investment portfolio was a crap-shoot. He probably thought there were laws to protect him from Wall Street scam-artists and flim-flam men.
It’ll be even worse for the banks than the hedge funds. In fact, the banks are more exposed than any time in history. Consider this: the banks are presently holding a half trillion dollars in debt (LBOs and CDOs) FOR WHICH THERE IS NO MARKET. Most of this debt will be dramatically downgraded since the CDOs have no true “mark to market” value. It’s clear now that the rating agencies were in bed with the investment banks. In fact, Joshua Rosner admitted as much in a recent New York Times editorial:
“The original models used to rate collateralized debt obligations were created in close cooperation with the investment banks that designed the securities”…. (The agencies) “actively advise issuers of these securities on how to achieve their desired ratings.” (Joshua Rosner, “Stopping the Subprime Crisis,” NY Times.)
Pretty cozy deal, eh? Just tell the agency the rating you want and they tell you how to get it.
Now we know why $1.7 trillion in CDOs are headed for the landfill.
The downgrading of CDOs has just begun and Wall Street is already in a frenzy over what the effects will be. Once the ratings fall, the banks will be required to increase their reserves to cover the additional risk. For example, “As a recent issue of Grant’s explains, global commercial banks are only required to set aside 56 cents ($0.56) for every $100 worth of triple-A rated securities they hold. That’s roughly 178 to 1 ratio. Drop that down to double-B minus, and the requirement skyrockets to $52 per $100 worth of securities held---a margin increase of more than 9,000%”.
“56 cents ($0.56) for every $100 worth of triple-A rated securities”?!? Are you kidding me?
As Mugambo Guru says, "That is 1/18th of the 10% stock margin equity required in 1929"!! (Mugambo Guru; kitco.com)
The high-risk game the banks have been playing---of “securitizing” the loans of applicants with shaky credit---is falling apart fast. There’s no market for chopped-up loans from over-extended homeowners with bad credit. The banks don’t have the reserves to cover the loans they have on the books and the CDOs have no fixed market value. End of story. The music has stopped and the banks can’t find a chair.
The public doesn’t know anything about this looming disaster yet. How will people react when they drive up to their local bank and see plywood sheeting covering the windows?
This will happen. There will be bank failures.
The derivatives market is another area of concern. The notional value of these relatively untested instruments has risen to $286 trillion in 2006---up from a meager $63 trillion in 2000. No one has any idea of how these new “swaps and options” will hold up in a slumping market or under the stress of increased volatility. Could they bring down the whole market?
That depends on whether they’re backed-up by sufficient collateral to meet their obligations. But that seems unlikely. We’ve seen over and over again that nothing in this new deregulated market is “as it seems”. It’s all stardust mixed with snake oil. What the Wall Street hucksters call the “new financial architecture of investment” is really nothing more than one overleveraged debt-bomb stacked atop another. Ironically, many of these same swindles were used in the run-up to the Great Depression. Now they’ve resurfaced to do even more damage. When the crooks and con-men write the laws (deregulation) and run the system; the results are usually the same. The little guy always gets screwed. That much is certain.
At present, the stock market is running on fumes. Another 4 to 6 months of wild gyrations and it’ll be over. The NASDAQ plunged 75% after the dot.com bust. How low will it go this time?
Keep an eye on the yen. The ongoing troubles in subprime and hedge funds are pushing the yen upwards which will unwind trillions of dollars of low interest, short term loans which are fueling the rise in stock prices. If the yen strengthens, traders will be forced to sell their positions and the market will tank. It’s just that simple. The Dow Jones will be a Dead Duck.
The American People: “We’re not a dumb as you think”
It’s always refreshing to find out that the majority of Americans seem to have a grasp of what is really going on behind the fake headlines. For example, The Wall Street Journal/NBC conducted a poll this week which shows that two-thirds of Americans believe that “the economy is either in a recession now or will be in the next year.” That matches up pretty well with the 71% of Americans who now feel the Iraq War “was a mistake”. Americans are clearly downbeat in their outlook on the economy and haven’t been taken in by the daily infusions of happy talk about “low inflation” and “sustained growth” from toothy TV pundits. In fact, the mood of the country regarding the economy is downright gloomy. “Only 19% of Americans say things in the nation are headed in the right direction, while 67% say the country is off on the wrong track.”
“Only 16% expressed substantial confidence in the financial industry”—“18% in the energy or pharmaceutical industries”—“17% in large corporations and 11% in health-insurance companies.” Only 18% of the people have confidence in the corporate media and only 16% in the federal government.
These are encouraging numbers. They show that the vast majority of people have lost confidence in the system and its institutions. They also illustrate the limits of propaganda. People are not as easily indoctrinated as many believe. Eventually the “bewildered herd” catches on and sees through the lies and deception.
The American people know intuitively that something is fundamentally wrong with the economy. They just don’t know the details or the extent of the damage. Decades of neoliberal policies have inflated the currency, broadened the wealth gap, and destroyed manufacturing. Workers can no longer buy the things they produce because wages have stagnated through a stealth campaign of inflation which originated at the Federal Reserve. When wages shrink, prices eventually fall from overcapacity and the economy slips into a deflationary cycle. This downward spiral ultimately ends in depression. So far, that's been avoided because of the Fed’s massive expansion of cheap credit. But that won’t last.
Economic policy is not “accidental”. The Fed’s policies were designed to create a crisis, and that crisis was intended to coincide with the activation of a nation-wide police-state. It is foolish to think that Greenspan or his fellows did not grasp the implications of the system they put in place. These are very smart men and very shrewd economists. They knew exactly what they were doing. They all understand the effects of low interest rates and expanded money supply. And, they’re also all familiar with Ludwig von Mises, who said:
"There is no means of avoiding the final collapse of a boom brought about by credit expansion.”
A crash is unavoidable because the policies were designed to create a crash. It’s that simple.
The Federal Reserve is a central player in a carefully considered plan to shift the nation’s wealth from one class to another. And they have succeeded. Nearly 4 million American jobs have been sent overseas, the country has increased the national debt by $3 trillion dollars, and foreign investors own $4.5 trillion in US dollar-backed assets. While the Fed has been carrying out its economic strategy; the Bush administration has deployed the military around the world to conduct a global resource war. These are two wheels on the same axle. The goal is to maintain control of the global economic system by seizing the remaining energy resources in Eurasia and the
The impending economic crisis is part of a much broader scheme to remake the political system from the ground-up so it better meets the needs of ruling elite. After the crash, public assets will be sold at firesale prices to the highest bidder. Public lands will be auctioned off. Basic services will be privatized. Democracy will be shelved.
The unsupervised expansion of credit through interest rate manipulation is the fast-track to tyranny. Thomas Jefferson fully understood this. He said:
“If the American people ever allow private banks to control the issue of our currency, first by inflation, then by deflation, the banks and the corporations that will grow up will deprive the people of all property until their children wake up homeless on the continent their fathers conquered.”
We are now in the first phase of Greenspan’s Depression. The stock market is headed for the doldrums and the economy will quickly follow. Many more mortgage lenders, hedge funds and investment banks will be carried out feet first.
As the disaster unfolds, we should try to focus on where the troubles began and keep in mind
“The issuing of power should be taken from the banks and restored to the people to whom it properly belongs.”
Rep. Ron Paul is the only presidential candidate who supports abolishing the Federal Reserve. (Mike Whitney, “Stock market Meldown,” Global Research, 6 Aug. 2007.)
Stock markets worldwide slumped Thursday amid mounting fears that the crisis in the subprime mortgage lending market is leading to a more generalized credit crisis. The Dow-Jones Industrial Average, the most widely followed stock index, ended down 387.18 points, its largest loss in six months and the fourth triple-digit movement in five days, an indication of the increasing instability in financial markets.
Thursday’s triggering event was the announcement by BNP Paribas, the biggest publicly-held French bank, that three of its subsidiaries engaged in trading in
BNP Paribas said that no redemptions would be made on the $3.8 billion invested in the funds until it could determine the value of the assets held by them. “The complete evaporation of liquidity in certain market segments of the
Securitization is a process in which a home mortgage is resold by the mortgage lender and then combined with thousands of other mortgages in packages that are sold to hedge funds and other huge investment firms in the form of Collateralized Debt Obligations, or CDOs. The process is so complex, and the distance so great between the underlying asset—the home—and the paper held by the investor, that determining the actual value of the investment under conditions of rising defaults and foreclosures has become problematic.
French stocks fell 3 percent in afternoon trading, while
The European Central Bank made available nearly 100 billion euros ($130 billion) at a cut-price 4 percent interest rate for bank lenders. It was the first such intervention by the ECB, which manages the value of the euro, since the terrorist attacks of September 11, 2001 shut down the
After the European action, the Federal Reserve Bank of
Even President Bush joined in the confidence-building exercise, issuing a carefully worded reassurance to the market in the course of his last White House press conference before embarking on his month-long sojourn in
In comments that were clearly rehearsed, Bush declared, “The fundamentals of our economy are strong.” He added, “Another factor one has got to look at is the amount of liquidity in the system. In other words, is there enough liquidity to enable markets to be able to correct? And I am told there is enough liquidity in the system to enable markets to correct.”
Bush later added—in another reassurance to Wall Street—that he opposed any proposal to raise the tax rate on the earnings of hedge fund managers, by taxing so-called “carried interest” as income rather than capital gains. While endorsing the billion-dollar incomes of the big speculators, he rejected any effort to bail out homeowners facing foreclosure or huge increases in monthly payments under adjustable-rate mortgages.
But in afternoon trading in
A letter to investors in Black Mesa Capital, another hedge fund, noted that one “very large hedge fund” was liquidating a “massive” trading portfolio. The letter, reported Thursday by MarketWatch, declared, “‘Clearly, something is amiss in the markets that few in our strategy, if anyone, have experienced before.”
American International Group (AIG), the largest
Press reports emphasized the shock effect of the French banking crisis on Wall Street trading. According to the Associated Press (AP): “The announcement by BNP Paribas raised the specter of a widening impact of
The AP suggested that the massive intervention by the European Central Bank had had a boomerang effect. According to the Associated Press, “although the bank’s loan of more than $130 billion in overnight funds to banks at a bargain rate of 4 percent was intended to calm investors, Wall Street saw the step as confirmation of the credit markets’ problems.”
Other events this week have demonstrated the deep-going crisis in the financial system. On Monday, American Home Mortgage, once the 10th-largest home mortgage lender, filed for bankruptcy, laying off nearly 7,000 employees, many at its
The giant investment bank Bear Stearns fired co-president Warren Spector, holding him responsible for the failure of two hedge funds that were part of the asset management group he supervised. The two funds, specializing in securities backed by subprime mortgages, filed for bankruptcy after losing billions, and last Friday Bear Stearns saw its credit rating lowered.
Figures reported in the financial press show a wider pattern of credit-tightening. Thomson Financial reported that sales of high-yield junk bonds fell from $22.4 billion in June to only $2.4 billion in July, while sales of investment-grade bonds fell from $109 billion in June to $30.4 billion in July, the lowest monthly figure in five years.
The Los Angeles Times noted, “many analysts say the real test will come in September, when private equity firms and investment banks will need to find investors for an estimated $330 billion in bonds and loans needed to finance corporate buyouts that already have been announced.”
The economics columnist for the Washington Post, Robert Samuelson, normally a free-market true believer, expressed the gloom settling in among financial observers. In Thursday’s column, written before the latest market plunge, he bemoaned the almost incomprehensible complexity of the mortgage securitization process: “The peril is that so much has changed so quickly that no one knows how the system operates. It’s often roulette. Monday’s defensible investment may become Tuesday’s silly speculation. Global markets are interconnected, and financial conditions are tightening. Some hedge funds—including foreign funds—have suffered huge losses on
Another Post business columnist, Steven Pearlstein, wrote: “Meanwhile, at hedge funds, insurance companies and the big Wall Street banks, masters of the universe are sweating bullets over what they are going to tell investors and regulators about all those assets on their balance sheets that, suddenly, nobody wants to buy. They include credit swaps and other fancy derivatives, along with loans to private-equity firms for corporate buyouts.”
Pearlstein was scathing about what he termed the Bush “administration’s Katrina-like response to the meltdown in the mortgage market, which has spread well beyond sketchy subprime loans... when, as result of market and regulatory failures, millions of Americans face the prospect of losing their homes, jobs or retirement savings, you’d expect the government to show a bit more urgency and candor about the problem, and more creativity and leadership in addressing it. This is hardly the time to head for the ranch and the beach and leave everything to Mr. Market.” (Patrick Martin, “Credit fears spark stock market plunge.” World Socialist Web Site, 10 August 2007.)
The U.S. Dollar is kaput. Confidence in the currency is eroding by the day.
A report in The Sydney Morning Herald stated, "Australia’s Treasurer Peter Costello has called on East Asia’s central bankers to ‘telegraph’ their intentions to diversify out of American investments and ensure an ‘orderly adjustment’….Central banks in China, Japan, Taiwan, South Korea, and Hong Kong have channeled immense foreign reserves into American government bonds, helping to prop up the US dollar and hold down interest rates,’ said Costello, but ‘the strategy has changed.’"
Indeed, the strategy has changed. The world has come to its senses and is moving away from the green slip of paper that is currently mired in $8.7 trillion of debt.
The central banks now want to reduce their USD reserves while trying to do as little damage to their own economies as possible. That’ll be difficult. If a sell-off ensues, it will start a stampede for the exits.
There’s little hope of an "orderly adjustment" as Costello opines; that’s just false optimism. When the greenback begins listing; things will turn helter-skelter quickly.
In September, we saw early signs that the dollar was in trouble. The trade deficit registered at $70 billion but the Net Foreign Security Purchases (NFSP) came in at a paltry $33 billion. That means that our main trading partners are no longer buying back our debt which puts downward pressure on the greenback. The Fed had two choices; either raise interest rates substantially or let the currency fall. Given the tenuous condition of the housing bubble and the proximity of the midterm elections, the Fed did neither.
A month later, in October, the trade deficit hit $69.9 billion but, then, without warning, a miracle occurred. The Net Foreign Security Purchases skyrocketed to a "historic high" of $116.8 billion; covering both months’ shortfalls almost to the penny.
Not likely. Either the skittish central banks decided to "stock up" on their dollar-denominated investments or the Federal Reserve (and their banking-buddies) is buying back its own debt to float us through the elections.
This is exactly the kind of hanky-panky that people expected when Greenspan stopped publishing the M-3 last March keeping the rest of us in the dark about what was really going on with the money supply.
Are we supposed to believe that the skeptical central banks suddenly doubled up on their T-Bills while they’re (publicly) moaning about the dollar’s weakness and threatening to diversify?
That’s a stretch.
According to the Wall Street Journal the Chinese Central-bank governor Zhou Xiaochuan stated unequivocally that "we think we’ve got enough." The Chinese presently have nearly $1 trillion in USD and US Treasuries.
Of course, everyone in
The administration never created a funding mechanism for the $400 million tax cuts or for the 35% expansion of the Federal government. Defense spending increased by leaps and bounds as did the "no-bid" contracts for friends of the Bush clan. At the same time, interest rates were lowered to rock-bottom to put as much money as possible into the hands of people who couldn’t meet the traditional criteria for a mortgage. And, if gluttonous waste, reckless overspending and "Mickey Mouse" loans were not enough; the Fed capped it off by doubling the money supply in 7 years; a surefire prescription for hyper-inflation.
So, which one of these policies was not deliberate?
The financial crisis that we now face was created by design. It is intended to destroy the labor movement, crush the middle class, quash Medicare, Medicaid and Social Security, reduce our foreign debt by 50 or 60%, force a restructuring of America’s debt, privatize all public assets and resources, and create a new regime of austerity measures which will divert more wealth to the banking and corporate establishments.
The avatars of neoliberalism invariably use crooked politicians to spawn enormous "unsustainable" debt so that the nation’s riches can be transferred to ruling elites. It works the same everywhere. It’s a form of corporate colonization, only this time the victim is the good old
"The Phase of Impact"
According to Richard Daughty in his prescient article "The Phase of Impact" the Federal Reserve and the Treasury Dept have already manned the battle-stations. Here’s an excerpt:
"Mr. Paulson, the Secretary of the Treasury, is, by virtue of his ascension to the throne, now the head of the shadowy President’s Working Group of Financial Markets (which was created by Presidential Order 12631) and he is insisting that they meet more often, namely every 6 weeks!
This whole Working Group thing was originally set up as a fallback, ad-hoc, if-then defense to deal with possible economic emergencies, but now they are routinely meeting every 6 weeks. He has even ordered Jim Wilkinson, his chief of staff, to “oversee the creation of a
Daughty goes on to say: "So a lot of the hubbub is obviously being caused by some approaching upheaval, perhaps reflected in something sent to me by Phil S., which is the Global Europe Anticipation Bulletin No 8 which reminded us that last May they predicted that the economy would have a ‘phase of acceleration’ that would begin in June, and it "would be spread out over a period of a maximum of 6 months’, which it subsequently did. They said then, and are saying again now, that a ‘phase of impact will begin in November 2006’, and that this impact phase would be the ‘explosive phase of the crisis’.
This ‘phase of impact’ that is due to begin momentarily is, they explain, ‘a period when a series of brutal crises starts affecting by contamination the total system. This explosive phase of the crisis, which will last 6 months to one year, will affect directly and very strongly financial players and markets, the owners of investment schemes with fixed incomes in dollars, pension funds and the strategic relations between the
Predictions, of course, are rarely reliable and Daughty’s scenario may be a bit too apocalyptic for many. But if we accept the premise that the tax cuts, the expansion of the federal government, the doubling of the money supply, and the $10 trillion that was sluiced into the housing bubble were not merely "honest mistakes" made by "supply side" enthusiasts; then we must assume that this is all part of a loony plan to demolish the economic foundation-blocks of the current system and remake society from the ground up.
Domestically, that plan appears to involve the activation of the police state.
In the last few weeks the Bush administration has passed the Military Commissions Act of 2006 which allows the president to arrest and torture whomever he chooses without charging him with a crime. Also, unbeknownst to most Americans, Bush signed into law a provision which, according to Senator Patrick Leahy, will allow the president to unilaterally declare martial law. By changing the Insurrection Act, Bush has essentially overturned the Posse Comitatus Act which bars the president from deploying troops within the
Internationally, the falling dollar means that
The dollar faces a second crisis at home which is bound to play out throughout 2007. The $10 trillion dollar housing bubble is quickly losing air causing a precipitous drop in GDP. The housing industry is seeing its steepest decline in 30 years and home equity is beginning to shrivel. Housing has been the one bright spot in an otherwise bleak economic landscape. With the housing market slowing down and prices decreasing, the $600 billion of consumer spending which was extracted in 2005 from home equity will quickly evaporate triggering an overall slowdown in the economy. (Consumer spending is 70% of GDP)
By the Fed’s own calculations; "The total amount of residential housing wealth in the
So, how will recession affect the dollar?
Capital has no loyalties. It follows the markets. When
What really matters is that the dollar retains its position as the world’s reserve currency. That allows the Federal Reserve to continue to print the money, set the interest rates, and control the global economic system. The dollar presently accounts for 66% of foreign currency reserves in central banks across the globe, an increase of nearly 10% in one decade alone. The dollar has become the international currency, a de-facto monopoly. This is the goal of the globalists and the American ruling elite who dream of one system, the dollar-system; with us running it.
So, how will this cadre of plutocrats coerce the other nations to continue to use the dollar while it plummets from its perch?
As long as oil is denominated in dollars, the central banks will be forced to stockpile American scrip regardless of its value. It’s no different than holding a gun to someone’s head. They will use our debt-plagued greenbacks or their cars and trucks will sputter, their tractors and factories will wheeze, and their economies will grind to a halt. It’s just that simple.
What’s the eventual goal? One world bank. And this has become trite almost to say, “They are pushing for a one world bank.” But they are. And when we look at it, the early institutions that are doing it … World Bank, WTO, … International Monetary Fund, … Trilateral Commission, the European Union Central Bank, … World Economic Forum, the Bilderberg Group. Course I’m sure a lot of you know about the Bilderberg. 120 of the world’s top elites, the top bloodline families, the top royals of Europe, who are very close to the control levers of this system, getting together, not necessarily dictating all policy, but they’re going to discuss which direction they’re going to take your world in. They’re not going to let you in to the meeting. The U.N. Economic [and Social Council].
People don’t talk about that in any G8 Summit. This is another major group where the countries get together and say how are we going to plan this world out for people. We control the world. What are we going to do?
The push right now is for a world bank. Well, how do you get a world bank? How do you do it? You need to kill the dollar.
It’s a controlled collapse. It is. I mean, I don’t think anyone in the elite predicts the dollar is going to survive. It’s just how long. A year? Two years? Three? Five? Ten if we’re lucky, maybe?
It’s coming to an end though. The credits are about to roll, OK?
So I say, the dollar on the deathbed. The end of
They’re not going to tell you that in the Wall Street Journal. You go on the websites of these people’s own countries and they’ll say, “Oh, yah, we’re selling the dollar.” Finance ministers are coming out and saying, “We think the dollar is finished. We do not want a part of it.”
In March 2007, the Chinese finance minister just said we’re going to diversify into gold, into Euros, into yen, into our own currency. They’re scared cause they see it coming down and they say we don’t want to hold all this worthless paper. They know it’s fiat. They know it’s based on nothing. It’s a fictitious thing of our imagination. We all just play the game, as if money were worth something. It’s not. It’s a joke.
But because their biggest assets are U.S. dollars, they need to start switching it over. Now if they do it too fast, the whole thing comes down and they lose anyways. Slowly. At least the Chinese think they can bring it down slowly too. The globalists, the Anglo-Americans think they can bring it down slowly. That’s why you see them working together. You see why the policy coordinates. Because on the one hand there’s this war against
Nobody wants the dollar to collapse too fast. Let’s sort of do it at the right pace, you know, medium pace, right? And just wipe you out in sort of slow torture. It’s like the Chinese water torture. That’s what it is, with this death of the dollar.
The Euro is up 50% since 2002. This is just a fact. It just hit a two-year high against the dollar.
Again, when we talk about the
Three trillion missing from the Pentagon. 2.3 trillion in one year. It’s like another trillion…. Who knows how much is really missing? This is just what they found. Three trillion. Dov Zackheim … is now working in a company called Booz Allen Hamilton. … You want to understand who’s got a lot of control over this shadow government right now? Just google it. Booz Allen Hamilton. That’s all I’ll say.
The current account deficit is over $800 billion a year. This means the
I mean, they’re buying up our assets. The Chinese have announced that they are going to take their currency and start buying up our stock, buying up our assets. They’re buying up the highways. They’re buying up the rivers. They’re buying up the forests and the ports.
It’s a fire sale. Your banks are being sold out. Your property is being sold out. Your RRAs are being stolen. Your 401K is being wiped out. It’s a fire sale.
Welcome to their game. And they’re expecting you not to notice. Just play dumb. Just be a good person. Just keep watching TV. Just take that Paxil and that Zooloft. Go back to sleep stupid, right?
The official debt of this country is supposedly 9 trillion. That’s what they put. You know, when Paul O’Neil resigned he said there was like 4 or 5 trillion off the books.
But when you look at the long-term debt, major mainstream news articles say, long-term debt, 45-75 trillion. That’s more than assets in this country. There is more long-term debt than all the wealth in the country, OK?
It’s over. We’ve been sold out. We were sold out a long time ago. There is not a lot of coming back from this. The question is how slow is the collapse going to happen?
And if we look at the comprehensive annual financial report, CAFR, we’ve been looted. There was actually a lot more money than they told us. That money got stolen. The government keeps two sets of books. They have the books for you and then they have the CAFR. So they’ve looted the state budgets, the local budgets, and the federal budgets with the CAFR. Look into that stuff. There was a lot more money that they stole.
This is a heist on a level bank robbers couldn’t dream of, you know? That’s what these people are. They’re the bank producers and the bank robbers at the same time. …
The debt house of cards is beginning to collapse. It’s called the debt-industrial complex. … The debt-industrial complex is … a system that is now built on debt, built on credit. The country doesn’t make anything any more. It’s all debt. Everyone’s in debt. The country is in debt. You’re in debt. I’m in debt. Everybody’s in debt.
Collapse of the $1 trillion subprime loan market is an indication of where we’re going. The bubble is collapsing. The Fed put trillions of dollars into the system, a credit free-for-all, which is pumped into the real-estate market, where they say no money down, nothing for the first two years. And, if the value of houses keeps going up, we’ll give you a second mortgage, third mortgage, keep leveraging, keep leveraging.
And now the payments go up. Nobody can make those payments. So you’ve seen all the sub-prime mortgage lenders are going belly up. They’re going to have to get bailed out probably. And this is a crisis for the bankers right now.
The mortgage-backed security market is tanking. … That’s where they take a thousand or ten thousand people with a subprime housing loan and package them into a bond and then they sell that bond. And so when you’re paying off your debt, you’re actually paying some banker who bought a bond of your issue. And that’s how this is worked. So it’s leveraged.
Now where is it leveraged? Into the hedge funds. That is 1.5 trillion in unregulated leveraged speculation – this is 100 to one, sometimes 500 to one. And do you want to see how this affects the market, having all these 8-10,000 hedge funds, 1.5 trillion unregulated?
Look at the blowout of the $6 billion-dollar Ameranth fund in
Now what’s leveraged on top of that. It gets worse. I’m sorry.
The derivatives market. Four hundred to 600 trillion in parasitic leveraged side bets and debt. Leveraged 5, 600 to one. You want to talk about the casino mentality of these parasitic bankers? This is what’s going on. So you see how this house of cards is built up? The debt-industrial complex, the credit complex, mortgage-backed securities on top of that, which go into hedge funds, which go into derivatives. And when the bottom falls out, you fall out. I fall out. And the dollar falls out.
The U.S. dollar is doomed by inflation.
They have now instituted the Plunge Protection Team, the PPT. The heads of the Treasury, the SEC and Federal Reserve are working to prop up the market with hundreds of billions of dollars.
You know, there is a report about
So why isn’t the market collapsing? It is collapsing. And the PPT keeps running it up. And then the people that short-sell the market have to cover their short bets and that creates a false rally. And this has been going on for a while. …
The Feds M3 money supply – no longer public as of March 2006. Why? Because they’re running a lot of money off those sheets. They’re printing a lot of money right now. We’re looking at a major hyperinflationary spiral. (Daniel Abrahamson speaking to Project for a New American Citizen, April 15, 2007, on video downloaded from http://video.google.com/videoplay?docid=8545414779301935419, 8 Aug. 2007.)
A few nuclear bombs in Iranian hands are no strategic threat to the
Author and historian Webster Griffin Tarpley warned today that the Bush administration is in the advanced stages of planning for a catastrophic nuclear sneak attack on
"A few nuclear bombs in Iranian hands hardly add up to a strategic threat to the
The Iranian oil bourse would be the first euro-based oil market in the recent history of the world where sellers and buyers of oil could come together for spot and futures transactions independent of the dollar, thus outside US control and without Wall Street skimming off a hefty part of the profits. Today’s privileged position for the dollar is "obsolete and removed from reality," Tarpley asserted.
"The 213-point drop in the Dow last Friday on reports that
The current system allows the
"A rational way out would be to rebuild the world monetary system around fixed parities among the dollar, the euro, and the yen as equal participants, with gold settlement and a credit mechanism to expand exports of capital goods. This would avoid a new general war."
"As for ‘Helicopter Ben’ Bernanke, the incoming Federal Reserve boss, he is clearly getting ready to gin up the printing presses to print an avalanche of paper dollars if the Chinese and Japanese demand cash for their plummeting US Treasury bonds in the near future -- what economists call monetization of the debt. The Fed will soon stop publishing the M3 data series on the money supply, which is the one that would reveal a monetization of debt. Bernanke seems to have Weimar-style hyperinflation written all over him," Tarpley commented.
"The lunatic neocon war plan for
Global Institute believes strategic miscalculations in programs enacted to inflate the dollar and forestall its slide have not only failed, but have eroded its value - setting off a death spiral - which will most likely hasten its ultimate demise.
A Marked Man: Saddam Hussein began selling his oil for euros instead of dollars, in Nov. 6, 2000-2003 triggering the largest decline in the dollar’s history!
A world jettisoning mountains of hyperinflated greenbacks would mortally wound the dollar, the
Under threat of other nations adopting the Euro for oil purchases, circumventing the dollar thereby sparking its implosion and final collapse - the
Missing: A plausible pretext, giving war legitimacy, while sending a powerful message to all oil producing nations entertaining the same ruinous idea. This pretext had to be convincing enough to mobilize public support for going to war.
The solution: - an attack on
The official US account of 9/11 appears to be a total fabrication - a mythical version of events incompatible with empirical evidence. (Global Currency Evaluation Institute, Statement on http://www.1global.org/index.html, downloaded 11 Aug. 2007.)
A large number of events - whose importance began to appear clearly at the end of 2006 - is about to thrust the world's financial sector into a process of deep crisis: depreciation of US dollar-denominated assets, monetisation of US debt, fast degradation of US banks' and of some EU banks' balance-sheets, low level of banks' reserves, fast depreciation of housing loans (2) and recession of the US economy.
For example, the value of US dollar-denominated assets worldwide (3) compared to the composite basket of currencies of the
The monetisation of the
In the United States, a growing number of financial institutions is beginning to announce that the bursting of the real-estate bubble and the increasing amount of default on housing loan repayments has started to impact on banks' (6) and loaning institutions' results. For instance, due to the market's fast degradation, the
Moreover, for many years, the
(1) With a EURUSD exchange rate now steadily above 1.30, the LEAP/E2020 researchers feel entitled to consider that the impact phase of the global systemic crisis has well started. LEAP/E2020 calculated that an operator who invested 100,000 Euros and followed over the last 10 months their anticipatory advices in terms of EURUSD exchange rate or
Source : « Mortgages delinquencies : a rising threat » AP/Yahoo, 11/12/2006
(3) Sources : International Bank of Settlements and GEAB N°2
(4) A 10% loss of the US dollar against the currencies of its main trade partners corresponds to an USD 850 billion reduction on the relative value of the US debt (source: US National Debt Clock), with a US trade deficit estimated to be around USD 750 billion in 2006 and a US balance of payment deficit over USD 900 billion (source: Roubini Global Economics Service). Thanks to the devaluation of the dollar, the
(5) “With their decision to put an end to the publication of M3 and other indicators designed to measure the evolution of Dollar ownership worldwide, the US authorities initiated a policy of « hidden monetisation » of the US debt. The Bush administration's incapacity to handle the various deficits (budget, trade) and the related debt will result in a monetary creation of unequalled proportion, leading to a dilution of the American debt in an
(6) As already announced by the world's third largest bank, HSBC. Source : [Banknet360]url:http://, 06/12/2006
(7) Source : « Time to Reform Fanny Mae and Freddy Mac », Heritage Foundation, 20/05/2006
(8) Source : “Fanny notes more accounting problems”, 10/11/2005, MarketWatch/DowJones
(9) Source : « Financial Markets and the Federal Reserve », Governor Kevin M. Warsh, Federal Reserve, 21/11/2006
Could the proposed Iranian oil bourse (IOB) become the catalyst for a significant blow to the influential position the US dollar enjoys? Manifold supply fears have driven the price of crude oil to its recent high of US$67.10 - only a notch below its highest price in inflation-adjusted dollar terms. With the world facing a daily bill of roughly $5.5 billion for crude oil at current price levels, it becomes apparent that sellers and purchasers of the black gold are looking into all ways that could lead to a financial improvement on their respective sides.
Non-US-dollar holders so far have been the victim of additional transaction costs in the oil trade. The necessary conversion of local currencies into oil-buying greenbacks can be considered a hidden tax, charged and enjoyed by the international banking sector. The IOB, by eliminating this transaction cost, will become a factor that could unsettle the dollar's dominant position. While the worldwide bottleneck of inadequate refining facilities and partly dramatic declines in production - for example in the North Sea - are two factors that cannot be eliminated in the short term, there is one area left which could result in smiling faces of oil producers as well as most buyers.
Oil consumers are entangled in a web of supply fears that span the globe. In
Until now, oil has been solely priced, traded and paid for in the greenback on markets in both
Especially in the case of
The proposal to set up a petroleum bourse was first voiced in
The IOB can count on two sharp arrows in its holster. It can - and probably will - lure European buyers with oil prices quoted in euros, saving them dollar transaction costs. And it can strike barter deals with oil-hungry giants like
Worse than an Iranian nuclear attack?
Weaned off the almighty commodity, the US dollar can have a deeper impact on the
With the world economy depending so much on oil, the black gold itself can be seen as a reserve currency that will be handed out against only the best collateral in the future. Last month, the Federal Reserve Bank of
Only one major actor stands to lose from a change in the current status quo: the
As this development poses a very real danger to the superior status of the greenback and the interests of the
The IOB could help the euro to become the interim primary reserve currency before
Abstract: The American Empire depends on the U.S. dollar. The proposed Iranian Oil Bourse will accelerate the fall of the U.S. dollar and hence the fall of the American Empire.
A nation-state taxes its own citizens, while an empire taxes other nation-states. The history of empires, from Greek and Roman, to Ottoman and British, teaches that the economic foundation of every single empire is the taxation of other nations or of their subjects. The imperial ability to tax has always rested on a better and stronger economy, and as a consequence, a better and stronger military that peacefully or militarily enforced the tax. One part of those taxes went to improve the living standards of the empire and the other part went to reinforce the military dominance necessary to enforce those taxes.
Historically, taxing the subject state has been in various forms, usually gold and silver, where those were considered money, but also slaves, soldiers, crops, cattle, or other agricultural and natural resources, whatever economic goods the empire demanded and the subject-state could deliver. Historically, the taxation has always been direct: the subject state handed over the money (gold/silver) or the economic goods directly to the empire.
For the first time in history, in the twentieth century, America was able to tax the world indirectly—not by enforcing the direct payment of taxes like all of its predecessor empires did, but by distributing its own currency, the U.S. Dollar, to other nations in exchange for goods with the intended consequence of devaluing over time those dollars and paying back later each dollar with less economic goods. The difference between the value of the dollar during the initial purchase and the devalued dollar during the repayment was the
Early in the 20th century, the
Economically, the American Empire was born with the establishment of the Bretton Woods system in 1945. The dollar was made only partially convertible to gold—convertibility to gold was available to foreign governments only, but not to private institutions. At this time the US dollar was established as the international reserve currency. This was possible, because during WWII, the
An economic Empire would not have been possible if the dollar remained fully backed by gold, i.e., if the dollar supply was kept limited and within the availability of gold, so as to exchange back dollars for gold at the pre-agreed exchange ratio. However, the dollar supply was actually increased far beyond its gold backing and handed over to foreigners in exchange for economic goods. There was no prospect of buying back those dollars at the same value—the amount of gold was not sufficient to redeem those dollars, while the quantity of dollars continually increased, so that those dollars constantly depreciated. The constant depreciation of the increasing dollar holdings of foreigners via persistent
When in 1971 foreigners demanded payment for their dollars in gold, The U.S. Government defaulted on its payments on August 15. The popular spin of this default was that "the link between the dollar and gold was severed". The proper interpretation is that the U.S. Government went bankrupt, just like any commercial bank is declared bankrupt.
However, by doing so, the
From that point on, to sustain the American Empire and to continue to tax the rest of the world via inflation, the
In 1971, as it became clear that the U.S. Government would not be able to buy back its dollars for gold, it prepared an alternative arrangement to hold the world hostage to its fiat dollar: during 1972-1973 it struck an iron-clad arrangement with Saudi Arabia—to support the rule of the House of Saud in exchange for accepting only dollars as a payment for Saudi oil. By imposing the dollar on the OPEC’s leader, the dollar was effectively imposed on all OPEC members. Because the world had to buy oil from the Arab oil countries, it had the reason to hold dollars as payment for oil. Because the world needed ever increasing quantities of oil at an ever increasing oil prices, the world’s demand for dollars could only increase. Even though dollars were no longer exchangeable for gold, they were now exchangeable for oil.
The economic essence of this arrangement was that the dollar was now backed by oil. As long as that was the case, the world had to accumulate increasing amounts of dollars, because those dollars were needed to buy oil. As long as the dollar was the only payment for oil, its dominance in the world was assured, and the American Empire could continue to tax the rest of the world. If, for any reason, the dollar lost its oil backing, the American Empire would cease to exist, because it would no longer be able to tax the world by making them accumulate ever more dollars. Thus, Imperial survival dictated that oil be sold only for dollars. It also implied that oil reserves were spread around various sovereign states that none was strong enough, economically or militarily, to demand payment for oil in something other than dollars. If someone demanded a different payment, he had to be convinced, either by political or by military means, to change his mind.
The man that actually did demand Euro for his oil was Saddam Hussein in late 2000. At first, his demand was met with ridicule, later with neglect, but as it became clearer that he meant his demand and even converted his $10 billion reserve fund at the U.N. into Euro, political pressure was exerted to change his mind. Other countries, like
Many have criticized Bush for staging the war in
History teaches that an empire goes to war for one of two reasons: (1) to defend itself or (2) benefit from war. Economically speaking, in order for an empire to initiate and conduct a war, its benefits must outweigh its military and social costs. Benefits from Iraqi oil fields are hardly worth the long-term, multi-year military cost. Bush went into
II. Iranian Oil Bourse
The Iranian government has recently proposed to open in March 2006 an Iranian Oil Bourse that will be based on an euro-based oil-trading mechanism that naturally implies payment for oil in Euro. In economic terms, this represents a much greater threat to the hegemony of the dollar than Saddam’s, because it will allow anyone willing either to buy or to sell oil for Euro to transact on the exchange, thus circumventing the U.S. dollar altogether. If so, then it is likely that much of the world will eagerly adopt this euro-denominated oil system:
Only the British will find themselves between a rock and a hard place. They have had a strategic partnership with the
At any rate, no matter what the British decide, should the Iranian Oil Bourse gain momentum and accelerate, the interests that matter—those of Europeans, Chinese, Japanese, Russians, and Arabs—will eagerly adopt the Euro, thus sealing the fate of the dollar. Americans cannot allow this to happen, and if necessary, will use a vast array of strategies to halt or hobble the exchange’s operations:
Whatever the strategic choice, from a purely economic point of view, should the Iranian Oil Bourse gain momentum, it will be eagerly embraced by major economic powers and will precipitate the demise of the dollar.
III. The Demise of the Dollar
The collapsing dollar will dramatically accelerate
The Austrian theory of money, credit, and the business cycle teaches us that ultimately there is no in-between the mythological Scylla and Charybdis scenario—between deflation and hyperinflation. Sooner or later, as pressure on the dollar rises and inflation rears its ugly head, the monetary system must swing one way or the other, forcing the Fed to make its choice. There is no doubt that the newly-appointed Commander-in-Chief of the Federal Reserve, Ben Bernanke, an renowned scholar of the Great Depression and an adept helicopter pilot, will choose the latter course of action—hyperinflation. Bernanke has learnt well the lessons of the Great Depression and the destructiveness of deflations. He has also learnt well from the Maestro the panacea of every financial problem—to inflate his way out, come hell or high water. He has even devised ingenious unconventional ways around the deflationary liquidity trap and teaches the Japanese how to apply them. To avoid deflation, he has publicly stated that he will accelerate the printing presses and "drop money from helicopters". If necessary, he will monetize everything in sight. He will ultimately destroy the American currency in Hyperinflation.
Hyperinflations, however, do not happen in an instant. It usually takes years before the final collapse. The
However, because the dollar is the reserve currency of the world, hyperinflating the dollar will be fundamentally different in two ways from all hyperinflations in history. On the one hand, there are tens of trillions of dollar-denominated debt and hundreds of trillions of dollar-denominated derivatives. Given that the ratio of currency to debts and derivatives is tiny, the coming hyperinflation must be necessarily of epic proportions. On the other hand, central banks around the world will fight tooth and nail to support the dollar, so that world financial system does not collapse and that their reserves do not evaporate into the nothingness. Many central banks will choose willy-nilly to support the dollar by inflating their own currencies. Thus, these two powerful forces will drive the dollar in opposite directions. Its inevitable demise may be swift and sudden, or it may be protracted and painful.
Whatever the speed of hyperinflation, ordinary Americans will have few available options to protect themselves—during crises, peoples’ first instinct is to resort to more "stable" fiat currencies of neighboring countries, like the Canadian Dollar and the Mexican Peso, but their availability will prove limited and complicated as people will most likely have to cope with governmentally-imposed capital controls. Next, people instinctively convert hyperinflating currencies to hard assets like land and real estate, but sellers refuse to accept the hyperinflating currency and quickly disappear from the market. Having run out of meaningful options to protect themselves, ordinary people will have little choice, but to convert their dollars to hard currencies like gold and silver, thus driving their prices much higher. On the other hand, central banks have no other options but gold. First, in times of crises, central banks fear the risk inherent in all fiat currencies. Moreover, not even the largest fiat currencies will accommodate their need to convert their reserves. Also, it is not practical for central banks to hold real estate and land. Thus, central banks will have no alternative, but to scramble to convert their reserves to the only hard currency known to man—gold. Historically, in times of crises, gold has always been the ultimate safe haven. When people and central banks flee en masse to gold, its value has always skyrocketed. This time, it will be no different. (Krasssimir Petrov, “Economics of Empire,” Global Currency Evaluation Institute, undated, downloaded from http://www.1global.org/article_economics_of_empires.html, 11 August 2007.)
It's accepted wisdom that the
No other nation on earth comes near to the commanding
In my view, the world has entered a new, highly dangerous phase since the collapse of the
How the Dollar System works
After 1945, the
That held until the late 1960's, when the costly Vietnam war led to a drain of US gold reserves. By 1968 the drain had reached crisis levels, as foreign central banks holding dollars feared the
In August 1971, Nixon finally broke the Bretton Woods agreement, and refused to redeem dollars for gold. He had not enough gold to give. That turn opened a most remarkable phase of world economic history. After 1971 the dollar was fixed not to an ounce of gold, something measurable. It was fixed only to the printing press of the Treasury and Federal Reserve.
The dollar became a political currency—do you have "confidence" in the
Currencies floated up and down against the dollar. Financial markets were slowly deregulated. Controls were lifted. Offshore banking was allowed, with unregulated hedge funds and financial derivatives. All these changes originated from
The dollar debt paradox
What soon became clear to US Treasury and Federal Reserve circles after 1971, was that they could exert more global influence via debt, US Treasury debt, than they ever did by running trade surpluses. One man's debt is the other's credit. Because all key commodities, above all, oil, were traded globally in dollars, demand for dollars would continue, even if the
Soon, its trade partners held so many dollars that they feared to create a dollar crisis. Instead, they systematically inflated, and actually weakened their own economies to support the Dollar System, fearing a global collapse. The first shock came with the 1973 increase in oil by 400%.
This Dollar System is the real source of a global inflation which we have witnessed in
The dollar is still the only global reserve currency. This means other central banks must hold dollars as reserve to guarantee against currency crises, to back their export trade, to finance oil imports and such. Today, some 67% of all central bank reserves are dollars. Gold is but a tiny share now, and Euros only about 15%. Until creation of the Euro, there was not even a theoretical rival to the dollar reserve currency role.
What is little understood, is how the role of US trade deficits and the Dollar System are connected. The
What has evolved is a mechanism more effective than any the British Empire had with
It works so: A German company, say BMW, gets dollars for its car sales in the
The German central bank thus builds up its dollar currency reserves. Since the oil shocks of the 1970's, the need to have dollars to import oil became national security policy for most countries,
Today, most foreign central banks hold US Treasury bonds or similar
Because the world payments system, and most importantly, the world capital markets---stocks, bonds, derivatives—are dollar markets, the dollar overwhelms all others. The European Central Bank could offer an alternative. So far it does not. It only reacts to a dollar world. German banks destroy the German economy as they rush to imitate US banks. The Dollar System is destroying the German industrial base. German national economic policy as well as Bundesbank and now ECB policy is oriented on the far smaller export sector, to maximize trade surplus dollars, or to the big banks, to attract as many dollars as possible.
The biggest dollar surplus country today is
What is perverse about this system is the fact that
The US Treasury and Greenspan are certain that its trade partners will be forced to always buy more
Washington Treasury officials have learned to be masters at the psychology of "monetary chicken." Treasury Secretary Snow used an implied threat of letting the dollar collapse, after the
But debt must be repaid you say? Does it ever? The central banks just keep buying new debt, rolling the old debts over. The debts of the
The second key to the Dollar System deals with poorer debtor countries. Here the
This is a kind of Dollar Imperialism more slick than anything the
The internal debt bomb in the
The question is if the Dollar System is reaching its real limits? The Dollar System for the past 30 years has been built on growing dollar debt. What if the rest of the world decides it no longer wants to give its savings to the US Treasury to finance its deficits or its wars? What if
In addition to colossal debts to the rest of the world, the
Since the Asia crisis in 1998, the
US Households took on new home mortgage debt in the first six months this year at an annual rate of $700 billion, double the debt growth in 2000. Total mortgage debt in the
The aim has been to inflate a housing speculation market in order to keep the economy rolling. The cost has been staggering new debt levels. Because it was created with record low interest rates, when rates again rise, millions of Americans will suddenly find the burden impossible, especially as unemployment rises. Fannie Mae and Freddie Mac combined guarantee $3 trillion in US home mortgages. The
But the rate of new debt growth among families is rapidly reaching alarm levels, while the overall manufacturing economy continues to stagnate or decline. Today US factories only operate at 74% of capacity, near historic lows. With so much unused capacity, there is little chance companies will soon invest in new factories or jobs. They are going to
So Greenspan continues to rely on foreign money to prop up his consumer debt bubble, at low interest rates. Were foreign money to stop propping the
There is a limit how much debt
There is no
With rapidly rising unemployment and a real economy that is not growing, at some point there will come a violent reality clash, as the market for home lending reaches its limit. At that point the danger is the consumer will stop buying, and the manufacturing economy will not be able to create new jobs and a real recovery. The jobs have gone to
We might already be at or very close to that point. In the past six weeks, US interest rates have risen sharply, as owners of
The problem is this process of creating debt, domestic and foreign, to keep the US economy going, has gathered so much momentum it risks destroying what remains of the US manufacturing and technology base. Henry Kissinger warned in a conference of Computer Associates in June, that the
Fed chief Greenspan even warned
It is caught in its own web: American jobs, hi-tech jobs as well as factory jobs, are vanishing permanently as
Oil and food, and money as strategic weapon
The fundamental reason for the Iraq war, beyond agendas of Richard Perle or other hawks, is hence, strategic in my view.
Even ordinary Americans have to give up their pension promises. If the Dollar System is to remain hegemonic, it must find major new sources of support. That spells likely destabilization and wars for the rest of the world.
Could it be that in this context, some long-term thinkers in
As Henry Kissinger once noted, "Who controls the food supply controls the people; who controls the energy can control whole continents; who controls money can control the world." (F. William Engdahl, “Crisis of the U.S. Dollar System,” Global Currency Evaluation Institute, undated, downloaded from http://www.1global.org/article_crisis_of_the_us.html, 11 Aug. 2007.)
Remember when the
What happened? It’s hard to believe that in the space of a generation our character and capabilities just collapsed as, for example, did our steel and automobile industries and our family farming. What then are the causes of the decline?
Here’s how I would put it today: our economy is on an artificial life-support system, a barely-breathing hostage in a lunatic asylum. That asylum is the
The inmates are the world’s central bankers, along with most of the financial magnates big and small. The fact is that the economy of much of the world is in a decisive downward slide which the financiers cannot stop because the systems they operate are the primary cause. As often happens, the inmates rule the asylum.
The problems aren’t confined to the
In such an environment, crime, warfare, terrorism, and other forms of violence are endemic. Only the most naïve, self-centered, and deluded jingoist could describe such a scenario in terms of the freedom-loving Western democracies being besieged by the ‘bad guys.’
Rather what is happening highlights the growing failures of Western globalist finance whose impact on political stability has been so corrosive. As many responsible commentators are warning, we are likely to see major financial shocks within the next few months. The warnings are even coming from high-flying institutional players like the Bank of International Settlements and the International Monetary Fund.
We may even be seeing the end of an era when the financiers ruled the world. At a certain point, governments or their military and bureaucratic establishments are likely to stop being passive spectators to the onrushing disorder. It is already happening in
The countries that will be least able to master their own destiny are those like the
THE HOUSING BUBBLE SETS THE STAGE FOR THE
Even so, these investors are increasingly uneasy with their dollar holdings and are bailing out anyway. Foreign purchase of
For a while we were floating on the housing bubble, but those days are now history when, according to a Merrill-Lynch study, the artificially pumped-up housing industry, as late as 2005, accounted for fifty percent of U.S. economic growth.
As everyone knows, the Federal Reserve under Chairman Alan Greenspan used the housing bubble, like a steroid drug, to pump liquidity into the economy. This worked, at least for a while, because consumers could borrow huge amounts of money at relatively low interest rates for the purchase of homes or for taking out home equity loans to pay off their credit cards, finance college education for their children, buy new cars, etc.
When the final history of the housing bubble is written, its beginnings will be dated as early as 1989-90, when credit restrictions on the purchase of real estate first began to be eased. According to mortgage industry insiders interviewed for this article, they began to be taught the methods for getting around consumers’ weak credit reports and selling them homes anyway in the mid to late 1990s.
The Fed started inflating the housing bubble in earnest around 2001, after the collapse of the dot.com bubble, which failed with the stock market decline of 2000-2002. Then, over a trillion dollars of wealth, including working peoples’ retirement savings, simply vanished.
Also according to mortgage specialists, it was in March 2001, two months after George W. Bush became president, that a ‘wave of intoxicated fraud’ started. Mortgage companies began to be instructed, by the creditors/lenders, on how to package loan applications as "master strokes of forgery," so that completely unqualified buyers could purchase homes.
There could not have been a sudden onset of industry-wide illegal activity without direction from higher-up in the money chain. It could not have continued without reports being filed by whistleblowers with regulatory agencies. Today the government is prosecuting mortgage fraud, but they certainly had to know about it while it was actually going on.
The bubble was coordinated from Wall Street, where brokerages ‘bundled’ the ‘creatively-financed’ mortgages and sold them as bonds to retirement and mutual funds and to overseas investors. Portfolio managers were directed to buy subprime bonds as other bonds matured. It’s the subprime segment of the industry that has now collapsed, triggering, for instance, the recent highly-publicized demise of two Bear Stearns hedge funds.
And it’s not just lower-income home purchasers who are affected. The Washington Post has reported that for the first time in living memory foreclosures are happening in
The subprime bonds were known to be suspect. One reason was that they were based on adjustable rate mortgages that were actually time bombs, scheduled to detonate a couple of years later with monthly payments hundreds of dollars a month higher than when they were written. Many of these mortgages will reset to higher payments this October.
Purchasers were lied to when they were told they could re-sell their homes in time to escape the payment hikes. Now the collapse of the market has made further resale at prices high enough to escape without losses impossible.
One way the system worked was for mortgage lenders to maximize the ‘points’ buyers were required to finance, making the mortgages more attractive to Wall Street. Of course bundling and selling the mortgages relieved the banks which originated the loans from exposure, pushing a considerable amount of the risk onto millions of small investors. This was in addition to the normal sale of mortgages to quasi-public agencies like Freddie Mac and Fannie Mae.
Was it a scam? Of course. Did the Federal Reserve know about it? They had to.
Did Congress exercise any oversight? No.
What did the White House know?
Amy Gluckman, an editor of Dollars and Sense, reported in the November/December 2006 issue: “During the
“But when George W. Bush moved into
“Whatever White House officials were whispering in Greenspan’s ear, it worked: Greenspan abruptly changed his tune on tax cuts, lending critical support to Bush’s massive 2001 and 2003 tax giveaways, and he loosened the reins by cutting Fed-controlled interest rates repeatedly beginning in January 2001, a gift to the Republicans in power.”
Along the way, the bubble caused housing prices to inflate drastically, which officialdom touted as economic ‘growth.’ Even today, periodicals like Barron’s naively boast that this inflation boosted American’s ‘wealth.’
But this source of liquidity for everyday people has been maxed out, like our credit cards, and there is nothing to replace it. There is no cash cushion anymore, because years ago people stopped earning enough money for personal or household savings.
As purchasers lose their homes to foreclosure, the real estate is being grabbed at bankruptcy prices by the banks and by any other investors with ready money. Whole neighborhoods of cities like
What we are seeing are the results of an economic crime on a fantastic scale that implicates the highest levels of our financial and governmental establishments. It spanned three presidential administrations - Bush I, Clinton, and Bush II - though the worst of it came with the surge of outright lending fraud after 2001.
As usual when hypocrisy is rampant only the small fry are being called to account. Commentators, including a sleepwalking Congress, have self-righteously railed at consumers who got in over their heads. The Mortgage Bankers Association is even lobbying Congress to allocate $7 million more to the FBI to go after the supposedly rogue brokers within their own industry who are being scapegoated.
THE BUBBLES ARE ONLY SYMPTOMS
But there’s much more to it than that. These bubbles are symptoms. They are created because our wage and salary earners lack purchasing power due to stagnant incomes and various structural causes. These causes include the outsourcing of our manufacturing industries to
Also, our farming, mining, and other resource-based industries are in a long-term slide. This and the decline of hard manufacturing have been going on since our oil production peaked in the 1970s, followed by the Federal Reserve-induced recession of 1979-83. Next came the deregulation of the financial industry. It was all part of the economic disintegration that led to today’s “service economy.”
Now, for the first time in modern
Our biggest sources of new private-sector jobs today are food service, processing of financial paperwork, health care for the growing numbers of retirees, and menial low-paying jobs, like landscaping and building maintenance. These are increasingly being performed by immigrants who are also underpricing
Today the rank-and-file of our population must increasingly turn to borrowing in order to survive. Only the banks and the credit card companies are the beneficiaries. The total societal debt for individuals, businesses, and government is over $45 trillion and climbing. This is happening even while the real value of wages and salaries is decreasing.
What I have just been saying is bad enough, but here’s where the real lunacy enters in.
A major factor connected to the decline in the value of employee earnings is dollar devaluation in the overarching financial economy due to the proliferation of huge quantities of bank credit being used to keep the stock market afloat and to fuel the speculative games of equity, hedge, and derivative funds.
In other words, while our factories continue to shut down, the Wall Street gambling casino - like its
The main growth factors for federal spending are
The financial world, which Dr. Michael Hudson calls the FIRE economy ‘Finance, Insurance, and Real Estate’ has been producing millionaires and billionaires among those who know how to play the game.
The Wall Street hedge funds stand out as the most irresponsible financial scams in history. Unregulated and secretive, they account for a third of all stock trades, own $2 trillion in assets, and pay their individual managers over $1 billion a year. Think about this the next time someone you know has their job outsourced to
The hedge funds borrow huge sums from the banks which generate loans under their Federal Reserve-sanctioned fractional reserve privileges. Often this money is used by the hedge funds to ‘short the market,’ thereby earning profits when stock prices decline.
In other words, the hedge funds and their banking enablers use banking leverage to bet against the producing economy. In doing so, they may actually drive stock prices down, causing ordinary investors to lose a portion of their own wealth. Can this be called anything other than a crime?
The livelihood of much of the
The Reagan administration ushered in these policies in the 1980s under the heading of ‘supply-side economics.’ But the opposite has happened. The system has institutionalized an increasingly stratified worldwide culture of haves and have-nots.
THE ROOT CAUSE OF THE CATASTROPHE
How did today’s looming tragedy come to pass?
Looking for causes is like peeling an onion. What we are really seeing are the terminal throes of a failed financial system almost a century old. It’s happening because, since the creation of the Federal Reserve System in 1913, even during the period of the New Deal with its Keynesian economics aimed at full employment, our economy has been based almost entirely on fractional reserve banking.
This means that under the regime of the world’s all-powerful central banking systems, money is brought into existence only as debt-bearing loans. Interest on this lending tends to grow exponentially unless overtaken by real economic growth.
Remember that every instance of bank lending, from purchase of Treasury Bonds, to credit cards, to home mortgages, to billion-dollar loans to hedge funds for leveraged buyouts or sheer speculation, must eventually be paid back somewhere, somehow, sometime, by somebody, with interest. In the end, it all comes back to people who work for a living, whether in the
In an anemic economy like that of the
And they have been high on average since the 1960s, as the banking industry became increasingly deregulated. Interestingly, since 1965, the U.S. dollar has lost eighty percent of its value, which tends to validate the contention by some observers that higher interest rates not only do not reduce inflation, as the Federal Reserve contends, but actually cause it.
The situation today is worse in many respects than 1929, because the debt ‘overhang’ vs. real economic value is much higher now than it was then. The
The question is not when will the system start to come down, because this has already begun. It’s shown most clearly by the fact that according to Federal Reserve data, M1, the part of the money supply most readily available for consumer purchases, is not only lagging behind inflation but has actually decreased in eleven of the last twelve months. This means that the producing economy is already in a recession.
The federal government is trying to figure out what to do. Their biggest concern is that foreign investors have started to pull out of dollar-denominated markets.
The government’s ‘plunge protection team. - known officially as the President’s Working Group on Financial Markets - is trying to engineer what they call a ‘soft landing.’ It’s been likened to the process by which you cook a frog in a pot where you raise the temperature one degree a day. The frog doesn’t hop out because the heat goes up gradually, but before long it’s too late. The frog has been cooked.
Even if the plunge protection team succeeds, and the frog cooks slowly, there will be a massive de facto default on dollar-denominated debt and a long-term degradation of the
The worst off will be people locked into retirement funds which have a heavy load of mortgage-related securities. Entire investment portfolios are likely to disappear overnight.
The banks, along with the bank-leveraged equity and hedge funds, are preparing for the biggest fire sale in at least a generation. Insiders are going liquid to get ready. If you think Enron was ‘the bomb,’ you won’t want to miss this one.
WHAT CAN BE DONE?
There are so many flaws in the system that it’s time for real change.
As I have been pointing out in articles over the last several months, the key to a rational solution would be immediate monetary reform leading to a fundamental shift in how the world conducts its financial business. It would mean taking control of the world’s economy out of the hands of the private bankers and giving it back to democratically elected governments.
I spent twenty-one years working for the U.S. Treasury Department and studying
During and after the Civil War (1861-5) we had five different sources of money that fueled our economy. One was the Greenbacks, an extremely successful currency which the government spent directly into circulation. Contrary to financiers’ propaganda, the Greenbacks were not inflationary.
Another was gold and silver coinage and specie-backed Treasury paper currency. The third was notes lent into circulation by the national banks. The fourth was retained earnings - individual savings and business reinvestment of profits -which was the primary source of capital for industry. The fifth was the stock and bond markets.
After the Federal Reserve Act was passed by Congress in 1913, the banks and the government inflated the currency through war debt and destroyed most of the value of the Greenbacks and coinage. The banks never entirely displaced the capital markets but eventually took them over during the present-day era of leveraged mergers, acquisitions, and buyouts, while the Federal Reserve created and deflated asset bubbles.
The banking system which rules the economy through the Federal Reserve System has produced the crushing debt pyramid of today. The system is a travesty. Banks, which can be useful in facilitating commerce, should never have this much power. Many intelligent people have called for the Federal Reserve to be abolished, including former chairmen of the House banking committee Wright Patman and Henry Gonzales and current Republican presidential candidate Ron Paul.
Some might call such a program a revolution. I prefer to call it a restoration - of national sovereignty. Central to the program would be the elimination of the Federal Reserve as a bank of issue and restoration of money-creation to the people’s representatives in Congress. This is what our Constitution says too. It’s the system we had before 1913.
THE MONETARY PRESCRIPTION
The fundamental objectives of monetary policy should be to secure a healthy producing economy and provide for sufficient individual income. The objectives should not be to produce massive profits for the banks, fodder for Wall Street swindles, and a blank check for out-of-control government expenditures.
Note I referred to income. I did not say ‘create jobs.’ That is the Keynesian answer, because Keynes was a collectivist, and the main thing collectivists like to come up with is to give everyone more work to do, even if it’s just grabbing a shovel and digging ditches like they did with the WPA during the Depression.
It’s what President Clinton did with his welfare-to-work program that threw hundreds of thousands of mothers off the welfare rolls and into a job market where sufficient work at a living wage did not exist. It’s another reason the government is constantly borrowing more money to fuel the military-industrial complex by creating more military, bureaucratic, and contractor jobs.
Back to income. The idea of ‘income,’ as opposed to ‘jobs,’ is a civilized and humane idea. When are we going to realize that everyone doesn’t need a paying job in order for an industrial economy to provide all with a decent living? When are we going to realize that the productivity of the modern economy is part of the heritage of all of us, part of the social commons?
Why can’t mothers have the choice of staying home with the kids like they could a generation ago? Why can’t some people choose to do eldercare? Why can’t others comfortably go into lower-paying occupations like teaching or the arts? Why can’t some just opt to study or travel for a while or learn new skills or start a business without facing financial ruin as they often must today? Why can’t retirees enjoy their retirement instead of having to stay in the job market or worrying about Social Security going broke?
Contrary to so many doomsayers, the mature world economy is capable of providing a decent living for everyone on the planet. It cannot because the monetary equivalent of its bounty is skimmed by interest-bearing debt.
These are things that monetary reformers have known about for decades. The first steps within the U.S. would be 1) a large-scale cancellation of debt; 2) a guaranteed income for all at about $10,000 a year, not connected to whether a person has a job; 3) an additional National Dividend, fluctuating with national productivity, that would provide every citizen with their rightful share in the benefits of our incredible producing economy; 4) direct spending of money by the government for infrastructure and other necessary costs without resort to taxation or borrowing; 5) creation of a new system of private lending to businesses and consumers at non-usurious rates of interest; 6) re-regulation of the financial industry, including the banning of bank-created credit for speculation, such as purchase of securities on margin and for leveraging buyouts, acquisitions, mergers, hedge funds, and derivatives; and 7) abolishment of the Federal Reserve as a bank of issue with retention of its functions as a national financial transaction clearinghouse.
While these proposals are basically simple, the overall program is so different from what we have today with our financier-controlled system that it takes careful reading and a great deal of thought to understand exactly how it would work. One way to approach it is to look at the likely effects.
These measures would immediately shift the basis of our economy from borrowing from the banks to a mixed system that would include the direct creation of credit at the public and grassroots level. The size of government would shrink, our producing economy would be reborn, debt would come down, economic democracy would become a reality, and the financial industry could be right-sized. Finally, the international situation could be stabilized because we would no longer be driven to a constant state of warfare to seize other nations’ resources as with
Such a system would work by creating indigenous sources of credit needed to mobilize the natural wealth and productivity of the nation. There are people who could implement this program. Systems to do so could be installed within the U.S. Treasury and the Federal Reserve within a matter of months.
Fundamental monetary reform implemented to restore economic democracy is what
How the outcome will play out may well depend on whether there is a Jefferson, Lincoln, or Roosevelt waiting in the wings. The success of each of these great leaders was due to one critical factor: their ability to implement monetary reform at a time of national emergency. (Richard C. Cook, “The Crashing U.S. Economy Held Hostage: Our Economy is on an Artificial Life-Support System,” Global Research, July 7, 2007.)
“If the world's central bankers accumulate fewer dollars, the result would be an unrelenting American need to borrow in the face of an ever weaker dollar - a recipe for higher interest rates and higher prices. The economic repercussions could unfold gradually, resulting in a long, slow decline in living standards. Or there could be a quick unraveling, with the hallmarks of an uncontrolled fiscal crisis." (New York Times editorial, 4 January 2005.)
It seems that there are a growing number of people who believe as I do, that the economic tsunami planned by the Bush administration is probably only months away. In just 5 short years the national debt has increased by nearly 3 trillion dollars while the dollar has continued its predictable decline. The dollar has fallen a whopping 38% since Bush took office, due largely to the massive $450 billion per year tax cuts. At the same time, numerous laws have been passed (Patriot Act, Intelligence Reform Bill, Homeland Security Bill, National ID, Passport requirements etc) anticipating the need for greater repression when the economy takes its inevitable nosedive. Regrettably, that nosedive looks to be coming sooner rather than later.
The administration is currently putting as much pressure as possible on OPEC to ratchet up the flow of oil another 1 million barrels per day (well over capacity) to settle down nervous markets and buy time for the planned bombing of Iran in June. Like Fed Chief Alan Greenspan's artificially low interest rates, the manipulation of oil production is a way of concealing how dire the situation really is. Rising prices at the pump signal an upcoming recession, (depression?) so the administration is pulling out all the stops to meet the short term demand and maintain the illusion that things are still okay. (Bush would rather avoid massive popular unrest until his battle-plans for
But, of course, things are not okay. The country has been intentionally plundered and will eventually wind up in the hands of its creditors as Bush and his lieutenants planned from the very beginning. Those who don't believe this should note the methodical way that the deficits have been produced at (around) $450 billion per year; a systematic and orderly siphoning off of the nation's future. The value of the dollar and the increasing national debt follow exactly the same (deliberate) downward trajectory.
This same Ponzi scheme has been carried out repeatedly by the IMF and World Bank throughout the world;
Did Americans really believe they could avoid a similar fate?
If so, they'd better forget about it, because the hammer is about to come down big-time, and the collateral damage will be huge.
The Bush administration is mainly comprised of internationalists. That doesn't mean that they "hate
There are a number of signs that the economy is close to meltdown-stage. Even with cheap energy, low interest rates and $450 billion in borrowed revenue pumped into the system each year, the economy is still barely treading water.
This has a lot to due with the colossal shifting of wealth brought on by the tax cuts. Supply-side, trickle-down theories have been widely discredited and Bush's tax cuts have done nothing to stimulate the economy as promised. Now, with oil tilting towards $60 per barrel, the economic landscape is changing quickly, and shock-waves are already being felt throughout the country.
Just as the economy cannot float along with sharp increases in oil prices, so too, Bush's profligate deficits threaten the dollar's status as the world's reserve currency. This is much more serious than a simple decline in the value of the dollar. If the major oil producers convert from the dollar to the euro, the American economy will sink almost overnight. If oil is traded in euros then central banks around the world would be compelled to follow and
The difficulties facing both the dollar and the economy are not insurmountable. The world has been more than willing to compensate for
The neoliberal chickens have come home to roost.
"The economic repercussions could unfold gradually, resulting in a long, slow decline in living standards. Or there could be a quick unraveling, with the hallmarks of an uncontrolled fiscal crisis."
"An uncontrolled fiscal crisis"...
The problem is that entities outside the traditional banking sector have been engaged in bank-like functions and are hence subject to bank-like problems such as bank-runs. Here's how it works.
Hedge funds can be hit with withdrawals even if they are not in trouble themselves, at least initially, due to uncertainties about the future state of the market.
But like a bank who lends out most of the deposit it receives, a hedge fund uses the deposits it receives to purchase securities and other assets for its portfolio. Thus, unless it has substantial cash reserves on-hand (part of the scramble now is to build cash reserves), when investors make withdrawals the fund must begin to liquidate its portfolio to pay them off.
But if nobody will purchase mortgage-backed securities, who do you sell to? With nobody buying the assets the fund is trying to sell, they are forced to try to raise cash in other ways, and problems mount.
And it can feed on itself, just like a bank run. If investors hear that people are having trouble getting their money out of a particular fund, or from funds generally, they will rush to get their money out before the fund fails, and the problems get worse as funds try to sell assets to raise the needed cash.
So it's sort of like a bank run, but without a standing lending facility (i.e. the equivalent of a discount window) available to meet the demand for liquidity, though such institutions could be created. ("A New Kind of Bank Run" Economist’s View, downloaded from http://economistsview.typepad.com/economistsview/2007/08/a-new-kind-of-b.html, 11 August 2007.)
It’s official. Mark your calendars. The crash of the
Pearlstein’s column was titled, “The Takeover Boom, About to Go Bust” and concerned the extraordinary amount of debt vs. operating profits of companies currently subject to leveraged buyouts.
In language remarkably alarmist for the usually ultra-bland pages of the Post, Pearlstein wrote, “It is impossible to predict when the magic moment will be reached and everyone finally realizes that the prices being paid for these companies, and the debt taken on to support the acquisitions, are unsustainable. When that happens, it won't be pretty. Across the board, stock prices and company valuations will fall. Banks will announce painful write-offs, some hedge funds will close their doors, and private-equity funds will report disappointing returns. Some companies will be forced into bankruptcy or restructuring.”
Further, “Falling stock prices will cause companies to reduce their hiring and capital spending while governments will be forced to raise taxes or reduce services, as revenue from capital gains taxes declines. And the combination of reduced wealth and higher interest rates will finally cause consumers to pull back on their debt-financed consumption. It happened after the junk-bond and savings-and-loan collapses of the late 1980s. It happened after the tech and telecom bust of the late '90s. And it will happen this time.”
Samuelson’s column, “The End of Cheap Credit,” left the door slightly ajar in case the collapse is not quite so severe. He wrote of rising interest rates, “As the price of money increases, borrowing and the economy might weaken. The deep slump in housing could worsen. We could also discover that the long period of cheap credit has left a nasty residue.”
Other writers with less prestigious platforms than the Post have been talking about an approaching financial bust for a couple of years. Among them has been economist Michael Hudson, author of an article on the housing bubble titled, “The New Road to Serfdom” in the May 2006 issue of Harper’s.
Among those poised to profit from the crash is the Carlyle Group, the equity fund that includes the Bush family and other high-profile investors with insider government connections. A January 2007 memorandum to company managers from founding partner William E. Conway, Jr., recently appeared which stated that, when the current “liquidity environment”—i.e., cheap credit—ends, “the buying opportunity will be a once in a lifeti