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TechnoratiExperts: Nationalization Is Only Way Out
Many of the nation's largest banks are too sick to cure and the only way to clean up their balance sheets, saddled with as much as $10 trillion in toxic assets, is through nationalization, a growing number of economists said.
![[Many of the nation's largest banks are too sick to cure and the only way to clean up their balance sheets, saddled with as much as $10 trillion in toxic assets, is through nationalization, a growing number of economists said.]](http://www.commondreams.org/files/article_images/banks-2.jpg "banks-2.jpg")
This drastic step, so far being resisted by the Obama administration, could wipe out shareholders and cause pain in the short run but spark the quickest rebound, the economists said.
"Paradoxically, nationalization may be a more market-friendly solution," said Nouriel Roubini, aka "Dr, Doom," chairman of RGE Monitor and an NYU economics professor. "It provides a fair upside to the taxpayer . . . by allowing the government to sell the assets to private investors after a cleanup of the bank."
Treasury Secretary Tim Geithner is still hoping for a private solution to the bank crisis - outlining a vague plan to draw out private capital to invest in the banks' toxic paper - but the problem may be too big to fix through asset purchases.
"It's clear there are divisions in the administration about where the financial bailout should be targeted as well as how much authority the government should gain over financial institutions," said Princeton professor Julian Zelizer.
Under the Geithner plan, a "stress test" would be administered to the ailing banks' balance sheets. The results, experts predict, will show a tremendous need to bolster Tier-1 Capital - most likely through common-stock purchases.
But the billions in additional capital injections will all but wipe out current common and preferred stockholders.
Geithner's alternative idea, of enticing private equity and hedge funds into purchasing the toxic paper through government loans, seems equally fraught with peril. Under this plan, Treasury would be empowering two totally unregulated entities - one of which recently brought us Bernie Madoff - to help bail out the banking industry.
If Washington were forced to nationalize several large banks, it would be best to take them over all at once to avoid a run on the weaker rivals, said Roubini.
Under such a plan, there would be no change for any bank customers and no deposits would be lost.
Some expecting at least a partial bank nationalization plan to emerge feel Geithner is not up to the task of solving the problem.
Quantum Fund co-founder Jim Rogers said Geithner, who was president of the New York Federal Reserve Bank, "has been dead wrong about everything for 15 years in a row," as was President Obama's economic advisor Lawrence Summers, who acted as Treasury Secretary under Pres. Clinton. "It is mind-boggling to me," Rogers said on CNBC.
"These guys have been wrong year after year after year consistently, and here they are making the same mistakes again."
Geithner is stuck with nationalization as a likely scenario because the US can't afford to fund a plan that will keep banks private - namely, buying up about $3 trillion more in toxic assets than they have spent so far.
Investors last week, showing little faith in Geithner's plan, drove down banking stocks deeper than the 4,9 percent drop in the S&P 500 Index over the last four trading days.
Citigroup fell 11.6 percent since Geithner announced his plan, Bank of America fell 19.2 percent, Wells Fargo dropped 17.3 percent, JPMorgan Chase declined 9.5 percent and American Express dipped 11.3 percent.
"The history of bubbles clearly shows that the significant consolidation of the financial sector is inevitable," said Richard Bernstein, strategist, Bank of America. "The latest Treasury program is simply another attempt to stymie the consolidation process," Bernstein added.
49 Comments so far
Show AllYes, nationalize. And nationalize energy as well. Instead of enriching CEO's, the revenue generated could support the Treasury. Anything left over could be issued as dividends. This would eliminate income taxes and render the IRS obsolete. We'd all have more money in our pockets. Then we'd have something extra to spend so we could afford to go down to the local music store and buy that Fender or Steinway we've been dreaming about. This would save downtown, our mortgages and our sanity.
This crisis also illustrates why it wasn't such a hot idea to become the greatest debtor nation in history. When Freddie and Fannie were tottering on the brink of failure, the Chinese essentially told our then-genius at treasury, Paulson, that if China took a bath on all the Freddie/Fannie debt it had purchased, we could kiss goodbye further investment we desperately need to keep this house of cards afloat.
I suspect similar concerns may be at work in explaining why the government won't simply insist on some form of bankruptcy for the banks--as they say, the investors then take a "haircut," more like a beheading, because in this case, there won't be anything but crumbs, at best for the shareholders and debt holders--but there you go again, many of these folks are foreign interests who won't take kindly to seeing all that highly rated paper issued by the investment banks and commercial banks turned to so much poop.
Yes, by all means, nationalize, but just as important, repeal the Federal Reserve Act and shut down the federal reserve. As long as it exists here in the U.S. it will still carry out those monetary agendas catering to the private corporations of which it is one of them. And the fed never puts more money into the economy without a % attached to it.
Alan MacDonald
It's not 'nationalization', but 'democratization', of the banks (and Wall Street) that is needed --- in any case, here's the best idea for a real solution:
In less than 200 pages, David Korten’s insightful new book, “Agenda for a New Economy: From Phantom Wealth to Real Wealth”, cuts like a hot knife through butter into the insane, dysfunctional, and destructive ruling-elite’s ‘corporate financial Empire’ that is now so obviously the cause of all our current sorrows.
Like William Greider, Ralph Nader, Joseph Stiglitz, Bill Van Auken, Dennis Kucinich, Kevin Phillips, Paul Krugman, Noam Chomsky, Gabriel Kolko, Justin Raimondo, Howard Zinn, Amory Lovins, George Akerlof, Herman Daly, Andrew Bacevich, Francis Fukuyama, Naomi Klein, Chalmers Johnson, Ron Paul, and thousands of other well educated, and rationally unbiased insightful economists, philosophers, writers, and thinkers who are aware and concerned with the sustainability of humane and peaceful life of people on our small threatened planet, David Korten rigorously and rationally researches, analyzes, and writes about what it might take to achieve these ends.
The singular and seminal threat to such peaceful and sustainable human survival can be summed up in one word: Empire ---- as has been the case for the last five thousand years. Likewise, the solution can be summed up in one term: political, economic, and social democracy. This was the genius and goal of our founding fathers and it must still be the signal goal of America.
We seemed to have it once, but as Franklin worried “we have our Republic now, if we can keep it”, we lost it for awhile.
Korten simply and compellingly brings into focus the way in which an elitist/royalist financial corporatist Empire crept back into our country through the economic ‘back-door’ and how it used the power of money to corrupt political and all other aspects of our democracy. He very simply explains the current financial abyss, clearly defining the Ponzi scheme of negative externality costs that have been hidden in debt pyramids of our economic lungs, like the cancer of cigarette smoke hidden in smokers’ lungs.
Korten exposes the ‘gaming’ of market flaws by a corrupt house of card sharks and Three Card Monte con-artists on Wall Street, who have swept all ‘phantom profit’ upwards, but all very real debt and destruction downward upon our society both at home and abroad --- all the while seeding elitist ‘divide and conquer’ racist, ethnic, and nationalistic divisions among honest working class people. As Hannah Arendt presciently warned during the era of the Nazi Empire, “Empire abroad (always) entails tyranny at home.”
However, Korten compellingly demonstrates how a refocusing on our common human goals and social democracy can quickly and peacefully overcome this death-spiral of Empire.
a line from a poem -- i don't know if it was rudyard kipling or some colleague of his:
"THE WHITE MAN RUSHES -- WHERE THE EASTERNER TAKES HIS TIME ...AND IN THE END ...THE EASTERNER LOOKS AT THE RUSHING MAN .....EXHAUSTED AND DEAD.....AND MOVES ON HIS WAY AS BEFORE".
"where the west thinks in terms of years and decades ....the east thinks in thousands of years".
"To the Buddha ...even buddhism will disappear at times ....only to reappear when the time is ripe...."
"we were already here long before your empires...and you were not even tribes ....we will still be here long after your empires are gone" ----an old Asian Indian saying to western imperial forays.
Teddy, ten posts in a row makes me ask this question:
Do you know the difference between a dialogue and a diatribe?
I do not seek to diminish the import of what you post, only the way it suppresses the exchange of ideas. Perhaps you might consolidate your thoughts and submit an article instead?
Not meant in rudeness I assure you.
"Most people would sooner die than think, in fact they do so." Bertrand Russell
from New York Times.
February 16, 2009
Finance Ministers Soften Their Tone on China’s Currency
By LANDON THOMAS Jr.
ROME — As the world lurches ever deeper into economic distress, China’s image is changing from that of currency manipulator to a source of badly needed consumer demand.
At the Group of 7 conference here over the weekend, finance ministers extended a friendly hand to the country many have criticized.
The United States Treasury secretary, Timothy F. Geithner, was quick to commend China for its $585 billion stimulus package, veering sharply from his past testimony before Congress in which he harshly criticized China’s reluctance to let its currency, the yuan, appreciate.
“We very much welcome the steps China has taken to strengthen domestic demand and its commitment to further exchange rate reform,” he said during a news conference on Saturday.
That view was echoed by the G-7’s communiqué on Saturday, which added that the yuan was “expected to appreciate in effective terms.”
The quick shift in the G-7’s stance toward China underscores how sharply policy positions are changing as the world economy continues to struggle.
It is also further proof of the diminishing stature of the G-7. It has become clear that rapidly growing economies like China, India, Brazil and South Korea, which are part of the Group of 20 but not the G-7, will play defining roles in generating the purchasing power the global economy so desperately needs.
The G-7 session this weekend was Mr. Geithner’s first official trip abroad as Treasury secretary. After the withering reception that his bank rescue plan received in Washington, he could be excused for seeing the event as a well-timed respite.
Mr. Geithner, whose previous job was president of the Federal Reserve Bank of New York, has spent his academic and professional life studying and implementing international financial policy. So two days spent in Rome brainstorming with G-7 finance ministers about fixing the global economy played to his specialty.
As one might expect in a gathering of diverse economies, there were differences of opinion.
Amid signs that Europe’s worsening economic slump has created fissures among G-7 leaders about how to deal with the crisis, Mr. Geithner fielded questions from his peers about provisions viewed as protectionist in the Obama administration’s stimulus plan. Ministers said the plan lacked detail and expressed worry over the debt needed to pay for it.
Few if any concrete measures were proposed to address the world slump, though the group’s final statement did point to increased steps to inject liquidity and strengthen bank balance sheets.
“There are no quick fixes,” said Alistair Darling, the British chancellor of the Exchequer.
Mr. Geithner’s trip to Rome — like many of his experiences since his protracted confirmation process — was a whirlwind, crammed tight with meetings, dinners and, when he could squeeze it in, a trip to the gym.
On paper, there has never been a Treasury secretary more qualified to be America’s lead spokesman on international financial affairs. Mr. Geithner, unlike virtually all of his predecessors, has an orientation — personal, academic and professional — that is rooted outside his native country’s borders.
At one dinner, Mr. Geithner, a veteran of international talks, gave an emotional speech outlining his respect for the consultative process.
“It was very heartfelt,” said a Treasury official, who added that Mr. Geithner relied on notes he had taken minutes before speaking instead of his prepared presentation. “You could tell it was a homecoming.”
But when it came to underlining the importance of a coordinated approach to stimulating economies, Mr. Geithner was all business. And while most leaders agreed on the need to bolster government spending, the question of how to finance it remained a contentious one here as well as in the United States.
Last week Giulio Tremonti, the Italian finance minister and Mr. Geithner’s host for the weekend, reviewed the United States administration’s stimulus in a Milan newspaper.
“If the problem is an excess of debt, the cure is not adding more debt, whether that debt is public or private,” he wrote in the newspaper, Corriere della Sera, referring to this approach as the “American way.”
Italy is one of the most indebted countries in Europe, with a debt that surpasses its annual gross domestic product.
The national debt of the United States, by contrast, was about 40 percent of G.D.P. at the end of 2008, but Moody’s Investor Service said it expected that to rise to 60 percent by 2010 because of the recession and spending tied to the government’s bailout and stimulus programs.
There was also much discussion about the “Buy America” provision in the stimulus plan passed by Congress on Friday, which covers iron, steel and manufactured goods. The president of the World Bank, Robert B. Zoellick, said he had emphasized in meetings with ministers how crucial it was to keep the world economy open and to not repeat the protectionist policy errors of the 1930s.
“The ‘Buy American’ provision is very dangerous,” he said.
Mr. Geithner was careful to take on both issues at his closing news conference, where he emphasized the administration’s commitment to open markets while also taking up America’s growing debt burden.
“We need to show the world that we can bring our resources and expenditures back into balance,” he said. “That is crucially important.”
Hit with a barrage of questions regarding his bank plan, he effectively said stay tuned.
“We are going to move quickly to lay out a broad design,” he said. “But we also want to makes sure that they work.”
And amid the camera flashes and aggressive questioning, the Treasury secretary seemed to have found a comfort level that was lacking during his earlier public appearance in Washington, where he announced his bank plan but took no questions. His voice had a deeper quality and his smile was more self-assured.
When there were no more questions at his Saturday news conference, he waited several beats before exiting with a quick wave and headed for the plane waiting to take him and his team back to Washington.
===========
as i mentioned earlier....washington is going to HAVE to be very careful about the habitual accusations against china of being "currency manipulator" -- now that the USA ITSELF has to OPENLY currency manipulate through the bail-out -- which in effect is what it is.....
additionally -- they KNOW there are options China can use APART from the demands to "floate china's currency" -- in order to save US capitalism and deficit in trades from the USA's OWN policies. lol.
there is little question that the "G-7 Nations" financial chiefs came to that decision to "tone down" the accusations at the behest -- or perhaps more to the point, BEGGING - of Geithner - out of public view.
they all know that the days of the "northern" power world using the rest of the globe as their "backyard" is OVER even if things are still in the midst of radical changes and the ongoing DISCREDITING of capitalism.
and, i suspect. in many ways -- the G-7 are getting frightened that the "engine of world growth" -- meaning inclusive of THEIR economies continuing the accepted norms of prosperity -- China MIGHT decide to promote its DOMESTIC CONSUMPTION economy at "FULL EMPLOYMENT AND EVER_RISING WAGES" basis....which will spark what really SHOULD have been the global economic reality for ALL nations to be prosperous and , once and for all, remove the NEED for Resource wars based on manipulated wealth accumulation as evidenced by IMperialism and Capitalism.
imo -- this is the reason , the true reason, they are cooling down the "currency manipulator" rhetoric - and in order to encourage china to StAY "on course" with global commitment and NOT "close in" on itself and deny THEM their precious "market" expansion if it ever adopted broader "protectionism" like the USA is NOW forced to DO!
Note:
in modern writings...it seems the term "DOLLAR HEGEMONY" now used more often by people such as below and even Congressman Ron Paul ...was first coined by Henry CK Liu many years ago...
======================
http://www.sacw.net/free/rohini_marinella30012005.html
www.sacw.net | January 30, 2005
US DOLLAR HEGEMONY:
THE SOFT UNDERBELLY OF EMPIRE (AND WHAT CAN BE DONE TO USE IT!)
by Rohini Hensman and Marinella Correggia
Introduction
What we intend to argue below is that if the US's ability to undertake imperial conquests like that of Iraq depends on its obvious military supremacy, this in turn is ultimately based on the use of the US dollar as the world's reserve currency. It is the dominance of the dollar that underpins US financial dominance as a whole as well as the apparently limitless spending power that allows it to keep hundreds of thousands of troops stationed all over the world. Destroy US dollar hegemony, and "Empire" will collapse.
David Ludden's article 'America's Invisible Empire' (1) sums up the problem of the world's most recent empire with remarkable clarity. Constituting itself at a time when decolonisation was well under way and other empires were disintegrating, US imperialism could never openly speak its name. Initially, it disguised itself as the defender of democracy against communism; when the Soviet Union ceased to exist, the pretext became the "war against terror". National security and national interest were invoked as the rationale for global dominance.
Ludden's description evokes the image of US citizens (and a few others) living in a Truman Show world, a bubble of illusion created by state deception and media complicity that prevents them from being aware of the reality of empire, although everyone outside can see it only too clearly. It sounds quite credible that ëthe empire will not be undone until its reality and costs become visible to Americans' (p.4777). However Ludden's claim that 'US taxpayers and voters pay the entire cost of the US empire' (p.4776) is less credible. If that were true, many more Americans would see their empire and oppose it; the Democrats would have put up a principled anti-war, anti-occupation candidate at the recent presidential elections, and the overwhelming majority of the US electorate would have voted for her or him. But it is the rest of the world that has been paying for the US empire: that is why it is almost invisible within the US.
As Emmanuel Todd wrote,(2) an imperial economy depends on drawing wealth from abroad, without any reciprocity. The US is now more dependent on the rest of the world than the rest of the world on the US. This explains their behaviour: not only their strategic need to get their hands on the world's resources, but also their need for hegemony. To counterbalance their economic dependence, they must keep themselves - at least symbolically - at the centre of the world. They must demonstrate their 'omnipotence': that is why they wage so many wars against militarily weak enemies. At the same time they must appear as benefactors à hence their whirlwind tour of the countries devastated by the tsunami disaster in order to make use of the photo opportunities it provided.
The history of dollar hegemony
The core advantage of the US economy, the source of its financial dominance, is the peculiar role of the US currency. It is because the dollar is the world's reserve currency that the US is able to maintain its twin deficits (fiscal and trade) and depend on the world's generosity. It needs a subsidy of at least 1.2 billion dollars per day to keep up its level of spending. Its military superiority is one reason why it it is unlikely ever to face an embargo, but more importantly, it can continue to live beyond its means because of US dollar hegemony. But for long?
The dollar mechanism has been described extensively elsewhere,(3) so we will merely summarize here. The strength of the US economy after World War II enabled the US dollar, backed by gold, to become the world's reserve currency. When the US abandoned the gold standard in 1971, the dollar remained supreme, and its position was further boosted in 1974 when the US came to an agreement with Saudi Arabia that the oil trade would be denominated in dollars.(4) Most countries in the world import oil, and it made sense for them to accumulate dollars in order to guard against oil shocks. Third World countries had even more reason to hoard dollars so as to protect their fragile economies and currencies from sudden collapse. With everyone clamouring for dollars, all the US had to do was print fiat dollars and other countries would accept them in payment for their exports. These dollars then flowed back into the US to be invested in Treasury Bonds and similar instruments, offsetting the outflow.
As a reserve currency fulfills world needs in addition to the functions of a domestic currency, the favoured country can build up debt for a protracted period on a scale that would wreck any other country's currency. But this advantage is a double-edged sword.(5) It allowed the US economy to decline unnoticed, its fiscal and trade deficits to climb steeply: by 2004 the US trade deficit had reached $503 billion, the current account deficit $413 billion, the gross national debt around $7 trillion. Globalization destroyed the US as a manufacturing nation; the outsourcing of services means that even this sector is gradually being shifted out of the US.(6) Only its pre-eminence in the global financial services industry remains intact.(7) And this is underpinned by US dollar hegemony.
http://www.sacw.net/free/rohini_marinella30012005.html
As Pierre Lecomte, a French financial analyst and supporter of the Campaign "Dette et dollar" (to reject the dollar as world currency) says, "While the rest of the world must toil hard to earn dollars which are needed to buy goods internationally, or to pay off foreign debt, the USA just needs to print dollars".(8) And as Frédéric Clairmont wrote in Le Monde Diplomatique (April 2003): "Living on credit is the credo of the foremost power in the world".
Various campaigns around the world have asked people to ëboycott Brand America,'(9) but most products with American brand-names are not made in the USA. Therefore refusing to buy such things may reduce royalties to America, but will not seriously undermine US economic power. On the other hand, ëthe longest-lived and most widely seen American "brand" in the rest of the world is almost certainly not Coca-Cola nor McDonalds, but rather the US dollar.'(10) Taking this into account, the secretariat of the international ëBoycott Bush campaign,' based at the Mother Earth association in Belgium, recently asked members if they were ready to open another front, ëto boycott the dollar'. Most of them have responded ëyes'.
Dollar hegemony is what concealed the costs of Empire, which were effectively being paid for by the rest of the world, from US citizens. Other countries were compelled to accept fiat dollars because they had no choice. It was the world's only reserve currency.
A "currency" reason for the Iraq war and the "oil euro"
Until - the euro came into being. Even then, the choice was only a potential one, as the euro initially lost value, making it unattractively risky as a reserve currency. The first non-European countries that made a move in its direction did so for political rather than economic reasons. When Saddam Hussein switched to the euro in late 2000 and converted Iraq's $10 billion reserve fund at the UN to euro, some analysts commented that this political gesture would have a heavy economic cost.(11) But against all expectations, he actually made a profit when the euro staged a recovery.(12) Iran is another country which in 2002 converted more than half its foreign exchange reserves to euros.(13) Both Iraq and Iran being oil-producing countries, the impact of their shifting currency allegiances would be significant. By contrast, North Korea's official shift to the euro for trade in December 2002(14) was negligible from the standpoint of the world economy, yet it signified a trend that US imperialism had to stop at all costs. Suddenly George Bush's diatribe against the ëAxis of Evil', which seemed so arbitrary and laughable at the time, doesn't appear quite so funny. Add to this picture the fact that Hugo Chavezóagainst whom the US supported a coup in April 2002, and who continues to be under attack by the Bush regimeóhas taken a large part of Venezuela's oil trade out of the orbit of the US dollar,(15) and the economic compulsions driving US foreign policy become clearer. Military might alone does not seem to be a sufficient basis for sustaining an empire: economic power is crucial. And for the declining US economy, US dollar supremacy is essential for maintaining its economic clout.
This is no longer unchallenged. Before the Iraq war, one Iranian economist and the Moroccan magazine, L'Indépendant, suggested that Islamic businessmen and countries should drop the dollar as their foreign exchange reserve currency, in order to weaken the US or at least deter them from their aggressive foreign policy. Given the deteriorating relations between the United States and the Arab world, quite a few Middle Eastern oil-exporting countries have begun to increase the proportion of international settlements made in euros. Reportedly, Russia may also follow suit. In 2003, a senior Iranian oil representative suggested in a speech in Europe that European oil purchases might be increasingly traded in euros in future. China and Russia have hinted that they may begin to hold more of their foreign currency assets in euros instead of dollars. An article in China Daily on 28 September 2004 by Jiang Ruiping, the director of International Economics at the China Foreign Affairs University, pointed out that China is already losing due to the dollar slide and would lose even more if it crashes, and recommended moving out of dollars into euros and possibly also yen, as well as using its dollar reserves to stock up on oil.(16) Other countries like South Korea and Taiwan also plan to shift some of their foreign currency assets out of dollars.(17)
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http://www.sacw.net/free/rohini_marinella30012005.html
WhAT TO DO: NON_VIOLENT ECONOMIC NON_COOPERATION
This brings us back to the dilemma posed by David Ludden. The costs of empire will become apparent to the US public only when they have to pay those costs, and this will happen only when (a) other nations stop subsidizing its imperial adventures by colluding in them, and (b) the dollar loses its role as the world's reserve currency. A weakening of the dollar while it retains its role as world currency, which is what has been happening so far, could actually help US imperialism by reducing the value of its fiscal and trade deficits; only when there is a large-scale shift away from dollar reserves will the rest of the world stop paying for the US empire. This may not happen in the near future if it is left entirely to economic forces, and meanwhile the occupation of Iraq and Palestine will go on, Iran may be invaded (as Bush has threatened repeatedly), and so on and so forth. On the other hand, if currency speculators get into the act and the dollar goes into free fall, it could pull down the world economy with it! Avoiding this, too, requires planning and coordination.
For citizens of the world who are opposed to US imperialism, that suggests several possible courses of action. The 'world's second super-power', world public opinion, made an hugely impressive showing prior to the invasion of Iraq, yet it failed to stop the invasion itself; stronger action is required. But the armed struggle taking place in Iraq is killing and maiming hundreds of thousands of Iraqis and thousands of Americans, most of them from poor families; surely this is not desirable. The alternative we propose is non-violent non-cooperation with the imperial monster. For example:
1) Putting pressure on all other governments not to participate in the occupation of Iraq in any way, and/or voting out of power governments which are colluding in this enterprise and voting in alternatives who promise to pull out of Iraq. In Britain, for example, if the Liberal Democrats are willing to make a commitment to withdraw British troops from Iraq, all anti-war activists, including those who would normally vote for Labour or Left parties, should campaign for them in the forthcoming elections. Similarly with other governments backing the US like those in Italy and Japan. This will leave the burden of running their empire fairly and squarely on the shoulders of the US administration.
2) Refusing to use the US dollar except within the US itself. Even if this is done on an individual basis, it will have the effect of undermining the role of the dollar as the sole world currency; but other economic actors, like the international fair trade movement, should also shift to other currencies for their international trade: the movement is increasing, and it would be an important gesture symbolically. Both academics and activists should stop using dollar equivalents to measure incomes in Third World countries, etc; for the moment, the euro can be used as a standard. Mass action of this sort played a major role in ending British rule in India and thus the British empire; employed on a much wider scale, it can help to undermine the US empire.
3) People in Third World countries putting pressure on their governments to shift foreign currency assets out of dollars, and to create regional currencies to strengthen regional commercial and economic ties. This would not only be a gesture of solidarity to the beleaguered peoples of Iraq, Palestine and others oppressed by the US empire, but would also make good economic sense. The dollar is sliding, and developing countries which hold all or most of their foreign exchange reserves in dollars are losing money as it loses value. If it crashes, their reserves could be wiped out.
4) Putting pressure on governments in oil-producing countries not to denominate their oil trade in US dollars. This does not necessarily involve a wholesale shift to the euro. Venezuela has concluded several barter deals with other Latin American countries including Cuba, giving them oil in exchange for goods and services,(21) and this is a pattern other oil-producing countries could consider. For example, tens of thousands of migrant workers from South and Southeast Asia work in Gulf countries; if their remittances in dinars, dirhams, etc. can be used directly for oil imports, all parties would benefit. Barter deals which do not involve oil could also be concluded between developing countries.
5) Changing world trading patterns. If the dollar sinks drastically with world trade unchanged, many countries which now rely on exports to the US will be affected adversely by its inability to import their goods with a weakened dollar. A reorientation of trade away from the US would therefore be necessary. For example, plans to constitute SAFTA as a regional bloc free of tariff and immigration barriers should be pursued at greater speed, and trade with other countries promoted at the same time. The European Union and MERCOSUR in Latin America provide examples that others could emulate. China and Japan, the biggest creditors of the US, suffer most from the decline of the dollar, and would have to work out alternative trade patterns to safeguard their economies.
6) Campaigning nationally and internationally for policies of employment creation, protection of workers' rights, shorter working hours, and enforced payment of minimum wages that are adequate to support a decent standard of living. This will redistribute resources from wasteful consumption of the rich and powerful to productive consumption of working people, and thus expand mass markets, especially in Third World countries but also in Europe and North America.
7) In addition to these economic measures, ending US imperialism would require pressing for the development and implementation of international humanitarian law, international law and multilateral treaties (such as the Geneva Conventions, Rome Treaty of the International Criminal Court, Chemical Weapons Convention, Biological Weapons Convention, Comprehensive Test Ban Treaty, Land Mine Treaty, ILO Core Conventions, CEDAW and the Kyoto Protocol), and the strengthening and democratization of multilateral institutions (like the UN, ILO and WTO). A recent example of such action was the open letter by eminent South Africans (including former President Nelson Mandela and Archbishop Desmond Tutu) protesting against US attempts to oust Kofi Annan, which says, 'Those who call for his resignation betray the objectivity his position as Secretary-General demands, and regard the United Nations as a mouthpiece to extol and exonerate the politics of the United States of America, right or wrong.'(22) Also important are actions ëtrying' the US for violations of international law, as in the World Tribunal on Iraq which is being carried out in various countries by hundreds of movements. Of course the effectiveness of international law and multilateral institutions is seriously undermined by US non-participation and sabotage, yet if other countries persist in working for global democracy, the US will come under greater pressure to comply.
Even if all possible adjustments are made, there is no doubt that the decline and fall of the dollar as the sole world currency will cause pain, both within and outside the US. But the alternative is incomparably worse. The world order cannot much longer survive having a heavily armed rogue state on the rampage in violation of all international law and multilateral treaties. The world economy cannot afford to depend on the currency of a bankrupt nation with a colossal military budget. And the earth itself is put at risk by a country which devours massive quantities of fossil fuels and spews out greenhouse gases at a catastrophic rate.
US imperialism would not be able to pursue its destructive policies without the unlimited supply of blank cheques extended to it by the rest of the world, so it is the responsibility of the rest of the world to withdraw that source of funding. The beast has to be killed by attacking it at the point where it is most vulnerable. Meanwhile, if enough people in the US work to ensure that the next elections install a president and representatives who undertake to abandon the pursuit of Empire and instead seek to reintegrate the US into the international community as a law-abiding, fiscally-responsible, non-polluting member, the result will be a far safer and more stable global order, world economy and environment.
Notes
(1) David Ludden, 'America's Invisible Empire,' Economic and Political Weekly Vol.XXXIX No.44, Bombay, 30.10.04, pp.4776-77
(2) Emmanuel Todd, Dopo l'impero - la dissoluzione dell'impero americano, Marco Tropea editore (Italian translation, 2003)
New Articles by Henry C.K. Liu
Super Capitalsism, Super Imperialism and Monetary Imperialism
Part I: A Structural Link
Part II: Deregulation: Global War on Labor
Unemployment and Credit
Crisis
Liquidity Bust Bypasses the Banking System
Part I: The Rise of the Non-bank Financial system
Part II: Bank Deregulation Fuels Credit Abuse
Creative Accounting and Destructive Debt
Central Bank Impotence and Market Liquidity
The Real Interest Rate Conundrom Part II
The Real Interest Rate Conundrum Part I
A Mute Strategic Economic Dialgue
Liquidity Boom Decouples US Equity Markets from
the US Economy
China and Appeasement
Part III: China's Misguided Experts on the US
Part II: China's Appeasement Faction
Part I: Beyond Munich - Geostrategy and
Betrayal
Why the US Subprime Mortgage Bust Will Spread to
the Global Finance System
US as Leading Currency Manipulator
Paulson and China
CUT AND RUN
Part III: The Situation in Iran
Part II: Looking to Syria and Iran for Help
Part I: Fleeing from Self Destruction is
Common Sense
Regime Change Blowback
CURRENT US-CHINA RELATIONS
Part XI: Japanese Strategy to become a "Beautiful
Nation"
Part X: South Korea's Changing Position
Part IX: The North Korean Perspective
Untested Management Team for the US Economy
WAGES OF NEOLIBERALISM
Part IV: Development Financing and Urbanization
Recent Articles
CURRENT US-CHINA RELATIONS
Part I: A Lame Duck-Greenhorn Dance
Part II: US Unilateralism
Part III: Geopolitical Dynamics of the Korea
Proliferation Crisis
Part IV: More
Geopolitical Dynamics of the Korea Proliferation Crisis
Part V:
Kim Il Sung and China
Part VI:
Korea under Park Chung Hee
Part VII: Clinton Policy on North Korea - A
Belated Path to Peace
Part VIII:
GW Bush Policy on North Korea - a Path to War
WAGES OF NEOLIBERALISM
Part I: Core Contradictions
Part II: The US-China Trade Imbalance
Part III: China's Internal Debt Problem
WORLD TRADE NEEDS A GLOBAL LABOR CARTEL (OLEC)
Part I: Background and Theory
Part II: Risng Wages Solve All Problems
GREENSPAN - WIZARD OF BUBBLELAND
Part I: Greenspan - Wizard of Bubbleland
http://groups.google.com/group/total_truth_sciences/browse_thread/thread/2e63dbf29fd3048d
Part II: The Repo Time Bomb
Part III: How the US Money Market Really Works
Part IV: The Global Money and Currency Markets
Global Trade Imbalance and Deflation
Liberating Sovereign Credit for Domestic Development
Superpower Vulnerability
The Hong Kong Democracy Controversy
Past Articles
Dollar Hegemony
Oil
The Abduction of Modernity
Iraq Geopolitics
World Order, Failed States and Terrorism
Critique of Central Banking
Quest for Peace: US-China
The Coming Trade War and Global Depression
China vs the Almighty Dollar
World Trade Center Memorial
The Case for an Asian Monetary Fund
Crippling Debt and Bankrupt Solutions
Mao and Lincoln
Turkey Financial Crisis
Perils of the Debt-propelled Economy
China Bank Reform
Capitalism's bad apples: It's the barrel that's
rotten
This website presents the writings of
Henry C.K. Liu
on
Geopolitics - Economics - History - Culture - Philosophy
All Rights Reserved
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Subject: The Writings of Henry C.K. Liu on the Dollar Hegemony
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John Swinton New York journalist at a banquet (1880's): "What folly is this, toasting an
independent press? There is no such thing, at this date of the World's history, in
America, as an independent press. You know it and I know it. There is not one of you who
dares to write your honest opinions, and if you did, you know beforehand that it would
never appear in print. I am paid weekly for keeping my honest opinion out of the paper I
am connected with. Others of you are paid similar salaries for similar things, and any
of you who would be so foolish as to write honest opinions would be out on the streets
looking for another job. If I allowed my honest opinions to appear in one issue of my
paper, before twenty-four hours my occupation would be gone. The business of the
journalists is to destroy the truth, to lie outright, to pervert, to vilify, to fawn at
the feet of Mammon [Biblical ref.], and to sell his country and his race for his daily
bread. You know it and I know it, and what folly is this toasting an independent press?
We are the tools and vassals of "rich men" [Biblical ref.] behind the scenes. We are the
jumping jacks, they pull the strings and we dance. Our talents, our possibilities and
our lives are all the property of other men. We are intellectual prostitutes."
http://groups.google.com/group/total_truth_sciences/browse_thread/thread/2e63dbf29fd3048d
Global Economy
US dollar hegemony has got to go
By Henry C K Liu
There is an economics-textbook myth that foreign-exchange rates are determined by supply and demand based on market fundamentals. Economics tends to dismiss socio-political factors that shape market fundamentals that affect supply and demand.
The current international finance architecture is based on the US dollar as the dominant reserve currency, which now accounts for 68 percent of global currency reserves, up from 51 percent a decade ago. Yet in 2000, the US share of global exports (US$781.1 billon out of a world total of $6.2 trillion) was only 12.3 percent and its share of global imports ($1.257 trillion out of a world total of $6.65 trillion) was 18.9 percent. World merchandise exports per capita amounted to $1,094 in 2000, while 30 percent of the world's population lived on less than $1 a day, about one-third of per capita export value.
Ever since 1971, when US president Richard Nixon took the dollar off the gold standard (at $35 per ounce) that had been agreed to at the Bretton Woods Conference at the end of World War II, the dollar has been a global monetary instrument that the United States, and only the United States, can produce by fiat. The dollar, now a fiat currency, is at a 16-year trade-weighted high despite record US current-account deficits and the status of the US as the leading debtor nation. The US national debt as of April 4 was $6.021 trillion against a gross domestic product (GDP) of $9 trillion.
World trade is now a game in which the US produces dollars and the rest of the world produces things that dollars can buy. The world's interlinked economies no longer trade to capture a comparative advantage; they compete in exports to capture needed dollars to service dollar-denominated foreign debts and to accumulate dollar reserves to sustain the exchange value of their domestic currencies. To prevent speculative and manipulative attacks on their currencies, the world's central banks must acquire and hold dollar reserves in corresponding amounts to their currencies in circulation. The higher the market pressure to devalue a particular currency, the more dollar reserves its central bank must hold. This creates a built-in support for a strong dollar that in turn forces the world's central banks to acquire and hold more dollar reserves, making it stronger. This phenomenon is known as dollar hegemony, which is created by the geopolitically constructed peculiarity that critical commodities, most notably oil, are denominated in dollars. Everyone accepts dollars because dollars can buy oil. The recycling of petro-dollars is the price the US has extracted from oil-producing countries for US tolerance of the oil-exporting cartel since 1973.
By definition, dollar reserves must be invested in US assets, creating a capital-accounts surplus for the US economy. Even after a year of sharp correction, US stock valuation is still at a 25-year high and trading at a 56 percent premium compared with emerging markets.
The Quantity Theory of Money is clearly at work. US assets are not growing at a pace on par with the growth of the quantity of dollars. US companies still respresent 56 percent of global market capitalization despite recent retrenchment in which entire sectors suffered some 80 percent a fall in value. The cumulative return of the Dow Jones Industrial Average (DJIA) from 1990 through 2001 was 281 percent, while the Morgan Stanley Capital International (MSCI) developed-country index posted a return of only 12.4 percent even without counting Japan. The MSCI emerging-market index posted a mere 7.7 percent return. The US capital-account surplus in turn finances the US trade deficit. Moreover, any asset, regardless of location, that is denominated in dollars is a US asset in essence. When oil is denominated in dollars through US state action and the dollar is a fiat currency, the US essentially owns the world's oil for free. And the more the US prints greenbacks, the higher the price of US assets will rise. Thus a strong-dollar policy gives the US a double win.
Historically, the processes of globalization has always been the result of state action, as opposed to the mere surrender of state sovereignty to market forces. Currency monopoly of course is the most fundamental trade restraint by one single government. Adam Smith published Wealth of Nations in 1776, the year of US independence. By the time the constitution was framed 11 years later, the US founding fathers were deeply influenced by Smith's ideas, which constituted a reasoned abhorrence of trade monopoly and government policy in restricting trade. What Smith abhorred most was a policy known as mercantilism, which was practiced by all the major powers of the time. It is necessary to bear in mind that Smith's notion of the limitation of government action was exclusively related to mercantilist issues of trade restraint. Smith never advocated government tolerance of trade restraint, whether by big business monopolies or by other governments.
.....................
In 1795, when the Americans began finally to wake up to their disadvantaged trade relationship and began to raise European (mostly French and Dutch) capital to start a manufacturing industry, England decreed the Iron Act, forbidding the manufacture of iron goods in America, which caused great dissatisfaction among the prospering colonials. Smith favored an opposite government policy toward promoting domestic economic production and free foreign trade, a policy that came to be known as "laissez faire" (because the English, having nothing to do with such heretical ideas, refuse to give it an English name). Laissez faire, notwithstanding its literal meaning of "leave alone", meant nothing of the sort.
=====for rest of article and others:
http://www.atimes.com/global-Econ/DD11Dj01.html
What do you call a system where fatally constructed securities called CDOs, reaped hedge funds millions of dollars when they plunged? A collapsed banking industry! Yeah, it was like buying a huge death benefit insurance policy on a terminally ill person. I repeat; you made millions by bundling up and offloading as many of these loser loans as possible. And the really cool thing is these insurance policies on large loans, called credit derivatives, will continue to pay off until the entire system is sucked dry, even after billions upon billions of more dollars are thrown at the problem. You just know Geithner understands this, but the orders he receives from upstairs say “suck it dry”. These big players are not done until hyperinflation is raging. Then, in about six months, it will be Nationalize! See how this works?
Try to adapt to the new reality ahead of time or you will more than likely have to accept your personal failure later.
“If a free society cannot help the many who are poor, it cannot save the few who are rich.” --John F. Kennedy
I also want to thank GWNorth for his post. One of the best I've seen on CD. I agree wholeheartedly that this financial crisis was manufactured by hooligans like Goldman Sachs. Unfortunately I think these crooks feel that they are too big to jail. Goldman Sachs has also engaged in collapsing currencies like the Mexican Peso to try to force Mexico into privatizing PEMEX. Mexico was forced to intervene with billions of US Dollars to protect the Peso from these Goldman Sachs thugs. Edit: I also want to add that inspite of what happened to Bear Sterns, they were not innocent victims. Before their demise, they were partially responsible for helping to spread malicious rumors about Iceland's economy in early 2008 that led to a disastrous run on the Krona.
I can't add anything to GwNorth's impeccably researched and expressed analyses. Good work!
I AM gratified that so far, no apologists have surfaced with the usual bleatings about how awful and stoopit it is to fault the new maladministration so soon after it put its foot through the door-- or reminding us that Obama is a political ninja playing eleven-dimensional chess for the purpose of unifying the country and gradually bringing it to a sociopolitical tipping point that will free Obama's Inner Progressive and generate a cascade of hitherto-impossible progressive reforms.
As Bloody Mary warbles so mellifluously:
♬ Happy talk, keep talkin' happy talk
Talk about things you like to do!
You got to have a dream!
If you don't have a dream,
How you gonna have a dream come true? ♫
· Yr Obd't Servant
It's telling that the people who have been right all this time like Stiglitz and Roubini are locked out from Obama's administration, and the people who were wrong are making policies.
People have to understand the difference between Geithner's half-baked plan that does nothing except protect the bankers' profits, and the alternative responsible thing to do for the ordinary taxpayer. This will require balls and standing up to Wall Street interests.
This from an interview on on a washington television station.
Representative Paul Kanjorski speaking and may have revealed a bit more then he should have.
>>Speaking the last week of January on the Washington DC-based television program, Rep. Kanjorski was verbally accosted by an irate American caller charging that the economic stimulus package currently up for debate in the Congress (as well as the previous $700 billion bank-bailout) is solely for the benefit of fat cats on Wall Street rather than for Joe Six-pack on Mainstreet. With barely-concealed panic in his voice, the Congressman tried explaining the severity of the current financial problem faced by the US with the following comments–
>>“Why did we do that? We did that because…Look, I was there when the Secretary of the Treasury and Chairman of the Federal Reserve came and talked with members of Congress about what was going on, it was about September the 15th…Here’s the facts and we don’t even talk about these things…”
>>“On Thursday at about 11 am the Federal Reserve noticed a tremendous drawdown of money market accounts in the United States to the tune of 550 billion dollars, being drawn out in the matter of about an hour or 2. The Treasury opened up its window to help, pumped 105 billion dollars in the system and quickly realized they could not stem the tide…We were having an electronic run on the banks. They decided to close the operation, close down the money accounts and announce a guarantee of $250,000 per account so there wouldn’t be further panic out there. If they had not done this, their estimation was that by 2 o’clock that afternoon, 5.5 trillion dollars would have been drawn out of the money market system of the United States, would have collapsed the entire economy of the United States, and within 24 hours the world economy would have collapsed…”
>>“We talked about what would happen–it would have been the end of our economic and political system as we know it, and that’s why we had to act and do things quickly. Why? Because if you don’t have a banking system you don’t have an economy, and although we did that it wasn’t enough. The economy has been falling and we’re really no better off today than we were 3 months ago, as other assets are going sour by the moment…Somebody threw us in the middle of the Atlantic ocean without a life raft and we’re trying to determine which is the closest shore and whether there’s any chance in the world to swim that far. We don’t know…”
Google Paul Kanjorski and you can see the video of the interview.
pk
Everyone should look at GWNorth's post further down. I think he makes some very good points! If I get the chance I will copy it in and reproduce it below as a 'reply' if CD will allow that.
Here in the UK the ratings agencies had a large impact in the problem. (But like most things it was a contributing factor, this alone doesn't explain everything.) I think GWNorth's point about investigating the MOTIVATIONS behind the creation of these debt-based securities and derivatives would be a very good move.
If he is correct then it would be well worth asking some of the CEO's of goldman sach's precisely WHY they created a derivative instrument that they then intended to sell short?? Did they not believe in their own creation? This is highly suspicious behavior, certainly.
I'm a bit leary of believing GWNorth because one would think, if this really happened, that given the way markets run, a sell-off by the orginators of a derivative would trigger a MASSIVE sell-off from other investors. Maybe that's kind of what happened...or maybe that was the point. GWNorth? Do you have any sources? I'm really curious to see the data from which you are making your claims!
Great post though if it is true!
First I must admit to not having all the links to the original articles on which my opinions based on. I have been accused since birth of having a Photographic memory when it comes to such things :).
I will provide some links that should help people to see how I arrived at my conclusions.This in addition to the interview with rep Janorski I also posted.
http://www.gata.org/node/5840
These speaks of Goldman Sachs short selling CDOS and betting on a crash in said market even as they were selling the same to other investors.
http://articles.moneycentral.msn.com/Investing/Extra/HowGoldmanProfitedFromSubprimeMeltdown.aspx?page=...
Another article on above.
http://www.euromoney.com/Article/2060049/Category/14/ChannelPage/0/US-equity-marketShort-selling-The-n...
This link reports on the evidence of short selling in bears sterns forcing a deliberate collapse so rivals could pick up the pieces.
http://www.globalresearch.ca/index.php?context=va&aid=8974
More on Bears Sterns. Suggesting Government Collusion to crash bears sterns so JP Morgan could take her over.
Google Goldman Sachs and short selling and there a pile of articles on the matter.
In any case the evidence all suggests a deliberate manipulation of the Financial markets wherein certain groups profited immensely. The "crisis" was created and forseen in my opinion. It not just an accident of de-regulation.
THIS IS manipulation. always has been. i often had arguments with friends about why the USA economic system is one giant "manipulation industry"...and why it's what i used to say years ago as a "phantom wealth economy" floating on an ocean of debt...it was not difficult to see, i think, for anyone that looks beyond just the exotic financial legerdemain and fancy terms they always come up with or the particularly american habit (seen in just about every institution) of using language to obfuscate and do things in an orwellian manner:
"clear skies initiative" = allow corporations to pollute
"customer representative" = floor clerk
"management sytem assistant" -- secretary
and moving on to "derivatives", etc...= make-believe wealth
when that is connected, this s0-called prosperity that is exposed as a bubble but not so easily seen while it consumed everone in its "Awesomeness" through the years -- with what the USA"s foreign policies have been for at least 150 years in order to rise as the world hegemon...one begins to make connections and concludes or at the VERY least SUSPECTS:
the USA has ALWAYS been the world's leading CURRENCY and wealth manipulator.
the best articles i have ever read explaining this and tracing in detail the history of events are those by
Henry CK LIU writing for Asiatimesonline
in various series of articles , such as those dealing with
USA as Leading Currency Manipulator -- in response to constant US accusations against China for manipulating currencies...
or "DOLLAR HEGEMONY" ...or "the Coming Trade Wars"....
or "the Rockefellers, Modern Art and IMperialism"....etc.
articles were written long before the "september" leaching out from US sold funds..and were quite ..........predictive to say the least.
it hardly even matters if these events and debacles were INTENTIONALLY manipulated as such -- to arrive at the desired effect of a "near-collapsed economy warranting bail-outs or nationalization that serves the manipulators - NOT the public" -- (fear mongering in other words as a result of a kind of "disaster economics" scheme) -- or not:
what matters, imo, is that the ENTIRE system of US economic power IS based on currency manipulation of the dollar - and manipulation of system's other functions that service the dollar and are derived from what the USA basically rests on:
the POWER of the DOLLAR as the world's currency -- and that power's foundation on American trustworthiness.
the september night that congressman alluded to is a clear sign , i long suspected, that should leaching out of funds based on the dollar and the "power and trust behind it" that is the "final guarantor" of the USA as the "master of the universe" -- of how VULNERABLE the US prosperity REALLY has been all along.
this is also one reason why they will be hard put to continue to , say, accuse china of "currency manipulation" for example , since along among all asian nations during the collapse of the Asian Bubble more than 20 years ago -- HELD ITS CURRENCY steady and NOT FLOATED as the USA demanded and THEREFORE survived the collapse in asia and became the ANCHOR for asia's resurgence after removing themselves from the IMF, World Bank "prescriptions" from the USA.
it will be hard put to do so , no matter that it is politically patriotic to americans because an annoyed china is CAPABLE of stabilizing even its present unemployment crisis resulting from an overdependence on the bubble "consumerism" of the USA as an export-oriented nation to the neglect of its DOMESTIC consumption potential which is largedly untapped...and FROM That china IS capable in an INSTANT to COLLAPSE the ENTIRE US economic system by unloading a large portion of its dollar denominated reserves....and leave IT floundering in its own ocean of debt YET UNPAID but which can STILL be demanded in the future once it "recovers"..while china and other economies tied to IT absorb the current losses and protect themselves from further losses by using their remaining savings in dollar denomination to increase the potential of their OWN DOMESTIC CONSUMPTION rather than as a "service economy" TO the BUBBLE ECONOMY that IS the Manipulative USA economy.
imo -- the US hegemony -- we are seeing the beginnings or its END.
and perhaps -- for the better for all in the world.
if it means the RICH in the USA are going to get off scot free while ordinary americans pay for that-- so be it.
but it will end up like that, imo.
http://www.atimes.com/atimes/others/Henry.html
THE FOLLY OF INTERVENTION, Part 2
No easy exit for nationalization
The notion that nationalization is only an emergency measure that can be undone promptly when the economy recovers is wishful thinking. We should realize that nations too can go bankrupt, even nations which were once superpowers. - Henry C K Liu (Jan 22,'09)
This article concludes a two-part report
Part 1: The zero interest rate trap
THE FOLLY OF INTERVENTION, Part 1
The zero interest rate trap
Two traps - those of liquidity and zero interest - demonstrate the futility of central bank macroeconomic attempts to use both quantitative and credit easing to stimulate an economy contracting from excessive debt and leverage. They merely sow the seeds for significant future inflation. - Henry C K Liu (Jan 21,'09)
This is the first article in a two-part report.
Monetarism enters bankruptcy
The US Federal Reserve era under Alan Greenspan and Ben Bernanke, with their belief that central bank monetarist measures can indefinitely perpetuate the business-cycle boom phase, proved only that mainstream monetary economists read the same books. As the world is discovering, Milton Friedman's mantra that "only money matters" turned out to be a very dangerous slogan. (Jan 5,'09)
China's inflation-free route from crisis
China must move away from export dependence to a high-wage, full-employment economy. Credit creation outside of the government's fiscal budget, with the use of work-creation certificates, poses no threat of inflation and offers a route to early achievement of this goal. (Dec 23,'08)
Restoring China's national destiny
Different nations profess different destinies at different stages of their history, be it the Ottoman dominion's to maintain peace or that of the US to expand into Central America and the Pacific. Until China realizes that export based on low wages is a self-diminishing strategy, the country's destiny to be restored to its rightful position in the world will be held back. (Dec 15,'08)
This is the fifth part of a continuing series
Part 1: Breaking free from dollar hegemony
Part 2: Developing China with sovereign credit
Part 3: History of monetary imperialism
Part 4: Gold, manipulation and domination
Beijing holds key to prosperity
China's best contribution to stabilizing the world economy is to develop the country's domestic market, raise earnings and pursue full employment - a strategy opposite to that being pursued in the United States. It should also cease importing dysfunctional economic systems such as predatory, neo-liberal, cowboy market capitalism. (Dec 5,'08)
Denial amid the storm
It took more than a year for President George W Bush to belatedly acknowledge that the financial crisis resulting from decades of US irresponsibility is not merely a passing shower. Even then, the terms of his ideological surrender, bloated by self-deception, sought merely to perpetuate the causes of collapse.(Dec 4,'08)
Black hole gapes for pensions
Assets of public pension funds
So, it's overt manipulation of the financial markets by the the most powerful financial players.
If it's in my self interest to take someone down and hugely profit from this action regardless of the collateral damage then I should do it.
This is conservative ideology that got us into this mess. The American tax payer is collateral damage to the massive profits earned by a few at the top.
Regulation isn't about protecting the system, it's about protecting us.
I read through these articles and although the articles stop short of making the kinds of claims that GWNorth is making....it doesn't take a genius to connect the dots. (Connecting up facts is something that our media does VERY POORLY.)
Although one cannot say these firms purposely, with intent, crashed the whole market just so they could profit it is completely clear that Goldman Sachs was operating very underhandedly. If they did NOT report to their investors that they were worried about the sub-prime risks and offer parts of their own short-selling programme to their own clients then I would call this fraud. It is fraudulent to protect the assets of your firm by directly gainsaying the advice you are giving your clients. That is fraud and deserves jail time. It would appear, based on these articles, that this is precisely what they did!
At best one could argue that these guys, like so VERY MANY conservatives, never actually thought about what their actions would have on the whole market. Most of these guys see themselves as too small a part of the market to effect it. This assumption is wholly wrong, of course, but is often made anyway. This is their only defense against their creating the market free-fall.
Note: this is a reproduction of an earlier post by GWNorth, I'm including no comments of my own
I think that the sheer criminal nature of what went on is still little reported on.
There very good evidence , as example, that the creation of all these CDOS was a deliberate attempt to bankrupt rival firms so that the certain other firms could swoop in and pick up all the pieces.
As example Paulson was at Goldman Sachs and Goldman Sachs was hyping some of these investment vehicles as good buys to others, and then selling them short when those other firms purchased them.
The Ratings agencies were also involved and should be investigated. Some here are under the impression that this was a problem worldwide because banks worldwide all got greedy and acted in the same manner when they bought up a lot of the phony paper.
That is NOT the full truth. These investors in many cases bought the paper because they had a triple A credit rating from the firms that have a duty to rate the risk on such instruments.
This is sort of like buying a house, having a house Inspector ensure you that all is in order and that the house is structuraly sound, only to find out later the Inspector was being paid off by the peoples selling the house to overlook all of the houses problems.
There is no call for trying to determine WHY the ratings agencies were claiming this debt was triple A. Was there collusion?
Remember Paulson was pulled from Goldman Sachs around a year before the crisis and as per later reports almost immediately started drawing up plans for a massive Government bailout. This was several months before it sprung on Americans as an immediate crisis.
Again this like the Patriot act , drawn up and ready to be implemented as law long before 9/11.
This has to raise questions of who knew what and when and is clear evidence that the whole "crisis" was manufactured so as to ensure a certain small number of investors profited, while others lost.
All this talk of fixing the financial crisis, and whether or not these bailouts will work , avoid getting to the heart of the matter as to what caused this. It was NOT IMHO JUST a matter of de-regulation. It my opinion there was criminal behaviour at the highest of levels. The Government of today HAS to know this and their actions also suggest they are part of that same conspiracy.
I'm trying to picture what a "wiped out" preferred bank shareholder might look like. I'm seeing somebody who probably has a few other investments, and who as a last resort, could probably sell off a couple of summer homes and squeak by somehow. The banking system is too important to remain in the hands of people who have no concern for the public welfare. We need to (1) become the government and (2) take over the frigging banks, along with a lot of other stuff. The money will still attract crooks, but at least stealing it will be a federal crime.
02/13/09
"But the billions in additional capital injections will all but wipe out current common and preferred stockholders"
Taking in account that finance "industry" constitute 30% of GNP, i.e. roughly $3T on top of $3T to $4T already lost in market capitalization, we are talking about loss of $60,000 to $70,000 per household in its pension funds. So, nationalization of bank requires nationalization of health and retirement systems on the same grand scale as it was originally privatized. Remember $3T taken by Bush's tax cuts. Add to that uncounted Trillions taken from our society by the Reagan's tax cuts, the Mother of all tax cuts.
Now, the accumulation of wealth in the hands of the few is very simple. It only needs persistence of few and indolence of many. Current generation is very good in indolence, while Americans excels in it. The reverse process, spreading the wealth requires deep understanding of how this world is rolling around and a lot of sacrifice in treasure and blood. Latter are not qualities you meet very often.
We all expected Obama to be the Second Coming of FDR. But we forgot that FDR had such powerful enablers as Benito Mussolini, Adolf Hitler and, most of all, Joseph Stalin. We don't have such a luxury as FDR had, so I predict that Obama Administration will proceed by half measures, “one step forward and two steps backward”. And then, hopefully the author of that title come alone in new reincarnation and cut Gordian Nut of American social structure the only way all Gordian Nuts are supposed to be cut – by bold strike of the sword.
If it sound a bit of Lenin it is because his time has come.
v.purto
I think this economic build up plan could work anywhere...Zimbabwe, Honduras, Guinea-Bissau, Afghanistan,Albania,...y'want to get the economy moving and building momentum? Just have the gvt borrow money from the future, and give it to the banks.
The new administration, I fear, is already quaking with fear and too terrorised to take truly POSITIVE action. This is economic paralysis.
I think that the sheer criminal nature of what went on is still little reported on.
There very good evidence , as example, that the creation of all these CDOS was a deliberate attempt to bankrupt rival firms so that the certain other firms could swoop in and pick up all the pieces.
As example Paulson was at Goldman Sachs and Goldman Sachs was hyping some of these investment vehicles as good buys to others, and then selling them short when those other firms purchased them.
The Ratings agencies were also involved and should be investigated. Some here are under the impression that this was a problem worldwide because banks worldwide all got greedy and acted in the same manner when they bought up a lot of the phony paper.
That is NOT the full truth. These investors in many cases bought the paper because they had a triple A credit rating from the firms that have a duty to rate the risk on such instruments.
This is sort of like buying a house, having a house Inspector ensure you that all is in order and that the house is structuraly sound, only to find out later the Inspector was being paid off by the peoples selling the house to overlook all of the houses problems.
There is no call for trying to determine WHY the ratings agencies were claiming this debt was triple A. Was there collusion?
Remember Paulson was pulled from Goldman Sachs around a year before the crisis and as per later reports almost immediately started drawing up plans for a massive Government bailout. This was several months before it sprung on Americans as an immediate crisis.
Again this like the Patriot act , drawn up and ready to be implemented as law long before 9/11.
This has to raise questions of who knew what and when and is clear evidence that the whole "crisis" was manufactured so as to ensure a certain small number of investors profited, while others lost.
All this talk of fixing the financial crisis, and whether or not these bailouts will work , avoid getting to the heart of the matter as to what caused this. It was NOT IMHO JUST a matter of de-regulation. It my opinion there was criminal behaviour at the highest of levels. The Government of today HAS to know this and their actions also suggest they are part of that same conspiracy.
"It my opinion there was criminal behavior at the highest of levels."
If what you write is true, and I believe it is, then RICO statutes can be used to recover the money from the perp's.
Trouble is that the criminals are running the government and the people are too stupid or complacent to change the government.
Sioux Rose
GW NORTH: Excellent post.
You are right on! I don't disagree with a word of your post. At the very least, we need a so-called "truth commission."
Mr. Obama will try every wrong solution given to him by the banksters. Mr. Obama was put into this job by the banksters, and for the banksters.
"In fact, it's looking more and more like Obama's election was part of a quid pro quo to ensure that Geithner, Summers and the other "big bank" loyalists would continue to control the levers of political power during the stormy years ahead, otherwise they would do what is necessary and and shut them (sick banks) down now."
http://www.counterpunch.com/whitney02132009.html
True--banks are like dead men walking.
Put them out of their misery. Let the awful bad ones die and take over the walking dead. Nationalize them, screw the shareholders who are holding shares of zero value.
Left to their own devices banks will refuse to tell the truth about their failures--Summers, Geithner, Obama, Schumer et. al. will cover their asses--this could go on for a long time and then the whole country will be like dead men walking.
The rich are ruining (running) the country.
Dr Wu, the last of the big-time thinkers
I agree.
there is something to be said about "shareholders"...they ARE part of the problem for only looking to their own personal interests behind their anonymity as they play the intricacies of the game of money...and they KNOW that fundamentally - they are playing a game of "wealthaccumulation" which is designed to
"gather wealth" to themselves BUT with a price -- DENYING wealth to others.
for that reason alone, unethical, they SHOULD be wiped out.
Without PRIVATE shareholders - holding themselves more "worthy" for their supposed "hard work" that is SUPPOSEDLY "more" than "others" - there are no PRIVATE corporations.
without Private Corporations that grew in this manner...there are no SCHEMES such as those in the banking, finance, industrial and other kinds of "private corporate entities".
and ALL of them -- when based on the supposed "free market" and "free enterprise" - by definition of capitalism's "self-interest" mantras - place PERSONAL PROFIT about that of the common welfare.
WIPE THEM OUT ..and the CONCEPT of "private shareholding" ITSELF ought to be VILIFIED and DEMYSTIFIED - as nothing more than
GREED.
attach that to the monstrosity that capitalism is showing --
and people will then be SHAMED for even ATTEMPTING to be "private shareholders". and socially ostracized should it be known they are playing that "private shareholder" game.
it's PAINFUL - but if ETHICAL society is to cultivate -- THAT is one of the temptations of "private shareholding" that needs to be EXPOSED to sunlight as being something that ought to be IRRELEVANT to a JUST society.
it should even be considered a case of crass, mendacious behavior in a human being.
Monopoly is a game that models this aspect of human behavior. The economic game is never over, so when one player gets all the money, the other players redistribute the money and start again. This whole cylce shows that we have the consolidation of money followed by the redistribution. Redistribution should be called "revolution". FDR probably prevented the complete redistribution, Obama will probably have to try to do the same.
According to the supreme court, these banks are people. They're also obviously riddled with incurable cancer and therapy isn't working, so STOP THE THERAPY AND LET THEM DIE!!
Agreed. Let them go under and be responsible for their own business decisions. Too big to fail.....for whom? Cover the depositor's and the hell with the rest. Makeing investments is both a win and lose situation.
I don't think the American people have any interest in protecting investors against loss, nor should they.
There really are only the two solutions, nationalization or free market non-action. The problem with letting them fail is that the investors referred to above include a number of banks and institutions in Europe and Asia as well, not to mention pension funds etc.,. Any decision about these banks has wide ranging ramifications and makes that decision a bit more complex than we here consider.
"Most people would sooner die than think, in fact they do so." Bertrand Russell
Yeah Rick,
What's a measly 10 trillion or is that just the tip of what they can't sort out?
The Republican guys on team Obama who got us into this mess are gonna want the American taxpayers to take on all bad debts and they can't accurately add those up because they are Toxic. How do you add things that are worthless?
The gang at the Fed who are wed to the international bank of settlements gang will want us to nationalize all their toxic shit and now it is their under-banks.... my bank of America is a pawn of the private international central banking Cartel.
They are the big boys who own the worlds money... the levers of power are not all the different corporations and governments... for a successful revolution the peoples power should concentrate on taking over their banking cartel that through its monetary policies control the economies of the world.
We don't need to blowup shit at all, we just need to take over the Jewish mob and kick the Nazis out!
Once we get them on our side this will get a lot easier...
Shalom
Errr, the Jewish mob? The Nazis? No need for that greatly charged sort of stuff, Jim.
"Most people would sooner die than think, in fact they do so." Bertrand Russell
At this rate we'll all be millionares
.
.
just like the people in Zimbabwe.
The most sensible-sounding economists and even some editorial writers are sounding the clarion call for intervention. Let's call it that, a term that Simon Johnson of MIT, formerly chief economist of the IMF, prefers to the commonly misused "nationalization". Nationalization implies full possession; intervention has the appropriate temporary ring and its objective is much clearer than "nationalization".
What is mind-boggling is that Pres. Obama first fought to keep Geithner and now seems to be standing by him. Geithner, who mishandled his responsibility at the New York Fed while the megabanks and financiers wrought havoc under his very nose. Geithner, who many people suspect is one of the "experts" embedded in the current admin. by Wall Street.
Oh, and let's not forget Summer and Volcker and the rest, the gang who have taken over economic policy despite having been the architects of decades of short-sighted management and of turning a blind eye to a series of bubbles. But then, capitalism is essentially short-sighted in its goals and in its management of money.
It will take a very very bold move by Obama and his inner circle, such as intervening the sick banks to stop their criminal activity that is bankrupting the US and destabilizing the world, to begin to solve the problem and to pull us away from the cliff's edge. Roubini was and is right, and he has been joined by a chorus of knowledgeable objective critics who are not Wall Street shills and who make far more sense than Geithner's buddies.
The tree of liberty must be refreshed from time to time with the blood of
patriots and tyrants. ....Thomas Jefferson
Very bold, indeed...but do not wait for Obama to bite the hands that have fed him.