Category Archives: Currency

Are You Ready for a Guaranteed Income for All?

Image from Peterborough Examiner

The world-wide collapsing economies and collapsing ecosystems together create such a catastrophic storm that all versions of buttoning down the hatches and weathering it out simply won’t work. The history of economy has been to tear at the earth until life itself cannot be sustained. The western addiction to profit at any cost has opened the floodgates to massive inequality, poverty and starvation across the globe.

The solution? — a global guaranteed income for all, what some social pioneers are calling a universal basic income (UBI). Oh! but who are these people kidding but themselves. Have they forgot that over-population worldwide kills this baby in the crib?

Contrary to belief, one of the first things people do when they have money is to control their family size. Yes, there will continue to be people who will want to be fruitful and over-multiply, but the number of concerned people is so great that a population reduction would immediately begin. At the Institute for Food and Development Policy, Frances Moore Lappé and Rachel Schurman reveal how “poverty is the TNT in the population bomb.” So don’t panic that 7.7 billion suddenly-fed mouths will automatically lead to another 7 billion mouths to feed.

Let’s create a model for a guaranteed income, then discuss background pros and cons. I will use U.S. economic numbers. Every other country can produce its own currency and guaranteed income using this design, creating in totality a world free of poverty and want.

For this model, we’ll use the productive sum total of the entire economy. As context, it started with the industrial revolution. Manual labor began moving from farming into factories of manufacturing. In the year 1760 Britain compiled the total production of manufacturing into a number called the Gross Domestic Product (GDP). In recent times, the GDP was changed to the Gross National Product (GNP).

The latest finalized number for the GNP for the U.S. is for the year 2018 at $20.18 trillion, according to the World Bank. The number of adults over the age of 18 in the U.S. is 209,128,094. If we divide the GNP by the number of adults, we get 99,651.84. This reflects an equal share for all adults of the GNP.

What is to stop us from issuing currency to each adult for the amount of $99,651.84 for the year 2018. Then we add a new differently designed currency again for 2019, the amount depending on the GNP. Let’s add three more years, making it a 5-star economy. So, what happens on the sixth year? The 2018 currency value collapses to zero and a new currency is made in its place. From then on, every year, one currency dies while another one is born. The 2018 currency collapses in 2023. The 2019 currency collapses in 2024, and so on; but a new currency replaces it; it’s just that simple. A perpetual economy is born. Rather than a paltry poverty-level UBI, we create a GNP-shared income (GNP-SI).

Since the Covid-19 disruption has had such a devastating effect on the economy, we can position a second option of using the 2018 GNP for each year of the 2018-2022 five-year rotation, unless unforeseen events snap back the economy to its normal yearly increase. The practical result is nearly the same. Multiplying the 2018 $20.18 trillion GNP by five gives us a $100.9 trillion perpetual economy.

Setting up the disbursement of cash is a straight-forward task. In the U.S., Constitutional money is gold or silver coin. Historically, silver and gold certificates have substituted for coin, which is too heavy to carry around.

The bigger job will be to update the GNP. Much of the work is done without pay and is therefore unregistered and uncounted for as part of the GNP. All service work needs to be included. So, if you have served, for instance, as a caregiver for some sick or elderly person, you should be able to walk into a government office and declare this work. A fair assessment can then be given to the work. The assessed value is then added to the aggregate GNP.

With people having enough money to follow the American dream, what opens up instantly is a vista onto a world that can now be saved from human destruction. Here are a few starters:

• People don’t have to go to work and build millions of new cars that are sending us over the cliff.
• Vast rail and shipping networks can quickly reduce our carbon footprint by leaps and bounds.
• People won’t show up to work in the morning to cut down the world’s forests for some psychopathic billionaire.
• The service work of protecting endangered species and marine sanctuaries will explode. Permaculture seaweed beds can carbon sink enormous tonnage, while creating havens in open ocean for fish and sea life to flourish.
• Plastic pollution is destroying our oceans and planet. New solutions are coming to bear. Watch the new documentary: The Story of Plastic.
• Regenerative localized farming practices can quickly replace destructive corporate land use for profit rather than bio-rich food.
• The application of biochar to the land will supercharge the quality of the global diet.
• Vast quantities of organic compost can be generated, without water, on the semi-arid deserts that constitute 40% of the world’s land surface using the agave plant and mesquite trees. See Ronnie Cummins new book: Grassroots Rising: A Call to Action on Climate, Farming, Food and a Green New Deal.
• Geoff Lawton took permaculture (permanent agriculture) to Australia and within 3.5 years he’s turned desert into an agricultural heartland without irrigation or artificial fertilizer.
• Virginia farmer Joel Salatin demonstrates how incredibly successful and sustainable natural farming can be. He hasn’t planted a seed or purchased a chemical fertilizer in 50 years.
• Warmongers will struggle to find mercenaries. Most people would rather ‘go fishing’ than kill people. Warmongers top the list of most destructive people, killers of people and nature.
• With today’s use of artificial intelligence and robot welders doing most of the manufacturing, service work becomes open to unimagined possibilities.

The beginning of the idea of GNP-SI goes back at least to the dawn of the industrial age. Futurists proscribed a new world order, a Garden of Eden economy for the exhausted masses. Machines would do the work, while government would split the profits created by the machines amongst the populace. But something got in the way.

British royalty and a new class of industrial magnates were aghast by the ideas of sharing wealth and economic liberation. The whole notion of royal ascension to power, the prerogatives and privileges it brings, with class layers of labor would all be put at risk. To think that the toiling masses might enjoy leisure was enough to make an aristocrat choke. Written history is replete with examples of self-anointed demigods belittling what they call the unwashed masses. Feudalism was in place and no uppity futurist was going to spoil the plot.

Expect the equivalent elites of today to fight against any UBI or GNP-SI. Inequality, poverty, sickness, famine, pandemics, and death amongst the masses shall go on just as before. Old excuses and new forgeries will be evoked to prove that equality is forever impractical.

Here are a few:

UBI is inflationary and therefore not reasonable. Not really—the 5 year rotation creates a ceiling amount that endures over time, approximately $100 trillion for the U.S. As described above, money creation is rotational, circular, meaning perpetual.

The current practice of quantitative easing by the Federal Reserve is inflationary. The number of dollars they create has no end in sight. The more they print, the less value the money in your pocket has. The rich get richer and the poor get poorer.

UBI would create a permanent lazy mass class that will only accelerate planetary destruction. Studies show that people want to help rather than sit around. When people get money, the first thing they do is get free from the grinding stagnation of poverty. Money is power. A UBI gives people the freedom to choose their own direction in life. The examples cited above are just a few ways people will respond to help save the planet for posterity. The masses will be set free to explore their creativity. The vast majority have said they want a planet that will sustain life for posterity. UBI gives them the chance to get some skin in the game.

GNP-SI is a breath-taking proposal. With such a huge shift toward sharing common wealth, old suspicions and concern about equal pay for equal work will persist. A commendable human social feature is that we love fairness. If abled persons refuse to put in effort and sacrifice for the overall economy, then why should they divvy up the profits equally with those who did put in effort and made sacrifices?

Flush with money, why would people work? Why should people continue at jobs that are for someone else’s profit, jobs that feed the over-consumption of the planet and tear at the ecosystems that are forced to absorb the shock of aggregate human behavior? Maybe opening a door to less productivity, even laziness, is a welcome feature for survival. It was certainly not welcome in the past.

When humans first lived in tribes, everyone had to pull their own weight or risk the survival of the community. Some sort of “equal” effort was imperative. Thus, we have a natural deep-seated fear of being pulled down by laziness or its equivalent by others.

This inherent fear can’t help but impinge on our ability to adjust to the new artificial world of industrialization where machinery of all kinds yield so much leverage and power over the basic challenges of survival. The levers of industrialization also brought with it new opportunity to continue ‘equality’ in the tribal effort. Industrialists were now in a position to share newly found wealth with their tribe of workers or do otherwise.

Witness to history, another age of greed took hold, preferring to perpetuate a likeness of king over subject, of master over slave, now industrial owner over worker, such that, slave wages well below the cost of living have persisted for the vast majority, which is exactly why it’s long overdue to create a GNP sharing program to adjust for the inability of greed to resolve itself, especially when care for ancient tribe and modern community have been lost.

Moreover, we must not forget that able-body persons are now, more than ever, in competition with super-body robots that can, for instance, weld auto bodies together at a record pace and with near perfect repetition. Automation is geared for profit not job creation, especially when mutual human respect is missing. Bots and advancing artificial intelligence increasingly make up the GNP work output, reducing the average citizen’s chances of entering the workforce as a meaningful participant.

Outstanding remains the question of important jobs not getting done if everyone is off living their American dream. Critical restoration is an example. Long-standing environmental damage and destruction continue because of political corruption and interference.

A case in point is the nuclear industry. Why should nuclear-related stockholders be allowed to profit from making the planet uninhabitable for posterity? If we are going to get serious about saving the planet then we have to make nuclear profiteers responsible for nuclear cleanup. This is a dirty job that needs to be done, and we the people, need to make these profiteers pay for their abuse of the planet and crime against posterity.

GEN-Z is screaming for global productive work to go towards saving the planet. A GNP-SI finally gives the masses the mobility and power to help them. Transforming the economy is essential to kick-starting many solutions begging for attention.

Another criticism will be that some countries are too poor to use GNP—wrong. If they apply fair value to all the goods and resources exported and add to that a fair value for all of the work done with and without pay, you suddenly have a GNP that will work quite well using their own currency.

To be clear, the GNP should reflect all of the work done, not just the work paid for. Many people work for free, helping friends and relatives who are too poor to pay for help. So, a vast store of work is being left out of the equation of GNP to the detriment to all. A fair assessment of all unaccounted for work should be added to the GNP to give the utmost true picture of valued human activity.

The private central banks will never give up their stranglehold on both the market and financial economies. This is the biggest challenge to any UBI proposal. Bankers seem impossible to defeat. The coronavirus is just the latest excuse to gift themselves and corporate elites with a multi-trillion dollar bailout. Trickery seems to never sleep. They manipulate the stock market with derivatives and credit default swaps, hedge funds, mortgage bubbles, and financial instruments that create toxic debt of all kinds.

They have given a nice euphemistic-sounding name to a new fraud called quantitative easing (QE). On the subject of QE, billionaire hedge fund manager Stanley Druckenmiller stated, “This is fantastic for every rich person. This is the biggest redistribution of wealth from the middle class and the poor to the rich ever.” Worse, many people believe that lavishing tax breaks on the rich will cause them to create employment. Druckenmiller confides that the billion dollar give-a-ways to billionaires by megabanks have not led to a trickle down of jobs.

Robbing the masses in not new in history. Kings robbed workers and slaves alike. Then came privately owned banks.

The U.S. privately owned central bank was born in 1913. It was named the Federal Reserve to deceive the public into believing it was owned federally by the people. The federal income tax was introduced the same year. The plan was to transfer wealth from the working classes to the federal government, then from the federal government to the bankers.

A GNP-SI creates a major challenge to this direct theft from workers to bankers. A GNP-SI allows the masses to break free from the mega-bank financial market manipulations. Wall street fraud needs to die on the vine and fraudsters need to go to jail.

The massive financial losses of workers world-wide due to the coronavirus is no accident. Follow the money. Working people daily lose houses to the bankers. The unipolar worldwide financial system is part of the broader project of the Wall Street financial elites to establish the contours of a world government.

Filling the world with fresh cash defeats the digital financial manipulations by the banks to create a unipolar cashless Feudal system. Now is the time to replace the elite’s plan for universal poverty with universal income. Now is the time to make our planet livable. Are you ready for a 5-star economy for all?

The post Are You Ready for a Guaranteed Income for All? first appeared on Dissident Voice.

Why the US Can Keep Increasing its Debt and not Suffer Inflation (Part 2)

The US Still Dominates the World Economy

The US ruling class has dominated the planet since the end of World War II. Key elements of this control include its military superiority in nuclear and conventional weapons, and the stationing of over 900 military bases around the world. In addition, the US presides over the United Nations, the International Monetary Fund (IMF) and the World Bank. It upholds the US dollar as the global currency, and it controls much of the world’s resources, particularly oil.

These factors provide the background to why the US can print, or create, billions and trillions of dollars, running up its national debt, now $25 trillion, yet endure little inflation. The reason for this capacity is only tangentially explained by Modern Monetary Theory. It results from the US position as the imperial superpower, which enables it to export inflation.

Back in 1948 George Kennan wrote:

We have about 50% of the world’s wealth but only 6.3% of its population. This disparity is particularly great as between ourselves and the peoples of Asia. In this situation, we cannot fail to be the object of envy and resentment. Our real task in the coming period is to devise a pattern of relationships which will permit us to maintain this position of disparity without positive detriment to our national security. To do so, we will have to dispense with all sentimentality and day-dreaming; and our attention will have to be concentrated everywhere on our immediate national objectives. We need not deceive ourselves that we can afford today the luxury of altruism and world-benefaction.

In spite of losing its status as the workshop of the world, the US still enforces this “pattern of relationships” throughout the world. The role of the dollar provides an essential tool.  As pointed out in Modern Monetary Theory (MMT) and the Power of the US Dollar in the World Economy, the dollar is the international reserve currency.  Between 50-70% of trade transactions between nations are calculated in dollar terms even though the US accounts for only 11.5% of world trade.  Most goods, particularly key ones such as oil and food staples are priced in dollars on the world market. It is the chief currency countries use for their central bank reserves, constituting 61% of the holdings.  Of the international debt of the nations of the world, 63% of it must be paid in dollars.  Close to all foreign exchange trading 88%, involves some currency’s exchange with just one, the dollar. About 70% of nations either directly peg their currency to the dollar, use the dollar as their own currency, or keep their currency in tight trading range relative to the dollar.  Contrary to widely held belief, the US grip on the world economy has more adapted than weakened.

Since foreign countries price their imports and exports in dollars and have debts in dollars, they are dependent on the dollar and the value of the dollar. They remain vulnerable to rises in the exchange value of the dollar, as that interferes with their trade and causes the value of their debt burden to grow.

The trillions of US dollars that nations hold make these dollars a captive market for US Treasury bonds. As of April 2020, over 30% of US debt is owed to foreign governmentsThis percent has slowly trended upwards over time.  Since essential commodities are priced in dollars, countries have to accumulate the currency to pay for their imports.  The New York Times reported in 2019, “The dollar has in recent years amassed greater stature as the favored repository for global savings, the paramount refuge in times of crisis and the key form of exchange for commodities like oil.” This allows the US to run giant deficits and borrow on a vast scale with little constraint.

Why the Dollar is the World Currency

The supreme imperial power, the US, imposed the 1944 Bretton Woods agreement on the world, elevating the dollar as the world reserve currency. The US made other states peg their own currencies to the dollar, itself pegged to gold at $35 an ounce. At that time, the US held three-fourths of world gold reserves. The US was the only nation that could print the globally accepted currency. The agreement also created the World Bank and IMF, US-backed organizations that helped oversee the new imperial set-up.

Unsurprisingly, the US did not keep its promise to peg $35 to one ounce of gold, and instead printed more dollars than it had gold to back. The US used these dollars to fund social programs and war spending during the 1950s and 1960s. By 1971, gold was valued at a rate closer to $200 an ounce, causing Nixon to take the dollar off the gold standard.

Ironically, since then, the global role of the dollar has only increased. US has used its power – diplomacy, threats, blackmail, favorable deals, sanctions, tariffs, coups, and military invasion to enforce the dollar role as the international currency.

The Role of the Petrodollar

After Nixon ended the convertibility of dollars into gold, the US needed a compelling new reason for foreign banks and governments to hold dollars. Given the importance of oil to any economy, Nixon replaced “dollars for gold” with “dollars for oil,” black gold, through the petrodollar system. An oil-exporting nation’s rulers get military backing from the US, and in return must price their oil not in their own money, but exclusively in dollars. They must buy US Treasury bonds with profits of their oil sales.

In 1971 the US told Saudi Arabia that it could charge what it wanted for its oil but had to recycle dollars from oil earnings back to the US. It would be considered an act of war if they didn’t comply.  The remaining OPEC countries soon followed suit.

Russia began switching to selling their oil in euros only last year. Venezuela and Iran have already moved off the dollar, but now the US uses cruel sanctions to block their oil’s access to the market. Qaddafi’s Libya and Saddam’s Iraq met a worse fate when they moved to stop selling their oil for dollars.

The US Market Remains the World’s Main Export Market

The US remains the biggest consumer market in the world, more than a quarter of world household consumption, amounting to $14 trillion in goods and services in 2018 (the equivalent of the European Union and China combined).  Much of the Third World counts on the US market to drive their economic growth. These countries rely on cheap exports in order to keep their economy moving, so they cannot let their own currency rise in value relative to the dollar.

How the US Uses the Dollar’s Role as International Currency to Export Inflation

When the Fed opens up its spigot of US dollars, over $10 trillion in the last 10 years, the US can engage in a global spending spree. Dollars travel abroad as foreign loans and investments, and to pay for more imported goods. Since world trade is largely conducted in US currency, the US can easily export the new dollars not backed by any increase in domestic production. This lowers the value of every dollar held around the world. It leads to rising prices abroad while  bringing a net inflow of goods to the US benefiting the US consumer, but at the long-term expense of the countries exporting to the US.

When the dollar drops in real purchasing power, the nominal dollar price of commodities on the world market would go up, hurting vulnerable import dependent poor countries.  The value of foreign currencies rises relative to the declining value of the dollar. The exports of Third World nations, generally valued in US currency, become more expensive, reducing their ability to sell their exports. A 2018 Harvard report points out the weight of the dollar in international trade: “A 1% U.S. dollar appreciation against all other currencies in the world predicts a 0.6% decline within a year in the volume of total trade between countries in the rest of the world.”

Countries on the receiving end of this Fed money-creating policy have two options. They can let the value of their currency rise relative to the new dollars entering their economy.  However, a rising value of their own currency hurts their export industries, on which many Third World countries survive. The alternative involves their central banks printing more of their own currency to buy up the new dollars circulating in their economies. US dollars created out of thin air end up in foreign central banks after these countries print more local currency to buy them up. This pushes up their rate of inflation and increases the local cost of imports, particularly hurting the people’s standard of living in nations that import food stables and other basic necessities.

When countries must print more of their currency, this lowers the dollar price of their goods exported to the US. This helps to limit price increases in the US caused by the Fed creating dollars. Thus, when the Fed conjures up dollars on a large scale, other countries are subject to rising prices, yet help to curtail it in the US market.

China loosely pegs the RMB to the dollar and is now the second largest foreign holder of US debt. This serves to keep its currency cheap relative to the dollar and the prices of its exports competitive. China uses the dollars from its trade surplus to the US  to purchase US Treasury bonds. This way, China has been rapidly developing and exporting by helping strengthen the dollar and lower the RMB’s value.

Secondary imperial powers like Canada or Japan, major exporters to the US, have more of an option of letting the dollar fall and allowing their own currencies to rise. This controls domestic prices, although it hurts exports, and would slow their economic growth. However, since they are already developed countries, they are more able to cope. Third World countries, relying on cheap exports to the massive US consumer market, cannot long tolerate such a hit. It would cause severe social and political difficulties, so they often must devalue their own currencies to stay competitive.

In sum, the US, the imperial superpower, has its hands on Aladdin’s lamp, and can rub it to create hundreds of billions, now trillions of dollars. The US gains by importing at reduced real cost, benefiting the US consumer, and in return sends its inflation abroad. In 2011, the Wall Street Journal noted this in The Latest American Export: Inflation. “What do the years 1971, 2003 and 2010 have in common? In each year, low U.S. interest rates and the expectation of dollar depreciation led to massive ‘hot’ money outflows from the U.S. and world-wide inflation. And in all three cases, foreign central banks intervened heavily to buy dollars to prevent their currencies from appreciating.”  As the Head Economist of Commercial Banking of JPMorgan Chase wrote in 2019, “When foreign central banks stockpiled dollars, they effectively pushed up the purchasing power of American consumers.”

US Economic Control over Third World Economies

Third World countries generally do not possess the requisites of sovereignty: basic food self-sufficiency, energy independence or technological and industrial development. They must import these goods, not with their own currency, but with “hard currency,” a code word for the currency of imperialist countries. Nor can they borrow in their own currencies on the similarly misnamed “international” market and have to rely on “international” capital for their development projects. Consequently, they are reduced to borrowing “hard currency,” usually dollars, and must earn dollars to pay back these debts. They become stuck in a debt trap, subjugated to the US and the lesser imperial countries. The imperialist system is constructed to protect this neo-colonial operation.

The role of World Bank and IMF in enforcing Third World subservience to the US illustrate this.

Michael Hudson, who calls himself a MMT economist, pointed out:

The World Bank has one primary aim, and that’s to make other countries dependent on American agriculture. Its idea is to make Third World countries export plantation crops, especially plantations that are US or foreign owned.” The World Bank encourages exports of foods not grown in the US, and have them import US staples, such as grains. “The US demands foreign dependency on its grain, technology and finance. The purpose of the World Bank is to make other countries’ economies distorted and warped to a degree that they are dependent on the United States for their trade patterns.Essentially, the Bank financed long- investments in the foreign trade sector, in a way that was a natural continuation of European colonialism.

The IMF was in charge of short-term foreign currency loans.…The function of the IMF and World Bank was essentially to make other countries borrow in dollars, not in their own currencies, and to make sure that if they could not pay their dollar-denominated debts, they had to impose austerity on the domestic economy – while subsidizing their import and export sectors and protecting foreign investors, creditors and client oligarchies from loss.

The IMF “uses debt leverage as a way to control the monetary lifeline of financially defeated debtor countries. So if they do something that U.S. diplomats don’t approve of, it can pull the plug financially, encouraging a run on their currency if they act independently of the United States instead of falling in line. This control by the U.S. financial system and its diplomacy has been built into the world system by the IMF and the World Bank…”

Nations relying on staple food imports, such as US grain, are hurt when the US conjures up new quantities of dollars.  When these lands must follow suit, working class purchasing power drops. Workers produce more for less, while those holding dollars receive more for less money.

Forbes pointed out in Fed Exports Inflation, Stokes Revolutions, in reference to what was called the Arab Spring, “The unrest in the Middle East has a lot to do with food and commodity prices, and Fed QE policies [printing trillions of dollars] may have a lot to do with those prices.” Most of these Middle Eastern states had become increasingly reliant on imports for food supply over the past half century. Rami Zurayk noted the high prices for basic food staples like grain led to social unrest across many Middle Eastern states in 2010-2011. “’Bread riots’ have been occurring regularly since the mid-1980s, following policies brought to us by the World Bank and the International Monetary Fund.”

Third World countries are driven to subsidize their export industries to gain the dollars or euros they need for their imports and for their international debts. This sabotages their economic modernization and national independence. Even an oil-producing state like Venezuela never had energy sovereignty, as it produces crude oil, but lacks the technological capacity to refine it, so depended on imports. Third World countries generally export raw materials and cheap low value-added content, and import high value-added content, advanced technology and capital goods. They constantly lose in the transaction. The system keeps them mired in a debt and dependency trap where they must prioritize export industries. MMT economist Fadhel Kaboub says over the last few decades, this has resulted in outflows of $600 billion every year from the Third World to the First.

The US Exports Inflation and in return the World Pays for the US Debt    

When foreign central banks collect new dollars by printing their own money these dollars are not just used to pay off foreign debts. Countries are pressured into loaning their dollar savings to the US, buying Treasury bonds. The US debt continues to this day as the safest haven for countries to store their foreign exchange reserves, especially at times of international economic and political stress. In practice, this means they are driven to make loans to the US so that the US can keep buying their goods. The US government can run up debt by conjuring dollars out of thin air, to be spent on cheapened imports that prop up US consumer society. The foreign central banks recycle dollars back to the US Treasury to maintain their own currencies’ exchange rate with the dollar. This set-up keeps other nations lending the new dollars they gained back to help pay for the ballooning US debt. As Treasury bonds, these dollars are taken out of circulation, so create little inflation at home, although they previously did when the US circulated them overseas.

Through this scheme, foreign countries hold savings as dollar reserves and loans to the US, loans now beyond the ability of the US to repay. The US supports itself by sending paper IOUs abroad to buy other countries’ goods with these unpayable IOUs. Meanwhile, the US keeps its gold reserves intact and prices stable. Already half a century ago, European finance ministers had complained about this export of US inflation, to which Nixon’s Treasury Secretary John Connally responded the “dollar is our currency, but your problem.”

Michael Hudson explains in simple terms the dollar’s role as the international currency:

Let’s suppose that you go to the grocery store and you buy food and then sign an IOU for everything that you buy. You go to a liquor store, IOU. You buy a car, IOU. You get everything you want just for an IOU. But when people try to collect the IOUs, you say, ‘That IOU isn’t for collecting from me. Trade it among yourselves. Think of it as your savings, and trade it among yourselves. Treat it as an asset, just as you treat a dollar bill saved in a cookie jar and not spent.’ Well you’d get a free ride. You’d be allowed to go and write IOUs for everything, and nobody could ever collect. That’s what the United States position is, and that’s what it wants to keep.

Hudson adds, again simplifying it, “That’s what makes the United States the ‘exceptional country.’ The value of our currency is based on other countries’ savings. The money they save has to be held in the form of dollars or securities that we’re never going to repay, even if we could.” The US has established an international system requiring other countries to use the dollar, obliging them to stockpile them in the trillions, and coercing them to make loans to finance a US debt that will never be paid.

The US, protecting the dollar as the world’s reserve currency, is not subject to the same rules other countries are: it can spend more than it produces, maintaining its consumerist lifestyle, by simply printing more dollars. It can use this extra money to gain control of goods and resources, giving them inflation and debt in exchange. Since these exported dollars often return home through now uncollectible loans as Treasury Bonds, they do not remain within the US economy to cause rising prices.

This scheme the preserves what George Kennan delicately labelled the “pattern of relationships” that upholds the “disparity” of the imperial economic system. To enforce this scam, the US has built military bases throughout the world — much of this dollar cost returned to the US through the same operation — ready to act against nations seeking to get off the dollar standard.

The post Why the US Can Keep Increasing its Debt and not Suffer Inflation (Part 2) first appeared on Dissident Voice.

Modern Monetary Theory (MMT) and the Power of the US Dollar in the World Economy (Part 1)

Modern Monetary Theory (MMT) has become popularized by some of the liberal-left because it offers an explanation how to achieve full employment, national health insurance, free college education, and the Green New Deal without raising taxes. Political leaders like Alexandria Ocasio-Cortez and Bernie Sanders have espoused MMT. Economist Stephanie Kelton, a leading spokesperson of the theory, served as chief economic adviser to Sanders during his 2016 presidential campaign.

We summarize the basics of MMT on the significance of a “sovereign” currency and consider which currencies meet the conditions of being sovereign in the existing structure of the world economic system.  This requires a review of the role the US dollar plays in world trade and how the dollar dominates the world trade system. For MMT, the existence of a sovereign currency explains the US capacity to keep pumping dollars into the economy and not experience inflation. In a subsequent article we address the validity of this last claim.

The Essentials of Modern Monetary Theory

The central idea of MMT states that a country that issues its own currency, a “sovereign” currency, can never run out of money or go bankrupt the way households or businesses can. Any government spending can be paid for by the creation of more money. Therefore, national government spending should not be determined by balancing the budget or limiting deficit levels, but only by whether spending is keeping the economy at full employment and at a reasonable level of inflation.

The US government, being a currency issuer, has its own sovereign currency, the dollar, just as Japan has the yen, and Britain the pound. The US, as the exclusive producer of the US dollar, can create more money whenever it needs. That is not the same for countries without their own currency, such as the eurozone nations which are shared users of the euro. In a similar manner, state and local governments in the US do not possess their own currency, and have to keep balanced budgets.

MMT states national government spending does not have to be paid for with taxes. It can print money and not experience inflation. The purpose of taxes, according to MMT, serves to limit inflation, by taking consumers’ money out of the money supply. This goes against the conventional idea that taxes provide the government with money to spend on the military, build infrastructure, fund social welfare programs, etc.

According to MMT, the only limit the government faces when pumping out money is the availability of real resources: raw materials, workers, construction supplies, etc. It is only when an economy hits physical or natural constraints on its productivity, when these resources have been fully put to use, will inflation result if the government continues introducing more money into the economy. Unemployment itself is the result of a government spending too little.

While the theory is controversial, much of what MMT says about US government creation of dollars and inflation is true. MMTers are not the only economists who say it. Former chair of the Federal Reserve Alan Greenspan remarked: “The United States can pay any debt it has because we can always print money to do that. So there is zero probability of default.”

Another former Fed chair, Ben Bernanke, likewise commented that the federal government’s $1 trillion bailout of the banks due to the 2008 financial crisis caused by their fraud did not come from raising taxes:

It’s not tax money. The banks have accounts with the Fed, much the same way that you have an account in a commercial bank. So, to lend to a bank, we simply use the computer to mark up the size of the account that they have with the Fed. It’s much more akin to printing money than it is to borrowing.  And we need to do that, because our economy is very weak and inflation is very low.

Former IMF chief economist and president of the American Economic Association, Olivier Blanchard declared: “Put bluntly, public debt may have no fiscal cost” given that “The current US situation in which safe interest rates are expected to remain below growth rates for a long time, is more the historical norm than the exception.”

Moreover, the US has run up its national debt, has not reached full employment, nor put in play all economic resources, and has not endured inflation, just as MMT predicted. The US government this spring created $6 trillion out of thin air to fund corporations, banks and to a lesser degree, working people, during the stock market crash and COVID pandemic. Yet the rate of inflation rate is less than 1%, lower than in 2019. The Quantitative Easing program (their term for creating money out of thin air) likewise conjured up $4.5 trillion from 2009-2014, and this also caused little inflation here.

Nations Possessing a Sovereign Currency

The key question for MMT is which nations besides the US have a “sovereign currency.” While definitions of monetary sovereignty provided by MMT authors vary, there are central elements. One, the government issues the national currency and imposes tax liabilities in that currency. Therefore, countries that do not print their own currency, such as those using the euro, do not have a sovereign currency. Two, the currency is fully floating, meaning it has a flexible exchange rate system determined by market forces of demand and supply of foreign and domestic currency, and where government intervention is non-existent. According to the IMF, 31 countries have “free floating currencies;” however, 19 of them use the euro.1  The remaining  12 are Australia, Canada, Chile, Japan, Mexico, Norway, Poland, Russia, Sweden, the UK, Somalia2, and the US. Three, the nation has no debt denominated in foreign currency. It receives foreign loans and repays them in its own currency. A country with an MMT sovereign currency is able to conduct trade with other states in its own currency.

Third World nations, a central MMT economist Randall Wray explains, “are not international reserve currency issuing countries.” If countries peg their currency to the dollar or the euro and if they receive loans payable in foreign currency:

They usually will adopt austerity as a means to obtaining US dollars, and that means that they have slow growth, they’ve failed to develop, and they are dependent on the US, the IMF, and the World Bank. So we recommend moving off the peg and stop issuing government debt in foreign currencies. Now, we know that’s a difficult condition, and it’s only the first step. They’ve got to move toward food independence and energy independence, because those are usually two of the things that they import. And they’ve got many other problems to deal with, political problems, corruption, and possibly foreign intervention.

Fadhel Kaboub, the leading MMT economist on Third World economies, agrees. He points out that Third World nations count on staple food and energy imports and on imported advanced technology. They therefore, accumulate foreign debts, mostly in dollars and euros. When asked if there were any Third World nations follow the conditions MMT recommends to develop,  Kaboub replied, “Unfortunately, not that I know of.” The closest, he said, were South Korea under the military dictatorship, and Singapore at some period in the past.

Given the MMT conditions for a sovereign currency, only 12 nations met the first two conditions. Meeting the further conditions, possessing no debt payable in a foreign currency and conducting its trade with other states in its own currency, requires a study of the role of the dollar in the world economy.

The Role of the US Dollar in World Trade

  1. Most International Trade Takes Place in the Dollar

Most traded commodities in the world, including basic commodities such as oil and food grains, are priced in dollars on the global market. Generally, trade contracts between countries take place in the US currency, followed by the euro and the Japanese yen.

Therefore, foreign nations require dollars to conduct international trade.  Exchange of goods and services among countries amounted to 39.7 trillion in dollar terms, in 2018, 46% of the global economy. The Society for Worldwide Interbank Financial Telecommunication (SWIFT) reports the majority of global trade takes place in dollars. (SWIFT is a key instrument the US uses to enforce its unilateral coercive measures – US imposed sanctions – to disrupt the international trading of a wide variety of countries.) In 2014, SWIFT determined the dollar makes up a 52% share of the value of international currency usage, a share that has been growing. The euro, used in trade in the eurozone region, is second, with a 30.5% share of total value. The British pound is third, with a 5.4% share. Concerning trade between regions of the world, the dollar’s role as payment currency rose to 79.5%.

Claudio Grass, a Swiss banker, gives a higher figure, with around 70% of world trade conducted in US dollars, and excluding trade among European states based on the euro, the percentage goes up to 90%. Forbes noted:

Almost all international transactions are done in US dollars.  Nearly all of the world’s commodities are priced in U.S dollars. So, an auto manufacturer in Korea importing steel from Japan must first convert Korean won into US dollars, pay for the transaction in dollars, and the Japanese exporter, once receiving the payment, must convert the dollars into Japanese yen.  So, the Dollar is key to much of the world’s trade.

Clearly, even the secondary imperial (“developed”) powers rely on the dollar for their economic operations.

A July 2020 IMF study looked at the pricing of worldwide exports and imports in dollars, euros, and other currencies since 1990. The dollar remains the prime currency used to price goods in global trade, even increasingly used for invoicing (as was also the euro) in spite of the decline in US and eurozone international trade, mostly due to the ever-increasing trade of China.

Studies of the Role of the Dollar in Country Imports and Exports

A 2018 Harvard economics report corroborates this: “the vast majority of invoicing is neither in the local currency or in the producer’s currency but instead in a ‘dominant currency’, which is most often the U.S. dollar.” Even other imperial (“developed”) countries’ trade takes place not in their own currencies, but mostly in dollars.  Another Harvard study noted that while only 13% of Japan’s imports come from the US, 71% of Japanese imports are priced in dollars, while only 33% of its exports are actually in Japanese yen. For the eurozone in 2018, 56% of the goods imported and 34% of good exported were calculated in dollars.

The Chinese renminbi (RMB), despite China being the world’s number one trader with 12.4% of world trade in 2018, was used in a mere 2% of international payments. 3   The US, by contrast, is second largest with 11.5%, yet the dollar reigns as the world currency.

For Latin America, 97% of exports and 90% of imports are still made in dollars4  even while China’s trade with Latin America has grown to half the size of US trade with the region.

The United States stands in sharp contrast to other nations, again showing the world power of the dollar. In 2015 93% of US imports were invoiced in the dollar, while 97% of its exports were.

  1. Most Foreign Central Bank Holdings Are in the Dollar

Central banks worldwide hold a considerable portion of their reserves in dollars, using it as their primary reserve currency. As of 2019, foreign government central banks held $6.8 trillion in US dollar reserves, about 61% of combined central bank foreign exchange reserves of $11 trillion. Nearly two-thirds of the world’s currency reserves are held in dollars, more than the combined holdings of all other currencies. The next closest reserve currency is the euro, which makes up 20% of known foreign central bank currency reserves. Japanese yen accounts for 5.7%, British pound 4.4%. Central banks held only 2% of their reserves in Chinese RMB, amounting to $221 billion worth of RMB.

The dollar’s portion of these foreign reserves has remained relatively the same since 2009. The New York Times noted in 2019, “The dollar has in recent years amassed greater stature as the favored repository for global savings, the paramount refuge in times of crisis and the key form of exchange for commodities like oil.”

  1. Almost Two-Thirds of International Debt Held Outside the US Must be Paid in Dollars

In 2018, 63% of international debt was denominated in dollars (to be paid in dollars), a percent that has been slowly rising since 2005. The second most common currency owed for international debt is the euro, at about 23%.5

There is $28 trillion worth of debt, to be paid in dollars, held by governments and private business outside the US. This is said to increase $1.6 trillion to $2 trillion a year. Foreign countries actually issued $11 trillion of this $28 trillion debt in the US currency rather than their own.

Third World government debt was the equivalent of 15 trillion in dollar terms. About 70% of this Third World debt is actually issued and owed in US dollars. This debt in dollars held abroad further serves to entrench the dollar as the world sovereign currency.

  1. Foreign Exchange Trading Dominated by the Dollar

Foreign exchange is the process of changing one currency into another for a variety of reasons, usually for commerce, trading, or tourism. The Foreign Exchange market has an estimated turnover of $6.6 trillion a day. In 2019, 88% of the world’s foreign exchange trading involves exchanging some currency with one in particular, the US dollar.  The euro ranked second with 32%, Japanese yen third at 17%. Chinese RMB ranked eighth at 4%. The dollar’s hold in this measure of the world’s most dependable currency remains the same as in 2004, while the euro, yen and British pound have tended to decline.6

  1. Most Foreign Currencies Rotate around the Dollar

While the US dollar ceased to be pegged to the price of gold, it continued as the monetary standard for other currencies, which revolve around the value of the dollar. At least 155 countries either directly peg their currency to the dollar, use the dollar as their own currency, or keep their currency in a tight trading range relative to the dollar.7 That constitutes just under 80% of the nations of the world. This means the quantity of dollars the US puts into circulation shapes to varying degrees the monetary policy of most other states. To maintain this relation to the dollar other states must keep a sufficient supply of them, undermining any sovereignty their currency may possess.  Nations that peg their currencies to the dollar typically rely on exports to the US. Their companies receive payment in dollars from the US market, which they then normally exchange with their own governments for their national currency.

The US Dollar Dominates the World Trade System

In spite of the US losing the status it held after World War II as workshop of the world, the dollar still exercises control over the world economy. It is the primary currency used in world trade; it is the main currency held in national central bank reserves; it is the currency used for just under two-thirds of all international debt; close to all exchange of world currencies involves one currency’s exchange for the dollar; most currencies’ exchange value is heavily influenced by the value of the dollar. Because foreign nations conduct trade in dollars and have debts in dollars, they are dependent on the dollar and the value of the dollar. This seriously compromises any sovereign power they possess.

Consequently, only in the dollar can we find a currency that meets the MMT conditions for being sovereign. All other countries must rely on the dollar to function, particularly for trade, although the degree of this dependency varies, with the subordinate First World powers exercising more independence than Third World nations. The present set-up of the world economy insures that another currency will not become sovereign like the US dollar. Therefore, the key importance MMT attaches to sovereign currency as a tool for national development loses value given these economic realities.

A gross omission made by MMT — the elephant in the room — is US corporate capital’s rule at home and abroad, which allows it to impose itself and its currency on the world. MMT compounds this weakness by presenting the obstacles nations face in establishing a sovereign currency largely as matters of political will, of choice. Ironically, this may explain MMT’s popularity at home in the liberal-left milieu. Implementing full employment, national health insurance, free college education, and the Green New Deal are presented as choices politicians have not yet made because of their mistaken beliefs concerning the national debt. Just clarify that we do not need to raise taxes and need not worry about inflation and bingo! We have what we want.

The question remains, however, why the US debt has grown over $10 trillion in 10 years with almost no inflation. Is the MMT explanation accurate, that the sovereign nature of the US dollar gives it that power? No. Printing or creating dollars out of thin air, backed by nothing, does create inflation. In Why the US Can Keep Increasing its Debt and not Suffer Inflation we show how the US has been able to export much of it and take many of the new dollars of out circulation. This does result from the US position as sovereign, but not in the sense MMT uses.

  1. Annual Report on Exchange Arrangements and Exchange Restrictions 2018, p. 18-19.
  2. The report notes in 2018 “the Central Bank of Somalia does not have a monetary policy framework”
  3. European Central Bank: The International Role of the Euro (June 2019), Box 1 Chart A.
  4. Ibid., Chart 26.
  5. Ibid., Chart 2 and p.19ff.
  6. Bank for International Settlements: Foreign Exchange Turnover in April 2019, p. 10.
  7. Annual Report on Exchange Arrangements and Exchange Restrictions 2018

The post Modern Monetary Theory (MMT) and the Power of the US Dollar in the World Economy (Part 1) first appeared on Dissident Voice.

Ten-Point Agenda for the Global South after COVID-19

Jorge González Morales (Mexico), Capitalism, 2020

Greetings from the desk of the Tricontinental: Institute for Social Research.

In 1974, the United Nations General Assembly passed a New International Economic Order (NIEO), which was driven by the Non-Aligned Movement (NAM). The resolution laid out a clear plan for the structural transformation of the world system, which was in the throes of a crisis at the time. But, the NIEO was set aside and the world order was shaped in a neoliberal direction; this neoliberal orientation furthered the crisis and brought us to this current cul-de-sac of human possibilities.

Our team at Tricontinental: Institute for Social Research developed a ten-point agenda for a post-COVID-19 world. Last week, I presented this agenda at the High-Level Conference on the Post-Pandemic Economy, organised by the Bolivarian Alliance for the Peoples of Our America (ALBA). The rest of this newsletter is taken up with the agenda, which we hope will be adopted by the Non-Aligned Movement (NAM) who might take it forward for discussion to the UN General Assembly. We are certainly in need of a New International Economic Order.

1. Tackle the global pandemic.

Our priority is to tackle the global pandemic. To this end, enhancing and pivoting public sector production towards masks, protective equipment, ventilators, field hospitals, and tests for the entire population must be central – as it is already in places such as Vietnam and in Venezuela. It is essential to establish worker control over working conditions so that workers – who are best placed to make these decisions – can be guaranteed a hygienic work environment. In the absence of adequate public action, governments need to create work plans to hire people for projects to break the chain of infection and to ensure that people are fed, clothed, and in good health; such public action can learn from the cooperatives in Kerala (India) and the Committees for the Defence of the Revolution in Cuba. The workforce in shuttered sectors – such as tourism – should be immediately hired into jobs that are geared towards countering the pandemic.

Greta Acosta Reyes (Cuba), Women Who Fight, 2020

2. Broaden medical solidarity.

A united front of the Global South must reject the IMF and creditor-driven limit placed on government sector salaries; because of these limits, former colonised countries have been losing medical personnel to the North Atlantic states. States must use their precious resources to enhance public medical education and train medical workers within communities to provide public health services. ALBA’s medical internationalism, with the Cuban brigades in the lead, must become a model for the world through the World Health Organisation (WHO). Chinese medical internationalism would play a key role here as the US departs from the WHO. The entire private health sector must be nationalised, and smaller medical centres need to be created so that people can easily access public health facilities. Governments must withdraw from public insurance for private health care; in other words, no more public subsidies for private health care. Public health systems must be strengthened, including the production of medical equipment and medicines and the distribution of essential medicines (whose prices must be controlled by regulations).

3. Create an intellectual commons.

The Global South must push for the annulment of the TRIPS Agreement (Trade-Related Aspects of Intellectual Property Rights), which provides unrestrained property rights on goods that must be part of the global commons. This applies directly to the COVID-19 vaccine, which must be offered for production in countries without consideration of profits or intellectual property rights. But it applies equally to any pharmaceutical drugs, many of them publicly financed – the profits for which are then privately appropriated – and to energy technologies that would swiftly move us from fossil to renewable fuels as well as to more efficient communications technologies (such as 5G). In the short term, the states of the Global South must enhance mechanisms for science and technology transfer amongst themselves.

Judy Ann Seidman (South Africa), Capitalism, 2020
4. Cancel debt.

Reasonable estimates suggest that the ‘developing countries’ owe $11 trillion in external debt, with debt service for this year alone estimated to be $3.9 trillion. With the coronavirus recession, such payments are unthinkable. Debt relief must go beyond the forty-seven ‘least developed countries’ and include all of the states in the Global South; this relief must not only postpone debt, but it must cancel debt (from both public and private creditors). An international alliance must be formed on a broad front to pressure creditors to cancel the debt so that all resources that go to service the debt can be channelled fully towards the dire needs of society.

5. Expand food solidarity.

Half of the world’s population struggles with hunger. Food sovereignty and food solidarity are essential antidotes, as has been shown by platforms such as Via Campesina. Corporate control over agriculture must be challenged and food production must be made into a human rights priority. Funds need to be marshalled towards enhancing the production of food; these funds need to be spent on infrastructure for agrarian production (including to enhance such projects as the ALBA Seed Bank). Universal public distribution systems must be strengthened to provide higher incomes for farmers and to ensure distribution of food to the people. A more robust rural landscape will decongest cities and draw people to live meaningful lives in rural areas.

6. Enhance and invest in the public sector.

The CoronaShock has shown that the private sector is simply not capable of addressing emergencies, let alone human needs. States of the Global South must lead by offering a robust defence of the public sector, not only for the production of key goods and services (medicine and food), but for anything that is essential for modern life – more public housing, more public transportation, more public Wi-Fi, and more public education. Allowing the profit sector to commodify these parts of human life has eroded our capacity to build a civilised society.

Davide Leone, Associazione Italiana Design della Comunicazione Visiva (Italy), Capitalism, 2020

7. Implement wealth taxes.

Currently, roughly $32 trillion is sitting in offshore tax havens, and untold amounts of money are simply not counted towards taxation. Two things are necessary: first, that illicit financial flows be recovered, and second, that wealth taxes be properly imposed on the upper echelons of the bourgeoisie and the wealthy land-owning elite, as well as financiers and those engaged in financial speculation. These funds would be enough to redirect priorities to eliminate poverty, hunger, illiteracy, homelessness, and indignity on a global level.

8. Enact capital controls.

Without capital controls, a country has no effective economic sovereignty. States of the Global South must create an international platform that binds each of them to undertake capital controls; this is a political issue that cannot be implemented by a single country. Capital controls are measures taken by a government to regulate the flow of finances into and out of a country. Such controls include transaction taxes, minimum stay requirements, and caps on the amount of currency that can move across borders. Capital controls and democratic control over the Central Bank will prevent capital flight and should give governments sovereignty over their currency and their economy.

Túlio Carapiá and Clara Cerqueira (Brazil), Fruits of the Earth, 2020

9. Shift to non-dollar-based regional trade.

Dedollarisation is an essential part of a new agenda. Sixty per cent of the world’s reserves are held in dollars, and world commerce is largely conducted in dollars. The Dollar-Wall Street Complex has a near stranglehold on international finance and trade; it is no surprise that US unilateral sanctions are having a catastrophic impact on countries not necessarily because they rely upon the dollar, but because their trading partners are enmeshed in it. The dollar has become a weapon to undermine development. Experimental alternative payment systems like the Sucre need to be dusted off, and new global financial institutions need to be created to facilitate wire transfers. In the short run, this could begin with non-dollar-based regional facilities, although there is a need for global institutions to set aside the immense advantage provided to the United States by the dollar being used as a global currency. Relatedly, there is a need to strengthen regional trade blocs that would honour barter as a mechanism for payment.

10. Centralise planning, decentralise public action.

The pandemic has shown us the power of central planning and the importance of decentralised public action. Economies that are not allowed to plan their use of resources have floundered before the virus. There is a need to establish participatory central planning mechanisms on an ever-increasing scale and to recast social production towards need – not towards profit. These plans must be derived from maximum democratic input and must be transparent to the public. Central planning would enable the nationalisation of sectors such as mining (including energy production), the large-scale production and processing of food, and tourism; these would be placed under worker control into cooperatives. It would be an instrument to minimise waste, including profligate military expenditures. The enhancement of local self-government and cooperative production, as well as of associations and unions of the people, will allow social life to become increasingly democratic.

Ahmed Mofeed (Palestine), Coca-Cola Zero, 2020

The images in this newsletter are from the Anti-Imperialist poster exhibition. The first set of posters are on the idea of capitalism. Please go to the website and browse through the posters, which come from seventy-seven artists from twenty-six countries and twenty-one organisations.

Economic Epidemic

Dynamic duo:  Same bat virus, same fat profits

From Havana to Helmstedt

The major reason for Cuba’s travel restrictions — always used as grounds for slandering the Cuban state — is the extreme difficulty Cuba has maintaining foreign exchange reserves essential for international trade,  especially since the end of trade-in-kind with the COMECON. Every traveller from Cuba spends pesos that have to be covered by Cuba’s USD or EUR reserves. Since there are already more than enough obstacles imposed by the US embargo, every forex transaction is critical for Cuba’s balance of payments — for its ability to buy what it cannot produce. In fact, those who can still recall crossing from West Berlin to East Berlin will also remember that it was necessary to exchange DM 30 for M 30 for every day one spent in the GDR. This was heavily criticised in the West, especially by travellers who would complain that it was impossible to spend the M 30 in a day since everything was so inexpensive. Of course, the GDR was trying to compensate for the discriminatory exchange rates that made trade with the West a drain on its foreign currency reserves.

While many ordinary visitors complained and the Western media encouraged Germans in the East to complain about the buying power of the GDR mark, the fact is that throughout the world national economies only survived the Bretton Woods regime as long as they maintained currency controls. A major element in the economic warfare waged by the US Empire since 1945 has been to abolish fixed exchange rates. Having rigged the post-war international monetary regime to replace the British pound with the US dollar as the benchmark currency, the International Monetary Fund and World Bank were deployed to stabilise the US dollar with advantage over the old European currencies.

Although officially these were international institutions, they were organised like private corporations. The decisions were to be made by the majority of shares held in the IMF or World Bank. Since the US held the majority of capital in both, it was endowed with the most votes over any Fund or Bank decision. The quasi-currency of the Fund and the Bank was called special drawing rights (SDR). These units of account were based on a weighted value of the underlying “reserve” currencies, mainly the USD. SDRs could be used to resolve balance of payments discrepancies. Members of the IMF were extended SDRs according to the relative strengths of their economy. Based on the SDRs allocated to a country it could draw dollars or another reserve currency in amounts sufficient to pay temporary imbalances between imports and exports, transactions that after WWII were almost all USD business.

As the late Jamaican Prime Minister Michael Manley once pointed out — when the Bretton Woods agreements were signed most of the countries, like Jamaica, were still colonies or protectorates of some European or North American power. Hence no provision was made for them to even have independent economies or national currencies. As a result most of the world’s population and any of the newly independent countries that did not adopt a version of a Euro-American currency had no way to monetize their economic activity in international trade. They were left entirely dependent upon the USD, GBP, and FF for foreign trade of any kind. In order to limit USD hegemony in Africa, the French invented the CFA-Franc. This African franc tied its former African colonies to France by giving the CFA-franc a favourable exchange rate with French franc, although not parity. Overall, however, the post-war independence movements were all faced with the inherent dependence of their currency systems from the machinations of US and European banks with their control over the two major foreign exchange markets, the City and Wall Street. The exceptions to this regime were the Soviet Union and COMECON as and after 1959 Cuba.

When the US economy faced possible financial collapse toward the end of its war in Vietnam (it had been fairly successful in transferring the costs of the Korean War to the “United Nations”), secret negotiations by the Nixon administration with the Kingdom of Saudi Arabia had, through their offices within OPEC, saved the USD by abolishing the gold fixing and establishing the USD as the sole currency for the world oil trade. At one fell swoop any country that did not have domestic oil supplies or had to trade oil on the world market was forced to use US dollars. To prove the point the US regime has never hesitated to wage war against any OPEC member that does not comply with this iron rule. Of course, the US is the only country which can issue US dollars and its banks are the only ones who can sell USD denominated debt, directly or indirectly, hence the central role of the Federal Reserve System — the private banking cartel chartered to issue dollars and control US monetary policy. The US regime has also pursued rigorous policies, even if not always entirely successful, to draw all those dollars back into US assets or to permit US entities to acquire foreign assets through the unlimited capacity to generate USD and to monetize private business (while on the other hand prohibiting the monetizing of public debt for social services, infrastructure etc.)

This is the context in which the current economic war with China and to a lesser extent with Russia has to be seen. This economic war entered a new phase with the Wuhan attack.

Lucrative lockdown

Fast-forward: European and US authorities order various degrees of “lockdown” and international travel, even within the EU itself, comes to a virtual halt. Airlines, hotels, and the rest of the travel sector have practically no more than essential business. The transport sector is also substantially restricted. The everyday economy is almost in coronary arrest.

What are the benefits of the general lockdown in the West? Is it really possible that the corona virus was so shocking that the economy as a whole was only an afterthought? Are we to believe that it was merely an oversight on the part of government to contemplate contingencies for epidemics but not for economics? It would be nice to think that Western governments care so much about the health of their citizens but that is rubbish. What is really very important — in fact, it is the only important issue for those who own our governments is MONEY and, of course, the power that goes with it.

What are the immediate consequences of the lockdown in economic terms?

  1. a) restriction of travel by masses of a generally mobile and consuming population (at least in the EU)
  2. b) restriction — soon to reach extinction of a substantial percentage of SMEs
  3. c) obstruction of supply chain transactions, not least of which with China
  4. d) increased unemployment beyond the already deliberately understated figures
  5. e) inevitable price increases, whether scarcity induced or because of added “safety” costs
  6. f) the creation of potential for a layer of corruption and contraband traffic that will not only raise the prices of everyday life but partly criminalise it.

At the same time we have heard more than a few reports of new QE (aka giving trillions to so-called banks). *

In the Western media one finds accusations that China caused the “corona crisis” to benefit from a fall in asset prices (not only stock markets but also for businesses damaged by the lockdown) to buy them up on the cheap. Personally I follow a golden rule when reading Western official statements, whether directly from regime mouthpieces or through their Great Wurlitzer: what they accuse is what they are hiding. It is like that classic scene in many a classroom: the bully slaps another pupil. Pupil slaps back and bully screams. The teacher only sees the return slap and never the first strike. The slapped pupil is punished and the bully rewarded.

If we ask critically what the new QE is supposed to do — is it to protect all these banks from another 2008 failure? No, not really. Instead it is to fill the “banks” with cash for pre-emptive buying following the price crashes so that China can be blocked out of any further investment in the West’s critical sectors.

It is also survival money so that all the defaults and bankruptcies in the SME sector can be written off without damaging the overall profit line.

In other words a) and b) can be directly linked not only to strategic population control objectives, linked also to the now infamous universal vaccination programme, but also to the imposition of currency controls. In Europe, fewer euros will flow to China and in the US obviously the USD flows will be reduced.

  1. c) The disruption of supply chains is mainly an organisational measure. This will reduce the number of channels by which China can trade in the West. In the first stage it will also facilitate the consolidation of the economy in fewer hands so that those supply chains can be better managed from the top.
  2. d) As argued elsewhere, purchasing power has declined steadily over the past thirty to forty years for most of the working population on both sides of the Atlantic. There is a need for a fundamental demographic adjustment. Germany, for instance, has used imported labour since its reestablishment in 1949. First it was a substitution for labour shortages immediately after its defeat by the Soviet Union.  The so-called Economic Miracle — the reconstruction period — in large part funded by orders from the US war machine in Korea — quickly absorbed its available German labour force. Hence it started to suck workers from impoverished Italy and Greece. If the German government is to be believed, then the domestic labour force is too old or too small to meet current demands, hence while domestic workers are under house arrest, the flow of persons displaced by NATO wars; e.g., in Syria, continues uninterrupted. Thus the new generation of industrial and technical labourers at the bottom of the German social hierarchy will not be Turkish but Arabic speaking. There is no reason that they will be able to return to their homes any time soon since NATO is not finished destroying them.

At the same time the crushing of the domestic small and medium-sized sector will — as it always has — have a positive effect by forcing wages down even more. If the virus is really as effective as some claim at killing people aged 60 and above, then the state pension funds will be able to declare surpluses soon, net revenues from immigrants and a sudden decline in beneficiaries. This sounds cynical but the insurance model for social security installed under Bismarck anticipated much shorter lifespans and fewer eligible retirees than today. The government’s plan to raise the retirement age to 70 cannot solve the problem because there are no jobs for these 65+ citizens. Hence they have to live from savings or the dole. Better just let them die.

If there is an economic meltdown in the West, then these assets have to remain denominated in USD/EUR in order to prop up these currencies and preserve the fortunes of dollar/euro/or sterling billionaires.

Now add to this the lockdown and recall the case of CUBA.

The lockdown makes good economic sense from the commanding heights of the Western economy! By more or less crushing the SME sector with its increasing exposure to China; e.g., import of components and finished goods for resale, a substantial foreign exchange gap is closed. China is deprived of these payments. Thus foreign trade with China becomes ever more concentrated in the few cartels that share control over the monetary policies of the FED, Bank of England and ECB.

For normal mortals this is insane.  Why would the West want to crush the lower third of its economy? For years people have been whining about the 1% but otherwise not doing very much about it. In fact, the 1% can live very well without most of the normal economy as long as they have currency stability for their stores of wealth in the world.

Not only travellers, like for Cuba, but much of the real economy, constitute a genuine risk to the monetary system the great Western private banks created in the BoE, in 1913 with the FED, and later with the ECB. The ECB and the euro can be sacrificed as long as the USD and GBP remain world standards.

  1. e) One of the virtues of the system which could emerge as a short-term or medium-term result of the lockdown and its associated policies and practices is the creation of a new class of criminal activity — the real economy. Since it is unlikely that the West can suborn China and together with Russia impossible, the West has an obvious potential as far as I can see that has hardly been mentioned. Perhaps it is worth recalling from mainstream history the narrative of feudalism: the peasants were tied to the land. The aristocracy and royalty fought over land plus the chattel (the people occupying and working the land). Movement from the land was forbidden without permission by the feudal lord (a prohibition also enforced by the Churc; e.g., through the Inquisition). Pursuing a craft or trade was almost only possible in cities, which may or may not have been “free”. The details can be found in most standard history books about this period.

Casino royale and camino real

However, we have almost no peasantry left — something that can be detected in the abysmal quality of food found in countries like Germany, the Netherlands, Belgium, Great Britain. Instead there are only “free labourers” some of whom imagine they own their homes. Immediately after the collapse of the GDR any traveller could see an explosion in the number of hairdressers and small restaurants or similar personal service enterprises. Much of this business was the desperate attempt to recover earning capacity after West German government and business closed GDR factories and other employing institutions causing an explosion in unemployment that is still vastly understated and concealed by half-hearted social policies. These businesses are vulnerable to taxation and other cost-intensive regulations that are characteristic of modern bureaucratic states like Germany. It is also no wonder that they offer little more than a marginal income that often has to be compensated by some other job or social benefit.

At present that is all very exhausting and frustrating for the vast majority of people in this low-income sector. Yet it is still legal. The first step toward terrorizing the bulk of the soon to be even more under- or unemployed is to restrict or effectively prohibit the personal service sector — for health reasons. Now it is almost impossible to get a haircut or a manicure anywhere because these businesses have been forced to close as part of the policy of “social distancing”. Reality, however, knows no such prohibitions. Those people who have no other means of earning a living except personal services and those who need those services will find a way to meet and transact business.

This is where the spirit of Mr Gates is especially pernicious — but not simply because of some billions more that he may steal. What Mr Gates, as the poster boy, and the whole public health paramilitary/civil affairs regime that is nascent as I write offer us — or may well force upon us — is spiritually and socially akin to the Prohibition regime created by the Volstead Act in the US. Prohibition was introduced ostensibly to control alcohol abuse. However, it failed to get substantial legislative support until people like Henry Ford — then along with Rockefeller one of the world’s richest men — insisted that Prohibition would give them the power to destroy the meeting places of immigrants, especially those from Eastern and Southern Europe where beer and wine were integral to social life. Forbidding alcohol to people who for centuries considered wine and beer part of their diets was a serious attack on their private and family lives. However, since this was a “health” issue the Volstead Act did not violate any constitutional rights. Any place could be closed for serving alcohol of any kind. The meeting venues for almost all immigrants could be shut by armed police wholly within the law.

Although this was a draconian law, it was not really enforceable. In fact, the famous Kennedy political dynasty was only one family whose wealth came from breaking the law. At no time during the period of Prohibition in the US was the ruling class deprived of intoxicating drink. Moreover the covert sale of alcohol, the bribery of police and other officials, the payment of protection money to gangsters, created an entire corporate structure, which survives today although its product range is based mainly on opiates. The illegal and legal drug businesses constitute one of the main pillars of USD supremacy, along with oil and weapons, but that is just a detail here.

The important point here is that the culture of prohibition has clearly mutated into the field of “communicable disease”; i.e., highly infectious viruses. Whether or not Mr Gates and his friends will succeed in their ID2020 scheme — vaccine or subcutaneous identity chips — is certainly a very serious question. But even if this particular model does not get forced under our skin, the struggle in the lower half or third of the population to survive through personal services and hospitality will become a target for the same kind of parasitical class that developed and enriched itself under the Prohibition regime, and in the environment of permanent war (which was what 1984 most nauseatingly described) scarcity and corruption are designer processes — intended to punish and discipline the majority of the population while extracting every bit of surplus from their already meagre incomes. This artificially created illegality will empower a class of people who profit from serving it and have no interest whatsoever in return to normal human relations. The already immanent price increases and due to increased unemployment parallel decline in wages — with the risk that one can be excluded from work or income for “health” reasons — will further enrich those at the top while undermining solidarity downward as people become caught in the net of this policing regime.

Therefore, it is absolutely essential to resist any further imposition of this state of siege. In this matter, I cannot help paraphrasing some otherwise noxious colonial from the 18th century: we must all be sick together, or each of us will be sick separately — in isolation.

There are some people who read George Orwell’s books as prescriptions; after all he spent his last years working for an office in the British “Ministry of Truth”. Then there are those who completely misread his books as attacks on the Soviet Union and communism. However, those who read his books carefully will see that he understood the spirit and actions of his employers very well. Orwell’s fiction is ambivalent, like his entire career and his nonfiction works as well. Perhaps the best way to understand them is as the diaries of a colonial police officer, who knew his duty and no matter how disagreeable did it. That duty was to hold down the hands and feet of the ruled while the rulers emptied their pockets. Orwell knew he was working for gangsters, but he needed the job. That was the price he paid.

AND yes, if Madeleine Albright was ready to see half a million Iraqi children dead for the policies she was appointed to represent, you can bet that some 60 million, dead or enslaved, is also a price the 1%  find worth paying to keep their privilege on this planet intact.

*QE = quantitative easing: a term of financial jargon used by the US Federal Reserve System to denote privileged financial support to the top tier “banks” to prevent them from suffering (or collapsing) under the weight of their own elaborate extractive operations; e.g., debt siphons and gambling rackets. The mechanism involves the quasi-governmental (but actually privately owned and managed) Federal Reserve System purchasing the “bad” or uncollectible debts or gambling chits of these top tier “banks” by issuing Treasury obligations (e.g. so-called T-notes), basically certified claims that these “banks” may then assert against the US government to siphon tax receipts and other public income into their coffers. These claims are negotiable too, meaning they are traded on financial markets and can be used like money to buy non-financial assets.

The Gates Foundation and the War on Cash: “Financial Inclusion” in an Age of Neoliberalism 

Back in November 2016, the Indian government decided to remove all 500- and 1000-rupee notes from circulation overnight without prior notice. This effectively removed 86% of cash in a country that was almost 90% cash reliant.

The notes became worthless and people were asked to hand them in to banks. They would only receive what they had deposited in dribs and drabs over time in the form of new notes. The official reason for this was that the action would curtail the shadow economy and reduce the use of illicit and counterfeit cash to fund illegal activity and terrorism.

Some who questioned the official narrative regarded this ‘demonetisation’ policy as a ploy to take money from the public and use it to inject much needed liquidity into the banking system that had been bled dry by the outflow of cheap money (and loan waivers) to large corporations which had been milking the well dry.

The purpose of this article is not to explore the merits or otherwise of this claim or the official government narrative. The point here is to highlight how the policy (also) formed part of an ongoing global ‘war on cash’. In the discussion that follows, it will be shown that Bill Gates is a major player in trying to get the world to go digital and ditch cash, especially relevant given his role in the COVID-19 issue.

When we look beyond the mainstream narrative to gain an understanding of the current crisis, it doesn’t take long before the name of Bill Gates and his foundation appear. And this is no coincidence seeing that he has placed himself firmly in the limelight on prime time TV shows offering his opinion on COVID-19 and what he thinks should be done. He has mentioned the need for maintaining some form of lockdown until a vaccine is discovered.

Much has been written on the Gates Foundation’s close associations with the big vaccine manufacturers and its questionable practices and record in rolling out vaccines in places like Africa and India. US attorney Robert F Kennedy Jr says that top Trump advisor Stephen Fauci has made the reckless choice to fast track vaccines, partially funded by Gates, without critical animal studies. Gates is so worried about the danger of adverse events that he says vaccines shouldn’t be distributed until governments agree to indemnity against lawsuits.

But this should come as little surprise. The Gates Foundation and its global vaccine agenda already has much to answer for. Instead of prioritising projects that are proven to curb infectious diseases and improve health — clean water, hygiene, nutrition and economic development — Kennedy notes that the Gates Foundation spends only about $650 million of its $5 billion budget on these areas.

It is fair to say that the Gates Foundation has an agenda: it believes that many of its aims can be delivered via the barrel of a syringe. It has been well documented in recent weeks about how the Gates Foundation has spread its tentacles into every facet of global health policy. For instance, it is a major funder of the World Health Organization and donates to other pivotal players in the COVID-19 saga, not least Imperial College London whose Neil Ferguson produced hugely flawed data upon which the UK government implemented a lockdown, which entailed sanctioning draconian state powers and stripping of people’s basic rights via the Coronavirus Emergency Act.

Although often alluded to, Gates’s push for cashless societies is given less attention in the current climate but is just as important. It is not only the major pharmaceutical corporations which the Gates Foundation is firmly in bed with (along with the big agri-food players), it is also embedded with Wall Street financial interests.

The global shift from cash towards digital transactions is being spearheaded by Bill Gates and US financial corporations who will profit from digital payments. At the same time, by controlling digital payments (and removing cash), you can control and monitor everything a country and its citizens do and pay for.

War on cash in India

In India, the informal workforce has been measured at around 85%By 2014, fewer than 35% of Indians above the age of 15 had used a bank account and under 10% had ever used any kind of non-cash payment instrument.

Although some voices welcomed the 2016 demonetisation policy, as they believed it would push many Indians off cash and towards ‘financial inclusion’, it was, according to economist Norbert Haring, concocted in Washington, not for the benefit of Indians but in the interests of Western financial institutions who are pushing for a cashless world. For a lower income country such as India, which runs on cash, the outcomes were catastrophic for hundreds of millions of people, especially those who did not have a bank account (almost half the population) or did not have easy access to a bank.

According to Haring, the global ‘war on cash’ has the backing of some heavy hitters: the major US banks and likes of PayPal, Visa and the Gates Foundation. Writing in 2017, he argued that the cooperation of the Gates Foundation and the Reserve Bank of India (RBI) has been a very tight one. For example, Nachiket Mor, a banker, is director of the Gates Foundation India. He is also a board member of the RBI with responsibility for financial supervision.

Haring indicates that the demonetization policy was carried out on behalf of USAID, MasterCard, Visa and the people behind eBay and Citi, among others, with support from the Gates Foundation and the Ford Foundation. He adds that the start of direct cooperation of the Gates Foundation with the RBI on digital payments coincided with the work of the foundation in the President’s Global Development Council, which was to promote cooperation with foreign governments and the private sector with a view to securing US defence and commercial interests.

Bill Gates, Haring notes, gave an example of the link between worldwide digitalisation of payments (via the large US payment companies) and US security interests in a speech in 2015.

Gates said:

If financial flows go into a digital system that the US is not connected to, it becomes much harder to find those transactions that you want to be aware of or you want to block.

Demonetisation used the Indian population as a collective guinea pig to see how far the geostrategic interests of the US and those of Wall Street could be secured in a country of 1.3 billion people. The effects of people’s lives did not matter as long as the policy was pushed forward.

And this was carried out with reference to the usual corporate jargon of ‘financial inclusion’. Cash already provides financial inclusion. What does not lead to financial inclusion or any type of inclusion is a neoliberal system that imposes gross inequalities, austerity, joblessness, neocolonialism and the destruction of indigenous practices and cultures under the guise of ‘development’, the deliberate impoverishment of farmers in India, the twisting and writing of national and international laws, the destruction of rural communities or an unjust global food regime.

It is clear that ‘financial inclusion’ really means eliminating the main competitor of digital payments and finance sector profits – cash. In capitalism, every aspect of human life is to be commodified in the quest for fresh markets and profit — in this case, securing payments from payments.

Norbert Haring quotes Dan Schulmann, CEO of PayPal, who has stated:

The major competitor we have is cash. Right now, 85 percent of the world’s transactions are done in cash. That is really what we are trying to attack right now.

He also quotes Strive Masiyiwa, chairman and founder of Econet, a large African mobile phone company with a payment platform:

Our major competitor is cash. Cash is what we seek to eliminate.

It seems ‘financial inclusion’ really means denying sections of society their preferred method of payment – cash – to benefit the bottom line of these corporations.

Did Gates and his associates succeed in pushing Indians off cash? By April 2018, the volume of digital payments had doubled. At the same time, however, at the end of May 2019, currency notes in circulation had increased by more than 22% over the pre-demonetisation level. The use of cash was expected to reach $2.45 trillion by 2021, up from $1.5 trillion in 2016, although demonetisation helped digital payments advance by three to four years.

The 2016 policy adopted a callous and ill-thought-out blanket approach. And it was not as though Indians were clamouring for digital — it was imposed on them.

Under cover of COVID-19 lockdowns, can we expect to see cash being pushed right to the margins when countries emerge from the current crisis (for instance, in an ongoing pandemic culture of fear and paranoia, it would be easy to convince people that notes and coins are potential transmitters of disease, or with mass unemployment we may have universal basic income schemes linked to digital payment systems)? It can already be seen with large stores asking customers to pay by card whenever possible.

Many commentators have discussed how the current crisis has been used to remove basic rights and how vaccines and surveillance will be intensified. What could follow may also see our purchases and behaviour being monitored even further via digital payments. For instance, Haring notes that in Kenya Gates saw little wrong in compelling mobile phone providers to give the authorities the opportunity to monitor all phone calls and mobile payments by telling phone companies to let contracted (private) companies hook up to all routers. The plan was to monitor transactions and use the data to target people with advertising to make even more transactions, thereby driving consumption.

It doesn’t take a great leap of faith to appreciate how in a fully digital system, ‘financial flows’ could be blocked, as Gates implied back in 2015. This already happens in the dollar-centred monetary system. But when there is no cash to fall back on and every single transaction in a society is computerised and can be monitored by the state and private corporations, will the term ‘financial inclusion’ then sound so benign?

Locked Down and Locking in the New Global Order

On 12 March, British PM Boris Johnson informed the public that families would continue to “lose loved ones before their time” as the coronavirus outbreak worsens.

He added:

We’ve all got to be clear, this is the worst public health crisis for a generation.

In a report, the Imperial College had warned of modelling that suggested over 500,000 would die from the virus in the UK. The lead author of the report, epidemiologist Neil Ferguson, has since revised the estimate downward to a maximum of 20,000 if current ‘lockdown’ measures work. Johnson seems to have based his statement on Ferguson’s original figures.

Before addressing the belief that a lockdown will help the UK, it might be useful to turn to an ongoing public health crisis that receives scant media and government attention – because context is everything and responses that are proportionate to crises are important.

The silent public health crisis

In a new 29-page open letter to Fiona Godlee, editor-in-chief of the British Medical Journal, environmentalist Dr Rosemary Mason spends 11 pages documenting the spiralling rates of disease that she says (supported by numerous research studies cited) are largely the result of exposure to health-damaging agrochemicals, not least the world’s most widely used weedkiller – glyphosate.

The amount of glyphosate-based herbicides sprayed by UK farmers on crops has gone from 226,762 kg in 1990 to 2,240,408 kg in 2016, a 10-fold increase. Mason discusses links between multiple pesticide residues (including glyphosate) in food and steady increases in the number of cancers both in the UK and worldwide as well as allergic diseases, chronic kidney disease, Alzheimer’s, Parkinson’s, obesity and many other conditions.

Mason is at pains to stress that agrochemicals are a major contributory factor (or actual cause) for the spikes in these diseases and conditions. She says this is the real public health crisis affecting the UK (and the US). Each year, she argues, there are steady increases in the numbers of new cancers in the UK and increases in deaths from the same cancers, with no treatments making any difference to the numbers.

Of course, it would be unwise to lay all the blame at the door of the agrochemicals sector: we are subjected each day to a cocktail of toxic chemicals via household goods, food processing practices and food additives and environmental pollution. Yet there seems to be a serious lack of action to interfere with corporate practices and profits on the part of public bodies, so much so that a report by the Corporate Europe Observatory said in 2014 that the then outgoing European Commission had become a willing servant of a corporate agenda.

In a 2017 report, Hilal Elver, UN Special rapporteur on the right to food, and UN Special Rapporteur on human rights and hazardous substances and wastes Baskut Tuncak were severely critical of the global corporations that manufacture pesticides, accusing them of the “systematic denial of harms”, “aggressive, unethical marketing tactics” and heavy lobbying of governments which has “obstructed reforms and paralysed global pesticide restrictions”.

The authors said that pesticides have catastrophic impacts on the environment, human health and society as a whole, including an estimated 200,000 deaths a year from acute poisoning.  They concluded that it is time to create a global process to transition toward safer and healthier food and agricultural production.

At the time, Elver said that, in order to tackle this issue, the power of the corporations must be addressed.

While there is currently much talk of the coronavirus placing immense strain on the NHS, Mason highlights that the health service is already creaking and that due to weakened immune systems brought about by the contaminated food we eat, any new virus could spell disaster for public health.

But do we see a ‘lockdown’ on the activities of the global agrochemical conglomerates? Not at all. As Mason has highlighted in her numerous reports, we see governments and public health bodies working hand in glove with the agrochemicals and pharmaceuticals manufacturers to ensure ‘business as usual’. So, it might seem strange to many that the UK government is seemingly going out of its way (by stripping people of their freedoms) under the guise of a public health crisis but is all too willing to oversee a massive, ongoing one caused by the chemical pollution of our bodies.

Mason’s emphasis on an ongoing public health crisis brought about by poisoned crops and food is but part of a wider story. And it must be stated that it is a ‘silent’ crisis because the mainstream media and various official reports in the UK have consistently ignored or downplayed the role of pesticides in fuelling this situation.

Systemic immiseration

Another part of the health crisis story involves ongoing austerity measures.

The current Conservative administration in the UK is carrying out policies that it says will protect the general population and older people in particular. This is in stark contrast to its record over the previous decade which demonstrates contempt for the most vulnerable in society.

In 2019, a leading UN poverty expert compared Conservative welfare policies to the creation of 19th-century workhouses and warned that unless austerity is ended, the UK’s poorest people face lives that are “solitary, poor, nasty, brutish, and short”. Philip Alston, the UN rapporteur on extreme poverty, accused ministers of being in a state of denial about the impact of policies. He accused them of the “systematic immiseration of a significant part of the British population”.

In another 2019 report, it was claimed that more than 130,000 deaths in the UK since 2012 could have been prevented if improvements in public health policy had not stalled as a direct result of austerity cuts.

Over the past 10 years in the UK, there has been rising food poverty and increasing reliance on food banks, while the five richest families are now worth more than the poorest 20% and about a third of Britain’s population lives in poverty.

Almost 18 million cannot afford adequate housing conditions; 12 million are too poor to engage in common social activities; one in three cannot afford to heat their homes adequately in winter; and four million children and adults are not properly fed (Britain’s population is estimated at 63 to 64 million). Welfare cuts have pushed hundreds of thousands below the poverty line since 2012, including more than 300,000 children.

In the wake of a lockdown, we can only speculate about how a devastated economy might be exploited to further this ‘austerity’ agenda. With bailouts being promised to companies and many workers receiving public money to see them through the current crisis, this will need to be clawed back from somewhere. Will that be the excuse for defunding the NHS and handing it over to private healthcare companies with health insurance firms in tow? Are we to see a further deepening of the austerity agenda, let alone an extension of the surveillance state given the current lockdown measures which may not be fully rolled back?

The need for the current lockdown and the eradication of our freedoms has been questioned by some, not least Lord J. Sumption, former Supreme Court Justice. He has questioned the legitimacy of Boris Johnson’s press conference/statement to deprive people of their liberty and has said:

There is a difference between law and official instructions. It is the difference between a democracy and a police state.

Journalist Peter Hitchens says a newspaper headline for what Sumption says might be – ‘Former Supreme Court justice says Johnson measures lead towards police state’ or ‘TOP JUDGE WARNS OF POLICE STATE’.

But, as Hitchens implies, such headlines do not appear. Indeed, where is the questioning in the mainstream media or among politicians about any of this? To date, there have been a few isolated voices, with Hitchens himself being one.

In his recent articles, Hitchens has questioned the need for the stripping of the public’s rights and freedoms under the pretext of a perceived coronavirus pandemic. He has referred to esteemed scientists who question the need for and efficacy of ‘social distancing’ and keeping the public under virtual ‘house arrest’.

An open Letter from Dr. Sucharit Bhakdi, emeritus professor of medical microbiology at the Johannes Gutenberg University Mainz, to Angela Merkel calls for an urgent reassessment of Germany’s lockdown response to Covid-19. Then there is Dr Ioannidis, a professor of medicine and professor of epidemiology and population health at Stanford University. He argues that we have made such decisions on the basis of unreliable data. These two scientists are not alone. On the OffGuardian website, two articles have appeared which present the views of 22 experts who question policies and/or the data that is being cited about the coronavirus.

Shift in balance of power

Professor Michel Chossudovsky has looked at who could ultimately benefit from current events and concludes that certain pharmaceutical companies could be (are already) major beneficiaries as they receive lavish funding to develop vaccines. He asks whether we can trust the main actors behind what could amount to a multi-billion dollar global (compulsory) vaccination (surveillance) project.

The issue of increased government surveillance has also been prominent in various analyses of the ongoing situation, not least in pushing the world further towards cashless societies (under the pretext that cash passes on viruses) whereby our every transaction is digitally monitored and a person’s virtual money could be declared null and void if a government so decides. Many discussions have implicated the Bill and Melinda Gates Foundation in this – an entity that for some time has been promoting the roll-out of global vaccine programmes and a global ‘war on cash’.

For instance, financial journalist Norbert Haring notes that the Gates Foundation and US state-financial interests had an early pivotal role in pushing for the 2016 demonestisation policy with the aim of pushing India further towards a cashless society. However, the policy caused immense damage to the economy and the lives and livelihoods of hundreds of millions in India who rely on cash in their everyday activities.

But that does not matter to those who roll out such policies. What matters is securing control over global payments and the ability to monitor and block them. Control food you control people. Control digital payments (and remove cash), you can control and monitor everything a country and its citizens do and pay for.

India has now also implemented a lockdown on its population and tens of millions of migrant workers have been returning to their villages. If there is a risk of corona virus infection, masses of people congregating in close proximity then returning to the countryside does not bode well.

Indeed, the impact of lockdowns and social isolation could have more harm than the effects of the coronavirus itself in terms of hunger, depression, suicides and the overall deterioration of the health of older people who are having operations delayed and who are stuck indoors with little social interaction or physical movement.

If current events show us anything, it is that fear is a powerful weapon for securing hegemony. Any government can manipulate fear about certain things while conveniently ignoring real dangers that a population faces. In a recent article, author and researcher Robert J Burrowes says:

… if we were seriously concerned about our world, the gravest and longest-standing health crisis on the planet is the one that starves to death 100,000 people each day. No panic about that, of course. And no action either.

And, of course, each day we live with the very real danger of dying a horrific death because of the thousands of nuclear missiles that hang over our heads. But this is not up for discussion. The media and politicians say nothing. Fear perception can be deliberately managed, while Walter Lippmann’s concept of the ‘bewildered herd’ cowers on cue and demands the government to further strip its rights under the guise of safety.

Does the discussion thus far mean that those who question the mainstream narrative surrounding the coronavirus are in denial of potential dangers and deaths that have been attributed to the virus? Not at all. But perspective and proportionate responses are everything and healthy debate should still take place, especially when our fundamental freedoms are at stake.

Unfortunately, many of those who would ordinarily question power and authority have meekly fallen into line: those in the UK who would not usually accept anything at face value that Boris Johnson or his ministers say, are now all too easily willing to accept the data and the government narrative. This is perplexing as both the government and the mainstream media have serious trust deficits (putting it mildly) if we look at their false narratives in numerous areas, including chemical attacks in Syria, ‘Russian aggression’, baseless smear campaigns directed at Jeremy Corbyn and WMDs in Iraq.

What will emerge from current events is anyone’s guess. Some authors like economist and geopolitical analyst Peter Koenig have presented disturbing scenarios for a future authoritarian world order under the control of powerful state-corporate partners. Whatever the eventual outcome, financial institutions, pharmaceuticals companies and large corporations will capitalise on current events to extend their profits, control and influence.

Major corporations are already in line for massive bailouts despite them having kept workers’ wages low and lining the pockets of top executives and shareholders by spending zero-interest money on stock buy backs. And World Bank Group President David Malpass has stated that poorer countries will be ‘helped’ to get back on their feet – on the condition that further neoliberal reforms and the undermining of public services are implemented and become further embedded:

Countries will need to implement structural reforms to help shorten the time to recovery and create confidence that the recovery can be strong.  For those countries that have excessive regulations, subsidies, licensing regimes, trade protection or litigiousness as obstacles, we will work with them to foster markets, choice and faster growth prospects during the recovery.

In the face of economic crisis and stagnation at home, this seems like an ideal opportunity for Western capital to further open up and loot economies abroad. In effect, the coronavirus provides cover for the further entrenchment of dependency and dispossession. Global conglomerates will be able to hollow out the remnants of nation state sovereignty, while ordinary people’s rights and ability to organise and challenge the corporate hijack of economies and livelihoods will be undermined by the intensified, globalised system of surveillance that beckons.

BNP before a French Court

A court case is currently running in France that is of relevance to more than the French.

During two weeks to 29 November, Banque Nationale de Paris Paribas is being sued in the Tribunal correctionnel of Paris (a mid-level criminal court) by lawyers representing borrowers of loans denominated in foreign currency.

The issue is of broad relevance because Eastern European countries are bogged down in a quagmire of the stuff. Millions of naïve customers were sold loans in foreign currencies to finance housing, auto loans, etc. Welcome to the freedoms of the West. It was a bomb waiting to explode. Explode it has, with victim activists pressuring for acknowledgement of wrongdoing and compensation, and litigation in national courts and in the European Court of Justice. Media coverage outside of Eastern Europe of this financial catastrophe has been deplorable.

All this is déja vu in the antipodes. In a rush of blood immediately following financial deregulation in the early 1980s, Australian banks (replicated in New Zealand) flogged foreign currency loans to unsuspecting small businesspeople and family farmers. The Australian dollar plummeted in 1985 (it had only been floated in December 1983) – a disaster for the borrowers. Much litigation ensued, with only a small number of borrowers benefiting from favourable court judgments or out-of-court settlements. The ensuing conflict and litigation was well reported in the local media for over a decade but the news doesn’t appear to have travelled above the equator.

In March 2008. The French banking giant BNP Paribas (via its subsidiary Personal Finance) initiated the offering of housing loans in Swiss francs (CHF). The loan product, designated ‘Helvet Immo’ (immobilier, or real estate), was ultimately sold to over 4,600 borrowers until December 2009. The loans were sold through property consultant firms as advisory intermediaries.

The formal attraction to borrowers, as with foreign currency loans in general, was a lower interest rate than that available in the domestic currency. There was another reputed advantage. The loans were pushed for the purchase of rental properties to be constructed to add to the country’s ‘patrimony, and thus to be eligible for reduction of the borrower’s tax liability. They were pushed as the ideal safe investment for one’s retirement.

However, the monthly payments for these loans were to be in euros, as was ultimate repayment of the principal.

Apart from being rooted in a culture of consummate spivery, BNP’s introduction of Helvet Immo in early 2008 constituted very bad timing. During and after the GFC, the CHF climbed significantly against the euro. That the euro should suffer was in large part due to the excesses of European banks, not least BNP itself, that brought the GFC to the Continent.

When the initial borrowers subscribed to this facility, the euro bought 1.6 – 1.7 CHF. In the initial phase of the GFC, the Swiss Central Bank (BNS) allowed only a small revaluation. But when general banking debt was converted into a sovereign debt blowout in 2010 following governments’ support for the crippled banking sector, the BNS let the CHF float. After the float, the CHF rose to about 1.2 until the BNS stepped in again in September 2011. In January 2015, the BNS again floated the CHF, following which it soon rose to near parity with the euro (it has since retreated marginally to 1.1).

Euro / CHF 2003-2019. Source: fxtop.com

The euro thus experienced a long-term degradation vis-à-vis the CHF. As elsewhere, the borrowers faced a massive hike in their repayment of principal and a comparable hike in their monthly payments in euros.

Journalist Dan Israel, of French online journal Mediapart, covered the early BNP loan disclosures.1 In 2015 Israel reported that one couple had borrowed €120,000 and had already paid more than €60,000 in monthly payments but found themselves at that stage owing more than €140,000. Another client had borrowed more than €330,000, had paid €160,000 but remained indebted at €450,000.

Distressed BNP borrowers began taking BNP to court after 2011. Procedures have been in place in both civil and criminal (pénal) jurisdictions, but the wheels of justice turn excruciatingly slowly in France. The lawyers are seeking judgment and compensation for ‘misleading representation’ (practique commercial trompeuse).

The perennial question is whether the borrowers were given sufficient warning as to the embodied risk due to potential variation in debt principal linked to exchange rate variation – crucial as to the attribution of accountability for the subsequent losses.

BNP chose to market the product only through intermediaries, potentially reducing its responsibility at law. Discovered documents highlight that the bank knowingly minimised the risk to its intermediaries and thus to its borrowers. An early marketing document had a warning of exchange rate variation that disappeared in subsequent versions. Marketing documents consistently emphasised that the product offered ‘security’ and was ‘without risk’.

One Normandy couple was told, as part of their advisor’s aggressive spiel, that BNP was ‘the most powerful bank in Europe’ – ergo, the epitome of trustworthiness (competence, integrity, etc.).

In spite of this evidence, many individual cases heard in civil jurisdiction have been decided in favour of the bank (some on appeal), for reasons unclear. Of those decided for the borrower, compensation awarded has been feeble. There is more optimism emanating from the criminal court, and the bulk of borrower cases in the civil court have been deferred pending the outcome there.

In April 2013, the judge Claire Thépaut, after long studying the dossier, determined that BNP should be put under examination for potential misrepresentation. This was a first stage, not implying culpability. It involved two questions – was the information provided sufficient, and was it deceptive. On 16 April 2015, after questioning the then CEO of BNP PF, Thépaut indicted BNP for misleading representation.

The decisive evidence comes from a whistleblower. On 17 September 2015, Nathalie Chevallier was auditioned in the criminal court. Chevallier was then regional director of BNP PF in Paris. BNP PF was then stagnating and the CHF housing loan was suggested as a means of reviving the subsidiary’s revenue. She was put into a workgroup to work out details. She realised immediately that the proposed facility was dangerous. She wanted ‘crash tests’. She noted that even minor exchange rate variations would be disadvantageous for clients.

But Chevallier was rebuked by her superiors. Her superiors retorted (paraphrasing): ‘Do you think you’re smarter than those who developed this product? You have 15 days to change your mind, or we’ll have to think about your job’.

On 29 March 2017, the Cour de cassation (France’s highest court in commercial matters) ruled that BNP could have prevented the issuing of a dangerous facility. It also ruled that the civil courts of appeal could have examined, on their own initiative, the contract for misleading representation even if the borrowers had not so demanded.

The Cour de cassation also determined that the typical loan contract contained ‘unfair contract terms’ which strategically (and unconscionably) advantaged the bank lender. This ruling is consistent with (indeed mandated by) European Union consumer law – law that the Eastern European victims are hoping to leverage for their own pursuit of justice.

In early April 2017, BNP PF was belatedly arraigned before the Tribunal correctionnel for criminal prosecution. Two and a half years later …

Thus on the first day of the current hearing, 12 November, the courtroom was packed to the gills with borrowers and their legal representatives. On the other side, BNP masked its solitariness with its battalion of lawyers, etc.

BNP’s lawyers still insist that the FCL facility was a casualty of the CHF surge following the 2010 sovereign debt blowout, which was ‘unforeseeable.’ Buyer beware! In any case, claim the lawyers, BNP offered the borrowers conversion options.

Tell that to Guiseppe and Sonia, retirees from running a restaurant in Nice. Guiseppe has been recently reported as claiming, ‘We were deceived … When I asked what difference there was between borrowing in swiss francs or in euros, the financial advisor replied – there’s no difference’. They are in the same predicament as those cases cited above. They borrowed €115,000 in 2008, they have been paying off €745 a month over 10 years, but their debt stands at €145,000. In short, a nightmare.

One couple notes the humiliation associated with their loss. From the hope of being able to assist their children they are now dependent on them.

But back to 1980s Australia for a telling vignette. BNP then operated a subsidiary in Australia, promoting itself as a high class entity amongst local banking yokels. It cynically offered a FCL to small-scale property developers who were directed to BNP for informed advice. BNP proffered to the know-nothings sophisticated skills to handle this unique facility. Not atypically in small business Australia, the country having experienced a massive wave of immigrants from post-1945 Southern Europe, the borrowers were semi-literate in English and totally oblivious of the nuances of cowboy financial intermediation.

The borrowers took BNP to court. The judge (Foti v BNP, South Australian Supreme Court, 1989) granted negligence, duty of care on the part of the bank and causation (i.e., customer avoidable loss due to bank failure to advise). BNP, as did the Australian banks, abused its reputation as a reputedly trustworthy institution and its asymmetric power in the entrapment of financially ignorant customers.

Fortunately for BNP, the loss at litigation was only partial. The point here is that BNP was party to an environment in which the intrinsic technical flaw in FCL loans became transparent. The losses to thousands of hapless unsophisticated played out in the Australian courts, the media and public inquiries over fifteen years. In its extensive foray into lending in CHF in 2008, BNP chose to forget this previous experience and to hide the dysfunctionality of such a facility for borrowers.

The decisions of the criminal court to date and of the Cour de cassation represent a seismic shift in the balance between bank and borrowers – they constrain the civil courts in their determinations. The determinations of the Cour de cassation effectively damn intrinsically the foreign currency character of the Helvet Immo facility.

Two factors make the French litigation regarding this facility unique. The first is that the media consistently refer to such loans as ‘toxic’ – that is, not fit for purpose. It appears that the Cour de cassation confirms the accuracy of the appellation. The second is that litigation is proceeding in a criminal jurisdiction, in my understanding an unprecedented development.

Apart from the 4,600 French casualties of BNP’s chicanery, millions of Eastern European FCL borrowers will be awaiting expectantly the French court’s deliberations.

  1. Dan Israel, “Prêts toxiques de la BNP: un témoin clé veut parler [BNP’s toxic loans: a key witness ready to speak],” Mediapart, 17 September 2015.

Will the IMF, FED, Negative Interest and Digital Money Kill the Western Economy?

The IMF, has been instrumental in helping destroying the economy of a myriad of countries, notably, and to start with, the new Russia after the fall of the Soviet Union, Greece, Ukraine and lately Argentina, to mention just a few. Madame Christine Lagarde, as chief of the IMF had a heavy hand in the annihilation of at least the last three mentioned. She is now taking over the Presidency of the European Central Bank (ECB). There, she expects to complete the job that Mario Draghi had started but was not quite able to finish: Further bleeding the economy of Europe, especially southern Europe into anemia.

Let’s see what we may have in store to come.

Negative interest, we have it already. It’s the latest banking fraud stealing money from depositors to give to large borrowers. It’s a reverse cross-subsidy, the poor financing the rich. That’s the essence. It’s a new form of moving money from the bottom to the top. Now, a Danish bank has launched the world’s first negative interest rate mortgage. It provides mortgages to home owners for a negative rate of 0.5%. The bank pays borrowers to take some money off their books. Of course, as usual, only relatively well-off people can become home owners and benefit from this reverse cross-subsidy. It is a token gesture, duping the public at large into believing that they are benefitting from the new banking stint. The bulk of such operations serve large corporations.

The borrower pays back less than the full loan amount. Switzerland may soon go into the direction of Denmark. Bank deposits with central banks pay negative interest almost everywhere in the western world, except in the US – yet. It’s only a question of time until the average consumer will have to reimburse the banks for their central bank deposit expenses, meaning, the customers are getting negative interest on their deposits. That’s inflation camouflage. A sheer fraud, but all made legal by a system that runs amok, that does not follow any ethics or legal standards. A totally deregulated western private banking system, compliments of the 1990s Clinton Administration, and, of course, his handlers. As Professor Michael Hudson calls it, financial barbarism. We are haplessly enslaved in this aberrant ever more abusive private  fiat money banking shenaniganism.

RT’s Max Keiser recently interviewed Karl Denninger of Market-Ticker.org. Denninger told Keiser:

Negative yielding bond is forced inflationary instrument: you buy it, you’re guaranteed inflation in the amount of a negative yield.

He blasted the tool as plain “theft” by any government that issues these bonds, which is done in an effort to nominally expand a country’s GDP.

If the government is issuing more in sovereign debt their GDP is expanding in nominal terms. If you have negative interest rates on those government bonds, you’re creating excess space for the government to run the fiscal deficit […] in excess of GDP expansion. Nobody in any civilized nation should allow this to happen because it is theft, on the scale of that differential, from everybody in the economy,

To make sure the little saver doesn’t think about depositing his savings under his mattress or in a hole in the ground instead of bringing it to the bank, money will be digitized and cash will disappear. Madame Lagarde has already more than hinted at that, when she gave a pre-departure speech at the IMF – explaining on how she sees the future of monetary banking. The future, according to her, being no more than 15 to 20 years away, is a no-cash society. Just enough time for the elder generations, those that may still feel an instinct of rejection and have some consciousness about personal privacy, those that may resist money digitization, may have died out. The young, up-and-coming age groups may be brainwashed enough to find a cashless society so cool.

Since Madame Lagarde is moving to head the ECB in Frankfurt, it is fair to assume that Europe will be one of the largest test grounds for digitized money; i.e., towards a cashless society. In fact, it is already a test ground. Many department stores and other shops in Nordic countries — Sweden, Norway, Denmark, Finland — do no longer accept cash, only electronic money. In Denmark already up of 80% of all monetary transactions are made digitally.

Imagine, for your chewing gum wrapper, pack of cigarette, or candy bar, you swipe a card in front of an electronic eye, and bingo, you have paid, not touching any money – “that’s mega cool!”.  That’s what the young people may think, oblivious to leaving a trail of personal data behind, among them their bank account details, their GPS-geared location, what they are shopping, a pattern of data that is in ten years-time expected to amount to about 70,000 points of information about an individual’s characteristics, emotions, preferences, photos, personal contacts… what Cambridge Analytica in the superb documentary “The Great Hack” revealed as already today on average 5,000 points of data per citizen. The system will know you inside out better than you know yourself. And you will be exposed to algorithms that know exactly how to influence every action, every move of yours. Cool!

That, combined with face recognition which is advancing rapidly around the globe, will be super cool.

A horrendous trial on how an entire country, India, with the world’s second largest population, may react to demonization, was introduced in 2016 by President Modi, bending to the pressure of the western financial system, with support of the IMF and implementation funding by USAID. It amounted in a disastrous and cruel demonetization, invalidating almost over-night the most popular 100 Rupee (Rs) bank note, replacing it with a 200 Rs note which in most places, especially in rural towns, where banks are scarce, was not available. Never mind that less than half of the Indian population has a bank account, where the bank note exchange transactions had to be carried out.

The sudden disappearance of the most popular bank note – more than 80% of all monetary cash transactions in India took place in 100 Rs notes – was a proxy to digitization of money. Countless people starved to death especially in rural areas, because their 100 Rs were declared worthless and became unacceptable to buy food.

The 340,000 citizens of Iceland have already a fully digitized e-ID, now moving towards a mobile ID; i.e., accessible through your smart phone uniting every possible data that belongs to you, from medical records to insurance policies, all the way to dog, cat and car registrations. You name it. Most say they trust their government and are not unhappy with their divulging their most intimate data. Many have no or little idea, though, to what extent the private sector is involved in setting up such a hermetic countrywide data bank for the government. Even if the regulator is within the government and you trust your government, how much can you trust the profit-oriented private sector in protecting your data?

The surveillance state that you, among other clandestine intrusions into your privacy, will allow by willy-nilly accepting digitization of money, and eventually digitization of your entire private data, pales Orwell’s imagination of “1984”. Every citizen is registered in every western “security agency’s” electronic data bank, and, of course, those of the empire and Middle East affiliate, Israel, CIA, NSA, FBI, Mossad, and so on.  No escaping anymore.

It just so happens that you, dear citizen, are oblivious to all of what is going on behind your back, since your attention will be captured by massive marketing and directed towards the nefarious machinations of the corporate elite-ruled, globalized world, making you an eternal and ever-more intense consumer. You must spend the last penny of your income on trendy stuff, all those fashion things that will be pumped non-stop day-in-day-out into your brain, what’s left of it, by propaganda on television, radio, electronic cartoon-like billboards, internet, and that at every turn you take. And let’s not forget sports events.  They increase every year and are the most direct deviation tactic take-over from the Roman Empire.

The most aberrant trends will be cool, like shredded jeans, for which you pay a premium, body-paintings called tattoos, footballer hair styles, because they are fashionable and your looks are key to fit into a standardized, globalized society that has seized thinking for itself, no more interest in politics, in what your non-democratically elected representatives decide for you. It’s what Noam Chomsky calls the marginalization of the populace.

You are made to believe that you are living in a democracy where you can do what you want, shop what you want, watch what you want, and even when the elections or occasional referenda are offered to request your opinions, you are cheated into believing your choice is free. Of course, it is not. It is all programmed. Algorithms drawing on your profile of 70,000 points of information on emotions, desires and dreams, will clandestinely help the ‘system’ to enslave, cheat and master you, and you won’t even notice.

That’s where we are headed, largely thanks to digitalization of money – but not only, because surveillance will also follow all your steps on internet, on Facebook, Twitter, Instagram, Whatsapp – and many more of those especially created marketing tools, implanted in societies’ social media, that make life and communication so much easier.

And there is more to digital money. Much more. In 2014, the unelected European Commission (EC) has put on its books of regulations, following a similar decree in the US, the rule that an overextended bankrupt too-big-to-fail private bank will no longer be rescued by the state, by your tax money – which used to be called a “bail-out”. Instead, there will be “bail-ins”, meaning that the bank will seize your deposits, your savings and sanitize itself with money stolen from you. You have no choice. There will be no ‘run on the banks’  because there is no cash to withdraw. We have seen signs of this when Greece collapsed after 2010, and cash machines spitting out no more than 20 € per day, if at all. For many Greek citizens, especially the poorer class living from day to day, this meant often cruel starvation.

Bail-ins are little talked about, but they happen already today and ever more so. In 2014, the Austrian bank Hypo Alpe Adria – the Heta Asset Resolution AG, was given green light by the Austrian Banking Regulator, the Austrian Financial Market Authority (FMA), to refinance itself by a so-called “haircut” of an average 54%, meaning, stealing 54% of depositors’ money.

But the first and largest “haircut” test took place in Cyprus, when in 2013 the Bank of Cyprus depositors lost about 47.5% in a “haircut” to bail out their bank. Of course, the big sharks were forewarned, so they could withdraw their money in time and transfer it abroad.1

It could get worse. The state, tax authority, an institution, a corporation says you owe them money which you deny, possibly for a good reason, but they have access to your bank account and just seize the amount they pretend is their due. You are powerless against these tyrannical monsters and may have to hire expensive legal service to get your stolen money back if at all. Because the “system” is run by the “system”. And once that level has been reached, a form of Full Spectrum Dominance, a key target of the PNAC (Plan for a New American Century), there is hardly any escaping. That has all happened already, in front of our publicity-blinded eyes, little spoken about, the trend is growing and this even without necessarily a digitized world.

Is it that the kind of society you want?

Then there are the rather prominent gurus who bet on gold and bitcoins to replace the faltering dollar, like a last-ditch solution. None of them is any more viable than the fiat dollar. Gold is highly volatile due to its vulnerability for manipulation – as it is largely controlled by the BIS (Bank for International Settlement, in Basle, Switzerland, also called the central bank of all central banks, and yes, the same bank that helped the FED finance Hitler’s war against the Soviet Union.  (So you see where this bank is coming from.) It is entirely privately owned and largely controlled by the Rothschild clan. And as an associated side note — few people talk about it — there is in excess of 100 times more paper gold in circulation than you could ever cash in, if you needed it. It is another one of those bank-invented ‘derivative’ bubbles that will explode and serve to enrich them when the time is ripe.

Bitcoins, the most prominent of some 3,000 to 4,000 cryptocurrencies flooding the world, is totally unreliable. A year after it was created in 2008 allegedly by an unknown person or group of people using the name Satoshi Nakamoto, bitcoin’s value in 2009 was US$ 0.08, It gradually rose and eventually jumped in December 2017 briefly above US$ 20,000, but dropped within a year to about US$ 3,500. Today bitcoin is hovering around US$ 9,500 (August/September 2019). Bitcoin – along with other cryptocurrencies – is highly speculative, lends itself to Mafia-type money-laundering and other fraudulent transactions. It is about equivalent to fiat money and certainly inept to be the backing for a monetary system.

And let’s not forget, the latest Facebook initiative — a cryptocurrency, the Libra, to be launched in 2020 out of Geneva, Switzerland – is expected to dominate within a few years 70% to 80% of the international money market. You see, the same clan that has been manipulating and cheating you with the dollar, is now ‘banking’ on you falling for the Facebook currency  as it will be so easy to use your smart phone for any kind of monetary transaction, thus, avoiding traditional predatory banking. Looks like a good thing at the outside – right? – Nope! It’s entirely privately owned and run by an unscrupulous mafia that is being set up to continue milking the masses for the benefits of an ever-smaller elite.

There is ,however, a role for blockchain cryptocurrencies, to circumvent private banking, those that are government controlled and regulated. China and Russia are about to launch their government-controlled cryptocurrencies and others – Iran, Venezuela, India – are following in the same steps. But they all ban privately run cryptocurrencies in their countries and rightly so. A combination of government-regulated blockchain cryptos and public banking, where no private profits are in the fore, but rather the well being of the citizen and the country’s economy, may be a viable solution into a new monetary scheme, protected from the kleptocracy of western banking.

Desperation about the dollar losing its world hegemony is growing – and growing fast. To salvage the western fiat monetary system, Madame Lagarde and others are also talking about some kind of Special Drawing Rights (SDR) to replace the dollar as a reserve currency, since there is no escaping – the dollar as reserve currency is doomed. The current IMF SDR basket consists of five currencies, the US-dollar (weighing 41.73%), the British Pound (8.02%) the Euro (30.93%), the Japanese Yen (8.33%) and since 2017 the Chinese Yuan, the currency of the world’s largest economy compared by Purchasing Power GDP (10.92%).

At this point thinking of any reshuffling of the SDR basket’s contents is purely speculative. However, it can easily be assumed that the dollar would remain in a very prominent position within the basket, as it should remain the leading hegemon of world economy. Let’s not forget, the US Treasury controls the IMF with an absolute veto, in other words, 100%. It can also be assumed that the Chinese Yuan would either be kicked out altogether or would be given a minor weight in the basket so to diminish its role. If this was to become the chosen option by the US Treasury, it could and probably might prompt China to withdraw the Yuan from the SDR basket, as the Yuan does no longer need SDR recognition in the world to be considered a primary reserve currency.

Unless this is stealthily done — outside of public sight and in disguise of countries still holding major US-dollar reserves — the world would unlikely accept such an alternative, especially since it is widely known among treasurers of countries around the globe that the Chinese Yuan is rapidly raising to become the key world reserve currency.

As reported by William Engdahl’s analytical essay “Is the Fed Preparing to Topple the US Dollar?”, the outgoing Governor of the Bank of England, Mark Carney, delivered at the recent annual meeting of central bankers in Jackson Hole, Wyoming, a set of ideas that went into a similar direction, towards a shift away from the dominant role of the US dollar as a reserve currency. Similar to Mme. Lagarde’s earlier remarks about an SDR-type reserve currency, he made it understood that though the Chinese Yuan, the currency of the key trading nation, may have a role in the basket, it would – for now – not be an important one. He also was clear about the current disturbing and destabilizing imbalance where a faltering dollar still pretends to hold the hegemonic scepter over the world economy.

Keeping the dollar still in a leading role, while the US economy is declining, was no longer a viable option for an increasingly globalized world economy. Carney was hinting at a multipolar monetary and reserve system for a multipolar globalized world. Similar remarks came from former New York Federal Reserve Bank chief, Bill Dudley. However, Dudley, hinted that for the United States to give up her dollar dominance, the backbone for her world hegemony, may not come voluntarily. Might that lead to a major, maybe armed world conflict?

Much of this is speculation from the western perspective. It is, however, clear that there is a tremendous and mounting uneasiness about the western dollar-based fiat monetary system, backed by nothing, not even by the western economy. You compare this with the Chinese Yuan and the Russian Ruble, both backed by gold and – more importantly – by their own economy. It becomes increasingly clear that much of the speculation and efforts by influential central banking figures to save the western monetary Ponzi scheme maybe just propaganda to calm the minds of western financiers – holding them back from jumping ship.

• First published in New Eastern Outlook (NEO)

  1. See: Peter Koenig: “Infringing upon the Eurozone’s Sovereignty on behalf of Wall Street.  The EBC’s “Haircut” Measures, Undermining Trade and Investment with Russia and China“, Global Research, November 7, 2015; and Peter Koenig, “Retrenchment, Robotization and Crypto-Currencies: The Runaway Train Towards Full Digitization of Money and Labor“, Global Research, December 27, 2017.

Neoliberalism Has Met Its Match in China

Ellen Brown chairs the Public Banking Institute and has written thirteen books, including her latest, Banking on the People: Democratizing Money in the Digital Age.  She also co-hosts a radio program on PRN.FM called It’s Our Money.

When the Federal Reserve cut interest rates on July 31 for the first time in more than a decade, commentators were asking why. According to official data, the economy was rebounding, unemployment was below 4%, and GDP growth was above 3%. If anything, by the Fed’s own reasoning, it should have been raising rates.

The explanation of market pundits was that we’re in a trade war and a currency war. Other central banks were cutting their rates and the Fed had to follow suit, in order to prevent the dollar from becoming overvalued relative to other currencies. The theory is that a cheaper dollar will make American products more attractive on foreign markets, helping our manufacturing and labor bases.

Over the weekend, President Trump followed the rate cuts by threatening to impose a new 10% tariff on $300 billion worth of Chinese products effective September 1. China responded by suspending imports of U.S. agricultural products by state-owned companies and letting the value of the yuan drop. On Monday, August 5, the Dow Jones Industrial Average dropped nearly 770 points, its worst day in 2019. The war was on.

The problem with a currency war is that it is a war without winners. This was demonstrated in the beggar-thy-neighbor policies of the 1930s, which just prolonged the Great Depression. As economist Michael Hudson observed in a June 2019 interview with Bonnie Faulkner, making American products cheaper abroad will do little for the American economy, because we no longer have a competitive manufacturing base or products to sell. Today’s workers are largely in the service industries – cab drivers, hospital workers, insurance agents and the like. A cheaper dollar abroad just makes consumer goods at Walmart and imported raw materials for US businesses more expensive. What is mainly devalued when a currency is devalued, says Hudson, is the price of the country’s labor and the working conditions of its laborers. The reason American workers cannot compete with foreign workers is not that the dollar is overvalued. It is due to their higher costs of housing, education, medical services and transportation. In most competitor countries, these costs are subsidized by the government.

America’s chief competitor in the trade war is obviously China, which subsidizes not just worker costs but the costs of its businesses. The government owns 80% of the banks, which make loans on favorable terms to domestic businesses, especially state-owned businesses. Typically, if the businesses cannot repay the loans, neither the banks nor the businesses are put into bankruptcy, since that would mean losing jobs and factories. The non-performing loans are just carried on the books or written off. No private creditors are hurt, since the creditor is the government, and the loans were created on the banks’ books in the first place (following standard banking practice globally).

As observed by Jeff Spross in a May 2018 Reuters article titled “China’s Banks Are Big. Too Big?”:

[B]ecause the Chinese government owns most of the banks, and it prints the currency, it can technically keep those banks alive and lending forever.…

It may sound weird to say that China’s banks will never collapse, no matter how absurd their lending positions get. But banking systems are just about the flow of money.

Spross quoted former bank CEO Richard Vague, chair of The Governor’s Woods Foundation, who explained, “China has committed itself to a high level of growth. And growth, very simply, is contingent on financing.” Beijing will “come in and fix the profitability, fix the capital, fix the bad debt, of the state-owned banks … by any number of means that you and I would not see happen in the United States.”

To avoid political and labor unrest, Spross wrote, the government keeps everyone happy by keeping economic growth high and spreading the proceeds to the citizenry. About two-thirds of Chinese debt is owed just by the corporations, which are also largely state-owned. Corporate lending is thus a roundabout form of government-financed industrial policy – a policy financed not through taxes but through the unique privilege of banks to create money on their books.

China thinks this is a better banking model than the private Western system focused on short-term profits for private shareholders. But U.S. policymakers consider China’s subsidies to its businesses and workers to be “unfair trade practices.” They want China to forgo state subsidization an it’s d other protectionist policies in order to level the playing field. But Beijing contends that the demanded reforms amount to “economic regime change.” As Michael Hudson puts it:

This is the fight that Trump has against China.  He wants to tell it to let the banks run China and have a free market.  He says that China has grown rich over the last fifty years by unfair means, with government help and public enterprise.  In effect, he wants the Chinese to be as threatened and insecure as American workers.  They should get rid of their public transportation.  They should get rid of their subsidies.  They should let a lot of their companies go bankrupt so that Americans can buy them.  They should have the same kind of free market that has wrecked the US economy. [Emphasis added.]

Kurt Campbell and Jake Sullivan, writing on August 1 in Foreign Affairs (the journal of the Council on Foreign Relations), call it “an emerging contest of models.”

An Economic Cold War

In order to understand what is happening here, it is useful to review some history. The free market model hollowed out America’s manufacturing base beginning in the Thatcher/Reagan era of the 1970s, when neoliberal economic policies took hold. Meanwhile, emerging Asian economies, led by Japan, were exploding on the scene with a new economic model called “state-guided market capitalism.” The state determined the priorities and commissioned the work, then hired private enterprise to carry it out. The model overcame the defects of the communist system, which put ownership and control in the hands of the state.

The Japanese state-guided market system was effective and efficient – so effective that it was regarded as an existential threat to the neoliberal model of debt-based money and “free markets” promoted by the International Monetary Fund (IMF). According to William Engdahl in A Century of War, by the end of the 1980s Japan was considered the leading economic and banking power in the world. Its state-guided model was also proving to be highly successful in South Korea and the other “Asian Tiger” economies. When the Soviet Union collapsed at the end of the Cold War, Japan proposed its model for the former communist countries, and many began looking to it and to South Korea as viable alternatives to the U.S. free-market system. State-guided capitalism provided for the general welfare without destroying capitalist incentive. Engdahl wrote:

The Tiger economies were a major embarrassment to the IMF free-market model.  Their very success in blending private enterprise with a strong state economic role was a threat to the IMF free-market agenda.  So long as the Tigers appeared to succeed with a model based on a strong state role, the former communist states and others could argue against taking the extreme IMF course.  In east Asia during the 1980s, economic growth rates of 7-8 per cent per year, rising social security, universal education and a high worker productivity were all backed by state guidance and planning, albeit in a market economy – an Asian form of benevolent paternalism.

Just as the U.S. had engaged in a Cold War to destroy the Soviet communist model, so Western financial interests set out to destroy this emerging Asian threat. It was defused when Western neoliberal economists persuaded Japan and the Asian Tigers to adopt the free-market system and open their economies and their companies to foreign investors. Western speculators then took down the vulnerable countries one by one in the “Asian crisis” of 1997-98. China alone was left as an economic threat to the Western neoliberal model, and it is this existential threat that is the target of the trade and currency wars today.

If You Can’t Beat Them …

In their August 1 Foreign Affairs article, titled “Competition without Catastrophe,” Campbell and Sullivan write that the temptation is to compare these economic trade wars with the Cold War with Russia; but the analogy, they say, is inapt:

China today is a peer competitor that is more formidable economically, more sophisticated diplomatically, and more flexible ideologically than the Soviet Union ever was. And unlike the Soviet Union, China is deeply integrated into the world and intertwined with the U.S. economy.

Unlike the Soviet Communist system, the Chinese system cannot be expected to “crumble under its own weight.” The US should not expect or want to destroy China, say Campbell and Sullivan. Rather, we should aim for a state of “coexistence on terms favorable to U.S. interests and values.”

The implication is that China, being too strong to be knocked out of the game as the Soviet Union was, needs to be coerced or cajoled into adopting the neoliberal model. It needs to abandon state support of its industries and ownership of its banks. But the Chinese system, while obviously not perfect, has an impressive track record for sustaining long-term growth and development. While the U.S. manufacturing base was being hollowed out under the free-market model, China was systematically building up its own manufacturing base, investing heavily in infrastructure and emerging technologies; and it was doing this with credit generated by its state-owned banks. Rather than trying to destroy China’s economic system, it might be more “favorable to U.S. interests and values” for us to adopt its more effective industrial and banking practices.

We cannot win a currency war by competitive currency devaluations that trigger a “race to the bottom,” and we cannot win a trade war by competitive trade barriers that simply cut us off from the benefits of cooperative trade. More favorable to our interests and values than warring with our trading partners would be to cooperate in sharing solutions, including banking and credit solutions. The Chinese have proven the effectiveness of their public banking system in supporting their industries and their workers. Rather than seeing it as an existential threat, we could thank them for test-driving the model and take a spin in it ourselves.