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.
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 governments. This 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 theUS 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.
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.”
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.
It usually makes sense to follow the money when seeking understanding of almost any major change. The strategy of following the money in our current convergence of crises in late summer of 2020 leads us directly to the lockdowns. The lockdowns were first imposed on people in the Wuhan area of China. Then other populations throughout the world were told to “shelter in place,” all in the name of combating the COVID-19 virus.
Understanding of the enormous impact of the lockdowns is still developing. The lockdowns are proving to pack a far more devastating punch than any other aspect of the strange sequence of events that is making 2020 a year like no other. Even when the issues are narrowed to those of human health, the lockdowns have had, and will continue to have, far more wide-ranging and devastating impacts than the celebrity virus.
The lockdowns have, for starters, been directly responsible for explosive rates of suicide, domestic violence, overdoses, and depression. In the long run, these maladies from the lockdowns will probably kill and harm many more people than COVID-19.
But this comparison does not tell the full story. The nature and length of the lockdowns are causing millions of people to lose their jobs, businesses and financial viability. It seems that the economic descent is still gathering force. The assault of the lockdowns on our economic wellbeing still has much farther to go.
The lockdowns have proven to be a powerful instrument of social control. This attribute is becoming very attractive especially to some politicians. They have discovered they can derive considerable political traction from hyping and exploiting the largely manufactured pandemic panic.
The lockdowns are still a work-in-progress. There are past lockdowns, revolving lockdowns, partial lockdowns, mandatory lockdowns, voluntary lockdowns, severe lockdowns and probably an array of many lockdown types yet to be invented.
The lockdowns extend to disruptions in supply chains, disruptions in money flows, drops in consumption, breakdowns in transport and travelling, increased bankruptcies, losses of finance leading to losses of housing, as well as the inability to pay taxes and debts.
The lockdowns extend beyond personal habitations to prohibitions on large assemblies of people in stadiums, concert halls, churches, and a myriad of places devoted to public recreation and entertainment. On the basis of this way of looking at what is happening, it becomes clear the economic and health effects of the lockdowns are far more pronounced than the damage wrought directly by the new coronavirus.
This approach to following the money leads to the question of whether the spread of COVID-19 was set in motion as a pretext. Was COVID-19 unleashed as an expedient for bringing about the lockdowns with the goal of crashing the existing economy? What rationale could there possibly be for purposely crashing the existing economy?
One possible reason might have been to put in place new structures to create the framework for a new set of economic relationships. With these changes would come accompanying sets of altered social and political relationships.
Among the economic changes being sought are the robotization of almost everything, cashless financial interactions, and elaborate AI impositions. These AI impositions extend to digital alterations of human consciousness and behavior. The emphasis being placed on vaccines is very much interwoven with plans to extend AI into an altered matrix of human nanobiotechnology.
There are other possibilities to consider. One is that in the autumn of 2019 the economy was already starting to falter. Fortuitously for some, the new virus came along at a moment when it could be exploited as a scapegoat. By placing responsibility for the economic debacle on pathogens rather than people, Wall Street bankers and federal authorities are let off the hook. They can escape any accounting for an economic calamity that they had a hand in helping to instigate.
A presentation in August of 2019 by the Wall Street leviathan, BlackRock Financial Management, provides a telling indicator of foreknowledge. It was well understood by many insiders in 2019 that a sharp economic downturn was imminent.
At a meeting of central bankers in Jackson Hole Wyoming, BlackRock representatives delivered a strategy for dealing with the future downturn. Several months later during the spring of 2020 this strategy was adopted by both the US Treasury and the US Federal Reserve. BlackRock’s plan from August of 2019 set the basis of the federal response to the much-anticipated economic meltdown.
Much of this essay is devoted to considering the background of the controversial agencies now responding to the economic devastation created by the lockdowns. One of these agencies is empowered to bring into existence large quantities of debt-laden money.
The very public role in 2020 of the Federal Reserve of the United States resuscitates many old grievances. When the Federal Reserve was first created in 1913 it was heavily criticized as a giveaway of federal authority.
The critics lamented the giveaway to private bankers whose firms acquired ownership of all twelve of the regional banks that together constitute the Federal Reserve. Of these twelve regional banks, the Federal Reserve Bank of New York is by far the largest and most dominant especially right now.
The Federal Reserve of the United States combined forces with dozens of other privately-owned central banks thoughout the world to form the Bank of International Settlements. Many of the key archetypes for this type of banking were developed in Europe and the City of London where the Rothschild banking family had a large and resilient role, one that persists until this day.
Along with the Federal Reserve Bank of New York, BlackRock was deeply involved in helping to administer the bailout in 2008. This bailout resuscitated many failing Wall Street firms together with their counterparties in a number of speculative ventures involving various forms of derivatives.
The bailouts resulted in payments of $29 trillion, much of it going to restore failing financial institutions whose excesses actually caused the giant economic crash. Where the financial sector profited greatly from the bailouts, taxpayers were abused yet again. The burden of an expanded national debt fell ultimately on taxpayers who must pay the interest on the loans for the federal bailout of the “too big to fail” financial institutions.
Unsettling precedents are set by the Wall Street club’s manipulation of the economic crash of 2007-2010 to enrich its own members so extravagantly. This prior experience bodes poorly for the intervention by the same players in this current round of responses to the economic crisis of 2020.
In preparing this essay I have enjoyed the many articles by Pam Martens and Russ Martens in Wall Street on Parade. These hundreds of well-researched articles form a significant primary source on the recent history of the Federal Reserve, including over the last few months.
In this essay I draw a contrast between the privately-owned regional banks of the Federal Reserve and the government-owned Bank of Canada that once issued low-interest loans to build infrastructure projects.
With this arrangement in place, Canada went through a major period of national growth between 1938 and 1974. Canada emerged from this period with a national debt of only $20 billion. Then in 1974 Prime Minister Pierre Trudeau dropped this arrangement to enable Canada to join the Bank of International Settlements. One result is that national debt rose to $700 billion by 2020.
We need to face the current financial crisis by developing new institutions that avoid the pitfalls of old remedies for old problems that no longer prevail. We need to make special efforts to change our approach to the problem of excessive debts and the overconcentration of wealth in fewer and fewer hands.
Locking Down the Viability of Commerce
Of all the facets of the ongoing fiasco generally associated with the coronavirus crisis, none has been so widely catastrophic as the so-called “lockdowns.” The supposed cure of the lockdowns is itself proving to be much more lethal and debilitating than COVID-19’s flu-like impact on human health.
Many questions arise from the immense economic consequences attributed to the initial effort to “flatten the curve” of the hospital treatments for COVID-19. Did the financial crisis occur as a result of the spread of the new coronavirus crisis? Or was the COVID-19 crisis set in motion to help give cover to a long-building economic meltdown that was already well underway in the autumn of 2019?
The lockdowns were first instituted in Wuhan China with the objective of slowing down the spread of the virus so that hospitals would not be overwhelmed. Were the Chinese lockdowns engineered in part to create a model to be followed in Europe, North America, Indochina and other sites of infection like India and Australia? The Chinese lockdowns in Hubei province and then in other parts of China apparently set an example influencing the decision of governments in many jurisdictions. Was this Chinese example for the rest of the world created by design to influence the nature of international responses?
The lockdowns represented a new form of response to a public health crisis. Quarantines have long been used as a means of safeguarding the public from the spread of contagious maladies. Quarantines, however, involve isolating the sick to protect the well. On the other hand the lockdowns are directed at limiting the movement and circulation of almost everyone whether or not they show symptoms of any infections.
Hence lockdowns, or, more euphemistically “sheltering in place,” led to the cancellation of many activities and to the shutdown of institutions. The results extended, for instance, to the closure of schools, sports events, theatrical presentations and business operations. In this way the lockdowns also led to the crippling of many forms of economic interaction. National economies as well as international trade and commerce were severely impacted.
The concept of lockdowns was not universally embraced and applied. For instance, the governments of Sweden and South Korea did not accept the emerging orthodoxy about enforcing compliance with all kinds of restrictions on human interactions. Alternatively, the government of Israel was an early and strident enforcer of very severe lockdown policies.
At first it seemed the lockdown succeeded magnificently in saving Israeli lives. According to Israel Shamir, in other European states the Israeli model was often brought up as an example. In due course, however, the full extent of the assault on the viability of the Israeli economy began to come into focus. Then popular resistance was aroused to reject government attempts to enforce a second wave of lockdowns against a second wave of supposed infections. As Shamir sees it, the result is that “Today Israel is a failed state with a ruined economy and unhappy citizens.”
In many countries the lockdowns began with a few crucial decisions made at the highest level of government. Large and proliferating consequences would flow from the initial determination of what activities, businesses, organizations, institutions and workers were to be designated as “essential.”
The consequences would be severe for those individuals and businesses excluded from the designation identifying what is essential. This deep intervention into the realm of free choice in market relations set a major precedent for much more intervention of a similar nature to come.
The arbitrary division of activities into essential and nonessential categories created a template to be frequently replicated and revised in the name of serving public heath. Suddenly central planning took a great leap forward. The momentum from a generation of neoliberalism was checked even as the antagonistic polarities between rich and poor continued to grow.
To be defined as “nonessential” would soon be equated with job losses and business failures across many fields of enterprise as the first wave of lockdowns outside China unfolded. Indeed, it becomes clearer every day that revolving lockdowns, restrictions and social distancing are being managed in order to help give false justification to a speciously idealized vaccine fix as the only conclusive solution to a manufactured problem.
What must it have meant for breadwinners who fed themselves and their families through wages or self-employment to be declared by government to be “non-essential”? Surely for real providers their jobs, their businesses and their earnings were essential for themselves and their dependents. All jobs and all businesses that people depend on for livelihoods, sustenance and survival are essential in their own way.
Was COVID-19 a Cover for an Anticipated or Planned Financial Crisis?
A major sign of financial distress in the US economy kicked in in mid-September of 2019 when there was a breakdown in the normal operation of the Repo Market. This repurchase market in the United States is important in maintaining liquidity in the financial system.
Those directing entities like large banks, Wall Street traders and hedge funds frequently seek large amounts of cash on a short-term basis. They obtain this cash from, for instance, money market funds by putting up securities, often Treasury Bills, as collateral. Most often the financial instruments go back, say the following night, to their original owners with interest payments attached for the use of the cash.
In mid-September the trust broke down between participants in the Repo Market. The Federal Reserve Bank of New York then entered the picture making trillions of dollars available to keep the system for short-term moving of assets going. This intervention repeated the operation that came in response to the first signs of trouble as Wall Street moved towards the stock market crash of 2008.
One of the major problems on the eve of the bailout of 2008-09, like the problem in the autumn of 2019, had to do with the overwhelming of the real economy by massive speculative activity. The problem then, like a big part of the problem now, involves the disproportionate size of the derivative bets. The making of these bets have become a dangerous addiction that continues to this day to menace the viability of the financial system headquartered on Wall Street.
By March of 2020 it was reported that the Federal Reserve Bank of New York had turned on its money spigot to create $9 trillion in new money with the goal of keeping the failing Repo Market operational. The precise destinations of that money together with the terms of its disbursement, however, remain a secret. As Pam Martens and Russ Martens write,
Since the Fed turned on its latest money spigot to Wall Street [in September of 2019], it has refused to provide the public with the dollar amounts going to any specific banks. This has denied the public the ability to know which financial institutions are in trouble. The Fed, exactly as it did in 2008, has drawn a dark curtain around troubled banks and the public’s right to know, while aiding and abetting a financial coverup of just how bad things are on Wall Street.
Looking back at the prior bailout from their temporal vantage point in January of 2020, the authors noted “During the 2007 to 2010 financial collapse on Wall Street – the worst financial crisis since the Great Depression, the Fed funnelled a total of $29 trillion in cumulative loans to Wall Street banks, their trading houses and their foreign derivative counterparties.”
The authors compared the rate of the transfer of funds from the New York Federal Reserve Bank to the Wall Street banking establishment in the 2008 crash and in the early stages of the 2020 financial debacle. The authors observed, “at this rate, [the Fed] is going to top the rate of money it threw at the 2008 crisis in no time at all.”
The view that all was well with the economy until the impact of the health crisis began to be felt in early 2020 leads away from the fact that money markets began to falter dangerously in the autumn of 2019. The problems with the Repo Market were part of a litany of indicators pointing to turbulence ahead in troubled economic waters.
For instance, the resignation in 2019 of about 1,500 prominent corporate CEOs can be seen as a suggestion that news was circulating prior to 2020 about the imminence of serious financial problems ahead. Insiders’ awareness of menacing developments threatening the workings of the global economy were probably a factor in the decision of a large number of senior executives to exit the upper echelons of the business world.
Not only did a record number of CEOs resign, but many of them sold off the bulk of their shares in the companies they were leaving.
Pam Marten and Russ Marten who follow Wall Street’s machinations on a daily basis have advanced the case that the Federal Reserve is engaged in fraud by trying to make it seem that “the banking industry came into 2020 in a healthy condition;” that it is only because of “the COVID-19 pandemic” that the financial system is” unravelling,”
The authors argue that this misrepresentation was deployed because the deceivers are apparently “desperate” to prevent Congress from conducting an investigation for the second time in twelve years on why the Fed, “had to engage in trillions of dollars of Wall Street bailouts.” In spite of the Fed’s fear of facing a Congressional investigation after the November 2020 vote, such a timely investigation of the US financial sector would well serve the public interest.
The authors present a number of signs demonstrating that “the Fed knew, or should have known…. that there was a big banking crisis brewing in August of last year. ” The signs of the financial crisis in the making included negative yields on government bonds around the world as well as big drops in the Dow Jones average. The plunge in the price of stocks was led by US banks, but especially Citigroup and JP Morgan Chase.
Another significant indicator that something was deeply wrong in financial markets was a telling inversion in the value of Treasury notes with the two-year rate yielding more than the ten-year rate.
Yet another sign of serious trouble ahead involved repeated contractions in the size of the German economy. Moreover, in September of 2019 news broke that officials of JP Morgan Chase faced criminal charges for RICO-style racketeering. This scandal added to the evidence of converging problems plaguing core economic institutions as more disruptive mayhem gathered on the horizons.
Accordingly, there is ample cause to ask if there are major underlying reasons for the financial crash of 2020 other than the misnamed pandemic and the lockdowns done in its name of “flattening” its spikes of infection. At the same time, there is ample cause to recognize that the lockdowns have been a very significant factor in the depth of the economic debacle that is making 2020 a year like no other.
Some go further. They argue that the financial crash of 2020 was not only anticipated but planned and pushed forward with clear understanding of its instrumental role in the Great Reset sought by self-appointed protagonists of creative destruction. The advocates of this interpretation place significant weight on the importance of the lockdowns as an effective means of obliterating in a single act a host of old economic relationships. For instance Peter Koenig examines the “farce and diabolical agenda of a universal lockdown.”
Koenig writes, “The pandemic was needed as a pretext to halt and collapse the world economy and the underlying social fabric.”
Inflating the Numbers and Traumatizing the Public to Energize the Epidemic of Fear
There have been many pandemics in global history whose effects on human health have been much more pervasive and devastating than the current one said to be generated by a new coronavirus. In spite, however, of its comparatively mild flu-like effects on human health, at least at this point in the summer of 2020, there has never been a contagion whose spread has generated so much global publicity and hype. As in the aftermath of 9/11, this hype extends to audacious levels of media-generated panic. As with the psyop of 9/11, the media-induced panic has been expertly finessed by practitioners skilled in leveraging the currency of fear to realize a host of radical political objectives.
According to Robert E. Wright in an essay published by the American Institute for Economic Research, “closing down the U.S. economy in response to COVID-19 was probably the worst public policy in at least one-hundred years.” As Wright sees it, the decision to lock down the economy was made in ignorant disregard of the deep and devastating impact that such an action would spur. “Economic lockdowns were the fantasies of government officials so out of touch with economic and physical reality that they thought the costs would be fairly low.”
The consequences, Wright predicts, will extend across many domains including the violence done to the rule of law. The lockdowns, he writes, “turned the Constitution into a frail and worthless fabric.” Writing in late April, Wright touched on the comparisons to be made between the economic lockdowns and slavery. He write, “Slaves definitely had it worse than Americans under lockdown do, but already Americans are beginning to protest their confinement and to subtly subvert authorities, just as chattel slaves did.”
The people held captive in confined lockdown settings have had the time and often the inclination to imbibe much of the 24/7 media coverage of the misnamed pandemic. Taken together, all this media sensationalism has come to constitute one of the most concerted psychological operations ever.
The implications have been enormous for the mental health of multitudes of people. This massive alteration of attitudes and behaviours is the outcome of media experiments performed on human subjects without their informed consent. The media’s success in bringing about herd subservience to propagandistic messaging represents a huge incentive for more of the same to come. It turns out that the subject matter of public health offers virtually limitless potential for power-seeking interests and agents to meddle with the privacies, civil liberties and human rights of those they seek to manipulate, control and exploit.
The social, economic and health impacts of the dislocations flowing from the lockdowns are proving to be especially devastating on the poorest, the most deprived and the most vulnerable members of society. This impact will continue to be marked in many ways, including in increased rates of suicide, domestic violence, mental illness, addictions, homelessness, and incarceration far larger than those caused directly by COVID-19. As rates of deprivation through poverty escalate, so too will crime rates soar.
The over-the-top alarmism of the big media cabals has been well financed by the advertising revenue of the pharmaceutical industry. With some few exceptions, major media outlets pushed the public to accept the lockdowns as well as the attending losses in jobs and business activity. In seeking to push the agenda of their sponsors, the big media cartels have been especially unmindful of their journalistic responsibilities. Their tendency has been to avoid or censor forums where even expert practitioners of public health can publicly question and discuss government dictates about vital issues of public policy.
Whether in Germany or the United States or many other countries, front line workers in this health care crisis have nevertheless gathered together with the goal of trying to correct the one-sided prejudices of of discriminatory media coverage. One of the major themes in the presentations by medical practitioners is to confront the chorus of media misrepresentations on the remedial effects of hydroxychloroquine and zinc.
On July 27 a group of doctors gathered on the grounds of the US Supreme Court to try to address the biases of the media and the blind spots of government.
Another aspect in the collateral damage engendered by COVID-19 alarmism is marked in the fatalities arising from the wholesale postponement of many necessary interventions including surgery. How many have died or will die because of the hold put on medical interventions to remedy cancer, heart conditions and many other potentially lethal ailments?
Did the unprecedented lockdowns come about as part of a preconceived plan to inflate the severity of an anticipated financial meltdown? What is to be made of the suspicious intervention of administrators to produce severely padded numbers of reported deaths in almost every jurisdiction? This kind of manipulation of statistics raised the possibility that we are witnessing a purposeful and systemic inflation of the severity of this health care crisis.
Questions about the number of cases arise because of the means of testing for the presence of a supposedly new coronavirus. The PCR system that is presently being widely used does not test for the virus but tests for the existence of antibodies produced in response to many health challenges including the common cold. This problem creates a good deal of uncertainty of what a positive test really means.
The problems with calculating case numbers extend to widespread reports that have described people who were not tested for COVID-19 but who nevertheless received notices from officials counting them as COVID-19 positive. Broadcaster Armstrong Williams addressed the phenomenon on his network of MSM media outlets in late July.
From the mass of responses he received, Williams estimated that those not tested but counted as a positive probably extends probably to hundreds of thousands of individuals. What would drive the effort to exaggerate the size of the afflicted population?
This same pattern of inflation of case numbers was reinforced by the Tricare branch of the US Defense Department’s Military Health System. This branch sent out notices to 600,000 individuals who had not been tested. The notices nevertheless informed the recipients that they had tested positive for COVID 19.
Is the inflation of COVID-19 death rates and cases numbers an expression of the zeal to justify the massive lockdowns? Were the lockdowns in China conceived as part of a scheme to help create the conditions for the public’s acceptance of a plan to remake the world’s political economy? What is to be made of the fact that those most identified with the World Economic Forum (WEF) have led the way in putting a positive spin on the reset arising from the very health crisis the WEF helped introduce and publicize in Oct. of 2019?
As Usual, the Poor Get Poorer
The original Chinese lockdowns in the winter of 2020 caused the breakdowns of import-export supply chains extending across the planet. Lockdowns in the movement of raw materials, parts, finished products, expertise, money and more shut down domestic businesses in China as well as transnational commerce in many countries outside China. The supply chain disruptions were especially severe for businesses that have dispensed with the practice of keeping on hand large inventories of parts and raw material, depending instead on just-in-time deliveries.
As the supply chains broke down domestically and internationally, many enterprises lacked the revenue to pay their expenses. Bankruptcies began to proliferate at rates that will probably continue to be astronomical for some time. All kinds of loans and liabilities were not paid out in full or at all. Many homes are being re-mortgaged or cast into real estate markets as happened during the prelude and course of the bailouts of 2007-2010.
The brunt of the financial onslaught hit small businesses especially hard. Collectively small businesses have been a big creator of jobs. They have picked up some of the slack from the rush of big businesses to downsize their number of full-time employees. Moreover, small businesses and start-ups are often the site of exceptionally agile innovations across broad spectrums of economic activity. The hard financial slam on the small business sector, therefore, is packing a heavy punch on the economic conditions of everyone.
The devastating impact of the economic meltdown on workers and small businesses in Europe and North America extends in especially lethal ways to the massive population of poor people living all over the world. Many of these poor people reside in countries where much of the paid work is irregular and informal.
At the end of April the International Labor Organization (ILO), an entity created along with the League of Nations at the end of the First World War, estimated that there would be 1.6 billion victims of the meltdown in the worldwide “informal economy.” In the first month of the crisis these workers based largely in Africa and Latin America lost 60% of their subsistence level incomes.
This pandemic has laid bare in the cruellest way, the extraordinary precariousness and injustices of our world of work. It is the decimation of livelihoods in the informal economy – where six out of ten workers make a living – which has ignited the warnings from our colleagues in the World Food Programme, of the coming pandemic of hunger. It is the gaping holes in the social protection systems of even the richest countries, which have left millions in situations of deprivation. It is the failure to guarantee workplace safety that condemns nearly 3 million to die each year because of the work they do. And it is the unchecked dynamic of growing inequality which means that if, in medical terms, the virus does not discriminate between its victims in its social and economic impact, it discriminates brutally against the poorest and the powerless.
Guy Ryder remembered the optimistic rhetoric in officialdom’s responses to the economic crash of 2007-2009. He compares the expectations currently being aroused by the vaccination fixation with the many optimistic sentiments previously suggesting the imminence of remedies for grotesque levels of global inequality. Ryder reflected,
We’ve heard it before. The mantra which provided the mood music of the crash of 2008-2009 was that once the vaccine to the virus of financial excess had been developed and applied, the global economy would be safer, fairer, more sustainable. But that didn’t happen. The old normal was restored with a vengeance and those on the lower echelons of labour markets found themselves even further behind.
The internationalization of increased unemployment and poverty brought about in the name of combating the corona crisis is having the effect of further widening the polarization between rich and poor on a global scale. Ryder’s metaphor about the false promises concerning a “vaccine” to correct “financial excess” can well be seen as a precautionary comment on the flowery rhetoric currently adorning the calls for a global reset.
Wall Street and 9/11
The world economic crisis of 2020 is creating the context for large-scale repeats of some key aspects of the bailout of 2007-2010. The bailout of 2007-2008 drew, in turn, from many practices developed in the period when the explosive events of 9/11 triggered a worldwide reset of global geopolitics.
While the events of 2008 and 2020 both drew attention to the geopolitical importance of Wall Street, the terrible pummelling of New York’s financial district was the event that ushered in a new era of history, an era that has delivered us to the current financial meltdown/lockdown.
It lies well beyond the scope of this essay to go into detail about the dynamics of what really transpired on 9/11. Nevertheless, some explicit reckoning with this topic is crucial to understanding some of the essential themes addressed in this essay.
Indeed, it would be difficult to overstate the relevance of 9/11 to the background and nature of the current debacle. The execution and spinning of 9/11 were instrumental in creating the repertoire of political trickery presently being adapted in the manufacturing and exploiting of the COVID-19 hysteria. A consistent attribute of the journey from 9/11 to COVID-19 has been the amplification of executive authority through the medium of emergency measures enactments, policies and dictates.
Wall Street is a major site where much of this political trickery was concocted in planning exercises extending to many other sites of power and intrigue. In the case of 9/11, a number of prominent Wall Street firms were involved before, during and after the events of September 11. As is extremely well documented, these events have been misrepresented in ways that helped to further harness the military might of the United States to the expansionistic designs of Israel in the Middle East.
The response of the Federal Reserve to the events of 9/11 helped set in motion a basic approach to disaster management that continues to this day. Almost immediately following the pulverization of Manhattan’s most gigantic and iconographic landmarks, Federal Reserve officials made it their highest priority to inject liquidity into financial markets. Many different kinds of scenario can be advanced behind the cover of infusing liquidity into markets.
For three days in a row the Federal Reserve Bank of New York turned on its money spigots to inject transfusions of $100 billion dollars of newly generated funds into the Wall Street home of the financial system. The declared aim was to keep the flow of capital between financial institutions well lubricated. The Federal Reserve’s infusions of new money into Wall Street took many forms. New habits and appetites were thereby cultivated in ways that continue to influence the behaviour of Wall Street organizations in the financial debacle of 2020.
The revelations concerning the events of 9/11 contained a number of financial surprises. Questions immediately arose, for instance, about whether the destruction of the three World Trade Center skyscrapers had obliterated software and hardware vital to the continuing operations of computerized banking systems. Whatever problems arose along these lines, it turned out that there was sufficient digital information backed up in other locations to keep banking operations viable.
But while much digital data survived the destruction of core installations in the US financial sector, some strategic information was indeed obliterated. For instance, strategic records entailed in federal investigations into many business scandals were lost. Some of the incinerated data touched on, for instance, the machinations of the energy giant, Enron, along with its Wall Street partners, JP Morgan Chase and Citigroup.
The writings of E. P Heidner are prominent in the literature posing theories about the elimination of incriminating documentation as a result of the controlled demolitions of 9/11. What information was eliminated and what was retained in the wake of the devastation? Heidner has published a very ambitious account placing the events of 9/11 at the forefront of a deep and elaborate relationship linking George H. W. Bush to Canada’s Barrick Gold and the emergence of gold derivatives.
The surprises involving 9/11 and Wall Street included evidence concerning trading on the New York Stock Exchange. A few individuals enriched themselves significantly by purchasing a disproportionately high number of put options on shares about to fall precipitously as a result of the anticipated events of 9/11. Investigators, however, chose to ignore this evidence because it did not conform to the prevailing interpretation of who did what to whom on 9/11.
Another suspicious group of transactions conducted right before 9/11 involved some very large purchases of five-year US Treasury notes. These instruments are well known hedges when one has knowledge that a world crisis is imminent. One of these purchases was a $5 billion transaction. The US Treasury Department would have been informed about the identity of the purchaser. Nevertheless the FBI and the Securities Exchange Commission collaborated to point public attention away from these suspect transactions. (p. 199)
On the very day of 9/11 local police arrested Israeli suspects employed in the New York area as Urban Movers. The local investigators were soon pressured to ignore the evidence, however, and go along with the agenda of the White House and the media chorus during the autumn of 2001.
In the hours following the pulverization of the Twin Towers the dominant mantra was raised “Osama bin Laden and al-Qeada did it.” That mantra led in the weeks, months and years that followed to US-led invasions of several Muslim-majority countries. Some have described these military campaigns as wars for Israel.
Soon New York area jails were being filled up with random Muslims picked up for nothing more than visa violations and such. The unrelenting demonization of Muslims collectively can now be seen in retrospect as a dramatic psychological operation meant to poison minds as the pounding of the war drums grew in intensity. In the process a traumatized public were introduced to concepts like “jihad.” At no time has there ever been a credible police investigation into the question of who is responsible for the 9/11 crimes.
Defense Secretary Donald Rumsfeld chose September 10, the day before 9/11, to break the news at a press conference that $2.3 trillion had gone missing from the Pentagon’s budget. Not surprisingly the story of the missing money got buried the next day as reports of the debacle in Manhattan and Washington DC dominated MSM news coverage.
As reported by Forbes Magazine, the size of the amount said to have gone missing in Donald Rumsfeld’s 2001 report of Defense Department spending had mushroomed by 2015 to around $21 trillion. It was Mark Skidmore, an Economics Professor at the University of Michigan, who became the main sleuth responsible for identifying the gargantuan amount of federal funds that the US government can’t account for.
As the agency that created the missing tens of trillions that apparently has disappeared without a trace, wouldn’t the US Federal Reserve be in a position to render some assistance in tracking down the lost funds? Or is the Federal Reserve somehow a participant or a complicit party in the disappearance of the tens of trillions without a paper trail?
The inability or unwillingness of officialdom to explain what happened to the lost $21 trillion, an amount comparable to the size of the entire US national debt prior to the lockdowns, might be viewed in the light of the black budgets of the US Department of Defense (DOD). Black budgets are off-the-books funds devoted to secret research and to secret initiatives in applied research.
In explaining this phenomenon, former Canadian Defense Minister, Paul Hellyer, has observed, “thousands of billions of dollars have been spent on projects about which Congress and the Commander In Chief have deliberately been kept in the dark.” Eric Zuesse goes further. As he explains it, the entire Defense Department operates pretty much on the basis of an unusual system well outside the standard rules of accounting applied in other federal agencies.
When news broke about the missing $21 trillion, federal authorities responded by promising that special audits would be conducted to explain the irregularities. The results of those audits, if they took place at all, were never published. The fact that the Defense of Department has developed in a kind of audit free zone has made it a natural magnet for people and interests engaged in all kinds of criminal activities.
Eric Zuesse calls attention to the 1,000 military bases around the world that form a natural network conducive to the cultivation of many forms of criminal trafficking. Zuesse includes in his reflections commentary on the secret installations in some American embassies but especially in the giant US Embassy in Baghdad Iraq.
The US complex in Baghdad’s Green Zone is the biggest Embassy in the world. Its monumental form on a 104 acre site expresses the expansionary dynamics of US military intervention in the Middle East and Eurasia following 9/11.
The phenomenon of missing tens of trillions calls attention to larger patterns of kleptocratic activity that forms a major subject addressed here. The shifts into new forms of organized crime in the name of “national security” began to come to light in the late 1980s. An important source of disclosures was the series of revelations that accompanied the coming apart of the Saudi-backed Bank of Credit and Commerce International, the BCCI.
The nature of this financial institution, where CIA operatives were prominent among its clients, provides a good window into the political economy of drug dealing, money laundering, weapons smuggling, regime change and many much more criminal acts that took place along the road to 9/11.
The BCCI was a key site of financial transactions that contributed to the end of the Cold War and the inception of many new kinds of conflict. These activities often involved the well-financed activities of mercenaries, proxy armies, and a heavy reliance on private contractors of many sorts.
The Enron scandal was seen to embody some of the same lapses facilitated by fraudulent accounting integral to the BCCI scandal. Given the bubble of secrecy surrounding the Federal Reserve, there are thick barriers blocking deep investigation into whether or not the US Central Bank was involved in the relationship of the US national security establishment and the BCCI.
The kind of dark transactions that the BCCI was designed to facilitate must have been channelled after its demise into other banking institutions probably with Wall Street connections. Since 9/11, however, many emergency measures have been imposed that add extra layers of secrecy protecting the perpetrators of many criminal acts from public exposure and criminal prosecutions.
The events of 9/11 have sometimes been described as the basis of a global coup. To this day there is no genuine consensus about what really transpired to create the illusion of justification for repeated US military invasions of Muslim-majority countries in the Middle East and Eurasia.
The 9/11 debacle and the emergency measures that followed presented Wall Street with an array of new opportunities for profit that came with the elaborate refurbishing and retooling of the military-industrial complex.
The response to 9/11 was expanded and generalized upon to create the basis of a war directed not at a particular enemy, but rather at an ill-defined conception identified as “terrorism.” This alteration was part of a complex of changes adding trillions to the flow of money energizing the axis of interaction linking the Pentagon and Wall Street and the abundance of new companies created to advance the geopolitical objectives emerging from the 9/11 coup.
According to Pam Martens and Russ Martens, the excesses of deregulation helped induce an anything-goes-ethos on Wall Street and at its Federal Reserve regulator in the wake of 9/11. As the authors tell it, the response to 9/11 helped set important precedents for the maintaining flows of credit and capital in financial markets.
Often the destination of the funds generated in the name of pumping liquidity into markets was not identified and reported in transactions classified as financial emergency measures. While the priority was on keeping financial pumps primed, there was much less concern for transparency and accountability among those in positions of power at the Federal Reserve.
The financial sector’s capture of the government instruments meant to regulate the behaviour of Wall Street institutions was much like the deregulation of the US pharmaceutical industry. Both episodes highlight a message that has become especially insistent as the twenty-first century unfolds.
The nature of the response to 9/11 emphasized the mercenary ascent of corporate dominance as the primary force directing governments. Throughout this transformation the message to citizens became increasingly clear. Buyer Beware. We cannot depend on governments to represent our will and interests. We cannot even count on our governments to protect citizens from corporatist attacks especially on human health and whatever financial security we have been able to build up.
Bailouts, Derivatives, and the Federal Reserve Bank of New York
The elimination of the Glass-Steagall Act in 1999 was essential to the process of dramatically cutting back the government’s role as a protector of the public interest on the financial services sector. The Glass-Steagall Act was an essential measure in US President Franklin D. Roosevelt’s New Deal. Some view the New Deal as a strategy for saving capitalism by moderating ts most sharp-edged features. Instituted in 1933 in response to the onset of the Great Depression, the Glass-Steagall Act separated the operations of deposit-accepting banks from the more speculative activity of investment brokers.
The termination of the regulatory framework put in place by the Glass Steagall Act opened much new space for all kinds of experiments in the manipulation of money in financial markets. The changes began with the merger of different sorts of financial institutions including some in the insurance field. Those overseeing the reconstituted entities headquartered on Wall Street took advantage of their widened latitudes of operation. They developed all sorts of ways of elaborating their financial services and presenting them in new packages.
The word, “derivative” is often associated with many applications of the new possibilities in the reconstituted financial services sector. The word, derivative, can be applied to many kinds of transactions involving speculative bets of various sorts. As the word suggests, a derivative is derived from a fixed asset such as currency, bonds, stocks, and commodities. Alterations in the values of fixed assets affect the value of derivatives that often take the form of contracts between two or more parties.
One of the most famous derivatives in the era of the financial crash of 2007-2010 was described as mortgaged-backed securities. On the surface these bundles of debt-burdened properties might seem easy to understand. But that would be a delusion. The value of these products was affected, for instance, by unpredictable shifts in interest rates, liar loans extended to homebuyers who lacked the capacity to make regular mortgage payments, and significant shifts in the value of real estate.
Mortgage-backed securities were just one type of a huge array of derivatives invented on the run in the heady atmosphere of secret and unregulated transactions between counterparties. Derivatives could involve contracts formalizing bets between rivals gambling on the outcome of competitive efforts to shape the future. An array of derivative bets was built around transactions often placed behind the veil of esoteric nomenclature like “collateralized debt obligations” or “credit default swaps.”
The variables in derivative bets might include competing national security agendas involving, for instance, pipeline constructions, regime change, weapons development and sales, false flag terror events, or money laundering. Since derivative bets involve confidential transactions with secret outcomes, they can be derived from all sorts of criteria. Derivative bets can, for instance, involve all manner of computerized calculations that in some cases are constructed much like war game scenarios.
The complexity of derivatives became greater when the American Insurance Group, AIG, began selling insurance programs to protect all sides in derivative bets from suffering too drastically from the consequences of being on the losing side of transactions.
The derivative frenzy, sometimes involving bets being made by parties unable to cover potential losses, overwhelmed the scale of the day-to-day economy. The “real economy” embodies exchanges of goods, services, wages and such that supply the basic necessities for human survival with some margin for recreation, travel, cultural engagement and such.
The Swiss-based Bank of International Settlements calculated in 2008 that the size of the all forms of derivative products had a monetary value of $1.14 quadrillion. A quadrillion is a thousand trillions. By comparison, the estimated value of all the real estate in the world was $75 trillion in 2008.
As the enticements of derivative betting preoccupied the leading directors of Wall Street institutions, their more traditional way of relating to one another began to falter. It was in this atmosphere that the Repo Market became problematic in December of 2007 just as it showed similar signs of breakdown in September of 2019.
In both instances the level of distrust between those in charge of financial institutions began to falter because they all had good reason to believe that their fellow bankers were overextended. All had reason to believe their counterparts were mired by too much speculative activity enabled by all sorts of novel experiments including various forms of derivative dealing.
In December of 2007 as in the autumn of 2019, the Federal Reserve Bank of New York was forced to enter the picture to keep the financial pumps on Wall Street primed. The New York Fed kept the liquidity cycles flowing by invoking its power to create new money with the interest charged to tax payers.
As the financial crisis unfolded in 2008 and 2009 the Federal Reserve, but especially the privately-owned New York Federal Reserve bank, stepped forward to bail out many financial institutions that had become insolvent or near insolvent. In the process precedents and patterns were established that are being re-enacted with some modifications in 2020.
One of the innovations that took place in 2008 was the decision by the Federal Reserve Bank of New York to hire a large Wall Street financial institution, BlackRock, to administer the bailouts. These transfers of money went through three specially created companies now being replicated as Special Purpose Vehicles in the course of the payouts of 2020.
In 2008-09 BlackRock administered the three companies named after the address of the New York Federal Reserve Bank on Maiden Lane. BlackRock emerged from an older Wall Street firm called Blackstone. Its former chair, Peter C. Peterson, was a former Chair of the Federal Reserve Bank of New York.
The original Maiden Lane company paid Bear Stearns Corp $30 billion. This amount from the New York Fed covered the debt of Bear Stearns, a condition negotiated to clear the way for the purchase of the old Wall Street institution by JP Morgan Chase. Maiden Lane II was a vehicle for payouts to companies that had purchased “mortgage-backed securities” before these derivative products turned soar.
Maiden Lane III was to pay off “multi-sector collateralized debt obligations.” Among these bailouts were payoffs to the counterparties of the insurance giant, AIG. As noted, AIG had developed an insurance product to be sold to those engaged in derivative bets. When the bottom fell out of markets, AIG lacked the means to pay off the large number of insurance claims made against it. The Federal Reserve Bank of New York stepped in to bail out the counterparties of AIG, many of them deemed to be “too big to fail.”
Among the counterparties of AIG was Goldman Sachs. It received of $13 billion from the Federal Reserve. Other bailouts to AIG’s counterparties were $12 billion to Deutsche Bank, $6.8 billion to Merrill Lynch, $5 billion to Switzerland’s UBS, $7.9 billion to Barclays, and $5.2 billion to Bank of America. Some of these banks received additional funds from other parts of the overall bailout transaction. Many dozens of other counterparties to AIG also received payouts in 2008-2009. Among them were the Bank of Montreal and Bank of Scotland.
The entire amount of the bailouts was subsequently calculated to be a whopping $29 trillion with a “t.” The lion’s share of these funds went to prop up US financial institutions and the many foreign banks with which they conducted business.
Much of this money went to the firms that were shareholders in the Federal Reserve Bank of New York or partners of the big Wall Street firms. Citigroup, the recipient of the largest amount, received about $2.5 trillion in the federal bailouts. Merrill Lynch received $2 trillion,
The Federal Reserve Bank was established by Congressional statute in 1913. The Federal Reserve headquarters is situated in Washington DC. The Central Bank was composed of twelve constituent regional banks. Each one of these regional banks is owned by private banks.
The private ownership of the banks that are the proprietors of the Federal Reserve system has been highly contentious from its inception. The creation of the Federal Reserve continues to be perceived by many of its critics as an unjustifiable giveaway whereby the US government ceded to private interests its vital capacity to issue its own currency and to direct monetary policy like the setting of interest rates.
Pam Martens and Russ Martens at Wall Street on Parade explain the controversial Federal Reserve structure as follows
While the Federal Reserve Board of Governors in Washington, D.C. is deemed an “independent federal agency,” with its Chair and Governors appointed by the President and confirmed by the Senate, the 12 regional Fed banks are private corporations owned by the member banks in their region. The settled law under John L. Lewis v. the United States confirms: “Each Federal Reserve Bank is a separate corporation owned by commercial banks in its region.”
In the case of the New York Fed, which is located in the Wall Street area of Manhattan, its largest shareowners are behemoth multinational banks, including JPMorgan Chase, Citigroup, Goldman Sachs and Morgan Stanley.
There was no genuine effort after the financial debacle of 2007-2010 to correct the main structural problems and weaknesses of the Wall Street-based US financial sector. The Dodd-Frank Bill signed into law by US President Barack Obama in 2010 did make some cosmetic changes. But the main features of the regulatory capture that has taken place with the elimination of the Glass-Steagall Act remained with only minor alterations. In particular the framework was held in place for speculative excess in derivative bets.
In the summer edition of The Atlantic, Frank Partnoy outlined a gloomy assessment of the continuity leading from the events of 2007-2010 to the current situation. This current situation draws a strange contrast between the lockdown-shattered quality of the economy and the propped-up value of the stock market whose future value will in all probability prove unsustainable. Partnoy writes,
It is a distasteful fact that the present situation is so dire in part because the banks fell right back into bad behavior after the last crash—taking too many risks, hiding debt in complex instruments and off-balance-sheet entities, and generally exploiting loopholes in laws intended to rein in their greed. Sparing them for a second time this century will be that much harder.
Wall Street Criminality on Display
The frauds and felonies of the Wall Street banks have continued after the future earnings of US taxpayers returned them to solvency after 2010. The record of infamy is comparable to that of the pharmaceutical industry.
The criminal behaviour in both sectors is very relevant to the overlapping crises that are underway in both the public health and financial sectors. In 2012 the crime spree in the financial sector began with astounding revelations about the role of many major banks in the LIBOR, the London Interbank Offered Rate. The LIBOR rates create the basis of interest rates involved in the borrowing and lending of money in the international arena.
When the scandal broke there were 35 different LIBOR rates involving various types of currency and various time frames for loans between banks. The rates were calculated every day based on information forwarded from 16 different banks to a panel on London. The reporting banks included Citigroup, JP Morgan Chase, Bank of America, UBS, and Deutsche Bank. The influence of the LIBOR rate extended beyond banks to affect the price of credit in many types of transactions.
The emergence of information that the banks were working together to rig the interest rate created the basis for a huge economic scandal. Fines extending from hundreds of millions into more than a billion dollars were placed on each of the offending banks. But in this instance and many others to follow, criminality was attached to the financial entities but not to top officials responsible for the decisions that put their corporations on the wrong side of the law.
One of the factors in the banking frauds comprising the LIBOR scandal was the temptation to improve the chance for financial gains in derivative bets. The biggest failure of the federal response to the financial meltdown of 2007-210 was that little was done to curb the excesses of transactions in the realm of derivatives.
Derivatives involved a form of gambling that exists in a kind of twilight zone. This twilight zone fills a space somewhere between the realm of the real economy and the realm of notional value. Notional values find expression in unrealized speculation about what might or might not come to fruition; what might or might not happen; who might win and who might lose in derivative speculations.
The addiction of Wall Street firms to derivative betting remains unchecked to this day. The bankers’ continuing fixation with unregulated gambling, often with other people’s money, is deeply menacing for the future of the global economy…. indeed for the future of everyone on earth. According to the Office of the Controller of Currency, in 2019 JP Morgan Chase had $59 trillion in derivative bets. In July of 2020 it emerged that Citigroup held $62 trillion in derivative contracts, about $30 trillion more than it held before it was bailed out in 2008. In 2019 Goldman Sachs held $47 trillion and Bank of America held $20.4 trillion in derivate bets.
A big part of the scandal embodied in these figures is embedded in the reality that all of these banks carry their most risky derivative bets in units of their corporate networks that are protected by the Federal Deposit Insurance Corporation. This peril played a significant part in deepening the crisis engendered by financial meltdown that began in 2007.
One of the most redeeming features of the Dodd-Frank Act as originally drafted was a provision preventing financial institutions from keeping their derivative portfolios in banks whose deposits and depositors were backed up by federal insurance.
Citigroup led the push in Congress in 2014 to allow Wall Street institutions to revert back to a more deregulated and danger-prone economic environment. The notoriously inept decisions and actions of Citigroup had played a significant role in the lead up to the financial debacle of 2007 to 2010. Since 2016 Citigroup has become once again the biggest risk taker by loading itself up with more derivative speculations than any other financial institution in the world.
By returning derivative speculations to the protections of federal financial backstops, taxpayers are once again forced to assume responsibility for the most outlandish risks of Wall Street’s high rollers. It is taxpayers who are the backers of the federal government when it comes to their commitment to compensate banks for losses, even when these losses come about from derivative bets.
How much more Wall Street risk and public debt can be loaded onto taxpayers and even onto generations of taxpayers yet unborn? How is national debt to be understood when it plunders working people to guarantee and augment the wealth of the most privileged branches of society? Why should those most responsible for creating the most excessive risks to the financial wellbeing of our societies be protected from bearing the consequences of the very risks they themselves created?
Along with Citigroup, JP Morgan Chase stands out among a group of financial sector reprobates most deeply involved in sketchy activities that extend deep into the realm of criminality. In a simmering scandal six of JP Morgan Chase’s traders have been accused of breaking laws in conducting the bank’s futures trading in the value of precious metals. They have been accused of violating the RICO statute, a law meant for people suspected of being part of organized crime.
In the charges pressed by the Justice Department on JP Morgan Chase’s traders it is alleged that they “conducted the affairs of the [minerals] desk through a pattern of racketeering activity, specifically, wire fraud affecting a financial institution and bank fraud.”
In 2012 JP Morgan Chase faced a $1 billion fine for its role in the “London Wale” series of derivative bets described as follows by the Chair of the US Senate’s Permanent Subcommittee on Investigation. Senator Carl Levin explained, “Our findings open a window into the hidden world of high stakes derivatives trading by big banks. It exposes a derivatives trading culture at JPMorgan that piled on risk, hid losses, disregarded risk limits, manipulated risk models, dodged oversight, and misinformed the public.”
Traders at Goldman Sachs appear to have been part of the Wall Street crime spree. The tentacles of corruption in the Goldman Sachs case apparently extend deep into the US Justice Department. The case involves allegations of embezzlement, money laundering and missing billions. These manifestations of malfeasance all spin out of a scandal-prone Malaysian sovereign wealth fund administered by Goldman Sachs.
A big part of the scandal reported in Wall Street on Parade in July of 2020 involves the fact that the Justice Department’s prosecutors seem to be dragging their feet in this possible criminal felony case against Goldman Sachs. The prosecutors, including the US Attorney-General, William Barr, worked previously for the law firm, Kirkland and Ellis. Kirkland and Ellis was retained to defend Goldman Sachs in this matter.
Pam Martens and Russ Martens express dismay at the failure of US officialdom to hold Wall Street institutions accountable for the crime spree of some of its biggest firms. They write, “Congress and the executive branch of the government seem determined to protect Wall Street criminals, which simply assures their proliferation.”
Even racketeering charges against officials at JP Morgan Chase, where Jamie Dimon presides as CEO, failed to receive any attention from the professional deceivers that these days dominate MSM. The star reporters of Wall Street on Parade write, “Crime and fraud are so de rigueur at the bank led by Dimon that not one major newspaper ran the headline [of the racketeering charge] on the front page or anywhere else in the paper.
While federal charges that JP Morgan Chase’s Wall Street operation engaged in criminal racketeering was not of interest to the press, Jamie Dimon’s surprise visit in early June to a Chase branch in Mt. Kisco New York aroused considerable media attention. Dimon was photographed with staff wearing a mask and taking the knee. By participating in this ritual Dimon signaled that his Wall Street operation is in league with the sometimes violent cancel culture pushed into prominence by the Democratic Party in partnership with Black Lives Matter and Antifa.
*(JPMorgan CEO Jamie Dimon takes a knee with employees in front of a bank vault. Credit: JPMorgan)
In an article on 21 July marking ten years since the Dodd-Frank Act of 2010, the Martens duo conclude, “So here we are today, watching the Fed conduct another secret multi-trillion dollar bailout of Wall Street while the voices of Congress and mainstream media are nowhere to be heard.”
In March it was announced that representatives of the US Treasury Department, the Federal Reserve Board and the BlackRock financial management were joining forces to make adjustments in the US economy. The aim was to address the financial dislocations resulting from the decision to lock down businesses, citizens, schools, entertainment, and social mingling outside the home, all in response to the health care hysteria promoted by governments and their media extensions.
The format of this process suggested some relaxation in the strict distinctions historically drawn between the US Treasury and the Federal Reserve. What would be the role of the third member of the group? In reflecting on this topic Joyce Nelson observed, “the new bailout bill not only further erases the line between the Federal Reserve and the U.S. Treasury, it places BlackRock effectively in an overseer position for both.”
Some saw as symbolically instructive the delegation to BlackRock of a larger role than that assigned it during the first bailout of 2007-2008. It would be hard to overestimate the significance of this prominent Wall Street firm’s return to a strategic role near the very heart of this major exercise of federal power. This invitation to take part in such crucial negotiations at such a consequential juncture in history caused some to characterize BlackRock as a “fourth branch of government.”
As Victoria Guida commented in Politico, “This is a transformational moment for the Fed, and BlackRock’s now going to be in an even stronger position to serve the Fed in the future.”
BlackRock officials had been instrumental in helping to manoeuvre their company into such a strategic role by responding proactively to the understanding in some elite circles that another financial debacle was imminent. Only months before the financial meltdown actually occurred a group of former central bankers all commissioned by BlackRock delivered a recovery plan in August of 2019.
Presented at a G 7 summit of central bankers in Jackson Hole Wyoming, the plan for the government responses to the looming financial collapse was entitled Dealing with the Next Downturn. Its authors are Stanley Fischer, former Governor of the Central Bank of Israel, Philipp Hildebrande, former Chairman of the Governing Board of the Swiss National Bank, Jean Boivin, former Deputy Governor of the Bank of Canada, and Elga Bartsch, Economist at Morgan Stanley.
The BlackRock Team at Jackson Hole put forward the case that a more aggressive and coordinated combination of monetary and fiscal policy must be brought to the job of stimulating a financial recovery. Monetary policy includes the setting of interest rates. Where monetary policy has historically been the domain of the central banks, fiscal policy, involving issues of taxation as well as the content and size of government budgets, lies within the jurisdiction of elected legislatures.
The nub of the proposal to unite fiscal and monetary policy put the US Treasury and the US Federal Reserve on the same political platform. As the author of this merger of monetary and fiscal policy, BlackRock became third member of the triumvirate charged to address the broad array of economic maladies that arrived in the wake of the lockdowns.
In the spring of 2020 BlackRock has been hired by the Bank of Canada and by Sweden’s Central Bank, the Riksbank, to deliver on the approaches to crisis management its representatives had laid out at Jackson Hole. BlackRock’s most high-profile and strategic engagement, however, began with its involvement in the negotiation of the $2 trillion CARES stimulus package that passed through the US Congress in March of 2020.
The CARES Act included $367 billion for loans and grants to small business, $130 billion for health care systems, $150 billion for state and local government, $500 billion for loans to corporate America, and $25 billion for airlines (in addition to loans).
The heart of the plan involved a payout of $1,200 per adult and $500 per child for households making up to $75,000. This payment to citizens approaches the concept of disseminating “helicopter money” as referred to in BlackRock’s initial outline for dealing with the “downturn.” Helicopter money distributed by the federal government to its citizens was also related to the concept of “going direct” in strategies for stimulating the economy.
BlackRock seems to be moving into the space recently held by Goldman Sachs as Wall Street’s best embodiment of ostentatious success including in the preparation of its corporate leaders for high-ranking positions in the federal government. Laurence Fink, BlackRock’s founder and CEO, might well have replicated this career path to become Treasury Secretary if Hillary Clinton had succeeded in becoming US President in 2016.
BlackRock’s leadership went to great lengths to avoid being tagged with the title in the United States of a “systematically important financial institution” (sifi). To be subject to this “sifi” label entails added federal scrutiny and regulation as well as heightened requirements to keep high amounts of capital on hand. BlackRock’s status as a private company not subject to sifi regulations makes the financial management firm more attractive to its federal partners in the federal payout operation presently underway.
One of the reasons for including a private company in the trio of partners involved in the payouts is to sneak around limitations on the legal powers of the Federal Reserve. As explained by Ellen Brown in her essay, Meet BlackRock: The New Great Vampire Squid, the Federal Reserve can only purchase “safe federally-guaranteed assets.” As a private company, BlackRock apparently faces no such restrictions. It can purchase more risky assets not backstopped by federal insurance.
The regional banks of the Federal Reserve Board are owned by private companies whose directors seem to have been part of the decision to include BlackRock in the implementation of the CARES process. There can be no doubt that the format of the CARES negotiations pulled the supposedly independent Federal Reserve more deeply into the political orbit of the US Treasury branch. The presence of a major Wall Street firm in the process, however, apparently gave the advocates of the Fed’s supposed independence from politics a sense that they retained some leverage in the process.
The inclusion of private companies in the conduct of government business has become in recent decades a very common expression of neoliberalism. One of the reasons for this embrace of public-private partnerships in the conduct of government business is to take advantage of the legal nature of private companies. The apportionment to private companies of significant roles in deciding and implementing public policies helps put veils of secrecy over the true nature of government decisions and actions.
Private companies can more easily assert claims to “proprietary information” than can public institutions when they act on behalf of citizens. This feature of privatization in the performance of public responsibilities by elected government runs counter to the imperatives of democratic transparency. It puts obstacles in the way of genuine accountability because the public is more likely to be kept in the dark about key aspects of what is being decided and done on their behalf.
Suck Up Economics and State Monopoly Capitalism
BlackRock owns, controls, or manages about $30 trillion in total in securities. It directly controls or owns somewhat less than a third of this amount. The remainder of the assets BlackRock manages are to service clients responsible for taking care of pension funds, philanthropies, foundations, endowments, family offices, superannuation funds and such.
A big part of BlackRock’s business model involves attracting customers by allowing them access to great masses of timely information of significant utility to those responsible for making investment decisions. This technological wizardry happens on a very advanced computational platform known as Aladdin.
Aladdin remains a work-in-progress, one that is widely recognized as the most sophisticated medium of its kind for assessing all manner of financial risks and potentials for profit. Its future as an investment platform is to become more and more integrated into the complex mix of hardware and software animating Artificial Intelligence.
BlackRock’s job is to dispense funds ushered into existence through the money-creating powers of the Federal Reserve. These transactions are to take place through eleven so-called “special purpose vehicles” similar to the Maiden Lane companies that BlackRock administered during the prior bailouts.
The funds it distributes in this round starting in 2020 are meant, at least at this early stage of the crisis, as payments for various sorts of assets. These assets might include an array of corporate bonds spanning a range from so-called investment grade to garbage grade junk bonds. The losses incurred in this exchange, involving supposed assets that might turn out to be worthless, or loans that might not be paid back, are to be charged to the US Treasury. Ultimately the liability lies on US taxpayers who are the holders of the national debt.
Bonds of varying levels of worth lie beneath another asset eligible for transformation into cash. This instrument of value is referred to as Exchange Traded Funds, ETFs. ETFs happen to be a specialty of BlackRock ever since the company launched a range of commercial ETFs into Stock Market circulation through its iShares division. BlackRock’s role on both sides of buying and selling ETFs comes up repeatedly as one of the many conflicts of interest of which the Wall Street firm stands accused.
Given that BlackRock is involved in one way or another in the proprietorship of pretty much every major company in the world, there is plenty to back up the allegation that Black Rock is an interested party in most of the transactions in which it engages as part of its partnership with the US Fed and Treasury Branch.
Pam Matens and Russ Martens have been very critical of the role of the Federal Reserve and BlackRock in the current economic crisis. They have anticipated that, if the current drift of events continues, American taxpayers will once again be gobsmacked with a huge growth in the national debt. This development would amount to another major transfer of wealth away from working people to the beneficiaries of Wall Street firms and the same commercial institutions that received the lion’s share of funds during the last bailout.
The co-authors picture BlackRock is part of a scheme to use “Special Purpose Vehicles” like “Enron used to hide the true state of its finances and blow itself up.” They entitle their article published on 31 March, 2020 as “The Dark Secrets in the Fed’s Wall Street Bailout Are Getting a Devious Makeover in Today’s Bailout.”
The authors observe. “What makes the New York Fed’s bailout of Wall Street so much more dangerous this time around is that it has decided to use a different structure for its loans to Wall Street – one that will force losses on taxpayers and, it hopes, will provide an ironclad secrecy curtain around how much it spends and where the money goes.”
I find this account of an effort by the Federal Reserve to create an “ironclad secrecy curtain” shocking under these circumstances. It suggests an intention to exceed the deceptiveness of the last bailout. This warning renews longstanding suspicions that the failures of transparency and accountability have not subsided since the beginning of the era when deregulation and the 9/11 deceptions converged in the domestic and international operations of Wall Street.
The structural problems already identified in the process initiated to implement the CARES Act could have enormous consequences if the current economic crisis continues to deteriorate. This deterioration is not likely to stop anytime soon given the depth of the crash and its probable domino effects. It was reported in late July that during the second quarter of 2020 the US Gross Domestic Product collapsed at an annualized rate of 33%, the deepest decline in output ever recorded since the US government began measuring GDP in 1947.
The CARES Act helped set in motion a program with the potential to repeat elements of the earlier bailout. The amount of $454 billion was to be set aside to assist the banking sector. The Fed can leverage this amount by ten times according to the principles of fractional reserve banking.
The news of this development caused Mike Whitney to imagine “the Fed turning itself into a hedge fund in order to buy the sludge that has accumulated on the balance sheets of corporations and financial institutions for the last decade,” Whitney pictured an onslaught of “scheming sharpies who will figure out how to game the system and turn the whole fiasco into another Wall Street looting operation.”
Meanwhile the Martens Team at Wall Street on Parade called attention to the $9 trillion already injected by the New York Fed to flood liquidity into the still-troubled Repo Markets that began to falter in September of 2019. Add to this revelation the news that the Fed “has not announced one scintilla of information on what specific Wall Street firms have received this money or how much they individually received.”
There is no doubt that the nature of economic relations will be substantially altered in the process of dealing with the financial meltdown induced by the lockdowns and by the overreliance on high debt rates combined with artificially low interest rates prior to 2020. The altered political economy that is beginning to emerge following the lockdowns is sometimes described as state monopoly capitalism.
In deciding what companies get bailed out and what companies don’t, the financial authorities that are intervening in this crisis are pretty much deciding what enterprises get the advantage of federal financial backstops and what enterprises will not enjoy government sanction. Increasingly, therefore, it is the state that determines winners and losers in the organizing of financial relations. This development further undermines any notion that some idealized vision of competition and market forces will determine winners and losers in the economy of the future.
As Peter Ewarts has observed, it seems that BlackRock is being delegated by federal authorities to exercise “discretionary powers to pick winners and losers,” a choice that is “where the real bonanza and clout lies.” Will the winners be chosen from the companies run by executives that used the money gained from the prior bailouts to engage in stock buy backs? This process of buying back stock tends to be reflected in CEO bonuses and higher share prices. Alternatively this way of allocating funds tends to short change workers as well as innovation and efficiency in industrial production?
Will companies be rewarded whose executives have moved production facilities overseas or issued billions in junk bonds? Will companies be rewarded whose directors have participated in the effort to censor the Internet, bring about lockdowns or foment mask hysteria? Why is it that the coddled elites serving the financial imperatives of most wealthy branches of society are being put in the best position to decide who gets a life preserver from the state and who must sink and drown?
Might this bias be a factor in the current process that led Forbes Magazine to conclude in a headline that “Billionaries Are Getting Richer During the Covid-19 Pandemic While Most Americans Suffer.”
There can be no doubt that the financial transactions beginning with the CARES Act represent a crucial initial stage in what the promoters of the World Economic Forum have been labeling as the Great Reset. Laurence Fink and the BlackRock firm are significant participants in the World Economic Forum. The WEF helped introduce the pandemic in Event 201 in October of 2019 even as it is now trying to put a positive face on the fiasco.
Why should the people most harshly affected by the lockdowns tolerate that the very Wall Street interests dispossessing them, are tasked once again to lead and exploit the reset of the financial system? As presently structured by the likes of BlackRock and its beneficiaries, this process is once again transferring new wealth to the most wealthy branches of society. Simultaneously it is burdening the rest of the population with yet another massive increase in both personal and national indebtedness.
There is no more discussion of “trickle down” economics, a frequent metaphor invoked in the Reagan-Thatcher era. Instead we are in the midst of an increasingly intense phase of suck up economics. The rich are being further enriched and further empowered through the dispossession of the poor and the middle classes. This procedure, initiated when locked down citizens were sidelined from the political process, has the potential to result in the largest upward transfer of wealth so far in history.
BlackRock Versus the Debt-Lite Legacy of the Bank of Canada
At the end of March Laurence Fink, CEO and founder of BlackRock, announced in a letter to his company’s shareholder, “We are honored to have been selected to assist the Federal Reserve Bank of New York and the Bank of Canada on programs designed to facilitate capital to businesses and support the economy.”
This announcement might leave the impression that the Bank of Canada and the Federal Reserve Bank of New York are similar institutions. This impression is unfounded. The two banks have very different structures and histories. A spotlight on these differences helps illuminate the nature of a number of core financial issues.
These financial issues should command avid attention during this time of reckoning with a serious economic crisis that may well be still in its early stages. Such issues inevitably draw attention to the current manifestations of very old questions about the character of money and its relationship to the concepts of usury and debt. Questions about debt, debt enslavement as well as the possibility of debt renunciation or debt forgiveness are becoming especially pressing.
These controversial queries arise in an era when a tiny minority is aggressively asserting sweeping claims to ownership of vast concentrations of the world’s available assets. The other side of this picture reveals that the largest mass of humanity is sinking into a swamp of rising debt on a scale that is concurrently unsustainable and unconscionable. How did this level of inequity reach such audacious extremes? Are there any remedies in sight?
There is nothing to suggest structural remediation in the current approach to the economic crisis. In fact so far there is every indication that the current approach of bringing about an enormous expansion in the availability of debt-laden money will only compound the further dispossession of the already dispossessed in order to expand the wealth of the already wealthy.
As already noted, the Federal Reserve Bank of New York is one of twelve regional banks that together constitute the US Federal Reserve. Every regional Federal Reserve Bank is owned by a group of private banks. Each of the private banks at the base of a Federal Reserve regional bank marks its proprietorship through the ownership of shares. These shares cannot be freely traded in stock markets. The ownership of these shares expresses the private ownership of the US banking system.
The Fed’s New York regional bank has a special role in money creation given its location at the heart of the US financial sector on and around Wall Street. In this crisis, the Federal Reserve Bank of New York is creating new money in the name of holding back onslaughts of destitution and penury in a traumatized society. Ever since 1913 every new dollar brought into existence by the Federal Reserve, which is the central bank of the United States, creates added debt that collects compound interest as long as it is left unpaid.
The Bank of Canada was created to counter the delegation of money-creating authority to privately-owned banks. The Bank of Canada was founded during the Great Depression, a time when the failure of many existing institutions created the conditions to try out alternative entities in the attempt to improve economic relationships.
One of the driving forces in the creation of Canada’s new banking system was Gerald Gratten McGeer. McGreer was an elected official in British Columbia dedicated to changing the system so that the people of Canada could generate their own currency through the sovereign authority of Canada’s Parliament. McGeer helped to push the national government of Prime Minister R.B. Bennett in this direction. The wheels were set in motion in 1933 through the work on the Royal Commission on Banking and Currency.
McGeer drew much of his inspiration from former US President, Abraham Lincoln. Lincoln led the US federal government throughout the US Civil War. To finance the Armed Forces of the Union, Lincoln used the authority of the federal government to create “Greenbacks” as a means of paying the troops. By employing the sovereign authority of the US government to create its own currency, Lincoln avoided the intrigues that often accompanied the process of borrowing money from foreign lenders.
McGreer had obtained what he viewed as credible evidence that Lincoln had been assassinated because of his antagonism to the designs of private bankers seeking to widen their base of power in the United States. The Canadian politician had taken to heart a comment attributed often to Lincoln: “The privilege of creating and issuing money is not only the supreme prerogative of Government, but it is the Government’s greatest creative opportunity.”
The Bank of Canada was created in 1934 and nationalized as a Crown Corporation in 1938. To this day it retains its founding charter that affirms,
WHEREAS it is desirable to establish a central bank in Canada to regulate credit and currency in the best interests of the economic life of the nation, to control and protect the external value of the national monetary unit and to mitigate by its influence fluctuations in the general level of production, trade, prices and employment, so far as may be possible within the scope of monetary action, and generally to promote the economic and financial welfare of Canada.
The Bank of Canada formed an essential basis of a very creative period of Canadian growth, development, and diversification throughout the middle decades of the twentieth century. The Bank of Canada created the capital that financed the Canadian war effort from 1939 until 1945. After the war the Bank of Canada lent money at very low rates of interest to the municipal, provincial and national governments. The monies were used for infrastructure projects and for investments to increase the wellbeing and creative potential of Canada’s most important resource, its people.
This type of low interest or no interest financing formed the economic basis for projects like the creation of a national pension plan, national health care insurance, the Trans-Canada Highway, the St. Lawrence Seaway, the Avro-Arrow initiative as well as a formidable system of colleges and universities.
One could say that the Bank of Canada provided an indigenous money supply that was spent into the operations of a fast growing economy greased with lots of federal liquidity. The new money derived its value from the efforts of Canadian workers. Together they brought about significant increases in the country’s net worth through practical improvements that bettered the lives of all citizens.
Consider the contrast between this type of national development and the kind of larceny facilitated by the Federal Reserve’s infusions of the money it creates into Wall Street’s operations in the twenty-first century. In, for instance, the financial bailouts of 2007 to 2010 the largest part of the newly-created money ended up in the coffers of the wealthy whereas the new debt created ended up as part of a US national debt.
The burden of carrying this debt falls inter-generationally on average working people who form the lion’s share of taxpayers. They have long been saddled with an “inextinguishable debt” that unrelentingly grows, hardly ever shrinks, and remains basically unpayable forever. The very concept of “compound interest” conveys the image of an overall debt spread out over many venues. This debt must grow in perpetuity. There is a constant need for additional debtors while existing debtors must face constantly growing personal debt.
There is reason to suspect that the financial debacle of 2020 will re-enact some the worst excesses of the 2008 bailout. Might the payouts this time around to derivative-addicted Wall Street firms like Citigroup, Goldman Sachs and JP Morgan Chase exceed the scale of the prior bailout? Would there be any way of even knowing whether the current round of payouts outdoes the former round of bailouts? The current process of federal disbursements is not transparent. In fact the process has been described as one designed to “provide an ironclad secrecy curtain around how much [the Fed} spends and where the money goes.”
Why is the Canadian government turning to the very firm that emerged as Wall Street’s main fixer and winner in the 2008 bailouts? Why is Justin Trudeau looking to BlackRock to respond to the Canadian aspects of the 2020 economic crash?
Justin Trudeau seems unwilling or unable to provide a coherent answer to this question and others requiring thoughtful replies rather than barrages of platitudes. Why is Justin Trudeau instituting what Joyce Nelson has characterized as a “new feudalism” in Canada’s economic policies?
Any decent effort of response on Trudeau’s part would have to make some reference to the background of the current debacle. There would have to be some acknowledgment that between 1934 and 1974 the Canada government did not build up any significant national debt. Then, between 1974 and 2020, the national debt of Canada skyrocketed from $22 billion to $700 billion.
Why was such a good and sustainable use of the Bank of Canada put aside, one that contributed magnificently to the health and wellbeing of the Canadian people as well as the Canadian federation? Who lost out? Who gained besides the international bankers?
The incomprehensible abandonment of a winning formula for Canadian development by Prime Minister Pierre Trudeau puts a special onus on his son, Canada’s current PM, to explain the incredibly costly mistake of his father. Why won’t Justin Trudeau fix the mistake of his father and restore the Bank of Canada to its former role in Canadian nation building?
There has never been a full and satisfactory explanation of what really happened in 1974 to persuade Pierre Trudeau to throw aside the means of developing infrastructure with resources generated internally within Canada. Trudeau Senior’s decision to stop building up Canada through the operation of the Canadian people’s own national bank was not debated in Parliament. The option was never part of an election platform let alone the subject of a national referendum.
Apparently the Swiss-based Bank of International Settlements, which is often referred to as the central bank for central bankers, had some role in Pierre Trudeau’s decision to cease using the Bank of Canada’s powers to generate near-debt-free Canadian currency.
Government as a Means of Escaping Debt Entrapment
That powers of debt-lite money creation invested by Parliament in the Bank of Canada have never been formally withdrawn. The Bank of Canada could still revert back to the direct creation of Canadian currency to be spent into an economy of national recovery; to be spent in investments in infrastructure as well as in cultivating and applying the creative skills of the Canadian people.
Between 2011 and 2017 a court case was brought against the government of Canada with the aim of restoring the Bank of Canada to its former role. As Rocco Galati, the lawyer for the Committee on Monetary and Economic Reform (COMER) explained “Not only has the government abandoned its constitutional duty to govern, but it has transferred it to international private banks which corresponds to an abandonment of its sovereignty.”
After some significant rulings and contentious appeals, the COMER case came to an end without delivering results that its plaintiffs sought. But the court case helped to put a spotlight on the potential of the Bank of Canada. If properly utilized, this institution could provide a model corrective to the subordination of governance to the international Lords of Debt Explotation and their minions.
This process of politicizing the role of the Bank of Canada should extend to a process of calling out Justin Trudeau’s current approach to selling off key components of Canada’s infrastructure.
This topic came up in private discussions between Larry Fink and Justin Trudeau at the World Economic Forum in Davos in January of 2016. Fink apparently got Trudeau interested in attracting private investors to the project of improving or building Canadian infrastructure projects like roads, high-speed trains, airports and such. This kind of approach to developing infrastructure projects runs counter to the role once played by the Bank of Canada in incorporating self-sufficiency into the process of national building.
The dangers and opportunities in this time of manufactured crises are indeed unprecedented. Instead of rejecting the Davos crowd’s preoccupation with a giant reset, why not embrace the concept? Why not treat this moment as an opening to reset the global economy in a way that would restore the Bank of Canada to some of its former functions. Why not highlight this return to the sovereign embrace of benevolent nation building as an example for the rest of the world?
Why not reconstitute the worldwide structures of the international system of economic relations to restore elected governments to the functions that have been pre-empted by unaccountable institutions like the US Federal Reserve or the Bank for International Settlements? Why not renew the model of banking as an exercise and expression of national sovereignty and the self-determination of peoples in a dynamic global arena of rules-based economic interaction?
Why not withdraw the power from private bankers to create national currencies? Why not follow the advice of the deceased Abraham Lincoln by restoring “the greatest of all creative possibilities available to governments,” namely their power to issue money and set interest rates. The restoration of economic power to governments and the people and peoples they represent would involve the infusion of life into conceptions of globalization very different than those used to justify the industrialization of China and the deindustrialization of North America.
By delegating to international organizations much of their capacity to influence the economic conditions affecting their own people, national legislatures have lost much of their capacity to provide responsible government. Governments thus weakened are not realistically in a position to derive their authority from the consent of the governed. When representative bodies cannot effectively express the right of their constituents to collective self-determination in economic realm, what legitimacy is left to the institution of representative government?
This strange moment puts humanity face to face with much that is novel and unprecedented and much that is old and integral to the history of human interaction. The economic dimensions of this crisis constitute its most devastating and far-reaching attribute. The supposed remedy being rushed into operation is to flood large quantities of debt-laden loans into existence and for governments to distribute the borrowed funds to individuals, businesses, and organizations as they see fit.
Once again, vast quantities of debt-laden money are being created without the informed consent of those on whose shoulders the vastly increased loads of debt are falling. Once again governments are rewarding political friends and punishing political enemies by means of the way the new funds are being apportioned.
Decisions are pushed forward that emanate not from citizen constituents but from cabals of supranational connivers actively engaged in wrecking what little remains of responsible government. As governments lose legitimacy by engaging in collusion with corrupt cronies and international crime syndicates they must depend more and more on police state thuggery to enforce some semblance of order.
This process is going forward in spite of the fact that alternative means exist to create as much new money as is required without having to pay large amounts of compound interest to private bankers. Every sovereign government has the capacity to generate new money by following the model of the Bank of Canada between 1938 and 1974.
There is an especially urgent need at this time for some serious reckoning with the economic dimensions of the crisis before us. This reckoning will inevitably meet the resistance of extremely powerful interests who are deriving great benefits from the existing system. The process of privatizing the creation of money has enriched and empowered a clique whose institutionalized, deep-rooted and continuing kleptocracy was exposed in part by the bailout of 2008.
Why should we take for granted in 2020 that the best way to deal with the economic debacle put before us is to create new money by agreeing to go much deeper into a quagmire of debt entrapment. This debt trap, whose cumulative amount will soon be more that $300 trillion globally, creates gross liabilities in a trajectory of disadvantage that severely limits the life chances even of many generations still unborn.
The other side of debt is embodied in assets. Who gets the assets and who gets the liabilities that coalesce to form indebtedness? What is to be made of the role of birth or inheritance or race or natural ability or social connections in apportioning assets or imposing the enslavements of accumulated debt?
John Perkins addressed some of these issues in his Confessions of an Economic Hit Man and in a subsequent follow-up volume. Perkins chronicled how an inter-related complex of US institutions aligned themselves with his own greedy and unscrupulous interventions. The goal of their coordinated aggressions was aimed at imposing the enslavements of massive debt with compound interest. Their version of loan sharking is one of many manifestations expressing a very old and common phenomenon. It often happens that powerful interests parasitically exploit the weak to further enrich themselves.
This partnership between John Perkins and the kleptocratic agencies directed by the US government has long been drawing wealth from struggling countries by pushing them more deeply into national indebtedness. Once the governments of target countries succumbed to greater dependence on debt-based financing, the conditions were ripe to force officials into adopting policies of austerity that harmed local citizens in order to augment the assets of international investors.
Significantly the World Bank demonstrated how this coercion works in the context of the current economic crisis. The World Bank attempted to impose conditions on a loan of $940 million to Belarus because the WB wanted Belarus to conform to the lockdowns that are a primary cause of the current manufactured crisis.
As revealed by the Belarus’s President, Alexander Lukashenko, the World Bank wanted his country to adopt the full set of COVID-19 measures that had been implemented by the Italian government. Lukashenko said no to the loan. He refused to accept the conditions and carried on the established policies of Belarus, a country that has “not implemented strict coronavirus containment measures.”
Lukashenko is far from alone in his contempt for the manipulative tactics of the apparatus promoting the manufactured crisis. For instance Tanzanian President, John Magufuli, tested the accuracy of the testing procedures being forced on his country by the World Health Organization. President and Medical Doctor Mugufi included in the samples submitted to the testing agency some tissue of a goat and a papaya. Both the goat and the papaya tested positive for COVID-19, an outcome he publicized before ordering the WHO group to leave his country.
The Political Economy of Usury From the Middle Ages to the Era of Social Credit and Ezra Pound
We cannot assess the division of humanity between a massive group of debtors and a much smaller group of creditors without touching on the issue of usury. The subject of usury, the lending of money with the addition of interest payments, has been an extremely contentious issue throughout much of human history.
There were prohibitions against usury in ancient Greece, ancient India and the Roman Empire. Throughout much of the last thousand years usury has been regarded as a sin outlawed in the Bible, the Torah and the Koran. At different times in history the Roman Catholic Church has been an especially zealous opponent of some forms of usury.
Considering the nature of our current predicaments including obscene levels of economic inequality, usury might yet again arouse contentions. Some of the core ethical issues raised by the resort to usury remain unresolved. How is it ethical, for instance, to subject disinherited children in poor countries to the indignities of deepened poverty so that rich folks in rich parts of the world can reap larger dividends?
Beginning in the Middle Ages, forms of usury began to show up first in the Italian city states and in the towns of the Franco-Flemish realm. The act of loaning money with interest gradually spread throughout Europe. In some predominately-Muslim jurisdictions, the concept conveyed in the Arabic term, “riba,” approximated the idea of usury or interest. Over time various versions of riba have affected Muslim banking practices.
Often there were prohibitions preventing Jews from demanding interest on loans made to other Jews. There were many Talmudic teachings, however, permitting interest to be collected from gentiles when they borrowed money from Jews. Many accounts of Jewish efforts to break down prohibitions on usury highlight obstacles preventing Jews from pursuing other lines of work. The case is made that the pull of some Jews into banking came about in part because of their exclusion from other occupations.
Whatever the case, the obstacles to usury continued to be lessened including through the changes to Biblical interpretation that came with the Protestant Reformation. Even in the twentieth century, however, usury continued to arouse criticism and distrust. Ezra Pound was one of those who became very outspoken when it came to problems with usury.
The modernist poet and scholar, Ezra Pound, was one of the most influential literary figures of the twentieth century. The importance of his work was expressed not only in his own literary efforts but also in his contributions to other authors in his circle of friends and colleagues.
Pound’s outspoken criticism of usury formed part of the discourse that was integral to the political movements seeking economic reform. The creation and successful nationalization of the Bank of Canada was one of the outgrowths of the concerted quest to give substance to economic institutions that would more effectively serve human needs.
The creation of the Bank of Canada drew on the ideas of Abraham Lincoln and also on those of many other theorists including Major C.H. Douglas. While Major Douglas and John Maynard Keynes each denounced one another’s work, both sought to stimulate economic activity by expanding the supply and distribution of money. Major Douglas’ vision of Social Credit, one that Pound enthusiastically embraced, sought to bring about greater harmony and equilibrium between the forces of production and consumption.
A biographer of Pound has explained that this formidable literary figure believed “there was the prospect of building a Social Credit society where money served the consumer and served the producer.” As Pound pictured it, “the middle men” seeking usurious, interest bearing profit” to be collected “without work or prior motivation, could be cut out.” During the Depression the hope of prosperity through the application of Social Credit principles was seized upon by many. One of them was an evangelical preacher in the Canadian province of Alberta.
Largely as a result of the popularity he gained by incorporating Major Douglas’ analysis of Social Credit into his Sunday afternoon Christian radio broadcast, “Bible Bill” Aberhart became the Premier of Alberta. His Social Credit Party gained 56 of 63 seats in the Alberta Legislature. The Social Credit Party continued in power until 1971.
The Social Credit preoccupation with bringing about changes in the relationship of citizens to financial institutions helped add to the discourse from which the Bank of Canada emerged as a dynamic instrument of nation building.
The enthusiasm was well placed of those who threw their lot in with the movement to create and enlivened the Bank of Canada. The generations that put their trust in this federal financial institution had the satisfaction of knowing that their taxes were not devoured to pay big amounts of interest to private bankers in the style that presently prevails almost everywhere.
Like his good friend and colleague, Ernest Hemingway, Pound was a devotee of clear, terse and succinct prose.
This characteristic of his writing comes through strongly in his harsh condemnations of usury. “Usury is the cancer of the world,” Pound wrote. He explained, “Until you know who has lent to whom, you know nothing of politics, you know nothing whatever of history, you know nothing of international wrangles.”
Ezra Pound was born in Idaho but was attracted to Italy throughout long periods of his life. In Italy he lionized its fascist leader, Benito Mussolini. He embraced the Axis side in World War II developing close relations with the British fascist leader, Oswald Mosley. Pound threw himself into the contest producing a torrent of radio broadcasts seeking to win over English-speaking converts to the Axis side. These broadcasts are today widely described as war propaganda.
Pound was indicted in the United States in 1943 and arrested at the war’s end by the US Armed Forces in Italy. After being jailed in Pisa, Pound was charged with treason. Then Pound was diagnosed as being mentally unfit to face charges.
The finding that he was mentally ill caused Pound to be locked up as a patient in St. Elizabeth’s Hospital in the Washington DC area for the next 13 years. In spite of his severe prejudices against Jewish bankers and his active embrace of fascism during the war years, Pound continued to carry on very lively interactions with his formidable circle of poets, essayists and novelists.
Pound’s circle included James Joyce, Ernest Hemingway, and T.S. Eliot. All these writers wrote works that won a Nobel Prize for Literature. These and many other authors benefited from Pound’s encouragement and mentorship. In 1948 Eustace Mullins joined Pound’s circle. Mullins was introduced to the famous poet and scholar through Pound’s wife, Dorothy Shakespeare,
When he first met Pound, Mullins was an art school student and a veteran of the US Air Force. He had already published some short pieces in the British journal, Social Creditor. Mullins remembered Pound’s place of forced residence as “a hideous, urine-soaked madhouse in Washington D.C.” As their visits became increasingly regular, Pound encouraged Mullins to conduct research into the history and activities of the Federal Reserve.
When Pound proposed the idea Mullins was unaware of the existence of the Federal Reserve. Nevertheless, Mullins threw himself into the project that he supported by combining his research with work as a book stacker at the Library of Congress. At the Library he befriended George Stimpson who was well known among Washington journalists and government officials for his wealth of knowledge and his ability to locate relevant research materials.
Stimpson happily worked with Mullins. He helped the aspiring author by guiding him into the primary and secondary literature illuminating many facets of the Federal Reserve’s history
Eustace Mullins Explores the Secrets of the Federal Reserve
An initial edition of the volume appeared in 1952 as Mullins on the Federal Reserve. Another edition with added information was published in 1954. The text has been republished many times, sometimes in different editions under the title Secrets of the Federal Reserve. The text is organized around both thematic and chronological facets.
Mullins lays out the history of the Federal Reserve with considerable attention to the institution’s roots and origins. The author emphasizes several strands of continuity showing the links of the Federal Reserve to the banking establishments of Europe but especially those of Great Britain and Germany.
Mullins characterizes the Federal Reserve as the most powerful institution in the United States whose influence grew so that “it gradually superseded the popular elected government of the United States.” The power of the Fed and its core facet, the Federal Reserve Bank of New York, is said to have become so formidable because the agency operates in secrecy without any genuine form of accountability to any public institution. The NY Fed combines the power of secrecy with the enormous power to create new currency and to set interest rates becoming in the process “the most gigantic trust on earth.”
Mullins makes the case that the financial district known as the City of London exercised enormous influence over the activities of the Federal Reserve and many of the large Wall Street banks. Mullins wrote, “London is the world’s financial centre, because it commands enormous sums of capital created at its command by the Federal Reserve Board of the United States.”
Mullins is conscientious in presenting many citations to back up his observations and interpretations. He cites, for instance the New York Times on January of 1920 where it states, “The Federal Reserve is a fount of credit not capital.” The manipulation of credit, however, can greatly affect the industrial economy by affecting the ability of manufacturers and farmers to produce.
Mullins emphasizes throughout the text how events are often engineered to strengthen the hand of the Lords of Credit in the matrix of society’s operations. In referring, for instance, to a secret banker’s plan to crash the stock market in 1929, Mullins expressed a view that could as easily describe the growing suspicion in 2020. Could it be that the lockdowns of businesses and workers were purposely engineered to strengthen the hands of the Lords of Credit whose main platform is the Federal Reserve Bank of New York?
Mullins explains that sometimes “bankers paralyse the industrial energies of the country” in order to highlight and strengthen “their tremendous powers” over the financial and business organization of the American economy. Mullins’ observation that “panic is an instrument of [financial] power” is another statement with obvious relevance to the current crisis.
As have many authors since, Mullins emphasizes the importance of a top-secret meeting on Jekyll Island in the state of Georgia in 1910. At this meeting Paul Warburg essentially took the intellectual lead in creating a plan for a Central Bank in the United States. Such an institution was long contemplated and promoted but it had been stopped repeatedly, most famously be Andrew Jackson. Jackson’s political career culminated in his winning the US presidency between 1829 and 1837.
Warburg left his family banking business in Hamburg Germany in 1902. He joined the Wall Street Office of Kuhn Loeb, a Wall Street House that helped finance the Bolshevik Revolution in Russia. Mullins devotes much effort to describing the complex of alliances and rivalries that characterized banking before and after the founding of the Fed.
Weaving throughout these networks of financial activity were the banking operations of the Rothschild family. Mullins leaves no doubt that the operations of the Rothschild family of bankers were extensive, elaborate and very influential.
In the nineteenth century the Rothschild banking establishment gradually wove its operations into those of large segments of Europe’s royal and aristocratic establishments. Mullins emphasizes the genesis of the close business relationship between the Rothschild banking clan and a London-based US company, George Peabody and Company.
Peabody’s bank was passed on to a father and son team, Junius Spencer Morgan and John Pierpont Morgan. In the days of the Fed’s founding and even today, the name of J.P. Morgan is synonymous with New York banking. Mullins explains how the Rothschild bankers kept a fairly low profile in New York by conducting much of their American business largely through the financial organizations associated with the name and reputation of J.P. Morgan.
Mullins outlines the role of the Federal Reserve in the funding of two world wars. Many of the topics covered in Secrets of the Federal Reserve were later pursued in much more detail in the prolific writings of Antony C. Sutton.
Most of Sutton’s volumes describe the role of Wall Street in helping to bring about many of world history’s major turning points during the twentieth century. These turning points include Wall Street’s funding of the rise of the National Socialist government in Germany in the 1930s and the role of Wall Street in financing the Bolshevik Revolution and the business activities of the Soviet Union.
The capacity of the New York Bank of the Federal Reserve to create vast quantities of credit to finance wars, often with the same bankers funding competing sides in conflicts, provided the key to the creation of huge fortunes. The funding of both sides in war can be seen as an early form of hedging one’s bets. This kind of high impact intervention through banking sometimes created huge leverage for a very small number of people to steer history towards preconceived destinations.
As Mullins explains it, the Federal Reserve was founded in extreme secrecy and often employs deceptive tactics to misrepresent its true nature. As Mullins sees it, for instance, the creation of the twelve regional banks was a ploy to gain political acceptance for the Central Bank’s core entity, the Federal Reserve Bank of New York. Mullins explains, “the other eleven banks were so many expensive mausoleums erected to salve local pride and quell the Jacksonian fears of the hinterland.”
The ability of Wall Street bankers to invoke the credit creating powers of the New York Fed forms a key aspect of the frequent military adventurism of the US government. This military adventurism continued full force even after the United States became the world’s largest debtor nation after 1990. How large has been the role of the US Fed in building up the US national debt together with the tens of trillions missing from the books of the US Defense Department?
The Israel Lobby and the Federal Reserve
Much of the military adventurism of the United States especially after 9/11 was directed into invasions of Muslim-majority countries that threaten a particular view of Israel as a dominant power in its region and in the world. Why would it be that the Federal Reserve is any less involved in creating the available credit for the waging of wars in the twenty-first century than it was in creating the wars of the twentieth century?
In his authorship of The Secrets of the Federal Reserve, Mullins seems largely oblivious to the role in world history of Zionism and the genesis of Israel. His main attention lay elsewhere. As I read his text, he accurately conveyed how the large Jewish influence in the banking institution of Europe, including the influence of the Rothschild consortium, was extended into Wall Street including the Federal Reserve.
While Mullins does not shy aware from dealing with the Jewish component of the story he set out to tell, I don’t think he belabours this subject or becomes aggressively polemical about it. Certainly the same cannot be said of some of his critics whose condemnations of Mullins can sometimes be extremely polemical.
Mullins might have made more of the identity politics prevailing throughout the twentieth century. The sensibilities of the dominant Christian constituency in the United States probably influenced the decisions of many customers shopping for banking services. Quite likely some of them would have been more comfortable dealing with firms identified with names like J.P. Morgan, Rockefeller and Mellon rather than Warburg, Greenspan or Fink. Times, however, have changed.
Some of the more severe prejudices seem to have subsided around the time that Sandy Weill combined his Travellers Insurance Company with Citicorp to create Citigroup. This merger helped create the political momentum leading to the elimination of the Glass-Steagall Act in 1999. With Glass-Steagall’s elimination, Citigroup tried to become a giant department store of varied financial services. In its inner sanctums, however, Citigroup developed a preoccupation with derivatives that continues yet.
In the twenty-first century it happened that some of the cosmetic overlays were removed that had previously been imposed to disguise the large representation of Jews in Wall Street banking, including in the Federal Reserve Bank of New York. For good or bad, usury has become a core features of how the contemporary world is organized. Some reckoning with the ethnic inheritances attending usury are therefore inescapable, especially when dealing with the some of the most dramatic displays of usury on steroids in Wall Street institutions.
Where I see the need to draw a line in the sand is not on the question of the ethnicity of Wall Street personnel. Rather this line in the sand involves the question of how power is used or abused at the domineering heights of our financial institutions. Generally speaking it is not a justifiable use of the Federal Reserve to produce credit that enables the waging of wars that are offensive rather than defensive in character.
The waging of war has long been one of the big bonanzas producing major windfalls for international bankers. In the twenty-first century so many of the wars involve the flexing of military might by the United States to advance the expansionary designs of the Israeli state. The US Federal Reserve has been part of the process of creating what some would consider wars for Israel in Iraq, Syria, Yemen and Iran.
Why are the money-generating powers of the secretive Federal Reserve being invoked to help fund wars for Israel and also to help shape public opinion to accept the US role in these wars of aggression. Especially sensitive is the further indebting of the American people to subsidize the production of propaganda aimed at persuading them to back wars for Israel. This propaganda is deemed necessary to deflate opposition to Israel’s actions including the ruthless dehumanizing treatment of Palestinian Arabs.
We have seen that the Federal Reserve Bank of New York was deeply engaged in 2008 in transferring tens of trillions into the coffers of its own member institutions and counterparties. What uses were made of this bailout produced through a dubious process of legalized financial larceny?
One way or another the Israel Lobby must be a prime beneficiary of the machinations of Wall Street and its money spigot, the Federal Reserve Bank of New York. This pattern of priority can easily be related to US federal funding of the Israel project as a higher priority in federal budgeting than even the basic needs of the domestic population of the United States. Black Lives Do Matter but why is it that the lives of Israel First Partisans seem to matter more than any other group?
This Israel Lobby has the power to prevent any critic of Israeli policies from gaining the nomination of a major US party to run for US president. The result is that, in election after election, Americans are offered a very limited choice between competitors who are equally supportive of Israel.
The Israel Lobby can intervene to prevent the leadership of opposition parties from adopting policies that emphasize equity in Israel-Palestinian relations. Through its campaign contributions, the Israel Lobby dominates the process of choosing and electing representatives in Congress. How much does it cost to buy the political obedience of most federal politicians? How much does it cost to replicate this feat in the state legislatures and even municipal governments?
Through the ownership and/or control of major media outlets, the Israel Lobby exerts major influence in determining the main outlines of much public discourse when it comes to US-Israeli relations and many related subjects. How could one calculate the amount of money it took to achieve this feat? How much of this money is directed into payments for compliance, in other words, bribery? In the post-Epstein era what is the role of bribery’s criminal cousin, namely backmail?
The Israel Lobby is deeply engaged with other lobbies in transforming the Internet from an open forum of public interaction and debate into a centrally controlled propaganda instrument. Prominent among the Internet’s most aggressive censors and thought police are Google, You Tube, Facebook, Twitter and the Anti-Defamation League of B’nai B’rith.
Through all kinds of interventions the Israel Lobby asserts significant forms of control over a broad array of institutions and operations including those of the judiciary, the universities, book publishing, magazine publishing, municipal governments, trade unions and cultural groups. The biggest and most influential cultural group of all is the Hollywood film industry. Not surprisingly there is little in its cinematic output that provides critical perspectives on Zionism and its emanations.
The injection of huge amounts of money are essential to the exercise of so much concerted influence over such a broad sweep of political, intellectual and cultural organizations. Where do the large quantities of money supporting the activities the Israel project come from? Why is it that so many of agencies of the Israel Lobby have the status of charitable organizations with the capacity to extend tax write-offs to donors? What is the relationship of the Israel Lobby to Wall Street and the Federal Reserve Bank of New York?
Even the act of asking such questions will be seen by some as heretical. There is, however, nothing wrong with looking into issues that have so much impact on the quality of our political discourse… so much impact on our capacity to live together with the civility and security we have been losing so quickly with the imposition of the economically crippling lockdowns.
It is no less legitimate to ask questions about the ethnic identity of those who benefit most from the US economy than it is to ask questions about what groups suffer the most from the deprivations of poverty. Wouldn’t it make sense to try to moderate the disparities beginning with processes of research and discussion?
In a book of the same name, former ADL Executive Director, Abe Foxman, has opened the discussion of Jews and Money. Foxman effectively counters the view that all Jews are rich. Foxman, of course, is correct in this assertion. All Jews are not rich. Some are outright poor. A fairly large number of Jews, however, are somewhat rich and a small minority of Jews are disproportionately invested with wealth and power. Jews are especially well represented in the billionaires club both within the United States and internationally.
Some of the wealthiest Jews are part of the Wall Street establishment including the Federal Reserve Bank of New York. Perhaps the time has come to begin retiring this, “the most gigantic trust on earth.” Perhaps it is time to retire some of the debt created over more than a century of putting private bankers in charge of dictating interest rates as well as creating debt-laden dollars. Perhaps the time has come to lessen the debt burden that is narrowing the life chances of so many people who have been funding the wars for Israel mounted in the wake of the 9/11 deception.
The severity of the crisis before us compel all thoughtful people of conscience to look beyond the redeployment of old institutions and old remedies for old problems that are different from the challenges facing us now. One of the most obvious ways to avert further calamity is to move away altogether from the empowerment of private bankers to massively expand national debts with compound interest charged to tax payers.
The alternative to this approach is to change the present means of creating new money. The creation of many banking systems similar to that of the Bank of Canada should be considered in the quest for the main ingredients of a global reset. The Bank of Canada brought about an almost-debt-free run of prodigious nation building before Pierre Trudeau bent the policies of his government to meet the impositions of the Bank of International Settlements.
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.
Simply “printing” more money and adding more debt to the existing enormous debt load in the U.S. is not a solution. It is particularly irresponsible when it is done with no connection to social production and the working class. Non-fictitious value comes only from the labor-time of workers involved in the process of producing goods and services. Value cannot come from thin air. Capital does not magically produce value by itself.
Currently, the Federal Reserve’s balance sheet is approximately $7 trillion. The national debt is about $25 trillion. The federal debt-to-GDP ratio is 120%. The higher the ratio, the harder for a country to reliably pay back its debts. Many believe it is mathematically impossible to repay these historically unprecedented amounts. A massive black hole of debt has been rapidly created by the financial oligarchy.
Recently, Torsten Slok, Chief Economist at Deutsche Bank, estimated that if the U.S. Federal Reserve were to simply purchase everything (“monetize all assets”), it would total $130 trillion. Others have come up with similar estimates. The unthinkable may become thinkable.
It is important to appreciate that the state-sanctioned ability of the financial oligarchy to create counterfeit money serves only to further enrich the financial oligarchy while further reducing control over the economy by working people. Such unconscionable moves concentrate more money and power in even fewer hands and foster the illusion that real workers and real production are superfluous.
If anything, now is the time to demand a debt jubilee, also known as a moratorium on the debt—all kinds of debt. Economist Michael Hudson points out that throughout history large debts have been repeatedly cancelled for a range of reasons. And as Ellen Brown notes, we need a robust public banking system that actually serves the public interest. We do not need a private banking system or economic setup that ensure more tragedies for the people.
Cancelling all debts would bring enormous overdue relief to millions of Americans.
Since the 2008 economic collapse engineered by Wall Street, most of the world’s economies have been running on gas fumes and more bankrupt schemes and failed policies. Few, if any, economies have been able to return to weak pre-2008 economic growth levels. Even the Chinese and Indian economic “miracles” are not that miraculous.
To be sure, major capitalist economies have been declining since the late 1970s, and for the past few years imperialist organizations like the IMF and World Bank have routinely reviseddownward multiple economic growth estimates that are low to begin with.
Financialization, stock market manipulation, the refusal to strengthen the productive sector that actually produces what people need (the real economy), large declines in consumer spending, enormous sums of debt in all forms and at all levels,1 more personal and corporate bankruptcies, endless money printing by central banks around the world, extremely low interest rates, and the non-stop invention of toxic financial instruments, “utilities,” “vehicles,” “facilities,” and arrangements to rescue the rich now dominate the retrogressive direction of humanity. These and other antisocial developments point to a historically exhausted ruling class that is unfit to rule. The financial oligarchy has no solutions for any of the serious problems confronting humanity, just more tragedies.
The last few months have unmasked the most massive economic collapse the U.S. has ever experienced. Officially, 30 million people in the U.S. lost their jobs in about 6 weeks. The St. Louis Federal Reserve noted recently that around 50 million Americans may be unemployed in the coming months, resulting in an “official” unemployment rate exceeding 32 percent.2 The jobless rate at the height of the 1930s Great Depression was 25%.
Millions have also seen their pensions and savings drop substantially and rapidly. Not surprisingly, the mental, emotional, and physical health of millions has also further deteriorated, causing more harm than the coronavirus itself. Insecurity and uncertainty have never been higher.
Globally, a bigger disaster is unfolding. An April 29, 2020 press release from the International Labor Organization states that, “The continued sharp decline in working hours globally due to the COVID-19 outbreak means that 1.6 billion workers in the informal economy – that is nearly half of the global workforce – stand in immediate danger of having their livelihoods destroyed.”3
The coming months and years will be horrendous for millions worldwide. More intense social, economic, and political turmoil is bound to arise. Few will be unaffected by coming developments.
Fortunately, the fear, hysteria, and disinformation built into the ready-made “COVID Pandemic” narrative promoted by the rich and their allies has not caused everyone to become anticonscious or paralyzed. Many have not abandoned conscious acts of finding out the truth.
The “COVID Pandemic” did not trigger, induce, or cause the current economic meltdown, it simply diverted attention from it temporarily and provided convenient cover for what was inevitable.4 For years, many have been accurately predicting a major stock market crash and a deepening of the economic depression that started 12 years ago. It was not a matter of if the house of cards would collapse, but when it would break down. Many actually came very close to predicting the exact timeline of the economic collapse as well. There really were no mysteries or secrets.
Capitalism has always lurched from crisis to crisis, ensuring instability and insecurity for millions. Chaos, anarchy, and violence are inherent core features of the so-called “free market.” Economic upheavals, slumps, recessions, booms, and busts are fellow-travelers of this anachronistic economic system that further destroys the social and natural environment with each passing day. This will continue so long as conscious human control of the economy is blocked by existing political-economic arrangements.
While comparing the current economic catastrophe to the deep economic crises of 2008 or the 1930s has some value, this value is limited because the breadth, depth, and nature of the current economic collapse is far greater and qualitatively different given the all-around level of development and interconnectedness of contemporary societies and economies around the world. Wealth and power are also more concentrated in fewer hands today than just 12 years ago. Geo-political and geo-economic configurations have evolved and changed as well, presenting humanity with new realities. And never before has most of the world been put on a top-down extended lockdown (a prison term) for months at the same time.
In this dark context, while various benefits, stimulus checks, waivers and extensions for bills, and other social insurance programs are being considered and implemented in order to provide people with some relief, these are all temporary and inadequate—they are largely “stop-gap measures.” Student loans, for example, will have to start being repaid eventually, as will rent, credit cards, mortgages, car payments, service fees, and utility bills.
Here it is worth recalling that the U.S. Federal Reserve recently printed $4 trillion to prop up the big banks and big business. This is in addition to the $2.2 trillion CARES Act passed a few weeks ago,5 which also benefits mainly the rich. Most of the money that was printed in three seconds will not go to the majority. It will not substantively help the millions who have been harmed by the severe economic collapse that could have been prevented if decisions were made by the people and not the financial oligarchy. This is even more alarming when considering that the President of the Federal Reserve Bank of Minneapolis, Neel Kashkari, recently stated that the Federal Reserve has an “infinite amount of cash” to bail out the super-rich.
But if an “infinite amount of cash” can arbitrarily and instantly be printed on a whim, why should anything go unfunded? Why not fully fund excellent healthcare for all right now? Why not fully fund America’s public schools? Why not eliminate $1.7 trillion of humiliating student debt immediately? Why should anyone even pay taxes? What meaning does money have if it bears no relationship to the real world and the sphere of production that humanity depends on? Replacing real value with fictitious value is not a recipe for social progress; it lays the groundwork for deeper problems down the road.
The current crisis will lead to the further concentration of wealth in even fewer hands. Everything will be even more monopolized by the super-rich.
Monopoly in economics means monopoly in politics, and monopoly in politics means less democracy and more authoritarianism, repression, surveillance, and war. Things cannot be otherwise in the final and highest stage of capitalism. Economic parasitism and decay will only intensify until a new direction, motivation, and outlook for society and the economy are established by the people themselves.
On May 2, 2020, the Washington Post wrote:
In a matter of months, tens of millions of people in dozens of countries have been placed under surveillance. Governments, private companies and researchers observe the health, habits and movements of citizens, often without their consent…. At least 27 countries are using data from cellphone companies to track the movements of citizens, according to Edin Omanovic, the advocacy director for Privacy International, which is keeping a record of surveillance programs.6
It is no accident that we are seeing a broad range of enhanced police-state arrangements being put into place during the “COVID Pandemic.” Police-state arrangements are multiplying, often out of sight and with zero scrutiny.
New police-state arrangements include stepping up the number of police departments in dozens of U.S. cities using more drones to “protect public health”—usually without telling anyone. A dystopian atmosphere has even emerged in some places.
We are also seeing big tech companies like Apple launching “tracing apps” so as to “find infected people” and “improve public health.” Such apps will gather, store, and misuse gigantic quantities of private information, creating much anguish and many headaches for people in a variety of ways.
State “digital checkpoints” have also conveniently emerged during the “COVID Pandemic.” Some states are now setting up arrangements that require those driving into their state to stop at some place close to the state border and complete some sort of digital personal inventory and questionnaire before being permitted to enter the state. Putting aside the many embarrassing logistical and technical problems that have emerged with these poorly-conceived antisocial arrangements, this is nonetheless an effective way to gather extensive private and personal information—and it is probably unconstitutional; certainly not something Americans are used to or should get used to.
Perhaps worse, several mayors of major cities have publicly, casually, and openly called on people to snitch on each other in the name of “improving public heath.” Snitching all of a sudden has been cynically turned into a virtue, even a heroic act. But is such an approach a progressive, responsible, and ethical way to build a modern society that honors the dignity and personality of people? How is sowing distrust, animosity, and fear between neighbors helpful and acceptable? Is this how unity and mutual support are built?
A massive top-down effort to shift many different services and work online is also exposing millions more to frequent invasions of their privacy and hacking, not to mention a range of technology-related health problems (e.g., headaches, eye strain, neck pain, hand problems, shoulder tension, and sedentary behavior). Technology is great in many ways, but it is also excellent at delivering many problems.
It is critical to consciously reject and condemn police state arrangements and government abdicating its responsibility to the people. As grim and sometimes apocalyptic as the dark situation we are collectively suffering through feels like at times, all is not lost. All is not doom and gloom.
Contradictions, cracks, and openings abound.
While various things have (inadvertently) improved during the “COVID Pandemic,” such as less pollution around the world, clearer skies, cleaner lakes, fewer car accidents, and lower gas prices, to name just a few, we are experiencing a deep crisis, and a crisis presents various opportunities.
What happens next is significant.
It is critical to deprive the rich and their allies of any initiative to further wreck everything. Their ideas and policies are bankrupt and do not serve the public interest. The rich and their retinue, including the cartel political parties, must not be allowed to set the agenda for anything. They have no real solutions.
People are tired of being told what to do by unaccountable “leaders” and politicians, and they reject the ready-made diversionary answers “leaders” are tirelessly promoting. People do not want any more top-down “solutions” that leave them out of the equation. They want to be the decision-makers themselves, which means giving more than occasional “input” that is routinely disregarded or used against them anyway. Decision-making and “input” are not the same. The entire polity must be part of all decision-making. Sovereignty lies with the polity, not “leaders,” different factions of the rich, and politicians.
People can and must boldly speak out in their own name and be accountable only to themselves and their peers. The polity is very creative and has many intelligent solutions for everything, as well as a strong desire to enact such solutions.
It is harmful to rely on the rich and their political representatives. It is best to avoid them altogether and find new ways to come together and think about, analyze, and discuss new directions, motivations, agendas, and programs for society and the economy. There is an alternative to the highly untenable status quo.
It is worth noting that, intended or not, social and physical distancing rules have played a big role in blocking rallies, protests, and demonstrations against assaults on people’s rights and livelihoods.
Note that millions of people have still not received their meager stimulus check.
I admit upfront that this is a hard newsletter to read. It is about debt. There is a bloodless quality to the way that we talk about the debt of the poorer nations. There is nothing poetic here. The numbers are alienating, their outcome shocking.
In mid-April, eighteen heads of government from Africa and Europe publicly urged the World Bank, the International Monetary Fund, the African Development Bank, and the New Development Bank as well as other regional institutions to announce an ‘immediate moratorium on all bilateral and multilateral debt payments, both public and private, until the pandemic has passed’. Meanwhile, these agencies – and others – were asked to ‘provide liquidity for the procurement of basic commodities and essential medical supplies’.
On 30 April, Abiy Ahmed, Prime Minister of Ethiopia, wrote that the call for debt postponement is insufficient; what was needed was debt cancellation. In 2019, stunningly, sixty-four countries around the world (half of them on the African continent) spent more money to service their external debt than on health care; the governments in 121 low and middle-income countries spent 10.7% of their revenue on public health, while they drained 12.2% on external debt payments. Ethiopia, Ahmed wrote, ‘spends twice as much on paying off external debt as on health’. Last year, the IMF said that Ethiopia was one of the five fastest growing economies in the world; this is no longer going to be the case because of the impact of the novel coronavirus. Ethiopia, Ahmed noted, will slip into a coronavirus recession.
In late March, the IMF announced that it would provide a new facility worth $1 trillion to prevent countries from falling into a coronavirus recession (under pressure from the US Treasury, the IMF excluded Venezuela). Within a short period of time, more than a hundred countries appealed to the IMF for help. The IMF and the G20 either cancelled debt payments for the next six months or froze debts for the remainder of the year. The G20 said that $32 billion in debt servicing owed to official, private, and multilateral creditors would be suspended in 76 countries. The current debt stocks of the developing countries – by comparison – is over $8 trillion. The absence of any international debt authority means that these initiatives are insufficient. Private creditors are not bound to following through with these initiatives, which means that many of the highly indebted countries will have to continue to service their debt to them. There is talk of the creation of a ‘central credit facility’ developed within the World Bank, where the indebted countries could deposit their debt and let the World Bank deal with the creditors; after the coronavirus has gone, the situation of the debt would be reassessed.
Far more ambitious is the proposal from the UN Conference on Trade and Development (UNCTAD) to establish an International Developing Country Debt Authority. This body would have a dual mandate: first, to oversee any temporary standstills in debt repayments in order to stave off such events as a coronavirus recession; second, to look carefully at the necessity of fundamental debt relief (including debt cancellation). UNCTAD has made similar proposals in 1986, 1998, 2001, and 2015; each time the powerful creditors and the wealthy nations have rejected this approach. In 1985, the Cuban government hosted the Havana Debt Conference, where Fidel Castro made a plea for a Third World Debt Strike to put pressure on the creditors to come to the table; immense pressure on the less confident states derailed that approach. Neither UNCTAD nor the Havana Debt Conference were able to move this agenda. It now returns to the table.
On April 16, US Treasury Secretary Steven Mnuchin said bluntly that the US is against any of these more aggressive measures. The most that the US would accept was ‘time-bound suspension of debt service payments’ in the G20 and Paris Club (official creditors), while the London Club (private creditors) would be asked to act on a voluntary basis. Not only has the US put its foot down to prevent any proper immediate relief, but it has said that no long-term debt cancellation is going to be allowed. If there is a coronavirus recession in the countries of the Global South, then so be it.
One of the countries that will slip into a coronavirus recession is Jamaica, where Minister of Finance and Public Service Nigel Clarke said that the ‘tourism sector is operating at zero utilisation and the prospect and timing of reopening remain unclear’. In November 2019, Jamaica completed its obligations to an IMF loan; the head of the IMF team, Uma Ramakrishnan, said that Jamaica was poised for a bright future. But these friendly words came at the end of a process of terrible austerity on the island.
Christophe Simpson, Chair of Jamaica Lands, spoke to Tricontinental: Institute for Social Research about the situation of debt and health care in Jamaica. Simpson emphasises that, in Jamaica, 90% of the population is descended from people who had been enslaved, whose labour was stolen by the British. When the people won their freedom, the British exchequer compensated the plantation owners for the ‘loss’ of their ‘property’; the loan that the British government took to pay the plantation owners was not paid off till 2015, when British Prime Minister David Cameron came to Jamaica to say that reparations for the formerly enslaved people and their descendants was off the table. Colonialism left Jamaica reliant upon tourism, with limited economic sovereignty.
‘We are in a never-ending cycle of debt’, Simpson said. ‘International institutions like the IMF set conditions on the money they lend, so that – for instance – we are not allowed to spend more than 9% of our GDP on public sector wages’. Health care and education face cuts, which means that nurses and teachers are underpaid. ‘Nurses and teachers are lured away from Jamaica by promises of higher wages in countries such as the United States, Canada, and Britain’. ‘They essentially benefit from our indebtedness’, Simpson explained. Jamaica’s people provide each other with free primary and secondary education and with half of the tertiary education costs; 80% of tertiary graduates leave the island to work abroad. Jamaica, which has been robbed for centuries now subsidises the health care sectors in the North Atlantic states.
Elean Thomas (1947-2004), a founder of Jamaica’s Workers Party, in her book Before They Can Speak of Flowers: Word Rhythms (1988) thought about how often she had been asked not to interfere in politics, or – as she put it in the clever Jamaican variation – in politricks. Neither hunger nor ill-health have to do with anything other than politics, since it is through political decisions that resources are stolen from people who then suffer the indignities of poverty.
How I fe no deal with politics? when Politricks a deal with me.
Take for instance…
the good book says
‘By the sweat of your brow
you shall eat bread’
But don’t you know
whole heap of people
a sweat rivers
and still can’t find no bread
is what decide that.
Vikas Thakur, ‘Home’, a distant dream for India’s migrant labourers, 2020.
Our Tricontinental: Institute for Social Research dossier no. 28 (May 2020) on CoronaShock: A Virus and The World is focused on the politics – or the politricks – of the moment. The virus of austerity and of enforced debt servitude produced a fragile world order in most of the world, which has crumbled in the wake of the global pandemic. The dossier traverses the political framework of neoliberalism, which has eroded the basic social institutions that provide health care and education, creating a world in which unproductive finance rules the roost and in which the vast platform or web-based firms have taken hold of a large part of the economy.
Along with the International People’s Assembly, Tricontinental: Institute for Social Research produced a 16-point declaration that includes immediate relief and long-term measures. In our most recent dossier, we look carefully at one of these policies, the call for a Universal Basic Income (UBI). We lay out our critical view of the UBI scheme, offering our assessment of why this must be an undiluted universal scheme and why it must be funded by taxes on the wealthy and on profits rather than merely by dismantling other social service schemes. We take a socialist approach to the UBI, insisting that it be a supplement to other social wages rather than perpetuate the myth of the ‘deserving poor’ to sift out who should qualify and who should not.
Dossier no. 28 is illustrated by eight artists from Cuba to Malaysia who came together to make images that depict the Great Lockdown. This newsletter shares some of their work.
A call for artists for Anti-Imperialist Poster Exhibitions.
Collaboration with artists is a central feature of our work. For that reason, we have partnered with the International People’s Assembly and the International Week of Anti-Imperialist Struggle to hold a poster exhibition featuring four different concepts – capitalism, neoliberalism, hybrid war, and imperialism. Please widely forward the call for this exhibition.
Dar Yasin (Associated Press), Srinagar, Kashmir, 9 August 2019.
Three AP photographers – Dar Yasin, Mukhtar Khan, and Channi Anand – won a Pulitzer Prize for their photography on the struggles inside Kashmir. Please see our Red Alert on Kashmir.
The International Monetary Fund (IMF) says that the Great Lockdown, which has no end date, could very well lead to a loss of $9 trillion to global Gross Domestic Product over the entirety of 2020 and 2021; this number is greater than the combined economies of Japan and Germany. This scenario, the Fund’s managing director Kristalina Georgieva admits, ‘may actually be a more optimistic picture than reality produces’.
There are calls within Europe for the mutualisation of debt, there are calls on the global stage for debt moratoriums, and there are calls for the IMF to issue trillions of dollars of Special Drawing Rights (SDRs). But old habits do not die. Germany and the Netherlands do not want to bail out the southern European economies, while the US Treasury and the creditors are not keen on debt relief or the issuance of SDRs. In fact, in the midst of a catastrophic pandemic, the United States government has decided to withhold its financial contribution to the World Health Organisation (WHO).
There are now over 2 million people infected by SARS-CoV-2 across the world, with deaths increasing, a general sense of gloom falling like heavy winter snow on our human capacity for optimism.
But then there are sparks of hope, mainly coming from parts of the world committed to socialism. At the end of January, when most of the world was cavalier about the news from Wuhan (China), Vietnam’s Prime Minister Nguyễn Xuân Phúc assembled a team and began to create measures to tackle the spread of the virus. ‘Fighting the epidemic is fighting the enemy’, he said at that time. Vietnam’s government began to trace those who might be infected, test their contacts, quarantine anyone who interacted with them, and bring in the entire medical establishment – including retired doctors and nurses – to deal with the emergency. Vietnam’s Military Medical Academy and Viet A Corporation developed a low-cost test kit based on WHO guidelines, which allowed the country to begin testing people with symptoms. Crucially, the government repeatedly cautioned the population against xenophobia. A clever campaign for public information by Vietnam’s National Institute of Occupational Safety and Health about the virus and about basic hygiene included a song and video, which then spawned numerous imitators.
Until now, there have been no deaths from COVID-19 in Vietnam.
Last week, Vietnam shipped 450,000 protective suits to the United States and 750,000 masks to France, Germany, Italy, Spain, the United Kingdom, and the United States. Within living memory, the United States, with assistance from its European allies, dropped seven and a half million tonnes of explosives, including chemical weapons (napalm and Agent Orange), which devastated Vietnam’s society and poisoned its agricultural land for generations; this is 100 times greater than the power of the atom bombs that the US dropped on Japan. Yet, it is Vietnam whose government and people have used science and public action to tackle the virus and who sent – in solidarity – equipment to the United States, where the absence of science and public actions has paralysed society.
Vladimir Lebedev, Yesterday and Today, 1928.
A hundred years ago, in 1918-19, an influenza pandemic swept the world, traveling on ships carrying troops to and from the battlefields of Europe in the throes of World War I. At least fifty million people were felled by what was erroneously called the Spanish Flu (the virus was first detected in Kansas, USA in March 1918). This influenza followed another pandemic – in 1889-90 – whose swift diffusion has been blamed on the rapid movement of humans by steam transportation by sea and land. While the 1889-90 influenza mainly killed children and the elderly, the influenza of 1918-19 also killed young adults for reasons that are still not fully explained.
Troops, who, in the words of the poet Isaac Rosenberg, ‘Drained the wild honey of their youth’ in the mud, lice, and mustard gas of the ghastly trenches now had to confront the infectious flu at home. As the war ended, the belligerent countries set up the League of Nations, which created the Typhus Commission, quickly renamed the Epidemics Commission. Disease was the close cousin of war, with a volt of diseases – such as typhus, typhoid, dysentery, smallpox, cholera, and influenza – aflame amongst the demobilised soldiers. The Epidemics Commission visited Poland, where it recommended the establishment of a cordon sanitaire to prevent the diseases from spreading further and worked with the government to create emergency hospitals and clinics. It was this Commission that would be folded into the Health Organisation of the League, and – after World War II – the World Health Organization (WHO).
The young Soviet Republic, established after the October Revolution of 1917, faced the wrath of what was known as ispanskaya bolezn, or the ‘Spanish Disease’. By late 1918, the Soviets saw 150 cases per week, although it was not as much of a problem as typhus, which brought 1000 cases per week to the hospitals. It was because of typhus – caused by lice – that Lenin said, ‘Either socialism will defeat the louse, or the louse will defeat socialism’. The young Soviet Republic inherited a broken medical system and a population in poverty and ill health; civil war, disease, and famine threatened the total collapse of society. It was in light of this that the Soviets hastily acted in several keyways:
Create a commissariat for public health. On 21 July 1918, the Soviet Republic centralised the various health agencies and put Nikolai Semashko in charge; this was the first such institution in the world (by comparison, the US did not create a Department of Health till 1953). The Commissariat was charged with ensuring that health care was a right and not a privilege; therefore, medical care had to be free.
Expand and democratise the health sector. The Soviet Republic hastily built hospitals and polyclinics, trained doctors and public health experts, and expanded medical schools and bacteriological institutes. Dr. E. P. Pervukhin, Commissar of Public Health of the Petrograd Commune, said in 1920, ‘New factories for medicines have been erected, and great stocks have been confiscated from the speculators in medicines’. The profit motive was removed from the medical sector.
Lithograph to illustrate the distribution of the Soviet budget, 1930.
Mobilise the population. Health care could not be left in the hands of the doctors and nurses alone; Semashko made the case for the mobilisation of workers and peasants into the struggle to build a healthy society. The Workers’ Committees to Combat Epidemics were established in 1918 in both cities and villages; the representatives of these Committees – workers and peasants themselves – communicated scientific information about health and sanitation, ensured that the public baths (banyas) were clean, and monitored their communities to ensure that any sign of disease would lead to professional medical care. In 1920, Semashko wrote, ‘We may say without exaggeration that the epidemics of typhus and cholera were stopped chiefly by the assistance of the workers’ and peasants’ committees’. Public action was an integral part of Soviet health care.
Strengthen preventive measures. The Soviet public health officials believed that more resources had to go towards prevention, whether towards public health instruction or towards the improvement of the living conditions of the workers and the peasants. Dr. Pervukhin told a Norwegian journalist in 1920 that in the Soviet Republic, ‘all dwellings are nationalised, so no one any longer lives in the surroundings so dangerous to health which many had to put up with under the old regime. By means of our grain monopoly, foodstuffs are guaranteed first of all to the sick and weak’. Better conditions of life and more frequent medical attention would be able to stop the spread of disease.
No wonder, then, as Dr. Pervukhin said, that ‘We overcame the Spanish influenza better than the western world did’. Reading these texts shines a familiar light on the way that Vietnam and Kerala, China and Cuba are tackling the coronavirus pandemic today; it underlines the gap between the socialist order and the capitalist order, one with a disposition to put people before profit and the other lashed to the mast of profit. Reading Jessica Lussenhop’s magnificent story about how the Smithfield pork plant in South Dakota (USA) refused to shut down when multiple cases of COVID-19 broke out along their production line, instead pressuring workers who had little choice but to keep coming to work, tells you something about the compulsions of the capitalist order in the face of a pandemic. Tim, one of the Smithfield workers, said he had to keep working because ‘I got four kids to take care of. That income is what provides a roof over my head’, COVID-19 or not.
Wednesday, 22 April, was the 150th anniversary of Lenin’s birthday. Tricontinental: Institute for Social Research, along with three publishing houses (LeftWord Books in India, Expressão Popular in Brazil, Batalla de Ideas in Argentina) released a free book online to commemorate the birthday. The book, available in English, Portuguese, and Spanish, includes Lenin’s 1913 essay on Marx, Mayakovsky’s 1924 epic poem about Lenin, and a short essay I wrote about Lenin’s theory and praxis.
On 24 March, the Kenyan writer Ngũgĩ wa Thiong’o wrote a poem called ‘Dawn of Darkness’; it was written in response to his neighbour Janet DiVinceno and offerings by Mukoma wa Ngugi (Cornell University) and Naveen Kishore (Seagull Books, Kolkata, India). A few days later, he shared the poem, a gift for all of us.
I know, I know,
It threatens the common gestures of human bonding
The shoulders we give each other to cry on
The neighbourliness we take for granted
So much that we often beat our breasts
Crowing about rugged individualism,
Disdaining nature, pissing poison on it even, while
Claiming that property has all the legal rights of personhood
Murmuring gratitude for our shares in the gods of capital.
Oh, how now I wish I could write poetry in English,
Or any and every language you speak
So, I can share with you, words that
Wanjikũ, my Gĩkũyũ mother, used to tell me: Gũtirĩũtukũũtakĩa:
No night is so Dark that,
It will not end in Dawn,
Or simply put,
Every night ends with dawn. Gũtirĩũtukũũtakĩa.
This darkness too will pass away
We shall meet again and again
And talk about Darkness and Dawn
Sing and laugh maybe even hug
Nature and nurture locked in a green embrace
Celebrating every pulsation of a common being
Rediscovered and cherished for real
In the light of the Darkness and the new Dawn.
This darkness too will pass away. The light that welcomes us will not be, as Ngugi writes, the old light, but a new dawn.
There is surprisingly a certain degree of optimism around at the moment, despite virtually entire populations and economies on lockdown. Although things are really bad for millions right now due to the effects of lockdown, economist Mariana Mazzucato believes that the Covid-19 crisis will shine light on societal and economic systems all across the world, exposing some of the deep-rooted flaws of capitalism.
After lockdown ends, Mazzucato believes societies can be reshaped to become more inclusive. She says an overly financialised business sector has been siphoning value out of the economy by rewarding shareholders through stock-buyback schemes, rather than shoring up long-run growth by investing in research and development, wages and worker training. Mazzacuto thinks we can use the current state of emergency to start building a fairer and more sustainable economy with the state playing a leading role to serve the public interest over the long term.
Her optimism is also shared by others who think that out the wreckage of the current crisis, the state and citizens can work together to shift towards more stakeholder capitalist or even more socialist oriented societies.
The reality, however, may merely mean the entrenchment of the prevailing system. For example, does anyone really believe that the ruling Conservative administration in the UK genuinely cares about the well-being of ordinary people or has any kind of commitment to publicly funded institutions? The Conservative Party has devastated millions of lives courtesy of an ideologically driven austerity agenda for over a decade. And for over three decades, it has been waging war on workers, unions and the public sector on behalf of global capital.
The situation is not unique to the UK. In India, successive administrations have been facilitating neoliberal policies that have led to a wholly avoidable agrarian crisis, marked by farmer suicides, child malnourishment, growing unemployment, increased informalisation, indebtedness and an overall collapse of agriculture. If anything, the current Modi administration has been keen to further open up the sector to the demands of Western agrocapital.
Things in the US hardly merit optimism for radical change either. The Federal Reserve estimates over 47 million will lose their jobs in the US, taking unemployment to almost a third of the labour force. This is more than during the Great Depression of the 1930s. However, in a series of short explanatory films for the layperson, analyst John Titus shows that US capitalism and the privately owned Fed are not going to change their spots: Wall Street and its top executives will continue to enrich themselves, while the public will suffer throughout the duration of lockdown, which could persist in various forms for 18 months.
Even if we take a brief, more general look at what is happening, we can see that, for instance, factory farms in the US are expected to receive $23.5 billion in stimulus money. The Center for Biological Diversity and allies have urged congress to direct these funds to small and mid-size farmers instead of big agri-food concerns. With the threat of environmental regulation rollbacks also on the cards, it is clear the current crisis is being used to consolidate the position of major players in the sector.
Consider too that, according to a recent piece in the New York Times, the $2 trillion-plus coronavirus relief package making its way through US congress will give bailouts to a number of key industries and companies that have indulged in the types of shameful activities that Mazzucato outlines. The airline industry is expected to get some $50 billion in cash and loans and Boeing, which asked for $60 billion, is widely expected to receive some part of a $17 billion fund.
During the past decade, most of the companies in line to get taxpayer money did not prepare for a downturn. For example, the airline industry, which is prone to booms and busts, collectively spent more than $45 billion on stock buybacks over the past eight years. Viewed in context, The New York Times says the relief package still amounts to a bailout of private capital and the endorsement of self-enriching practices.
Further Neoliberal reforms
The current crisis is hitting workers hard across the world, possibly more so in India than elsewhere. Consider that nearly half of India’s workforce of 467 million is self-employed, 36 percent are casual wage workers, while only 17 percent are regular wage workers. Two-thirds of them work without contracts and more than 90 percent lack any social security or health benefits in the workplace. The six-week coronavirus lockdown has made survival extremely difficult for them.
But is there hope on the horizon? World Bank Group President David Malpass recently stated that poorer countries will be ‘helped’ to get back on their feet after the various lockdowns that have been implemented in response to the Covid-19 crisis. However, before getting anyone’s hopes up too much, this ‘help’ will be on condition that 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.
Ranil Salgado, mission chief for India at the IMF, echoes the views of Malpass by saying that when the economic shock passes, it’s important that India returns to its path of undertaking long-term reforms.
In the face of economic crisis and stagnation at home, this would seem like an ideal opportunity for Western capital to further open up and loot economies abroad. On 20 April, the Wall Street Journal ran the headline ‘IMF, World Bank Face Deluge of Aid Requests From Developing World. Scores of countries are asking for bailouts and loans from financial institutions with $1.2 trillion to lend. An ideal recipe for fuelling dependency.
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.
This is a sentiment shared by economics professor Michel Chossudovsky, who implies Covid-19 provides ideal cover for rebooting the global economy via a global debt crisis and the subsequent privatization of national states. The current crisis will certainly have the effect of impoverishing hundreds of millions of workers and increasing the national debt of nations. It could prove so devastating to economies that bailout packages from global financial institutions might saddle nation states with debts that prove almost impossible to pay back.
Dollar denominated loans will help secure the global hegemony of the dollar, which has been looking increasingly fragile in recent years.
At the same time, with mass unemployment and workers’ pay decimated, ordinary people in both rich and poor countries will have finally reached the finishing line in the race towards the bottom. Workers’ rights and well-paid jobs will be at a premium, with a global reserve army of labour waiting in the wings to snap up any work that is available.
In India, neoliberal reforms have already devastated many livelihoods and the US – via the WTO and World Bank – has since the 1990s been pushing India to further open up to Western goods and corporations. Pressure has been applied to further reduce subsidies to the farm sector and to dismantle mechanisms which have ensured some degree of food security for the hundreds of millions who rely on state support.
As the lockdown plays out in India, we see stories of fractured supply chains and of farmers who cannot sell their produce. In rural areas, millions of migrant workers have returned to the countryside. Rural affairs commentator P Sainath paints a dreary picture of the impacts of India’s lockdown. He discusses the desperate plight of migrant workers, a shortage of cash to buy food and a potential shortage of food as farmers are unable to complete their harvests.
He notes that Dr. Sundararaman, a former executive director of the National Health Systems Resources Centre, asserts that there is a desperate need to “identify and act on the reverse migrations problem and the loss of livelihoods. Failing that, deaths from diseases that have long tormented mostly poor Indians could outstrip those brought about by the corona virus.”
But no doubt cash-rich Western capital which will gain from the trillions being pumped into the system will see many strategic opportunities to benefit. It has been pushing via the World Bank to bring Indian agriculture under corporate control for a long time. This would involve forcing GMO food crops into the country, the displacement of peasant farmers, corporate consolidation and commercialisation based on industrial-scale monocrop farms incorporated into global supply chains dominated by transnational agribusiness and retail giants.
This would amount to the wholesale restructuring of Indian society. What we could see is the acceleration of existing processes which have already led to what Sainath describes as a crisis of civilisation proportions.
Across the world, people need to question the narrative, the data and the data collection methods surrounding Covid-19 and assess whether lockdowns and their devastating effects are in line with the risks involved. Because, five years from now, given what is at stake and the massive hardships being endured, it will then be too late to look back and say it was all based on flawed data and wrongheaded responses and was driven by vested interests who were set to benefit financially.
Did Congress just nationalize the Fed? No. But the door to that result has been cracked open.
Mainstream politicians have long insisted that Medicare for all, a universal basic income, student debt relief and a slew of other much-needed public programs are off the table because the federal government cannot afford them. But that was before Wall Street and the stock market were driven onto life-support by a virus. Congress has now suddenly discovered the magic money tree. It took only a few days for Congress to unanimously pass the Coronavirus Aid, Relief, and Economic Security (CARES) Act, which will be doling out $2.2 trillion in crisis relief, most of it going to Corporate America with few strings attached. Beyond that, the Federal Reserve is making over $4 trillion available to banks, hedge funds and other financial entities of all stripes; it has dropped the fed funds rate (the rate at which banks borrow from each other) effectively to zero; and it has made $1.5 trillion available to the repo market.
It is also the Federal Reserve that will be picking up the tab for this bonanza, at least to start. The US central bank has opened the sluice gates to unlimited quantitative easing, buying Treasury securities and mortgage-backed securities “in the amounts needed to support smooth market functions.” Last month, the Fed bought $650 billion worth of federal securities. At that rate, notes Wall Street on Parade, it will own the entire Treasury market in about 22 months. As Minneapolis Fed President Neel Kashkari acknowledged on 60 Minutes, “There is an infinite amount of cash at the Federal Reserve.”
In theory, quantitative easing is just a temporary measure, reversible by selling bonds back into the market when the economy gets back on its feet. But in practice, we have seen that QE is a one-way street. When central banks have tried to reverse it with “quantitative tightening,” economies have shrunk and stock markets have plunged. So the Fed is likely to just keep rolling over the bonds, which is what normally happens anyway with the federal debt. The debt is never actually paid off but is just rolled over from year to year. Only the interest must be paid, to the tune of $575 billion in 2019. The benefit of having the Fed rather than private bondholders hold the bonds is that the Fed rebates its profits to the Treasury after deducting its costs, making the loans virtually interest-free. Interest-free loans rolled over indefinitely are in effect free money. The Fed is “monetizing” the debt.
What will individuals, families, communities and state and local governments be getting out of this massive bailout? Not much. Qualifying individuals will get a very modest one-time payment of $1,200, and unemployment benefits have been extended for the next four months. For local governments, $150 billion has been allocated for crisis relief, and one of the Fed’s newly expanded Special Purpose Vehicles will buy municipal bonds. But there is no provision for reducing the interest rate on the bonds, which typically runs at 3 or 4 percent plus hefty bond dealer fees and foregone taxes on tax-free issues. Unlike the federal government, municipal governments will not be getting a rebate on the interest on their bonds.
The taxpayers have obviously been shortchanged in this deal. David Dayen calls it “a robbery in progress.” But there have been some promising developments that could be harnessed for the benefit of the people. The Fed has evidently abandoned its vaunted “independence” and is now working in partnership with the Treasury. In some sense, it has been nationalized. A true partnership, however, would make the printing press available for more than just buying toxic corporate assets. A central bank that was run as a public utility could fund programs designed to kick-start the economy, stimulate productivity and generally serve the public.
Harnessing the Central Bank
The reason the Fed is now working with the Treasury is that it needs the Treasury to help it bail out a financial industry burdened with an avalanche of dodgy assets that are fast losing value. The problem for the Fed is that it is only allowed to purchase or lend against securities with government guarantees, including Treasury securities, agency mortgage-backed securities, debt issued by Fannie Mae and Freddie Mac, and (arguably) municipal securities. To get around that wrinkle, as Wolf Richter explains:
[T]he Treasury will create (or resuscitate) a series of special-purpose vehicles (SPVs) to buy all manner of financial assets, backed by $425 billion in collateral conveniently supplied by the US taxpayer via the Exchange Stabilization Fund. The Fed will lend to SPVs against this collateral which, when leveraged, could fund $4-5 trillion in asset purchases.
That includes municipal bonds, non-agency mortgages, corporate bonds, commercial paper, and every variety of asset-backed security. The only things the government can’t (transparently, yet) buy are publicly-traded stocks and high-yield bonds.
Unlike in QE, in which the Fed moves assets onto its own balance sheet, the Treasury will now be buying assets and backstopping loans through SPVs that the Treasury will own and control. SPVs are a form of shadow bank, which like all banks create money by “monetizing” debt or turning it into something that can be spent in the marketplace. The SPV decides what assets to buy and borrows from the central bank to do it. The central bank then passively creates the funds, which are used to purchase the assets backing the loan. As Jim Bianco wrote on Bloomberg:
In other words, the federal government is nationalizing large swaths of the financial markets. The Fed is providing the money to do it. BlackRock will be doing the trades. This scheme essentially merges the Fed and Treasury into one organization. …
In effect, the Fed is giving the Treasury access to its printing press. This means that, in the extreme, the administration would be free to use its control, not the Fed’s control, of these SPVs to instruct the Fed to print more money so it could buy securities and hand out loans in an effort to ramp financial markets higher going into the election.
Of the designated SPVs, none currently serves a public purpose beyond buoying the markets; but they could be designed for such purposes. The taxpayers are on the hook for replenishing the $425 billion in the Exchange Stabilization Fund, and they should be entitled to share in the benefits. Congress could designate a Special Purpose Vehicle to fund its infrastructure projects, and to fund those much-needed public services including Medicare for all, a universal basic income, student debt relief, and similar programs. It could also purchase a controlling interest in insolvent or profligate banks, pharmaceutical companies, oil companies and other offenders and regulate them in a way that serves the public interest.
Another possibility would be for Congress to fund these programs in the usual way by issuing government bonds, but to enter into a partnership agreement first by which the central bank would buy the bonds, roll them over indefinitely, and rebate the interest to the Treasury. That is how Japanese Prime Minister Shinzo Abe has funded his stimulus programs, with none of the predicted inflationary effects on consumer prices. In fact, the Japanese consumer price index is hovering at a very low 0.4%, well below even the central bank’s 2 percent target, although the Bank of Japan has monetized nearly half of the government’s debt. Half of the US debt would be over $11 trillion. Assuming $6 trillion for the current corporate bailouts, that means another $5 trillion could safely be monetized for programs benefiting individuals, families and local governments. (How to do this without driving up consumer prices will be the subject of another article.)
Relief for State and Local Governments
State and local governments, which are on the front lines for delivering emergency services, have for the most part been left out of the bailout bonanza. While we are waiting for action from Congress, the Fed could make cheap loans available to local governments using its existing powers under Federal Reserve Act Sec. 14(2)(b), which authorizes the Fed to purchase the bills, bonds, and notes of state and local governments having maturities of six months or less. Since local governments must balance their budgets, these loans would have to be repaid, but the loans could be extended by rolling them over for a reasonable period, as is done with repo loans and the federal debt; and the loans could be made at the same near-zero interest rate banks can borrow at now. State and local governments are at least as creditworthy as banks – they have a taxpayer base and massive assets. In fact, the private banking industry would have been insolvent long ago if it were not for the deep pocket of the central bank and the bailouts of the federal government, including the FDIC insurance scheme that rescued the banks from bankruptcy in the Great Depression.
There is a way state and local governments can take advantage of the near-zero interest rates available to banks even without federal action. They can set up their own publicly-owned banks. Besides giving them the ability to borrow much more cheaply, having their own banks would allow them to leverage their loan funds. A $100 million revolving fund issuing loans at 3% would gross the state $3 million per year. If that same $100 million were used to capitalize a bank, it could issue ten times that sum in loans, grossing $30 million per year. Costs would need to be deducted from those earnings, including the cost of funds; but the cost of funds is quite low for banks today. They can borrow to meet their liquidity needs from their own deposit pool, or at 0.25% in the fed funds market, or at about the same rate in the repo market, which is now backstopped by the central bank.
The blatant disparities in the congressional response to the current crisis have shone a bright light on how our financial system is rigged against the people in favor of a wealthy elite. Crisis is when change happens; this is the time for advocates to unite in demanding change on behalf of the people. As Greek economist Yanis Varoufakis admonished in a recent post:
[T]his new phase of the crisis is, at the very least, making it clear to us that anything goes – that everything is now possible.… Whether the epidemic helps deliver the good or the most evil society will depend … on whether progressives manage to band together. For if we do not, just like in 2008 we did not, the bankers, the spivs [petty criminals], the oligarchs and the neofascists will prove, again, that they are the ones who know how not to let a good crisis go to waste.
The pandemic, economic collapse and the government’s response to them are going to not only determine the 2020 election but define the future for this decade and beyond. People are seeing the failure of the US healthcare nonsystem and the economy. The government was able to provide trillions for big business and Wall Street without asking the usual, “Where will we get the money?” However, the rescue bill recently passed by Congress provides a fraction of what most people need to get through this period. Once again, a pandemic will reshape the course of history.
Last week, we wrote about the failings of the healthcare system and the need for a universal, publicly-funded system. This week, we focus on the need to change the US economic system. The economic crisis in the United States is breaking all records. The class war that has existed for decades is being magnified and sharpened. The failings of financialized, neoliberal capitalism is being brought into focus at a time when people in the United States have greater support for socializing the economy than in recent times.
This Thursday, there was a record 3.3 million applications for unemployment, an increase of three million from the previous week, but on the same day, there was a record rise in the stock market. This contradiction shows the divide between the economic insecurity of the people and investors profiting from the crisis. The 11.4 percent increase in the stock market on Thursday was the largest increase since 1933 while the record rise in unemployment was 40 percent higher than ever recorded. Projections are for 30 percent unemployment this quarter, which is five percent higher than the worst of the Great Depression.
The response to the economic crisis reveals who the government represents. While people’s economic insecurity grew, the government acted to primarily benefit the wealthiest. This realization should spur an uprising like the United States has never seen before. Perhaps the most dangerous to the ruling class is their incompetence has been exposed. As Glen Ford writes, “The capitalist ‘crisis of legitimacy’ may have passed the point of no return, as the Corporate State proves daily that it cannot perform the basic function of protecting the lives of its citizens.”
Disaster Aid: Crumbs For The People, Trillions For The Wealthiest
Congress unanimously passed a $1.6 trillion coronavirus disaster aid bill this week. This is almost equal to the 2009 Recovery Act and the 2008 Wall Street rescue combined. Democrat’s votes were essential to passing the bill so they could have demanded whatever they wanted. This bill shows the bi-partisan priority for big business.
The bill is too little too late for people who have lost their jobs and for small businesses that have been forced to close. The law includes a one-time $1,200 payment to most people. This payment will arrive after rent and other debt payments are due for a US population with record debt. Congress does not understand the economic realities of people in the United States. Nobel Prize-winning economist Joseph Stiglitz explained what was needed saying, “The answer is we need no evictions, no foreclosures on all properties, and the government should guarantee pay.” In addition, credit card companies should also put “a stay on interest on all debt.”
When COVID-19 first began, we pointed out that the US healthcare system was not prepared to respond and showed the problems of putting profits before health. The COVID-19 rescue bill did not pay for coronavirus testing or treatment. Millions of people who lose their jobs will lose their health insurance, demonstrating why healthcare should not be tied to employment. Adding to health problems, the law did not increase the SNAP food program for the poor.
Roughly one-third of the funding goes to direct payments to people, unemployment insurance for four months, hospitals, veterans’ care, and public transit. Two-thirds go to government and corporations. Adam Levitin describes the law as “robbing taxpayers to bail out the rich.”
Congress allotted at least $454 billion to support big business in addition to $46 billion for specific industries, especially airlines. Some of these funds will also bail out the fossil fuel industry. According to the way the Federal Reserve operates, they will be allowed to spend ten times the amount Congress allocated to support big business, $4.5 trillion. Jack Rasmus writes that the Federal Reserve had already “allocated no less than $6.2 Trillion so far to bail out the banks and investors.” He summarizes the disparity: “Meanwhile Congress provides one-fourth that, and only one-third of that one fourth, for the Main St., workers, and middle-class families.”
Trump shows the disdain government has for the people and its favoritism for big business and investors as he objected to paying for 80,000 life-saving ventilators because they cost $1 billion while the government provides trillions to big business and investors. Governors and hospitals are issuing dire warnings of what is to come, but the federal government is not listening.
Economic Collapse Shows The Need For Transformational Change
The economic collapse is still unfolding. The US is already in a deep recession that is likely to be worse than the 2008 financial crisis and could develop into a greater depression if the COVID-19 economic shutdown lasts a long time.
Already, the crises, the government’s support for Wall Street and its failure to protect the 99% are creating louder demands for system change. We need to put forward a bold agenda and agitate around it to demand economic security for all. As Margaret Kimberly writes, we are entering a period of revolutionary change because we know returning to normal is “the opposite of what we need.” Or as Vijay Prashad says, “Normal was the problem.”
While the urgent health and economic crises dominate, the climate crisis also continues. The climate crisis already required replacing the fossil fuel era with a clean and sustainable energy economy and remaking multiple sectors of the economy such as construction, transportation, agriculture, and infrastructure. Now, out of these crises, a new sustainable economic democracy can be born where people control finance, inequality is minimized and workers are empowered, along with creating public programs that meet the necessities of the people and protect the planet.
The US Constitution gives the government the power to create money; Article I, Section 8 says: “The Congress shall have power … to coin money, regulate the value thereof, and of foreign coin.” Congress needs to take back that power so the government can create debt-free money. Currently, the Federal Reserve, which was created by Congress in 1913, is the privately-owned US central bank that produces money and sets interest rates. It puts the interests of the big banks first. The Fed can be altered, nationalized or even dismantled by Congress. Its functions could be put into the Department of the Treasury.
Monetary actions need to be transparent and designed to serve the necessities of the people and the planet. Money should be spent by the government into the economy to meet those needs while preventing inflation and deflation. In this way, the government would have the funds needed to transform to a green energy economy, rebuild infrastructure, provide education from pre-school through college without tuition, create the healthcare infrastructure we need for universal healthcare and more. In addition, through a network of state and local public banks, people would be able to get cost-only mortgages and loans to meet their needs.
Moving money creation into the federal government would place it within the constitutional system of checks and balances where the people have a voice to ensure it works for the whole society, not only for the bankers and the privileged. This could end the parasitic private banking system and replace it with a democratic public system designed for the people’s needs as Mexico is doing.
Globalization must be reconsidered. Corporate globalization with trade agreements that favor corporate power is a root cause of this global pandemic. We need trade that puts people and the planet first and encourages local production of goods. This includes remaking agriculture to support smaller farms and urban farming using organic and regenerative techniques that increase the nutritional value of foods and sequester carbon.
What we need instead is popular globalization – developing solidarity and reciprocity between people around the world. We can learn from each other, collaborate and provide mutual aid in times of crisis as Cuba and other countries are doing now.
As businesses are bailed out by the government, they could be required to protect and empower workers. Workers’ rights have been shrinking since the 1950s as unions have become smaller and more allied with business interests. The right to collective bargaining needs to be included as a requirement for receiving government funds. For large public corporations, workers should be given a board seat, indeed the government should be given a board seat and an equity share in any corporation that is bailed out. For smaller businesses, as they reopen, it is an opportunity to restructure so worker ownership and workers sharing in the profits become the norm.
The US needs to build the economy from the bottom up. The era of trickle-down economics that has existed since the early 80s has failed most people in the United States. The government needs to create a full-employment economy with the government as the employer of last resort. The American Society of Civil Engineers gives US infrastructure a grade of D+ requiring a $2 trillion dollar investment that would create millions of jobs. The Green New Deal would create 30 million jobs over ten years according to the detailed plan put forward by the Green Party’s Howie Hawkins.
The coronavirus disaster aid includes a payment to every person in the US earning under $70,000. While the one-time $1,200 check is grossly insufficient, it demonstrates the possibility of a universal basic income. This would lift people out of poverty and protect them from the coming age of robots and artificial intelligence that will impact millions of existing jobs. The evidence is growing that a basic income works. A World Bank analysis of 19 studies found that cash transfers have been demonstrated to improve education and health outcomes and alleviate poverty
The United States economy is in a debt crisis that demands quantitative easing for the people. Personal, corporate and government debt is at a record high. While the economic collapse is being blamed on the coronavirus, the reality is that the pandemic was a trigger that led to a recession that was already coming. The US needs to correct those fundamentals — massive debt, a wealth divide, inadequate income, poverty — as part of restarting the economy. Just as the Fed has bought debts to relieve businesses of debt burden, it can do the same for the personal debts of people. We should start by ending the crisis of student debt, which is preventing two generations from participating in the economy. While we make post-high school vocational and college education tuition-free, we should not leave behind the generations suffering from high-priced education.
Rise-Up and Demand Change
To create change, people must demand it. Even before the coronavirus collapse, people were demanding an end to inequality, worker rights, climate justice, and improved Medicare for all, among other issues. In the last two years, the United States has seen record numbers of striking workers. The climate movement is blocking pipelines and infrastructure and shutting down cities. Protests against inequality and debt resistance have existed since the occupy movement.
Now, with the economic collapse, protests are increasing. It’s Going Down reports: “with millions of people now wondering how they are going to make ends meet and pay rent, let alone survive the current epidemic, a new wave of struggles is breaking out across the social terrain. Prisoners and detention center detainees are launching hunger strikes as those on the outside demand that they be released, tenants are currently pushing for a rent strike starting on April 1st, the houseless are taking over vacant homes in Los Angeles, and workers have launched a series of wildcat strikers, sick-outs, and job actions in response to being forced onto the front lines of the pandemic like lambs to the slaughter.”
The pandemic requires creativity in protest. Technology allows us to educate and organize online, as well as to protest, petition, email, and call. There have also been car marches, public transport drivers have refused to monitor tickets, collective messages have been sent from balconies and windows. People are showing they can be innovative to get our message across to decision-makers. We can also build community and strengthen bonds with mutual aid.
If the ownership class continues its call to re-open the economy despite the health risks, the potential of a general strike can become a reality. When Trump called for returning to work the hashtags #GeneralStrike and #GeneralStrike2020— calling on workers everywhere to walk off the job — began trending on Twitter. Rather than a strike against one corporation, people would strike across multiple businesses and could also include a rent and mortgage strike as well as a debt strike. The coronavirus has shown that essential workers are among the lowest-paid workers and that they make the economy function. We also understand that if people refuse to pay their debts or rent, the financial system will collapse. Understanding those realities gives a new understanding of the power of the people.
A general strike, as Rosa Luxembourg described it in 1906, is not ‘one isolated action” but a rallying call for a campaign of “class struggle lasting for years, perhaps for decades.” A general strike could take many forms, including a global day of action. Before the current crises, we saw the decade of the 2020s as a decade of potential transformational change because on multiple fronts movements were growing and demanding responses to an array of crises. Now, the triggers for the economic collapse could also be the trigger for transformational revolt.
We are all in this together. We are all connected and share a common humanity. If we act in solidarity during this time of crisis and in this decade of transformation, we can create the future we want to see for ourselves and future generations.