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Jun 6, 2011

US breathes life into a new cold war, the focal point remains, EURASIA...

From GeoPlotilicalNWO:

US breathes life into a new cold war, the focal point remains, EURASIA, Energy security, Pipelinestan and the new Great Game...& its obscure objectives!
The American strategy remains unchanged--to so destabilize Southeast Asia that it remains unsafe for pipeline construction, thus bottling-up Asian energy reserves until they can be harvested through the European "Southern Corridor," Nabucco and the Caspian projects. This indirect form of economic warfare fits better into the "Russian reset" psy-ops. Should the SCO meeting actually bring Pakistan and India into the club, doesn't necessarily mean that the TAPI project will proceed, but it does clarify the geostrategic alignment intended to disrupt American destabilization plans for south Asia. The US will then be checked, but not "check-mated," leaving the American Imperialists just one more move, total war with the SCO alliance. Are American leaders actually that insane or desperate? It seems pretty obvious to me that they are...as always!!!

By M K Bhadrakumar

There might have been a difference of opinion between the classical Greek dramatist Aeschylus and British romantic poet Percy Bysshe Shelley regarding the circumstances of the release of the Titan god Prometheus from captivity: whether it followed reconciliation with Jupiter, as the classicist thought, or a rebellion, as the romantic insisted. In either case, Prometheus was "unbound".

The exact circumstances of the endgame in Iraq and Afghanistan will remain a moot point, but the outcome is certain to be that the United States, which like Prometheus was chained to a mountain where he was daily punished by Jupiter's eagle and underwent immense suffering, is being "released" to normal life.

For Prometheus, it came as an existential moment and when Hercules came to unbind him, he was so relieved at the freedom "long desired/And long delayed" that he pledged to his love that they "will sit and talk of time and change/As the world ebbs and flows, ourselves unchanged".

The United States, too, is re-emerging "unchanged". There is a flurry of activity as if making up for lost time - "unilateralist" military intervention in Libya; deployment of a F-16 squadron in Poland; establishment of military bases in Romania; resuscitation of the George W Bush era plans for deployment of a US missile defense system in Central Europe; revival of the entente cordiale among "new Europeans"; threatened "humanitarian intervention" in Syria; renewed talk of military action against Iran; a push for a long-term military presence in Iraq and Afghanistan; revving up of the expansion of the North Atlantic Treaty Organization (NATO) into Central Asia; violation of the sovereignty and territorial integrity of Pakistan; the threat of "regime change" in Sri Lanka; and last weekend the announcement of the deployment of light combat ships in Singapore.

All this has happened within a 100-day period. It was almost inevitable that the Caspian great game would be revived, too. After the unexplained hibernation in the period since the exit of the Bush presidency in the beginning of 2009, Richard Morningstar, the US's special envoy for Eurasian energy, has returned to the arena.

If his testimony at the hearing conducted by the US House Committee on Foreign Affairs last week had one single message, it was that the US's Eurasian energy strategy remained "unchanged" in its core agenda, namely, to challenge Russia's potential to use its vast reserves as an energy exporter to re-emerge as a big power on the world stage.

Cold War rhetoric surfaces 
The geopolitical agenda of the US's Eurasian energy strategy was spelt out with characteristic bluntness at the same congressional hearing by noted Russia expert Ariel Cohen. There may be nothing strikingly new, arguably, in Cohen's thesis about Russia's "expansionist agenda" reflected in its energy policies, but nonetheless it merits reiteration by way of providing the backdrop to Morningstar's testimony. He was constrained by the norms of diplomatic practice to hold back on direct criticism of Russia, with which the Barack Obama administration is engaged in a "reset" at the moment:
  • The Kremlin views energy as a tool to pursue an assertive foreign policy.

  • Europe's level of dependence on Russia for energy is unacceptably high.

  • Russia's attempts to exclude the US from Central Asian and Caspian energy markets.

  • Russia is using energy to "re-engage" India, Southeast Asia, the Middle East, Africa and Latin America.

  • Russia forces neighboring countries to direct their energy exports via its pipeline system.

  • The absence of a "rule of law" blocks Western companies' entry into Russia's energy sector.

  • Russia remains disinterested in developing energy ties with the US.

    Cohen candidly spelt out the geopolitics. One, European demand for energy is projected to grow further and it could lead to greater dependence on energy from Russia, which has serious implications for Moscow's ties with Europe.

    The point is, the US apprehends that Moscow will exploit the growing energy ties to stabilize its relationship with the countries of Western Europe, and that could weaken the spirit of Euro-Atlanticism and incrementally loosen the US's trans-Atlantic leadership.

    Two, Germany has taken a strategic decision to abandon nuclear energy and to instead increase its energy imports from Russia. From the US viewpoint, steadily growing Russo-German ties have not only a historical resonance of great significance for European security but they could eventually weaken European unity and the underpinnings of NATO itself, which the US commands as its principal instrument for the pursuit of its global strategies.

    Three, Russia is aspiring to graduate from the role of energy exporter to Europe to participation in the continent's energy distribution system and retail trade as well. Europe may eventually "face tough choices between the cost and stability of their energy supply, and siding with the US on key issues".

    Conversely, Cohen anticipates, "As oil prices rise, it is safe to expect Russia's cockiness to return." What is this "cockiness" about? In geopolitical terms, it means a more assertive Russia in global politics. Cohen mentioned India more than once as a worrisome prospect for the US.

    Chalk circles in South Asia 
    In essence, countries like India, where the US hopes to become entrenched as a strategic partner, may choose to be autonomous or "non-aligned" if Russia succeeds in developing stronger energy ties with them. With regard to India, in particular, the implications are far-reaching since the US's Asia-Pacific strategy and its containment policy toward China would become seriously debilitated if New Delhi opted out.

    Interestingly, Cohen brings in Syria in this context. He claimed that Russia was "seeking to re-engage in a centuries-old balance of power in the Middle East" and Syria - like India in the Asia-Pacific - is pivotal, which is the reason why Moscow is rebuilding naval bases in Tartus and Ladakiye and is "supplying modern weapons" to it - like it does with India.

    Four, Russia is fostering the Shanghai Cooperation Organization (SCO) as an exclusive preserve to keep out the US, especially in the grouping's energy club. The SCO comprises China, Kazakhstan, Kyrgyzstan, Russia, Tajikistan and Uzbekistan.

    The US is getting frantic that the SCO is gearing up to admit India and Pakistan as full members and Afghanistan as an observer. So far, the US had banked on the reservations of Russia and China over the SCO membership claims of Pakistan and India respectively, but the rethink in Moscow and Beijing on this score has set alarm bells ringing in Washington.

    Moscow is outflanking the US by rapidly building up ties with Pakistan. A crucial vector in this accelerating relationship is energy cooperation. Moscow has begun discussing with Pakistan the nuts and bolts of its participation in the TAPI (Turkmenistan-Afghanistan-Pakistan-India) gas pipeline project.

    The countries are restoring their air links; they have held two summit-level meetings within a year; and begun closely coordinating their approach to the stabilization of Afghanistan (which is integral to the execution of TAPI). Incidentally, Russia's special representative on Afghanistan Zamir Kabulov (the Kremlin's ace hand on Afghanistan) visited Islamabad last week for in-depth consultations.

    The thrust of the Russian approach is to augment Pakistan's strategic autonomy so that it can withstand Washington's bullying. And Moscow estimates that Pakistan is keen to reciprocate. As a prominent South Asian scholar in Moscow, Andrey Volodin, wrote last week, "[Pakistan President] Asif Zardari's visit to Russia has shown that Pakistan is actively diversifying its foreign economic ties and foreign policy. This attitude is welcomed by Pakistan's main all-weather ally, China, which is pursuing a policy of 'soft reverse containment' of America in Asia, including Pakistan."

    No more a Turkmen pipedream 
    Thus, the Russian-Chinese initiative to induct Pakistan and India as full SCO members holds out the prospect of dealing a devastating blow to the US's strategy to get "embedded" in Asia. The underpinning of a regional energy grid tapping into Turkmenistan's energy reserves gives a profound character to the matrix.

    The fact is that the US all along paid lip-service to the TAPI, but its real interest has been in the so-called Southern Corridor for transporting Turkmen energy to Western Europe so that Russian dominance of the European market would be whittled down.

    Russia is killing two birds with one stone. By diverting Turkmen gas to the huge energy guzzlers of South Asia - India is potentially one of the world's two or three biggest consumers of energy in the coming decades - Moscow is on the one hand undercutting the US's Eurasian energy strategy to evacuate the gas to Europe, while at the same time retaining its pre-eminent footing on the European energy market from being challenged by the Turkmen gas.

  • The big question mark on TAPI has been all along two-fold. First, there was doubt regarding Turkmenistan's energy reserves. However, the confirmation by British auditor Gaffney, Cline & Associates last week that Turkmenistan is sitting on the world's second-largest gas field - South Yolatan - completely changes the scenario. (Afghan President Hamid Karzai made an air dash to Ashgabat as soon as he heard the news.) The vast South Yolatan field covers an area of about 3,500 square kilometers - bigger than the country of Luxembourg - and as a top executive of the British auditor put it, "The South Yolatan field is so big that it can sustain several developments in parallel."

    In short, Turkmenistan has the proven capacity to meet the energy requirements of China, India and Pakistan for many decades to come, and would still be left with a surplus for exports


    to Russia. The prospect is shocking for US strategy if the so-called "SCO energy club", which is an idea that then-Russian president Vladimir Putin floated in 2005 a little ahead of time that is finally coming to fruition.

    Thus, the robust Russian and Chinese diplomacy on Pakistan to encourage a paradigm shift in its Afghan policy; the growing US impatience over Pakistan's "recalcitrance"; the SCO's keenness to get involved in the stabilization of Afghanistan; the US's insistence that it must have direct dealings with the Taliban rather than through an "Afghan-led" peace process; Washington's push to establish a long-term military presence in Afghanistan; Russia's and China's hurry to get India and Pakistan on board as SCO members; the US's overtures to India with a partnership that US Secretary of Defense Robert Gates described last week in a speech in Singapore at a regional gathering of defense ministers (including from China, Russia and India) as the "indispensable pillar of stability in South Asia and beyond"; Gates' affirmation of US commitment to a "robust" and "enhanced" military presence in Asia, especially in the Malacca Straits - all these have a hugely important "energy dimension", too.

    Cohen is a Russia expert, but he mentioned Central Asia more than once in this testimony and pointedly brought to the notice of US congressmen that Russia was attempting to "push the US out of Central Asia, and successfully limited US participation in new Caspian energy projects, excluding it from the SCO's energy club".

    Containing the energy superpower 
    Ambassador Morningstar in his congressional testimony kept up the diplomatic decorum and neatly sidestepped the geopolitics, sticking to a detailed presentation of the US's Eurasian energy strategy, which he projected as a mix of continuity from the George W Bush era but imbued with new realities. The principal vectors of the US strategy can be identified in the following terms:
  • The US's intention to be deeply involved in Europe's energy security is never in doubt since "Europe is our partner on any number of global issues from Afghanistan to Libya to the Middle East, from human rights to free trade.

  • The US will work for Europe's "diverse energy mix" both in terms of its sources of supply and transportation routes as well as the type of energy - " diversity of suppliers, diversity of transportation routes and diversity of consumers, together with a focus on alternative technologies, and renewable and other clean energy technologies, and increased energy efficiency". (The US is entering the European market as a big exporter of shale gas, which competes with Russia's natural gas.)

  • The US's aim is to encourage Europe to develop a "balanced and diverse energy strategy with multiple energy sources with multiple routes to market". (Read reduce the dependence on Russia which is supplying one-third of Europe's energy needs currently).

  • The US will encourage and help Central Asian and Caspian countries to "find new routes to the market". (Read bypassing Russian territory and pipelines).

  • The US will push for the energy sector to be privatized, and to this end, will "create the political framework" in the post-Soviet space within which "businesses and commercial projects can thrive".

  • The Obama administration's commitment to the so-called Southern Corridor - to bring natural gas to Europe via Turkey from the Caspian and "potentially other sources beyond Europe's southeastern frontiers" - is no less than that of the previous US administrations of Bill Clinton and Bush. The US will actively promote the three separate European pipeline consortia - the Nabucco, ITGI and TPA groups - and is "confident that a commercially viable Southern Corridor will be realized. The investment decisions to make that possible should occur by the end of this year."

  • Washington pays particular attention to promoting Turkmenistan as a major supplier of gas for Europe via the Southern Corridor.

  • The US will pitch for the integration of the Baltic states into the European energy market so they do not remain vulnerable to Russian supplies and/or political pressure.

  • The US will challenge Russia's efforts to get a monopoly hold over Ukraine's energy sector.

  • Europe should develop a single market for energy so that the kind of bilateral relationships that are developing between Germany and Russia or Italy and Russia or France and Russia do not happen.

  • Europe should have more focus on shale gas development, which can be a substitute for Russian gas.

  • Europe should take initiatives for "unbundling the distribution and supply functions of energy firms" so that Russia's leviathan company Gazprom's efforts to penetrate downstream activities can be stalled.

    It's the Eurasian heartland, stupid 
    The US's Eurasian energy strategy almost entirely aims at “containing” Russia's pre-eminent role as Europe's energy supplier and its vast influence over the Central Asian and Caspian energy-producing countries. Cohen spoke of a future role for NATO as provider of security for the non-Russian pipelines, but unsurprisingly, Morningstar didn't visit the controversial idea, which was first mooted by the Bush administration. What is of utmost interest is that Morningstar didn't say a word about the feasibility of Turkmenistan or the Central Asian region providing energy for the South Asian region, although US diplomats traveling to Delhi unfailingly profess a keen interest in TAPI. What emerges is that the US's one hundred percent focus is on Europe's energy security - how supplies can be developed from the Caspian, Central Asian and Middle Eastern regions for Europe - and it pays lip-service to the TAPI.

    Clearly, the SCO summit meeting scheduled to be held in Kazakhstan next week becomes an historic occasion for the geopolitics of energy. The US congressional hearing in Washington last week was well-timed. The US apprehends a paradigm shift in the Asian power dynamic. The odds are heavily stacked against the US insofar as Russia and China are recrafting their South Asia polices that aim at harmonizing their ties with Pakistan and India respectively within the umbrella of the SCO.

    A leading Chinese scholar, Yan Xuetong, director of the Institute of International Studies at Tsinghua University, stated at a recent seminar of the Institute of Asia-Pacific Studies, a branch of the Chinese Academy of Social Sciences:
    If we can establish relations with neighboring countries like what we are doing with members of the SCO, we will also succeed in moving fast. The establishment of SCO in the 1990s was widely recognized as one of China's most successful diplomatic moves. The purpose of establishing the SCO is to challenge the American strategic intention of extending its military breach to Central Asia.

    It destroyed America's intention of making Central Asia its sphere of military influence. With the SCO, China's relations with countries in the region have been greatly improved. In order to establish SCO-style relations with surrounding countries, China must ... establish all-weather strategic partnerships with them. Or it will be impossible for China to have more and better friendly international relationships than America.
    Indeed, the Afghan endgame is inspiring the several tracks in the geopolitics of Eurasia and Central Asia and South Asia, some running tracks, some dormant, some visible, some others nor so visible, to begin to converge. But the focal point is Eurasia.

    Indeed, Sir Halford John Mackinder (1861-1947), the great English geographer and scholar-diplomat, who is considered one of the founding fathers of the esoteric subjects of geopolitics and geostrategy, based his famous Heartland Theory on the basis that Eurasia remains the heartland of international politics. Curiously, when Prometheus had his liver eaten out daily by Jupiter's eagle - only to be regenerated at night - he was also chained to a rock in the Caucasus....

  • Some illuminating quotes of our rulers at the link below. They are freaking INSANE, and if we don't stop them they will destroy our planet and genocide billions of people. The 'climax' of the NWO has begun - the coming year will likely decide the fate of our planet. A peaceful revolution is the only solution - violence is what they want, so they can use our police and military against us. Just like in Orwell's "Animal Farm", all of us 'critters' need to put aside our differences and stand together in solidarity against the NWO. When the police and military realize we are united, they will stand beside us against our common enemy.

    http://www.questionwar.com/QuotesPowerful.html


    We'll know our disinformation program is complete when everything the American public believes is false.
    - William Casey, CIA Director (from first staff meeting in 1981)

    In the technotronic society the trend would seem to be towards the aggregation of the individual support of millions of uncoordinated citizens, easily within the reach of magnetic and attractive personalities effectively exploiting the latest communications techniques to manipulate emotions and control reason.
    — Zbignew Brzezinski, current advisor to Barrack Obama

    (many more...)
    http://www.theatlanticwire.com/global/2011/05/us-sought-libyan-oil-wikileaks-cables/37783/

    U.S. diplomats scored a silent victory last month when the Italian oil company Eni and Russian energy giant Gazprom postponed a deal to share a large claim to Libyan oil. The State Department can't take credit, however, as the two companies based their decision to shelve the arrangement was based on the violence in the region. But it's all part of a bigger plan to keep access to oil out of Russia's paws, reports McClatchy's Kevin G. Hall based on a recent release of WikiLeaks cables. Gazprom, once a part of the Soviet Union's gas ministry, has been busy buying up oil and gas reserves across Europe and the Middle East. In 2008, the state-run company even attempted to buy all of Libya's natural gas and oil. Since then, United States diplomats discussed how prevent Libyan oil from making its way to Russia in the Eni-Gazprom deal.
    http://southasia.oneworld.net/globalheadlines/wikileaks-arctic-could-be-the-new-cold-war

    "The twenty-first century will see a fight for resources," Russian Ambassador to NATO Dmitry Rogozin was quoted as saying in a 2010 cable. "Russia should not be defeated in this fight."

    Along with exposing an estimated 22% of the world's oil, ice melting due to global warming will open new shipping lanes, the arteries of global commerce, which nations are competing to control. And Russia certainly is not the only country eyeing the frozen prize.

    Per Stig Moller, then Danish foreign minister, mused in a 2009 cable that "new shipping routes and natural resource discoveries would eventually place the region at the centre of world politics".

    ...A 2008 cable quotes Russian Navy head Admiral Vladimir Vysotsky as saying: "While in the Arctic there is peace and stability, however, one cannot exclude that in the future there will be a redistribution of power, up to armed intervention."

    ‘Lucky’ Larry’s Chicago’s Sears/Willis Tower Tenants are Moving out and it has an Asbestos Problem


    On June 10, 2011, Chicago’s Northwest Community Hospital and the U.S. Army Reserve will perform anemergency exercise called “Red Dragon” to prepare for any future event involving mass death.Security at Willis is provided by Kroll’s, the same outfit that provided ‘security’ to the WTC.
    An Israeli Company provides ‘security’ to Chicago’s O’Hare Airport.
    And with MOSSAD agent Rahm Emanuel as Mayor of Chicago, the table is set for mass murder.
    Is the ‘Windy City’ about to get REAL Windy?
    Since last year a number of emergency drills and exercises have taken place in and around the city of Chicago. To find out more about these drills and exercises, here are some articles you should read:
    June 2010 – Emergency drills may close Chicago-area roads
    June 2010 – Armageddon Simulated in Chicago, which involved a ‘simulated’ airplane crash.
    May 2011 – Third tallest building in Chicago enhances security, conducts fire evacuation drills
    On June 10, 2011, Chicago’s Northwest Community Hospital and the U.S. Army Reserve will perform an emergency exercise called “Red Dragon” to prepare for any future event involving mass death.
    Get Out While You Still Can
    Thoma Bravo moves out of Willis Tower
    Thoma Bravo is becoming the second private equity firm in the past year to move out of Willis Tower, formerly known as Sears Tower, and into a new office building at 300N. LaSalle. About a year ago GTCR Golder Rauner LLC also left Willis for 300 N. LaSalle.
    He also cited other factors: inconvenient security for visitors; tourists now allowed in what had been the business lobbies; and “poor maintenance” of many common areas.
    Ernst & Young to leave Sears Tower
    Willis Tower is owned by a group that includes, surprise, surprise ‘Lucky’ Larry Silverstein.

    Will ‘Lucky’ Larry remove the Willis Tower’s asbestosthe same way he did at the WTC?Will this appear on Chicago’s skyline in the near future?
    Photobucket
    The same deranged perps that pulled off the 9/11 FALSE FLAG/INSIDE JOB have nuts the size of grapefruits and total disdain for us ‘sheeple.’ Maybe they will stage another 9/11 FALSE FLAG/INSIDE JOB in Chicago or maybe it’s just part of their nonstop psyops to keep Americans so scared about another ‘al CIA Duh’ attack so we won’t notice our country’s infrastructure is falling apart right before our very eyes and to keep us from asking questions about all our wealth stolen by the Zionist owned Federal Reserve and those Israeli owned ‘Too Big to Fail” Wall Street gangsters.
    Another false flag attack is a matter of when, not if. The U.S. shadow terrorist state is an unaccountable, secretive, resourceful, cunning, and powerful engine for destruction and deception. We should not underestimate the evil men who have hijacked the national security policy and foreign policy of the United States of America.”
    “We should not expect mercy or pity from these monsters. We should expect the worst because they are the worst kind of men: they seek to terrorize, steal, deceive, destroy, and control. Through enacting history they gain dominion over us.”
    The trial of CIA asset/agent David Coleman Headley, who helped set off the Mumbia, India False Flag, is also taking place in Chicago during this time frame. The feds are trying to implicate Pakistan in this atrocity so they use that as an excuse to keep murdering Pakistani civilians with their cowardly Predator drone attacks.

    Add in the fact that the Jewish holiday of Shavuot will take place from June 7 through nightfall of June 9, which Zionist Jews usually celebrate by killing us GOYIM, so people in the ‘Windy City’ better beware.

    CONFRONTATION BETWEEN GREEK PEOPLE AND EU AND IMF-LED GOVERNMENT TURNING INTO A REVOLUTIO


    *Greece at historical crossroads; make or break week for country, faces economic and political obliteration
    *500,000 people attend protests in Athens over new EU, IMF and ECB austerity measures; these will destroy what remains of Greece’s economic base and plunge millions of Greeks into life-threatening poverty; national debt will increase under new plans; EU and IMF officials set to take over fire sale of state assets; country to be reduced to status of EU and IMF protectorate
    *Head on confrontation between the Greek people and government turning into a revolution
    *EU anti fraud expert indicates it is the people who must act; no valid economic reason for Greece not to be prosperous; current depression only due to the corruption and mismanagement of elite
    *Calls for fresh elections and debate about adopting the Drachma growing
    *Drachma will allow for devaluation and boost exports and jobs, and bring more tourists; Greek central bank can supply liquidity to economy to return country to prosperity
    *Greek, Irish and Portuguese debt crisis could result in Germany being administered by the IMF and EU; tsunami of debt rolling towards Germany; country faces same fate as Greece in near future


    Greek Prime Minister George Papandreou’s plans to impose years of austerity on a Greece are meeting increasing resistance with 500,000 people demonstrating in Athens yesterday.
    http://www.focus.de/finanzen/news/staatsverschuldung/griechenland-hunderttausende-protestieren-gegen-lohnkuerzungen_aid_634413.html


    The new austerity measures being planned will accelerate the total destruction of the financial basis of the lives of millions of Greek people and will increase the country’s overall national debt. In addition, new plans foreseee EU and IMF with officials organising the sale of state assets, making Greece a de facto economic protectorate .
    „We didn’t run up any debts and we’re not paying,“ say protestors who have poured onto the central square of Athens.
    Falsely labelled as a ”rescue package” by the corporate-controlled mainstream media, the new austerity plans will, in fact, put the final nail in the coffin for the Greek economy, which has already contracted significantly due to fiscal measures mandated by the IMF and EU as part of penal bailout in May 2010.
    The additional austerity measures will drain away from the economy whatever little liquidity is left and so help push the remaining businesses into bankruptcy. Unemployment will soar even higher. Tax receipts will plummet even further. Greece’s overall debt will increase as the country is forced to borrow more money to meet the gigantic interest payments due to banks in the coming years.
    The sale of key state assets including historical ports at rock bottom prices will deprive the government of sources of revenue.
    If the Greek government has no more revenue because the country’s economic base has been destroyed and because those state assets that generate a  revenue have been sold off, then there will be no money to pay the benefits of the soaring numbers of unemployed people, leaving millions of people in Greece with no option but to launch a revolution against the corrupt financial and political elite or endure life-threatening poverty.
    To argue as Lorenzo Bin Smaghi is doing that the fact that the Greek government still has property to sell means it is solvent is absurd. Even if Greece sold all ist assets  – to which Smaghi assigns the totally unreaslistic value of 300 billion –, it would not be enough to pay off ist debt of 330 billion euros. Greece is insolvent. A default is inevitable.
    http://www.forbes.com/feeds/ap/2011/06/06/business-eu-europe-financial-crisis_8501723.html

    The ECB is behaving like a bailiff asking a person to hand over all their income, sell their house and even their clothes until they have nothing left at all to pay for a fraudulently engineered debt.
    The ECB appears to have actively helped engineer this gigantic debt of Greece by funding a trade deficit and by dealings with CDS. Its 2010 bailout package involving austerity measures and penal interest rates on a compulsory loan to pay private banks have sent Greek national debt soaring.
    German economist Hans Werner Sinn argues that the best option for Greece is to reintroduce the Drachma and he is certainly right.
    http://www.focus.de/politik/weitere-meldungen/finanzkrise-sinn-fuer-austritt-griechenlands-aus-euro-zone_aid_629203.html

    The ECB, IMF, EU are resisting a default by Greece and the Drachma only out of self interest. On a default, the the scale of the losses that tax payer’s — especially in Germany — have to bear as a result of an intricate Ponzi scheme that the ECB is running — analysed by former Argentinian central banker Mario Blejer – will become apparent.
    Research by Germany’s Der Spiegel revealed that banks are involved in complex accountancy manoeuvres with the ECB, eurozone central banks and government-owned banks such as the German Landesbanken to shuffle the costs of Greek, Irish and Portuguese bonds onto tax payers just as the revenue stream from the bonds in the form of interest payments is drying up as Greece goes bankrupt, leaving German tax payers, especially, sitting on debts of hundreds of billions of euros of debt.
    http://www.focus.de/finanzen/news/staatsverschuldung/griechenland-hunderttausende-protestieren-gegen-lohnkuerzungen_aid_634413.html

    The extent to which the Merkel government is now acting as the long arm of the corporations was underlined by the appointment of Lars-Hendrik Röller as the new chief economic advisor. Röller’s business school is funded by Deutsche Bank and Allianz, Daimler and BMW, and Eon and RWE, according to the FT. Surely, this is a clear cut case of a conflict of interest?
    Hans Werner Sinn has warned that a tsunami of debt is rolling onto German taxpayers from deeply indebted Greece, Ireland and Portugal and on scale that could well see Germany itself placed under an IMF and EU administration in the near future.
    After all, Germany has a per capita national debt which is only a little lower than Greece’s and yet Germany will be expected to foot the bill for hundreds of billions of euros of debts run up by the ECB and by the EU and IMF funds as part of the Greek, Irish and Portuguese „bailouts“. It only requires rating agencies to start downgrading Germany and it will sink into the same debt death spiral as Greece.
    Will the EU and IMF be sending in officials to help with the “technical process” of stripping the country of state assets in the near future?
    Hans Werner Sinn has presented figures in connection with illegal activities of the ECB that suggest that the financial architecture of the eurozone is set to collapse very soon anyway.
    If Greece does not exit the eurozone now, it will face more turmoil down the road. The arguments for introducing the Drachma are clear.
    The Drachma will also allow for new rules at the central bank to ensure that the Greek economy flourishes in the long-term. Greece can turn this crisis into an opportunity if it addresses the issue of central bank liquidity properly.
    The Greek central bank should be allowed to supply liquidity to governments and also businesses and enterprises directly and without booking a debt on its balance sheet or charging interest to avoid a repeat of the instability that results from the interest-based fractional reserve banking system, which is being so ruthlessly exploited by banks right now for their enrichment.
    As long as the liquidity is used to produce tangible goods and services (and does not flow into property or other bubbles), then there will be little danger from inflation.
    Inflation arises only when money is printed or the money supply is increased but there is no corresponding increase in goods or services. This is the reason why a central bank which prints money to service the interest on a national debt creates inflation and hyperinflation. Nothing is being produced.
    Inflation targets can be set as in China, which is booming due to the fact the government prints money without creating debt as Vienna economics professor Franz Hörmann explained.
    A devaluation due to the reintroduction of Drachma will also give a boost to exports and jobs.
    Although a devaluation will make imports more expensive, many of these imports can be substituted by local products.
    Greece will also become a more attractive tourism destination with the competitive Drachma, allowing the Greek government to earn foreign currency to pay for oil imports and other vital goods. 
    Perhaps the Queen of England or other members of the royal family could be persuaded to pay a state visit. The Queen’s visit to Ireland certainly provided a huge boost to the country’s tourism industry and general image.
    Greece can take heart from the example of Iceland, which is forging ahead. Iceland is now on the road to economic recovery after defaulting on the private bank debt and after devaluing its currency. There is a lot of scare mongering about such a move in the controlled media, and no doubt there will be turmoil, but the long term prosperity of Greece will be secured.
    Millions of Greeks now have access to independent sources of information and they understand that the mainstream media has being given false information and that the so called austerity measures are nothing more than a mechanism for looting them.
    So far, the Greek parliamentarians appear to have failed to grasp the economic fact that the Greek people are being looted, and to comprehending that the people have grasped this fact, creating the potential for a head on confrontation and revolution in the next few weeks in Greece.
    A revolution is bound to lead to the overthrow of the tiny minority who are profitting from the looting of the vast majority.
    „The development of the spirit without a parallel development of institutions so that one comes into a conflict with the other is the source not only of discontent but of a revolution,“ said the German philosopher Georg Friederich Hegel.
    http://www.spiegel.de/spiegel/print/d-14024650.html

    Either the Greek – and German — parliaments take sensible  measures to stop the looting of the eurozone by banks and complicit politicians or there will surely be a revolution not just in Greece but across Europe.
    Fresh elections in Greece are needed as soon as possible to give people the chance to debate the alternatives to destitution and the extinction of Greece as state such as reintroducing the Drachma.
    The Greek central bank can at any time reintroduce the Drachma and start to supply liquidity to the economy as it did for 2,500 years. The current disastrous state of the Greek economy is due to the fact that it relinquished ist currency to join the euro zone and that eurozone is in the grip of a financial mafia as OLAF anti corruption expert Wolfgang Hetzer says.
    The time has come for people in other parts of Europe to show solidarity with the Greeks. Greece is all our futures if we do not act now.
    Even Hetzer suggests that a peaceful revolution is needed to restore competent and democratic government because the corruption is now so deep.
    A revolution is not just a necessity given the illegal looting by political institutions such as the EU and IMF, it is a right as Hegel argued.
    Every single person has a right to life and a society must be so organised that people enjoy the right to life, says Hegel. He interpreted the right to life in the wider sense of a right to fulfilment, adequate work and freedom.
    „What is reasonable must become reality,“ Hegel said in his essay.
    It is reasonable for people to expect that the government they elect will run the economy with a mininum of competence and honesty, and the people will make such a government a reality.
    The EU, IMF and ECB had an opportunity last week to be reasonable ie follow facts and reason and begin to put Greece into managed insolvency as is required by an objective and impartial analysis but they failed to do so. They produced a report instead which was conspicuous for the absence of any truth or facts and which was virtually incomprehensible from the financial point of view in order to have an excuse to continue to suck the last cent from tax payers of Greece and Europe and expropriate their assets.
    The entire eurozone is impacted by this financial meltdown. The debts saddled on tax payers by politicians complicit with banks are so immense that they can never be repaid. The interest payments cannot be met even if the entire tax revenues of the eurozone are confiscated just for this purpose 
    This is a Ponzi scheme that is designed to end in a huge implosion and in a take over by EU and IMF of the entire eurozone.
    It is better for Greece and Ireland to adopt another currency as soon as possible to insulate themselves from the impact of this collapse and beat a path for the other countries.
    In the future, European nations may decide to join in a monetary union but if they do, it has to be on a sound basis and with a competent and honest central bank.
    The ECB is incompetent or criminal. The euro is being run into the ground for the profit of the banks.

    _________-

    Related:

    Top EU anti-corruption official says Europe’s financial crisis was engineered by the mafia and complicit politicians

    Wolfgang Hetzer, one of the top anti-corruption officials in OLAF, the EU’s anti-fraud office, has written an acclaimed book analysing how organised white collar criminals engineered the current financial crisis for their profit.
    In remarkably frank interviews in the German media, Hetzer says that top politicians are complicit in the crimes of the financial mafia, that the justice system is unable to cope with crimes of this nature – in the US they have RICO laws —  and it is up to the people to take action.
    Read more in German at: http://www.business-on.de/muenchen/politik-wirtschaft-finanzkrise-mafia-griechen-bank-_id15273.html
    http://www.welt.de/print/die_welt/wirtschaft/article13411602/Die-Finanzwelt-folgt-der-Mafia.html

    Greek Bailout #2 Is Dead On Arrival: A Few Good Hedge Funds May Have Called The ECB's Bluff, And Hold The Future Of The EUR Hostage

    The usual suspects that create ridiculous wars, and fiat currency Ponzi systems are stealing everyone blind.




    The usual suspects create ridiculous wars, and massive fiat currency Ponzi systems are stealing everyone blind....
    Can we call it a depression yet? Or do we have to keep calling it the F'ing Great Recession?

    Really, it's hilarious that this is even being discussed at all. Was it a bubble? Of course it was. Everyone knows it was. Will prices return to their bubble levels? Yes, but the way it will happen will be the Detroit Way. The housing stock will be reduced. Governments will cover the banks on this end too. And yes, that means that there will be many more Americans without houses. Most likely we will see massive dislocations, multitudes of homeless, and poverty at indescribable levels. Or, rather, we won't 'see' it. It will be there all around us, but we won't see it.


    See, that's really the story behind the story. How folks see the current situation depends on how they see the last three decades, since the Reagan years. Carter's 'malaise' speech posed a question: whither America? Reagan provided the answer. The answer was the screeching rise of predatory capital, both domestically and globally. Volker started it all, by knocking everyone down several pegs with a vicious recession, a monetary policy that, as vicious as it was domestically, was truly savage on a global level.


    Then the glorious recovery began. And we all pretended not to notice that suddenly, we were all working harder for less. Almost overnight, women in the workforce became a necessity, not a choice. But we didn't notice. It took two incomes to run a household. But we didn't notice. Inflation began to run away, but because you could buy cheaper and cheaper goods at Wal-Mart (so cheap that it made no sense to fix anything anymore), no one noticed. The roof over your head, the education for your children, the medical care ... all these things began to skyrocket in cost ... but you could get loans ... more and more loans. And you could work more jobs. During the Clinton era, two jobs wasn't enough for a household anymore. Now Mom had a second job at night. Preachers railed about the 'breakdown of the American Family', but they always attributed this to the moral turpitude of ordinary people, who were having to work harder and harder just to keep things going, AND WERE DOING IT!


    Finally people lost all hope of keeping up. That's when the real loan frenzy started. Nothing made sense anymore, and there was no way that things could work out that anyone could really imagine. The future was just unimaginable. But economists said that the economy would keep expanding, without industries or jobs, because of sophisticated financing, and a second mortgage WOULD help with Sally's college expenses, or Dad's medical care, or the extra car that the extra jobs necessitated, and so maybe you could keep the household going, and surely the economists had to be right about how bright the future surely was ...


    And so we've been living in an economy that has been in a death spiral for decades, but - with a lot of help from Hollywood - we've imagined ourselves to be in a completely different place, in an economy revenant.
    We were experiencing the Glory that was Rome. We had our pride. And now we continue to refuse to open our eyes. We still have more guns than anyone else, more prisons than anyone else, and we still have the Dream Factory.


    But we don't have an economy. Not for most people.
    As Peter Schiff recently stated, "This is the end of the beginning." The real economic drop off is just about to kick in and it will be brutal. As Celente has said, there will be riots. People should be afraid of what is about to happen the next 5-10 years....
    It seems we just just cannot to go to that place of the only real explanation for the whole collapse - it is mostly by design. Lots of doors will open to the actual reality of the mechanisms of this pillaging if one is simply willing to look at the obvious.


    Recoveries with negative job growth? Only actual jobs being created are in the govt sector that creates nothing but endless debt? Housing market return or bubble? Are we really still spending time on these types of discussions? I apologize in advance at my tone but it is just too disgusting to me that much of the country and beyond are still propping up these frauds at this incredibly late juncture....


    The reality is when the dust settles, the banks and big corps will own most of the real assets on the cheap. The usual suspects that create ridiculous wars, and fiat currency ponzi systems are stealing everyone blind. Anyone that doesn't call it like it is either benefiting from it, afraid for their own head, or simply has no clue.


    Inflation on everything that is necessary for Americans to survive has already risen massively. Only ridiculous CPI equations that play hide the weenie and exclude food, housing and fuel do not spell this out on purpose....


    As necessities rise beyond reach, and no one has a job to be able to afford a home regardless the price, it will be clear who has won this game and how.


    Do we really think that all this crushing debt that has destroyed the third world (now most real assets are becoming owned by the bankers and big corps), and is now being wielded upon the West in similar fashion was not by design? Decades of duping the less fortunate has emboldened the global governance crowd to crush the Western world.


    It is criminal that it is not being called out by name by the "journalism" community. It is the biggest, most pervasive, most violent, most destructive economic pillaging the world has ever seen. Shame on us all for not reporting reality.


    The IMF announced they are prepared to provide $100T more credit to markets! Yippee. Anyone listening?! Credit is quite synonymous with DEBT last time I checked. Crushing, stifling, enslaving debt. They also announced they are ready to role out their new currency, the Bancor.


    How are those Greece pillagings, I mean bailouts, treating everyone? 2nd default in a blink? Wow, the bankers and politicians must really know what they are doing to have set up an immediate second default with their master bailout plans. You bet they do...they are now owning Greece, then Ireland, Spain, Portugal, Italy, France, Ukraine and many many more to come down the line....


    Contrasting the last depression with today:


    1. There was very little state debts then, now massive.
    2. There was reasonable Fed Govt debt, now it breaks calculators.
    3. There was not an estimated >$200T in exotic investment vehicles like derivatives (more money out of thin air). How do we resolve what some estimate is possibly more than double that number? It has to wash out at some point.
    4. Consumers had very little debt. Now >$14T.
    5. The US had manufacturing as great as the world has seen...now has very little thus cannot build itself out of debt.
    6. Did not have unlimited money printing of a currency backed by...NOTHING.


    Hey, I have a solution-a centralized global banking system. That way we could hand over all sovereignty right now!


    All empires die, and they always die from within. Only fools would think this one would be any different. We have every symptom of the death rattle of a former empire - rampant corruption, wealth consolidated in a tiny few's hands(we have more income disparity than Egypt and >30 other countries), multiple criminal illegal wars, false flag attacks, the Infamous White House Murder INC, UKUSA alliance of evils, Zioconned Intelligence agencies worldwide, utterly corrupt and complicit main stream media on a massive scale and the coliseum to distract the sheep, numerous attorneys perpetuating the game, justice system that only serves the cartels....etc etc.


    Lets start getting some courage shall we?

    Michael Hudson: Will Greece let EU Central Bankers Destroy Democracy?

    From Counterpunch:
    By Michael Hudson,

    The Greek bailout provides an opportunity for privatization grabs

                When Greece exchanged its drachma for the euro in 2000, most voters were all for joining the Eurozone. The hope was that it would ensure stability, and that this would promote rising wages and living standards. Few saw that the stumbling point was tax policy. Greece was excluded from the eurozone the previous year as a result of failing to meet the 1992 Maastricht criteria for EU membership, limiting budget deficits to 3 percent of GDP, and government debt to 60 percent.

                The euro also had other serious fiscal and monetary problems at the outset. There is little thought of wealthier EU economies helping bring less productive ones up to par, e.g. as the United States does with its depressed areas (as in the rescue of the auto industry in 2010) or when the federal government does declares a state of emergency for floods, tornados or other disruptions. As with the United States and indeed nearly all countries, EU “aid” is largely self-serving – a combination of export promotion and bailouts for debtor economies to pay banks in Europe’s main creditor nations: Germany, France and the Netherlands. The EU charter banned the European Central Bank (ECB) from financing government deficits, and prevents (indeed, “saves”) members from having to pay for the “fiscal irresponsibility” of countries running budget deficits. This “hard” tax policy was the price that lower-income countries had to sign onto when they joined the European Union.

                Also unlike the United States (or almost any nation), Europe’s parliament was merely ceremonial. It had no power to set and administer EU-wide taxes. Politically, the continent remains a loose federation. Every member is expected to pay its own way. The central bank does not monetize deficits, and there is minimal federal sharing with member states. Public spending deficits – even for capital investment in infrastructure – must be financed by running into debt, at rising interest rates as countries running deficits become more risky.

                This means that spending on transportation, power and other basic infrastructure that was publicly financed in North America and the leading European economies (providing services at subsidized rates) must be privatized. Prices for these services must be set high enough to cover interest and other financing charges, high salaries and bonuses, and be run for profit – indeed, for rent extraction as public regulatory authority is disabled.

                This makes countries going this route less competitive. It also means they will run into debt to Germany, France and the Netherlands, causing the financial strains that now are leading to showdowns with democratically elected governments. At issue is whether Europe should succumb to centralized planning – on the right wing of the political spectrum, under the banner of “free markets” defined as economies free from public price regulation and oversight, free from consumer protection, and free from taxes on the rich.

                The crisis for Greece – as for Iceland, Ireland and debt-plagued economies capped by the United States – is occurring as bank lobbyists demand that “taxpayers” pay for the bailouts of bad speculations and government debts stemming largely from tax cuts for the rich and for real estate, shifting the fiscal burden as well as the debt burden onto labor and industry. The financial sector’s growing power to achieve this tax favoritism is crippling economies, driving them further into reliance on yet more debt financing to remain solvent. Aid is conditional upon recipient countries reducing their wage levels (“internal devaluation”) and selling off public enterprises.

                The tunnel vision that guides these policies is self-reinforcing. Europe, America and Japan draw their economic managers from the ranks of professionals sliding back and forth between the banks and finance ministries – what the Japanese call “descent from heaven” to the private sector where worldly rewards are greatest. It is not merely delayed payment for past service. Their government experience and contacts helps them influence the remaining public bureaucracy and lobby their equally opportunistic replacements to promote pro-financial fiscal and monetary policies – that is, to handcuff government and deter regulation and taxation of the financial sector and its real estate and monopoly clients, and to use the government’s taxing and money-creating power to provide bailouts when the inevitable financial collapse occurs as the economy shrinks below break-even levels into negative equity territory.

                Regressive tax policies – shifting taxes off the rich and off property onto labor – cause budget deficits financed by public debt. When bondholders pull the plug, the resulting debt pressure forces governments to pay off debts by selling land and other public assets to private buyers (unless governments repudiate the debt or recover by restoring progressive taxation). Most such sales are done on credit. This benefits the banks by creating a loan market for the buyouts. Meanwhile, interest absorbs the earnings, depriving the government of tax revenue it formerly could have received as user fees. The tax gift to financiers is based on the bad policy of treating debt financing as a necessary cost of doing business, not as a policy choice – one that indeed is induced by the tax distortion of making interest payments tax-deductible.

                Buyers borrow credit to appropriate “the commons” in the same way they bid for commercial real estate. The winner is whoever raises the largest buyout loan – by pledging the most revenue to pay the bank as interest. So the financial sector ends up with the revenue hitherto paid to governments as taxes or user fees. This is euphemized as a free market.


    Promoting the financial sector at the economy’s expense

                The resulting debt leveraging is not a solvable problem. It is a quandary from which economies can escape only by focusing on production and consumption rather than merely subsidizing the financial system to enable players to make money from money by inflating asset prices on free electronic keyboard credit. Austerity causes unemployment, which lowers wages and prevents labor from sharing in the surplus. It enables companies to force their employees to work overtime and harder in order to get or keep a job, but does not really raise productivity and living standards in the way envisioned a century ago. Increasing housing prices on credit – requiring larger debts for access to home ownership – is not real prosperity.

                To contrast the “real” economy from the financial sector requires distinctions to be drawn between productive and unproductive credit and investment. One needs the concept of economic rent as an institutional and political return to privilege without a corresponding cost of production. Classical political economy was all about distinguishes earned from unearned income, cost-value from market price. But pro-financial lobbyists deny that any income or rentier wealth is unearned or parasitic. The national income and product accounts (NIPA) do not draw any such distinction. This blind spot is not accidental. It is the essence of post-classical economics. And it explains why Europe is so crippled.

                The way in which the euro was created in 1999 reflects this shallow vision. The Maastricht fiscal and financial rules maximize the commercial loan market by preventing central banks from supplying governments (and hence, the economy) with credit to grow. Commercial banks are to be the sole source of financing budget deficits – defined to include infrastructure investment in transportation, communication, power and water. Privatization of these basic services blocks governments from supplying them at subsidized rates or freely. So roads are turned into toll roads, charging access fees that are readily monopolized. Economies are turned into sets of tollbooths, paying out their access charges as interest to creditors. These extractive rents make privatized economies high-cost. But to the financial sector that is “wealth creation.” It is enhanced by untaxing interest payments to banks and bondholders – aggravating fiscal deficits in the process, however.


    The Greek budget crisis in perspective

                A fiscal legacy of the colonels’ 1967-74 junta was tax evasion by the well to do. The “business-friendly” parties that followed were reluctant to tax the wealthy. A 2010 report stated that nearly a third of Greek income was undeclared, with “fewer than 15,000 Greeks declar[ing] incomes of over €100,000, despite tens of thousands living in opulent wealth on the outskirts of the capital. A new drive by the Socialists to track down swimming pool owners by deploying Google Earth was met with a virulent response as Greeks invested in fake grass, camouflage and asphalt to hide the tax liabilities from the spies in space.”[1] <#_ftn1>

                As a result of the military dictatorship depressing public spending below the European norm, infrastructure needed to be rebuilt – and this required budget deficits. The only way to avoid running them would have been to make the rich pay the taxes they were supposed to. But squeezing public spending to the level that wealthy Greeks were willing to pay in taxes did not seem politically feasible. (Almost no country since the 1980s has enacted Progressive Era tax policies.) The 3% Maastricht limit on budget deficits refused to count capital spending by government as capital formation, on the ideological assumption that all government spending is deadweight waste and only private investment is productive.

                The path of least resistance was to engage in fiscal deception. Wall Street bankers helped the “conservative” (that is, fiscally regressive and financially profligate) parties conceal the extent of the public debt with the kind of junk accounting that financial engineers had pioneered for Enron. And as usual when financial deception in search of fees and profits is concerned, Goldman Sachs was in the middle. In February 2010, the German magazine Der Spiegel exposed how the firm had helped Greece conceal the rise in public debt, by mortgaging assets in a convoluted derivatives deal – legal but with the covert intent of circumventing the Maastricht limitation on deficits. “Eurostat’s reporting rules don’t comprehensively record transactions involving financial derivatives,” so Greece’s obligation appeared as a cross-currency swap rather than as a debt. The government used off-balance-sheet entities and derivatives similar to what Icelandic and Irish banks later would use to indulge in fictitious debt disappearance and an illusion of financial solvency.

                The reality, of course, was a virtual debt. The government was obligated to pay Wall Street billions of euros out of future airport landing fees and the national lottery as “the so-called cross currency swaps … mature, and swell the country’s already bloated deficit.”[2] <#_ftn2> Translated into straightforward terms, the deal left Greece’s public-sector budget deficit at 12 percent of GDP, four times the Maastricht limit.

                 Using derivatives to engineer Enron-style accounting enabled Greece to mask a debt as a market swap based on foreign currency options, to be unwound over ten to fifteen years. Goldman was paid some $300 million in fees and commissions for its aid orchestrating the 2001 scheme. “A similar deal in 2000 called Ariadne devoured the revenue that the government collected from its national lottery. Greece, however, classified those transactions as sales, not loans.”[3] <#_ftn3> JPMorgan Chase and other banks helped orchestrate similar deals across Europe, providing “cash upfront in return for government payments in the future, with those liabilities then left off the books.”

                The financial sector has an interest in understating the debt burden – first, by using “mark to model” junk accounting, and second, by pretending that the debt burden can be paid without disrupting economic life. Financial spokesmen from Tim Geithner in the United States to Dominique Strauss-Kahn at the IMF claimed that the post-2008 debt crisis is merely a short-term “liquidity problem” (lack of “confidence”), not insolvency reflecting an underlying inability to pay. Banks promise that everything will be all right when the economy “returns to normal” – if only the government will buy their junk mortgages and bad loans (“sound long-term investments”) for ready cash.


    The intellectual deception at work

                Financial lobbyists seek to distract voters and policy makers from realizing that “normalcy” cannot be restored without wiping out the debts that have made the economy abnormal. The larger the debt burden grows, the more economy-wide austerity is required to pay debts to banks and bondholders instead of investing in capital formation and real growth.

                Austerity makes the problem worse, by intensifying debt deflation. To pretend that austerity helps economies rather than destroys them, bank lobbyists claim that shrinking markets will lower wage rates and “make the economy more competitive” by “squeezing out the fat.” But the actual “fat” is the debt overhead – the interest, amortization, financial fees and penalties built into the cost of doing business, the cost of living and the cost of government.

                When difficulty arises in paying debts, the path of least resistance is to provide more credit – to enable debtors to pay. This keeps the system solvent by increasing the debt overhead – seemingly an oxymoron. As financial institutions see the point approaching where debts cannot be paid, they try to get “senior creditors” – the ECB and IMF – to lend governments enough money to pay, and ideally to shift risky debts onto the government (“taxpayers”). This gets them off the books of banks and other large financial institutions that otherwise would have to take losses on Greek government bonds, Irish bank obligations bonds, etc., just as these institutions lost on their holdings of junk mortgages. The banks use the resulting breathing room to try and dump their bond holdings and bad bets on the proverbial “greater fool.”

                In the end the debts cannot be paid. For the economy’s high-financial managers the problem is how to postpone defaults for as long as possible – and then to bail out, leaving governments (“taxpayers”) holding the bag, taking over the obligations of insolvent debtors (such as A.I.G. in the United States). But to do this in the face of popular opposition, it is necessary to override democratic politics. So the divestment by erstwhile financial losers requires that economic policy be taken out of the hands of elected government bodies and transferred to those of financial planners. This is how financial oligarchy replaces democracy.


    Paying higher interest for higher risk, while protecting banks from losses

                The role of the ECB, IMF and other financial oversight agencies has been to make sure that bankers got paid. As the past decade of fiscal laxity and deceptive accounting came to light, bankers and speculators made fortunes jacking up the interest rate that Greece had to pay for its increasing risk of default. To make sure they did not lose, bankers shifted the risk onto the European “troika” empowered to demand payment from Greek taxpayers.

                Banks that lent to the public sector (at above-market interest rates reflecting the risk), they were to be bailed out at public expense.[4] <#_ftn4> Demanding that Greece not impose a “haircut” on creditors, the ECB and related EU bureaucracy demanded a better deal for European bondholders than creditors received from the Brady bonds that resolved Latin American and Third World debts in the 1980s. In an interview with the Financial Times, ECB executive board member Lorenzo Bini Smaghi insisted:

                 First, the Brady bonds solution was a solution for American banks, which were basically allowed not to ‘mark to market’ the restructured bonds. There was regulatory forbearance, which was possible in the 1980 but would not be possible today.
                Second, the Latin American crisis was a foreign debt crisis. The main problem in the Greek crisis is Greece, its banks and its own financial system. Latin America had borrowed in dollars and the lines of credit were mainly with foreigners. Here, a large part of the debt is with Greeks. If Greece defaulted, the Greek banking system would collapse. It would then need a huge recapitalization - but where would the money come from?
                 Third, after default the Latin American countries still had a central bank that could print money to pay for civil servants’ wages, pensions. They did this and created inflation. So they got out [of the crisis] through inflation, depreciation and so forth. In Greece you would not have a central bank that could finance the government, and it would have to partly shut down some of its operations, like the health system.

                 Mr. Bini Smaghi threatened that Europe would destroy the Greek economy if it tried to scale back its debts or even stretch out maturities to reflect the ability to pay. Greece’s choice was between or anarchy. Restructuring would not benefit “the Greek people. It would entail a major economic, social and even humanitarian disaster, within Europe. Orderly implies things go smoothly, but if you wipe out the banking system, how can it be smooth?” The ECB’s “position [is] based on principle ... In the euro area debts have to be repaid and countries have to be solvent. That has to be the principle of a market-based economy.”[5] <#_ftn5>

                A creditor-oriented economy is not really a market-based, of course. The banks destroyed the market by their own central financial planning -- using debt leverage to leave Greece with a bare choice: Either it would permit EU officials to come in and carve up its economy, selling its major tourist sites and monopolistic rent-extracting opportunities to foreign creditors in a gigantic national foreclosure movement, or it could bite the bullet and withdraw from the Eurozone. That was the deal Mr. Bini Smaghi offered: “if there are sufficient privatizations, and so forth – then the IMF can disburse and the Europeans will do their share. But the key lies in Athens, not elsewhere. The key element for the return of Greece to the market is to stop discussions about restructuring.”

                One way or another, Greece would lose, he explained: “default or restructuring would not help solve the problems of the Greek economy, problems that can be solved only by adopting the kind of structural reforms and fiscal adjustment measures included in the programme. On the contrary it would push Greece into a major economic and social depression.” This leverage demanding to be paid or destroying the economy’s savings and monetary system is what central bankers call a “rescue,” or “restoring market forces.” Bankers claim that austerity will revive growth. But to accept as a realistic democratic alternative would be self-immolation.

                Unless Greece signed onto this nonsense, neither the ECB nor the IMF would extend loans to save its banking system from insolvency. On May 31, 2011, Europe agreed to provide $86 billion in euros if Greece “puts off for the time being a restructuring, hard or soft, of Greece’s huge debt burden.”[6] <#_ftn6> The pretense was a “hope that in another two years Greece will be in a better position to repay its debts in full.” Anticipation of the faux rescue led the euro to rebound against foreign currencies, and European stocks to jump by 2%. Yields on Greek 10-year bonds fell to “only” a 15.7 percent distress level, down one percentage point from the previous week’s high of 16.8 percent when a Greek official made the threatening announcement that “Restructuring is off the table. For now it is all about growth, growth, growth.”

                How can austerity be about growth? This idea never has worked, but the pretense was on. The EU would provide enough money for the Greek government to save bondholders from having to suffer losses. The financial sector supports heavy taxpayer expense as long as the burden does not fall on itself or its main customers in the real estate sector or the infrastructure monopolies being privatized.

                The loan-for-privatization tradeoff was called “aiding Greece” rather than bailing out German, French and other bondholders. But financial investors knew better. “Since the crisis began, 60 billion euros in deposits have been withdrawn from Greek banks, about a quarter of the country’s output.”[7] <#_ftn7> These withdrawals, which were gaining momentum, were the precise size of the loan being offered!

                Meanwhile, the shift of 60 billion euros off the balance sheets of banks onto the private sector threatened to raise the ratio of public debt to GDP over 150 percent. There was talk that another 100 billion euros would be needed to “socialize the losses” that otherwise would be suffered by German, French and other European bankers who had their eyes set on a windfall if heavily discounted Greek bonds were made risk-free by carving up Greece in much the same way that the Versailles Treaty did to Germany after World War I.

                The Greek population certainly saw that the world was at financial war. Increasingly large crowds gathered each day to protest in Syntagma Square in front of the Parliament, much as Icelandic crowds had done earlier under similar threats by their Social Democrats to sell out the nation to European creditors. And just as Iceland’s Prime Minister Sigurdardottir held on arrogantly against public opinion, so did Greek Socialist Prime Minister George Papandreou. This prompted EU Fisheries Commissioner Maria Damanaki “to ‘speak openly’ about the dilemma facing her country,” warning: “The scenario of Greece’s exit from the euro is now on the table, as are ways to do this. Either we agree with our creditors on a programme of tough sacrifices and results ... or we return to the drachma. Everything else is of secondary importance.”[8] <#_ftn8> And former Dutch Finance Minister Willem Vermeend wrote in De Telegraaf that ‘Greece should leave the euro,’ given that it will never be able to pay back its debt.”[9] <#_ftn9>

                As in Iceland, the Greek austerity measures are to be put to a national referendum – with polls reporting that some 85 percent of Greeks reject the bank-bailout-cum-austerity plan. Its government is paying twice as much for credit as the Germans, despite seemingly having no foreign-exchange risk (using the euro). The upshot may be to help drive Greece out of the eurozone, not only by forcing default (the revenue is not there to pay) but by Newton’s Third Law of Political Motion: Every action creates an equal and opposite reaction. The ECB’s attempt to make Greek labor –(“taxpayers”) pay foreign bondholders is leading to pressure for outright repudiation and the domestic “I won’t pay” movement. Greece’s labor movement always has been strong, and the debt crisis is further radicalizing it.

                The aim of commercial banks is to replace governments in creating money, making the economy entirely dependent on them, with public borrowing creating an enormous risk-free “market” for interest-bearing loans. It was to overcome this situation that the Bank of England was created in 1694 – to free the country from reliance on Italian and Dutch credit. Likewise the U.S. Federal Reserve, for all its limitations, was founded to enable the government to create its own money. But European banks have hog-tied their governments, replacing Parliamentary democracy with dictatorship by the ECB, which is blocked constitutionally from creating credit for governments – until German and French banks found it in their own interest for it to do so. As UMKC Professor Bill Black summarizes the situation:

    A nation that gives up its sovereign currency by joining the euro gives up the three most effective means of responding to a recession. It cannot devalue its currency to make its exports more competitive. It cannot undertake an expansive monetary policy. It does not have any monetary policy and the EU periphery nations have no meaningful influence on the ECB’s monetary policies. It cannot mount an appropriately expansive fiscal policy because of the restrictions of the EU’s growth and stability pact. The pact is a double oxymoron – preventing effective counter-cyclical fiscal policies harms growth and stability throughout the Eurozone.

                Financial politics are now dominated by the drive to replace debt defaults by running a fiscal surplus to pay bankers and bondholders. The financial system wants to be paid. But mathematically this is impossible, because the “magic of compound interest” outruns the economy’s ability to pay – unless central banks flood asset markets with new bubble credit, as U.S. policy has done since 2008. When debtors cannot pay, and when the banks in turn cannot pay their depositors and other counterparties, the financial system turns to the government to extract the revenue from “taxpayers” (not the financial sector itself). The policy bails out insolvent banks by plunging domestic economies into debt deflation, making taxpayers bear the cost of banks gone bad.

                These financial claims are virtually a demand for tribute. And since 2010 they have been applied to the PIIGS countries. The problem is that revenue used to pay creditors is not available for spending within the economy. So investment and employment shrink, and defaults spread. Something must give, politically as well as economically as society is brought back to the “Copernican problem”: Will the “real” economy of production and consumption revolve around finance, or will financial demands for interest devour the economic surplus and begin to eat into the economy?

                Technological determinists believe that technology drives. If this were so, rising productivity would have made everybody in Europe and the United States wealthy by now, rich enough to be out of debt. But there is a Chicago School inquisition insisting that today’s needless suffering is perfectly natural and even necessary to rescue economies by saving their banks and debt overhead – as if all this is the economic core, not wrapped around the core.

                Meanwhile, economies are falling deeper into debt, despite rising productivity measures. The seeming riddle has been explained many times, but is so counter-intuitive that it elicits a wall of cognitive dissonance. The natural view is to think that the world shouldn’t be this way, letting credit creation load down economies with debt without financing the means to pay it off. But this imbalance is the key dynamic defining whether economies will grow or shrink.

                John Kenneth Galbraith explained that banking and credit creation is so simple a principle that the mind rejects it – because it is something for nothing, the proverbial free lunch stemming from the principle of banks creating deposits by making loans. Just as nature abhors a vacuum, so most people abhor the idea that there is such a thing as a free lunch. But the financial free lunchers have taken over the political system.

                They can hold onto their privilege and avert a debt write-down only as long as they can prevent widespread moral objection to the idea that the economy is all about saving creditor claims from being scaled back to the economy’s ability to pay – by claiming that the financial brake is actually the key to growth, not a free transfer payment.

                The upcoming Greek referendum poses this question just as did Iceland’s earlier this spring. As Yves Smith recently commented regarding the ECB’s game of chicken as to whether Greece’s government would accept or reject its hard terms:

                This is what debt slavery looks like on a national level. …
                Greece looks to be on its way to be under the boot of bankers just as formerly free small Southern farmers were turned into “debtcroppers” after the US Civil War. Deflationary policies had left many with mortgage payments that were increasingly difficult to service. Many fell into “crop lien” peonage. Farmers were cash starved and pledged their crops to merchants who then acted in an abusive parental role, being given lists of goods needed to operate the farm and maintain the farmer’s family and doling out as they saw fit. The merchants not only applied interest to the loans, but further sold the goods to farmers at 30% or higher markups over cash prices. The system was operated, by design, so that the farmer’s crop would never pay him out of his debts (the merchant as the contracted buyer could pay whatever he felt like for the crop; the farmer could not market it to third parties). This debt servitude eventually led to rebellion in the form of the populist movement.[10] <#_ftn10>


                One would expect a similar political movement today. And as in the late 19th century, academic economics will be mobilized to reject it. Subsidized by the financial sector, today’s economic orthodoxy finds it natural to channel productivity gains to the finance, insurance and real estate (FIRE) sector and monopolies rather than to raise wages and living standards. Neoliberal lobbyists and their academic mascots dismiss sharing productivity gains with labor as being unproductive and not conducive to “wealth creation” financial style.


    Making governments pay creditors when banks run aground

                At issue is not only whether bank debts should be paid by taking them onto the public balance sheet at taxpayer expense, but whether they can reasonably be paid. If they cannot be, then trying to pay them will shrink economies further, making them even less viable. Many countries already have passed this financial limit. What is now in question is a political step – whether there is a limit to how much further creditor interests can push national populations into debt-dependency. Future generations may look back on our epoch as a great Social Experiment on how far the point may be deferred at which government – or parliaments – will draw a line against taking on public liability for debts beyond any reasonable capacity to pay without drastically slashing public spending on education, health care and other basic services?

                Is a government – or economy – be said to be solvent as long as it has enough land and buildings, roads, railroads, phone systems and other infrastructure to sell off to pay interest on debts mounting exponentially? Or should we think of solvency as existing under existing proportions in our mixed public/private economies? If populations can be convinced of the latter definition – as those of the former Soviet Union were, and as the ECB, EU and IMF are now demanding – then the financial sector will proceed with buyouts and foreclosures until it possesses all the assets in the world, all the hitherto public assets, corporate assets and those of individuals and partnerships.

                This is what today’s financial War of All against All is about. And it is what the Greeks gathering in Syntagma Square are demonstrating about. At issue is the relationship between the financial sector and the “real” economy. From the perspective of the “real” economy, the proper role of credit – that is, debt – is to fund productive capital investment and economic growth. After all, it is out of the economic surplus that interest is to be paid. This requires a tax system and financial regulatory system to maximize the growth. But that is precisely the fiscal policy that today’s financial sector is fighting against. It demands tax-deductibility for interest, encouraging debt financing rather than equity. It has disabled truth-in-lending laws and regulation keeping prices (the interest rate and fees) in line with costs of production. And it blocks governments from having central banks to freely finance their own operations and provide economies with money.

                Banks and their financial lobbyists have not shown much interest in economy-wide wellbeing. It is easier and quicker to make money by being extractive and predatory. Fraud and crime pay, if you can disable the police and regulatory agencies. So that has become the financial agenda, eagerly endorsed by academic spokesmen and media ideologues who applaud bank managers and subprime mortgage brokers, corporate raiders and their bondholders, and the new breed of privatizers, using the one-dimensional measure of how much revenue can be squeezed out and capitalized into debt service. From this neoliberal perspective, an economy’s wealth is measured by the magnitude of debt obligations – mortgages, bonds and packaged bank loans – that capitalize income and even hoped-for capital gains at the going rate of interest.

                Iceland belatedly decided that it was wrong to turn over its banking to a few domestic oligarchs without any real oversight or regulation over their self-dealing. From the vantage point of economic theory, was it not madness to imagine that Adam Smith’s quip about not relying on the benevolence of the butcher, brewer or baker for their products, but on their self-interest is applicable to bankers? Their “product” is not a tangible consumption good, but interest-bearing debt. These debts are a claim on output, revenue and wealth; they do not constitute real wealth.

                This is what pro-financial neoliberals fail to understand. For them, debt creation is “wealth creation” (Alan Greenspan’s favorite euphemism) when credit – that is, debt – bids up prices for property, stocks and bonds and thus enhances financial balance sheets. The “equilibrium theory” that underlies academic orthodoxy treats asset prices (financialized wealth) as reflecting a capitalization of expected income. But in today’s Bubble Economy, asset prices reflect whatever bankers will lend. Rather than being based on rational calculation, their loans are based on what investment bankers are able to package and sell to frequently gullible financial institutions. This logic leads to attempts to pay pensions out of a “wealth creating” process that runs economies into debt.

                It is not hard to statistically illustrate this. There amount of debt that an economy can pay is limited by the size of its surplus, defined as corporate profits and personal income for the private sector, and net fiscal revenue paid to the public sector. But neither today’s financial theory nor global practice recognizes a capacity-to-pay constraint. So debt service has been permitted to eat into capital formation and reduce living standards – and now, to demand privatization sell-offs.

                As an alternative is to such financial demands, Iceland has provided a model for what Greece may do. Responding to British and Dutch demands that its government guarantee payment of the Icesave bailout, the Althing recently asserted the principle of sovereign debt:

           The preconditions for the extension of government guarantee according to this Act are:
    1. That … account shall be taken of the difficult and unprecedented circumstances with which Iceland is faced with and the necessity of deciding on measures which enable it to reconstruct its financial and economic system.
            This implies among other things that the contracting parties will agree to a reasoned and objective request by Iceland for a review of the agreements in accordance with their provisions.
    2. That Iceland’s position as a sovereign state precludes legal process against its assets which are necessary for it to discharge in an acceptable manner its functions as a sovereign state.

                Instead of imposing the kind of austerity programs that devastated Third World countries from the 1970s to the 1990s and led them to avoid the IMF like a plague, the Althing is changing the rules of the financial system. It is subordinating Iceland’s reimbursement of Britain and Holland to the ability of Iceland’s economy to pay:

                In evaluating the preconditions for a review of the agreements, account shall also be taken to the position of the national economy and government finances at any given time and the prospects in this respect, with special attention being given to foreign exchange issues, exchange rate developments and the balance on current account, economic growth and changes in gross domestic product as well as developments with respect to the size of the population and job market participation.

                This is the Althing proposal to settle its Icesave bank claims that Britain and the Netherlands rejected so passionately as “unthinkable.” So Iceland said, “No, take us to court.” And that is where matters stand right now.

                Greece is not in court. But there is talk of a “higher law,” much as was discussed in the United States before the Civil War regarding slavery. At issue today is the financial analogue, debt peonage.

                Will it be enough to change the world’s financial environment? For the first time since the 1920s (as far as I know), Iceland made the capacity-to-pay principle the explicit legal basis for international debt service. The amount to be paid is to be limited to a specific proportion of the growth in its GDP (on the admittedly tenuous assumption that this can indeed be converted into export earnings). After Iceland recovers, the Treasury offered to guarantee payment for Britain for the period 2017-2023 up to 4% of the growth of GDP after 2008, plus another 2% for the Dutch. If there is no growth in GDP, there will be no debt service. This meant that if creditors took punitive actions whose effect is to strangle Iceland’s economy, they wouldn’t get paid.

                No wonder the EU bureaucracy reacted with such anger. It was a would-be slave rebellion. Returning to the applicable of Newton’s Third Law of motion to politics and economics, it was natural enough for Iceland, as the most thoroughly neoliberalized disaster area, to be the first economy to push back. The past two years have seen its status plunge from having the West’s highest living standards (debt-financed, as matters turn out) to the most deeply debt-leveraged. In such circumstances it is natural for a population and its elected officials to experience a culture shock – in this case, an awareness of the destructive ideology of neoliberal “free market” euphemisms that led to privatization of the nation’s banks and the ensuing debt binge.

                The Greeks gathering in Syntagma Square seem to need no culture shock to reject their Socialist government’s cave-in to European bankers. It looks like they may follow Iceland in leading the ideological pendulum back toward a classical awareness that in practice, this rhetoric turns out to be a junk economics favorable to banks and global creditors. Interest-bearing debt is the “product” that banks sell, after all. What seemed at first blush to be “wealth creation” was more accurately debt-creation, in which banks took no responsibility for the ability to pay. The resulting crash led the financial sector to suddenly believe that it did love centralized government control after all – to the extent of demanding public-sector bailouts that would reduce indebted economies to a generation of fiscal debt peonage and the resulting economic shrinkage.

                As far as I am aware, this agreement is the first since the Young Plan for Germany’s reparations debt to subordinate international debt obligations to the capacity-to-pay principle. The Althing’s proposal spells this out in clear terms as an alternative to the neoliberal idea that economies must pay willy-nilly (as Keynes would say), sacrificing their future and driving their population to emigrate in a vain attempt to pay debts that, in the end, can’t be paid but merely leave debtor economies hopelessly dependent on their creditors. In the end, democratic nations are not willing to relinquish political planning authority to an emerging financial oligarchy.

                No doubt the post-Soviet countries are watching, along with Latin American, African and other sovereign debtors whose growth has been stunted by predatory austerity programs imposed by IMF, World Bank and EU neoliberals in recent decades. We should all hope that the post-Bretton Woods era is over. But it won’t be until the Greek population follows that of Iceland in saying no – and Ireland finally wakes up.

                Financial Times columnist Martin Wolf writes that the eurozone “has only two options: to go forwards towards a closer union or backwards towards at least partial dissolution. … either default and partial dissolution or open-ended official support.”[11] <#_ftn11> But ECB intransigence leaves little alternative to breakup. Europe’s payments-surplus nations are waging financial war against the deficit countries. Without a common union based on mutual support within a mixed economy – one capable of checking financial aggression – the European Central Bank replaced the military high command. Its bold gamble is whether the Greeks will be as stupid as the Irish, not as smart as the Icelanders.






    [1] <#_ftnref>  Helena Smith, “The Greek spirit of resistance turns its guns on the IMF,” The Observer, May 9, 2010.

    [2] <#_ftnref>  Beat Balzli, “How Goldman Sachs Helped Greece to Mask its True Debt,” Der Spiegel, February 8, 2010. <http://www.spiegel.de/international/europe/0,1518,676634,00.html> The report adds: “One time, gigantic military expenditures were left out, and another time billions in hospital debt.”

    [3] <#_ftnref>  Louise Story, Landon Thomas Jr. and Nelson D. Schwartz, “Wall St. Helped to Mask Debt Fueling Europe’s Crisis,” The New York Times, February 13, 2010.

    [4] <#_ftnref>  At the time of the spring 2010 bailout French banks held €31 billion of Greek bonds, compared to €23 billion by German banks. This helps explain why French President Nicolas Sarkozy sought to take major credit for the bailout, based on a May 7, 2010 discussions with  EU Commission  President José Manuel Barroso, ECB President Jean-Claude Trichet and Eurogroup President Jean-Claude Juncker.

    [5] <#_ftnref>  Ralph Atkins, “Transcript: Lorenzo Bini Smaghi,” Financial Times, May 30, 2011. The interview took place on May 27.

    [6] <#_ftnref>  Landon Thomas Jr., “New Rescue Package for Greece Takes Shape,” The New York Times, June 1, 2011.

    [7] <#_ftnref>  Ibid.

    [8] <#_ftnref>  Emma Rowley, “Greece risks ‘return to drachma,’” The Telegraph, June 1, 2011.

    [9] <#_ftnref>  Idris Francis, “Greece leaving the EMU: From taboo to fashionable?” Open Europe blog, June 1, 2011. (I am indebted to Paul Craig Roberts for drawing my attention to this source.)

    [10] <#_ftnref>  Yves Smith, “Will Greeks Defy Rape and Pillage By Barbarians Bankers? An E-Mail from Athens,” Naked Capitalism, May 30, 2011.

    [11] <#_ftnref>  Martin Wolf, “Intolerable choices for the eurozone,” Financial Times, June 1, 2011.

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