Governments are the Primary Creators of Systemic Risk

From The Daily Reckoning
By Charles Kadlec

06/29/11 The greatest lesson of the still young 21st century is proving to be that governments are the primary source of systemic risk to the economy, our standard of living, and our liberty.

The latest case in point is the European government debt crisis, with Greece once again running out of money and threatening to trigger yet another financial crisis. The government’s debt now totals more than 150% of its GDP, and continues to grow. Last year’s bailout by other European governments was supposed to give it the time needed to reduce its budget deficits so that next year Greece could roll over its maturing debts, as well as finance additional deficits at interest rates under 6%. However, the government’s austerity plan of tax increases and budget cuts has not reduced current or projected government deficits because the economy in 2010 contracted by 4.5% and the unemployment rate jumped to 15%.

The combination of a contracting economy and rising debt levels has driven the market yield on Greek two-year notes to near 25% and on its 10-year debt to around 15%. Since these loans are in euros, rates this high reflect the growing risk the people of Greece will not be able to make good on their collective debts. They also effectively shut the government out of the capital markets. Last week, S&P downgraded its rating on Greek debt to B from BB-, well into junk bond territory.

The downgrade reflects the increasing possibility that Greece will restructure its debt by forcing current debt holders to accept longer maturities, or do what demonstrators in the streets of Athens are demanding, which is to force its creditors to take a loss on their loans.

Normally, this would be a matter between a debtor and its creditors. However, European Central Bank (ECB) Executive Board Member Juergen Stark warns that the effects of restructuring “could overshadow the effects of the Lehman bankruptcy,” which is associated with the beginning of the 2008 financial crisis.

At the heart of that financial crisis were government policies including Federal Reserve efforts to manipulate the economy by keeping interest rates artificially low and a weak dollar policy that fueled the housing bubble, federal government rules and regulations that de facto required banks to make loans to high risk borrowers, and two government sponsored enterprises, Fannie Mae and Freddie Mac, who stood ready to purchase hundreds of billions of dollars of sub-prime mortgages if only Wall Street could figure out how to turn them into high grade bonds.

In the case of Greece, government actions and regulations also lie at the heart of what threatens to be a European financial crisis.

Greek social security funds hold nearly two-thirds of their liquid assets in government bonds. Thus, any default would undermine these funds’ ability to meet their obligations to pay promised health and pension benefits. Such an outcome understandably would create massive political unrest that could reduce government revenues and the government’s ability to make good on its debts.

This risk is amplified by special rules created by politicians that encourage banks to lend freely to governments.

Here’s how it works. Governments require banks to hold capital against the loans that they make, anticipating that in the normal course of business, some of the loans will not be repaid. The riskier the loan, the more capital that needs to be held in reserve.

However, under international rules negotiated by government representatives through the Bank for International Settlements (BIS), government loans fit into a special category that has a 0% risk requirement. That means European banks do not have to hold any reserves against loans they make to European governments. That’s right, politicians implicitly promised banks that governments would never default. And, given the opportunity to make “risk free” loans that require no capital commitment, bankers purchased mountains of government debt.

According to Reuters, Greek banks own nearly 60 billion euros ($84 billion) of Greek government debt, and would almost certainly need additional capital and potentially a government bailout in the event of a government default.

In addition, the European Central Bank has increased the risk of systemic failure by becoming one of Greece’s largest creditors. As reported by The New York Times, J. P. Morgan estimates that the ECB owns 40 billion euros of Greek debt. In addition, it has lent 91 billion euros to Greek banks, with much of that backed by Greek government bonds.

That means any Greek default would cost the ECB billions of euros in losses and potentially impact the value of the euro, disrupting European and international financial markets, and the conduct of European monetary policy.

In a television interview last Friday, ECB Vice President Lucas Papademos warned: “…the adverse consequences both on the banking system in Greece as well as on financial stability in the euro area as a whole can be far reaching and undesirable. So all in all, I think that Greek debt restructuring should not be on the agenda.”

One possible “far reaching and undesirable” consequence of such a disruption to European financial markets would be follow-on defaults by Ireland, Portugal, Spain and Italy. According to AEI Scholar Desmond Lachman, the combined debt of the first four countries alone is about $2 trillion, a large portion of which is held by European banks. As a consequence, a write-down of 30% of that debt could lead to a European financial crisis not unlike that which struck the US banks from subprime mortgages.

Thus, the systemic risk created by the political class has put the citizens of Europe on the hook for irresponsible levels of government spending. Wealth producers are faced with the lose-lose choices of bailing out governments, bailing out bankers who were induced into buying government debt, or suffering the economic consequences and losses associated with widespread bank failures.

The brewing European debt crisis demonstrates again that the greatest source of systemic risk is believing politicians when they promise government guarantees are costless, and that elite public servants are capable of protecting us from systemic risks in the first place. The lesson is that giving governments more power over the economy and financial system is itself a source of potentially catastrophic financial and economic instability.

Regards,

Charles Kadlec,
for The Daily Reckoning

Microsoft director admits EU data not exempt from Patriot Act spying

Source: Raw Story June 29, 2011

In the brave new world of cloud computing, where data is stored off-site in massive server farms instead of on a user's local hard drive, privacy and security are paramount in the consumer's mind.

Unfortunately for privacy advocates, their concerns are essentially moot thanks to the U.S.A. Patriot Act, which a key Microsoft official said recently permits the U.S. to spy on data stored within cloud servers across the European Union.
The revelation of transcontinental spying, which has long been suspected, came from Gordon Frazer, Microsoft U.K.'s managing director, speaking at an announcement event for the company's new suite of office software.
Frazer's admission was caught by ZDNet reporter Zack Whittaker, who's long covered data security issues as they relate to the Patriot Act.
According to Whittaker's report, Frazer was asked whether the company could "guarantee that EU-stored data, held in EU based datacenters, will not leave the European Economic Area under any circumstances".
Because Microsoft is a U.S.-based company, he replied, they would be bound by its laws.
Provisions within the Patriot Act allow U.S. authorities to conduct surveillance without identifying the person or location to be wiretapped; permit surveillance of "non-US" persons who are not affiliated with a terrorist group; and allow law enforcement to gain access to "any tangible thing" during investigations.
Microsoft Office documents would now be officially included in that -- seemingly no matter where they reside.

How ‘al-Qaeda’s spokesman’ advances the Israel lobby’s gun control agenda

By Maidhc Ó Cathail | June 29, 2011

On June 3, in an al-Qaeda video rather loftily titled “You Are Held Responsible Only for Thyself,” al-Qaeda’s California-born spokesman, Adam Gadahn, urged followers to commit violent acts of jihad by exploiting alleged weaknesses in U.S. gun laws and the gun background check system. “America is absolutely awash with easily obtainable firearms,” he said. “You can go down to a gun show at the local convention center and come away with a fully automatic assault rifle without a background check and, most likely, without having to show an identification card. So what are you waiting for?”
SeparaAround the same time, a “hit list” of American executives, officials and companies appeared on jihadist websites. “Security analysts,” reported FoxNews.com, “believe the two messages are related and underscore a shift in terror strategy—from top-down, mass-casualty events to smaller-scale attacks taken up, in some cases, by freelancing, lone-wolf jihadists.” According to one of Fox’s security analysts, Aaron Weisburd, the founder and director of the revealingly named Internet Haganah, the discussion originated on a password-protected, members-only site, to which he has access, known as the Shumukh forum. Describing Shumukh—which bears an uncanny resemblance to the Yiddish word for “idiot”—as “the number-one Al Qaeda-supporting website on the Internet today,” Weisburd suspiciously added that it was “most frequented by Palestinians.”
On the very same day that Gadahn’s video was released, the Mayors Against Illegal Guns (MAIG) coalition issued a press release in response. New York City Mayor and MAIG founding co-chair Michael Bloomberg said that Gadahn’s statement was “absolutely accurate,” adding that the video “may help Washington understand that weak gun laws aren’t just a crime problem, they’re a national security threat.” Helpfully pointing out that legislation had already been introduced to address the problem, Bloomberg, an uncritical supporter of Israel’sseemingly unlimited “right to defend itself,” urged Congress to pass the Fix Gun Checks Act of 2011 and the Denying Firearms and Explosives to Dangerous Terrorists Act of 2011. Then on June 16, Ben Rattray’sChange.org breathlessly alerted subscribers to its MAIG-sponsored “Stop Al-Qaeda From Exploiting Gun Law Loopholes” online petition. This was followed by a June 17 editorial in the Chicago Sun-Times entitled “Terrorists buying guns? There ought to be a law.”
In fact, it was Mayor Bloomberg’s coalition that had initially proposed the legislation to fix gun background checks. On February 23, Bloomberg and his New York Police Commissioner, Ray Kelly, had joined Israel’s self-described “guardian” in the Senate, Charles Schumer, to announce the introduction of legislation that would provide greater reporting to the National Instant Criminal Background Check System (NICS) for individuals with mental illness, domestic violence records, and drug abusers, by increasing the penalties for states that fail to adequately turn over records for those who are prohibited from owning a gun. The legislation would also require that all gun sales, including those by private sellers, be subject to a background check, effectively ending the so-called “gun show loophole.”
On May 12, the 550-member Mayors Against Illegal Guns—more than three-quarters of whom come from California, Florida, Pennsylvania, New Jersey and New York—issued a statement decrying the House Judiciary Committee’s vote that day against an amendment to close the “Terror Gap” by giving the Justice Department discretion to deny gun and explosive sales to terrorists. “Hopefully, last night’s arrest in New York City of two terrorists plotting an attack using guns and explosives,” Mayor Bloomberg said in a statement, “will help convince Congress that this is a national security issue and they need to do the right thing and pass this legislation.”
On that same day, at a high-profile City Hall news conference, the New York Mayor and his steadfast NYPD Commissioner accused Ahmed Ferhani and Mohamed Mamdouh of “planning to blow up the largest synagogue in Manhattan and to kill as many Jews as possible.” The FBI, however, had their doubts about the police undercover who investigated the two alleged “lone wolf” terrorists and refused to get involved in the case. Those doubts were confirmed on June 15 when a grand jury rejected the top terrorism charge against the two Muslim immigrants from North Africa. “This is a political case, brought by political people, for their own political purposes,” Elizabeth Fink, a lawyer for Ferhani, said outside court.“You will see that this case is bogus.… It’s total entrapment.” She added that Ferhani had a history of mental illness and had been institutionalized up to 30 times, and that the police were aware of this because of 911 calls his mother had made to subdue him.
The grand jury’s rejection of the NYPD’s exaggerated claims of a dastardly anti-Semitic plot came just days after the White House announcement of the Jewish Federations’ new partnership with the Department of Homeland Security (a post 9/11 goldmine for the Israeli security industry) “dedicated mainly to the state of threats posed to American Jewish institutions.” Notwithstanding the strong evidence pointing to FBI entrapment as the source of earlier media-hyped “synagogue terror” plots, Michael Gelman, chair of the Executive Committee of the Board of The Jewish Federations of North America, said: “The American Jewish community and the places we gather are, unfortunately, often targets for terrorists. This new partnership with the Department of Homeland Security will empower us to counter this threat as we become more actively involved in our own protection.”
And given Mayor Bloomberg’s support for legislation to prevent the mentally ill from buying guns, it’s also worth noting that the “Manhattan synagogue” plot is far from being the only instance in which the NYPD has used people suffering from mental illness to make terrorism cases. In 2004, police arrested a Pakistani immigrant, Shahawar Matin Siraj, and charged him with plotting to bomb the Herald Square subway station on the eve of the Republican National Convention at nearby Madison Square Garden. After paying an informant $100,000 to spend more than a year encouraging Siraj in the plot, the police persuaded his schizophrenic co-defendant, James Elshafay, to testify against Siraj. Despite being described by acquaintances as “borderline retarded,” Siraj was convicted and sentenced to 30 years in prison.
In spite of the fact—or perhaps because of it—that investigators couldn’t find a connection between Siraj and Elshafay and any terrorist organization, the NYPD’s deputy commissioner for intelligence, David Cohen, later described the mentally ill pair as “lone wolves” who were “homegrown, but inspired globally.” After a brief 2001 stint at insurance giant AIG (a $40 billion beneficiary of the increased demand for bonds in the wake of the Sept. 11 attacks), Cohen had been tapped for the newly created position at the beginning of 2002. Despite his extreme unpopularity and a less than reassuring record in a 35-year career at the CIA—he once wrote a report, later dismissed by an internal CIA review, blaming the Soviet Union for the 1981 assassination attempt on Pope John Paul II—Cohen’s appointment was warmly endorsed by Mayor Bloomberg. Describing his role as chief of the NYPD’s Intelligence Division, Cohen later said, “It’s like starting the CIA over in the post-9/11 world.”
Indeed, it seems that Cohen set about starting over not only the CIA but the FBI as well—the latter’s investigations on occasions being frustrated by his Intelligence Division’s “Lone Cowboy behaviour.” But cowed by post-9/11 criticism from Congress and the media, the Feds passively watched the creation of a troublesome rival. Early on, Cohen suggested to Commissioner Kelly that New York police officers be assigned overseas. By 2005, NYPD Intelligence had seven detectives deployed in cities around the world, including London, Singapore and Tel Aviv, which perhaps predictably received the NYPD’s first foreign liaison. While Cohen’s man in Tel Aviv, Mordecai Dzikansky, had virtually no contact with his American counterpart from the FBI, which opposed the creation of the post, the Orthodox Jew and former IDF volunteer enjoyed close relations with his Israeli hosts. A few months before her 2005 “resignation,” Judith Miller wrote in the New York Times: “[A]s the New York detective walks through the corridors of police headquarters in Jerusalem, home to Israel’s 27,000 police officers, he is invariably greeted as Morty, in the Hebrew he now speaks fluently, with a quip and a smile.”
Although most liberals would be inclined to support calls for tighter gun control, the source of those calls should give them pause for thought. It’s more than a little ironic that the most ardent advocates of gun control for Americans such as the pro-Israel Anti-Defamation League are the very same people who demand that American taxpayers continue to lavish Israelis with as much weaponry as they desire “to defend themselves,” i.e. by slaughtering Palestinian and Lebanese civilians with impunity. Leaving aside arguments over the relative legitimacy of state terrorism versus non-state terrorism, one can hardly imagine the likes of Bloomberg and Schumer advocating background checks as passionately for Israeli settlers to prevent a Jewish extremist likeBaruch Goldstein from acquiring a gun to massacre Palestinian civilians.
So, how do we account for such blatant double standards? Could it be that Israel’s fifth columnists are worried that if enough Americans ever become aware of how much their “unbreakable bond” with Israel has cost them inblood, treasure and credibility, they might have an American Intifada on their hands? Better, then, to preempt the possibility of such “domestic extremists” coming up with their own “hit list” by closing the “Terror Gap” now, while they still can. In the meantime, the fear and loathing of America’s maligned Muslim community engendered byscary tales of “lone wolf” jihadists ensures the perpetuation of America’s wars for Israeli hegemony in the Greater Middle East for the forseeable future—or at least till they completely bankrupt the country.
Even if Adam Gadahn had become a board member of the ADL like his beloved paternal grandfather, Carl Pearlman, he could hardly have served their gun control agenda better.

~

Maidhc Ó Cathail is an investigative journalist and Middle East analyst.

Tripoli bombed but steadfast

From Voltairenet:

by Thierry Meyssan

An international team of investigators from Voltaire Network is currently in Libya where it visited the bombing sites. With the support of the Libyan authorities, and not withstanding the war conditions, they were able to meet with a number of political leaders and security officials. What they witnessed is diametrically opposed to the accounts conveyed by the western media. Thierry Meyssan shares their initial observations.

VOLTAIRE NETWORK | TRIPOLI (LIBYE) | 29 JUNE 2011

Muammar Gaddafi’s bedroom after a NATO bombing. Two other rooms in the building were also destroyed, those of his son and grandchildren all of whom were killed. The Leader himself was absent.

© Voltaire Network

As the Libyan bombing campaign entered the 100th day, NATO announced its imminent success. However, since the aims of the war were never clearly defined, it is difficult to know what is meant by success. Simultaneously, the International Criminal Court issued an arrest warrant against Libyan leader Muammar Gaddafi, his son Seif al-Islam and the Libyan regime’s intelligence chief Abjullah al-Sanoussi for "crimes against humanity."

According to the terms of Security Council Resolution 1973, the aim of the Coalition of the willing was to establish a no-fly zone to prevent the tyrant from murdering his own people. However, the initial reports of Libya mobilizing its air force against its own people have as yet to be corroborated, despite the ICC’s acceptance of their authenticity. Whatever the case, NATO operations have largely exceeded the establishment of a no-fly zone, morphing into a systematic destruction campaign of all national armed forces -air, land and sea.

NATO’s objectives must evidently lie elsewhere. Accordingly, the heads of the Alliance have repeatedly called for the overthrow of Muammar Gaddafi’s "regime", including the "Brother Leader"’s physical elimination. At the same time, the western media periodically evoke the "massive defections" of Tripoli officials to rally the cause of the Benghazi rebels, while failing to cite any names except for those political leaders already famous for their longstanding sympathies towards, such as Foreign Minister Moussa Koussa.

International public opinion is widely misinformed. Washington had the Arab Satellite Communications Organization (Arabsat), of which Libya is a shareholder, block the transmission of the Jamahiriya Satellite Channel. It shouldn’t be long before the State Department follows suit with NileSat. In breach of its international obligations, Washington denied a visa to the new Libyan ambassador to the United Nations. He is barred from going to New York to expound his point of view, while his predecessor - who has joined the National Transitional Council - continues to occupy his seat.

With Tripoli’s voice stifled, any lie can easily be spread without risk of refutation.

It should come as no surprise if - when seen from Tripoli where this article is written - NATO’s announcements and the injunctions of the ICC seem unreal. Western Libya is peaceful. The sirens unpredictably announce the arrival of bombers or missiles, immediately followed by explosions. It is pointless to scramble towards the shelters; on one hand, time is too short and, on the other hand, there are no shelters.

The bombings are carried out with razor-sharp precision. The guided munitions hit the targeted buildings, then the targeted rooms inside the buildings. Nevertheless, NATO loses control in flight of roughly one guided missile out of every ten. When that occurs, the missile lands haphazardly in the city, sowing indiscriminate death.

While part of NATO’s targets are "military": barracks and bases; the majority are "strategic", that is economic. For example, the Alliance bombarded the Libyan Mint Office building, a civilian administration in charge of manufacturing dinars. Also, its commandos sabotaged factories that were competing with those of the Coalition. Other targets are said to be "psychological" in that they strike the political and security leaders where it hurts most: the decimation of their families. The missiles are then aimed at their private quarters and, more precisely, their children’s bedrooms.

The capital and the coast are steeped in a heavy atmosphere. But the population is united. The Libyans emphasize that none of their internal problems can justify the recourse to war. They voice social claims and regional issues, comparably to certain European countries, but nothing that would prompt families to split up, a situation which the imposed partition of the country is currently generating.

With NATO’s intervention, tens of thousands of wealthy Libyans packed up and moved to neighboring countries, especially Tunisia, leaving the poor with the responsibility to defend the country that made them rich. Many shops have closed down but no one knows whether it’s because of replenishment problems or because the owners have fled.

As is happening in Syria, the majority of political opponents are behind the government, eager to protect their country’s integrity in the face of foreign aggression. Meanwhile, certain Libyans collaborate with NATO under the radar, feeding information on the location of targets. In the past, their parents had welcomed the Italian colonial troops; today, in unison with their Benghazi counterparts they chant "1, 2, 3, Sarkozy is on his way!." Each nation has its share of traitors and quislings.

The abuses committed by Prince Bandar’s mercenaries in Cyrenaica wound up convincing a lot of fence sitters. Television channels broadcast non-stop the doings of Al-Qaeda leaders in Libya, some of whom were sent directly from Guantanamo to fight alongside the United States. Unbearable images display scenes of lynchings and mutilations in cities which have been transformed into Islamic emirates - Afghan or Iraqi style - by individuals dehumanized by inflicted torture and under the influence of potent drugs. It is not necessary to be a longstanding supporter of Gaddafi’s Revolution in order to support it today in the face of the horrors perpetrated by the jihadists in the "zones liberated" by the Alliance [1].

Nothing anywhere in the West of the country is reminiscent of a rebellion or a civil war. There are no barricades, nor armored vehicles in the streets. Along every road, the authorities set up a check-point every two kilometers. The drivers patiently bide their time, themselves on the look out for elements infiltrated by NATO.

Colonel Gaddafi has armed the population. Approximately two million machine guns have already been distributed to the civilians. The idea is that each adult, man or women, should be in a position to defend his or her home. The Libyans learned the Iraqi lesson. Saddam Hussein had rested his power on the Ba’ath ruling party and the army, excluding the people from political life. When the party was decapitated and several generals defected, the State suddenly collapsed leaving the country with no resistance and floundering in chaos. Libya instead follows an original system of participative democracy, similar to the grassroots assemblies in Vermont. People are used to being consulted and assuming responsibilities. Hence, it is easy to mobilize them en masse.

Unexpectedly, women are more determined than men to carry arms. This could be explained by their higher rate of participation in the popular assemblies in recent years. It could also be a reflection of the flightiness that has affected certain officials in this socialist country where they enjoy a high standard of living.

Everyone is aware that the decisive moment will come when NATO will deploy its ground troops, if it dares to venture it. The defense strategy has been entirely conceived in terms of dissuading the penetration of ground troops by mobilizing the population. Here, U.S., French and British soldiers will not be received as liberators, but as colonial invaders. Endless urban guerrilla combats will await them.

Libyans are perplexed about the real motives behind NATO’s military operation. I was surprised to learn that it was often through the articles published by Voltaire Network, translated and relayed by numerous other Internet sites and printed newspapers, that they were informed of what was at stake. Here, like everywhere else, there is an information deficit when it comes to the international scene. People are aware and proud of their government’s initiatives and achievements in favor of African unity and the development of the Third World, but they are oblivious to certain aspects of international politics and under-estimate the destructive capacity of the Empire. War always seems remote, until the predator picks you as his prey.

So, what is the success heralded by NATO? For the time being, the country is fractured in two. Cyrenaica has been proclaimed an independent republic - although preparations are under way to restore the monarchy - and has been recognized by several States, starting with France. This new entity is governed de facto by NATO, but officially by a mysterious non-elected National Transitional Council whose members, if they exist, are undercover to avoid having to answer for their acts. A portion of Libyan assets has been frozen and currently administered to their greatest benefit by western governments. Part of the oil production is marketed at unbeatable conditions in favor of western companies, which are going hog wild. Perhaps this is the success that NATO is talking about: colonial pillaging.

By issuing an international arrest warrant against Muammar Gaddafi, his son and his intelligence chief, the International Criminal Court aims to exert pressure on the Libyan diplomats to get them to resign. Should Jamahiriya fall, each one is threatened to be charged with "complicity in crimes against humanity." Those who resign will leave a vacant post behind them, without being replaced. The arrest warrants are clearly linked to a policy of isolating the country.

The ICC also engages in war communication. It qualifies Seif al-Islam as a "de facto Prime Minister", which he is decidedly not, but it conveys the impression of a family regime. We are before an example of the reversal-of-values principle which is typical of US propaganda. While the Benghazi rebels brandish the flag of the Senussi monarchy and that the heir to the throne sits impatiently in London, it is the system of participative democracy which is being portrayed as a family dynasty.

At the end of the first hundred days of war, disappointment is seeping through NATO’s communiqués. With the exception of Cyrenaica, the Libyans did not rise up against the "regime." No military solution is in sight. The only exit allowing NATO not to loose too much face is the division of the country. Benghazi would thus become the equivalent of Camp Bondsteel, the largest US military base in Europe, which acceded to the status of an independent state by the name of Kosovo. Cyrenaica would serve as the permanent base that Africom requires for the better control of the black continent.

Thierry Meyssan

[1] Some readers may find such remarks surprising. Voltaire Network will revisit them in more detail in forthcoming articles.

________________


Related:

U.S. Aircraft Supercarrier Enters Mediterranean For "NATO Missions"

France armed Libyan rebels - official

GREEK PARLIAMENT PASSES AUSTERITY MEASURES AS PROTESTS CONTINUE: Next clash with EU and IMF pre-programmed in September

From Case about Bird Flu 

By Jane Burgermeister

The banks and the euro have escaped immediate economic disaster after the Greek parliament today voted by a narrow margin in favour of privatisations and austerity measures mandated by the EU, IMF and ECB.

However, a fresh clash with the Greek parliament and people is preprogrammed when the Troika undertake their next review of Greece’s finances in September.

George Papandreou’s socialist government  pushed through a €28bn package of drastic tax increases and budget cuts by 155 votes to 138 while protestors outside the parliament faced tear gas and even plastic bullets from riot police. Unions also staged a 48 hour strike.

Watch live stream of the protests at:

http://www.livestream.com/stopcarteltvgr?utm_source=lsplayer&utm_medium=embed&utm_campaign=footerlinks

A vote is to be held tomorrow on enabling legislation to allow the sale to foreign corporations of Greek government assets by a special agency overseen by EU, IMF and ECB officials.

The passage of this legislation will clear the way for the next interest payment on the country’s astronomical national debt to be made to American, French and German banks  in July.

Greek souvereign debt is set to rise to 170% of the GDP next year after IMF, EU austerity measures mandated in 2010 crushed the economy, and the new cuts will only deepen Greece’s dire economic situation.

Greece already has with the lowest credit rating in the world and is considered by rating agencies, bond markets and economists to be insolvent and not illiquid. But a recommendation to create an insolvency mechanism for over indebted eurozone countries such as Greece was buried by the German government in autumn 2010.

According to an IMF report, Greece is set to spend 131 billion euros on interest payments and refinancing on its national debt between 2009 and 2014 as part of  the fiction that Greece is just illiquid.

http://www.guardian.co.uk/commentisfree/2011/jun/27/greece-bailout-eu-neocolonialism

But it is not just the Greeks who will be forced by their complicit governments to give money they cannot afford to the banks for engineered fractional-reserve banking debts.

The cost of the Greek bankster bailout is set to rise to 1,450 euros for each household in Europe, according to a report by Open Europe.

http://www.telegraph.co.uk/finance/financialcrisis/8589016/Second-Greek-bail-out-could-push-eurozone-bill-to-1450-per-household.html

The Greek socialist government pushed through the austerity package demanded by the EU and IMF by fanning fears of bankruptcy after failing to take steps to prepare for an orderly insolvency of the country and in spite of the fact that the example of Argentina showed that a default, even a disorderly default, can return a country to rapid growth.

Only one PASOK lawmaker voted against the measures which will burden the poorest section of society with new “bank” taxes so brutal that Die Welt newspaper admitted they would lead to uprisings if implemented in Germany. All members of the main opposition conservative party voted against the package apart from one lawmaker.

In spite of the passage of the legislation, a default and the demise of the euro is almost certain given the economic facts, which will push people into resistance.

The IMF, EU and ECB are due to undertake their next review of Greece’s progress in implementing the austerity measures in September.

By that time the impact of  savage salary cuts and job cuts, tax increases and spending cuts will begin to make itself  felt, making even stiffer opposition from the people of Greece and unions to any further measures certain.

In addition, the staggering costs of the Greek bank bailout will become clearer to eurozone taxpayers, especially German tax payers, it will become clear there is no end in sight to the bailouts.

“Even if Greece gets its bailout and its economy rebounds, the government would have to run a budget surplus, excluding debt-service costs, of 5 percent of GDP for about three decades to bring down debt to the 60 percent maximum allowed by euro- area rules,” reports Bloomberg.

http://www.bloomberg.com/news/2011-06-28/greek-vote-obscures-the-european-union-s-unsavory-choices-view.html

Greek banks have received almost €100bn in loans from the ECB under an emergency liquidity assistance programme in spite of the fact the banks are insolvent and their finances are set to further deteriorate, meaning eurozone tax payers will have to pick up the bill.

The ECB has burned so much capital by supporting insolvent Greek, Irish, Portuguese and Spanish banks that it is set to become a net debtor to itself in just two years, German economist Hans Werner Sinn has calculated. Sinn called the way the EECB offered loans to banks for junk collateral an invitation to the banks to “self service.”

The ECB has resisted a default by Greece to avoid having to declare these losses on its books.

As the social and economic meltdown that is resulting from transferring so much money to banks becomes apparent, resistance to the bankster bailouts is set to grow across the eurozone.

The EU, IMF and ECB financial empire has taken off its mask and made an unprecedented grab for the assets and taxes of the people of Greece and in this lie the seeds of its own defeat.

 “All warfare is based on deception,” said Sun Tzu.

“The general, unable to control his irritation, will launch his men to the assault like swarming ants, with the result that one-third of his men are slain, while the town still remains untaken. Such are the disastrous effects of a siege.”

The Bilderberg elite have launched their Troika to assault Greece like swarming ants and the result is that they have nearly been defeated already in the Greek parliament and at a fairly early stage in theircampaign of financial warfare against Europe. Ireland, Portugal, Spain, Italy and Germany are all still in earlier stages of the eurozone debt slavery entrapment than Greece.

There will be no more swift victory for the elite, just a prolonged campaign finishing in the demise of the euro given the degree of awareness already existing among people across Europe of how the banks are looting tax payers with the help of complicit governments and much of the mainstream media.

______________

Related:

The Future of the Euro

European Sovereign Debt Contagion Continues to Spread

Economic crisis in Greece could reach United States, IMF warns

Rioters Turn Athens Greece Into A War Zone — Banks And Finance Ministry Set On Fire After Banker Bailout Passes

Member Of Greek Parliament Assaulted By Angry Mob For Flip-Flopping On Austerity Vote

License to torture and more

Some of the latests from ICH. Very telling:

US Torturers Win :
Abu Ghraib Inmates Lose U.S. High Court Bid to Sue Contractors:

 

 The U.S. Supreme Court refused to revive a lawsuit that accused two military contractors of abusing inmates at the Abu Ghraib prison in Iraq, turning away an appeal by 26 onetime prisoners.

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Obama Administration Fires ATF Whistleblower:

 

The Bureau of Alcohol, Tobacco and Firearms is being accused of retaliating against an agent who helped publicize the agency's role in allowing thousands of guns to cross the U.S. border and fall into the hands of Mexican drug gangs.

 

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In Miami, 12 Officers Shoot Haitian over 100 Times:

 

Where Is International Press?: Apparently the murder of this son of a humble Haitian immigrant doesn't interest anyone, including those holders of power in this city with their persistent traits of racial hate and segregation.

 

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Doctors in U.S. Turning Away Insured Patients on Low Payments, Study Finds:

 

U.S. doctors are turning away an increasing number of patients, including those with private insurance. Patients in Medicare, the U.S. health insurance program for the elderly and disabled, also had a harder time finding a doctor.

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Proposed GOP Budget Cuts To Medicaid Could Kill Jobs And Short-Change Seniors:

 

Sen. Jay Rockefeller (D-W.Va.) has organized more than 40 Democrats into a bloc committed to opposing cuts to Medicaid. "I can see just a feast of people who have no idea what Medicaid does and who don't care, because Medicaid people don't vote, they don't give money, they don't have lobbyists,"

White House anticipates "significant" deal with Republicans to slash social spending:

 

 President Obama met Monday with Republican Senator Mitch McConnell and Democratic Senator Harry Reid in an effort to work out a bipartisan plan to cut trillions of dollars in social spending.

Greece Is a Kleptocracy

From OfTwoMinds, June 28, 2011 
By Charles Hugh Smith


Strip away the bailouts and the bogus austerity plans, and the truth is revealed: Greece is a kleptocracy, and the banks and the ECB Eurocrats are both complicit.

Despite a veritable flood of financial and political analysis about Greece, nobody seems to have noticed the obvious: Greece is a kleptocracy. Just as a refresher, here is the definition of kleptocracy. Ask yourself is this doesn't fit Greece like a supple leather glove:

Kleptocracy, alternatively cleptocracy or kleptarchy, from the Ancient Greek for "thief" and "rule," is a term applied to a government subject to control fraud that takes advantage of governmental corruption to extend the personal wealth and political power of government officials and the ruling class (collectively, kleptocrats), via the embezzlement of state funds at the expense of the wider population, sometimes without even the pretense of honest service. The term means "rule by thieves".

Here is a quote from a first-person report (via Zero Hedge) titled The Ugly Truth:

What angers me and most hard working Greeks is that the common workers are bearing the brunt of the austerity measures while the rich get off scot free.In Greece, if you want to strike it rich, become a specialist dealing with critical life and death decisions, tax collector or a high profile minister in the government. The scandalous stories that are coming out now of doctors, tax collectors, and ministers with millions of euros in their bank accounts and villas in Santorini and Mykonos are no surprise to regular hard-working Greeks.

This is a classic description of a kleptocracy: a financial and political Elite which skims and concentrates the wealth of the nation via corruption and embezzlement while being protected by the winking complicity of their fellow plunderers who hold civil and financial authority.

Here's the real dynamic in Greece: The Kleptocracy--broadly, the political and financial Elites of the nation--saw a stupendous opportunity to embezzle hundreds of billions of euros from greed-blinded European banks at super-low rates of interest.

Being kleptocrats, they sniffed out the basics of the bezzle right away, and have been playing it ever since: we're not paying any of these loans back, so go get the money from the European Central Bank (ECB) and the German taxpayers, or declare bankruptcy. Your choice.

The Greek kleptocrats knew all along that the German, Dutch, French and Finnish taxpayers were easy marks, just as they knew the European Union Power Elites would fall all over themselves to "save the euro" which was the centerpiece of their "one Europe" strategy of domination.

Only the Greek kleptocrats just beat them at their own game. The entire game plan of the "one Europe" Elites depends on nation-states actually complying with non-enforceable codes of conduct and on European banks making prudent loans.

Neither condition held: Greece's Elites reckoned they could game the system and string along the Eurocrats, if not forever, then certainly long enough to engorge their Swiss accounts with euros skimmed from the banks, and they've played that hand to perfection.

Their performance is truly a thing of beauty, a masterful display of the Big Con.Yes, we will agree to austerity, but of course that is only for "the little people." Then, we'll renege on that, and demand another bailout. The Eurocrats will of course comply, lest their own plans for domination crumble along with the euro and the Eurozone edifice.

Meanwhile, the European banks were playing a similiar bezzle. They knew Greece had a history of defaulting on a regular basis, and any employee of the bank who lived in Greece could have briefed them on the kleptocracy's hold on that nation. But the banks knew they could play the Eurocrats and the ECB, too, as the Eurozone had what amounted to a "German Put": if any bad bank loans to Greece ever threatened the Eurozone, the German-led European Central Bank would make them whole.

Once again, the Eurocrats responded as expected, quickly massing hundreds of billions of euros to backstop the impaired loans to Greece and promising that bondholders would not suffer any losses.

The banks and the Greek kleptocracy are like the wife and the mistress of a prominent conservative socialite who absolutely needs to preserve a facade of conventional propriety. The kleptocrats, like the mistress, know they can blow down the entire charade, and so when they demand some baubles (bailouts) from their "Sugar Daddy" European Central Bank, the bank whimpers and complains but forks over the cash, lest the whole shaky facade collapses in a heap, along with the ECB's dominance.

The wife, meanwhile, also gets her demand met. Now that the European banks have leveraged themselves up to pre-implosion Lehman Brothers levels of 30-to-1, they need a bailout, too, and so they tell the ECB, don't even think about saying "no" because massive bank insolvency would also shatter the Euroland's thin veneer of permanence.

The euro system is already broken, but the ECB and its Eurocrats are desperate to maintain the facade. The game is untenable, however, because the Greek kleptocrats and the European banks have all the leverage and the ECB is the bleating mark trying to satisfy the dualing demands of its wife and mistress.

"But you promised." Ah yes, Dearie, but I changed my mind.

It is almost laughable to see the Eurocrats desperately trying to get another "austerity deal" approved, even as everyone involved knows it's as phony as passing off your mistress as your "private secretary." The austerity plan will not actually be put in place, none of the line-in-the-sand fiscal targets will be met, and the Greek kleptocrats will be smirking as the frantic ECB marks scrounge up another bailout and another face-saving "austerity program."

The wild card here is the oppressed Greek citizenry, who might just spoil the fun by overthrowing their corrupt Overlords. They could also spoil the game by simply refusing to play any more, as a General Strike of any length would quash the fantasy of rising taxes and all the rest of the absurd assumptions at the heart of the "austerity program."

If the Eurocrats and the ECB really want to save the euro, then they should help the Greek citizenry evict their kleptocratic Elites. But that would take genuine courage and insight, and alas, the Eurocrats, like all bureaucrats seeking to protect their fiefdom at any cost, don't really care about the oppressed Greeks. They just want to play for time, and hope that a miracle will occur. Even as their fat, sweaty fingers hold a jumble of worthless cards--not even a pair of deuces--they persist in a laughably transparent charade of holding four aces.

The game is over for the ECB, the Greek kleptocracy and the european banks. All that needs to happen now is for the players to reveal their miserable cards and fold. The losses will be stupendous, but they will only get more horrendous the longer the game is allowed to go on.

Readers forum: DailyJava.net. 

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Related:

The EU is Determined to Postpone the Greek Default Until Taxpayers Have Assumed the Banks' Liabilities

Farage: Arab Spring Could Lead to “Mediterranean Summer of Discontent”

BBC News | “It doesn’t matter how much money you throw at it… the fact is that Greece is going bust,” he told MEPs.

EU bailout of Greece – “robbery and swindle” — RT: “... One of the reasons that everybody is so determined to keep Greece in the euro is so that the banks do not have to take a serious hit on their faulty lending policies,” said Nigel Farage, Member of the European Parliament from the UK Independent Party. “It is almost as if there is an unholy alliance of politicians and bankers versus ordinary people....”