The official start of the European transfer union

From The Cobden Centre 

By Prof Philipp Bagus

There are basically three scenarios for the future of the European Monetary Union as I argue in my book The Tragedy of the Euro.
First, the Stability and Growth Pact (SGP) is reformed and enforced with automatic sanctions for countries not complying with its conditions. This requires harsh austerity measures, privatizations, labor market reforms and reduction of living standards in the periphery. The case of Greece shows that this option may just not be viable considering political structures and socialist voters resisting a reduction of the state’s size. Indeed, for 2011 the Greek deficit is expected to be at 9.5% of GDP, far above of the 3% limit established by the SGP and the 7.4% target established by the European Commission.
The second scenario is a break-up of the monetary union. The periphery has no interest in exiting the Eurozone. Periphery governments are benefitting from guarantees by the core and from monetary redistribution. An exit would imply a substantial reduction of living standards in the periphery. But why are core countries not leaving the Euro? While a euro exit would be in the interest of the common population, the political elite and their financiers from the banking sector want to continue the Euro project. As we have seen in the summit on the second Greek bailout, German Chancellor Merkel not only defied the “no-bailout clause” of the Maastricht Treaty but also a resolution of the German parliament against purchasing commonly-guaranteed bonds from February 2011. This leads us to the third scenario, which we are approaching fast: a transfer union and a European superstate. The EU summit of Thursday, 21^st of July 2011 marks a big step in this direction.
The Greek government will get an additional €109 bn. bailout loan until 2014. Maturities for Greek bonds from the first bailout were raised from 7.5 to 15 years (originally it was 3 years). Interest rates were reduced from 4.2 % (originally at 5.2 %) to 3.5 %. Likewise, interest rates on loans to Portugal and Ireland were reduced.
The day brought also another bailout of banks. Banks, insurance companies and other private investors can swap their old Greek government bonds against new ones with a longer maturity. Joseph Ackermann, CEO of Deutsche Bank, estimates write-downs for banks around 21%. Politicians sell the  so-called “participation of private investors” in the bailout as a great success. However, it is just another bailout for the banking system, limiting losses to 21% and putting taxpayers’ money on the hook. Old bonds are swapped into new bonds that are guaranteed by the EFSF and such by European taxpayers. Without the second bailout the Greek government would have had to default. Banks would have had to take much higher losses in a restructuring. Estimates of losses range between 50-70%. After the swap, banks are effectively protected. The financial industry, the governments’ main financier, can be very happy about this covert bailout.
The most important consequence of 21^st of July was the official establishment of a transfer union by granting more powers to the EFSF (the European bailout fund). In the Eurozone, there have always been transfers through monetary redistribution: The ECB accepts bonds from the periphery as collateral thereby monetizing deficits indirectly. Last year, the ECB even started to buy government bonds from the periphery outright, spreading the burden of the bailout to all users of the currency. Yet, from now on, direct purchases by the ECB may become unnecessary. The burden of the bailouts will be more concentrated. Not all currency users will pay in form of a dilution of the Euro but rather taxpayers in countries that effectively guarantee the EFSF.
The EFSF now can give credit lines to countries that are expected to have financing problems. In addition, the EFSF may purchase government bonds on the secondary market. The role of the ECB is thereby partially taken over by the EFSF.
The possibility of financing through the EFSF reduces the pressure for countries to eliminate deficits and reduce government debts. Why introduce harsh austerity measures, reform labor markets and privatize the public sector if there are loans available from the EFSF at ridiculously low interest rates? If you want to win elections, you should not reform but spend. Only through deficit spending one can maintain the artificially high living standards in the periphery. Indeed, debts are still on the rise. Deficits are huge and far from being eliminated. Most probably, Greece, Ireland, Portugal and soon Spain, Italy and even Belgium will borrow exclusively from the EFSF. To be effective, the size of the EFSF will have to be extended. The main guarantor will be Germany. Considering peripheral funding needs, a report from Bernstein calculates:

As the guarantees of the periphery including Italy are worthless, the guarantee Germany would have to provide rises to €790bn or 32% of GDP.

If France is downgraded, the German share increases to €1.385 trillion — 56% of GDP.
The transfer union implies a transfer of power to the European Commission. We get ever closer to a European superstate. Incentives to reduce deficits will be reduced both in the periphery and in the core. Germans will start to resist cuts in public spending. Why save if the savings flow to the periphery? Instead of reducing German pensions to guarantee Greek pensions, German voters will push for more public spending. To pay for welfare states and transfers, more taxes (maybe a European tax) and money production will become necessary. The centralization of power allows for harmonization of regulations and taxes. Once tax competition ends, there will be a tendency towards ever higher taxes. With the transfers, the power of Brussels will continue to rise. There seems to be only one bold, albeit costly way, to stop the process towards a EUSSR: withdrawal from the transfer union. With an exit from the Euro, Germany could bring down the whole Euro project and save Europe.

Austerity and Deficit Hawks Say, “Let Them Eat Cake,” The People Will Say, “Off With Their Heads”

By David DeGraw, AmpedStatus Report July 21st, 2011 

The vultures are circling above the debt ceiling, along with the austerity and deficit hawks, ready to pounce on what little remains.

Before I get into the tragic comedy that is the deficit debate, I must say that it is both fascinating and horrifying to watch the global financial elite incrementally destroy the United States. The American people remain passive while enduring a slow death by a thousand cuts. Each year brings another step down in living standards. The efficiency of the Neo-Feudal Technocratic-Fascists is impressive. They always seem to know just how much they can get away with without causing “civil unrest.” They bribe 45 million people with food stamps, 10 million with unemployment checks. They give you just enough to keep you passive and weak, so they can continue their plunder.

They’re masters of slow economically-induced death. They’re like vampires, sucking our blood slowly, turning us into beaten down zombies. You wake up one day and realize that you are thousands of dollars in debt, working harder for much less money, while everything costs more. You’re struggling to get by and make ends meet. Your future prospects are increasingly dire and you don’t have the ability to retire without living in poverty. So you jump on prescription meds or turn to alcohol or other drugs to deal with all the stress and anxiety. You try to escape by watching increasingly trivial and absurd “reality” TV for hours daily, you need to get your soma and delude yourself some more. Next thing you know, you have failing health and can’t afford treatment. At this point, every penny of your Social Security and Medicare counts, but now, as billionaire Charlie Munger recently said, sorry, you’re going to have to “suck it in and cope.”

Yeah, he’s talking to you.

As if a collapsing economy, skyrocketing costs of living and reduced pay weren’t making life hard enough, now vital social programs are getting cut. Social Security and Medicare cuts are going to be very painful for millions of Americans who are already hanging by a thread. As are cuts to food and housing assistance programs. Paid off politicians are using deficit hysteria to implement an austerity program; an attack on social safety nets that would have been unthinkable just a few years ago. It is a shame that we squandered trillions of tax dollars on Wall Street, wars and tax breaks for multi-millionaires and billionaires.

No matter how technocratically skilled the ruling class is, at some point soon 250 million Americans are going to become aware that they have been completely screwed and thrown overboard. The naïve propagandized masses are headed for a nasty wake up call. They will finally come to the brutal realization of how depraved, greedy and power-addicted our ruling class truly is.

Wake up Dorothy, you’re not in Kansas anymore. The American Dream is O-V-E-R.

The Obama Illusion, Act II: Countdown to Collapse…

When it comes to the economy, the Obama Administration and their global banking benefactors have been kicking the can down the road by hiding trillions of dollars in losses, “extending and pretending” that things are fine. Recovery is just around the corner. Pay no attention to the man behind the curtain. The economic stimulus and quantitative easing programs were never serious attempts to revive the economy, they were a way of prolonging the charade and papering over reality, to buy more time while pumping even more money into the global banks so they could continue their pillage and set the conditions for the next phase of their assault on the existence of a middle class and democracy worldwide.

The Obama Administration injected a mild stimulus, just enough to keep the dying body from convulsing. They temporarily extended unemployment benefits, food stamp and other “anti-poverty” programs, just enough to keep a suffering population pacified a little bit longer. Just enough to keep our society from rioting, to keep the torches and pitchforks at bay a little while longer, so they can complete their plunder.

Given the way they have played it thus far, you would expect another half-ass stimulus to kick the can a little further down the road to get us closer to the 2012 election without all-out disaster, perhaps. But the vultures are now circling above the debt ceiling, along with the austerity and deficit hawks, ready to pounce on what little remains.

Austerity and Deficit Hawks Say, “Let Them Eat Cake”

Do you know why the deficit hawks want to cut and privatize your Social Security?

It’s because these people flat out stole the money you spent your entire working life putting aside into the system. Excuse me for not being “civilized” enough, apologies, they didn’t “steal” it, they just “borrowed” it and are refusing to pay it back.

It astounds me how people constantly debate the fiscal condition of Social Security but they never seem to notice or mention that the Social Security Trust Fund has been looted. Guess what? Between Wall Street, wars and tax breaks for multi-millionaires and billionaires, the $2.5 trillion surplus that was supposed to be used for your retirement has already been used. Forgive me for being blunt, but one-tenth of one percent of the population is giving you the finger and telling you to “suck it in and cope.”

The looting of the Social Security Trust Fund is about as funny as Wall Street executives crashing the economy and then using trillions of our tax dollars to give themselves all-time record-breaking bonuses.

Speaking of the joke being on us, the late great comedian George Carlin once prophetically warned:

“You know what they want? They want obedient workers… Obedient workers, people who are just smart enough to run the machines and do the paperwork. And just dumb enough to passively accept all these increasingly shittier jobs with the lower pay, the longer hours, the reduced benefits, the end of overtime and vanishing pension that disappears the minute you go to collect it. And now they’re coming for your Social Security money. They want your f#ckin’ retirement money. They want it back so they can give it to their criminal friends on Wall Street. And you know something? They’ll get it… they’ll get it all from you sooner or later cause they own this f#ckin’ place.

It’s a big club, and you ain’t in it.

You and I… are not in The big club.”

When you hear all these talking heads and politicians saying that they want to cut “entitlement” programs that we have already paid into, they are literally saying that they do not intend to payback money that they owe. While they cry about the national deficit thatthey created and demand austerity measures to cut back on vital social services, they have the audacity to demand debt increasing tax cuts for themselves and their corporations.

Tax breaks for the rich and budget cuts for the rest of us.

That’s what I call a recipe for revolution.

Austerity and deficit hawks say, “Let them eat cake.” The people will eventually say, “Off with their heads!”

One-tenth of one percent of the population is drunk with arrogance and blinded by shortsighted greed. Instead of providing affordable healthcare to hardworking Americans; instead of creating employment programs and improving our educational system; instead of building vital infrastructure, our tax dollars have ended up in the obscenely bloated pockets of the richest people to ever walk the face of this planet.

Deficit Hawks Vs. Keynesian Stimulus Supporters – They’re Both Wrong!

The debate between those who are calling for deficit cuts (austerity) and those who are calling for stimulus spending (debt) is yet another perfect example of how the mainstream media sets the agenda and controls public opinion by limiting the range of acceptable debate and reducing the “spectrum of thinkable thought.” This is a bullshit debate that exposes the sham that is the Democrat Vs. Republican dynamic. Both of these choices will not fix our economic crisis and will only reinforce the status quo dominance of the ruling class.

The debate boils down to this: How should we make the working class pay for the crimes of the ruling class?

Should we:

A) Cut vital life-sustaining social programs that keep society functioning.

or

B) Keep the programs in place and pour more money (debt) into them, which will ultimately have to be paid for by the working class through rising taxes.

Call me crazy, but both of these choices screw hardworking Americans and will only make our problems worse.

While the media endlessly debates between deficit cuts and spending, how come we are not discussing a third and much better option? How about we seize the assets of the criminals who stole our money and stop all the enormous subsidies that we are giving away to the most profitable corporations and obscenely wealthy individuals?

We have such a huge national deficit because the economic top one-tenth of one percent of the population has made off with trillions of dollars in national wealth, and the looting continues, unabated.

How about we tell the paid-off puppet politicians, “economists,” and “regulators” to step aside and bring in criminal investigators?

At the root, this is not an economic crisis, this the breakdown of law and order. We are in this mess because global bankers have rigged the system with an organized criminal racketthat has robbed trillions of dollars from the American working class.

If you are serious about fixing the economy, first and foremost, we need to stop the ongoing looting and seize the assets of the organized criminal class who have robbed us. Until that’s done, this crisis will never be solved.

Now, just to be clear, I know it is an extraordinarily difficult task to purge a system that is, at its core, hardwired into organized criminal activity without causing further damage, but it must be done. You can talk about financial reform and economic theory all you want, but anything less than taking the vampire’s fangs out of the neck of the global economy is an absolute waste of time.

Until the criminals are held accountable for their actions, removed from positions of power, have their assets seized and their companies placed under temporary receivership until they are efficiently unwound, our economic crisis will never be solved.

The Federal Reserve board must also be held accountable and broken up just like the “too big to fail” banks. The International Monetary Fund, World Bank, and Bank of International Settlements must be dealt with in a similar fashion. How can anyone claim a free-market based on fair competition when it is obvious that the system is rigged to serve this global banking cartel?

Let’s also restore Glass-Stegall and rework the markets to eliminate dark pools, shadow banking, casino gambling, high frequency trading, front-running, accounting gimmicks and any other tricks that cause market rigging, economic instability and suck the lifeblood out of the real economy.

Until we restore the rule of law and take these steps, the stock market and global economy will continue to increasingly serve the interests of the few, at the devastating expense of everyone else, and will eventually crash again, sometime soon – no matter how much theFed, Treasury, CIA and the plunge protection team artificially prop it up.

Countdown to Rebellion…

The jig is up. The global Ponzi has been exposed for all to see. Either we dismantle it and start anew, or we all drink the Kool-Aid and go lay down.

Clearly, the paid off politicians and bankers are willing to throw us all to the wolves to keep the scam rolling. For those of you out of the loop, global bankers used financial derivatives to turn the global economy into an elaborate Ponzi scheme. They created a bogus economy ten times the size of the entire global economy. No matter how audacious, complex and complicated their Ponzi was, eventually reality was going to catch up with it. When the derivative Ponzi began to collapse in 2007, law enforcement and politicians should have held the Ponzi players accountable. Instead, the Bush and Obama Administrations have doubled down on the side of the criminals. Allowing them to not only get away with it, but to make even more money while throwing tens of millions of people into poverty. For anyone paying attention, it is obvious that we now live in a banana republic run by a global banking cartel, or a financial terrorism network, whichever term you prefer.

To sum this all up, a bold fact, that cannot be argued, is that our tax dollars have been funneled into the pockets of the very people who caused this crisis. The money that we need to live a secure and healthy lifestyle has been looted. The people responsible for this crisis must be held responsible for their actions. No one, no matter how much money they have, and no matter how politically-connected they are, should be above the rule of law.

Either we have a nation of justice and law, or we have a nation of chaos and war.

A very wise man once made this point clear when he said, as long as “justice remains the tool of a few powerful interests; legal interpretations will continue to be made to suit the convenience of the oppressor powers…. When forces of oppression come to maintain themselves in power against established law, peace is considered already broken.”

That’s a quote from a man who knew something about taking on the global financial elite, his name was Che Guevara.

Viva la revolution!

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- David DeGraw is the founder and editor of AmpedStatus.com. His long awaited book, The Road Through 2012: Revolution or World War III, will finally be released on September 28th. He can be emailed at David[@]AmpedStatus.com

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~ We are fighting to remain 100% independent, completely free from partisan influence. If you respect our work, please donate to support our efforts here.

Chart of the day: U.S. Debt, debt limit...and the gold price

From Gold & Silver Daily:

Here's a new graph that Nick Laird sent me yesterday...and it certainly says a lot. There are three things on this chart...the U.S. Debt, the increasing debt limit...and the gold price. One has to wonder how high the new U.S. debt ceiling will drive the gold price.

(Click on image to enlarge)

Michael Hudson on the Debt Ceiling. Imposing a Radical Pro-Rich Agenda

Global Research, July 23, 2011

Democracy Now

President Obama and Republican House Speaker John Boehner are allegedly close to a $3 trillion deficit-reduction package as part of a deal to raise the federal debt ceiling before an Aug. 2 deadline. But the deal is coming under fire from both congressional Democrats and Republicans. Part of it calls for lowering personal and corporate income tax rates, while eliminating or reducing an array of popular tax breaks, such as the deduction for home mortgage interest. Some Democratic lawmakers expressed outrage on Thursday because the Obama-Boehner agreement appears to violate their pledge not to cut Social Security and Medicare benefits, as well as Obama’s promise not to make deep cuts in programs for the poor without extracting some tax concessions from the rich. We’re joined by economist Michael Hudson, president of the Institute for the Study of Long-Term Economic Trends, a Distinguished Research Professor of Economics at the University of Missouri, Kansas City, and author of "Super Imperialism: The Economic Strategy of American Empire." [includes rush transcript] JUAN GONZALEZ: President Obama and Republican House Speaker John Boehner are said to be close to a $3 trillion deficit-reduction package as part of a deal to raise the federal debt ceiling before an August 2nd deadline. But the deal is coming under fire from both congressional Democrats and Republicans.             According to the Washington Post, part of the deal calls for lowering personal and corporate income tax rates while eliminating or reducing an array of popular tax breaks, such as the deduction for home mortgage interest. Some Democratic lawmakers expressed outrage on Thursday because the Obama-Boehner agreement appears to violate their pledge not to cut Social Security and Medicare benefits, as well as Obama’s promise not to make deep cuts in programs for the poor without extracting some concessions from the rich. AMY GOODMAN: Meanwhile, more details have emerged about the massive government bailout of the banking industry. On Thursday, the Government Accountability Office issued an audit of the Federal Reserve’s emergency lending programs. It revealed the Fed provided more than $16 trillion in secret loans to bail out American and foreign banks and businesses. Independent Senator Bernie Sanders responded to the audit by saying, quote, "This is a clear case of socialism for the rich and rugged, you’re-on-your-own individualism for everyone else."             To talk more about the debt debate in Washington, as well as the overall economic crisis here and in Europe, we’re joined by economist Michael Hudson, president of the Institute for the Study of Long-Term Economic Trends, Distinguished Research Professor of Economics at the University of Missouri, Kansas City, and author of Super Imperialism: The Economic Strategy of American Empire.             Welcome back to Democracy Now!, Professor Hudson. What about these latest revelations? MICHAEL HUDSON: If you’re talking about the revelations of the Senator, these are the second big story to come out in the last two weeks. The first story, really, was two weeks ago when Sheila Bair finished her five-year term at the Federal Deposit Insurance Corporation. And now that she left, she was able to talk about the arguments that were going on while all of this money was being given away. She opposed it. She said none of this money, not a penny, had to be given away at all. She said the job of the FDIC was to do what it did with Washington Mutual and IndyMac. They could have closed down Citibank, they could have closed down AIG and the others. Depositors insured by the FDIC wouldn’t have lost a penny. She said, “That’s what the FDIC does.”             She was overruled by Geithner and by the Treasury Department, and especially by Bernanke, who essentially said, “We have to save the rich first. We have to save the gamblers.” There was plenty of money in all of the banks to cover all of the retail vanilla deposits for businesses and families. What there was not money for was for all the cross-gambles that they had made on derivatives—that is, which way interest rates would go, which way currencies would go. And so, this was really a casino. These were bets. And people like the AIG couldn’t pay. And the question is, how are you going to get the winners in this casino to get money from the losers, who are broke? So these $16 trillion worth of loans were all for junk securities. They weren’t for the solid securities that did back out the deposits. These were all for junk gambles, having nothing to do with the real economy at all.             And the result was that while many of the $16 trillion have been repaid, there has been a residue of $13 trillion added to the government debt since September 2008, when all of this began. All this was created simply on a computer keyboard at the Treasury. So the question is, if they can create a $13 trillion on a computer keyboard, taking over Fannie Mae and Freddie Mac, and the Federal Reserve can simply give this money, why can’t they, over 50 years, pay the trillion dollars for the Medicare and the Social Security? It’s—obviously, it’s a charade. JUAN GONZALEZ: Well, that was precisely my question. Where did this $13 trillion come from? So this was basically all paper, paper loans. MICHAEL HUDSON: Well, not even paper. It’s electronic. We’ve sublimated the whole thing. The Federal Reserve can create a deposit, just like a bank does. If you go into a bank, you sign an IOU, and the bank adds money to your account. It’s done on a computer keyboard. That’s what money—how it’s created these days. And the government can do exactly what the bank can do. They can create the money on their own computer keyboards. And that’s—usually, they do that by running a budget deficit. That’s why the economy needs a budget deficit to grow. When the government runs a budget deficit, that puts money into the economy and helps us recover from the recession. That’s pretty obvious.             Under Clinton, we had a budget surplus. And what that meant was, normally, that would have pushed the economy down, but the gap was all provided by banks, commercial banks, on their computer keyboards, at interest. They cleaned up. And that’s a situation that President Obama is trying to restore today. Instead of the government creating free money on its keyboard with a deficit, all of the increase in money used by the American economy will be created by Wall Street at interest. It’s completely unnecessary. JUAN GONZALEZ: Now, let me ask you about the $3 trillion deal that no one yet knows the specifics of, but we’re already getting the outlines of it leaked little by little. This whole issue of eliminating the tax deduction that millions of Americans use for home mortgage interest, this was supposedly what helped so many people be able to buy homes. With the entire housing industry of the United States in crisis, why would they eliminate mortgage interest deduction, which it seems to me would make—mean fewer houses are bought and sold in the United States? MICHAEL HUDSON: The banks normally wouldn’t back anything that was going to lead to more foreclosures. But in this case the government has told the banks: “Yes, there are going to be a lot more foreclosures, but we’re going to bail you out, because we’ve insured the mortgages.” Eighty percent of the mortgages in America are now insured by the government, so the banks won’t lose the money. By cutting the deduction, this is going to lead to a huge—a higher bailout by the government to Wall Street on the guarantees that Fannie Mae and the Federal Housing Authority have done.             Now, you said one thing, that making mortgage interest deductible makes homes more affordable. It really doesn’t. What happens is, it enables the banks to make a larger loan against the value of the home, and the buyer now has to pay more interest and take on a larger debt, because they have more free money to pay. Whatever the tax collector relinquishes is available to be paid to the banks as interest. So all this tax deductibility in the first place was an attempt to un-tax real estate, so that home buyers could take out larger mortgages. And 80 percent of banks’ business is making mortgage loans. AMY GOODMAN: Michael Hudson, let me ask you about the Republican proposal dubbed "cut, cap and balance." It passed the House earlier this week, and the Senate will vote on the measure today. This is House Speaker John Boehner. SPEAKER JOHN BOEHNER: Also this week, the House passed our “cut, cap and balance” legislation that represents exactly the kind of “balanced legislation” the President has talked about. It provides him with the debt limit increase that he’s requested. But it gives families and small businesses the real spending cuts and reforms that they’re demanding without any job-crushing tax hikes. What this legislation also shows, that it’s not only important to avoid default, it’s also important that we take a meaningful step toward real deficit reduction. This means, in addition to cutting and capping spending now, there should be real structural reforms to our entitlement programs. And there will be no tax increases. AMY GOODMAN: Senate Majority Leader Harry Reid described the “cut, cap, balance” bill as one of the worst bills in the history of the country. SEN. HARRY REID: I think this piece of legislation is about as weak and senseless as anything that has ever come on this Senate floor. And I am not going to waste the Senate’s time, day after day, on this piece of legislation, which I think is an anathema to what our country is all about. So everyone understand, we’re going to have a vote tomorrow. I’m not going to wait ‘til Saturday. We’re going to have a vote tomorrow, and I feel confident that this legislation will be disposed of, one way or the other. The American people should understand that this is a bad piece of legislation, perhaps some of the worst legislation in the history of this country. AMY GOODMAN: Michael Hudson, your response? MICHAEL HUDSON: He’s quite right. This is an awful piece of legislation, and it’s too bad that Mr. Obama supports it. But you could see it all coming even before Mr. Obama took office, when he appointed the Deficit Reduction Commission. He appointed opponents of Social Security to the commission: Republican Senator Simpson and Erskine Bowles, who was Clinton’s chief of staff. Obama really believes in trickle-down economics. He believes that Wall Street are job creators, not downsizers and outsourcers and foreclosures. That’s the tragedy of all this.             Now, how—the question is, how can a Democratic president put forth a Republican program? There has to be a crisis. Now in reality there is no crisis at all. In reality, raising the debt ceiling has been done for a hundred years automatically. There is no connection between raising the debt ceiling and arguing over tax policy. Tax policy takes many years to work out. All of a sudden, Mr. Obama is going along with the charade of saying, “Wait a minute, let’s create a crisis.” As his former manager Rahm Emanuel said, a crisis is too important an opportunity to waste. But Wall Street doesn’t likereal crises, so there’s an artificial non-crisis that Obama is treating as a crisis so that he can put forth the recommendations of the Deficit Reduction Commission to get rid of Social Security that he has supported all along. That’s the problem. He believes it. JUAN GONZALEZ: You know, I wanted to ask you specifically about that, because every time you turn on the TV now or you read a mainstream newspaper, there are all these quotations from Moody’s and this rating agency and this expert that August 2nd will be a financial Armageddon for the country. And I’m saying to myself, we’ve already been through a financial Armageddon for the last couple of years, and now they’re suddenly saying that, on this date, if this stuff is not passed, if a deal is not reached, suddenly the entire world financial system will be under severe strain. MICHAEL HUDSON: Well, you had this kind of debt ceiling come up, I think, maybe 20 times under Bush’s administration. It’s a non-threatening thing. It’s something automatic. It’s technical. It’s sort of like going to the corner and having a notary public certify what you’ve done. It’s a technical thing that has nothing to do with real economy or policy at all. They’re pretending it’s a crisis because they have a plan. And the plan is what Mr. Boehner has put forth. Just like after 9/11, the Pentagon pulled out a plan for Iraq’s oil fields, Wall Street has a plan to really clean up now, to really put the class war back in business and get rid of Medicare, get rid of the programs for the poor, and say, “There’s no money for you. We’ve given it all away in the bailouts.” AMY GOODMAN: So, Michael Hudson, what could President Obama do? MICHAEL HUDSON: He could say, “This debt ceiling has nothing to do with policy. You want to argue about the tax policy? Fine, let the Democrats and Republicans do it under non-crisis conditions. But this has nothing to do at all with the debt ceiling. If you want to refuse to increase the debt and plunge the economy into disaster, maybe you’d better talk to your campaign contributors and see what they want. Because I know what they say. Your campaign contributors in the Republican camp are my own campaign contributors: Wall Street. And they don’t like crises." If he said this, you would find that the charade would pop, just like pricking a balloon. AMY GOODMAN: Well, what about that? I mean, the very people that are supporting the Tea Party, you know, congressmen activists, are these very same financial institutions that, of course, are demanding a lifting of the debt ceiling. MICHAEL HUDSON: What they’re pushing for really isn’t a default on the debt. They’re pushing for a crisis to let Mr. Obama rush through the Republican plan. In order for him to do it, the Republicans have to play good cop, bad cop. They have to have the Tea Party move so far to the right, take a so crazy a position, that Mr. Obama seems reasonable by comparison. And of course he is not reasonable. He’s a Wall Street Democrat, which we used to call Republicans. JUAN GONZALEZ: And in terms of the danger to Social Security and Medicare, how do you see the direction that they are hoping to go into, in terms of the reductions on this deal? MICHAEL HUDSON: As Mr. Obama’s Deficit Reduction Commission said, we have to get rid of Medicare, we have to get rid of Social Security, put the Social Security funds into the stock market, create a stock market boom, create new business for his—for Wall Street. He believes in trickle-down economics. JUAN GONZALEZ: And the retirement accounts. MICHAEL HUDSON: Yes. That’s what he believes in. And this would be a disaster, as people have already seen the last time the market crashed. AMY GOODMAN: What about unemployment? How does it fit into this picture? We say 9.2, but in fact it is so much higher in so many communities. We’re talking 30 and 50 percent. MICHAEL HUDSON: That’s right. And it’s getting worse. The interesting thing is when you look at the press reports, the adjective you always see is “unexpected” or “surprising.” What that means is plausible deniability, as if nobody could have foreseen it, while every economist I know says, “Look, we’re in the middle of debt deflation.”             In fact, before he took office, Mr. Obama said he was going to fight to make sure that mortgages—relief was given to mortgage debtors, because if there were foreclosures, there was going to be unemployment. He then did absolutely nothing. He broke his promise. And everything that he warned about has taken place. So it really should not be surprising. JUAN GONZALEZ: I also wanted to ask you about the connection to—from what’s going on here to what’s going on in Europe, and especially in Greece, the situation there. On Thursday, European leaders agreed to a new $155 billion bailout for Greece. Manuel Barroso, who is the European Commission president, said this: JOSÉ MANUEL BARROSO: We needed a credible package. We have a credible package. It deals with both the concerns of the markets and of citizens. It responds also to the concerns of all member states of the euro area. It is a package that every government has signed up to. For the first time, the crisis, politics and markets are coming together. Now I expect every one of them to go out and defend and implement, with determination, this package. JUAN GONZALEZ: The connections, if any, between what’s going on in Greece and Europe and the battle we’re having here? MICHAEL HUDSON: Well, Greece’s should be viewed as a dress rehearsal for the United States. It’s exactly the same thing. Greece didn’t really get any bailout funds at all. All of the bailout funds were given by European creditor governments to the banks that held the Greek bonds. And Greece was told, “Well, there’s a 50 billion euro loss on your bonds that have gone down. You have to sell off and privatize €50 billion of your land and property in the public domain.” So for every euro that the bankers lose, Greece has to sell off an equivalent amount. Tthe idea is to carve up the government and privatize it, just like Illinois and Chicago and Wisconsin and California are doing. So it’s a dress rehearsal for what’s happening here. AMY GOODMAN: If you talk about dress rehearsal, there are massive protests—there have been—in the streets of Greece, in Spain, when we were just in Britain, in London. What about here? MICHAEL HUDSON: You’ve seen the protests in Madison, Wisconsin. And in the Greek Parliament Square, in front of the parliament building, there were signs up to say, “We are Wisconsin.” There was a very clear connection they were making that this is a worldwide struggle. What’s happening across the world is an attempt by the financial sector to really make its move and say this is their opportunity for a power grab. And they’re creating this artificial crisis as an opportunity to carve up the public domain and to give themselves enough money. They’re taking the money and running, because they know that unemployment is going up. The game is over. They know that. And the only question is, how much can they take, how fast? AMY GOODMAN: Michael Hudson, we want to thank you very much for being with us, president of the Institute for the Study of Long-Term Economic Trends, Distinguished Research Professor of Economics at the University of Missouri, Kansas City, and author of the book Super Imperialism: The Economic Strategy of American Empire. Michael Hudson, president of the Institute for the Study of Long-Term Economic Trends, Distinguished Research Professor of Economics at the University of Missouri, Kansas City, and author of the book Super Imperialism: The Economic Strategy of American Empire.

U.S. and Ethiopia Kill Somalis With Food Weapon

By Glen Ford BAR, July 21, 2011 The drought that threatens more than ten million lives in the Horn of Africa has been made vastly more deadly by U.S. and Ethiopian use of food as a weapon of war. The Americans last year forced the collapse of cooperation between aid agencies and Shabab resistance fighters in Somalia. And Ethiopia, a center of the drought, has virtually sealed off its rebellious Ogaden region from outside observers and aid providers, including the International Red Cross, in order to conceal its brutal, collective punishment of ethnic Somalis. "The Ethiopian government has blocked the International Red Cross and other aid agencies from carrying out relief work in the region." At least 10 million people are in danger of starvation in Kenya, Djibouti, Ethiopia and Somalia, under the worst drought conditions in 60 years. This should be taken as fact. But when it comes to which humans are to blame for relief supplies being unavailable to the victims, don’t believe a word that the United States government says. Washington is not only the greatest purveyor of violence in the world, it is also the biggest liar on the planet, none of whose words can be taken at face value. The Americans claim the Shabab Islamist fighters made the drought crisis worse by preventing international aid agencies from distributing food relief. But only last year, in February 2010, the New York Times was running a headline, "UN Officials Assail U.S. for Withholding Somali Aid." We explored that story in Black Agenda Report. Back then, United Nations officials charged the U.S. with imposing conditions that made it "impossible" to deliver tens of millions in food aid to hungry Somalis. The Americans refused to allow food to be transferred from warehouses in Kenya, claiming it might enrich the coffers of the Shabab, who controlled about half of Somalia. The U.S. finally let some food pass through, but only on the condition that aid workers not pay any fees at Shabab checkpoints around the country. Aid workers on the ground said that following U.S. orders would make them "look like spies." Apparently, they were right. It was a clear case of the United States using food as a weapon of war, starving the people of Somalia in order to destroy the social base for the resistance to U.S. proxy rule over the country. We do know that the relationship between the Shabab and international aid agencies fell apart, at that point, so one could conclude that Washington succeeded in its mission. Starving people are now paying the price. "A look at the map of the drought-stricken areas shows that the Ogaden is a center of the crisis." The U.S.-backed puppet government in Somalia's capital, Mogadishu, waited until this week to declare a drought emergency in Somalia. Kenya, another American puppet, refused to allow Somalis to enter a brand new – and empty – refugee camp. Ethiopia may be the worst case. Not only did it bring on what was then Africa's "worst humanitarian crisis," according to the UN, by invading the country in late 2006, at the instigation of the United States – Ethiopia has virtually sealed off its vast Ogaden region to outside observers, and a look at the map of the drought-stricken areas shows that the Ogaden is a center of the crisis! The Ogaden is populated by ethnic Somalis who have been fighting their own guerilla war against the Ethiopian dictatorship, whom they charge with using food as a weapon of war. Of the 10 million people at risk of starvation, a huge portion live – or are now dying – in the Ogaden. As the dependable Thomas C. Mountain reports from nearby Eritrea, the Ethiopian government has blocked the International Red Cross and other aid agencies from carrying out relief work in the region. The Obama administration, which now gives the Ethiopian dictatorship more money than any regime in Africa, could force the doors to the Ogaden open with one phone call. But it won't, because Ethiopia and the U.S. are on the same mission, and there is nothing humanitarian about it. For Black Agenda Radio, I'm Glen Ford. On the web, go to www.BlackAgendaReport.com. BAR executive editor Glen Ford can be contacted at Glen.Ford@BlackAgendaReport.com.  ________ Related: Famine victims converge on Mogadishu; region's camps report deaths:   Uprooted by famine and conflict, more than 20,000 desperate people have sought refuge in the Somali capital Mogadishu so far this month. Thousands more continue to flee into the region, some on the brink of death.

Oslo Police Conducted Bombing Exercise 48 Hours Before Terrorist Blast

Paul Joseph Watson
Prison Planet.com - July 22, 2011

In yet another example of how almost every major terror event is accompanied by a security drill focused around the same scenario, Oslo police were conducting a bombing exercise at a location near the Oslo Opera House just 48 hours before a terrorist blast hit a government building in the Norwegian capital.

According to the translated version of an Aftenposten report, “Anti-terror police fired explosive charges at a training center in Oslo, two hundred meters from the Opera, but forgot to notify the public.”

The exercise occurred on Wednesday and revolved around anti-terror units attacking a disused building at the edge of Bjørvika pier with bombs and firearms.

“The men lowered themselves down from the roof and in through the window that had just been blown out, while they fired hand their weapons,” states the report, noting that the exercise was “dramatic,” produced “violent bangs,” and was watched by spectators at the nearby Opera House.

A video of the drill that accompanies the story shows police scaling the side of a building with an explosion going off below them before they enter the window and start firing.

Police had to publicly apologize today for not informing the public about the exercise.

Although it’s too early to judge the nature of this exercise, the fallback of a drill, which gives the state an excuse should any evidence of complicity in the real attack emerge, has been evident in previous major terror events, including both 7/7 and 9/11.

In the case of the London bombings, a consultancy agency with government and police connections was running an exercise for an unnamed company that revolved around the London Underground being bombed at the exact same times and locations as happened in real life on the morning of July 7th, a “coincidence” many skeptics of the official story have dismissed as a statistical impossibility.