Peter Dale Scotts new GUT [Grand Unification Theory]

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End game: either they deflate the debt/credit bubble bailing out the people or all hell is going to get loose

 

From The Business Insider  

by Edward Harrison

Get ready because the second dip will occur. It will be nasty: unemployment will be higher and stocks will go lower than in 2009. I am convinced that it is politically unacceptable to have the government propping up the economy as [Richard] Koo suggests it should. The question now is one of timing: when will the government stop propping up the economy? The more robust the recovery, the quicker the prop ends and the sooner we get a second leg down.

So to recap:

1. A depression was borne out of high levels of private sector debt, the unsustainability of which became apparent after a financial crisis.
2. The effects of this depression have been lessened by economic stimulus and government support.
3. Government intervention led to a reduction in asset price declines, which led to stock market increases, which led to asset price stabilization and more stock market increases and eventually to asset price increases. This has led to a false sense that green shoots are leading to a sustainable recovery.
4. In reality, the problems of high debt levels in the private sector and an undercapitalized financial system are still lurking, waiting for the government to withdraw its economic support to become realized
5. Because large scale government deficit spending is politically impossible, expect a second economic dip within three to four years at the latest.

-Credit Writedowns, Oct 2009

I really don’t like being a doomsayer but I think this train of events accurately describes what has happened in the two years since I wrote these paragraphs. Predicting the future of policy making has been and will continue to be key to understanding where this economy is headed – and by extension what your investment portfolio will do.

The last 2 1/2 years have been a stimulus-induced interregnum in a global depression the likes of which we have not witnessed in three-quarters of a century. Policy makers went at it guns blazing after Lehman’s collapse. The result: in April 2009, we got “The Fake Recovery”. As I wrote then, “you should be under no illusion that the coming rebound is permanent. Much of it is not. What we are seeing is the makings of a cyclical recovery”.

So, the governments went in guns blazing. Great. Nonetheless, the scale of the overextended credit was massive; it was just too much to bear and eventually, bailout and deficit fatigue took over. You have to see a lot more writedowns and debt forgiveness before this plays out. Moreover the leveraging up of public balance sheets meant politically that the origins of this next crisis were always going to be a result of deflationary economic policy.

everyone is fixated on [paying down public and private sector debts via accumulated savings]. I do not believe this private sector balance sheet recession can be successfully tackled via collective public sector deficit spending balanced by a private sector deleveraging. The sovereign debt crisis in Greece tells you that.  More likely, the western world’s collective public sectors will attempt to pull this off. But, at some point debt revulsion will force a public sector deleveraging as well.

And unfortunately, a collective debt reduction across a wide swathe of countries cannot occur indefinitely under smooth glide-path scenarios. This is an outcome which lowers incomes, which lowers GDP, which lowers the ability to repay. We will have a sovereign debt crisis. The weakest debtors will default and haircuts will be taken.  The question still up for debate is regarding systemic risk, contagion, and  economic nationalism because when the first large sovereign default occurs, that’s when systemic risk will re-emerge globally.

That’s where we are now. So, by October 2011, I was telling you that “with the stimulative measures that supported recovery over, the end of the fake recovery is at hand.” That’s what austerity means.

Here’s Keynesian scholar Robert Skidelsky very much on point on this today. He calls the policy response “The Wages of Economic Ignorance”:

When we ask politicians to explain these deplorable results, they reply in unison: “It’s not our fault.” Recovery, goes the refrain, has been “derailed” by the eurozone crisis. But this is to turn the matter on its head. The eurozone crisis did not derail recovery; it is the result of a lack of recovery. It is the natural, predictable, and (by many) predicted result of the main European countries’ deliberate policy of repressing aggregate demand.

That policy was destined to produce a financial crisis, because it was bound to leave governments and banks with depleted assets and larger debts. Despite austerity, the forecast of this year’s UK structural deficit has increased from 6.5% to 8% – requiring an extra £22 billion ($34.6 billion) in cuts a year. Prime Minister David Cameron and Chancellor George Osborne blame the eurozone crisis; in fact, their own economic illiteracy is to blame.

Unfortunately for all of us, the explanation bears repeating nowadays. Depressions, recessions, contractions – call them what you will – occur because the private-sector spends less than it did previously. This means that its income falls, because spending by one firm or household is income for another.

In this situation, government deficits rise naturally, as tax revenues decline and spending on unemployment insurance and other benefits rises. These “automatic stabilizers” plug part of the private-sector spending gap.

But if the government starts reducing its own deficit before private-sector spending recovers, the net result will be a further decline in total spending, and hence in total income, causing the government’s deficit to widen, rather than narrow. True, if governments stop spending altogether, deficits will eventually fall to zero. People will starve to death in the interim, but the budget will be balanced.

That is the crazy logic of current economic policy in much of Europe (and elsewhere).

Got it? Let me translate that into the way I write. Lord Skidelsky is saying that any fool could see that the private sector was getting killed by a retrenchment of consumers and businesses. Without the government filling in the gap via “automatic stabilizers”, we would already have been in depression globally as they are in Greece, Spain and Ireland. Now, the economic ignorance of our policy making elite is telling us to fight private sector retrenchment with public sector retrenchment as if that will make things better. No it will make things worse, considerably so. But, hey, that’s what people are saying we should do.

The question is why are they saying this? I think economic ignorance is probably right here. But, there is also a sense among many that even if this policy leads to depression, it is better to take the bitter pill now than throwing money at the problem and making the credit bubble worse down the line. I have a lot of sympathy for that line of thinking. This site is named Credit Writedowns for a reason and this is it.

The real problem/question is how to prevent the deflating of the credit bubble and the attendant deflationary spiral from leading to civil unrest, nationalism, and geopolitical tension. My answer is that you have to fight against austerity. Let the automatic stabilisers be robust and let them do their job until the writedowns have all been taken. That way we get a sharp break and reboot without everyone becoming destitute.

The problem is allowing the credit bubble to deflate… and then piling on by deflating the public sector at the same time. Tell government: If you want to do anything, invest in infrastructure. But on the whole, don’t intervene pro- or anti-cyclically. Don’t cut spending, don’t cut rates, don’t do QE, and don’t do cash for clunkers or that kind of palaver. Let the credit bubble deflate. But be damn sure you have robust enough of a social safety net before you do. That’s my solution: one part Austrian, one part Keynesian.

Of course that’s not how it will play out. Skidelsky has the mindset pegged right:

Of course, [austerity] will not be carried through to the bitter end. Too much will crack along the way – the banks, the monetary system, social cohesion, the legitimacy of the political regime. Our leaders may be intellectually challenged, but they are not suicidal. Deficit reduction eventually will be put into cold storage, either openly, as I would prefer, or surreptitiously, as is politicians’ way. In the United Kingdom, there is already talk of Plan A +.

[…]

If nothing works, it will be time to sprinkle the country with what Milton Friedman called “helicopter money” – that is, put purchasing power directly into people’s pockets, by giving every household a spending voucher with an expiration date. This would at least keep the economy afloat pending the development of the longer-term investment program.

It would be better if such schemes could be agreed upon by all by G-20 countries, as was briefly the case in the coordinated stimulus of April 2009. If not, groups of countries should pursue them on their own.

That’s exactly right, both in prediction and tone. So, as Christopher Wood predicted a year and a half ago “the endgame will be a systemic government debt crisis in the western world”. And you can forget about Skidelsky’s ideas of renewed coordinated policy stimulus a la April 2009 fake recovery mode as a response. The helicopter drop of which Skidelsky speaks is probably how this eventually gets resolved. Brodsky and Quantaince talked about just such a plan to stabilize the global monetary system last year. I don’t see any of this happening before we try the deflationary route first.

And while I have called the Age of the Fiat Currency a 38-year (and now 40-year) experiment in (credit) inflation, I recognise that the deflationary route leads to chaos and military confrontation. Policy makers will panic when they see the economic ills their policies create for voters who will revolt in protest. I call it the Scylla and Charybdis of inflationary and deflationary forces in which policy stimulus is removed and then only after everything collapses, do policy makers press the red button; and then they act super-aggressively, leading to wild swings in asset prices, cyclical inflation, currency wars and the like.

Ominously, “this kind of volatility will induce a wave of populist sentiment, leading to an unpredictable and violent geopolitical climate and the likelihood of more muscular forms of government.” And we are beginning to see this now. It will continue.

P.S – since this post is a bit over-the-top Armageddonish, I would really appreciate push back. Don’t feel like you have to agree with me here. But I warn you; I’ve run through this thing a million times and have responses ready! Frankly, I just don’t see where the coordinated policy response is going to come from in a world of bailout and deficit fatigue and nationalistic recrimination. April 2009 was the last chance for that. I seriously think Angela Merkel is trying to bridge this thing. But the gulf between the Barrossos and the Juergen Starks of the world is pretty large. You don’t bridge that gap in a deflationary environment.

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Free book of the day: The New Germany and The Old Nazis

From Spitfirelist,

by Dave Emory ⋅ November 14, 2011

 

by T.H. Tetens

1961, Ran­dom House
286 pages.
Down­load Pt. 1 | Down­load Pt. 2

No book doc­u­ments the fail­ure of the Allies’ de-Nazification poli­cies fol­low­ing World War II bet­ter than T. H. Tetens’ The New Ger­many and the Old Nazis. Build­ing effec­tively on their plans to go under­ground, final­ized dur­ing the lat­ter years of the war, the Third Reich suc­cess­fully made the tran­si­tion to “peace­time” gov­er­nance of  the “new” Fed­eral Repub­lic of  Germany.
Dom­i­nat­ing the polit­i­cal,  national secu­rity,  judi­cial and eco­nomic hier­ar­chies of the Ger­man state, the Third Reich was able to real­ize goals set by Hitler and com­pleted by his cho­sen agents in the Fed­eral Republic.
Two long excerpts effec­tively char­ac­ter­ize the dimen­sion of the post­war Nazi suc­cess. Him­self a Nazi sym­pa­thizer and col­lab­o­ra­tor dur­ing the war, [Ger­man chan­cel­lor Kon­rad] Ade­nauer was really a fig­ure­head, with con­trol of the chancellor’s office falling to Dr. Hans Globke. (Infor­ma­tion about Adenauer’s wartime col­lab­o­ra­tion is avail­able in AFA #2.)
Globke–the “emi­nence grise” behind “Der Alte” (Adenauer)–was the man who had imple­mented the Nazi racial laws, under which the Third Reich’s exter­mi­na­tion pro­grams were per­formed. Globke’s real power was such that he screened Adenauer’s mail.

. . . And the one directly involved with the for­mu­la­tion of these laws was Dr. Hans Globke. It was he who drafted the text of Hitler’s race law and who wrote the noto­ri­ous “Com­men­tary” inter­pret­ing this Nurem­berg law, which paved the way for the exter­mi­na­tion of mil­lions of human beings.
When the Nazis decided to carry out the mass liq­ui­da­tion of Euro­pean Jews, Dr. Globke’s direct supe­rior, Min­is­te­r­ial Coun­sel Bernard Loes­ner, him­self a Nazi party mem­ber, had scru­ples of con­science and resigned from office. His post was taken over by Dr. Hans Globke. As chief legal adviser and head of the Office of Jew­ish Affairs, Dr. Globke thus became a direct par­tic­i­pant in the gigan­tic ven­ture to make Ger­many juden­rein. In apply­ing the racial laws Dr. Globke worked hand in hand with the Main Secu­rity Office, the head­quar­ters of the SS mur­der orga­ni­za­tion. Der Spiegel of Sep­tem­ber 28, 1960, reported a case which reveals that Dr. Globke had direct deal­ings with the SS Colonel Adolf Eichmann.
More than that, the evi­dence shows that Dr. Globke was a key admin­is­tra­tor in the “Final Solu­tion,” the mas­ter plan for the exter­mi­na­tion of the Jews. The arti­cle in Der Spiegel quoted the tes­ti­mony of a Wehrma­cht offi­cer, Max Merten, who  together with Eich­mann sug­gested in 1943 that 20,000 Jews in Mace­do­nia (marked for the gas cham­bers in Auschwitz) should be released and shipped to Pales­tine. It was obvi­ously not a feel­ing of human­ity, but rather a per­sonal greed for  money, as well as a short­age of trans­porta­tion facil­i­ties to the con­cen­tra­tion camps, that moti­vated both Nazis to make this suggestion. . . .
. . . The Ger­man press has called Dr. Globke “The Gray Emi­nence,” “the power behind the throne,” and “The Spi­der.” Die Welt of Octo­ber 30, 1955, described Dr. Globke as “the second-in-command in the con­trol tower of the Ger­man ship of state.” Accord­ing to Die Welt, Dr. Globke is the “only man who has access to Ade­nauer at all times or who can call the Chan­cel­lor at any hour.” The paper adds: “Globke’s polit­i­cal power rests entirely on the con­fi­dence which emanates from his chief, and on his dom­i­na­tion over the offi­cial appa­ra­tus which must be regarded as his exclu­sive hand­i­work. of state.”. . .

The New Ger­many and the Old Nazis; pp. 37–40.
Globke, in turn, was a pri­mary touch­stone for a Nazi gov­ern­ment in exile, oper­at­ing effec­tively from Spain.
Newer lis­ten­ers may well be con­founded by the fre­quent ref­er­ences  to “The Under­ground Reich,” an under­stand­able reac­tion, under the cir­cum­stances. Tetens’ vol­ume details the coup attempt of 1953, in which SS offi­cer Werner Nau­mann (pro­pa­ganda min­is­ter Goebbels’ hand-picked suc­ces­sor) tried to seize power, with the assis­tance of other Third Reich alumni.
Of con­sum­mate sig­nif­i­cance in this con­text is the exec­u­tive force behind Naumann’s attempt–a fuehrungsring that admin­is­tered the “new” Ger­many on behalf of a Nazi gov­ern­ment in exile in  Spain.
Taken in con­junc­tion with the mate­r­ial in Mar­tin Bor­mann: Nazi in Exile, the dis­clo­sure that Rein­hard Gehlen’s relo­ca­tion of his spy out­fit to U.S. intel­li­gence was cleared with a Ger­man chain of com­mand that had been pre­served intact,  as well as the rela­tion­ship between Helene Van Damm, Otto von Bolschwing and the Nazi fac­tion of the GOP, the Tetens dis­cus­sion of the Nau­mann coup per­mits us to view much of the struc­ture of this Under­ground Reich. A num­ber of con­sid­er­a­tions to remem­ber  in this context:

• Once Nau­mann and his fel­low con­spir­a­tors were released into the cus­tody of the Ade­nauer gov­ern­ment and the post­war judi­ciary,  all charges were dismissed.
• The lawyers for the defen­dants threat­ened to dis­close the full mea­sure of the con­spir­acy and its backers–knowledge that would have been dev­as­tat­ing to the West. That infor­ma­tion would have played directly into the hands of the for­mer Soviet Union and its pro­pa­ganda arm. In addi­tion, many in the non-communist world would have been gen­uinely appalled at the degree of collaboration.
• The fuehrungsring was charged with ini­ti­at­ing con­spir­a­cies in for­eign coun­tries on behalf of Ger­man cartels.
• The Nazi under­ground (includ­ing the Nazi Party itself) had pen­e­trated diverse enti­ties, includ­ing com­mu­nist organizations.
• This infor­ma­tion dove­tails per­fectly with con­tent of The Nazis Go Under­ground and Mar­tin Bor­mann: Nazi in Exile, the lat­ter dis­tilled into FTR #305.

. . . . The next morn­ing shortly after seven, the head of the press divi­sion of the For­eign Office, Sir William Rids­dale, dis­trib­uted a com­mu­nique which stated that a group of seven for­mer high Nazi offi­cials had been arrested in Dues­sel­dorf and Ham­burg for hav­ing plot­ted the over­throw of the Bonn Repub­lic. The offi­cial announce­ment said that the British author­i­ties had been aware for some time that the seven men had been involved in a plot and that the arrest had been made under the author­ity of For­eign Min­is­ter Eden. The ring­leader of the group was a Dr. Werner Nau­mann, who, until the Ger­man col­lapse, had served as State Sec­re­tary in Dr. Goebbels’ Pro­pa­ganda Min­istry. Dr. Nau­mann had been with Hitler dur­ing the very last days in the bunker of the Chan­cellery in Berlin, and he was the one des­ig­nated by the Fuehrer in his tes­ta­ment to suc­ceed Dr. Goebbels as Pro­pa­ganda Minister. . . .
. . . The British reply was polite but deter­mined. It pointed out that the occu­pa­tion author­i­ties had been pro­foundly dis­turbed when they had found evi­dence of an advanced plot,  insti­gated by a vast Nazi net­work  spread­ing from Dus­sel­dorf to Cairo,  Madrid,  Buenos AIres,  and Malmo,  Swe­den. They stated fur­ther­more that they had had to pro­ceed with the utmost secrecy, since the plot­ters had close con­tacts with high gov­ern­ment cir­cles in Bonn. Accord­ing to the New York Times) the British sub­mit­ted evi­dence to the Chan­cel­lor which “revealed a wide-spread plot with ram­i­fi­ca­tions into many polit­i­cal par­ties and other influ­en­tial orga­ni­za­tions of West Ger­many.” Faced with the grave impli­ca­tions of the Nau­mann con­spir­acy, Dr. Ade­nauer and his Min­is­ter of Jus­tice, Dr. Thomas Dehler, had to con­firm the seri­ous­ness of the case. . . .
. . . After tak­ing over the inves­ti­ga­tion, Dr. Ade­nauer admit­ted at a press con­fer­ence “the exis­tence of a far-flung plot” and that Naumann’s activ­i­ties “had been financed with con­sid­er­able sums by Nazi groups in for­eign coun­tries.” Min­is­ter of Jus­tice Dehler told reporters that the Nau­mann group had devel­oped “a most cun­ning and dia­bolic sys­tem of infil­tra­tion” and that the con­spir­acy rep­re­sented “an acute threat to the demo­c­ra­tic insti­tu­tions in the Fed­eral Repub­lic.” The cap­tured Nau­mann doc­u­ments, he said, “gave clear proof that the aim of the group had been to fill key posi­tions m all Right­ist par­ties with hard-core Nazis and thereby cre­ate pro­pa­ganda vehi­cles which later could be used for a broad neo-Nazi mass move­ment.”  Accord­ing to the Wies­badener Kurier of May 6, 1953, Dr. Dehler quoted from one doc­u­ment in which Nau­mann expressed the hope that, if his scheme suc­ceeded, “the com­ing elec­tion might be the last of its kind.”
Soon after the British had trans­ferred the pros­e­cu­tion of the case to the Ger­man author­i­ties, the lawyers of the arrested plot­ters began to put pres­sure on the fed­eral gov­ern­ment to sup­press the case and release their clients. The Bre­mer Nachrichten reported on June 15, 1953, that the Nau­mann lawyers had even threat­ened to dis­cuss “the true back­ground of the case openly” if their clients were not released soon.
By the end of June 1953 Dr. Nau­mann and his co-plotters were sud­denly released, in vio­la­tion of the most rigid stip­u­la­tions of Ger­man law and court pro­ce­dure. A year and a half later, in Decem­ber 1954, in spite of the fact that the pros­e­cu­tor had brought an indict­ment against Nau­mann charg­ing con­spir­acy against the con­sti­tu­tion of the Fed­eral Repub­lic, the high­est court qui­etly dis­missed the case with­out any trial or hear­ing. Even before the plot­ters were released, the British became sus­pi­cious about the han­dling of the Nau­mann case and leaked some of the incrim­i­nat­ing mate­r­ial to a staunchly demo­c­ra­tic Ger­man news­pa­per which had gained quite a rep­u­ta­tion for its reveal­ing arti­cles on the infil­tra­tion of for­mer Nazis into the Ade­nauer admin­is­tra­tion. Dur­ing the early part of June 1953 the Frank­furter Rund­schau pub­lished five arti­cles deal­ing with Naumann’s tapped tele­phone con­ver­sa­tions, notes from his appoint­ment cal­en­dar, cor­re­spon­dence between the plot­ters, and sig­nif­i­cant excerpts from his diary. The pub­lished mate­r­ial gave a full inside view of the scope and char­ac­ter of the con­spir­acy. The descrip­tion of the intri­cate struc­ture of the plot and the back­ground of the many peo­ple involved filled whole pages in the Frank­furter Rund­schau. Here it is suf­fi­cient to state the main objec­tives as they emerged from the con­fis­cated material:
1] Use the demo­c­ra­tic con­sti­tu­tion as a facade behind which a new Nazi move­ment could be orga­nized, designed to take over the appa­ra­tus of the state when time and cir­cum­stances would make such a step nec­es­sary and profitable.
2] Let Chan­cel­lor Ade­nauer serve as a front, exactly as Gus­tav Stre­se­mann did dur­ing the twen­ties, behind which a new Ger­man power could develop undis­turbed with­out arous­ing pre­ma­ture suspicions.
3] Apply a new method of infil­tra­tion (Unter­wan­derung) in order to con­quer the exist­ing par­ties and the admin­is­tra­tive machin­ery of the state from within. Avoid noisy nation­al­is­tic demon­stra­tions, flag-waving and inci­dents; use the more effi­cient and unsus­pi­cious pro­ce­dure of work­ing in small cells, which some day, at an oppor­tune moment, might con­sol­i­date them­selves into a broad mass organization.
The detailed plan, which the Ger­mans soon called the “Nau-Nau” strat­egy, instructed for­mer well-known Nazi lead­ers to stay dis­creetly in the back­ground until the time was ripe for action. In the mean­time the lead­ers were to use all their con­nec­tions to bring bright and capa­ble young Nazis, espe­cially those trained in the Hitler Youth, into influ­en­tial posi­tions, not only in the Ade­nauer coali­tion par­ties but also into all other polit­i­cal organizations.
The Nau­mann doc­u­ments revealed much more than a mere strate­gic blue­print of how to sub­vert a state appa­ra­tus or the exist­ing par­ties from within. There was a detailed record of how Dr. Nau­mann had used his con­tacts with top indus­tri­al­ists and lead­ing politi­cians to fill well-paid posi­tions in the Free Demo­c­ra­tic party with scores of young, able Nazis who once had learned the tricks of the trade in the Goebbels’ Pro­pa­ganda Min­istry. Dr. Naumann’s most devoted col­lab­o­ra­tor in this enter­prise was his inti­mate friend, Dr. Ernst Achen­bach, a for­mer Ribben­trop diplo­mat who, after the war, had become a promi­nent lawyer in the Ruhr dis­trict. It was reported that Achen­bach and Nau­mann had been close friends dur­ing the war when they served together in impor­tant posi­tions under Ambas­sador Otto Abetz in the Ger­man Embassy in occu­pied Paris. It was Dr. Achen­bach who, in 1943, rec­om­mended to the For­eign Office that two thou­sand Jews be shipped to the East as reprisal for an attack on two Nazi officers. . . .
. . . A lengthy British white paper on the Naumann-Achenbach plot was ready to be released in August 1953, when it was sud­denly “with­drawn at the last moment on Cab­i­net instruc­tions, for rea­sons which never have been made quite clear.” There were rumors that the British had yielded under the com­bined pres­sure of Wash­ing­ton and Bonn.  The con­fis­cated mate­r­ial dis­closed that the Achenbach/Naumann group rep­re­sented a so-called Fuehrungsring-a Nazi high command-a kind of polit­i­cal Mafia, with head­quar­ters in Madrid, which oper­ated by remote con­trol through clever orga­ni­za­tional schemes on dif­fer­ent lev­els, serv­ing var­i­ous pur­poses. This Gauleiter group met peri­od­i­cally in the strictest secrecy, mainly in Dues­sel­dorf or Hamburg.
Up to thirty for­mer Nazi top offi­cials assem­bled under false names as “old friends” in hotels, where they car­ried on their polit­i­cal schem­ing. Among them were the ex-Gauleiters Kauf­mann,  Grohe,  Flo­rian,  Wegener,  Frauen­feld,  and Scheel, a num­ber of high offi­cials from the Pro­pa­ganda Min­istry, some Ribben­trop diplo­mats, and top-ranking SS offi­cers. Accord­ing to the British cor­re­spon­dent Alis­tair Horne, the “roll calls of the ex-Gauleiters and high SS offi­cials present read like a page from some night­mare Who’s Who of the Third Reich.” These Nazi lead­ers had either escaped the drag­net of the vic­to­ri­ous Allies by false iden­ti­fi­ca­tion papers or had been released from intern­ment after a year or two with­out any sub­stan­tial penalty. The aim of the group was “to form the gen­eral staff of the ‘National Oppo­si­tion’ ” and build “a new polit­i­cal party out of the exist­ing par­ties of the right.”
Besides the infil­tra­tion of co-conspirators into posi­tions of com­mand within the exist­ing par­ties and into gov­ern­ment depart­ments and party orga­ni­za­tions on the mid­dle and lower lev­els, another task of the Fuehrungsring was to orga­nize and direct mass orga­ni­za­tions, such as vet­er­ans’ and refugee asso­ci­a­tions, which one day could eas­ily be used as instru­ments for polit­i­cal action. Other fields of activ­i­ties for the group were polit­i­cal pro­pa­ganda in for­eign coun­tries, car­ried out in close con­tact with the Nazi head­quar­ters in Madrid, and the ini­ti­a­tion of con­spir­a­cies in for­eign coun­tries on behalf of Ger­man indus­trial cartels. . . .
. . . Long before, they had cap­tured numer­ous key posi­tions in the Ade­nauer admin­is­tra­tion, in polit­i­cal par­ties, and in the Laen­der (state) par­lia­ments. They were exu­ber­ant about their suc­cesses in one of their secret direc­tives cir­cu­lated by the Nazi head­quar­ters in Madrid. This lengthy doc­u­ment, issued in Sep­tem­ber 1950, spoke  of the total fail­ure of the West­ern occu­pa­tion pol­icy and pointed glee­fully to the suc­cess of the “flex­i­ble and smoothly-working orga­ni­za­tion which, at the end of the war, pro­vided the pre­con­di­tion for all the gains that by neces­sity emerged for Ger­many out of the chaos of the post­war period .
“. . . Five ‘years after Pots­dam, we can look back with pride at our accom­plish­ments .... Noth­ing hap­pened by chance; every­thing was care­fully planned.” There is con­sid­er­able mate­r­ial avail­able which gives con­clu­sive proof that the Nazis had made prepa­ra­tions long before their col­lapse to train an army of agents, often skill­fully cam­ou­flaged as “resis­tance fight­ers.” About the suc­cess­ful con­tin­u­a­tion of the Nazi sub­ver­sive activ­i­ties, the Madrid Cir­cu­lar Let­ter had this to say: “Even after the col­lapse, the National Social­ist party con­tin­ued to work in a cam­ou­flaged way [getarnt] in dozens of seem­ingly innocu­ous soci­eties and groups, in order to keep the national out­look of the Ger­man peo­ple alive and undi­luted. Just as many small brooks go toward mak­ing a mighty stream, the var­i­ous nation­al­is­tic and rad­i­cal groups in the Zonen-Reich car­ried out, almost with­out excep­tion, worth­while and pow­er­ful pro­pa­ganda. Each of these groups had its spe­cial task and had to adjust its work to cer­tain sit­u­a­tions and cir­cum­stances. How­ever, it was of chief impor­tance to direct the under­ly­ing trend of the patri­otic pro­pa­ganda toward the same goal. The more diverse and dis­con­nected these groups appeared on the sur­face, the less they were apt to arouse sus­pi­cion that they were directed and influ­enced by a cen­tral orga­ni­za­tion. We  have placed our con­fi­den­tial agents, observers, and rep­re­sen­ta­tives for spe­cial assign­ments in all par­ties, even among Com­mu­nist orga­ni­za­tions and their fronts. The greater the num­ber of orga­ni­za­tions con­trolled and influ­enced by us, the more effec­tive will be the results of our work.” . . . .

The New Ger­many and the Old Nazis; pp. 24–33.
From the book jacket:

More than a decade after World War II the infa­mous crimes of the Third Reich still haunt the world.
Now a new Ger­many has emerged. Its unri­valed energy has already made it one of the most pow­er­ful states in Europe.
What kind of coun­try is this new Ger­many? Is Nazism “dead and buried,” as James B. Conant, our for­mer ambas­sador to Bonn, believes? Has Ger­many really changed? If so, where are the hun­dreds of thou­sands who once faith­fully and eagerly served Hitler’s reign of ter­ror? And what is life like today for the Jews who are still in Germany?
The answers to these ques­tions will shock most Amer­i­cans. Many Nazis have returned to power–in almost every walk of Ger­man life.
The New Ger­many and The Old Nazis is based on thou­sands of news sto­ries and court records, most of them of Ger­man ori­gin. Nam­ing names-including Adenauer’s top aide, Hans Globke–it doc­u­ments in detail the dan­ger­ous resur­gence of Nazism and anti-Semitism in the “new” Germany.
It describes noto­ri­ous occur­rences of anti-Semitism such as the Zind case–and the Ger­man reac­tion to it; it tells of the cur­rent activ­i­ties of the Nazi SS; it reveals for­mer Nazi offi­cials who hold impor­tant posi­tions in the present Ger­man gov­ern­ment; it exposes for­mer Nazi crim­i­nals and shows how they have been pro­tected; it out­lines the present plans of the under­ground Nazi party; and it presents the shame­ful record of Hitler’s judges who still sit on the bench.
As West Germany’s posi­tion in the cold war becomes more cru­cial, it is impor­tant to under­stand its aims and ambi­tions. This out­spo­ken book looks behind the offi­cial façade of Adenauer’s Ger­many. What it dis­closes is of vital impor­tance to every American.
T.H. Tetens, a lead­ing expert on Ger­man geopol­i­tics, was born in Berlin and worked dur­ing the 1920’s in Ger­many as an econ­o­mist and news­pa­per edi­tor. For more than thirty years he has stud­ied the Pan-Germanic move­ment, the Nazi party, and the strate­gic the­o­ries of Ger­man geopol­i­tics. When Hitler came to power, Mr. Tetens was put in a con­cen­tra­tion camp. He escaped to Switzer­land in 1934. There in pam­phlet and news­pa­per arti­cles he fore­told the com­ing Ger­man assault on Europe.
Mr. Tetens is the direc­tor of the Library on Ger­manic and Related Inter­na­tional Prob­lems. He has writ­ten sev­eral books on the Ger­man ques­tion, the most recent being Ger­many Plots with the Krem­lin.
In 1938, Mr. Tetens came to the United States and began research on Ger­man prob­lems for gov­ern­ment agen­cies and pri­vate orga­ni­za­tions, From 1946 to 1947, he served with the U.S. War Crimes Com­mis­sion in Washington.

Francois Mitterand’s Fascist Past and the Formation of the European Monetary Union

From Spitfirelist

by Dave Emory ⋅ November 7, 2011

Mit­terand in French Army: Wolf in sheep’s clothing?

COMMENT: As the global econ­omy reels from the Euro­zone debt cri­sis, it may be use­ful to pon­der a lit­tle known aspect of the back­ground of for­mer French Pres­i­dent Fran­cois Mit­terand, the man who [offi­cially] insisted on the for­ma­tion of the com­mon Euro­pean currency.

Mitterand’s decades-long asso­ciate and finan­cial angel Rene Bous­quet (in fur coat)

As dis­cussed in Mis­cel­la­neous Archive Show M61, Mit­terand had a his­tory of par­tic­i­pa­tion in, and col­lab­o­ra­tion with, the French fas­cists who desta­bi­lized French democ­racy in the years before World War II and actively sub­verted the French mil­i­tary resis­tance to the Ger­man inva­sion of 1940. (The infor­ma­tion about Mit­terand is on side 1c.)

Mit­terand was asso­ci­ated with the Cagoule and Croix de Feu, French fas­cist orga­ni­za­tions that attempted to over­throw the French gov­ern­ment in 1938, much as U.S. fas­cists attempted to elim­i­nate Roo­sevelt in 1934. Under­min­ing the French defenses, these same ele­ments real­ized their goal when the invad­ing Ger­mans cre­ated the col­lab­o­ra­tionist Vichy gov­ern­ment.

Mitterand’s asso­ci­a­tion with French fas­cist Rene Bous­quet extended decades into the post­war period. Bous­quet helped finance Mitterand’s post­war polit­i­cal career. Details of Bousquet’s polit­i­cal career and Mitterand’s asso­ci­a­tion with him are cov­ered in detail below.

A num­ber of con­sid­er­a­tions sug­gest them­selves in this regard:

• Was Mit­terand actu­ally a dou­ble for the Axis dur­ing the war?
• Was Mitterand’s “escape” from a POW camp dur­ing the war a cover for his sub­se­quent infil­tra­tion of the French Resis­tance on behalf of the Ger­mans and Vichy?
• Was Mit­terand a deep-cover oper­a­tive for the Under­ground Reich in the post­war period?
• Was he a will­ing, con­scious fas­cist through­out, or [per­haps] sub­ject to polit­i­cal black­mail, manip­u­lated by the threat of reveal­ing his pre­war and wartime activities?
• Was Mitterand’s insis­tence on a com­mon Euro­pean cur­rency because of his fear of a re-unified Ger­many or because he was actu­ally aid­ing in the real­iza­tion of the strat­a­gem of Friedrich List, as envis­aged by the Third Reich? (For more detailed dis­cus­sion of this, see–among other pro­grams–FTR #746.)
  
• In light of the con­tin­ued post­war Ger­man dom­i­na­tion of the  French econ­omy, we might see Mitterand’s behav­ior as ful­fill­ment of pol­icy embraced by the French power elite–junior part­ners with their busi­ness asso­ciates in the Fed­eral Repub­lic. (This is dis­cussed at some length in sec­tions 28 through 31 in FTR #305. There is an excel­lent pre­sen­ta­tion of the inter­lock­ing of French and Ger­man cor­po­rate inter­ests in the steel indus­try and the posi­tion they mutu­ally occu­pied in the Inter­na­tional Steel Car­tel on pages 34–37 of James Stew­art Martin’s All Hon­or­able Men.)
  

Mitterand’s idol Mar­shall Petain (left) with his boss

In addi­tion to reflect­ing on Mitterand’s past, we will also high­light the endeav­ors of Robert Zoel­lick in the con­text of Ger­man reuni­fi­ca­tion. Zoel­lick recently con­firmed that Mit­terand insisted on the estab­lish­ment of a com­mon cur­rency as pre-condition for Ger­man  reuni­fi­ca­tion. Zoel­lick was a prin­ci­pal archi­tect of that reuni­fi­ca­tion, as well as a prob­a­ble oper­a­tive on behalf of the Under­ground Reich.

We should not lose sight of the fact that it is largely the advent of the euro itself that has brought about the finan­cial cri­sis  in Greece, Italy, Por­tu­gal and Spain.

“A Euro Power Play that Back­fired” by Oliver Mark Hartwich; Busi­ness Spec­ta­tor; 8/17/2011.

EXCERPT: To fully appre­ci­ate the sub­tle ironies of the euro cri­sis it takes a sense for his­tory. Europe’s com­mon cur­rency has prac­ti­cally achieved the very oppo­site of what its cre­ators orig­i­nally intended. Instead of fram­ing the Ger­mans in Europe, the cri­sis has ele­vated Ger­many to the continent’s new, albeit reluc­tant, hege­mon. For­mer French Pres­i­dent François Mit­ter­rand must be spin­ning in his grave.

Last Sun­day, the Asia Soci­ety hosted a din­ner for World Bank Pres­i­dent Robert Zoel­lick in Syd­ney. His warn­ings about a fur­ther esca­la­tion of the debt cri­sis were widely reported, and the high-calibre audi­ence cer­tainly appre­ci­ated his views on the state of emerg­ing mar­kets. How­ever, Zoel­lick also gave a fas­ci­nat­ing insight into the early his­tory of Euro­pean mon­e­tary union.

After the fall of the Berlin Wall in Novem­ber 1989, Zoel­lick was the lead US offi­cial in the ‘two-plus-four’ nego­ti­a­tions that pre­pared Germany’s re-unification in Octo­ber 1990 (so named after the two Ger­man states and the four allied forces – Britain, France, the Soviet Union and the US). He was thus inti­mately involved in the diplo­matic bal­anc­ing act of uni­fy­ing Ger­many while reas­sur­ing the British and the French that they had noth­ing to fear from this new and big­ger coun­try in the heart of Europe. For his achieve­ments, Zoel­lick was even made a Knight Com­man­der of the Ger­man order of merit, a very high award for a for­eign national. [Ital­ics are mine–D.E.]

British Prime Min­is­ter Mar­garet Thatcher was hor­ri­fied about the prospect of a united Ger­many. “We beat the Ger­mans twice, and now they’re back,” she allegedly told a meet­ing of Euro­pean lead­ers at the time. Thatcher even invited his­to­ri­ans to a sem­i­nar at Che­quers to dis­cuss the ques­tion of how dan­ger­ous the Ger­mans really were. Her trade min­is­ter, Nicholas Rid­ley, was forced to resign after he had com­pared Ger­man chan­cel­lor Hel­mut Kohl to Adolf Hitler in an inter­view with The Spec­ta­tor. . . .

. . . There had always been rumours that in the two-plus-four nego­ti­a­tions the French had demanded Ger­many to give up its beloved Deutschmark in return for a French ‘oui’ on uni­fi­ca­tion. More than once the dom­i­nance of the über-solid Deutschmark had caused the French and other Euro­pean nations pain. Forc­ing the Ger­mans to aban­don their cur­rency would surely be an appro­pri­ate way to weaken them so they could not become a threat to other nations, the French prob­a­bly thought.

The only prob­lem with this account of his­tory is that there is no solid evi­dence for it. When Der Spiegel news mag­a­zine reported these rumours once again last year, rep­re­sen­ta­tives of the old Kohl gov­ern­ment were quick to dis­pute that there had been any secret deals at the time. “There never was an agree­ment,” Ger­man trea­surer Wolf­gang Schäu­ble (who was home sec­re­tary at the time) boldly claimed. His pre­de­ces­sor Theo Waigel flatly denied any link between uni­fi­ca­tion and the euro.

Such pre­vi­ous denials made Robert Zoellick’s remarks at the Syd­ney din­ner all the more remark­able. Almost in pass­ing, and as if it was the most obvi­ous thing in the world, he explained his under­stand­ing of how Europe got its com­mon cur­rency. And his account con­firmed the rumours that it had a lot to do with Ger­man unification.

As Zoel­lick told his audi­ence (that was prob­a­bly unaware of how con­tro­ver­sial these issues still are in Europe) it was very clear that Euro­pean mon­e­tary union resulted from French-German ten­sions before uni­fi­ca­tion and was meant to calm Mitterrand’s fears of an all-too-powerful Ger­many. Accord­ing to Zoel­lick, the euro cur­rency is a by-product of Ger­man uni­fi­ca­tion. As one of the key insid­ers in the two-plus-four nego­ti­a­tions, trusted and highly dec­o­rated by the Ger­mans, nobody would be bet­ter qual­i­fied to know the real story behind Euro­pean Mon­e­tary Union. Despite all offi­cial denials com­ing from the Ger­man gov­ern­ment until the present day, there are no good rea­sons not to believe Zoellick’s account of the events.

The great his­tor­i­cal irony of this story is, of course, that if the French had really planned to weaken the pow­ers of newly reunited Ger­many through mon­e­tary union, this attempt has now com­pletely back­fired. Sure, the Ger­mans will pay mas­sively for the sake of keep­ing the euro project alive (if they don’t pull out of mon­e­tary union once they realise this). But in strate­gic terms, Germany’s influ­ence has never been greater. As the con­ti­nent wants to bank on Germany’s AAA rat­ing, Berlin can now effec­tively dic­tate fis­cal pol­icy to Athens, Lis­bon and Rome – per­haps in the future to Paris, too. . .

. . . As it turns out, the euro is not only an unwork­able cur­rency. It actu­ally started as a French insur­ance pol­icy against Ger­man power. But even as an insur­ance pol­icy it has failed. Against their will, it has turned the Ger­mans into the new rulers of Europe. And it has con­signed France to be the weaker part­ner in the Franco-German relationship.

If Mit­ter­rand had known all this in advance, he would have insisted on Ger­many keep­ing the Deutschmark as the price for Ger­man unification. . . .

COMMENT: In addi­tion to infor­ma­tion pre­sented in Mis­cel­la­neous Archive Show M61, Mitterand’s rela­tion­ship with Rene Bous­quet is of great impor­tance in appre­ci­at­ing “the real Mitterand.”

“Mit­terand and the Far Right”; Wikipedia.

EXCERPT: . . . The most damming of all charges against Mit­ter­rand and his right wing con­nec­tions is prob­a­bly his long last­ing friend­ship with René Bous­quet, ex secré­taire général of the Vichy police. Charles de Gaulle said of Mit­ter­rand and Bous­quet “they are ghosts who come from the deep­est depths of the collaboration.“[24] Georges-Marc Ben­amou quotes Mit­ter­rand as say­ing of Bous­quet “his career shat­tered at the age of 35, it was dread­ful... Bous­quet suf­fered badly. Imag­ine the break, the career shot to pieces“[25] which shows Mit­ter­rand felt that Bous­quet was unde­servedly badly treated. In 1974, René Bous­quet gave finan­cial help to François Mit­ter­rand for his pres­i­den­tial cam­paign against Valéry Gis­card d’Estaing. In an inter­view with Pierre Favier et Michel Martin-Roland Mit­ter­rand claimed that he was not the only left wing politi­cian to ben­e­fit from Bousquet’s money, as René Bous­quet helped finance all the prin­ci­pal left wing politi­cians from the 1950s to the begin­ning of the 1970s, includ­ing Pierre Mendès France. Worse still after Mitterrand’s 1981 win René Bous­quet was received at the Élysée palace “to talk pol­i­tics”. In an inter­view with Pas­cale Fro­ment (René Bousquet’s biog­ra­pher) Mit­ter­rand declared “I lis­tened to him as a polit­i­cal com­men­ta­tor. He saw me as a con­tin­u­a­tion of his halted career.“[26] Only in 1986, when media crit­i­cism of Bous­quet began to gain in vol­ume, did Mit­ter­rand stop see­ing him and he did not com­ment on the mat­ter until the 1994 inter­view with Jean-Pierre Elkabach.[27] Lionel Jospin com­mented that he was lit­tle impressed by the President’s expla­na­tion say­ing “One would have liked a sim­pler and more trans­par­ent rise to power for the leader of the French left dur­ing the 70s and 80s. What I can’t under­stand is the con­tin­u­ing rela­tion­ship into the 80’s with the likes of Bous­quet who orga­nized the mass arrests of Jews“[28] and Charles Fiter­man also felt let down: “these rev­e­la­tions leave the uncom­fort­able impres­sion of hav­ing been deceived by the man. 50 years later we see no trace of regret nor crit­i­cal analy­sis, but a con­tin­u­a­tion of a com­pro­mis­ing rela­tion­ship which casts new light on events such as putting flow­ers on Pétain’s tomb. This seems to show a con­ti­nu­ity in the choices of a leader call­ing in favors from a net­work of friends.“[29] Pierre Moscovici, com­ment­ing on Pierre Péan’s book said ” What shocked me is his rub­bing shoul­ders with some­one who was instru­men­tal in state anti­semitism and the ‘final solu­tion’. We can’t tol­er­ate such tol­er­ance of evil, and for me René Bous­quet was absolute evil“[30] and the his­to­rian Pierre Miquel com­ment­ing on the TV inter­view said “the com­ments... of the Pres­i­dent of the Repub­lic are part of a dis­course from the right... on the sub­ject of the occupation“[31] . . .

COMMENT: In light of Mitterand’s long-standing, pro­found rela­tion­ship with Bous­quet, more detail about Bousquet’s wartime activ­i­ties is instructive.

“Rene Bous­quet”; Wikipedia.

EXCERPT: . . . . On 2 July 1942, Bous­quet and Carl Oberg pre­pared the arrests known as the Vel’ d’Hiv Roundup (Rafle du Vel’ d’Hiv). Bous­quet per­son­ally can­celed orders pro­tect­ing some cat­e­gories of peo­ple from arrests, notably chil­dren under 18 and par­ents with chil­dren under 5. After the arrests, some bish­ops and car­di­nals protested; Bous­quet threat­ened to can­cel tax priv­i­leges for Catholic schools.

Under the pre­text of not sep­a­rat­ing fam­i­lies, Pierre Laval ordered that Jew­ish chil­dren under 16 be included in depor­ta­tion con­voys, thus sur­pass­ing the require­ments of the Nazis. Bous­quet obliged, per­son­ally set­tling that chil­dren under 2 years also be included. Chil­dren were actu­ally deported sep­a­rately from their parents.

In Jan­u­ary 1943, he organ­ised with Carl Oberg a mas­sive raid in Mar­seille, known as the Bat­tle of Mar­seille. Dur­ing this repres­sive oper­a­tion, the French police assisted the Ger­man police, in par­tic­u­lar in the expul­sion of 30,000 peo­ple from the Old Port, and the sub­se­quent destruc­tion of this neigh­bor­hood, con­sid­ered as too dan­ger­ous and as a “ter­ror­ist nest” by the Ger­man police, because of its wind­ing, small streets. Bous­quet eagerly offered his ser­vices dur­ing this oper­a­tion. The French police con­trolled the iden­tity of 40,000 peo­ple, and the oper­a­tion suc­ceeded in send­ing 2,000 Mar­seillese to the exter­mi­na­tion camps. The oper­a­tion also encom­passed the expul­sion of an entire neigh­bor­hood (30,000 per­sons) before its destruc­tion. For this occa­sion, SS Carl Oberg, in charge of the Ger­man Police in France, made the trip from Paris, and trans­mit­ted to Bous­quet orders directly received from Himm­ler. It is a notable case of the French police’s will­ing col­lab­o­ra­tion with the Nazis.[1]

In April 1943, Bous­quet met with Hein­rich Himm­ler. Himm­ler declared him­self “impressed by Bousquet’s per­son­al­ity”, men­tion­ing him as a “pre­cious col­lab­o­ra­tor in the frame­work of police col­lab­o­ra­tion”. . . .

Europe seeks power to place weak states in ‘administration’

The Irish Times
Tuesday, November 22, 2011

THE EUROPEAN Commission wants the Brussels authorities to be given the power to place distressed euro zone countries in a form of EU “administration” as part of a new drive to toughen the fiscal rules behind the single currency.

In a bid to intensify the battle against the worsening sovereign debt crisis, the EU executive will publish plans tomorrow for euro countries to issue debt with a common euro zone guarantee.

The initiative, resisted for months by Germany, includes intrusive measures to radically expand the reach of budgetary oversight by the European authorities.

While the objective is to minimise the increased risk that fiscally sound countries would bear in the “eurobond” or “stability bond” system, member states would have to yield significant new powers to Brussels. So that eurobonds are always repaid, the commission suggests mechanisms to ensure the servicing of such debt always takes priority over “any other spending in . . . national budgets”.

Drafts seen by The Irish Times say a further option “would be to grant extensive intrusive power at EU level in cases of severe financial distress, including the possibility to put the failing member state under some form of ‘administration’ ”.

This implies EU officials would be given power to intervene in the execution and supervision of key national policies. The commission says the system, seen as a potential panacea to the crisis, could only be adopted if euro countries deepened the co-ordination of economic policy.

Read more: Europe seeks power to place weak states in ‘administration’

_________

Related:

Brussels plans to bring eurozone to heel 

Proposals would require members to submit budget plans to the European Union, which would be able to send inspectors even if unrequested