Vice President Dick Cheney’s Incredible and Deadly Lie

Vice President Dick Cheney’s Incredible and Deadly Lie

By Deceiving a Congressional Leader, Cheney Sent Us to War on False Pretenses and Violated the Separation of Powers – as Well as the Criminal Law

By John W. Dean

19/09/08 “” — – This week, I agreed to deliver a “Constitution Day” talk on a college campus. My talk was not partisan. Yet the subject matter I selected was prompted by the most incredible – not to mention the most deadly – lie Dick Cheney has yet told, which was reported earlier this week.

Last year, Washington Post reporter Barton Gellman and Jo Baker, now of the New York Times, did an extensive series for the Post on Cheney. Now, Gellman has done some more digging, and published the result in a book he released this week: Angler: The Cheney Vice Presidency. The book reveals a lie told to a high-ranking fellow Republican, and the difference that lie made. In this column, I’ll explain how Cheney defied the separation of powers, and go back to the founding history to show why actions like his matter so profoundly.

Cheney’s Bold Face Lie To Congress

According to Gellman (and to paraphrase from the Post story on his finding), in the run-up to the war in Iraq, the White House was worried about the stance of Republican Majority Leader Richard Armey of Texas, who had deep concerns about going to war with Saddam Hussein. According to the Post, Armey met with Cheney for a highly classified, one-on-on briefing, in Room H-208, Cheney’s luxurious hideaway office on the House side of the Capitol.

During this meeting, the Post reports, Cheney turned Armey around on the war issue. Cheney did so by telling the House Majority Leader that he was giving him information that the Administration could not tell the public — namely (according to Armey), that Iraq had the “‘ability to miniaturize weapons of mass destruction, particularly nuclear,’ which had been ‘substantially refined since the first Gulf War,’ and would soon result in ‘packages that could be moved even by ground personnel.’ In addition, Cheney linked that threat to Saddam’s alleged personal ties to al Qaeda, explaining that ‘we now know they have the ability to develop these weapons in a very portable fashion, and they have a delivery system in their relationship with organizations such as al Qaeda.'”

The Post story continues, “Armey has asked: “Did Dick Cheney … purposely tell me things he knew to be untrue?” His answer: “I seriously feel that may be the case…Had I known or believed then what I believe now, I would have publicly opposed [the war] resolution right to the bitter end, and I believe I might have stopped it from happening.”

In short, it was this lie that sealed the nation’s fate, and sent us to war in Iraq. By lying to such an influential figure in Congress, Cheney not only may have changed the course of history, but also corrupted the separation of powers with their inherent checks and balances.

Cheney’s monumental dishonesty, the news of which has been buried under the current meltdown of the nation’s economy, did not strike me as a topic for a Constitution Day speech. But a realistic discussion of the working of the separations of powers did seem a fitting topic, for college students need to understand the basics of our system. After we remind ourselves of those basics, Cheney’s great lie can be viewed not only as a great immorality and violation of the criminal code, but also and more fundamentally as the significant breach of his oath of office to protect and defend the Constitution that it is.

Our Constitutional Separation of Powers

Historians, not to mention contemporary historical documents, establish that no issue was more important to the founders of our national government than that of what its structure should be. Accordingly, in anticipation of the Constitutional Convention in Philadelphia during the summer of 1787, James Madison of Virginia plowed through historical accounts of governments and concluded that there are three basic forms of government: monarchy (the one), oligarchy (an elite few) and democracy (the many). Each form, however, had serious drawbacks.

As a result, Madison sought to take the best of each to create a “republic” – as had been done in varying degrees with many of the American colonies. Republics, of course, had been around a long time, for they were the forms employed by the Greeks and Romans. Thus, the republic was a form of government those who were meeting in Philadelphia well understood, in which sovereignty resides with the people who elect agents to represent them in the political decision-making process.

Madison’s republic combined elements of each type of government, in a mixing of forms. It featured an executive who incorporated the strength of monarchy without the evils of a King; a Senate that embodied the wisdom of an oligarchy; and a House that balanced the self-interest of such elites with a throng of representatives who spoke for the people of the nation.

Many delegates at the founding convention were mistrustful of a pure democracy since none had worked well in the past; moreover, the country was too large and diverse to directly involve everyone. Later, Madison nicely explained the differences in Federalist No. 14: “[I]n a democracy, the people meet and exercise the government in person; in a republic they assemble and administer it by their representatives and agents. A democracy consequently will be confined to a small spot. A republic may be extended over a large region.”

Most importantly, Madison’s structure had three separate branches of the government – legislative, executive and judicial — and each branch was empowered to check and balance the others, and thereby diffuse power.

Madison’s system, however, has not worked as designed even in the best of times, not to mention when there is an all-powerful Vice President hell-bent on gaming the system.

The Reality of Separation of Powers

An article in the June 2006 Harvard Law Journal Daryl J. Levinson and Richard H. Pildes, “Separation of Parties, Not Powers,” Harvard Law Journal (Jun. 2006) 2311 — provides one of the better analyses out there of the real-world workings of the separation of powers, and their accompanying checks and balances. Professors Levinson and Pildes argue that Madison’s vision of separation of powers has, in fact, been trumped in America by political parties. Their point is well taken, but as I see it their conclusion is far more applicable to the Republicans than the Democrats.

“The success of American democracy overwhelmed the Madisonian conception of separation of powers almost from the outset, preempting the political dynamics that were supposed to provide each branch with a ‘will of its own’ that would propel departmental ‘[a]mbition … to counteract ambition’,” Levinson and Pildes explain. This, in turn, they argue, made the underlying theory of the government – separation of powers – largely “anachronistic.”

When they looked at government, however, they found that when different political parties control the different branches – creating a divided government – then the parties working through those branches still do operate as Madison had hoped. Why? By sifting through the work of noted political scientists, Levinson and Pildes have concluded that it is not on behalf of protecting the institutional powers that the checking and balancing occurs; rather, it is through the influence of party politics operating through that divided branch.

I believe, based on the record (and as someone who worked on the Hill when Democrats controlled both ends of Pennsylvania Avenue) that Levinson and Pildes have it half right.

Democrats under unified government (i.e., when Democrats control both Congress and the White House) have been remarkably institutionally-minded, and the separation of powers has remained viable. On the other hand, conservative Republicans – as I have explained in my book Broken Government (just out in paperback too) – easily place party loyalty before the responsibilities of the governmental institution in which they serve. The first six years of the Bush/Cheney Administration, for example, were a travesty in Republican denial of institutional responsibilities. In contrast, there is a long list of Democratic House and Senate Chairmen who have a on-going history of refusing to be the rubber-stamps of Democratic Presidents.

For instance, unlike in the situation where Cheney lied to former Majority Leader Armey, when both the Democratic House and Senate suspected that President Lyndon Johnson had lied to them about the incident(s) in the Gulf of Tonkin that provoked Congress to authorize the war in Viet Nam, they took action. In contrast, Republicans have not acted on Cheney’s lie to Armey – and surely Washington Post reporter Barton Gellman is not the first person to learn about this lie.

Why Cheney Is Not Likely To Be Held Accountable

Those of us who follow these matters have long known – and I have written before – that it is Dick Cheney who is molding his hapless and naive president to his will, by effecting endless expansions of Presidential powers, and acting upon Cheney’s total disregard of the separation of powers.

Cheney does not seem to believe the Constitution applies to “real leaders,” who do whatever they believe they must do. Nor does he believe in the separation of powers. Indeed, Cheney absurdly claims he is himself part of the Legislative Branch because he is the presiding officer of the Senate – though, in practice, that position exists only to break tie votes. It has long been clear that Cheney has been corruptly bridging the constitutional separation of powers throughout the Bush/Cheney presidency.

If Armey is right, Dick Cheney has not only behaved improperly, but also criminally: In addition, when lying to Armey, Cheney clearly committed a “high crime or misdemeanor” in his blocking the Constitution’s checks and balances from stopping our march into Iraq. During the debates that took place during the Constitution’s ratification conventions, it was specifically stated that lying to Congress about matters of war would be an impeachable offense. Congress has also made it a crime.

Nonetheless, nothing is likely to happen to Cheney, for Congress is too busy dealing with the disastrous economy that he and Bush are leaving behind as they head for the door. No one seems inclined to hold Cheney responsible, and he appears totally unconcerned about the wrath of history. Yet in lying even to those in his own party, about reasons to go to war, he has sunk to a low level few have reached, and it is no hyperbole to call his actions treasonous to the structure and spirit of the Republic.

John W. Dean, a FindLaw columnist, is a former counsel to the president.

The Trap Behind The Curtain

The Trap Behind The Curtain

Jim Kirwan
All the financial markets are showing green lights, joyous profits! Have real profits returned to the world markets! NO, this is a response to the proclamation, underwritten yesterday by the central banks with $247 billion: What an insignificant amount to pay to guarantee tens of trillions in illegal profits down the road. Yet apparently the gullible, determined-to-believe-followers have apparently taken the bait!
This is a trap of global proportions designed to complete the shell game over ‘the ownership society’s’ claims on everything that matters, to them. What’s at stake is the future of everyone who works, all pension funds, and any remaining idea of retirement after the public has been irrevocably chained to a bailout plan that has no limits!
“US government policy has encouraged recklessness – most recently by taking extraordinary measures to privatize gains while socializing losses. As part of the agenda of its so-called ownership society (excepting ownership of responsibility by powerful bankers and insurers who fail) the govt. even sought to privatize public obligations – recall the Bush proposal to privatize social security. So why not play fast and loose if the rules are heads I win tails you lose?” (1)
All of this has been quietly put into play over the decades beginning with Reagan and continuing through Bush senior, Clinton, and finally to be enacted under Bush Jr. A lot of time went into this segregation of profits from costs, along with massive offshore operations that have hidden the true nature of all that has now failed. No records are available of these “private transactions” which ‘the people’ are now about to be locked-into paying off.
No oversight has been done throughout the last eight years. From the congress to the SEC to the courts! No one has been responsible for reining in any of the outrageous behavior throughout the entire financial community: hence this near total collapse should not have been a surprise-yet obviously the extent of the corruption has shocked most ordinary people-as severely as it has threatened the entire structure of Wall Street and the entire financial community on a global scale.
There were warnings of a more subtle nature, if only the public and the unions had been paying attention. Bill Fletcher on Democracy Now:
“Think about the Silverado Savings and Loan debacle at the end of the ’80s. You know, any time capital, big business, finds itself threatened, all of this whole thing about a free market just goes right out the window. And it’s at that point that they’re looking for government bailouts, for the government to step in and save them. And that happened in Silverado Savings and Loan.
But for working people, for farmers in the 1980s in the Midwest, for working people more generally, when they are being squeezed, the political operatives that represent the interests of big business step in and say, “No, no, no, no. You are not entitled to a bailout. You are not entitled to welfare. You are basically out of luck.” And just as you described, during a period when we were perhaps a little bit more stable economically, the Republicans were able to move that legislation in, that
But now we have-what?-Wall Street, where we’re suffering as a result of the irresponsible, absolutely irresponsible, investments in game planning-playing by these individuals. And what happens? Government is forced to bail them out. Otherwise, we are in complete meltdown.” (2)
By the way Obama’s running mate led the way in passing the draconian bankruptcy laws that currently punish ordinary people and protect the Corporations! Interestingly, the current foreclosures are only demanded on the primary home a person owns, second homes and more are excluded from Biden’s legislation.
If you liked Patriot Acts, One and Two, or HR 1955 & S1959 (Thought- control legislation) then you’re going to love this one because it’s another “VOTE ONLY DO NOT READ,” in the interests of National Security of course, and the panicked need to appear to get a solution quickly!
Congress cannot be trusted; they’ve proven this so many times over with all their wars, with the blunted impeachment attempts, with FEMA and with every other major failure of oversight responsibility during the last eight years!
What his trap amounts to is a reverse-version of The Federal Deposit Insurance Corporation. FDIC was created to protect our money: this piece of the unfolding treason will be created to insure that every citizen will be saddled with enough debt to permanently enslave us, while freeing the gambler’s, the power- brokers and the banks to reap all the profits while mandating our compliance to pay them for all their mistakes – even though
“We” have no idea of how huge this debt might eventually turn out to be!
When was the last time you signed any agreement without first looking at the books? Given the scale of this pending “solution” to the international monetary collapse, is it not necessary to give the public a full and unflinching accounting of what actually happened-along with the heads of those that let this happen!
This will all be accomplished, again, without congress even reading the legislation (per Pelosi’s orders), so that congress can maintain their deniability once this dagger is discovered for what it truly is – the end of individual profits and the beginning of total control over all the financial
assets’ of this nation.
This is a trap from which there will be no escape if we do not stop this from happening, before it too becomes “law”!

The economic meltdown is no accident


Since they are betting, drinking, gambling and enjoying music, so they are “new,” “modern,” “new style” Taliban and “new Afghan incarnation” for the reporter. But he won’t say the truth that these are ordinary Afghans

more about “Dictatorship Watch :: Putting dictato…“, posted with vodpod

The Western media would keep on adding these adjectives only to add legitimacy to an illegal war and illegitimate occupation and justify mass murder in the name of the Taliban and Al-qaeda, despite the admission, as you will see in this report, that “no one talks about Osama, al-Qaeda or Mullah Omar.” All this discussion is part of the Western media and politics’ fantacy world they have created to fool their public into supporting the war of terror.

Satellites cast doubt on Iraq surge success

Satellites cast doubt on Iraq surge success
Sat, 20 Sep 2008 00:48:04 GMT

Satellite images suggest ethnic shift in Baghdad could be behind drop in violence.

An academic study using satellite imagery suggests that the drop in violence in Baghdad is due to ethnic redistribution and not the US troop surge.

The study by researchers from the University of California in Los Angeles used levels of light pollution to track the movements of social groupings within the city.

Superimposing satellite images over neighborhood maps showed that light levels had dimmed by more than 20% more in Sunni-dominated west and south-western regions of the city suggesting that Sunnis had “cleared out”.

Light levels in Shia areas and the Green Zone increased during the same period.

The researchers believe this is evidence of a demographic shift which concluded before the arrival of 30,000 extra US troops in February 2007, the date which supporters of the surge say was the beginning of a decline in sectarian violence in the Iraqi capital.

“By the launch of the surge, many of the targets of conflict had either been killed or fled the country, and they turned off the lights when they left,” UCLA geography professor John Agnew said in a statement.

“Essentially, our interpretation is that violence has declined in Baghdad because of intercommunal violence that reached a climax as the surge was beginning,” said Agnew, who studies ethnic conflict.

The study adds weight to the argument that it was not the US troop surge alone that reduced sectarian violence in Iraq but a range of factors.

Sunni Arabs were driven out of many Baghdad neighborhoods following the bombing of the Shia Samarra mosque in February 2006 which sparked a wave of sectarian violence.

Thomas Jefferson’s PREDICTION made in 1802 is NOW occurring

Thomas Jefferson’s PREDICTION made in 1802 is NOW occurring

Red Dawn wrote:“The first misconception that most people have is that the Federal Reserve Bank is a branch of the US government. IT IS NOT. THE FEDERAL RESERVE BANK IS A PRIVATE COMPANY”…

“I will close with Thomas Jefferson’s Warning To America :”

“I believe that banking institutions are more dangerous to our liberties than standing armies. If the American people ever allow private banks to control the issue of their currency, first by inflation, then by deflation, the banks and corporations that will grow up around [the banks] will deprive the people of all property until their children wake-up homeless on the continent their fathers conquered. The issuing power should be taken from the banks and restored to the people, to whom it properly belongs.”

” Written by Jefferson in a letter to the Secretary of the Treasury Albert Gallatin (1802).”…

“their children wake-up homeless on the continent their fathers conquered”…

I was thinking about Thomas Jefferson’s warning when the Fed (a PRIVATE corporation) took over Fannie & Freddie & AIG. The Fed is going to end up owning EVERYTHING, as Jefferson feared. Indeed, having all those loan facilities which the banks depend on means the Fed calls ALL the shots, and has the banks dancing to its tune. The Fed can tell the banks what to do and what not to do, and even control how much profits the bank make. This is effective ownership.


Systemic Failure of the United States- Game Over

Systemic Failure of the United States- Game Over

By: Jim Willie

We are in historically unprecedented times. The foundation is being laid for a default of USTreasurys in the wake of the greatest regulatory failure in modern history, and the collapse of the US financial system. Anyone who cannot see that suffers from poor vision, chronic nostalgia, low mental wattage, a paycheck from Wall Street, a post in financial press media, or owning an Economics advanced degree. So many changes come with each passing day, not week, that it boggles the mind. Many of us predicted $100 updays for gold, and we almost saw one. The wheels came off the US financial wagon long ago, but only now that fact is being recognized. The monetization largesse finally has gone beyond the corrupt bailouts of fraud kings on Wall Street.

My longstanding forecast has been that when the monetary inflation machinery spits output beyond the sanctimonious walls of the Wall Street whorehouses, INTO THE MAINSTREAM, that the gold price would rise substantially. That process has begun, starting with Fannie Mae & Freddie Mac, and now moving to AIG. Only when phony money floods the system where people live, not where the elite conmen with strangehold control the counterfeit processes, will gold shine. So many unexpected upcoming events will occur, enough to make a forecaster dream. Let’s begin with the most important. Much more details are provided to Hat Trick subscribers.


This is so important a topic, that it deserves top billing!!! Hidden inside the AIG bailout funding package, surely hastily cobbled together, but carefully enough to include a totally corrupt clause, was a handy dandy clause that permits raids. The conglomerate financial firms are permitted at this point to use private individual brokerage account funds to relieve their own liquidity pressures. This represents unauthorized loans of your stock account assets. So next, if the conglomerate fails, your stock account is part of the bankruptcy process. Finally the corrupt USGovt and corrupt Wall Street houses are desperate enough to put into policy, stated by the US Federal Reserve, outlining the authorized raid of your money.

Beware. A good route would be to remove your money, start a subscription here, and open a GoldMoney account, then purchase physical gold or preferably silver with my offered discount. That cannot be taken from you, and will rise 5x for gold and 10x for silver in the next two to three years. The actual evidence for legalized stock account raids by the financial firms can be found in recent articles in Financial Times and Wall Street Journal . So this is not a wild claim. The September 14th article on the Wall Street Journal entitled “Wall Street Crisis Hits Stocks” was the first exposure.

The runs on US banks are in progress. See Washington Mutual, where private email messages have been shared by WaMu bank officers. WaMu alone could deplete the entire Federal Deposit Insurance Corp fund for bank deposit coverage. Eventually the FDIC will compete for USGovt federal money for bailouts and nationalizations. Eventually, bank deposits will not receive 100 cents per dollar, in a compromise. Next the bank runs will push banks into failure, at a time when stock accounts are under raids, without broad public knowledge.


Did anyone notice that on Wednesday the 17th, gold was up big, like over $50, silver was up big, like over 70 cents, but the USDollar was essentially flat, even up a smidgeon? By afternoon, the gold rise intensified, and the USDollar fell hard. THE MESSAGE IS CLEAR: GOLD IS LEADING MOVEMENTS IN CURRENCY PRICES. The world did flock to the USTreasurys, surely led by mangled confused central bankers who have lost control. However, gold is finally being seen as a safe haven. It will become highly amusing to observe a clueless cast of corrupted minds attempt to explain why gold vaults past the 1000 mark, and why silver vaults past the 20 mark. They will offer up reasons, and if lucky, they will touch on at most three or four of the twenty relevant reasons. Their confusion includes observation of the decline in the crude oil price. Their eye is off the monetary panic.

Moral hazard is just an obstacle to be side-stepped in such times. Today, Bill McCullum of PIMCO actually said “We should not give one thought to inflationary consequences.” He was referring to gargantuan rescue packages and now global lending lines to central bankers. And people wonder why gold shot up $80 yesterday, and why silver silver shot up over $1 yesterday. PREPARE IN THE VERY NEAR FUTURE FOR GOLD TO RISE OVER $100 ON SUCCESSIVE DAYS, AND FOR SILVER TO RISE OVER $2 ON SUCCESSIVE DAYS. Inflation is soon to be seen as the remedy to prevent monetary collapse. Gold just hit 900, and silver has reached 12.70 today. The euro has risen 500 basis points just since Friday morning. Gold is not rising sharply due to inflation concerns alone, although plenty of monetary inflation is set to continue flying through the money pipelines. THE REAL REASON WHY GOLD IS RISING IS FOR THREAT OF SYSTEMIC FINANCIAL FAILURE CENTERING IN THE UNTIED STATES.

What factors are key to gold rising? Perhaps because the US financial system is imploding. Perhaps because the USGovt nationalization demands are accelerating. Perhaps because the threat of default for USTreasurys is seen as inevitable, even imminent. Perhaps because nitwits who have highjacked the White House and USMilitary are planning something truly reckless on the military front in Iran. Perhaps because the US Federal Reserve is depleted and secretly insolvent, even as they put word out of an INFINITE BALANCE SHEET. Perhaps because enormous demand has come in physical gold & silver, despite the low price set by corrupt US PaperHangers. Perhaps because fear has entered the room globally.


The financial firms are not just dead, they are corrupt to the core. Perhaps one or two Wall Street firms will be left standing in a year or more. Has anyone figured out why foreign pursuit of Wall Street firms is blocked? Partly because foreigners cannot assess the value of such complicated opaque assets, intertwined within nests of acid pits. The other reason is that US banking authorities wish to keep the protected corrupt evidence within the Manhattan fold. The South Koreans wanted a piece of Lehman Brothers, the best pieces. But they would have had access to evidence needed eventually in criminal prosecutions. See the KfW case of € 300 million theft, possibly soon to emerge against Lehman crooks. The German insurance titans wanted a piece of AIG, the dead insurance giant. But they would have been handed access to evidence of extreme vulnerability or criminality. Why were officers at Lehman permitted to remove box after box from their building, when it should be treated as a crime scene with yellow cordon tape? The answer has to do with the Fascist Business Model, the merger of state with business, where the syndicate facilitates fraud in deep collusion.

Why did Morgan Stanley stock go down hard after they announced early their quarterly earnings? Possibly because nobody believes they are honest. Morgan Stanley might be kept afloat longer, so as to enable theft of brokerage account funds. Lehman does not have private stock accounts, mostly bonds of the acidic type. So Lehman is free to enter the trash heap of liquidation and the de-bone process for assets. Meat is to be separated from bone. John Mack of Morgan Stanley had better be careful, as he appeals for a Chinese role in a merger. That could give the Chinese an important toe-hold in US mortgage bond ownership. They are looking to convert mammoth USTBond garbage paper into hard assets, as a foundation to a possible migration of one hundred thousand to one million elite Chinese, to California, Arizona, Las Vegas, and Florida. It is called colonization.

The moral of the consolidation story is that the dead are marrying the dead. The Bank of America merger with Merrill Lynch struck me as hilarious. Each is dead from insolvency. Each has big counter-party risk from coverage of failed bonds. So they will now serve as each other’s guarantor of counter-party risk? Not in this world! Imagine two fat men absent of musculature tossed overboard a ship. They tell each other, “Stand on my shoulders and you will be fine for breathing in this vast sea.” They both sink. The end game for such ludicrous indefensible consolidation is that the Wall Street fraudulent corporations go down all together. A friend called last night from the analyst community. He wondered aloud that nobody could expect the speed of the breakdown.

My response was to point out a strong message mentioned here repeatedly. Since the Bear Stearns bailout killjob merger by JPMorgan, all Wall Street investment banks are aligned in similar fashion, with common bond risk and common counter-party risk. So when one Wall Street firm goes down, several will immediately go down, and AIG is the umbilical cord to the Main Street economy. This point was borne out as wickedly true when the Lehman funding bailout failed. The parties trying to bail them out, offering funds, all found themselves as subject to writedowns immediately. The funds they offered were not available, since the loop of price reality reduced the level of the offered funds!!! That means they are all in the same boat, and if one fails, they all fail. So the system will desperately attempt to avoid any failing. Thus, the entire system fails.

As simple citizens, people should be concerned that the US Federal Reserve and US Dept of Treasury have begun to take actions far outside their own legal powers. The bailout of AIG was made illegally. The USFed cannot act to aid non-bank entities. Senator Jim Bunning has drafted Congressional legislation to limit the USFed action outside the banking realm. The system is losing control, especially with the law.

The parade of doomed deals continues. Talks have begun for JPMorgan taking over Washington Mutual. Could the JPMorgan ‘Garbage Can’ be inadequate soon? Bank of America has entered talks to take over Merrill Lynch, apparently striking a deal. Could BOA serve as the alternative ‘Garbage Can’ next, whose service would be as squire to JPMorgan? Now Morgan Stanley is in talks to take over Wachovia. The disaster du jour today seems to be State Street, which was down over 50%. The dominos are falling. THE MESSAGE IS CLEAR: THE DEAD ARE MARRYING THE DEAD. It is unclear what music to play at such events. My suggestion is something from “Phantom of the Opera” would be apt.


The US financial sector became unglued this week. In last week’s article, the point was made that the financial system had just that one week to lift the USDollar, to raid private accounts with games like yanked credit and a raft of paper naked short gold & silver future contracts. Then next week the brown excrement hits the fan. Over the weekend, deals were attempted to be forged into the night. Nobody seemed to ask the question why they were all acting like in an emergency. What emergency? A condition ordered by whom? My maintained point is that the Bank For Intl Settlements ordered the US bankers to fix it or flush it!

Big news was expected from my analysis, and my Hat Trick Letter newsletter. We got it! By the way, AIG was not on the radar for numerous analysts. It was on my radar, a secondary radar. The big banks are primary for my observation and monitor. WE ARE WITNESSING A CONCENTRATION OF RISK, OF RUINED CORPORATIONS, AND OF THEIR ACIDIC BALANCE SHEETS THAT IS SO GREAT THAT THE RISK OF US FINANCIAL IMPLOSION GROWS BY THE DAY !!!

Blame for speculators continues, as nitwit players within the fraud centers accuse others of speculation, and threaten prosecution by their watchdogs on leash. Recent research failed to disclose any collusion or illegal activity in the crude oil market. That does not stop continued claims, with hue & cry. These criminals are pathetic, if not consistent. Just when failed regulation is at the core of the financial crisis, Wall Street conmen and clueless Congressional legislators argue for more regulation and control, when the regulators and controllers deserve prison terms. Instead, prosecute the regulators and controllers, and begin with Alan Greenspan, and his knights of the Stupid Table at the Federal Reserve.

The financial crisis continues each day. Last Friday the currency markets smelled what was cited in broad terms as the end of the OPEN WINDOW for the US banks. The euro currency rose over 220 basis points that Friday, and the pound sterling rose over 330 basis points. Gold and silver firmed in price. Something tipped them off, like huge flows of private money out of the Untied States. This week, AIG and Merrill Lynch and Morgan Stanley dominate the news. On two different days this week, the NYSE Dow Jones Industrial index fell over 400 points. Today, when the Dow Jones Index was up 170 points, in a phone call to a trusted friend, we both agreed that the index would turn negative before the afternoon, and close down. So far, that call looks correct, as it was minus 100 points before now being up 50 to 60 points.

By the way, important option put stock positions are in place against Goldman Sachs. They point to a strong likelihood of the GSax stock falling to 80 or 85 imminently. The knock on GSax is that they have lied about their subprime mortgage exposure, and soon will be forced to come clean. The ‘GS’ stock shares plummeted from 160 in early September, now to under 100. Justice is served. My guess is their executives will profit privately from shorting their own stock. Even their 6-month corporate paper must pay out 20% in bond yield in order to attract funds.


OK, so finally the US Federal Reserve has opened the monetary spigots to England, to Europe, to Switzerland, to Japan, and later to Canada. Not only is the monetary spigot overflowing inside the Untied States, it is overflowing from the US to the world. At least to the world affected (infected) by US control. The total central bank infusions of liquidity (translated: phony money) is $180 billion in the last several hours alone!! This huge amount is not enough to quiet the LIBOR or the 2-year USTreasury swaps. Gold is rising versus the pound sterling, the euro, the yen, and Canadian Dollar, aka the loonie. This trend is new and powerful. Central bankers are growing desperate. Their measures to open numerous lending facilities have not stopped lending constraints. Even commercial paper has fallen by $52 billion last week.

Clownish anchors and analysts cannot seem to comprehend what is going on with the central bankers, liquidity injections, market tanking, USDollar decline, and gold & silver zoom. They wonder why the USDollar would continue to fall after central bankers reacted responsibly. BECAUSE THE USTREASURY IS DOOMED FROM INSOLVENT BANKS, EXTREME DEMANDS FROM NATIONALIZATION, AND RECESSION, AGAINST A BACKDROP OF ENDLESS WAR FOR PRIVATE SYNDICATE BENEFIT. It is obvious! Gold smells a systemic failure.


A hidden initiative has been in progress for the last two weeks. Foreigners are forced to supply credit for the Untied States. Nations led by Russia, China, Arabs, and Japanese are meeting to form a formal committee. They have a common purpose, to maintain and manage massive US$-based debt securities in danger. Their continued credit support is hampered by three magnificent factors, each a show stopper.

1) The US banks are insolvent,

2) The Wall Street bankers export fraudulent bonds, and

3) The USMilitary has acted with chronic aggression in violation of established contracts, international treaties, and disrespect for sovereign boundaries.

So they are working to organize a committee of giant USTreasury Bond creditors. They wish to confront the US debtor with a single voice. Regard this important step as a prelude to possible default of the USTreasurys . It is one thing to be in trouble from insolvency. Add corruption from export of fraud, and you have a bigger problem. Throw in military aggression, complete with misreporting by a controlled press, and you have a crisis in need of almost immediate remedy. My argument has been made for four years, that foreign held US debt creates a threat to national sovereignty. Since when are the Chinese our friends and allies? They are business partners turned rivals, now adversaries. Since when are Russians our friends and allies? They are energy and metals suppliers, betrayed by treaty violations, now adversaries, even on the military front. Since when are Arabs our friends and allies? For three decades an uneasy partnership has been in existence, one that has turned into a blatant protection racket. The endless concocted war on terrorism is seen by Arabs as a war on Islam.


Don’t be fooled by the drop in USTBond yields. That is a symptom of collapse in my view. Yesterday, it was with great disillusion yet satisfaction that my eyes and ears witnessed an interview by a Standard & Poor analyst. He said there was no imminent danger of a USTreasury debt security downgrade, but he did say that if pushed, the S&P would put them on NEGATIVE WATCH. Interpret that to mean the USTreasurys will soon be downgraded. Never is a denial of such importance made without coming to fact and fruition later. Why else is the topic even discussed? This line of thinking is basic when ripping the BS from US financial propaganda. Notice the Credit Default Swap price for USTreasury Notes. The price is around 0.24% for the AAA-rated USGovt debt. Without colossal continued corrupt pressure against the ratings agencies by the US thugs in financial orifices, the USGovt debt would have been downgraded immediately with the launch of the Iraq and Afghan Wars, or years earlier. The Shock & Awe should have been reflected in USTBond risk.


The US bankers have lost control badly. Even ill-equipped USFed Chairman Bernanke admitted recently as having lost control. He spoke to economist David Hale at a Florida financial conference last week. Bernanke said, “We have lost control. We cannot stabilize the dollar. We cannot control commodity prices.” The age of central bank control, ala Soviet Politburo, is coming to an end. GOLD RECOGNIZES IT. Check out the 1-month USTreasury Bill yield. Incredibly, it closed under 0.1% yesterday. This ultra short-term bond yield testifies to lost control and the advent of extreme conditions, the prelude to an historical storm. Just what should the USTreasury maturity yield curve look like before a default? Let me check, and get back to you. Ooops, no precedent! The TED Spread (difference between USTreasury and EuroDollar yield) has jumped up, another signal of banking turmoil.

In recent days, the tight grip control of certain commodities has been lost by the Evil Ones. Even Morgan Stanley has been forced to close down its trading desks at the Platts Window, where they trade crude oil. The USCongress is equally lost. Today, a quote came from Senate Majority Leader Harry Reid. They are unlikely to pass new legislation to overhaul financial regulations this year. He said, “No one knows what to do. We are in new territory, this is a different game. [Neither Federal Reserve Chairman Ben Bernanke nor Treasury Secretary Henry Paulson] know what to do, but they are trying to come up with ideas.” Gee! Maybe the chief architects of this grand failure have a solution? They should be ignored then imprisoned. Perhaps they are seeking final opportunities to steal, raid, and pilfer from the public till during the final months of this Administration.

The 2-year USTBill yield has also plummeted, but not as drastically. It is now far below the official USFed Fed Funds 2.0% rate. Some thought the USFed might cut rates in an act of desperation this week, me included. My guess is for two reasons, why they did not. 1) They did not want to project an impression of lost control, not after the Fannie Mae & Freddie Mac bailout, not after the failed Lehman Brothers deal, not after the shotgun wedding for Bank of America & Merrill Lynch, not after the secret eloped marriage in the works for JPMorgan & Washington Mutual, not after the merger of cadavers planned between Morgan Stanley & Wachovia. And 2) the Bank For Intl Settlements in Switzerland might have forbidden a USFed rate cut. My maintained position is firm, that the BIS ordered the US to fix it or flush it! Let’s watch to see if the 2-year TBill yield continues lower, a signal of even more lost control.


My greatest impatience is shown for those who attempt to argue whether inflation or deflation is winning, and where we stand. Such pursuits of chasing one’s tail serves to illuminate nothing and to waste time. We have both, will continue to have both, as both intensify. The key is for monetary inflation to enter the mainstream, which is underway finally. One can benefit little from putting the unique crisis into convenient cans for purposes of organization. This is not simple, and people should not attempt to simplify the ongoing collapse of the Great American Experiment in Counterfeit Monetary Systems. To be sure, we have gone past a tipping point. The move to flood the monetary pools of phony money beyond Wall Street is the big event. To be sure, the bankruptcies and deep insolvent events are accelerating. To be sure, the desperation for attempted mergers is palpable. To be sure, central bank activity with lending, swapping, and even accepting stock equity as collateral is a sign of total absence of any safeguard toward respect of moral hazard.

Looking for inflation vs deflation labels when the failure and default of USTBonds and receivership occur TOTALLY MISSES WHAT IS GOING ON. This is a death event for the US finances, US banking system, USEconomy structure, and USTreasurys, all rolled together like a gigantic vortex hurricane. Looking for (in) vs (de)flation in this environment is like observing color schemes on walking dead as they attempt to merge at a ceremony. They are of DEAD PARTIES ATTEMPTING TO SHARE COUNTER-PARTY RISK. Looking for (in) vs (de)flation when dead partners are marrying is like DECIDING WHETHER A HONEYMOON SHOULD TAKE PLACE IN THE CARIBBEAN OR FRENCH COAST. They both go to the recycling cemetery instead. The place to be now is in gold and silver, preferably silver since central banks own none and because silver has strong industrial demand. Besides, a silver default of sorts has been in effect for several months.

It is with pleasure to attend again the upcoming Cambridge House conference in Toronto on October 4 and 5. Thankfully, my Frequent Flyer miles were used to cover the airfare from Costa Rica, where the rainy season is coming close to an end. POR FIN! Is that inflationary or deflationary? With absolute certainty, one can say WHO CARES?

Buy gold, buy silver, do NOT use borrowed money or leverage, and rest comfortably at night, since it cannot be taken from you. Then patiently wait for gravity to work, for night to follow day, for evil to be unmasked, for foreign creditors to arrive with hatchets. dvz


From subscribers and readers:

“Your analysis is of outstanding quality, the best I have read. In particular, as a person on the spot, I can confirm the accuracy of your bleak assessment of our prospects in the UK .” (JanB in England )

“I just subscribed to your services and must say that your insights are so eye-opening that it is like having a window to the future. I never thought that they would in so much detail encompassing the entire world. With all that is going on, I still wonder how you are so in touch with it all.” (ChrisB in Australia )

“The latest Hat Trick letter is great work. I am still reading and absorbing, but this is just great analytical work. Truly inspired. I would say you produce a very sophisticated, detailed product that is the best of the bunch. Truly. You help keep me very focused on current events and help me keep my eyes on the distant horizon.” (RichardB in Texas )

“Your unmatched ability to find and unmask a string of significant nuggets, and to wrap them into a meaningful mosaic of the treachery-*****-stupidity which comprise our current financial system, make yours the most informative and valuable of investment letters. You have refined the ‘bits-and-pieces’ approach into an awesome intellectual tool.” – (RobertN in Texas )

“Your reports scare the hell out of me every month, probably more so over time, since so many of your predictions have turned out to be very accurate. I am afraid you might be right that by the end of 2008, we are in a pretty severe situation, with civil unrest and severe financial stress on Main Street .” – (GeorgeC in Minnesota )

by Jim Willie CB
Editor of the “HAT TRICK LETTER”
Home: Golden Jackass website
Subscribe: Hat Trick Letter





Nothing is irreversible. Taking a stand is romantic, but not a substitute for day in, day out, lifetime dedication of hard work. Whether Bush does anything before going to the happy sage brush fields in the sky, or Obama or Maccain get in, Americans who really care about their country should be working in these areas:To wit:

APATHY AND CONFUSION- The most active and powerful political party is the party of indifference. This represents a victory for the ruling  party. In addition to this, the right wing has unscrupulously hijacked the language of the left for its own ends, distorting words and phrases like “politically correct” sexual harassment” ” hate speech” “feminism” to serve its own reactionary uses. The result is confusion and voter apathy, qualities that serve the ruling class in power. If the opposition is timid, and intimidated by the rhetoric, there is always the danger that an elected  left government limit itself to administrating   the crisis and engaging in the same kind of politics that the right-wing does, allowing the right to set the agenda even when it is out of power.
FREEING THE SOCIAL FORCES- The left must work to create a new balance of power in the correlation of forces, using what is progressive, and strengthening that.  It must include all people exploited by capital—-permanent workers and temporary workers, contracted or subcontracted, union or non-union, along with all the other social sectors that have been damaged by the neoliberal system. When one thinks of building a movement, one must also overcome the old and entrenched mistake of trying to build a political force, whether by means of arms or the ballot box, without building a social force at the same time. It must  tear apart the barriers that the enemy puts up to prevent the movement from being built. The new political organization should have in its sights not only on the economic exploitation of the workers, but also on the diverse forms of capitalist oppression and destruction of humans and nature that go way beyond the basic relations between capital and the  workforce.  It is not about simply defending discriminated and exploited people, but of understanding the radical and transforming political potential that exists in all of these struggles. The new political organization should not try to take over legitimate  representatives of all those who strive for emancipation, but rather try to articulate its practice into a single political project, at the same time generating spaces so that the different social problems can recognize each other’s needs and create a consciousness, which is the result of specific struggles that each one has in their particular area: neighborhood, university, school, factory, etc.. There should be a creative tension between the social movements but they do not have to lose their autonomy or their roots, because that is their strength. A different style starts with the basic idea that the social force is not something already given, but rather has to be built, and that the ruling class has strategies in place to prevent it from coming into being. This implies that one does not allow oneself to be carried along by events, but instead acts to build organizations that are capable of giving millions of people a single will.
(1)-The ruling class takes off its mask and reveals its undemocratic methods of struggle.
(2)-The people become politicized and learn with extraordinary speed  their  historical and social practice, their  ideas and values,  conceptions, as well as their  forms organization in struggle and styles of work.
(3)- Very often left organizations have overvalued  this indirect knowledge,  underestimating forms of knowledge such as those that are based on direct experience, in collective and social practice of the people. There is a tendency to ignore the knowledge that is acquired in this manner by the dominated sectors. Direct experience is considered unimportant in building knowledge, especially if one is talking about the social experiences of ordinary men and women. To forget the past, to not learn from failure, to ignore one’s own traditions of struggle, is to help the right, which has the greatest interest in erasing the historic memory of the  people.  This winds up leaving the analysis of reality in a handful  of intellectuals.
DIVIDE AND CONQUER- A key element in the strategy of power of neoliberalism is to achieve maximum fragmentation of society, because a society divided into different minority groups is not capable of building itself into a majority that can challenge the hegemony of the ruling class, and that is the best formula for the reproduction of the system.
THE VANGUARD- The “vanguard” considers politics as the only way of knowing the truth: The party is the conscious element, it holds the key to knowledge, and the masses are the backward sector. This vision is based on a simplistic interpretation of the thesis regarding the need of the fusion of theory whithin the working-class movement. This vision leads to relationship with the masses characterized by a strong dose of authoritarianism and verticalism.
SPONTANEOUS ACTION- The direction of the movement,  where the poorest urban masses have risen up and under no particular direction have taken highways, towns, neighborhoods and supply centers, in spite of their massiveness and their combativeness,  did not manage to destroy the ruling system in power.
SECTARIANISM- One must remember that in politics it is not only necessary to be  right; one  must act at the right time and have the strength to materialize  forces. Each organization  fights for the title of the most  revolutionary, the most just etc.; What is important is the sect, the outward appearance, and not the movement. As a result, many organizations fall into sectarianism. This leads to another deviation: The tendency to pile up many leadership responsibilities on a few people to control everything from above instead of going through the process of patiently working with the base. The tendency is to make a theoretical general analysis that is unable to explain how concrete processes function. What comes out are agitational politics and sloganeering, which does not contribute much to the popular social forces. Great strategic goals are planned, e.g., the struggle for national liberation and people´s power, but there is no concrete analysis of the concrete situation.
There is a confusion between tactics and strategy. The leadership confuses the state of mind of the most radical members with the state of mind of the popular sectors at the base.
DEMOCRACY- Democracy has three basic aspects:
1.-The problem of representation and citizen’s rights. People go to the polls and vote
2.- The problem of social equality. Promises may be kept, but can also be dismantled in the next election.
3.- The role of people’s participation and the people as protagonists. The people control the politics and the economy.
The most characteristic aspect of people´s power must be the practice of participatory democracy, where people are the real protagonists in the building the new society; where people’s self-organizing is stimulated and respected, without trying to make them submit to the party or to the state. People´s power cannot separate itself from democracy; it can only be  a greater and more intense expression of democracy, and an enormous expansion of it in relation to the more limited ruling class democracy.
One should not confuse the rule of right (law) with the rule of the right. Popular participation must be welcomed, and the method of arriving with pre-established schemes must be abandoned. We have to struggle to eliminate all verticalism that discourages the initiative of the masses. Our role is that of orientator and not a matter of taking over. We must learn to listen, we must then speak to people, and of all of the ideas that are gathered we must be able to diagnose a correct plan that reflects their true state of mind, synthesize that which can be unified and can generate action, and fight against pessimism and ideas of failure. At the same time,  one must avoid falling into an ultra-democratic deviation, where more time is spent in discussion than in action because everything, even that which is unnecessary, is discussed and the action becomes nullified. To achieve consensus  it is necessary to have ample discussion, where everybody gives their opinion and where finally agreements are adopted that all have to carry out. To achieve coordinated action, the lower organs have to take into account in their decisions the instructions that come from the higher organs. Initiative shows itself in the willingness to take responsibility, in an orderly style of work, in courage and aptitude for solving problems, for expressing opinions, for criticizing defects, as well as in the control that is shown, with the comradely care, over the higher organs.
THE MAJORITY AND THE MINORITY- In order for a democratic political system to reflect the interests of the majority, the interests of those who are opposed to it have to be limited for the benefit of the people. The dictatorship of the proletariat is simply another name for the widest popular democracy, the right to force the majority interest to be respected. If this right is not practiced against the opposition, one would go against the very concept of democracy, because the majority would not be respected . The most representative ruling class democracies are actually ruling class  dictatorships, because they express the supremacy and dominion of the minority ruling class. They impose their class interests on the rest of society.  The minority must submit to the majority, while the majority respects the minority’s ideas. The minority must not be crushed nor marginalized, it must be respected. It need not give up its political, theoretical, or ideological agenda. On the contrary, it has the duty to continue struggling to defend minority ideas until it convinces or is convinced. The minority can be right, and attempts to crush them leave only one option: The formation of a splinter group. These groups are accused of being divisive. Weren’t the real devisive ones those who provoked the division in the first place, those who forced minority groups to use the only way out if they tried to defend the positions that they believed to be correct?
Better results are gotten in general meetings where different ideas by quality presenters can be addressed, where they have profound debates in which they defend their ideas so that others can continue forming their own criteria. If dialogue and debate do not allow one to reach an understanding, the differences can be resolved by a vote. In order for this to function we have to assume that people are willing to submit themselves to the results of the voting. This is fundamental
Not every meeting is synonymous with democracy; meetings may not be productive if people do not have the right information, and if they are not politicized. It is fundamental to give information to the people. There is no democracy with people who are unequally informed.
DIVERSIFICATION- What must be avoided—that these currents of opinion must not become stagnant, or fractionalized, or parties within a party; and that the theoretical debates become the excuse to impose a correlation of forces that has nothing to do with the debate at hand. You don’t always have to have, for example, the same group of people who have the same position in terms of the role of the state in the economy, coupled with those who have the same position on the role of women in the economy. This should only be done if the different positions are complemented. There can be many differences around many things, but there has to be a consensus on the program. There can be many tactics but only one strategy. There are forces that add and forces that subtract, and there are those that multiply; for example, a political coalition that brings together all the left groups whose militancy surpasses the degree of militancy in each one of the individual groups. Ignoring this fact and demanding a uniform militancy is to limit and weaken the political organization. Some people are ready to militate round a certain theme: health, education, culture, and not at work or in a particular geographical area. There are others who want to act only at particular times, elections, for example, although at key moments one can always count on them, and in daily life they push for the project and the values of the left. Trying to box in the members into a single form, the same for everyone, twenty-four hours a day in seven days a week, is to leave all the rest outside, and to ignore their potential. One way of doing this is to create groups outside the party itself that are useful to the political organization that can take advantage of the theoretical or technical potential: research centers, centers of publicity and propaganda, discussion of issues such as agrarian reform, oil, housing, education, the national and external debts, etc. It is necessary to have a strategy that includes forces that operate in the great world power blocks, and to establish  multilateral relationships with each one of them as a way of dislocating the political concentration of globalization. It is necessary to checkmate capitalism in the areas of state or non-state governments, in militancy or non-militancy of members, in party or non- party politics, in social movements, in scientific and technical complexes, in cultural and communications centers, in forms of understanding, and in self-directed organizations.
INDIVIDUALISM- To fight against individualism, something we have to do, does not mean to negate the individual needs of each human being. Individual interests are not contrary to social ones; they are complementary . If political work prevents some from carrying out a more human existence, they should be conscious of the fact that they can fall into dogmatic extremes, into cold scholasticism, into isolation from the masses. Traditional practices on the left must be overcome, such as a kind of  fundamentalism,  seriousness, rigidity, often heroic, but also not very attractive for the population in general and frequently sterile.
POLITICAL CHANGE  WITHIN  EXISTING STRUCTURES- Sometimes elections have been lost by putting forth a party platform based on internal prestige, expression of a particular correlation of internal forces, without taking into account the opinion of the population about the candidate The area where it will always prevent any further activity is in attempts to build an alternative society . From this we can deduce that as the left grows in power and influence, it must be ready to face strong resistance by the groups most closely tied to financial capital, who will use legal and illegal means to prevent a program of democratic and popular transformations The army can be invisible in the barracks, but the fundamental wellspring of the ruling  class in the current system of limited democracy is based on coercion.  When there is a revolutionary crisis at the heart of the  power structure, it is absolutely expected that the rulers will turn from ideology to violence .
The Revolution must be international, democratic, multiple and profound, or it will not be. People are tired of speeches that do not correspond to the desired results, of leadership organizations that negotiate on their own for the supposed well-being of others; of gigantic machines that stifle the initiative, the action and the word of the individual. The new morality must tend toward the disappearance of the contradictions between social values and individual values; it needs to try to build a world of cooperation, solidarity and love. Those who feel the opposite, that we’re living in a period of ultraconservatism and that we are in a great disadvantage as far as the correlation of forces at both a world and local levels,  feel that what we have to do is to accumulate organizational and political experience within the framework of legal ruling class institutions to prepare the conditions for change, and we feel that access to the local governments by the left is a positive thing.
It’s not about diminishing the role of the state, but rather about de-privatizing it, that is, preventing that the state be used for the private interests of privileged groups, in other words, to democratize  it. The left has at times participated in elections with the idea of making a government exclusively of workers, but very soon has been forced to admit that such a policy is not viable, because besides isolating them politically and socially, they need the government  to approve  fundamental reforms that will allow them to govern, for example taxes, the budget, etc. The only way to find it is by having a correct policy of alliances, something which the most  radical sectors of the left do not understand.  This minority tries to oppose and sabotage them, but it is possible to negotiate with some of the social sectors and to neutralize others. First, in raising projects that are very well developed and so attractive and popular that it is difficult for legislators in the opposition to be against them if they want to keep their electoral support; the second consists in trying to negotiate directly with the legislators of the different benches, so that they can include in their proposals some of these ideas of their own projects; and the third consists in mobilizing social sectors interested in these project to pressure the chambers. Since within this margin of autonomy,  the government may put in practice measures which the political organization does not agree with, because it compromises it in the face of public opinion, the dilemma of public criticism is created.
SMEAR TACTICS- This means that certain responsibilities must be assumed–knowing when such criticism will be taken advantage of by the right to smear the left government– or lying and making it appear that the party supports a policy which it does not in fact support. This is an inherited result of former political clients and cronyism, the apathy of the oldest public servants unwilling to change their habits because they’re comfortable in the old-style work and the lack of will by those who do not agree politically with the left administration. Further, the government must combat the neoliberal arguments that the government is inefficient and that it needs to reduce state spending and privatize public services. The left government must demonstrate efficiency if it is to survive, and for that it needs to ration and modernize services without getting rid of the functionaries Some of these local governments have managed to modernize without laying off anyone, recycling the workers as they are put on other activities. They are given courses to prepare them, proving that in this way the humanist concern for the defense of working conditions of the workers is not contradictory  with modernizing state enterprises and public services. The result is that there is great pressure by these workers to raise their salaries. Left-wing city halls are very sensitive to this situation: they know that a just salary is the means for the workers to recover their dignity. How to resolve this with limited material resources, and at the same time channel resources into social projects meant to satisfy the needs of all the poorest members of society? In this area there have been some interesting initiatives: the first is tied to raising salaries consistent with the collection of taxes. This allows municipal workers to see that their work is tied to a global whole and not just to the city and its needs. Public servants must understand that to defend public services they must maintain high quality, because a population is well taken care of  is motivated to support and defend public services against privatization. The great challenge  that these city mayors have had has been to be respected without being authoritarian, and to combine this with respect for the autonomy that social movements must have. When one is concerned about working conditions in the life of public servants, and one values their contribution to society and allows them to recover the dignity, this in itself allows the worker to increase his/her self-esteem and this in turn has positive results on worker efficiency At the same time, when there is a better quality of services, workers feel more satisfied with themselves and are more apt to receive the appreciation of the population. This has not been easy. When a popular government triumphs, not only does it face great skepticism and apathy, but in the face of a weak, fragmented and de-politicized popular movement, it can find a population that is accustomed to populism, to political clients and cronyism, ignorant of politics, simply ready to ask for things. In the popular assemblies, petitions can be gathered that widely overshoot the capacity of the municipal government to comply.
WORKING IN THE COMMUNITY-A serious problem for these governments when they try to make contact with the population is that they only meet activists: the worker, the president of a neighborhood association; a housewife  who is a leader in the community, activists who are politicized, but badly politicized, because they carry the vices and the fundamental defects of the traditional political system; populism, bossism, verticalism, corruption and manipulation of the popular movement. It is also important that administrative leaders and all those who do community organizing listen and are flexible enough to accept the people’s ideas, even if they are not their own. There can be technical criteria that are very valid, for example to place a bus stop in a particular location. If the people have a different idea, and the representative is not capable of convincing the  population with his argument, the people will feel overwhelmed by his authority.
THE PARTICIPATORY BUDGET. What defines the participatory budget is that in this case it is not just legislators or the governors behind closed doors who make decisions over the gathering of funds and public expenses, but it is the population, by means of debates and consultations, who assigns value to incomes and expenses, who decides where investments shall be made, what are going to be the priorities, and which public works have to be developed by the government. The participatory budget, by encouraging popular participation, especially by those most needy, is a powerful weapon for better distribution of resources throughout the city. The participatory budgets is also transformed into an instrument of planning and control over the administrators. The lack of organized control by the people is what allows corruption and the channeling of resources against the collective interest Later the delegates go throughout the neighborhoods and have a series of meetings with the neighbors to gather their demands. The neighbors establish what type of works have the greatest urgency in their neighborhood. The delegates estimate the cost of the works at their monthly meetings. Once all the smaller meetings have taken place, there is a general meeting of the whole region. The government presents an estimate of the income and expenses for the following year, and each region turns in their priorities and demands. In this general meeting the advisors for the participatory budget are elected. Advisors have as one of their main tasks to decide what public works are going to be carried out in the city, taking into account the proposals of the administration and the needs of the different regions. The participatory budget is also an efficient instrument in the struggle against cronyism and the exchange of favors. Since the neighborhood decides which works are to be carried out, the influence of self-appointed leaders, legislators and local strongmen is diminished. This has the effect of making everything more competent and of reducing bureaucracy. People are more satisfied with work that has been brought into existence by them. The quality of life is improved, and people are more ready to pay taxes.
CITIZEN PARTICIPATION. Probably the most significant achievement is to motivate citizen participation in the government of the city. The neighbors know and decide public policy in a concrete form, and this allows them to grow as human beings, because they have a newly found dignity–they are no longer beggars. They become politicized in the widest sense of the word, it allows them to have an independent opinion because they are no longer subject to manipulation; it turns them more and more into owners of their own destiny. This process allows them to break with the traditional alienation of community leaders who see problems as only affecting their own individual street. People begin to understand that their problems are tied to the national social situation, and even the international situation.  Autonomous organizations in society need to gather forces and gain control over present governments and begin to delve into areas that combine representative democracy with direct democracy in voluntary participation of spaces created by the administration: culture, health, citizenship, jobs, gangs, education, discrimination and racism. Local governments in the hands of the transforming left can be a weapon against neoliberalism, showing the world that the left not only says it’s better, but indeed is better. There is something no less important: these are indications of an alternative path. The responsibility is very great. They not only have the dreams of the people in their hands, but also part of the political future of the left. The problem is not to say yes or no reforms, but to examine when it is necessary to fight for reforms and what revolutionary harvest can be reaped from them. Neither the use of violence on one hand, nor the institutional promotion of reforms on the other, can be used to establish a line of demarcation between revolutionaries and reformists.
REFORMS ARE REVOLUTIONARY -1.-If reforms are accompanied by a parallel effort to strengthen the popular movement so that greater numbers of people join the struggle. 2.-If learning takes place as a result of an action by the left . An electoral campaign, for example, can be an excellent space to educate people, assuming it is expressly addresses the most important political questions; (but it can also be just a simple exercise in marketing, which instead of raising consciousness, leaves one disoriented , or, simply does not add anything.) 3.- If they  show a different political practice, one that does not allow left activity to be confused with traditional politics, and reflects at the same time an effort to show the limits of the institutions and the need of transforming them, avoiding the creation of any illusion that reforms are going to solve problems which actually demand revolutionary solutions.
Some reformist deviations are: 1.- The tendency to moderate programs without giving a political alternative, being content with the argument that politics is the art of the possible 2.- Calling for “responsibility and maturity” from union leaders and the working-class movement, instead of investing forces and time in encouraging the spirit of struggle. Working always in the area of negotiation, avoiding combative mobilizations with the pretext of not restraining the function of the State. 3.- The tendency to avoid conflict, to call for dialogue and peace, instead of calling for change. (This does not mean that the left should refrain from working to establish the widest dialogue and alliances against neoliberal forces, but it must learn to manage the confrontation–agreement dialectic.) 4.- The tendency to passively occupy existing institutions without trying to change them, or to change the rules of the game.
CARRERISM- One of these deformations is political careerism, the idea than one must always move up, that there is something degrading about going back to being a simple member at the base. Many times the organization itself justifies this attitude by arguing that they cannot lose the investment that has been made in the preparation of the cadre, but in fact the experiences that have been acquired in one sphere can be used in another. Another pernicious element is to prefer being a player as opposed to working at the base. These cadres are seduced by the perfume of the elite and can no longer stand the smell of the people. They use bureaucratic barriers to not participate directly with the people and they inform themselves by means of groups of advisers and lose all possibility of taking the pulse of the people. They don’t seem to realize that the best disinformation mechanism is made up by those who should keep them informed. These advisors communicate to their bosses only that which is positive, ignoring difficulties, whether to not pile on too many worries on the candidate, or for the selfish reason of wanting to be congratulated by the good news that they bring.

COOPTATION. This great challenge is to not allow oneself to be co-opted by a system that has thousands of threads to trap the candidates in its net, from salaries that are higher than anyone in the popular movement can achieve, to a series of perks that accompany the job: airplane tickets, hotels, diets, paid advisors, even places to live, in addition to the social status that accompanies the job. It’s not a matter of governing for the sake of governing, and it’s not a matter of administrating a crisis, but it is about governing in a different way, showing at the local level what the left could do at a national level. A good local government is the best introduction, in the face of skepticism, that the left has. One of the greatest challenges is how to achieve being a party of government and continue being a party of struggle. Popular government must be completely transparent, and be ready to submit to public control in terms of finances, in terms of state resources, as well in hiring. It must respect the autonomy of popular organizations, accepting as normal that there are tensions and contradictions within the government of the popular movement.
1.- The tendency to see the job as an end in itself and not as a means to serve the project of social transformation, which is why many cadres hang onto their jobs and consider it a humiliation to go back to being simple members of the base.
2.- The connection with the popular movement only at elections and for electoral reasons.
3.- Individualism and the campaigns. Funds are gathered to support oneself and not for the party.
4.- Electoral disputes, as if members of the party were enemies.
Very often, however, the monopoly control exercised by the ruling class over the media can constitute veritable wall of silence that prevents reaching these objectives, and that is very difficult to breach if the left has not managed to become a significant force. To sum up: There are not only legal and illegal means of activity, there is an area that we can call a-legal, that is, an area that is neither legal nor illegal. The left needs to have a great deal of creativity to use this space effectively.

See Martha Harnecker, “Making Possible the Impossible”

Myth America: A Stand-up Tragedy

Myth America: A Stand-up Tragedy

by Mickey Z.

So here we are…in New York City in New York State in the white supremacist capitalist homophobic patriarchy we call America. Or, as it’s known by the indigenous crowd, “the occupied territories.”

Speaking of occupied territories, while I’m up here, let’s not forget that each and every one of us is sitting or standing on stolen land.

Let’s not forget that with each minute that passes, the US government spends one million of our tax dollars spent on war.

Let’s also not forget that on this planet of abundant resources, every two seconds, a human starves to death.  (Read more)

End Game

End Game

By John S. Hatch

Why should we subsidize intellectual curiosity?”—Ronald Reagan

16/09/08 “ICH” — – -The American predilection for choosing fuzzy myth over grim reality is one factor that has been driving the US ever closer to the abyss. There is danger in delusion. Americans always seem to suffer fools gladly. Nixon. Twice. Reagan. Twice. George H. W. Bush. George W. Bush. Twice! And their loathsome Vice Presidents—Agnew, Ford, Bush, Quayle, Cheney.

A McCain/Palin administration might supply that final push toward oblivion. More on that below.

Despite a mountain of easily accessible evidence to the contrary, many Americans choose to believe that Ronald Reagan was a kind and gentle grandfatherly person, the Great Communicator (if mostly of clichés from cue-cards, and Nancy whispering in his ear).

Both McCain and Obama sing his mythical praises and make self-serving and ostentatious claims regarding presumed rights of succession. Both debase themselves on the grave of this frightful ghost who was always a frigid and calculating phantasm.

In fact, Mr. Reagan had a lot in common with George W. Bush when it comes to illegal wars, disappearances, torture, death squads, murder, spin and denial. And all for reasons as vacuous as those of the latter. ‘Freedom’. ‘Democracy’. ‘The American Way’.

He found a pretext to invade Grenada, population 90,000. Operation Urgent Fury made the world safe for—nutmeg, the country’s chief export. As Michael Ledeen (Reagan Administration insider and Iran-Contra conspiracist) said: “Every ten years or so, the United States needs to pick up some small crappy little country and throw it against the wall, just to show we mean business.” If only it were once a decade…

In Nicaragua, ‘contras’ trained at Fort Benning, Georgia’s School of the Americas (since changed to ‘Western Hemisphere Institute for Security Cooperation’ but still teaching torture) spread across the countryside to instill maximum terror in the population by torturing and murdering more or less randomly. No one was exempt.

John Stockwell is a 13-year veteran of the CIA and a former U.S. Marine Corps major. Here’s what he had to say about Reagan’s ‘Freedom Fighters’, whom he (Reagan) compared to the founding fathers. Founding Fathers?

“They go into villages. They haul out families. With the children forced to watch, they castrate the father. They peel the skin off his face. They put a grenade in his mouth, and pull the pin. With the children forced to watch, they gang-rape the mother, and slash her breasts off. And sometimes, for variety, they make the parents watch while they do these things to the children.”

Or how about this in the name of exporting ‘freedom and democracy and The American Way’:

“They gave them crank generators — with “U.S.A.I.D.” written on the side, so the people even knew where these things came from — and developed a wire that was strong enough to carry the current and fine enough to fit between the teeth, so you could put one wire between the teeth, and the other in or around the genitals. You could crank, and submit the individual to the greatest amount of pain, supposedly, that the human body can register.” They did this to whomsoever, as they still do, knowing that they enjoy impunity. Freedom and democracy.

In Guatemala America’s client government death squads killed around 200,000, with at least 626 massacres in Mayan villages. These weren’t ‘accidental massacres’ or ‘collateral damage’; these were terror killings approved by the Great Communicator, who called President Rios Montt, a devout Christian, ‘a man of great personal integrity’. Indeed. Children were thrown into burning buildings, were thrown into the air and speared on bayonets, or were swung by the ankles into poles, smashing their heads. Freedom and democracy.

In El Salvador ‘Blowtorch Bob’ D’Aubisson presided. He came to his moniker honestly. He liked to begin the blowtorch session on the victim’s genitals. Needing to practice their new skills learned at the School of the Americas, his fascists would kidnap unwitting derelicts off the streets and torture them to death at demonstration sessions. teach-ins. Their bodies would then be deposited back on the streets as one more act of terror. A bonus, so to speak.

During the El Mozote Massacre in 1981, around eight hundred people were slaughtered. Men were shot or beheaded. Women were gang raped and then killed as children watched. Then the children were bludgeoned or burned alive. Tiny skulls became prized as candle-holders or ‘good luck charms’. More of Ronnie’s work by proxy. He knew. He approved. He rewarded. George H. W. Bush was in on it. Every step of the way.

In Honduras, similar things were happening. A list containing the names of military officers suspect to the Reagan Administration was delivered by Ollie North. They were killed, along with thousands of Hondurans.

Before being elected, Reagan had treasonously made a secret deal with Iranian leaders to not release the American hostages until his Inauguration (which is what happened). Now a very busy Ollie North was overseeing a plan (‘Rex 84 Bravo’) to imprison up to 400,000 Americans in concentration camps (sound familiar?), as well as illegal shipments of arms to Iran, CIA planeloads of heroin and cocaine into the US, and the distribution of money and arms to Reagan’s beloved ‘Contras’. (Three of the most implicated in Reagan’s bloody crimes would later be appointed to high-level positions in the Bush II Administration: John Negroponte, Elliot Abrams, and Otto Reich. Abrams was a signatory to the Project for the New American Century, a map for world domination and which longed for a ‘New Pearl Harbor Event’ to propel the plan. Then 9-11 magically happened.)

And yet Reagan remains largely venerated. If one dares mention his vile crimes against some of humanity’s most vulnerable, one is likely to be met with a blank stare, or with incredulity and hostility. ‘The Gipper? Naaah! You commie!’

Unlike Mr. Bush, some of the neo-cons in his dual disastrous Administrations know their history. They know that, a la Goebbels if a big lie is spun enough times, it will be widely accepted as truth. The Kennedy assassination was ‘solved’ even before it happened. Like 9/11.

They knew that Nixon was brought down because the concept of ‘Executive Privilege’ (later to be transformed into that of ‘Unitary Executive’) was not robust enough to shield him from having to turn over those incriminating tapes. Pesky, meddling Congress was too powerful. No problem!

They knew that perception is everything, and a President can literally get away with murder like Reagan if he is just portrayed properly. People were also gullible enough to believe V.P. George H. W. Bush, former head of the CIA, when he claimed not to be ‘in the loop’ regarding the Iran-Contra crimes, which were actually worse than most people know even today (for example certain rich politicians became further enriched via millions from Saudi Arabia and other Middle Eastern nations, something President George W. Bush took pains to conceal forever, along with other misdeeds of his father.)

They knew that a combination of fear and panic and a base call to patriotism can propel an ill-informed (or misinformed) population in any direction the manipulators choose, especially when the latter appeal to nationalism and insane Exceptionalism as justifications.

Learning from recent history and relying on Bush’s willingness to go along, his became the most powerful, most secretive, and least accountable Presidency in the nation’s history. Congress was simply ignored, with ‘signing statements’ replacing its former authority. Two criminal invasions were launched solely on Presidential authority. International treaties and conventions were abrogated or ignored.

The President, while denying it, not only did away with the centuries old concept of habeas corpus, he instituted policies of kidnapping (‘extraordinary rendition’) and torture (at the very least one hundred people have died under vile torture in America’s dungeons abroad). Discussions were conducted at the highest levels of the Bush Administration on what forms of torture to choose, and whether the President has the authority to order that a child’s testicles be crushed in front of his parents. (Affirmative.) One struggles to explain the degree of psychopathic sexual sadism that seems to have been so widely employed and enjoyed.

The President, while doing everything in his power to deny an investigation into the events of 9/11, and then everything to thwart it, nevertheless exploited the tragedy to maximum advantage in spying on Americans, detaining them, launching two illegal invasions resulting in perhaps a million deaths, and in so doing he engaged in countless war crimes and crimes against humanity.

A problem is that as in law with the Presidency once a precedent has been set, it stands and can be acted upon, and strengthened forever into the future. Thus the United States today has not a President, but a de facto king who need answer to no one. As we have seen, Congress can be ignored. Subpoenas are treated with contempt. The Supreme Court is so in name only. When Nixon famously said in a David Frost interview ‘If the President does it, then it’s not illegal’, people were aghast and thought that poor Tricky Dick had finally tilted over the edge. Today that’s exactly how the President operates, without shame or apology.

Given all that has happened in the past eight years, that the American people would even consider allowing someone like John McCain/Sarah Palin the opportunity to build even further upon the concept of Unitary Executive Power is quite appalling, and frightening.

That America (s)elected Bush and tolerated him twice is a disgrace to America, but it’s also a debasement of all humanity. We are all diminished.

America is thinking of bestowing on an angry and often irrational old man (a ‘war hero’, remember?) and a neophyte neo-con Christian anti-feminist Armageddon enthusiast unfettered power to ignore Congress, the Constitution, the law, and the wishes of Americans, to take a belligerent stance with the newly powerful Russia (they both were totally wrong about recent events in Georgia), to perhaps ‘bomb bomb bomb, bomb bomb Iran. It’s hard to think that voters would be so foolhardy, so soon. But then they voted for Reagan. Twice. If America chooses to continue down the path it has trodden for the past eight years, I fear there’s not much further to go before we’re all nowhere.

What if a candidate pledged to return the Presidency (and America) to the rule of law, to end all illegal wars, including covert ones, to make reparations, to free all illegally held prisoners and pay reparations, to never again invade any country or use illegal weapons against civilians such as depleted uranium, white phosphorous, thermobaric explosives, chemical and bacterial weapons, napalm, lasers, and others?

What if a candidate pledged a genuinely independent Truth Commission to investigate the Bush Administration and to bring its many criminals to justice, starting at the top?

What if a candidate pledged to end corrupt lobbying practices in Washington, to demand better and responsible corporate citizenship, to end an unfair system of taxation and to begin restoring the middle class?

What if a candidate pledged to strike a Commission to finally properly investigate who was responsible for 9/11 and bring them to justice no matter who they are?

What if a candidate pledged to stop wasting trillions on the military and instead began improving American infrastructure, education, health care, the environment and began to address the issue of homelessness? What if instead of bursting bombs, flying bullets, and political meddling the US exported genuine no-strings financial, food and health aid to needy populations around the world, thus for once fomenting respect and gratitude instead of justified hatred and loathing?

It’s never going to happen. Why not?

Wall Street Socialists

Wall Street Socialists

by Amy GoodmanAs these high-rolling gamblers are losing all their banks’ money, it comes to the taxpayer to bail them out. A better use of the money, says Michael Hudson, professor of economics at the University of Missouri, Kansas City, and an economic adviser to Rep. Dennis Kucinich, would be to “save these 4 million homeowners from defaulting and being kicked out of their houses. Now they’re going to be kicked out of the houses. The houses will be vacant. The cities are going to [lose] property taxes, they’re going to have to cut back local expenditures, local infrastructure. The economy is being sacrificed to pay the gamblers.” – Amy Goodman

The financial crisis gripping the U.S. has the largest banks and insurance companies begging for massive government bailouts. The banking, investment, finance and insurance industries, long the foes of taxation, now need money from working-class taxpayers to stay alive. Taxpayers should be in the driver’s seat now. Instead, decisions that will cost people for decades are being made behind closed doors, by the wealthy, by the regulators and by those they have failed to regulate.

Tuesday, the Federal Reserve and the U.S. Treasury Department agreed to a massive, $85-billion bailout of AIG, the insurance giant. This follows the abrupt bankruptcy of Lehman Brothers, the 158-year-old investment bank; the distressed sale of Merrill Lynch to Bank of America; the bailout of both Fannie Mae and Freddie Mac; the collapse of retail bank IndyMac; and the federally guaranteed buyout of Bear Stearns by JPMorgan Chase. AIG was deemed “too big to fail,” with 103,000 employees and more than $1 trillion in assets. According to regulators, an unruly collapse could cause global financial turmoil. U.S. taxpayers now own close to 80 percent of AIG, so the orderly sale of AIG will allow the taxpayers to recoup their money, the theory goes.

It’s not so easy.

The financial crisis will most likely deepen. More banks and giant financial institutions could collapse. Millions of people bought houses with shady subprime mortgages and have already lost or will soon lose their homes. The financiers packaged these mortgages into complex “mortgage-backed securities” and other derivative investment schemes. Investors went hog-wild, buying these derivatives with more and more borrowed money.

Nomi Prins used to run the European analytics group at Bear Stearns and also worked at Lehman Brothers. “AIG was acting not simply as an insurance company,” she told me. “It was acting as a speculative investment bank/hedge fund, as was Bear Stearns, as was Lehman Brothers, as is what will become Bank of America/Merrill Lynch. So you have a situation where it’s [the U.S. government] … taking on the risk of items it cannot even begin to understand.”

She went on: “It’s about taking on too much leverage and borrowing to take on the risk and borrowing again and borrowing again, 25 to 30 times the amount of capital. … They had to basically back the borrowing that they were doing. … There was no transparency to the Fed, to the SEC, to the Treasury, to anyone who would have even bothered to look as to how much of a catastrophe was being created, so that when anything fell, whether it was the subprime mortgage or whether it was a credit complex security, it was all below a pile of immense interlocked, incestuous borrowing, and that’s what is bringing down the entire banking system.”

As these high-rolling gamblers are losing all their banks’ money, it comes to the taxpayer to bail them out. A better use of the money, says Michael Hudson, professor of economics at the University of Missouri, Kansas City, and an economic adviser to Rep. Dennis Kucinich, would be to “save these 4 million homeowners from defaulting and being kicked out of their houses. Now they’re going to be kicked out of the houses. The houses will be vacant. The cities are going to [lose] property taxes, they’re going to have to cut back local expenditures, local infrastructure. The economy is being sacrificed to pay the gamblers.”

Prins elaborated: “You’re nationalizing the worst portion of the banking system. … You’re taking on risk you won’t be able to understand. So it’s even more dangerous.” I asked Prins, in light of all this nationalization, to comment on the prospect of nationalizing health care into a single-payer system. She responded, “You could actually put some money into something that pre-empts a problem happening and helps people get health care.”

The meltdown is a bipartisan affair. Presidential contenders John McCain and Barack Obama each have received millions of dollars from these very companies that are collapsing and are receiving the corporate welfare. President Clinton and his treasury secretary, Robert Rubin (now an Obama economic adviser), presided over the repeal in 1999 of the Glass-Steagall Act, passed after the 1929 start of the Great Depression to curb speculation that caused that calamity. The repeal was pushed through by former Republican Sen. Phil Gramm, one of McCain’s former top advisers. Politicians are too dependent on Wall Street to do anything. The people who vote for them, and whose taxes are being handed over to these failed financiers, need to show their outrage and demand that their leaders truly put “country first” and bring about “change.”

Bailouts Will Push US into Depression: Manager

Bailouts Will Push US into Depression

The end result of the global economic slowdown may be the U.S. announcing national bankruptcy as the government cannot afford the bailouts that it promised and the market will not bail out the government, Martin Hennecke, senior manager of private clients at Tyche, told CNBC on Thursday.

“We expect a depression in the United States. We expect a depression, very possibly, also in Europe,” Hennecke said on “Worldwide Exchange.”

The estimated $300 billion cost of the Fannie/Freddie bailout will probably be considered as a loss that the government will have to take, therefore passing it on to taxpayers, he explained.

“We already have $3 trillion of debt, as far as the U.S. government is concerned. These debt figures across the U.S. economy are rising very sharply.”

When the government can no longer pass the United States’ “immense debt” on to taxpayers, it will turn to the holders of U.S. dollars, leading to the eventual downfall of the currency, Hennecke said.

“Definitely, it (the dollar) is not a safe place to be invested in, as real inflation is closer to 10 or 11 percent than the actual inflation numbers given by the U.S. government,” Hennecke said on “Worldwide Exchange”.

Investors should avoid exposure to debt and stay away from leveraging on any investment or asset, including property, Hennecke advised, adding that “banks have been too highly leveraged in the past, private households, everybody.”

Hennecke’s stock allocations are mainly Asian-based, especially in the Chinese market as the country’s government has a large amount of cash and the macroeconomics are fundamentally strong.

He also suggested investing in gold, despite the recent fall in price.

© 2008

Capitalism’s bad apples: It’s the barrel that’s rotten

Capitalism’s bad apples: It’s the barrel that’s rotten

Henry C K Liu

This article appeared in AToL on August 1, 2002

There is a general rule about the way society treats criminals: place responsibility for antisocial acts on the individual, thus absolving society from blame.

The mismatch between society’s attitude toward heroes and criminals rests in society’s claim of credit on heroes and rejection of responsibility for criminals. A criminal is one who has betrayed societal values by violating a prescribed code of conduct, who is deranged but not legally insane, a deviant, an anomaly, a manifestation of social disease, a virus against the system, a unit malfunction and a personal malfeasance.

Adolf Hitler was labeled a madman to protect German culture and fascism, notwithstanding the curious fact that Hitler rose to power in Germany in a discernible sociocultural context. Even organized warfare must be conducted within the limits of regulated behavior. War crimes and crimes against humanity are not tolerated.

Yet market fundamentalism argues for wholesale deregulation to allow economic crimes against humanity. Charles Ponzi was deemed an unprincipled conman to insulate unregulated capitalism itself from being revealed as a systemic Ponzi scheme.

In the December 18 US Senate Commerce Committee hearing on the Enron collapse, the verbal barrage that committee members unleashed on Kenneth Lay, the resigned chairman of Enron, once the United States’ seventh-largest company and now bankrupt, amounted to wholesale trampling of Lay’s constitutional rights. The irony of Fifth Amendment capitalists was not lost on those who remember the McCarthy hearings on communists under the Smith Act, which outlawed a targeted political party in the democratic United States. The issue of Lay’s guilt or innocence is of course a matter for the judiciary branch and Lay’s right under the constitution’s Fifth Amendment to avoid self-incrimination is fundamental to US justice.

The same senators had not been skittish about having their pictures taken with Kenneth Lay the hero capitalist, or accepting vast sums in political contributions from him, his company, his consultants and lobbyists. Up to the sudden collapse of Enron, Lay was regarded by all as the star of deregulated markets, close friend of the president, a political mover and shaker who played key roles in putting George W Bush in the White House, a shining example of the high level of human potential that can be achieved with free enterprise.

Senator Peter Fitzgerald, a Republican from Illinois, comparing Lay to Charles Ponzi, now labeled him worse than a carnival barker, for a carnie will at least “tell you up front that he’s running a shell game”. Was Fitzgerald telling the nation that deregulated market fundamentalism with structured finance is a shell game?

The evidence is undeniable that the Enron scandal exposed critical flaws in the entire financial system and the ineffective policing of US capital markets and corporate governance. Arthur Levitt, former Democratic head of the Securities and Exchange Commission (SEC), characterizes corporate financial statements as “a Potemkin village of deceit”. Senator Ernest Hollings, a Democrat from South Carolina, characterized Lay’s political prowess as “cash and carry government”. The New York Times reported the following day that Hollings had received campaign contributions from Enron and Arthur Andersen dating from 1989.

Until Enron filed for bankruptcy, the system’s top law firms and accounting firms were providing professional opinion that what went on in Enron was “technically” legal. The international dealings of Enron received unfailing support from the US government. Many of the schemes undertaken by Enron and other companies were devised by investment bankers who collected fat fees advising their clients and who profited handsomely from providing financing for schemes they knew were towers of mirage. It was known in the industry as “finance engineering” and the vehicle was structured finance or derivatives.

The prevailing view in the legal profession is that the beleaguered Enron executives will most likely not be convicted of economic crimes under existing laws, only criminal liabilities arising from perjury, conspiracy, obstruction of justice and mail fraud. Anderson, the disgraced accounting/consulting firm, was found guilty of obstruction of justice, but not of economic malfeasance.

Coincidentally, the New York Times carried on the same day of the Senate Enron hearing an obituary on Victor Posner, whose financial dealings landed himself, Ivan Boskey and Michael Milkin, the junk-bond king, in jail over technical criminality for insider trading, but not for the violent damage their good work at Drexel did to the system and the millions of innocent victims in it.

On February 26, Jeffrey K Skilling, former president and chief executive of Enron, who was the sole top company official willing to testify without claiming Fifth Amendment protection, managed to engage accusing senators in a veiled debate about the system’s responsibility. Skilling, named in April 2001 by Worth magazine as No 2 of the 50 top CEOs in the US, behind only Steve Ballmer of Microsoft, maintained that while what Enron management did might have been unethical, it was most definitely not illegal within then applicable laws. Yes, the company’s management did cause a great deal of financial casualties and destruction, but it is not at all clear that it committed financial war crimes in the eyes of the law. At most, it was collateral damage. At any rate, Enron management did no more than what was common practice industrywide.

Unlike Skilling and his less forthcoming colleagues who can place their financial future under the protection of existing security laws, the lawmakers must subject their political future to the test of public opinion. Thus lawmakers were lining up for the microphone to make indignant grandstanding statements. Yet Skilling was quite effective in laying the blame for the financial mess at the door of unregulated structured finance (derivatives), which Congress, under pressure from the finance industry, had repeatedly refused to regulate, albeit also at the urging of the both the Federal Reserve Board and the Treasury, and even the SEC, which only faintly warned against accounting manipulation of corporate balance sheets.

It is ironic that the head of a company that had vigorously championed deregulation and market discipline, a company whose spectacular recent growth was financed by wholesale theft from the future if not directly the public, by booking future revenue as current income, deferring associated liabilities as off-balance-sheet future capital expenditure, by disguising loans as income with hedges in derivative transactions that produce spectacular instant profit, is now calling for Congress to regulate the widespread use of the “material adverse change” clause in derivative contracts and related financing that allows investors to pull their funds abruptly and completely on practically no notice. Not only was the barn manager allowed to play with fire, he is now asking for the authority to keep the barn doors closed to prevent the horses from fleeing for their lives. To deflect the embarrassing subject, one senator ridiculed the suggestion as a version of the old movie It’s a Wonderful Life, notwithstanding that it was a rather good film.

There is another systemic fault that surfaced briefly in the exchanges when Senator Barbara Boxer of California accused Skilling of “unloading” stocks while encouraging unsuspecting Enron employees to buy. When Skilling responded that he too had been hurt by the Enron collapse, being one of the major shareholders as a result of the dubious practice of lucrative stock options granted to management, albeit that his selling of a small portion of his holdings amounted to a proceed of US$60 million, no senator challenged him on what justified that astronomical level of executive compensation. The chairman of Citigroup was reported to have received compensation, including stock options, in excess of $1 billion over the past decade. All accepted it as the American way.

Obscene disparity of income is accepted as the heart rather than the cancer of finance capitalism. Yes, a lot of people connected with Enron at all levels lost 95 percent of their holdings, but the remaining 5 percent of residual asset could range from tens of millions to a mere thousands of dollars. Even if the average employee were exempt from the “lockup” provision in his or her pension plan, and was allowed to bail out his or her pension holdings at $4.50 a share, down from its peak of $90, many would still have walked away with merely a few thousand dollars, putting their retirement dreams in ruins. Risking one’s pension with a downside of $60 million is very different from a downside of $6,000, hardly an egalitarian game of a receding tide lowering all boats.

Skilling even ventured to propose introducing deposit insurance for derivative investors, though he fell short of suggesting that the insurance be financed by taxing the peak profits. It is another example of socializing the risk and privatizing the profits. Is Enron the opening shot of the return of New Deal populism? Skilling was probably telling the truth that when he resigned from his post a year ago, he did not expect Enron to go under, or he would have sold out his holdings completely. If Federal Reserve Board chairman Alan Greenspan could not resist denial of the inevitable outcome of a debt bubble, why should a mere mortal like Skilling?

General Electric was dragged into the hearing when the committee staff inaccurately listed GE offshore subsidiaries as numbering only 24 as compared with Enron’s 3,000, presumably to show GE as the model of good corporate behavior. Aghast, Skilling responded that most who are in the slightest way familiar with structured finance know that GE has been every bit as aggressive as Enron, and GE in fact is engaged as counterparty in many Enron trades. GE’s dominance in the commercial paper market is what gives it the financial advantage over many competitors, including commercial banks, in structured finance. Bankers feared Jack Welch and Gary Wendt (leaders of non-bank financial institutions) more than they fear Saddam Hussein or Osama bin Laden. When Wendt ran GE Capital, he had a reputation of taking no prisoners. GE of course is now facing its own credit rating and share value problems.

With the exception of cases of contempt of Congress, the US legislature is powerless to put any of the Enron officials behind bars, or to force them to disgorge their ill gains. That is the courts’ responsibility. Even the SEC can only impose civil fines. The rule of law often allows the unethical but legal to happen with impunity. Already, Greenspan, who steadfastly opposed regulating the structured finance markets, has told Congress that independent boards in corporate governance are harmful to economic growth. Karl Marx left out a big slice when he surmised that surplus value would lead to capitalism’s structural demise, in assuming that the financial system was inherently honest. To preserve the mirage of an honest system, Congress needs to find crooked financiers.

Seven months later, the July 24 Senate Subcommittee on Investigation hearing, chaired by Senator Carl M Levin, a Democrat from Michigan, on the role of financial institutions in the Enron scandal fingered JP Morgan Chase and Citigroup, two of the world’s largest banks, as culprits in helping Enron Corp arrange billions of dollars in loans that disguised as income to mask its deteriorating financial condition, and to hide the material details of some deals from unsuspecting investors. The subcommittee alleged that JP Morgan Chase and Citigroup were knowing participants in Enron’s efforts to disguise billions of dollars of debt as income from energy trades, by using the now notorious “prepay forward commodities transactions” (PFCT). Chase and Citigroup also sold the prepay structures to at least 10 other clients.

The PFCTs brought Enron more than $8.5 billion of misreported income in the six years before it collapsed last fall. Had Enron properly accounted for the loans, its debt obligations would have increased by more than 40 percent, to $14 billion in 2000. That would have led to drastically lower credit ratings for the company. Prepays are arrangements in which companies are paid to deliver a product – in Enron’s case, oil and natural gas – at a later date. But Enron and several large banks structured the deals in ways that compromised the independence of the transactions, making them loans rather than sales for accounting purposes. Senate investigators alleged that Enron did not reveal that fact to its shareholders, and instead booked the deals as cash from operations, making its finances look better than they were, thus inflating its share prices.

Chase and Citigroup engaged in the deals by using secretive offshore entities called Mahonia, Delta and Yosemite. Senate investigators alleged that while the entities, based on the Isle of Jersey in the English Channel and in the Cayman Islands, are not legally tied to the banks, they are, in essence, controlled by them through lawyers and charitable trusts. Investors might have been purposefully given misleading information about Enron’s health in the sale of notes via the Yosemite investment trust formed by Citigroup. Citigroup raised more than $2.4 billion for Enron in six Yosemite bond offerings between 1999 and 2001.

The prepay deals are also under scrutiny by the Manhattan district attorney’s office and the SEC. JP Morgan Chase and Citigroup are also being sued by Enron shareholders. Separately, JP Morgan Chase is fighting in court a group of insurance companies that refuse to pay for the failed prepay deals because they claim to have been deceived about the nature of the transactions.

Senator Levin had the smoking gun in an internal e-mail dated November 1998 within Chase stating that Enron “loves these PFCT deals as they allow Enron to hide funded debts from equity analysts …” The internal e-mails and recorded phone conversations showed that Chase knew Enron was using prepay deals deceptively, using them to hide what were in effect loans. According to criteria set out by the since disgraced Andersen, Enron’s auditor, one of the conditions that must be in place for a prepay to be considered a legitimate transaction is that the third party involved had to be independent.

Mahonia, the offshore vehicle known as a Special Purpose Entity through which JP Morgan funneled hundreds of millions of dollars to Enron, was set up in the Channel Islands at the behest of JP Morgan. The bank executives claimed that Mahonia was independent, to the visible dissatisfaction of Levin, who called Enron’s use of the prepays to disguise debt “an accounting sham” and said the company had “the help and knowing assistance of some of the biggest financial institutions in our country”. The senator referred to a recording of a telephone conversation last September between Morgan and Enron executives in which they discussed ways to make Mahonia appear more independent, such as getting it a separate fax number.

Senate investigators alleged that the banks collected large fees and earned consideration for more deals with Enron, in addition to interest payments, for structuring the PFCT deals. Both banks are counterattacking, arguing that their actions were consistent with years of widespread industry practice and had been vetted by lawyers and auditors. PFCT is a common and widely used form of structured finance.

As the biggest trader of derivatives, JP Morgan Chase also dismissed speculation that it may have to put up more money to satisfy counterparty credit requirements should its stock price fall below a certain level. Derivatives are contracts whose value is derived from underlying securities or commodities. Marc Shapiro, vice chairman for finance, risk management and administration at JP Morgan Chase and Co, told the press that prepays are routine structured finance plays that enable corporations to get funds from new sources that have fueled the boom of the past decade, and that it is “gross injustice” to the people involved suddenly to label it fraud now. Shapiro, co-chairman of the merger integration team within JP Morgan and Chase and a member of the merged firm’s executive and management committees, outlined six tenets of success in financial risk management in a recent speech: diversification, independence, transparency, alignment, active management and the importance of stress tests. The Enron case apparently fell short on all six tenets. There was structural misalignment of incentives that led to deviant behavior by executives.

JP Morgan Chase issued a press release on Monday together with a letter signed by chief executive officer William B Harrison in response to the United States Senate’s Permanent Subcommittee on Investigations’ request last Thursday for additional information about Mahonia, which states: “The capital markets system in the United States has been a key contributor to the most powerful economy in the world. Structured finance and Special Purpose Entities are important components in that system and contribute significantly to our economy. They are designed to help clients meet their financing needs, including reducing their borrowing costs, improving liquidity and diversifying their funding sources. Special Purpose Entities are used in transactions that range from the commonplace, including mortgage-backed securities and credit card securitizations, to highly structured transactions. The fact that structured finance transactions may be complex or that Special Purpose Entities may be organized offshore does not make them improper or unethical.”

The thrust of the subcommittee hearing was that more disclosure of off-balance-sheet debts or liabilities is needed to prevent abuse. Yet the focus on disclosure is obviously misdirected. With more disclosure, these deals would not have been done because their whole purpose was to evade existing disclosure requirements on financial manipulations to provide corporations with funds which they otherwise could not raise. Several witnesses from the finance industry and regulating agencies testified that there was nothing wrong with these structured finance deals if full disclosure was made. It is the same as saying that murder is all right if no killing is involved.

Derivatives can be used to restructure transactions so that liability positions are legally moved off balance sheet, floating rates turned into fixed rates (and vice versa), currency denominations changed, interest or dividend income can become capital gains (and vice versa), liability turned into assets or revenue, payments moved into different periods in order to manipulate tax liabilities and earnings reports, and high-yield securities made to look like conventional AAA investments (See The dangers of derivatives , May 23.)

So what is full disclosure? To tell the investing public that structured finance is an elaborate arrangement to mask the real financial condition of corporations? That, by the way, before you invest in this company, the management would like to tell you that the income reported in the balance sheet is not real?

The dilemma for Congress is that while Enron’s bankers are in the hot seat for alleged corporate and bank fraud, structured finance is on trial for systemic fraud. But structured finance is so widely used that if it should be stalled by new requirements of full disclosure, the financial system as it currently exists might well end.

WorldCom has overshadowed Enron as the largest bankruptcy in history. Federal prosecutors have let it be known that fired top executives of WorldCom will be indicted for fraud within days. The company admitted it inflated earnings by nearly $4 billion. WorldCom also could be indicted as a corporation by the US Justice Department. The SEC, citing “accounting improprieties of unprecedented magnitude”, filed civil fraud charges last month against WorldCom. Yet it is not clear that these executives can be found guilty independent of systemic fraud, given that what they did was not separable from industry practice norms.

The accounting of IRU (Indefeasible Right of Use) of communication network capacity, particularly “dark trades” of unused fiber-optics capacity widely employed in the telecommunication sector, has inflated revenue for the entire sector, by booking future revenue as current income and related future liabilities as off-balance-sheet future capital expenditure. Global Crossing also has massive IRU problems. Qwest and Sprint are also on the watch list.

Finance capitalism is operating with less and less reliance on capital. Capital has become a notional value in structured finance. Credit is no longer anchored by equity but by circular hedges. Debt-to-equity ratio is no longer a relevant consideration. Practically all US major businesses nowadays, with their high debt leverage based on an unprecedented asset bubble, would have negative real equity if the price/earning (P/E) ratio were to return to historical norms. Blue-chip corporations are being shut out of the unsecured short-term commercial paper market as their credit ratings are downgraded. Corporate credit ratings have been inflated by exorbitant market capitalization value, which in turn reflects irrational P/E ratios. Even now, during what many on Wall Street contend to be a savage bear market, the Standard & Poor’s 500 Index yields 25 times earnings. It would have to fall by another 41 percent to reach the median valuation prevailing since 1957. When that happens, the derivative defaults will hit the financial system like a tsunami.

Federal securities regulators investigating the collapse of Enron are turning their eyes toward Wall Street. The SEC, as part of its Enron probe, is reviewing the financing lines that banks such as JP Morgan Chase and Citigroup provided to Enron and other energy-trading companies. Regulators are examining whether the banks helped to create the intricate and misleading financial structure that eventually led to Enron’s bankruptcy filing.

Separately, the SEC is reviewing the adequacy of JP Morgan Chase’s disclosures about its exposure to Enron and in particular whether these disclosures were made in a timely fashion. The Federal Reserve Bank of New York, which has supervisory responsibility of New York banks, is also looking into civil liabilities. The Wall Street Journal criticized both banks by pointing out that “what is legal isn’t always ethical”.

Both New York banks confirm they have significant exposure to Enron. The role of commercial banks in the Enron saga throws the spotlight on the 1999 Financial Modernization Act, which in effect repealed the Depression-era Glass-Steagall Act. Glass-Steagall was meant to separate the business of lending from underwriting to prevent a repeat of the financial turmoil of 1929, and the Depression that ensued.

The SEC review underscores that Wall Street firms could ultimately face potential liability in the collapse of Enron, and now the second-largest US bankruptcy after WorldCom. At the very least, the review highlights the close ties and varied trading positions Wall Street firms had with Enron. Some of the world’s leading banks and brokerage firms provided Enron with crucial help in creating the intricate financial structure that fueled Enron’s impressive rise. Enron had billions of dollars of derivatives contracts outstanding with Wall Street, and until these contracts are unwound, the ultimate exposure of securities firms and commercial banks won’t be clear. But by now it is clear that Enron was not a unique case.

The Financial Times just revealed that US and European banks and bondholders lent an estimated $500 billion to the crippled US gas and power sector. US energy companies borrowed heavily in the late 1990s to take advantage of deregulation, investing in infrastructure and building up trading operations. The debt of the top eight energy traders soared by 200 percent to $115 billion in the three years to May 2002.

Asia is not immune to corporate fraud and creative accounting. While security laws in Asia are generally less sophisticated with regard to aggressively creative accounting, it does not follow that Asian corporations are less prone to dubious lessons on ingenious structured finance schemes from enveloping-pushing global investment banks.

The ripple effect has surfaced with press reports of Merrill Lynch downgrading four major Hong Kong corporations for potential accounting problems. One of these is deeply involved in telecommunication investment and finance and it would be highly unusual for it to be free of the financial problems facing the debt ridden global sector as a whole. A prominent Hong Kong property tycoon, a US citizen, was an outside director of the Enron board and a member of the board’s auditing committee.

JP Morgan Chase and Citigroup are both major players in Asia. It is only natural that what these banks did for Enron, WorldCom and Global Crossing, they would also do for their Asian corporate clients.

Abroad, Bailout Is Seen as a Free Market Detour

Abroad, Bailout Is Seen as a Free Market Detour

political-economic shift to state capitalism deepens…national socialism with a liberal face


PARIS — Is the United States no longer the global beacon of unfettered, free-market capitalism?

In extending a last-minute $85 billion lifeline to American International Group, the troubled insurer, Washington has not only turned away from decades of rhetoric about the virtues of the free market and the dangers of government intervention, but it has also probably undercut future American efforts to promote such policies abroad.

“I fear the government has passed the point of no return,” said Ron Chernow, a leading American financial historian. “We have the irony of a free-market administration doing things that the most liberal Democratic administration would never have been doing in its wildest dreams.”

The bailout package for A.I.G., on top of earlier government support for Bear Stearns, Fannie Mae and Freddie Mac, has stunned even European policy makers accustomed to government intervention — even as they acknowledge the shock of the collapse of Lehman Brothers.

“For opponents of free markets in Europe and elsewhere, this is a wonderful opportunity to invoke the American example,” said Mario Monti, the former antitrust chief at the European Commission. “They will say that even the standard-bearer of the market economy, the United States, negates its fundamental principles in its behavior.”

Mr. Monti said that past financial crises in Asia, Russia and Mexico brought government to the fore, “but this is the first time it’s in the heart of capitalism, which is enormously more damaging in terms of the credibility of the market economy.”

In France, where the government has long supported the creation of “national champions” and worked actively to protect select companies from the threat of foreign takeover, politicians were quick to point out the paradox of what is essentially the nationalization of the largest American insurance company.

“Today the actions of American policy makers illustrate the need for economic patriotism,” said Bernard Carayon, a lawmaker of President Nicolas Sarkozy’s center-right governing party, UMP. “I congratulate them.”

For the “evangelists of the market, this is a painful lesson,” he added.

National economies are entering “an era where we have much more regulation and where the public and the private sector will mix much more.”

In parts of Asia, the bailouts stirred bitter memories of the different approach the United States and the International Monetary Fund adopted during the economic crises there a decade ago.

When the I.M.F. pledged $20 billion to help South Korea survive the Asian financial crisis of the late 1990s, one of the conditions it imposed was that the Korean government allow ailing banks and other companies to collapse rather than bail them out, recalled Yung Chul Park, a professor of economics at Korea University in Seoul, who was deeply involved in the negotiations with the I.M.F.

While Mr. Park says the current crisis is different — it is global rather than limited to one region — “Washington is following a different script this time.”

“I understand why they do it,” he added. “But they’ve lost credibility to some extent in pushing for opening up overseas markets to foreign competition and liberalizing economies.”

The ramifications of the rescue of A.I.G. will be felt for years within the United States, too.

A.I.G. was a different kind of company than Fannie Mae or Freddie Mac, which enjoyed government sponsorship, or Bear Stearns, which was regulated by the federal government.

“This was an insurance company that wasn’t federally regulated,” said Gary Gensler, who served as a top official in the Treasury Department during the Clinton administration. Nor did A.I.G. have access to Federal Reserve funds or deposit insurance, like a commercial bank.

“We’re in new territory,” Mr. Gensler added. “This is a paradigm shift.”

A.I.G. is also in a different league because of the breadth of its businesses and its extensive overseas operations, especially in Asia.

What’s more, it fell into something of a regulatory gap under the current rules.

While the company, based in New York, is better known for selling conventional products like insurance policies and annuities overseen by state regulators in the United States, it is also deeply involved in the risky, opaque market for derivatives and other complicated financial instruments that operate largely outside regulation.

Along with the threat to the plain-vanilla insurance policies held by millions of ordinary consumers, it was the threat posed by these arcane financial instruments that led Washington to bail out A.I.G.

So far that rescue has not steadied markets.

“It’s pure crisis management,” Mr. Chernow said. “It’s the Treasury and the Federal Reserve lurching from crisis to crisis without a clear statement on how financial failures will be handled in the future. They’re afraid to articulate such a policy. The safety net they are spreading seems to widen every day with no end in sight.”

“Imperialism the Highest Stage of Capitalism”


“Imperialism the Highest Stage of Capitalism”

We have pacified some thousands of the islanders and buried them; destroyed their fields; burned their villages, and turned their widows and orphans out-of-doors; furnished heartbreak by exile to some dozens of disagreeable patriots; subjugated the remaining ten millions by Benevolent Assimilation, which is the pious new name of the musket; we have acquired property in the three hundred concubines and other slaves of our business partner Sultan of Sulu, and hoisted our protecting flag over that swag. And so, by the Providences of God – and the phrase is the government’s, not mine – we are a World Power
Mark Twain

Digest note: Readers know the mainstream media casts the monetary symptoms of this long-brewing, deep structural crisis of capital which finally erupted into public view, as the whole story. The news comes as an unfathomable shock to most people because this crisis has been disguised as isolated phenomena, bursting housing bubbles, downturns, etc.,to camouflage its systemic roots and nature, with its surface effects. Making sense of this irreversible crisis is critical.

The digest over the years has examined how, in deep crises, capitalism reveals the essence of its liberal democracy by institutionalizing ‘national socialist’, fascist measures. Since its beginnings this has been standard operating procedure against nations and peoples of color —- genocide and slavery are the pillars of american capitalism and racism its ideological engine. As the u.s. crisis deepened all the chickens started coming home to roost and american fascism developed under the aegis of counter-terrorism and national security — garbed for popular consumption in anti-Arab, Muslim, immigrant psywarfare.   Politically fascism was legitimized as well as institutionalized with the 911 pretext: an imperialist  world war AKA  ‘war on terror’, ‘the patriot act’ and ensuing infrastructure ‘security’ legalization of terror, torture and ‘preemptive’ war —-  all permitted the state a fre-hand against countries and people obstructing a state terrorist war to secure u.s. world supremacy. Except as usual the handful of strategists and political executors forgot to include in their thinktank white supremacist calculations a few billion people who would fuck up their neatly laid plans.  Nor in their supreme arrogance did they remember their political and economic manipulations contradicted reality in every other way too.

The systematic separation of capitalist politics and economics is essential to maintain public ignorance and patriotic loyalty: politics thus becomes electoral politics with its sham illusion of democratic control and change, while economics, totally unrelated, reduced to matters beyond our comprehension and control – except to vote for a new faces to carry out the same capitalist agenda posited as ‘change’ and ‘solutions’.

But here are some refreshing antidotes: Unlike WSJ, NYT etc. professional capitalist apologists, Henry K. Liu, a capitalist critic, is chairman of a New York-based private investment group, and F.William Engdahl, anti-imperialist historian, researcher and author, are exceptional – political economists – whose analyses frame economics in its actual political context for an understanding of the ‘big picture’. While not identifying theselves as Marxists, neither are blinded by the congenital ignorant anti-marxist credentials necessary for official propagandists, pundits and apologists to conceal the political-economic dynamic, exonerate capitalism and the systemic nature of its savage political-social impact: concealing the truth that, as the saying goes, it’s the system, stupid – not bad politicians and policies. Reducing systemic political-economics to electoral politics is their job.

Nothing you read or hear from mainstream ‘news’ will tell you the meaning of the current desperation moves: massive privatizing of profits by nationalizing/’socializing’ capital’s debt. Translation: working and oppressed peoples in the ‘homeland’  now officially owe/own the bill for the global devastation and destruction that this predatory system produces in its rampage for maximun power and profits — in the name of ‘stabilizing’ it, and pacifying us —- e.g. saving its ass to wreak even worse havoc.

An Arab proverb, “a mouth that prays, a hand that kills” sums it up.

Liu and Engdahl are is fearlessly independent, critical analysts, informed by vast historical knowledge including — as all genuine political-economy must – Marx and Lenin’s analyses of the nature of capital, its relation to the state, its trajectory and inherent contradictions.  Both analysts grasp and explore the global breadth and depth of this crisis that resulting domination. Both make clear, contrary to propaganda, that the ‘bailout’ moves nationalizing/’socializing’ the debt to privatize the gains,is capitalist to the core.

Brief excerpts from both author’s works will give you a sense of why you don’t find their incisive and comprehensive analyses in mainstream media, and how they make sense of what’s happening. While valuing their analyses, the digest has fundamental disagreements with such critics who, like Liu, as free-market capitalists, believe that despite its monstrous genesis and history, it can be salvaged by new ‘models’ and regulation.  The problems are generated not by bad models and managers but by the very nature of capital itself as Marx analyzed in Capital.

Hopefully this whets your appetite to explore further, to understand why this is not true because capitalism’s strategic vulnerability not only poses severe new dangers but rare historic  opportunities for radical change.  As Marx and other revolutionary leaders have said in so many words, understanding is the basis for conscious political action to change the world. Towards that end, as introduction, a brief excerpt from Lenin’s still on-target, highly recommended, pamphlet “Imperialism the Highest Stage of Capitalism” that Liu mentions, revealing the roots and the nature of capital, why this U.S. crisis will have a huge global impact: imperialism is global capitalism and through WW2 the U.S. became the world-dominant power.

“Imperialism the Highest Stage of Capitalism”
by V. I. Lenin
LCW vol.22,

Lenin enumerated the following five features characteristic of the epoch of imperialism:
The epoch of imperialism opens when the expansion of colonialism has covered the globe and no new colonies can be acquired by the great powers except by taking them from each other, and the concentration of capital has grown to a point where finance capital becomes dominant over industrial capital. Lenin enumerated the following five features characteristic of the epoch of imperialism:

(1) the concentration of production and capital has developed to such a high stage that it has created monopolies which play a decisive role in economic life; (2) the merging of bank capital with industrial capital, and the creation on the basis of this “finance capital”, of a financial oligarchy; (3) the export of capital as distinguished from the export of commodities acquires exceptional importance; (4) the formation of international monopoly capitalist associations which share the world among themselves, and (5) the territorial division of the whole world among the biggest capitalist powers is completed. Imperialism is capitalism at that stage of development at which the dominance of monopolies and finance capital is established; in which the export of capital has acquired pronounced importance; in which the division of the world among the international trusts has begun, in which the division of all territories of the globe among the biggest capitalist powers has been completed.
[Lenin, Imperialism the Highest Stage of Capitalism, LCW Volume 22, p. 266-7.]
“[Imperialism] is something quite different from the old free competition between manufacturers, scattered and out of touch with one another, and producing for an unknown market. Concentration [of production] has reached the point at which it is possible to make an approximate estimate of all sources of raw materials (for example, the iron ore deposits)… [throughout] the whole world. Not only are such estimates made, but these sources are captured by gigantic monopolist associations [now called multi-national conglomerates]. An approximate estimate of the capacity of markets is also made, and the associations “divide” them up amongst themselves by agreement. Skilled labor is monopolized, the best engineers are engaged; the means of transport are captured – railways in America, shipping companies in Europe and America. Capitalism in its imperialist stage leads directly to the most comprehensive socialization of production; it, so to speak, drags the capitalists, against their will and consciousness, into some sort of a new social order, a transitional one from complete free competition to complete socialization.

“Production becomes social, but appropriation remains private. The social means of production remain the private property of a few. The general framework of formally recognized free competition remains, and the yoke of a few monopolists on the rest of the population becomes a hundred times heavier, more burdensome and intolerable.”
(p. 205)

“The development of capitalism has arrived at a stage when, although commodity production still “reigns” and continues to be regarded as the basis of economic life, it has in reality been undermined and the bulk of the profits go to the “geniuses” of financial manipulation. At the basis of these manipulations and swindles lies socialized production; but the immense progress of mankind, which achieved this socialization, goes to benefit… the speculators.” (p. 206-207)

Monopoly, oligarchy, the striving for domination and not for freedom, the exploitation of an increasing number of small and weak nations by a handful of the richest or most powerful nations – all these have given rise to those distinctive characteristics of imperialism which compel us to define it as parasitic or decaying capitalism. … It would be a mistake to believe that this tendency to decay precludes the rapid growth of capitalism. It does not. In the epoch of imperialism, certain branches of industry, certain strata of bourgeoisie and certain countries betray… now one and now another of these tendencies. On the whole, capitalism is growing far more rapidly than before.”
Imperialism, the Highest Stage of Capitalism, VI Lenin, Selected Works in one volume, p 260

(ch.7) Parasitism and the Decay of Capitalism…parasitism is characteristic of imperialism… the deepest economic foundation of imperialism is monopoly. This is capitalist monopoly, i.e., monopoly which has grown out of capitalism and which exists in the general environment of capitalism, commodity production and competition, in permanent and insoluble contradiction to this general environment. Nevertheless, like all monopoly, it inevitably engenders a tendency of stagnation and decay….Certainly, the possibility of reducing the cost of production and increasing profits by introducing technical improvements operates in the direction of change. But the tendency to stagnation and decay, which is characteristic of monopoly, continues to operate, and in some branches of industry, in some countries, for certain periods of time, it gains the upper hand…. imperialism is an immense accumulation of money capital in a few countries, amounting, as we have seen, to 100,000-50,000 million francs in securities. Hence the extraordinary growth of a class, or rather, of a stratum of rentiers, i.e., people who live by “clipping coupons”, who take no part in any enterprise whatever, whose profession is idleness. The export of capital, one of the most essential economic bases of imperialism, still more completely isolates the rentiers from production and sets the seal of parasitism on the whole country that lives by exploiting the labour of several overseas countries and colonies….

Imperialism….CH. 10… the bourgeoisie to an ever-increasing degree lives on the proceeds of capital exports and by “clipping coupons”. It would be a mistake to believe that this tendency to decay precludes the rapid growth of capitalism. It does not. In the epoch of imperialism, certain branches of industry, certain strata of the bourgeoisie and certain countries betray, to a greater or lesser degree, now one and now another of these tendencies. On the whole, capitalism is growing far more rapidly than before; but this growth is not only becoming more and more uneven in general, its unevenness also manifests itself, in particular, in the decay of the countries which are richest in capital….

…the tendency of imperialism to split the workers, to strengthen opportunism among them and to cause temporary decay in the working-class movement, revealed itself much earlier than the end of the nineteenth and the beginning of the twentieth centuries; for two important distinguishing features of imperialism were already observed in Great Britain in the middle of the nineteenth century—vast colonial possessions and a monopolist position in the world market. Marx and Engels traced this connection between opportunism in the working-class movement and the imperialist features of British capitalism systematically, during the course of several decades. For example, on October 7, 1858, Engels wrote to Marx: “The English proletariat is actually becoming more and more bourgeois, so that this most bourgeois of all nations is apparently aiming ultimately at the possession of a bourgeois aristocracy and a bourgeois proletariat alongside the bourgeoisie. For a nation which exploits the whole world this is of course to a certain extent justifiable.”[15] Almost a quarter of a century later, in a letter dated August 11, 1881, Engels speaks of the “worst English trade unions which allow themselves to be led by men sold to, or at least paid by, the middle class”. In a letter to Kautsky, dated September 12, 1882, Engels wrote: “You ask me what the English workers think about colonial policy. Well, exactly the same as they think about politics in general. There is no workers’ party here, there are only Conservatives and Liberal-Radicals, and the workers gaily share the feast of England’s monopoly of the world market and the colonies.” [13] (Engels expressed similar ideas in the press in his preface to the second edition of The Condition of the Working Class in England, which appeared in 1892.)…

The distinctive feature of the present situation is the prevalence of such economic and political conditions that are bound to increase the irreconcilability between opportunism and the general and vital interests of the working-class movement: imperialism has grown from an embryo into the predominant system; capitalist monopolies occupy first place in economics and politics; the division of the world has been completed; on the other hand, instead of the undivided monopoly of Great Britain, we see a few imperialist powers contending for the right to share in this monopoly, and this struggle is characteristic of the whole period of the early twentieth century. Opportunism cannot now be completely triumphant in the working-class movement of one country for decades as it was in Britain in the second half of the nineteenth century; but in a number of countries it has grown ripe, overripe, and rotten, and has become completely merged with bourgeois policy in the form of “social-chauvinism”. [14]

Cramer: Black Monday Could Have Been “Financial Terrorism”

Cramer: Black Monday Could Have Been

“Financial Terrorism”

CNBC host compares crash to pre-9/11 short-selling of airline stocks as SEC enforces ban to fight “market manipulation”

Paul Joseph Watson

CNBC host Jim Cramer says that financial terrorism could have been behind Monday’s stock market crash as part of a conspiracy to “bring down capitalism,” as the SEC this morning announced a ban on short-selling in an effort to fight market manipulation.

“Traditional people who are allegedly shorting are not….it could be financial terrorism, what a great way to take down America….maybe they want to find out who is doing this shorting like in 9/11, remember the airlines went down first and people thought it was Bin Laden,” said Cramer.

A record number of ‘put’ options, speculation that the stock of a company will fall, were placed on American and United Airlines in the days preceding 9/11. This despite a September 10th Reuters report headlined ‘Airline stocks set to fly.’

Between September 6 and 7, the Chicago Board Options Exchange saw purchases of 4,744 put options on United
Airlines, but only 396 call options. On September 10, 4,516 put options on American Airlines were bought on the Chicago exchange, compared to only 748 calls.

However, independent investigators that looked into who benefited from advance knowledge of the terrorist attack found a trail not to Bin Laden, but to Alex Brown/Deutsche Bank - chaired up until 1997 by executive director of the CIA, Buzzy Krongard.

Cramer encouraged authorities to look at who was behind short selling stocks this week because the situation represented a “financial national emergency.”

“I think the FSA needs to find out….whether this is someone who wants to bring down capitalism,” added the host, noting that Hank Paulson himself was accused of helping to bring down capitalism when the government seized control of Fannie Mae.

“Obviously the financial terrorism thing for me has to be put on the table because the regular short sellers are not doing this, they’re not doing this,” stated Cramer.

The Securities and Exchange Commission announced this morning that investors would be temporarily prevented from making bets on stock declines on 799 financial stocks. The ban will remain in place for 10 days and could be extended for up to 30 days.

SEC Chairman Christopher Cox said, “The Commission is committed to using every weapon in its arsenal to combat market manipulation that threatens investors and capital markets. The emergency order temporarily banning short selling of financial stocks will restore equilibrium to markets. This action, which would not be necessary in a well-functioning market, is temporary in nature and part of the comprehensive set of steps being taken by the Federal Reserve, the Treasury, and the Congress.”

Cramer disagreed with the move, stating, “To ban short selling is wrong, unless you had reason to believe that it was a force you would normally use physical terrorism that is using financial terrorism.”

Watch the CNBC clip below.

Ron Paul Blasts “Secret Government” Running Economy

Ron Paul Blasts “Secret Government”

Running Economy

Congressman warns middle class in danger of being wiped out, says Congress is oblivious and Fed has no clue

Steve Watson

Congressman Ron Paul has issued a stinging address concerning the financial crisis in which he outlines how the current economic problems, created via malinvestment and shift to a debt based economy, are now being mismanaged by private interests in secret.

What’s more he says he is not sure the Federal Reserve has any idea what to do next and that the Congress is totally oblivious to the whole sorry state of affairs – a cocktail of elements he warns puts the middle class of America in serious jeopardy.

“Today we had a lot of financial fireworks in the markets, a lot of things are going on, and I think we are in the middle of something very big.” the Congressman stated.

Speaking on the recent collapse and government bailout of several big financial institutions he warned:

“We’re talking about big bucks, we’re not talking about hundreds of millions or even hundreds of billions, we’re talking about trillions of dollars, the obligation is immeasurable.”

“The interesting thing is that they (the financial institutions) don’t come to the Congress, I mean the Federal Reserve buys them out, they own it. We as tax payers now own Fannie Mae and Freddie Mac and know one knows how much that will cost. They don’t come to the Congress, we don’t have appropriations, it’s done by secret government, private individuals behind the scenes maneuvering and manipulating and trying to patch things up. While in the meantime, I’m sure there’s a few people making a couple of bucks out of this whole thing.”

The Congressman highlighted how an economy structured on debt and credit and a financial system based on interventionism and self serving moral hazard has led to gross devaluation of the dollar and ultimately lies at the root of the current financial meltdown.

“Our problems come first of all from the Federal Reserve. It is a monopoly and it controls interest rates artificially low, causes people to make mistakes, that’s the basic source. But then on top of that in the Housing market we had the community reinvestment act which told investors that they had to loan to risky borrowers, and that was a risky complication. HUD contributes to this, FDIC contributes, it’s called moral hazard, everything that we have done over here creates moral hazard, that is we assure people or assume that we will take care of everybody, just go out and create the risk, it is the opposite of the market place.” Paul stated.

“You can’t create money like we’re doing in order to support the dollar, because ultimately it hurts the dollar and everything we do in Washington today whether its on the appropriations side, whether it’s what the Fed is doing, buying up America, it’s all putting pressure on the dollar. One of these days we’re just going to have to wake up and say that we need to liquidate debt. This is malinvestment.” he urged.

The Congressman then slammed those who have blamed the crisis on failures of the free market:

“And then they have people come along and say ‘see, this is the failure of capitalism’, this has nothing to do with capitalism, this is something that started off as interventionism and us being too involved in the economy for the benefit of special interests. But now it is being socialized out in the open.”

“The end of this comes when people reject the dollar and I think we’re getting awfully close to this.” Paul stated echoing comments from leading investors such as Jim Rogers, who predicted Monday that the dollar would soon lose its world reserve status.

“When you see the movement in the markets that we have today, you know that there are serious problems out there and Congress basically are oblivious, they have no idea what’s going on.” Paul continued.

“As a matter of fact I’m not even sure the Federal Reserve has any idea what to do about this. They’ve been manipulating and maneuvering for their own benefit over the years but eventually the market wins out.”

The Congressman’s comments were echoed today by reports indicating that the Congress cannot agree on any form of action and is likely to simply adjourn and “get out of the way”.

Senate Majority Leader Harry Reid told reporters that “no one knows what to do”.

In a stark warning, Ron Paul stressed that the longer the value of the dollar is allowed to depreciate, the greater the risk becomes for the majority of Americans:

“The reason this is so important is that if you care about people in a humanitarian sense, what you want to do is protect the value of the money. Just think of the third world nations when they have total run away inflation, the middle class gets wiped out. And what we are seeing today is the middle class being jeopardized by this type of system that we have, unlimited spending, unlimited debt, unlimited creation of new credit.”

“So it’s time that we wake up… The answers are in the free market, sound money and our Constitution.” Paul concluded.

Watch the full address by the Congressman:

China Blames Wall Street Meltdown On Fed Overissuance Of Currency

China Blames Wall Street Meltdown

On Fed Overissuance Of Currency

(by Paul Joseph Watson & Yihan Dai, published Friday, 19 September 2008 00:00)

Saving financial institutions at cost of taxpayer part of wider agenda to increase control over global economy, says Communist state media

BEIJING, Sep. 19 ( PrisonPlanet ) — China’s state media today reports on the real reason behind the Wall Street meltdown and a subject that the mainstream US media dare not mention – the Federal Reserve’s overissuance of currency – which the Chinese say is part of a wider agenda to justify increased control over the global economy.

The Bush administration today announced a plan to use hundreds of billions of dollars of taxpayer money to buy up up bad mortgages and other debts. The process of injecting more fiat money into an already over-inflated system had the desired effect – the Dow Jones shot up 450 points – but the dollar, following a brief jump, began to plummet.

According to numerous Chinese state media news sources today, the Federal Reserve’s continued zeal for propping up the market by injecting illusory liquidity is part of an agenda to gain trust and grease the skids for increased government intervention in financial markets.

China Finance , China News and Chaobao Financial News, all state owned media outlets, slammed the Fed for taking action that will only make long term economic conditions worse and devalue the dollar by “creating money that does not exist which leads to the inflation of liquidity,” a policy contrary to China’s position as a holder of vast reserves of US dollars.

The analyst quoted by Chaobao Financial News highlighted “that when there is market failure, the paramount purpose of government intervention should be saving the market for the benefit of the people: Relief, Recovery and then Reform,” and that “Protecting the rights of people who are suffering in the housing market and as a result of high oil prices should be treated as a priority.”

The analyst added that by concentrating on saving just a few large financial companies, the Fed is creating wider financial chaos while arousing anger and suspicion by “only protecting and encouraging large companies’ wrong doing.”

CEIBS Professor of Economics and Finance Xu Xiaonian told a conference yesterday that “The fundamental source of Wall Street’s meltdown is caused by Federal Reserve overissuing currency.” He cautioned that the US government has already exceeded its scope in terms of intervention compared with their usual policy.

Similar sentiments were echoed by economist Zuo Xiaolie, who said that the amount of money injected into the market will have little real impact, but that such measures are a “Narrow minded way that the Federal Reserve uses to diversify the pressure of currency adjustment to other countries, which leads to the devaluation of the dollar, causing imbalance in the global economy.”

“The amount of money that has been put into the market can not fundamentally save the market,” said Xiaolie, adding that the move was merely part of an agenda to “regain the trust and justify future further intervention in the economy.”

On Wednesday, China’s official People’s Daily newspaper, the voice of the ruling Communist party, said that the US had unleashed economic “weapons of mass destruction” and set off a “financial tsunami” by allowing Wall Street lenders to trade in subprime debts and unstable financial derivatives, according to a Press TV report .

China has previously threatened to liquidate its vast holding of US treasuries, amounting to $1.33 trillion, if Washington imposes trade sanctions to force a yuan revaluation. The Communist power has also repeatedly expressed its anger at the Fed’s indifference to the weakening dollar. If China were to dump the dollar it would likely set in motion a chain of events that would lead to a collapse of the greenback.

We know we are in trouble when the Chinese Communist Party sound like bastions of sound money policy and fiscal conservatism in comparison to the Bush administration and the Federal Reserve, who in creating more money out of thin air continue to bail out their friends on Wall Street while the economic future of hundreds of millions of American citizens is sold down the river.


Chaobao Financial News:

China Finance:

China News:

The Reluctant Patriot

The Reluctant Patriot

By Archangel

So you say I’m Al-CIA-da, you gave me this name,

But what are my crimes then ? And fortune to fame ?

You say that I’m white now, hiding out in plain site,

A new “Boogeyman,” you’ve created, for your never ending fight.

You say I could strike now, anywhere on the planet,

With either, nuclear, bio, or chemical, you save that, ” I have it ! “

But we’ve heard it before, with Saddam Hussein,

We’re not stupid as we once were, we’re not playin’ that game.

We’ve been lied to & misled, had all our rights taken,

For your “False War on Terror,” if I’m not mistaken ?

So I’ll tell you this one time, just leave me alone,

Don’t bug me, or tap me, or enter my home.

Don’t watch where I’m going, the things that I do,

My bank balance, my credit cards, are not yours to view.

Don’t read all my e-mails, don’t search in my car,

Don’t go to my neighbors, my pastor, or bar.

I’ve had it, quite simply, & now I am pissed,

I have “God-Given,” rights, you’ve forgotten or missed.

My thoughts, my opinions, and all of my rights,

I didn’t give them up, & you’re now in my sights.

I’m so sick & tired, of all that you’ve done,

I’m fed up, I’m pissed off, now I’m gettin’ my guns !

I’m growing much stronger, & bigger each day,

The lies that you’ve told, are now slipping away.

The movement you’re afraid of, now is at hand,

So strike up the music ! And strike up the band !

This movement you’re afraid of, just in case it gets hot ?

It’s just like the first one, & you just might get shot.

We tried to be peaceful, do everything right,

But the case of “Impeachment,” was a horrible sight.

The clowns & the circus, the fluff & the show,

Said you have no intention of honor & so,……

I’ve come now to tell you, your time is now up !

You traitors, your tyrants, you sycophant scum.

Soon we’ll be marching onto D.C.,

With an army of millions, for the whole world to see.

To take back our country ! To take back our name !

To restore her to honor ! To undue her shame !

Some will fall early, some will fall late,

Others just vanish, we’ll not know their fates ?

But believe me, we’re comin’ , to this I attest,

We will never give up now, we will not ever rest !

You will be brought to justice, you will hang for your crimes !

We will give no mercy, no quarter, no time.

For the unspeakable horrors, & things that you’ve done,

Like “Murder, Torture, & Treason,” are some.

The things that I’d do to you, some I can’t even mention,

Do you get what I sayin’ now, do you hear my intention ?

You made this my fight ! I didn’t even start it !

I was just livin’ my life, blind & half hearted.

You wanted this “War,” so I hope you are happy !

I’m coming for you all now, so let’s make it snappy !

And when we are done, our country now saved,

We will bury our dead & honor their graves.

But you, you will be nothing, not ever remembered,

Cause like the cowards you are, you all ran & surrendered.

Written by: Archangel Copyright 2008

( written on the 26th, of July 2008, at 7:00 pm EST )*

Inspired by all those who came before us ! And the ghosts of Concorde 1775.

Best read, if read like “Dr. Suess’s – Green Eggs & Ham. “