Weekly Audit: Banks Get Big Bucks, Consumers Get Bupkis

 

by Lindsay Beyerstein, Media Consortium blogger

Last week, the Federal Reserve announced a plan to buy an additional $600 billion worth of Treasury bonds in an attempt to stimulate the economy. On Democracy Now!, economist Michael Hudson argues that the $600 billion T-bill buy will help Wall Street at the expense of ordinary Americans.

The Fed justifies the purchase as an infusion of cash into the U.S. economy. The buy-up will certainly be an infusion of cash into U.S. banks. In effect, the Fed will help the government pay back the banks that lent money to finance deficit spending. The hope is that these banks, suddenly flush with cash, will help the U.S. economy by lending money to finance projects that will create wealth and jobs (i.e. opening factories and hiring more workers).

However, as Hudson points out, there’s no guarantee that the banks are going to use the windfall to build wealth in the U.S. On the contrary, he argues, there’s every reason to suspect that they’ll invest the money overseas in currency speculation deals. Why? Because the Fed has also put massive pressure on Congress to push China into raising its currency by 20%. The banks know this because the House voted overwhelmingly to approve such a threat in September.

If the banks convert their extra billions to Chinese currency, and China raises the value of its currency in response to the threat of an across-the-board U.S. tariff on its imports, then banks that bought Chinese RMB when it was still artificially cheap will reap huge profits overnight.

Later in the Democracy Now! broadcast, Nobel Laureate Joseph Stiglitz describes how the U.S. employed a similar strategy of currency devaluation to insulate itself against the ravages of the Great Depression, with devastating global consequences:

So, the irony is that money that was intended to rekindle the American economy is causing havoc all over the world. Those elsewhere in the world say, what the United States is trying to do is the twenty-first century version of “beggar thy neighbor” policies that were part of the Great Depression: you strengthen yourself by hurting the others. You can’t do protectionism in the old version of raising tariffs, but what you can do is lower your exchange rate, and that’s what low interest rates are trying to do, weaken the dollar.

Trade war between the U.S. and China

The U.S. and China have a longstanding trade rivalry, but suddenly the two powers seem to be even more at odds than usual.

William Greider of The Nation argues that plummeting global demand has ratcheted up tensions as the two exporting nations fight over a dwindling pool of customers. The U.S. accuses China of artificially deflating its currency to make its exports cheaper. In retaliation, the U.S. imposed tariffs on Chinese tires and tubular steel. China, in turn, imposed a tariff on U.S. poultry. As I mentioned above, the House voted 348-79 in September to impose additional tariffs on nearly all Chinese imports if China doesn’t revalue its currency, though the Senate has yet to vote on this legislation.

The U.S. acts indignant about China manipulating its currency, but Grieder argues that this stance is hypocritical in light of the Federal Reserve’s decision to buy an additional $600 billion worth of Treasury bonds from the federal government to help finance the budget deficit. One effect will be to weaken the U.S. dollar, which will make our exports more competitive relative to those of China.

Voters reject free-for-all trade

In last week’s midterm elections, voters rewarded candidates who oppose unfettered free trade, according to Kari Lydersen of Working In These Times. According to a new report by Public Citizen, 60 congressional races were fought wholly or largely on trade issues in 2010. Only 37 candidates favored NAFTA-style free trade pacts and half of them lost. Not all the candidates who won on a protectionist trade platform were advocating a progressive agenda of fairly compensating trading partners, protecting American jobs, and upholding environmental regulations. Senator-Elect Rand Paul (R-KY) argued that the World Trade Organization is a threat to U.S. sovereignty.

Anti-union ballot initiatives win big

Mikhail Zinshteyn of Campus Progress brings us an update on the anti-union initiatives that appeared on the ballots in many states last week. Voters in Arizona, South Carolina, South Dakota and Utah approved legislation to preemptively neutralize the already-stalled Employee Free Choice Act (EFCA), should it ever become federal law. EFCA, also known as card check or majority sign-up, would allow workers to organize by signing up for a union, instead of going through a grueling National Labor Relations Board (NLRB) election process, which makes workers sitting ducks for management threats and propaganda.

Bean there, done that

Move over, Elizabeth Warren. The White House may be poised to appoint one of Wall Street’s favorite Democrats to head the new Consumer Financial Protection Bureau. Andy Kroll and David Corn report in Mother Jones that Rep. Melissa Bean (D-IL) is a favored contender for the job if her still-undecided race for reelection doesn’t work out. That would be heartening news for Bean’s former chief of staff, John Michael Gonzalez, now a leading lobbyist for Big Finance.

Bean, who serves on the House finance and small business committees, has received over $2.5 million in campaign contributions from the financial sector over the course of her 5-year career. Bean was also a big beneficiary of the Chamber of Commerce, which vehemently opposed the Dodd-Frank financial reform bill that created the CFPB in the first place. Bean ultimately voted for the bill, but not before she unsuccessfully attempted to water down the consumer financial protections therein, the very provisions Bean would be tasked with enforcing.

“The White House needs to beat back the Bean idea, otherwise they’ll look like fools,” one Democratic strategist told Corn and Kroll. “This is the craziest thing I’ve ever seen. She’s a tool of the financial industries.”

This post features links to the best independent, progressive reporting about the economy by members of The Media Consortium. It is free to reprint. Visit the Audit for a complete list of articles on economic issues, or follow us on Twitter. And for the best progressive reporting on critical economy, environment, health care and immigration issues, check out The Mulch, The Pulse and The Diaspora. This is a project of The Media Consortium, a network of leading independent media outlets.

 

Part 2: From Golden Lily to the War on Terror

In part one, it was revealed how $3 trillion in treasure plundered from Asia by Japan in the WW2 operation 'Golden Lily' was confiscated by the United States and funneled into a covert fund used by the CIA to fight communism.

This ‘Black Eagle Trust’ would bankroll numerous secret actions taken by the U.S. throughout the second half of the twentieth century.

One of the hidden accounts, called the ‘M-Fund’, was used to purchase political influence in Japan. It allowed the country to illegally rebuild their army while the U.S. moved troops to Korea. Richard Nixon repeatedly dipped into the fund as vice president to buy influence in the region. As president in 1971, he sent $35 billion to Japanese Prime Minister Kishi, an indicted war criminal.

In addition to foreign activity, the black accounts were used to fund operations within the United States. Nixon’s Japanese fascist friends, elements of what would become the World Anti-Communist League (WACL), are believed to have participated in the Kennedy assassination. This event was part of the larger war on the American Left known as COINTELPRO. The WACL went on to back Latin American death squads under President Reagan.

However, the greatest achievement of the ‘Black Eagle Trust’ would come under his successor, President George H.W. Bush. He would reach the ultimate goal, destruction of the U.S.S.R.

In 1989 President George H. W. Bush began the multi-billion dollar Project Hammer program using an investment strategy to bring about the economic destruction of the Soviet Union including the theft of the Soviet treasury, the destabilization of the ruble, funding a KGB coup against Gorbachev in August 1991 and the seizure of major energy and munitions industries in the Soviet Union. Those resources would subsequently be turned over to international bankers and corporations…

Project Hammer was staffed with CIA operatives and others associated with the National Security apparatus. Covert channels were already in place as a result of other illegal Bush activities. Thus, it was a given that the project would use secret, illegal funds for unapproved covert operations, and that the American public and Congress would not be informed about the illegal actions perpetrated in foreign countries. The first objective was allegedly to crush Communism, a growing political philosophy and social movement that was initially funded by the usual group of international bankers who now supported their demise. To this end, the "Vulcans" under George H. W. Bush, waged war against the Soviet Union…

During the process of accomplishing the main objective of destroying the Soviet Union, the operatives made massive profits. In September 1991, George H. W. Bush and Alan Greenspan, both Pilgrims Society members, financed $240 billion in illegal bonds to economically decimate the Soviet Union and bring Soviet oil and gas resources under the control of Western investors, backed by the Black Eagle Trust...

Herein lays the rub. With the removal of the world’s greatest purveyor of communism, the mission of the ‘Black Eagle Trust’ was complete. Nevertheless, it would be necessary to cover up its existence. Records of the Brady bonds, borrowed against illicit holdings, remained in the offices of Cantor Fitzgerald in New York City.

From early 2000 to June 2001, several workshops were held between the Naval War College and Cantor Fitzgerald at the top of the North Tower to discuss “globalization’s future and the threats that could derail it” One day before the 10 year bonds reached maturity, the attack on the trade centers struck directly below Cantor, killing all of its employees and destroying all documents.

The final step to bury evidence of the great stolen treasure was to target outsiders who had touched the Black Eagle Trust. The CIA had used money laundering schemes through dictators such as Saddam Hussein and dirty banks like the B.C.C.I. With the advent of the War on Terror, every rogue agent affiliated with the trust could be targeted...

Related Posts

Part 1: Golden Lily: How the CIA Funded a Covert Empire

Part 3: The Collateral Damage of Golden Lily

Part 4: Golden Lily's Liar Loans and the Subprime Meltdown

Globalization and the World Cup

(Note: I strongly encourage you to click the image links on this post when reading; they're essential to understanding what I'm saying.)

In the past few decades, the phenomenon of globalization has swept through the world. The world is more open and interconnected than any other time throughout history. Proponents of globalization argue that its effects have lifted hundreds of millions out of poverty, from places as diverse as China to India to South America. Opponents argue that globalization and free trade have led to rising inequality, damage to the environment, and jobs lost for millions of American workers.

Whatever the truth, globalization appears unstoppable. The greatest economic crisis since the Great Depression has barely dented the network; only another world war could truly undo its effects.

The World Cup offers a good illustration of globalization. The history of modern soccer contains a rich tradition in the veins of globalization. For decades, Third World countries have sent their best footballers to play in the First World, especially the great leagues of Europe: Italy’s Serie A, La Liga of Spain, and – above all – England’s Premier League. In World Cups, these players return to represent their home countries and win the World Cup championship.

Here is how the system looked in 1994:

Link to Picture of Globalization and the World Cup, 1994

This graphic comes from a Brazilian website, which can be accessed here. On top are each of the countries which participated in the 1994 World Cup; below are the national leagues of each country. The connecting lines indicate the leagues in which a country’s footballers play when not representing the national team. In some countries – Saudi Arabia, for instance – all the footballers played at the home league; in others, such as Norway and Brazil, the majority of footballers played in foreign leagues.

Here is how this phenomenon looked in the most recent World Cup:

Link to Picture of Globalization and the World Cup, 2010

Sixteen years after 1994, the system has exploded as globalization has set in. More footballers than ever play in countries outside their home. They go to a bewildering variety of different places, from Israel to Germany to even Saudi Arabia. In 1994 the majority of the World Cup team played outside home in 6 (out of 24) teams; today this figure has expanded to 22 (out of 32) teams. Even North Korea, perhaps the most isolated country in the world today, had three players participating in leagues outside the country. Then there are countries like Nigeria: not a single person on its team plays in the domestic league.

The globalization of soccer has had several effects. European leagues such as England’s Premier League now rely heavily on foreign talent. Famous clubs such as Real Madrid, Manchester United, and Juventus have combined the best of the best in the world to form teams of unprecedented skill. Indeed, the level of play in club competition – especially the European Champion Clubs’ Cup – is generally regarded as better than that of the World Cup.

Finally, one might wonder which teams do better – those that outsource their talent, or those that develop it domestically. The answer seems to be that it doesn’t make a difference. Brazil, for instance, has a long tradition of sending players to Europe – and it is widely regarded as the world’s best soccer team. However, so do a number of African teams such as Cameroon and the Ivory Coast. These teams came in the 2010 World Cup with high expectations and talent, but generally underperformed.

On the other side, soccer powers such as Spain and Germany keep talent at home.  However, so does North Korea – a team which came in dead last this year. It is difficult to draw a reliable distinction. Perhaps fittingly, out of the four top teams in this year’s World Cup two had most of their players go overseas, while the other two had most play at home.

P.S. For those interested, here is a graphic of the United States soccer team. Out of 23 players, nineteen play abroad.

Link to Picture of Globalization and the United States Soccer Team

 

--Inoljt, http://mypolitikal.com/

 

 

A Failure of Government

The Senate Democratic leadership have decided to not move forward on a comprehensive energy and climate legislative bill after failing to gain any support from the GOP. It's a failure of government and one with tremendous consequences for life as we know it on this planet. While the bill failed to gain any Republican votes, a number of Democratic lawmakers from manufacturing and coal-producing states were expected to oppose the energy and climate bill.

Instead, Majority Leader Senator Harry Reid intends to move forward next week on a bipartisan energy-only bill that responds to the Gulf of Mexico oil spill and contains other more popular energy items. The bill headed to the floor will not include a carbon cap or a renewable electricity standard but will contain provisions dealing with the oil spill, Home Star energy efficiency upgrades, incentives for the conversion of trucking fleet to natural gas and the Land and Water Conservation Fund.

The story in the New York Times:

After a meeting of Senate Democrats, party leaders on Thursday said they had abandoned hope of passing a comprehensive energy bill this summer and would pursue a more limited measure focused primarily on responding the Gulf oil spill and including some tightening of energy efficiency standards.

Senator John Kerry of Massachusetts, a champion of comprehensive climate change legislation called the new goal “admittedly narrow.”

At a news conference, the majority leader, Harry Reid of Nevada, blamed Republicans for refusing to cooperate. “We don’t have a single Republican to work with us,” Mr. Reid said.

Democrats said they would continue to pursue broader climate change legislation.

“This is not the only energy legislation we are going to do,” Mr. Reid said. “This is what we can do now.”

Senate Democrats had already scaled back their plans to pursue limits on greenhouse gas emissions, like those in a bill approved by the House last year. Instead, the Senate Democrats had said they would seek a cap on carbon emissions only for power plants. But even that proved overly ambitious.

Even before the proverbial plug was pulled on the energy and climate bill, Timothy Egan of the New York Times had a smart column with choice words for the most dangerous man on the planet today, Senator James Inhofe of Oklahoma.

Last month was the hottest June ever recorded worldwide, and 2010 is on course to be the warmest year since record-keeping began, says the National Oceanic and Atmospheric Administration.

In Senator Inhofe’s home state of Oklahoma, the National Weather Service issued a warning this week of “dangerous heat index values” of up to 110 degrees. A report from AccuWeather.com last month stated that, this year, “no other region has seen the variety of extreme weather” as much as Oklahoma.

Extreme weather. Perfect for an extreme politician, a man who won his senate seat in 1994 by using, as his slogan, the actual words of a cynical strategy to get people to think about anything but real issues: “God, guns, and gays.” Maybe, with this weather, God is trying to tell the senator something.

There's more...

Tackling Inequality

Yves Smith over at Naked Capitalism has a post with a rather spectacular statistic as a headline: "58% of Real Income Growth Since 1976 Went to the Top 1% (and why it matters)". That's a pretty devastating statistic though it clearly points to the salient development in the American economy, a widening, and dangerous in my view, social inequality.

That stat comes courtesy of the Financial Times' Martin Wolf who in turn is citing the work of the Indian born economist Raghuram Rajan, now a professor at the University of Chicago but previously the Chief Economist at the IMF. Dr. Rajan, who is a rather unorthodox economist even if he does lean right on regulatory reforms, has a new book out called Fault Lines: How Hidden Fractures Still Threaten the World Economy which is the subject of both Smith and Wolf posts.

From Martin Wolf:

In his book, Prof Rajan points to domestic political stresses within the US. Related stresses are emerging in western Europe. I think of it as the end of “the deal”. What was that deal? It was the post-second-world-war settlement: in the US, the deal centred on full employment and high individual consumption. In Europe, it centred on state-provided welfare.

In the US, soaring inequality and stagnant real incomes have long threatened this deal. Thus, Prof Rajan notes that “of every dollar of real income growth that was generated between 1976 and 2007, 58 cents went to the top 1 per cent of households”. This is surely stunning.

“The political response to rising inequality ... was to expand lending to households, especially low-income ones.” This led to the financial breakdown. As Prof Rajan notes: “[the financial sector’s] failings in the recent crisis include distorted incentives, hubris, envy, misplaced faith and herd behaviour. But the government helped make those risks look more attractive than they should have been and kept the market from exercising discipline.”

There's more...

Diaries

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