Making sense of Obama's billion dollar hammer

You probably heard it by now: Obama has pledged a billion dollars to what my "beloved" BBC called "European security". The official name for this initiative is the "European Reassurance Initiative".  You see, Obama and the BBC apparently believe that Europeans are really terrified and that they believe that the Russian tanks might roll into Warsaw, Athens, Rome or Lisbon at any time.  The good news is that Uncle Sam is here to reassure them that he will let no such thing happen and that this additional 1 billion dollars will deter the Russian Bear.

Have you ever read something more ridiculous?

So what is really going on here?

There is a wonderful American expression which says that "to a man with a hammer everything looks like a nail".  Well, to Obama, the EU and the Ukraine sure do look like nails because the only instrument the USA has used in its foreign policy for many decades now is a "hammer" composed of money and guns.  But let's backtrack for a second.

I submit that the US policy in Europe is nothing short of a total failure.  Not only has the US-instigated coup in the Ukraine turned into a full-spectrum disaster, but the latest elections in Europe clearly show that the European public is becoming more anti-EU and more anti-US.  In fact, since the EU is nothing more than a US instrument of colonial domination over Europe, being anti-EU is being anti-US.  Bernard-Henri Levi, the hyper-Zionist clown who fancies himself a "philosopher" and who is the darling of the European elites, once said that "anti-Americanism is a metaphor for anti-Semitism".  To paraphrase him I would say that "anti-Europeanism is a metaphor for anti-Americanism" (at least if by "Europe" we understand that trans-national horror known as the EU and not the "Europe of the fatherlands" which de Gaulle, a true patriot of France and Europe, had called for).  And the folks in DC understand that too, they are not stupid.  Worse of all for them, time is running out and the situation on the ground is getting worse and worse not by the day, but by the hour.  France, in particular, might explode literally any day.

But the real problem is not in Europe or in the Ukraine, it is in the USA.  The US leadership, clearly intoxicated on imperial hubris and 1% class arrogance, has simply forgotten Bismark's motto that "politics is the art of the possible" and this is why instead of seeking some kind of best possible compromise leading to the best possible outcome, they are holding on with a desperate death-grip to an impossible outcome: a Europe run by the EU and a unitary state of Banderastan on the border with Russia.  That ain't gonna happen, of course.  In fact, the harder the US pushes for such an outcome, the less likely it is to ever become reality.  No need to read Hegel to understand that - a quick look at the recent events in Europe clearly shows that the AngloZionist imperial design for the ATTU (Atlantic to the Ural) zone is going nowhere and will end up in an embarrassing meltdown.

Faced with this prospect, the White House does what the French call "fuite en avant" ("fleeing forward" if you want, or "advancing even faster into the quicksands").  The Russians did not take the Ukrainian bait?  Fine - we will pretend like they did anyway and "reassure" the Europeans by declaring that "the security of America's European allies is sacrosanct" with enough gravitas to hopefully make them believe that they are really threatened. The neo-Nazi junta has just engaged in yet another massacre in the east? No problem, we will simply praise the regime for its restraint and "democratic nature".  The EU leaders are having a panic attack over the latest elections?  No problem either, we will just give them a one billion dollar bribe to show them that we will stand by them no matter what and regardless of whom those pesky Europeans might vote for the next time around.

Because, of course, this is what this billion dollar is all about.  It's just bribe money for the 1% in the US and the EU to be distributed amongst these plutocrats under the guise of "reassuring Europe".  In reality, the "European Reassurance Initiative" only serves to reassure the European elites and the Eurobureaucrats as they are the only ones who will truly benefit from it.  And were shall the money come from?  Well, hell, Uncle Sam can just create it out of thin air with a few keystrokes on the right computer.  And as long as the EU and the rest of the US-colonized planet continues to accept payments in dollars, they will be the ones really paying for this "EU plutocracy reassurance initiative".

You might retort that this is a stupid strategy which will only make things worse.  And you would be right.  But not in the very short term, which is really the only term which has ever mattered to capitalists anyway.  Besides, money and guns are the only two "policy instruments" the US elites understand, so why not throw some money at the issue and hope that guns will make the Empire look stronger?

It is as pathetic as it is immoral. The good news is that the AngloZionist Empire is really sabotaging itself and that it does so faster and better than any outside power could ever dream of.  And we are far from having seen the worst of it (just think of what a Hillary Presidency would look like!).

As for the people of Novorossia and Russia - they should keep their cool and realize that all this hot air blowing from the West is just that - hot air.  Yes, sometimes they *sound* scary, but that only because American politicians are the masters of make believe and that they are running what Chris Hedges so brilliantly called the "Empire of Illusions".  No matter what they say, the reality on the ground, in the real world, is that Kiev does not have any military option in the Donbass just like the AngloZionist Empire has no military option against Russia.  Yes, they can *pretend* like they have, but that does not make it so.

What we all should keep in mind is that neither money nor guns win wars.  Yes, they are important factors, but they cannot decide an outcome.  Willpower does.  The Americans, by the way, are quite aware of that.  The dumb ones really believe their own propaganda, but the smart ones know that the real purpose of the US "make believe propaganda" is not to really make it happen, but to demoralize the opponent and break down his will to resist.  The danger of that is that the moment your opponent really understands that he will immediately understand something else too: that your bark is far bigger than your bite.  This is what has happened with Hezbollah.

For years the AngloZionist propaganda has presented the IDF as some kind of elite, almost invincible, force (which they never were, as anybody who has trained with them knows).  And that myth of Israeli invincibility has literally paralyzed the entire Middle-East until Hezbollah challenged it.  As Robert Fisk reported in 2006 "while in the past the Lebanese would jump into their cars and drive north as soon as an Israeli attack was announced, now they would jump in their cars and drive south".  That "switch" in the mind of the Lebanese is what really defeated the IDF in 2006, not some kind of Hezbollah super-weapon.

What does this mean for Novorossia?

It means that the people of Novorossia must truly believe in themselves and stop hoping for a Russian intervention which is not going to happen, at least at this moment in time.  Let Obama shake his billion dollar hammer until he drops in exhaustion, but never let that distract you from a victory which is very much within your reach.  Yes, the massacres in Odessa, Mariupol, Slaviansk, Kramatorsk, Donetsk and now Lugansk are disgusting atrocities which cannot be forgiven or forgotten, but they are not on the same scale as the horrors of WWII and yet the Russian people eventually also won that war.

Lies and terror have the exact same purpose: to defeat the will of their target and we can expect a lot more lies and terror from the neo-Nazis in Kiev and from the AngloZionist Empire.  But if we take heed of Hezbollah's example in Lebanon and if we keep in mind that time is very much on our side, we will prevail, sooner rather than later.

The Saker

The gates of Hell are opening for the Ukraine

written specially for the Asia Times 

 
Just as I have predicted in my last piece about the developments in the Ukraine, European politicians and Ukrainian opposition parties have gone into overdrive to attempt yet another color-coded revolution in Kiev.  The normally demure and low-key Eurobureaucrats have suddenly found it themselves to castigate Russia with irate statements about "unacceptable Russian interference" while their own diplomats actually went on stage to encourage the (illegal) demonstrations in Kiev.  As for the opposition, it used its formidable resources to bring people form all over the Ukraine, the Baltic states and Poland to Kiev to organize a mass rally and, just to make sure that enough people would show up, they began the rally with a free rock concert.  Finally the united opposition parties have declared that they are creating a "united headquarters of the resistance" which will have as its first task to coordinate a Ukrainian-wide general strike.

Finally, the opposition, lead by Yulia Timoshenko from her jail, is now openly calling for the overthrow of the Yanukovich government and new elections.

Very impressive.

And what about the "pro-Russian" Yanukovich government?

Just as I have predicted, it is already prepared to "zag" following its surprise "zig" of last week.  All Yanukovich & Co. have done is to send Prime Minister Azarov to explain the latest change of mind of President Yanukovich on a TV talkshow hosted by a notorious russophobic Jewish anchor "Savik Shuster" (his real name is "Shevelis Shusteris"- he first worked for the CIA-created Radio Free Europe/Radio Liberty, then for Russian "democratic" media outlets before joining the "Ukrainian" TV following the "Orange Revolution" in Kiev.  This true "cosmopolite" also holds Italian and Canadian citizenship, probably along with an Israeli one) where nobody listened to a word he had to say: for each economic figure Azarov mentioned in defense of his position, the nationalists responded with emotional slogans, promises of a bright tomorrow and the usual rabid anti-Russian rhetoric.   Still, Azarov explained that he had decided to show up because he hoped that at least on TV they would let him speak (that same day the opposition in the Ukrainian Parliament simply shouted Azarov down thereby successfully preventing him from taking the floor to explain the government's decision).

Yanukovich himself hinted that all that had happened was a "temporary delay" and that the Ukraine might sign after all, just a "little later", maybe in Spring.

Next, the government ordered their riot-cops to clear the Maidan square in Kiev at 4AM, which was done with the usual level of wanton violence (on both sides).  Azarov then denounced its own cops and announced that a special commission would be set up to investigate the violence and find out who was responsible (who else could it be besides him is unclear).

Finally, Yanukovich officially declared that he was "deeply outraged" by the violence and that all Ukrainians were united by, I kid you not, "our choice of our common European future".

Absolutely pathetic, if you ask me.

As for the so-called "Russian" folks of Donetsk, they organized an anti-EU/pro-Yanukovich rally were they displayed an immense sea of blue-yellow Ukrainian flags while playing Beethoven's "Ode to Joy" form is 9th symphony (probably unaware that this was the official Anthem of the EU).

The contrast between two parties to this dispute could hardly be bigger, I think.  Let' compare them:

The Eurobureaucrats and the Ukrainian nationalists

The Eurobureaucrats and the Ukrainian nationalists are mad, really really mad.  They feel like just one man suddenly changed his mind, reneged on all his previous promises and suddenly single handedly stopped a process in which they had invested a huge amount of political capital.  And they are absolutely correct, this is exactly what happened.  Now the Eurobureaucrats and the Ukrainian nationalists are exactly in the same predicament: both feel extremely weak and both fear Russia, both sides are financially bankrupt and hope that a political victory will overshadow their economic failure, both sides hate Russia and feel that it is absolutely crucial to deny Russia any possible advantage (real or imaginary) it might gain from a union with the Ukraine.  Yes, these are purely negative, hate-filled, feelings of inadequacy mixed with self-delusion about a much hoped for but forever unachievable greatness.  But negative feelings, in particular nationalistic ones, can be very powerful, as Hitler has so clearly demonstrated the entire world.

The supposedly "pro-Russian" Eastern Ukrainians

They have no vision, no ideology, no identifiable future goal.  All they can offer is a message which, in essence, says "we have no other choice than sell out to the rich Russians rather than to the poor European" or "all we can get from the EU is words, the Russians are offering money".  True.  But still extremely uninspiring, to say the least.  Worse, this point of view reinforces, at least by implication, the key theses of the the Eurobureaucrats and the Ukrainian nationalists: that this is a sellout to Russia and that the Russians are blackmailing and interfering whereas, in reality, the blackmail was totally on the EU sides as clearly shown with the demand that Tymoshenko be freed (while Berlusconi in Europe is charged with exactly the same crime, so much for double-standards).

And what about Russia in all that?

I am beginning to fear that this will all explode into a real and very dangerous crisis for Russia.  First, I am assuming that the the Eurobureaucrats and the Ukrainian nationalists will eventually prevail, and that Yanukovich will either fully complete his apparent "zag" and reverse his decision, or lose power.  One way or another the the Eurobureaucrats and the Ukrainian nationalists will, I think, prevail.  There will be more joyful demonstrations, fireworks and celebrations in Kiev, along with lots of self-righteous back-slapping and high-fiving in Brussels, and then the gates of Hell will truly open for the Ukraine.  Why?

Well simply because joining one Titanic at the hip with another one will save neither.  The EU is sinking and so is the Ukraine.  Neither has any real vision of how to stop this disaster and both sides are absolutely dead-set to try to hide their bankruptcy by an increasingly strident and outright nasty political rhetoric.   Needless to say, neither empty promises nor nationalistic slogans will feed anybody and the already dying Ukrainian economy will collapse at which point the Russian priority will have to change from supporting it to protecting Russia from the chaos happening just across its 2300km long and mostly completely unprotected border with the Ukraine.  What are the risk for Russia?

The real risks for Russia

Being drawn into the inevitable chaos and violence with will flare up all over the Ukraine (including the Crimean Peninsula), stopping or, at least, safely managing a likely flow of refugees seeking physical and economic safety in Russia and protecting the Russian economy from the consequences of the collapse of Ukrainian economy.  Russia will have to do all that while keeping its hands off the developing crisis inside the Ukraine as it is absolutely certain that the Eurobureaucrats and the Ukrainian nationalists will blame Russia for it all.  The best thing Russia could do in such a situation would be to leave the Ukrainians to their private slugfest and wait for one side or the other to prevail before trying to very carefully send out a few low-key political "feelers" to see if there is somebody across the border who has finally come to his/her senses and is capable and ready to seriously begin to rebuilt the Ukraine and its inevitable partnership with Russia and the rest of the Eurasian Union.  As long as that does not happen Russia should stay out, as much as is possible.

Sarajevo on the Dniepr

Right now, all the signs are that the Ukraine is going down the "Bosnian road" and that things are going to get really ugly.  The explosive brew we now see boiling in the Ukraine is exactly the same one which so viciously exploded in Bosnia: local nationalist backed by foreign imperialists who are absolutely determined to ignore any form of common sense, nevermind a negotiated solution, to achieve their ideological goals.  To most sensible and rational people my doom and gloom scenario might seem too pessimistic.  I would encourage these skeptics to take a look at this well-known Polish joke:

A Pole walking along the road happens to spy a lamp. He picks it up, and as it is covered in rust he gives it quick rub. Out comes a genie.  “I’m the genie of the lamp and I can grant you three wishes,” the genie says.   “OK,” says the Pole. “I want the Chinese Army to invade Poland.”  Odd choice, the genie thinks, but nevertheless he grants the wish, and the Chinese Army comes all the way from China, invades, and goes back home.  “Right, second wish. Maybe something more positive,” says the genie.   “No,” replies the Pole, “I want the Chinese Army to invade again.”  So the Chinese come all the way from China, lay waste to more of Poland, and then go home.  “Listen,” says the genie. “You have one last wish. I can make Poland the most beautiful and prosperous place on earth.”  “If you don’t mind, I want the Chinese army to invade one more time.”  So the Chinese army comes again, destroys what’s left of Poland, and then goes home for the last time.   “I don’t understand,” says the genie. “Why did you want the Chinese army to invade Poland three times?”.  “Well,” replies the Pole, “they had to go through Russia six times.”

This is the kind of "humor" a deep-seated inferiority complex combined with a compensatory strident nationalism can produce.  Ask anybody who has ever met a Ukrainian nationalist and he will confirm to you - they make the Polish nationalists look outright mild-mannered and sober.

Needless to say, when the Ukraine explodes the Eurobureaucrats will look the other way and lock the borders of their respective countries as best they can while the leaders of the Ukrainian nationalists parties will cut and run to the West where they will get well-paid position in academia, various think-tanks and NGOs.  As for the people of the Ukraine, they will be left to fight each other against a background of hypocritical outpouring of crocodile-tears from the so-called "international community?

Lasciate ogne speranza, voi ch'entrate?

I sincerely hope that I am wrong and that some individual or movement will rise up from the current chaos to prevent the Ukraine from collapsing into the "Bosnian scenario" but, unfortunately, I don't see any sign of that happening.  Ukrainian politicians - all of them - are a disgusting sight.  Ditto for the EU politicians, by the way.  At the very best they are boring, uninspiring if marginally competent.  At their habitual worst, they are pathological liars, political prostitutes and delusional imbeciles which are too illiterate and too arrogant to ever see the writing on the wall, even when it is written in big, thick, block characters.

Full disclosure here: I am by training, by trade and by character a pessimist (have you ever met an optimistic military analyst?).  For example, ever since I published my very first post on this blog I have been predicting a US/Israeli attack on Iran, and that still has not happened (worse, I still think that sooner or later the Israelis and their Neocon sayanim colleague will provoke such a US attack, if need be by a false flag operation).  So I have been wrong, very wrong, in the past and I fervently hope that I am wrong again.  Alas, I see no facts or arguments even indirectly suggesting that there is another, hopefully better, scenario for the Ukraine in the future.

Does anybody else see any?

The Saker

Russia between Cyprus and China

The last couple of days have been truly of immense, historical, importance for Russia, first because of the hugely important visit of  Xi Jinping, the President of the People's Republic of China, General Secretary of the Communist Party of China, and the Chairman of the Central Military Commission. During this visit the Chinese side stressed that it was highly symbolic that Xi Jinping had chosen Russia as the first country to visit following his election.  The Russians responded with their own highly symbolic gesture - they invited Xi Jinping to visit the Operational Control Center of the Russian Armed Forces, something no other head of state had ever done before.

Xi Jinping visits the Operational Control Center of the Russian Armed Forces

Both sides insisted that what took place was absolutely unprecedented.  For example, Xi Jinping and Vladimir Putin spent a total of seven hours in direct, face to face, consultations.  Both heads of state declared that the Russian-Chinese strategic partnership was of the highest possible importance for both countries and that the two nations would closely collaborate on all levels including long term energy and defense issues.  A large number of strategic agreements and contracts were signed and both Putin and Xi Jinping announced that Russia and China would also closely work together and support each other in all international questions.  Both leaders stressed that the past was forever gone and that the nature of the new relationship between their two countries will have no historical precedent.

While the western corporate press went out of its way to minimize the importance of this meeting, the Russian and the Chinese press stressed the truly tectonic shift such a close partnership represents for the future of the planet.  While everything was said in the most diplomatic language, it is rather clear that what we witnessed over the past few days is the birth of a new strategic alliance which is rather clearly aimed against the West both in economic and even military terms.  The goal of Russia and China is not to trigger some kind of confrontation with the West as much as it is to globally counter-act Western imperialism.  This is why both delegations insisted on the respect of international law in a multi-polar world were no one country or block can dictate its will.

It will be interesting to see what the impact of this strategic alliance will be upon the SCO, the CSTO and the BRICS countries.  My personal sense is that Russia and China will use their combined power to strengthen all these institutions.  I also see this strategic alliance as yet another manifestation of the new power of the "Eurasian sovereignists" inside the Kremlin who are now clearly pushing Russia towards a deeper integration with the East.

It is ironic that while this new strategic partnership between Russia and China was finalized in Moscow, the West found nothing better to do than to basically commit and act of pure highway banditry towards Russia.  I am referring, of course, to what is happening in Cyprus.

To make a long story short I will sum up what is taking place in the following sentence.  The EU bankers and their US sponsors have basically decided to rob Russian bank account holders of about 30% of  their money in Cyprus in order to repay the banks which gave dirty loans to Cyprus, in other words, to pay themselves.  Not only is such an action a direct violation of all possible laws and regulations pertaining to banking, but it is done against a background of vicious anti-Russian propaganda which basically claims that all the Russian money in Cyprus is dirty money from the Russian Mafia.  What the EU leaders are basically telling Russia is "yes, fuck you, we will simply take your money and dare you to do something about it".

Interestingly, the Russia media is very much aware of who is really pulling the strings of this entire operation and no Russian politician spoke out against the Cypriots themselves who are, in reality, as much the victims of the international banking cartels as the Russian investors.  The line chosen by Russian politicians and the media is the same one: what is happening here has little or nothing to do with Cyprus and everything to do with the entire EU zone becoming dangerous for Russian investors. 

The Russian economy will not suffer from any of that.  First, because Cyprus is way too small to matter.  Second, this situation only strengthens the position of the "Eurasian sovereignists" who have always been warning against placing money in Western banks.  Third, this act of banditry by the EU will only further fuel anti-Western sentiments in the already very hostile Russian public opinion and it will hurt all the pro-Western parties and movements in Russia.

The vast majority of the people in Russia see what is happening in Cyprus as yet another manifestation of the Western anti-Russian racism which appears to be the prime motivator of current Western policies towards Russia.  For example, Russian journalists were quick to remember that the last time somebody in Europe simply seized the bank accounts of foreigners was Hitler who did so to grab more money to finance his policies.  While I find this parallel a little far fetched, it is, I believe, very indicative of the mood in Russia which is deeply disgusted with the West.  This is hardly surprising: after the NATO expansion to the East (which it has promised not to do!), the support by the West for all the anti-Russian regimes, including the most aggressive (Georgia) and racist (Latvia), following the deployment of the US anti-missile system, the support for Jewish oligarchs like Berezovsky or Khodorkovsky, the support for Chechen separatists and their atrocities, the adoption of anti-Russian laws like the Magnitsky Act, the support for Pussy Riot and the homosexual parades in Russia, now the big Cypriot robbery.  It is hardly a wonder that the Russians are globally disgusted with the West and its seemingly infinite capability for hypocrisy and lies.

Still, the creation of this strategic partnership between China and Russia is excellent news for the world wide resistance against the US-run international global new world order and its turbocapitalist ideology.  Both Russia and China clearly and unambiguously stand for the ideas of sovereignty and social solidarity, in other words, what is arguably the most powerful alliance on the planet is clearly anti-capitalist in its ideological basis.  Sure, this is not the anti-capitalism of Stalin or Mao, and both Russia and China are more than happy to play the corporate game to their own benefit, but it remains that they are not willing to surrender their sovereignty to the trans-national banking interests and nor are they willing to give up the core value of social solidarity (what most Americans think of as "socialism") in their society.

At a time when Latin America is clearly wobbling and unsure about its future course and when Africa is becoming the next hunting ground for Western predators, it is extremely encouraging to see the emergence of a strategic alliance between the two most powerful countries to resist Western imperialism and the New World Order.

The Saker

CrossTalk: Cypriot Bail-In

82 people arrested in Spain as mass protests sweep across Europe

RT reports:


 


Eighty two people have been arrested and 38 injured, including 18 police officers, as Spanish police react swiftly to reports of property damage and disorderly behavior while mass protests that began in Spain continue to roll out across the EU.

­A wave of anti-austerity anger is sweeping across Europe. Spain and Portugal are undergoing general strikes, whereas Greece and Italy are seeing many walkouts.

In Spain – the fourth-biggest eurozone economy, yet with one in four workers unemployed – activists and unions will also be staging an evening rally outside the parliament in the capital, Madrid.

The atmosphere remains tense in the capital following violent confrontations which resulted in dozens of arrests and injuries. Among those detained were a man and a woman from Madrid who were allegedly carrying material to build a bomb, including gasoline, nails, screws and a firecracker, El Mondo reports.

There were more sporadic clashes between riot police and protesters as thousands continue to gather on the central square of Puerta del Sol. Baton-yielding riot police police were seen chasing hostile protesters down a central thoroughfare near city hall, where many of the shops have been shuttered in anticipation of potential riots. Police also fired rubber bullets into the air to disperse demonstrators from key locations in the heart of the city.

After a tense face-off between protesters and a police cordon near the iconic Plaza de Cibeles Square, demonstrators have finally backed down for the time being.


Policemen clash with demonstrators during a general strike on November 14, 2012 in Madrid. (AFP Photo / Dominique Faget)

Most of the anger has been concentrated on Prime Minister Mariano Rajoy, whose cuts in health, education and welfare benefits continue. Rajoy, who won a landslide election victory a year ago, is wrestling with the second-largest budget deficit in the euro region while trying to revive the economy from a five-year slump that pushed the jobless rate to 26 per cent. He is trying to avoid following Portugal, Greece and Ireland into seeking a sovereign bailout. Outrage is also growing over Spaniards losing their homes for failing to keep up with mortgage payments.

In Portugal, roughly 40 towns and cities are being called upon to protest. Strikes are being held to protest measures including wage and pension cuts. State-owned airline TAP SGPS SA has canceled flights. Lisbon’s Metro service was shut and state-owned train operator CP-Comboios de Portugal said most trains will not run.

Italian unions, too, are urging a four-hour work stoppage.

Transportation and shipping will be disrupted throughout the day due to staggered, four-hour walkouts. A nationwide strike will see Italy's railway employees cease work, while maritime workers are also expected to delay departure times of ships and ferries by four hours. The biggest protest will be held in Rome and is expected to involve around 3,000 protestors.

Demonstrators march during a protest on a day of mobilisation against austerity measures by workers in southern Europe on November 14, 2012 in Rome. (AFP Photo / Andreas Solaro)

Greece has called a three-hour walkout and a rally in Athens, as recent decisions by the government to further cuts spending in a bid to secure another tranche of bailout money have not gone down well. Greece has been at the crux of the eurozone crisis, with the country continuously tinkering with a possible default. This past week the government has been trying to further cut spending in order to secure another bailout.

It’s the first time the European Trade Union Confederation has appealed for a day of action that includes simultaneous strike action in four countries and further protests in other countries.

Other countries have also staged walkouts.

The synchronized and simultaneous strikes and protests have already grounded flights, forced schools to close and have shut down transport.

Policemen clash with demonstrators during a general strike on November 14, 2012 in Madrid. (AFP Photo / Dominique Faget)

Policemen clash with demonstrators during a general strike on November 14, 2012 in Madrid. (AFP Photo / Dominique Faget)

Police detain a man as picketers and protesters clashed with police during a 24-hour nationwide general strike in Madrid, November 14, 2012. (AFP Photo / Dominique Faget)

Policemen clash with a demonstrator during a general strike on November 14, 2012 in Madrid. (AFP Photo / Dominique Faget)

Vladimir Putin: 'Russia won’t fund EU political influence in Eastern Europe'

The definition of insanity

They did it again.  This time it is Spain - or rather, Spanish banks - which are getting a 100 billion Euros bailout in exchange for a wide and comphensive program of austerity measures by, no, not the Spanish banks, but the Spanish people.

You got to admire the brazen arrogance of this system.

First, the banks screw the people, then the international plutocracy makes it a condition to further screw the people before bailing out the banks (and not the screwed people, of course!)

And the entire Establishment and its lapdog corporate media try to out-compete each other in not seeing the obvious solution: to nationalize the banks, criminally prosecute their administrators and, possibly, shareholders, and jump-start the economy by bringing down unemployment.

First there was Greece, then Ireland and Portugal.  Now Spain is next, possibly followed by France.  Have the Europeans really forgotten that one definition of insanity is doing the same thing over and over again while expecting different results?

The Saker

Europe’s Transition From Social Democracy to Oligarchy

By Michael Hudson for Frankfurter Allgemeine Zeitung via Information Clearing House

The easiest way to understand Europe’s financial crisis is to look at the solutions being proposed to resolve it. They are a banker’s dream, a grab bag of giveaways that few voters would be likely to approve in a democratic referendum. Bank strategists learned not to risk submitting their plans to democratic vote after Icelanders twice refused in 2010-11 to approve their government’s capitulation to pay Britain and the Netherlands for losses run up by badly regulated Icelandic banks operating abroad. Lacking such a referendum, mass demonstrations were the only way for Greek voters to register their opposition to the €50 billion in privatization sell-offs demanded by the European Central Bank (ECB) in autumn 2011.

The problem is that Greece lacks the ready money to redeem its debts and pay the interest charges. The ECB is demanding that it sell off public assets – land, water and sewer systems, ports and other assets in the public domain, and also cut back pensions and other payments to its population. The “bottom 99%” understandably are angry to be informed that the wealthiest layer of the population is largely responsible for the budget shortfall by stashing away a reported €45 billion of funds stashed away in Swiss banks alone. The idea of normal wage-earners being obliged to forfeit their pensions to pay for tax evaders – and for the general un-taxing of wealth since the regime of the colonels – makes most people understandably angry. For the ECB, EU and IMF “troika” to say that whatever the wealthy take, steal or evade paying must be made up by the population at large is not a politically neutral position. It comes down hard on the side of wealth that has been unfairly taken.

A democratic tax policy would reinstate progressive taxation on income and property, and would enforce its collection – with penalties for evasion. Ever since the 19th century, democratic reformers have sought to free economies from waste, corruption and “unearned income.” But the ECB “troika” is imposing a regressive tax – one that can be imposed only by turning government policy-making over to a set of unelected “technocrats.”

To call the administrators of so anti-democratic a policy “technocrats” seems to be a cynical scientific-sounding euphemism for financial lobbyists or bureaucrats deemed suitably tunnel-visioned to act as useful idiots on behalf of their sponsors. Their ideology is the same austerity philosophy that the IMF imposed on Third World debtors from the 1960s through the 1980s. Claiming to stabilize the balance of payments while introducing free markets, these officials sold off export sectors and basic infrastructure to creditor-nation buyers. The effect was to drive austerity-ridden economies even deeper into debt – to foreign bankers and their own domestic oligarchies.

This is the treadmill on which Eurozone social democracies are now being placed. Under the political umbrella of financial emergency, wages and living standards are to be scaled back and political power shifted from elected government to technocrats governing on behalf of large banks and financial institutions. Public-sector labor is to be privatized – and de-unionized, while Social Security, pension plans and health insurance are scaled back.

This is the basic playbook that corporate raiders follow when they empty out corporate pension plans to pay their financial backers in leveraged buyouts. It also is how the former Soviet Union’s economy was privatized after 1991, transferring public assets into the hands of kleptocrats, who worked with Western investment bankers to make the Russian and other stock exchanges the darlings of the global financial markets. Property taxes were scaled back while flat taxes were imposed on wages (a cumulative 59 percent in Latvia). Industry was dismantled as land and mineral rights were transferred to foreigners, economies driven into debt and skilled and unskilled labor alike was obliged to emigrate to find work.

Pretending to be committed to price stability and free markets, bankers inflated a real estate bubble on credit. Rental income was capitalized into bank loans and paid out as interest. This was enormously profitable for bankers, but it left the Baltics and much of Central Europe debt strapped and in negative equity by 2008. Neoliberals applaud their plunging wage levels and shrinking GDP as a success story, because these countries shifted the tax burden onto employment rather than property or finance. Governments bailed out banks at taxpayer expense.

It is axiomatic that the solution to any major social problem tends to create even larger problems – not always unintended! From the financial sector’s vantage point, the “solution” to the Eurozone crisis is to reverse the aims of the Progressive Era a century ago – what John Maynard Keynes gently termed “euthanasia of the rentier” in 1936. The idea was to subordinate the banking system to serve the economy rather than the other way around. Instead, finance has become the new mode of warfare – less ostensibly bloody, but with the same objectives as the Viking invasions over a thousand years ago, and Europe’s subsequent colonial conquests: appropriation of land and natural resources, infrastructure and whatever other assets can provide a revenue stream. It was to capitalize and estimate such values, for instance, that William the Conqueror compiled the Domesday Book after 1066, a model of ECB and IMF-style calculations today.

This appropriation of the economic surplus to pay bankers is turning the traditional values of most Europeans upside down. Imposition of economic austerity, dismantling social spending, sell-offs of public assets, de-unionization of labor, falling wage levels, scaled-back pension plans and health care in countries subject to democratic rules requires convincing voters that there is no alternative. It is claimed that without a profitable banking sector (no matter how predatory) the economy will break down as bank losses on bad loans and gambles pull down the payments system. No regulatory agencies can help, no better tax policy, nothing except to turn over control to lobbyists to save banks from losing the financial claims they have built up.

What banks want is for the economic surplus to be paid out as interest, not used for rising living standards, public social spending or even for new capital investment. Research and development takes too long. Finance lives in the short run. This short-termism is self-defeating, yet it is presented as science. The alternative, voters are told, is the road to serfdom: interfering with the “free market” by financial regulation and even progressive taxation.

There is an alternative, of course. It is what European civilization from the 13th-century Schoolmen through the Enlightenment and the flowering of classical political economy sought to create: an economy free of unearned income, free of vested interests using special privileges for “rent extraction.” At the hands of the neoliberals, by contrast, a free market is one free for a tax-favored rentier class to extract interest, economic rent and monopoly prices.

Rentier interests present their behavior as efficient “wealth creation.” Business schools teach privatizers how to arrange bank loans and bond financing by pledging whatever they can charge for the public infrastructure services being sold by governments. The idea is to pay this revenue to banks and bondholders as interest, and then make a capital gain by raising access fees for roads and ports, water and sewer usage and other basic services. Governments are told that economies can be run more efficiently by dismantling public programs and selling off assets.

Never has the gap between pretended aim and actual effect been more hypocritical. Making interest payments (and even capital gains) tax-exempt deprives governments of revenue from the user fees they are relinquishing, increasing their budget deficits. And instead of promoting price stability (the ECB’s ostensible priority), privatization increases prices for infrastructure, housing and other costs of living and doing business by building in interest charges and other financial overhead – and much higher salaries for management. So it is merely a knee-jerk ideological claim that this policy is more efficient simply because privatizers do the borrowing rather than government.

There is no technological or economic need for Europe’s financial managers to impose depression on much of its population. But there is a great opportunity to gain for the banks that have gained control of ECB economic policy. Since the 1960s, balance-of-payments crises have provided opportunities for bankers and liquid investors to seize control of fiscal policy – to shift the tax burden onto labor and dismantle social spending in favor of subsidizing foreign investors and the financial sector. They gain from austerity policies that lower living standards and scale back social spending. A debt crisis enables the domestic financial elite and foreign bankers to indebt the rest of society, using their privilege of credit (or savings built up as a result of less progressive tax policies) as a lever to grab assets and reduce populations to a state of debt dependency.

The kind of warfare now engulfing Europe is thus more than just economic in scope. It threatens to become a historic dividing line between the past half-century’s epoch of hope and technological potential to a new era of polarization as a financial oligarchy replaces democratic governments and reduces populations to debt peonage.

For so bold an asset and power grab to succeed, it needs a crisis to suspend the normal political and democratic legislative processes that would oppose it. Political panic and anarchy create a vacuum into which grabbers can move quickly, using the rhetoric of financial deception and a junk economics to rationalize self-serving solutions by a false view of economic history – and in the case of today’s ECB, German history in particular.

A central bank that is blocked from acing like one

Governments do not need to borrow from commercial bankers or other lenders. Ever since the Bank of England was founded in 1694, central banks have printed money to finance public spending. Bankers also create credit freely – when they make a loan and credit the customer’s account, in exchange for a promissory note bearing interest. Today, these banks can borrow reserves from the government central bank at a low annual interest rate (0.25% in the United States) and lend it out at a higher rate. So banks are glad to see the government’s central bank create credit to lend to them. But when it comes to governments creating money to finance their budget deficits for spending in the rest of the economy, banks would prefer to have this market and its interest return for themselves.

European commercial banks are especially adamant that the European Central Bank should not finance government budget deficits. But private credit creation is not necessarily less inflationary than governments monetizing their deficits (simply by printing the money needed). Most commercial bank loans are made against real estate, stocks and bonds – providing credit that is used to bid up housing prices, and prices for financial securities (as in loans for leveraged buyouts).

It is mainly government that spends credit on the “real” economy, to the extent that public budget deficits employ labor or are spent on goods and services. If governments avoid paying interest by having their central banks printing money on their own computer keyboards rather than borrowing from banks that do the same thing on their own keyboards. (Abraham Lincoln simply printed currency when he financed the U.S. Civil War with “greenbacks.”)

Banks would like to use their credit-creating privilege to obtain interest for lending to governments to finance public budget deficits. So they have a self-interest in limiting the government’s “public option” to monetize its budget deficits. To secure a monopoly on their credit-creating privilege, banks have mounted a vast character assassination on government spending, and indeed on government authority in general – which happens to be the only authority with sufficient power to control their power or provide an alternative public financial option, as Post Office savings banks do in Japan, Russia and other countries. This competition between banks and government explains the false accusations made that government credit creation is more inflationary than when commercial banks do it.

The reality is made clear by comparing the ways in which the United States, Britain and Europe handle their public financing. The U.S. Treasury is by far the world’s largest debtor, and its largest banks seem to be in negative equity, liable to their depositors and to other financial institutions for much larger sums that can be paid by their portfolio of loans, investments and assorted financial gambles. Yet as global financial turmoil escalates, institutional investors are putting their money into U.S. Treasury bonds – so much that these bonds now yield less than 1%. By contrast, a quarter of U.S. real estate is in negative equity, American states and cities are facing insolvency and must scale back spending. Large companies are going bankrupt, pension plans are falling deeper into arrears, yet the U.S. economy remains a magnet for global savings.

Britain’s economy also is staggering, yet its government is paying just 2% interest. But European governments are now paying over 7%. The reason for this disparity is that they lack a “public option” in money creation. Having a Federal Reserve Bank or Bank of England that can print the money to pay interest or roll over existing debts is what makes the United States and Britain different from Europe. Nobody expects these two nations to be forced to sell off their public lands and other assets to raise the money to pay (although they may do this as a policy choice). Given that the U.S. Treasury and Federal Reserve can create new money, it follows that as long as government debts are denominated in dollars, they can print enough IOUs on their computer keyboards so that the only risk that holders of Treasury bonds bear is the dollar’s exchange rate vis-à-vis other currencies.

By contrast, the Eurozone has a central bank, but Article 123 of the Lisbon treaty forbids the ECB from doing what central banks were created to do: create the money to finance government budget deficits or roll over their debt falling due. Future historians no doubt will find it remarkable that there actually is a rationale behind this policy – or at least the pretense of a cover story. It is so flimsy that any student of history can see how distorted it is. The claim is that if a central bank creates credit, this threatens price stability. Only government spending is deemed to be inflationary, not private credit!

The Clinton Administration balanced the U.S. Government budget in the late 1990s, yet the Bubble Economy was exploding. On the other hand, the Federal Reserve and Treasury flooded the economy with $13 trillion in credit to the banking system credit after September 2008, and $800 billion more last summer in the Federal Reserve’s Quantitative Easing program (QE2). Yet consumer and commodity prices are not rising. Not even real estate or stock market prices are being bid up. So the idea that more money will bid up prices (MV=PT) is not operating today.

Commercial banks create debt. That is their product. This debt leveraging was used for more than a decade to bid up prices – making housing and buying a retirement income more expensive for Americans – but today’s economy is suffering from debt deflation as personal income, business and tax revenue is diverted to pay debt service rather than to spend on goods or invest or hire labor.

Much more striking is the travesty of German history that is being repeated again and again, as if repetition somehow will stop people from remembering what actually happened in the 20th century. To hear ECB officials tell the story, it would be reckless for a central bank to lend to government, because of the danger of hyperinflation. Memories are conjured up of the Weimar inflation in Germany in the 1920s. But upon examination, this turns out to be what psychiatrists call an implanted memory – a condition in which a patient is convinced that they have suffered a trauma that seems real, but which did not exist in reality.

What happened back in 1921 was not a case of governments borrowing from central banks to finance domestic spending such as social programs, pensions or health care as today. Rather, Germany’s obligation to pay reparations led the Reichsbank to flood the foreign exchange markets with deutsche marks to obtain the currency to buy pounds sterling, French francs and other currency to pay the Allies – which used the money to pay their Inter-Ally arms debts to the United States. The nation’s hyperinflation stemmed from its obligation to pay reparations in foreign currency. No amount of domestic taxation could have raised the foreign exchange that was scheduled to be paid.

By the 1930s this was a well-understood phenomenon, explained by Keynes and others who analyzed the structural limits on the ability to pay foreign debt imposed without regard for the ability to pay out of current domestic-currency budgets. From Salomon Flink’s The Reichsbank and Economic Germany (1931) to studies of the Chilean and other Third World hyperinflations, economists have found a common causality at work, based on the balance of payments. First comes a fall in the exchange rate. This raises the price of imports, and hence the domestic price level. More money is then needed to transact purchases at the higher price level. The statistical sequence and line of causation leads from balance-of-payments deficits to currency depreciation raising import costs, and from these price increases to the money supply, not the other way around.

Today’s “free marketers” writing in the Chicago monetarist tradition (basically that of David Ricardo) leaves the foreign and domestic debt dimensions out of account. It is as if “money” and “credit” are assets to be bartered against goods. But a bank account or other form of credit means debt on the opposite side of the balance sheet. One party’s debt is another party’s saving – and most savings today are lent out at interest, absorbing money from the non-financial sectors of the economy. The discussion is stripped down to a simplistic relationship between the money supply and price level – and indeed, only consumer prices, not asset prices. In their eagerness to oppose government spending – and indeed to dismantle government and replace it with financial planners – neoliberal monetarists neglect the debt burden being imposed today from Latvia and Iceland to Ireland and Greece, Italy, Spain and Portugal.

If the euro breaks up, it is because of the obligation of governments to pay bankers in money that must be borrowed rather than created through their own central bank. Unlike the United States and Britain which can create central bank credit on their own computer keyboards to keep their economy from shrinking or becoming insolvent, the German constitution and the Lisbon Treaty prevent the central bank from doing this.

The effect is to oblige governments to borrow from commercial banks at interest. This gives bankers the ability to create a crisis – threatening to drive economies out of the Eurozone if they do not submit to “conditionalities” being imposed in what quickly is becoming a new class war of finance against labor.

Disabling Europe’s central bank to deprive governments of the power to create money

One of the three defining characteristics of a nation-state is the power to create money. A second characteristic is the power to levy taxes. Both of these powers are being transferred out of the hands of democratically elected representatives to the financial sector, as a result of tying the hands of government.

The third characteristic of a nation-state is the power to declare war. What is happening today is the equivalent of warfare – but against the power of government! It is above all a financial mode of warfare – and the aims of this financial appropriation are the same as those of military conquest: first, the land and subsoil riches on which to charge rents as tribute; second, public infrastructure to extract rent as access fees; and third, any other enterprises or assets in the public domain.

In this new financialized warfare, governments are being directed to act as enforcement agents on behalf of the financial conquerors against their own domestic populations. This is not new, to be sure. We have seen the IMF and World Bank impose austerity on Latin American dictatorships, African military chiefdoms and other client oligarchies from the 1960s through the 1980s. Ireland and Greece, Spain and Portugal are now to be subjected to similar asset stripping as public policy making is shifted into the hands of supra-governmental financial agencies acting on behalf of bankers – and thereby for the top 1% of the population.

When debts cannot be paid or rolled over, foreclosure time arrives. For governments, this means privatization selloffs to pay creditors. In addition to being a property grab, privatization aims at replacing public sector labor with a non-union work force having fewer pension rights, health care or voice in working conditions. The old class war is thus back in business – with a financial twist. By shrinking the economy, debt deflation helps break the power of labor to resist.

It also gives creditors control of fiscal policy. In the absence of a pan-European Parliament empowered to set tax rules, fiscal policy passes to the ECB. Acting on behalf of banks, the ECB seems to favor reversing the 20th century’s drive for progressive taxation. And as U.S. financial lobbyists have made clear, the creditor demand is for governments to re-classify public social obligations as “user fees,” to be financed by wage withholding turned over to banks to manage (or mismanage, as the case may be). Shifting the tax burden off real estate and finance onto labor and the “real” economy thus threatens to become a fiscal grab coming on top of the privatization grab.

This is self-destructive short-termism. The irony is that the PIIGS budget deficits stem largely from un-taxing property, and a further tax shift will worsen rather than help stabilize government budgets. But bankers are looking only at what they can take in the short run. They know that whatever revenue the tax collector relinquishes from real estate and business is “free” for buyers to pledge to the banks as interest. So Greece and other oligarchic economies are told to “pay their way” by slashing government social spending (but not military spending for the purchase of German and French arms) and shifting taxes onto labor and industry, and onto consumers in the form of higher user fees for public services not yet privatized.

In Britain, Prime Minister Cameron claims that scaling back government even more along Thatcherite-Blairite lines will leave more labor and resources available for private business to hire. Fiscal cutbacks will indeed throw labor out of work, or at least oblige it to find lower-paid jobs with fewer rights. But cutting back public spending will shrink the business sector as well, worsening the fiscal and debt problems by pushing economies deeper into recession.

If governments cut back their spending to reduce the size of their budget deficits – or if they raise taxes on the economy at large, to run a surplus – then these surpluses will suck money out of the economy, leaving less to be spent on goods and services. The result can only be unemployment, further debt defaults and bankruptcies. We may look to Iceland and Latvia as canaries in this financial coalmine. Their recent experience shows that debt deflation leads to emigration, shortening life spans, lower birth rates, marriages and family formation – but provides great opportunities for vulture funds to suck wealth upward to the top of the financial pyramid.

Today’s economic crisis is a matter of policy choice, not necessity. As President Obama’s chief of staff Rahm Emanuel quipped: “A crisis is too good an opportunity to let go to waste.” In such cases the most logical explanation is that some special interest must be benefiting. Depressions increase unemployment, helping to break the power of unionized as well as non-union labor. The United States is seeing a state and local budget squeeze (as bankruptcies begin to be announced), with the first cutbacks coming in the sphere of pension defaults. High finance is being paid – by not paying the working population for savings and promises made as part of labor contracts and employee retirement plans.

Big fish are eating little fish.

This seems to be the financial sector’s idea of good economic planning. But it is worse than a zero-sum plan, in which one party’s gain is another’s loss. Economies as a whole will shrink – and change their shape, polarizing between creditors and debtors. Economic democracy will give way to financial oligarchy, reversing the trend of the past few centuries.

Is Europe really ready to take this step? Do its voters recognize that stripping the government of the public option of money creation will hand the privilege over to banks as a monopoly? How many observers have traced the almost inevitable result: shifting economic planning and credit allocation to the banks?

Even if governments provide a “public option,” creating their own money to finance their budget deficits and supplying the economy with productive credit to rebuild infrastructure, a serious problem remains: how to dispose of the existing debt overhead now acts as a deadweight on the economy. Bankers and the politicians they back are refusing to write down debts to reflect the ability to pay. Lawmakers have not prepared society with a legal procedure for debt write-downs – except for New York State’s Fraudulent Conveyance Law, calling for debts to be annulled if lenders made loans without first assuring themselves of the debtor’s ability to pay.

Bankers do not want to take responsibility for bad loans. This poses the financial problem of just what policy-makers should do when banks have been so irresponsible in allocating credit. But somebody has to take a loss. Should it be society at large, or the bankers?

It is not a problem that bankers are prepared to solve. They want to turn the problem over to governments – and define the problem as how governments can “make them whole.” What they call a “solution” to the bad-debt problem is for the government to give them good bonds for bad loans (“cash for trash”) – to be paid in full by taxpayers. Having engineered an enormous increase in wealth for themselves, bankers now want to take the money and run – leaving economies debt ridden. The revenue that debtors cannot pay will now be spread over the entire economy to pay – vastly increasing everyone’s cost of living and doing business.

Why should they be “made whole,” at the cost of shrinking the rest of the economy? The bankers’ answer is that debts are owed to labor’s pension funds, to consumers with bank deposits, and the whole system will come crashing down if governments miss a bond payment. When pressed, bankers admit that they have taken out risk insurance – collateralized debt obligations and other risk swaps. But the insurers are largely U.S. banks, and the American Government is pressuring Europe not to default and thereby hurt the U.S. banking system. So the debt tangle has become politicized internationally.

So for bankers, the line of least resistance is to foster an illusion that there is no need for them to accept defaults on the unpayably high debts they have encouraged. Creditors always insist that the debt overhead can be maintained – if governments simply will reduce other expenditures, while raising taxes on individuals and non-financial business.

The reason why this won’t work is that trying to collect today’s magnitude of debt will injure the underlying “real” economy, making it even less able to pay its debts. What started as a financial problem (bad debts) will now be turned into a fiscal problem (bad taxes). Taxes are a cost of doing business just as paying debt service is a cost. Both costs must be reflected in product prices. When taxpayers are saddled with taxes and debts, they have less revenue free to spend on consumption. So markets shrink, putting further pressure on the profitability of domestic enterprises. The combination makes any country following such policy a high-cost producer and hence less competitive in global markets.

This kind of financial planning – and its parallel fiscal tax shift – leads toward de-industrialization. Creating ECB or IMF inter-government fiat money leaves the debts in place, while preserving wealth and economic control in the hands of the financial sector. Banks can receive debt payments on overly mortgaged properties only if debtors are relieved of some real estate taxes. Debt-strapped industrial companies can pay their debts only by scaling back pension obligations, health care and wages to their employees – or tax payments to the government. In practice, “honoring debts” turns out to mean debt deflation and general economic shrinkage.

This is the financiers’ business plan. But to leave tax policy and centralized planning in the hands of bankers turns out to be the opposite of what the past few centuries of free market economics have been all about. The classical objective was to minimize the debt overhead, to tax land and natural resource rents, and to keep monopoly prices in line with actual costs of production (“value”). Bankers have lent increasingly against the same revenues that free market economists believed should be the natural tax base.

So something has to give. Will it be the past few centuries of liberal free-market economic philosophy, relinquishing planning the economic surplus to bankers? Or will society re-assert classical economic philosophy and Progressive Era principles, and re-assert social shaping of financial markets to promote long-term growth with minimum costs of living and doing business?

At least in the most badly indebted countries, European voters are waking up to an oligarchic coup in which taxation and government budgetary planning and control is passing into the hands of executives nominated by the international bankers’ cartel. This result is the opposite of what the past few centuries of free market economics has been all about.