venerdì 26 febbraio 2010

Pull plug on US rogue government

Is Europe finally ready to pull plug on US rogue government?

by Benjamin Fulford, 02/26/2010

Talks between the Black Dragon Society and representatives of the French, Italian and Russian governments indicate much of Continental Europe is getting ready to side with Britain and isolate the criminal regime in Washington D.C. A representative of former US vice-President Dick Cheney also contacted the BDS in Italy and indicated a large chunk of the US intelligence establishment was also looking to ally itself with Pentagon white hats and distance itself from the Washington D.C. crime syndicate. In relation to this, a representative of the US financial establishment was told by the BDS that they would have to remove and delete all the dollars created through fraudulent financial products before they would be welcomed back into the global financial system.

The criminals in D.C. and their propaganda media may continue their farce for a while longer but rest of the world is already tuning out of their sick, twisted world view. They no longer have the ability to manipulate world events and suppress free energy technology.

There are many ongoing negotiations which are complex and technical in nature so it is not clear exactly when the new global paradigm will be publicly announced. However, we can say for sure that behind the scenes the dark cabal is no longer in charge.


BDSとの交渉で、イタリア、フランス、 ロシアの政府の代理はイギリスと組み、米連銀犯罪組織と決裂をする準備が出来ているという。またチェイニー元副 大統領の代理は「アメリカの闇の政府の大きな派閥はペンタゴンの正規軍と組み、犯罪組織であるワシントンD.C.と決裂する意思がある」 ことを伝えた。そして米国金融界の代理は詐欺組織によって作られたドルを排除しない限り、あなた達は世界の金融システム から孤立し続ける」と責められた。

暫くワシントンの犯罪組織とそのプロパガンダマスコミによる芝居は続くが、世界はもう相手にしてな い。彼らに世界の世論や歴史を操作する能力がもうないからである。

様々な複雑な交渉が現在でも行われているため、いつ新し仕組みの発表があるのかまだ未定で ある。しかし明らかに米連銀は裏で権力を無くしている。新エネルギー技術の実用化も着々と進められている。

Former IRS Special Agent speaks out


Dear Friends,

Tomorrow, February 25th , 2010, my 47th birthday, will mark eleven years since the day I resigned from the IRS Criminal Investigation Division. I am grateful to God for the many blessings He has bestowed on me all these years, including the prayers and support of each and every one of you over the years. Your prayers and support have helped me battle against a staggeringly formidable foe, my former employer, the Internal Revenue Service. Let us continue to pray for and support those who have had to pay a much higher price than I have for standing up for the truth regarding the heavy-handed tactics of our government.
Many thanks to everyone who has invited me to speak at various events across the country, everyone who has made information about my story available on the internet and everyone who has arranged for my appearance on hundreds of radio shows.
Many thanks also to all the guests who have appeared on my own radio show(s) over the
years ( , , ). Recent guests include Karen Quinn-Tostado, founder of the “Tax Free 15th” national strike activities ( ) and the hosts of the “Hammer and Anvil Radio Show” ( ) Attorney TomCryer who was acquitted of all charges leveled against him by the IRS ( ) and Attorney Larry Becraft (who, by the way, as described below, has compiled an incredible and one-of-a-kind DVD research tool that is provided as a free gift for donors to my own radio show efforts).

I wish you all God’s blessings and again thank you for your prayers and support.

-Listen to the Freedom Above Fortune Radio Show on Saturday mornings from 7:00 am to 9:00 am pacific time by visiting
and scrolling down to the bottom of the page for the “listen live” link.

-Check out the “Joe Banister Channel” on “Youtube” at
or go to
and type in “josephbanister” into the “Search” box and then click on the word “Search” to the right of the “Search” box to find my “Twitter” page.

-For those who are unfamiliar with what has transpired to date in my battle against the IRS and other agencies and groups trying to silence my message, especially the recent acquittal on all charges leveled against me, please visit,
(click on "IRS LOCKOUT UPDATE"). You can also find archives of informative radio shows at Archives of my “Freedom Above Fortune Radio Show” that had broadcasted on are temporarily available at and

-My sincere thanks to those who have prayed for the success of our efforts and/or contributed to my legal defense fund. Your continued support is enabling me to illustrate, in detail and in a very public manner, that the IRS does not prevail against citizens because the agency adheres to the rule of law, but that the IRS prevails against citizens because the agency ignores the law, twists the meaning of the law, and overwhelms the citizen with economic and legal burdens. In a school yard, such tactics are called "BULLYING". In a government setting, such tactics are called "TYRANNY". This effort is the equivalent of ganging up on the bully and sending him to reform school where he belongs.

Kind regards,

Joseph R. (Joe) Banister
Former IRS Criminal Investigation Division Special Agent

II Chronicles 7:14:
And my people, upon whom my name is called, being converted, shall make supplication to me, and seek out my face, and do penance for their most wicked ways: then will I hear from heaven, and will forgive their sin and will heal their land.

George Orwell, 1984:
"You are a slow learner, Winston," said O'Brien gently.
"How can I help it?" he blubbered. "How can I help seeing what is in front of my eyes? Two and two are four."
"Sometimes, Winston. Sometimes they are five. Sometimes they are three. Sometimes they are all of them at once. You must try harder. It is not easy to become sane."

Hyperinflation watch

James Turk: Hyperinflation watch


9:20p ET Wednesday, February 24, 2010

Dear Friend of GATA and Gold:

GoldMoney founder and GATA consultant James Turk, editor of the Free Gold Money Report, comments tonight on the latest legerdemain of the U.S. Treasury Department and Federal Reserve, the Treasury's plan to borrow $200 billion and park it at the Fed. "The Fed is not there to fight inflation or encourage full employment or any of the other laudable reasons given for its existence," Turk writes. "The Fed has one mission. It is to make sure that the federal government obtains all the dollars it wants to spend. If the federal government cannot attract these dollars from the world’s savings pool, then there is only one other way to obtain them. The Fed must print them."

Turk's commentary is headlined "Hyperinflation Watch" and you can find it at the Free Gold Money Report Internet site here:

CHRIS POWELL, Secretary/Treasurer
Gold Anti-Trust Action Committee Inc.

How 'little guy' can exploit metals manipulation

Patrick Heller: How 'little guy' can exploit precious metals manipulation


1p ET Friday, February 26, 2010

Dear Friend of GATA and Gold (and Silver):

Patrick A. Heller, proprietor of Liberty Coin Service in Lansing, Mich., has written an essay for describing "How 'The Little Guy' Can Profit in Manipulated Gold and Silver Markets." Heller also announces an appearance by GATA Chairman Bill Murphy at the American Numismatic Association's National Money Show in Fort Worth, Texas, on Saturday, March 27. You can find Heller's essay at Coin Update here:

CHRIS POWELL, Secretary/Treasurer
Gold Anti-Trust Action Committee Inc.

Fine della finanza

Fine della finanza, forse che sì forse che no…

euroUn’impresa di grande distribuzione che vende sottocosto e fa utili con impieghi a breve della liquidità in eccesso generata dalle asimmetrie di pagamento è economia reale o no?
Un’impresa metalmeccanica che stipula un contratto di leasing per un macchinario, è economia reale o no?
Un’impresa della navalmeccanica che stipula un contratto di opzione per un piano di fornitura di acciaio, è economia reale o no?
Tre situazioni banalissime che fanno parte della più trita quotidianità di un’impresa, anche minuscola, per smontare una volta di più il famoso mito dell’”economia reale”. Nozione che semplicemente non esiste perché non è concretamente definibile. Pazienza, dirà il lettore, per l’uomo della strada l’approssimazione fa parte del gioco (e io risponderei: certo, perché tanto comanda chi ha le informazioni vere!), tuttavia su un libro di economia scritto da due docenti della Bocconi una svista del genere fa venire i capelli dritti. Leggetevi “Fine della finanza” (Donzelli, € 27,00 pp.330), e ne riparleremo, a fortiori perché nella pubblicazione viene adottata una certosina attenzione alle definizioni e alle puntualizzazioni. Ma andiamo oltre, concludo questo “incidente” enunciando per l’ennesima volta che la gestione finanziaria non è nulla di più di uno dei profili tramite i quali si analizza un’impresa, ne consegue che anche la più “reale” delle imprese ha a che fare con la finanza. E se vogliamo parlare dei privati, quanti di noi NON hanno un conto in banca? E quella non è finanza? E se pago col bancomat è economia reale o finanziaria… Suvvia, non scherziamo.
Questo testo, per quanto ricco di riferimenti e ben inserito nella più specialistica letteratura di settore, appare nell’insieme come un modo elegante per dire….Facciamo finta di aver scherzato.
Certo, la crisi batte, il sistema sta collassando, non è sostenibile all’infinito…Ma ci piace pensare che lo sia, in nome di una diuturnitas le cui basi sono tutte da definire, per stessa ammissione degli autori. Insomma tenere i piedi su due staffe è un’operazione che non convince, quand’anche gli autori, prevedendo possibili critiche, nell’introduzione specificano che è un lavoro in qualche modo “transitorio” (p.13). Un puntello di un’impalcatura più ampia. Ce lo auguriamo tutti perché su diverse cose si potrebbe discutere a lungo…Sospendiamo il giudizio in attesa delle prossime puntate.
Sono sempre più convinto che la crisi finanziaria attuale sia solo la conseguenza del grande crollo borsistico del 1987. Già allora erano evidenti i limiti strutturali del sistema, tuttavia il fato e la contingenza hanno sostenuto la finanziarizzazione dell’economia grazie al crollo del Muro di Berlino e del blocco sovietico cui è seguita un’apertura immediata di nuovi mercati che hanno dato ossigeno all’occidente e che, al contempo, hanno contribuito ad ampliare l’offerta di materie prime abbassandone il prezzo. Non è un caso che il periodo d’oro del WTO e delle relative (scellerate) politiche siano gli anni ’90. Su questo scenario si sono inseriti modelli di gestione del rischio assolutamente spregiudicati (sedicenti “rischio 0”) e le conseguenze le abbiamo sotto gli occhi.
Lo sviluppo, o quantomeno la tenuta, degli ultimi venti anni è, a parere di chi scrive, una fortuita e irripetibile coincidenza.
E invece ci sono fior di studiosi che si arrovellano a spiegare come mai il mondo è andato a cacciarsi in uno dei più bui vicoli ciechi della sua storia… Ma mi sembrano, alla luce di quanto detto, disamine accademiche.
La difesa a oltranza dell’istituto della banca centrale fa, poi, sorridere: il complesso dei fattori (Stato, banca centrale e mercati finanziari) appare “too big to fail” (p.233), troppo grande per fallire. Ergo: tenetevelo (richiamo polemico ad un articolo di Giavazzi citato a p. 21). Non è molto convincente come argomentazione… Sarebbe, più che suicida, omicida…ma verso i banchieri… Nella pagina precedente viene riportata la nota: “questa osservazione ci consente di prendere radicalmente le distanze dal discorso diffuso in certi ambienti (in fin dei conti si parla solo del Nobel Maurice Allais, evidentemente uno di cui proprio non ci si può fidare…ndr), secondo cui il signoraggio della banca centrale sarebbe un esproprio ai danni del “popolo”. Il problema non è il signoraggio, ma il modo in cui esso opera”. La chiusa è giustissima… E la parte precedente suona tanto come una “excusatio non petita, accusatio manifesta”. Honi soit qui mal y pense… Potremmo dire, ma gli autori dichiarano « così, con il volonteroso consenso dei paesi industrializzati, gli Stati Uniti conservano la facoltà di esercitare il signoraggio su scala globale, anche quando viene meno il principio di responsabilità in ragione del quale tale facoltà era stata originariamente accordata, ossia la convertibilità in oro della moneta americana » (p. 129), ricordando come, già dal 1971, la quantità di dollari in circolazione fosse ottupla rispetto alla loro copertura. Ma c’è di più: gli autori dichiarano che il signoraggio moderno “conferisce” qualcosa alla moneta (p.232), mentre secondo la nozione classica questo “toglie”: la fa valere (da qui la più corretta espressione “validazione monetaria”, che difatti lo scrivente utilizza)… Proprio una quisquilia.
Se poi le banche centrali sono questo concentrato di onestà e buoni sentimenti come dicono gli autori, mi farebbe piacere sapere come mai i loro vertici provengono inderogabilmente dalle “amiche” banche d’affari che hanno generato l’attuale crisi. Tanto per dire l’ultima: la ristrutturazione del debito pubblico greco verrà affidato ad un uomo della “solita” Goldman Sachs…
Parlare poi di “debito costruito per non essere pagato” (p.67) fa impallidire anche le “divergenze parallele” di Aldo Moro! Ma poche righe dopo il lettore troverà “potrebbe venire la tentazione di dichiarare esente dal fallimento anche il mercato”, ma se pagina 29 si parla dell’informazione nel mercato finanziario come “per sua natura asimmetrica e incompleta”? Il mercato è fallito per definizione poiché una delle ipotesi principali su cui si regge ad substantiam è proprio la…perfetta informazione!
Probabilmente ai comuni mortali questi sofismi sono preclusi… Ma allora perché parlare, come diffusamente fanno gli autori, delle immissioni di liquidità nel sistema come una “droga”? Se le banche centrali si divertono con la fotocopiatrice (è una battuta macabra…), per quale strana ragione non può essere lo Stato stesso a divertirsi con la fotocopiatrice? Molto interessante in tal senso l’articolo di Ellen Brown “The Weimar hyperinflation, could it happen again?” del sito tradotto in italiano dalla bella rivista “Indipendenza” (n. 27- novembre/dicembre 2009 , distribuita anche nel “circuito Feltrinelli”) nel quale si fa un interessante parallelo fra la situazione della Repubblica di Weimar e l’attuale scenario monetario inglese: attuale proprio alla luce delle recenti evoluzioni che hanno messo alle strette il governo Brown ormai pressato fra una tutt’altro che impossibile bancarotta e il disastro sociale di un Paese deindustrializzato, del quale noi stiamo sciaguratamente seguendo la scia, solo con vent’anni di ritardo.

Nel testo si mischiano prestiti di varia natura (Keynes in particolare) con derivazioni più eretiche (cfr.Auriti con il “denaro fattispecie giuridica”), filosofiche e storiche che complessivamente rendono l’opera anche gradevole sotto il profilo storiografico e “rilassante”, lasciando però scoperti snodi concettuali che, a parere di chi scrive, meriterebbero maggiore attenzione.

Alberto Leoncini

Joseph Stiglitz: Bankers Made Reckless Bets on the Economy, Knowing Taxpayers Were Going to Pick up the Tab

The Nobel Prize-winning economist argues the banking industry "failed in their core societal function," helping lead to the great economic crash of '08.
February 25, 2010 |

Nobel Prize-winning economist Joseph Stiglitz has served as the Chairman of President Bill Clinton's Council of Economic Advisers and Chief Economist for the World Bank. He has been a persistent critic of free-market economics, whose recent book Freefall: America, Free Markets, and the Sinking of the World Economy (W. W. Norton & Co., 2010) traces the roots of the financial crisis and details the government's flawed response. Dr. Stiglitz discussed the crash of '08 in an interview with AlterNet economics editor Zach Carter.

Zach Carter: How did we get here?

Joseph Stiglitz: Well, there are so many pieces that contributed to our getting here that it's hard to distill into something simple, but the bottom line is that the banks acted recklessly in their lending, in their gambling, in their management of risk. They made bad judgments about credit worthiness. In a sense, they failed their core societal function of allocating capital and managing risk. They misallocated capital and they mismanaged the risk. What I tried to do with the book is peel back the onion and ask – this is not the way capitalism supposed to work – why did things happen so badly? And here there are a number of factors. One of them was that the bankers had the incentive to engage in short-sighted behavior and excessive risk-taking. You have to ask, "Why is that?" And the answer has to do with problems of corporate governance and a host of other problems that I try to delineate in the book.

On the other side, though, they were allowed to get away with it. And here the issue was deregulation. We stripped away the regulations that had worked so well in the quarter century before 1980. We'd known about the potential for these problems for decades and we had figured out how to stop them, but then we stripped away those regulations. Then you have to ask why we did that, and it had to do with the ideology and with financial interests. The bankers wanted to be unrestrained and they painted the political process, shaped it to make sure they could get away with it. The economists provided some arguments for why it would be a good thing.

ZC: I want to focus on that word 'capitalism.' A lot of people who are advocates of financial reform are being described as 'populist' or 'socialist.' But it seems to me that one of the core thrusts of your book is that the system we had in place in the mid-'70s was a good system, and nobody was screaming about our socialist banking system at that time. What do you make of the current debate over the banks?

JS: What we have now is not real capitalism. I give it the name "ersatz capitalism" because what we're doing is socializing losses and privatizing gains. That's worse than real capitalism, of course, because it means that there are distorted incentives. So the banks can write these credit default swaps and crazy derivatives knowing that if things go bad, the taxpayer is going to pick up the tab. So the first point I want to make is that today's system is not real capitalism. It's gambling at the expense of the taxpayers.

The other point that I would make is about the use of the word "populism," which is used in a number of different ways. One meaning of populism is a government that responds to the concerns of the people. Of course, that is what democracy is supposed to be about, so reformers shouldn't worry about being labeled populist in that sense. But the other use of the word is much more negative in tone, and it describes a situation where political leaders promise things that are beyond the laws of economics.

In this crisis, I actually think of these bankers as being the populist figures in that sense. It was the bankers who tried to pretend that they could break the laws of economics. The things they were telling poor people -- borrow all this money, don't worry about your ability to replay, house prices are going to go up, you're going to be a wealthy person -- and by the way, you can share some of that wealth that you're going to get by giving us big fees -- well, that was unreality. There's no such thing as a free lunch and the bankers were promising a free lunch both for themselves and for everybody else. So the irony in all of this is that the people who ought to be most accused of that kind of populism, that out-of-touchness with reality, are the bankers themselves.

ZC: Speaking of reality, one of the most astonishing aspects of the deregulatory movement has been the popularity of these 'off-balance sheet vehicles' in finance. The banks actually refused to account for a lot of transactions and regulators just shrugged it off. You won your Nobel Prize for work on information asymmetries – where did this bogus accounting come from and is there any defense for it?

JS: One issue that I try to raise in my book Freefall is that good information is necessary for the functioning of a market economy. The banks' accountants were originally very clever in coming up with legal deceptions to avoid paying taxes -- you might call it "creative accounting." But then they discovered they could use some of the same techniques to deceive investors. And that's a lot of what all of this great, high-paid talent in the banking industry was up to over the last 20 years. They weren't trying to make our economy work more efficiently; they were engaged in what we call regulatory accounting and tax arbitrage. In other words, they were deceiving investors, deceiving the tax authorities and deceiving the regulators.

ZC: In Freefall there's a paragraph where you're talking about Henry Paulson coming to Congress with a three-page TARP bill and demanding the bailout money with no strings attached. You say it looked like a classic problem in developing nations where the financial sector basically uses the government to steal from the public. When has this taken place before and what does it look like?

JS: Oh, it's happened in many emerging markets. Mexico was one of the cases where it happened, and that was just before I arrived at the World Bank and we were seeing some of the consequences there. But what happens in the process of bailouts is that money goes from public purse to somewhere else. And you have to trace the money and what you discover is the money goes from the public, from the taxpayer, and it inevitably winds up in the hands of some of the same people who caused the crisis. And it's often done in a very obscure way, just like the creation of the crisis itself, into things that are hard to detect -- off-balance sheet transactions and the like.

What has absolutely amazed me about this crisis is the lack of transparency that created it is now being reflected in the lack of transparency in the bailouts. And the Federal Reserve is saying that it's not subjected even to the Freedom of Information Act. Here we have a public organization that is refusing to disclose where the money went.

ZC: The public's money, at that.

JS: That's right. Bloomberg [News] had to sue, Bloomberg won the suit and rather than saying, "We made a judgement call that wasn't right," the Fed said, "No, we're going to appeal because we don't want people to know." It's not like anyone has been advocating to have every scrap of information immediately available in the moment of the crisis. That obviously could cause a little bit of a turmoil. But now we're more than a year after Lehman Brothers. It's no longer a question of market stability but a question of accountability.

ZC: Are other central banks this secretive?

JS: This is part of the mentality of central banks. Remember, the central bankers are often people from the banking community, the same community that has been involved in the inventive, creative use of these off-balance-sheet kinds of non-transparent vehicles. So they know that information is money, and the best way to profit is to try and keep everything quiet.

ZC: 'Too big to fail' has become a household term, but how did things really play out when Lehman Brothers went under? If policymakers had just looked at Lehman's involvement in the commercial paper market, it's at least conceivable that the bankruptcy could have been managed without so much fallout. Could Lehman have gone through a prepackaged bankruptcy similar to what Chrysler and GM experienced? And if so, what would it have looked like?

JS: Clearly, we could have managed an orderly resolution for Lehman. You know, there have been big financial companies – Continental Illinois – that have gone bankrupt without any trauma to our economic system. And so we know how to manage these things. There is a little bit of a question about whether there was legal authority to do it because Lehman was an investment bank not a commercial bank, so the ordinary FDIC process wouldn't apply.

ZC: Well, Lehman was a lot bigger than Continental Illinois, but we still managed to come up with something for Chrysler and GM, and the FDIC process didn't apply to them.

JS: The point I was going to make is that everybody knew that there was going to be a problem with Lehman Brothers several months before it actually went under. If there really wasn't any legal authority to deal with it, Bernanke and Paulson should have gone to Congress and said they needed it. So the fact is, this legal authority issue was just an excuse for policymakers. The bailouts of AIG and Bear Stearns involved very unusual measures. These guys were willing to bend the law, and they could have done a lot more than they did on Lehman Brothers. But they were in the business of picking winners and losers. There were a lot of discussions about how they decided who to bail out and who to not, and the sheer recklessness of the process is just inexcusable.

ZC: But what do we do now? After Lehman, the government can say it will let these mega-banks fail, but the credit markets won't buy it. The big banks are still able to raise money at lower interest rates and take bigger risks because investors think the government will spare them from losses. Is there a way to establish a fair playing field in finance that doesn't involve breaking up these banks?

JS: It's very difficult. You know, the studies have shown very clearly that the very big banks, the banks that we call too big to fail, have a competitive advantage not because they are more efficient, but because they can get access to capital at lower costs. Everybody knows that they're effectively guaranteed by the U.S. government. And that really tilts the playing field and leads to a very adverse dynamic in which the big banks actually get bigger. The bigger you are, the better the implied government insurance, and that accelerates the process of concentration in a few banks. It's very, very unhealthy from an economic standpoint. It undermines competition and drives up interest rates. We want low interest rates to get our economy recovering. This goes in exactly the opposite direction because it weakens competition.

So in my mind you have to do something. Both because of this distorted playing field, but also because the too-big-to-fail banks have this bias toward risk-taking. If they gamble and they win they walk off with the profits. They lose, we, the taxpayers, pick up the losses.

So something has to be done. Taxes can make a big difference, they can help level the playing field, and there have been proposals for that. I'm not sure, though, that that's going to be enough, and here's why. Those who run the banks have interests that are not necessarily coincident with the banks' shareholders and bondholders. We saw that over and over and over again. The bankers have done very well, but the shareholders and bondholders have not always done so well. So we probably need to go further than tax policy.

I argue that we need a three-pronged approach. Higher taxes and higher capital adequacy requirements to level the playing field are the first prong. The second thing we need to do is take serious structural measures like breaking them up. We should not allow banks that accept deposits to engage in proprietary trading. We shouldn't allow them to own insurance companies, and so forth either. By forcing companies to focus on one thing rather than allowing them to conduct four different kinds of financial business, we will actually increase the efficiency of our economy. And finally, at the end, we have to make sure that they don't undertake excessive risk.

ZC: Paul Volcker wants to ban proprietary trading by commercial banks, but said recently that he's not in favor of bringing back the Glass-Steagall separation between commercial banking and investment banking. Is that enough?

JS: Well, I'm in absolute agreement that you have to ban proprietary trading and he's seen the risk of that. But I think you need to go a lot further than he seems to be willing to go at the current time. First, we have to do something about the too-big-to-fail investment banks. Goldman Sachs, we'll bail it out, AIG we'll bail it out. We need to make sure that our reforms don't just address the depository institutions, but all of the large financial institutions that pose the problem. Back in the 1990s we even engineered a bailout for the largest hedge fund, Long-Term Capital Management. So you have to go beyond the depository institutions, beyond traditional commercial banks.

And secondly, there are lots of forms of risk-taking. Proprietary trading is one, but for instance, the big banks are issuing these derivatives, these credit default swaps that brought down AIG. And that means if they're issuing them, the U.S. taxpayer is underwriting them because we underwrite the commercial banks. That means we, ultimately, are bearing the risk. We shouldn't be participating in this kind of gambling.

ZC: As soon as Goldman Sachs got its bank holding company status in 2008, the first thing it did was move all its derivatives operations under the commercial bank unit. It was very clear it wanted to use deposits to fund that business.

JS: Exactly.

ZC: We've talked a lot about banks so far, but there is more to the economy than banking. It's been a really bad year for American households. Do we need a second stimulus? If so, what should it look like?

JS: We clearly need a second stimulus. There are a couple of ways of seeing this. When the Obama administration first moved on the stimulus, it posed a scenario that was not really rosy, but one that proved a little too optimistic. It expected unemployment without the stimulus it would be around 10 percent, with the stimulus it would be brought down to 8 percent. Others like me thought things were going to be much worse, that without the stimulus, unemployment would be around 12 percent and with the stimulus, it would be about 10 percent. And the pessimists were right. Well, when the world turns out to be worse than you thought it would, you have to adjust what you do.

But even a much bigger stimulus would have only brought the unemployment rate down to about 8 percent, which is still totally unacceptable. So right now I am very much in favor of a second round of stimulus. Hopefully, it will be better designed and more targeted to job creation and actually stimulating the economy. The tax cuts in the first round weren't designed really to stimulate the economy very much and didn't work very effectively.

ZC: And what do you do to create jobs? Are we talking fiscal aid to states? Unemployment benefits? A new WPA?

JS: The first thing I would do is aid to the states. The states have balanced budget frameworks. The revenues are down by around $200 billion because of the recession. If they don't get aid, they have to either raise taxes—which is very hard in the current environment—or cut back expenditures. And what they inevitably cut are teachers, nurses, firefighters and a whole set of crucial public services which are all the more important in an economic recession.

So the first thing is to provide states with money, and that spending goes right to the economy very quickly. You don't have to set up new programs and it really does save jobs. I would also do one of the things that Obama is pushing now which are job credits to encourage companies to hire more workers. Focus a little bit more direct attention on jobs. We don't know how effective these are going to be. There is some debate, but it seems to me that if we don't try we're not going to get anywhere.

The forecast right now is that it will be the middle of the decade before unemployment returns to normal—that should be very worrying. That kind of situation should be completely unacceptable because it creates severe long-term problems. If you have young people who remain unemployed for extended periods of time, they lose their job skills. Economic studies show very clearly that their lifetime incomes will be significantly lower than if they had been able to get jobs and enter the labor force.

ZC: It's almost as if they aren't living in the same economy as everyone else. Changing gears a bit—how did every policymaker miss this? We had everybody at the Fed and the Treasury insisting as late as 2007 that everything was fine. How does the biggest credit bubble in history and the worst financial crisis in history just go unnoticed by every major public official?

JS: They didn't want to notice it. And they didn't want to notice it for two reasons. One was this absurd notion that if you can just keep the markets optimistic -- be a cheerleader -- the economy will keep going strong. The normal hope at Fed and Treasury is that you will be viewed as a great economic leader because you cheered the economy on. So political leaders start acting like cheerleaders and not as economic analysts, which is dangerous.

But the deeper problem is that our public officials – the Bush administration and the Federal Reserve – were very wedded to a particular ideology that could not conceive that the markets were not efficient. They actually argued that there was no such thing as a bubble, or that even if there was, you couldn't tell when it was happening. They actually argued that it was less expensive to clean up the mess afterward than to try to interfere with the magic of the market. It was crazy, but that made it intellectually easy to dismiss all the smart people who were talking about the housing bubble.

But of course, underneath all of that is the third reason. Lots of money was flowing to lots of people who were friends of these politicians. And no one wants to be a party pooper when so many people that they knew were making so much money. And so they were under pressure to keep the party going. But they weren't deceiving the American people in a sense, in that they actually, I think, believed what they were saying, which is all the more worrisome. Their role as cheerleaders, their ideology, their view that their friends were so smart and deserved to get all this money because it was making the economy go – all these went together and served as blinders on their eyes. And unfortunately, those same blinders have impeded a design of an effective response.

ZC: It's interesting to see similarities between the Obama administration's response and that of the Bush administration.

JS: Well, some of this is bipartisan. Wall Street is bipartisan. There are people in both parties that believed in deregulation. There were people in both parties that were making a lot of money. But there is a difference. The critics of the deregulation philosophy were much more vocal within the Democratic Party. When I was in the Clinton administration, there were several of us that were raising these issues very strongly. We didn't win out in the end, but there was at least a very vocal debate on the economic philosophy.

ZC: Can you go into that a little bit more? I think people are broadly aware of the conflict between Robert Reich and Robert Rubin on the budget deficit, but what was actually discussed when you were on the Clinton team?

JS: Well, the very issue that you were talking about before. The repeal of Glass-Steagall was one of those issues that was debated very extensively. And I described this in my book Freefall, that we had this big debate and I can say that I feel pleased that while I remained chairman of the Counsel of Economic Advisors the Glass-Steagall Act wasn't approved, but I think it had more to do with Congressional politics than politics within the administration. The Treasury wanted it. Bob Rubin wanted it. And one can understand why.

ZC: He made a lot of money working at Citigroup after the repeal.

JS: I think there was genuine belief in this doctrine of deregulation, that markets could take care of themselves. Greenspan in his famous Congressional testimony, his mea culpa, he said that he thought banks could manage risk far better than they did. But what he didn't point out was that if I mismanage my risk, there are consequences for me and my family, but when a major bank mismanages risks, there are consequences for the entire economy. So it's not just an issue of risk management, it's an issue of catastrophic externalities. You shouldn't allow a bank to put the entire economy at risk.

ZC: But the debate is still all about regulating banks as private sector, for-profit companies. Given the clear public purpose that banks serve, why don't we just make finance a public utility?

JS: There are actually several problems that carry a long history with governments trying to run banks. In many countries, they have not done it very well because of the potential politicization of the lending process. And that's why I'm actually fairly supportive of the approach that we took in the years after the Great Depression where we had private banks, strong incentives, but we made sure that they don't engage in excessive risk-taking, that they were regulated to serve the public purpose so that we try to shape their behavior. This public/private interaction that I think has worked most effectively.

There is no one today who believes the government should not be involved in finance. Even the bankers acknowledge this when they ask for bailouts, and they're also very protective of the Federal Reserve system. There would be no mortgage market today without the government. What we need to do is find the right balance, the right kind of government involvement in finance, because right now we clearly don't have that. And the bankers are doing everything they can to keep the balance out of whack.

ZC: Will we get it right?

JS: There's no question that we'll get it wrong, the question is how wrong we will get it. Right now, I am not very optimistic. We lost the political moment. Something will happen, it will have substance, but I worry that it will still be more cosmetic than substantive.

AlterNet will be publishing a two-part excerpt from Freefall in the days ahead.

Chart of the Day: the Dow is down 30%

Chart of the Day Bookmark  and Share For some long-term perspective, today's chart illustrates the Dow adjusted for inflation since 1925. There are several points of interest. For one, when adjusted for inflation, the bear market that concluded in the early 1980s was almost as severe as the one that concluded in the early 1930s. Also, the inflation-adjusted Dow is a little more than double where it was at its 1929 peak and trades 54% above its 1966 peak – not that spectacular of a performance considering the time frames involved. It is also interesting to note that the Dow is up 57% from its March 9, 2009 low which is actually slightly more than what the inflation-adjusted Dow gained from its 1966 peak to today.

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Bernanke Transparency Offer May Not Defuse Calls for Audits

February 25, 2010, 12:15 AM EST

By Scott Lanman, Craig Torres and Joshua Zumbrun

Feb. 25 (Bloomberg) -- Federal Reserve Chairman Ben S. Bernanke sought to defuse congressional efforts to audit monetary policy by backing the release of more information on emergency aid to investment banks and corporations.

The Fed will support legislation to let government auditors probe six temporary programs created to combat the financial crisis such as the Primary Dealer Credit Facility, Bernanke said yesterday in House testimony. While he would support the delayed release of names of firms getting aid from those programs, he said banks borrowing through the longstanding discount window must be allowed to remain anonymous.

Bernanke’s move toward greater openness may not dissuade lawmakers who want the Fed to disclose more information about the Fed’s lending and policy decisions. Lawmakers are responding to public anger over the Fed’s role in the $182.3 billion bailout of American International Group Inc.

“You’ve certainly seen changes for more transparency in the past 18 months,” said Representative Scott Garrett, a New Jersey Republican. “But I still support the legislation and I think the majority of the House still does as well.”

Representative Ron Paul won House passage in December of broader audits than Bernanke advocates. House members “signed on to the bill because there has been a public outcry, and this has given them a chance to express themselves and identify with that position,” Paul said in an interview yesterday.

Bernanke yesterday offered “full transparency” on the emergency programs, including revealing the names of borrowers.

Lehman Collapse

Most of the programs were created in response to the Bear Stearns Cos. near-collapse and the bankruptcy of Lehman Brothers Holdings Inc. and were closed by the Fed as of Feb. 1 because of improvements in financial markets. They include facilities backing investment banks, companies issuing commercial paper and money-market mutual funds. Loans outstanding under the programs peaked at a combined $930.1 billion and stood at $50.1 billion as of last week.

The Term Asset-Backed Securities Loan Facility, designed to spur consumer and business lending, closes June 30.

“He is definitely trying to defuse the Ron Paul issue,” said Diane Swonk, chief economist at Chicago-based Mesirow Financial Inc., which oversees $37.4 billion in assets. “The best he can do at the moment is to play more offense than defense.”

The openness can’t apply to the Fed’s discount window, used by banks facing temporary shortages of cash, Bernanke said.

Role in Panics

Borrowers would be reluctant to use the window if they knew their names would become known, and that would “intensify the crisis or panic, and therefore the whole purpose of the discount window to try to eliminate financial panics would be severely damaged,” Bernanke said during the hearing under questioning from Representative Michele Bachmann, a Minnesota Republican.

The proposed law to allow audits of interest-rate decisions could have “bad effects on markets” because it could create the perception that the central bank is subject to political pressure, Bernanke said.

Telling the public more about the operations of the central bank was one of the goals Bernanke listed for his second term when he was sworn in on Feb. 3. He pledged to “ensure maximum transparency” without compromising the “ability to conduct policy in the public interest.”

The Senate confirmed Bernanke for a second four-year term by a 70-30 vote last month, the most opposition in history for a Fed chief. Today Bernanke, 56, appears before the Senate Banking Committee to deliver his monetary policy report.

Senate Opposition

Opposition in the Senate to Paul’s audit measure was likely to doom the populist cause after it passed in the House Dec. 11, Gregory R. Valliere, a chief strategist at Potomac Research Group in Washington, said earlier this month.

“I still think the large majority will stick with me,” Paul said yesterday.

Vermont Independent Bernard Sanders, the measure’s main backer in the Senate, has 32 co-sponsors for a version of Paul’s audit provision, short of the 60 votes it will probably need to overcome procedural hurdles.

Bernanke “indicated the need for more transparency than before and a willingness to work with Congress,” Alabama Representative Spencer Bachus, the senior Republican on the House panel, said in an interview. “I really want to sit down with him.”

Bernanke’s comments were part of testimony in which the Fed chief said the U.S. economy is in a “nascent” recovery that still requires low interest rates to encourage demand by consumers and businesses once federal stimulus expires.

Low Inflation

Bernanke said slack labor markets and low inflation will allow the Federal Open Market Committee to keep the benchmark lending rate, which has been in a range of zero to 0.25 percent for more than a year, low “for an extended period.” He said the Fed will need to start tightening policy “at some point.”

The central bank hasn’t dropped its opposition to revealing data on borrowers through the Freedom of Information Act, which requires federal agencies to respond to public requests for government documents within 20 days. Fed spokeswoman Barbara Hagenbaugh declined to comment.

“Chairman Bernanke’s testimony is consistent with our position in the litigation,” said Paul Saltzman, general counsel for The Clearing House Association LLP, a trade group for the largest U.S. banks that joined the Fed in fighting Bloomberg’s lawsuit.

Banks have counted on confidentiality when borrowing from the Fed -- and if those rules are to change, “we believe that Congress, working with the Fed, is best situated to address disclosure issues,” Saltzman said.

--With assistance from Steve Matthews in Atlanta. Editors: Christopher Wellisz, James Tyson

Banks Bet Greece Defaults on Debt They Helped Hide

Banks Bet Greece Defaults on Debt They Helped Hide

NYTimes, February 24, 2010

Bets by some of the same banks that helped Greece shroud its mounting debts may actually now be pushing the nation closer to the brink of financial ruin.

Skip to next paragraph
Louisa Gouliamaki/Agence France-Presse — Getty Images

The police in Greece pushed back against demonstrators on Wednesday as unions staged a one-day general strike to protest austerity measures by the government to reduce its deficit.

The New York Times

Echoing the kind of trades that nearly toppled the American International Group, the increasingly popular insurance against the risk of a Greek default is making it harder for Athens to raise the money it needs to pay its bills, according to traders and money managers.

These contracts, known as credit-default swaps, effectively let banks and hedge funds wager on the financial equivalent of a four-alarm fire: a default by a company or, in the case of Greece, an entire country. If Greece reneges on its debts, traders who own these swaps stand to profit.

“It’s like buying fire insurance on your neighbor’s house — you create an incentive to burn down the house,” said Philip Gisdakis, head of credit strategy at UniCredit in Munich.

As Greece’s financial condition has worsened, undermining the euro, the role of Goldman Sachs and other major banks in masking the true extent of the country’s problems has drawn criticism from European leaders. But even before that issue became apparent, a little-known company backed by Goldman, JP Morgan Chase and about a dozen other banks had created an index that enabled market players to bet on whether Greece and other European nations would go bust.

Last September, the company, the Markit Group of London, introduced the iTraxx SovX Western Europe index, which is based on such swaps and let traders gamble on Greece shortly before the crisis. Such derivatives have assumed an outsize role in Europe’s debt crisis, as traders focus on their daily gyrations.

A result, some traders say, is a vicious circle. As banks and others rush into these swaps, the cost of insuring Greece’s debt rises. Alarmed by that bearish signal, bond investors then shun Greek bonds, making it harder for the country to borrow. That, in turn, adds to the anxiety — and the whole thing starts over again.

On trading desks, there is fierce debate over what exactly is behind Greece’s recent troubles. Some traders say swaps have made the problem worse, while others say Greece’s deteriorating finances are to blame.

“This is a country that is issuing paper into a weakening market,” said Ashish Shah, co-head of credit strategy at Barclays Capital, referring to Greece’s need for continual borrowing.

But while some European leaders have blamed financial speculators in general for worsening the crisis, the French finance minister, Christine Lagarde, last week singled out credit-default swaps. Ms. Lagarde said a few players dominated this arena, which she said needed tighter regulation.

Trading in Markit’s sovereign credit derivative index soared this year, helping to drive up the cost of insuring Greek debt, and, in turn, what Athens must pay to borrow money. The cost of insuring $10 million of Greek bonds, for instance, rose to more than $400,000 in February, up from $282,000 in early January.

On several days in late January and early February, as demand for swaps protection soared, investors in Greek bonds fled the market, raising doubts about whether Greece could find buyers for coming bond offerings.

“It’s the blind leading the blind,” said Sylvain R. Raynes, an expert in structured finance at R&R Consulting in New York. “The iTraxx SovX did not create the situation, but it has exacerbated it.”

The Markit index is made up of the 15 most heavily traded credit-default swaps in Europe and covers other troubled economies like Portugal and Spain. And as worries about those countries’ debts moved markets around the world in February, trading in the index exploded.

In February, demand for such index contracts hit $109.3 billion, up from $52.9 billion in January. Markit collects a flat fee by licensing brokers to trade the index.

European banks including the Swiss giants Credit Suisse and UBS, France’s Société Générale and BNP Paribas and Deutsche Bank of Germany have been among the heaviest buyers of swaps insurance, according to traders and bankers who asked for anonymity because they were not authorized to comment publicly.

That is because those countries are the most exposed. French banks hold $75.4 billion worth of Greek debt, followed by Swiss institutions, at $64 billion, according to the Bank for International Settlements. German banks’ exposure stands at $43.2 billion.

Trading in credit-default swaps linked only to Greek debt has also surged, but is still smaller than the country’s actual debt load of $300 billion. The overall amount of insurance on Greek debt hit $85 billion in February, up from $38 billion a year ago, according to the Depository Trust and Clearing Corporation, which tracks swaps trading.

Markit says its index is a tool for traders, rather than a market driver.

In a statement, Markit said its index was started to satisfy market demand, and had improved the ability of traders to hedge their risks. The index and similar products, it added, actually make it easier for buyers and sellers to gauge prices for instruments that are traded among players over the counter, rather than on exchanges.

“These indices have helped bring transparency to the sovereign C.D.S. market,” Markit said. “Prior to their creation, there was no established benchmark index enabling investors to track the performance of segments of the sovereign C.D.S. market.”

Some money managers say trading in Greek swaps alone, not the broader index, is the problem.

“It’s like the tail wagging the dog,” said Markus Krygier, senior portfolio manager at Amundi Asset Management in London, which has $40 billion in global fixed-income assets. “There is a knock-on effect, as underlying positions begin to seem riskier, triggering risk models and forcing portfolio managers to sell Greek bonds.”

If that sounds familiar, it should. Critics of these instruments contend swaps contributed to the fall of Lehman Brothers. But until recently, there was little demand for insurance on government debt. The possibility that a developed country could default on its obligations seemed remote.

As a result, many foreign banks that held Greek bonds or entered into other financial transactions with the government did not hedge against the risk of a default. Now, they are scrambling for insurance.

“Greece is not a small country,” said Mr. Raynes, at R&R in New York. “Credit-default swaps give the illusion of safety but actually increase systemic risk.”

giovedì 25 febbraio 2010

Convegno a Bergamo il 15 marzo 2010

Convegno ispirato agli studi
del Prof. Giacinto Auriti
lunedì 15 marzo 2010
ore 20.45
presso la Casa del Giovane
“Sala Nembrini”
Via Gavazzeni, 13
24125 Bergamo


20.45 – 20.50 Dr. Pierantonio Locatelli, Segretario di Giustizia Monetaria

20.50 – 21.00 Prof. Savino Frigiola, Autore del libro “Alta finanza e miseria”

21.00 – 21.20 Dr. Matteo Mazzariol, Presidente di Giustizia Monetaria

21.20 – 21.40 Sen. Fernando Rossi, Lista per il Bene Comune, già Insieme con l’Unione Verdi – Comunisti Italiani

21.40 – 22.00 On. Mario Borghezio, Europarlamentare Lega Nord

22.00 – 22.45 Discussione aperta al pubblico


“I politici sono camerieri dei banchieri”: chi ha usato questa frase forte ed incisiva non è un fanatico invasato da qualche teoria complottista ma Ezra Pound, uno dei massimi poeti ed uomini di cultura del ‘900. Lo scenario che aveva di fronte era molto simile all’attuale: gli sconvolgimenti economici-sociali conseguenti alla crisi del 1929. Pound individuò nella questione monetaria il problema per eccellenza e in coloro che producono i soldi – i banchieri - i veri detentori del potere reale, nei confronti dei quali i politici svolgerebbero il ruolo di meri camerieri: fornire servizievolmente una tavola imbandita per saziare il loro appetito.

La provocazione di Pound appare quanto mai attuale ed interroga le nostre coscienze. Chiediamoci quanti di noi sanno oggi che cosa sia il denaro, chi lo crei e chi ne sia il proprietario al momento della sua emissione. Chiediamoci quanti di noi sanno che fenomeni perniciosi quali il debito pubblico, il debito individuale, la tassazione esosa, la perdita del potere di acquisto dei cittadini, la cronica instabilità economica con il suo strascico di disoccupazione, povertà e disagio sociale hanno la loro radice nel fatto che attualmente il denaro può nascere solo come debito di Stati e cittadini verso il sistema bancario. Chiediamoci quanti di noi sanno che le risorse materiali, professionali e tecnologiche delle nazioni giacciono inutilizzante perché gli Stati hanno perso il monopolio monetario, affidato alle banche. Chiediamoci infine quanti di noi sanno che il 97% di tutto il denaro esistente viene prodotto da banche commerciali private sotto forma di debito e il rimanente 3%, sempre come debito, da banche centrali, le maggiori delle quali di proprietà privata.

Di fronte a questi dati di fatto, denunciati ormai da una vasta schiera di economisti e sociologi, si impone la domanda: come uscire da tale vicolo cieco?
La soluzione c’è: restituire allo Stato la proprietà del denaro al momento dell’emissione, come era avvenuto per secoli, ed abolire il denaro-debito bancario.
Riteniamo che chi si occupa di bene comune non può rimanere indifferente rispetto a tutto ciò, non può sottrarsi al dovere di conoscere, approfondire e trattare una questione così importante, che influisce tragicamente su ogni aspetto della vita dei cittadini.
I politici sono quindi chiamati ad una grande prova, da cui dipende secondo noi la sopravvivenza stessa della politica come tale: far prevalere la giustizia sull’ingiustizia, il diritto sulla prepotenza dei più forti, rimettendo il denaro al servizio dell’economia e l’economia al servizio dell’uomo: questo vuol dire oggi non essere camerieri dei banchieri.
Riteniamo anche che il periodo di campagna elettorale sia il più adatto per discutere di queste tematiche, in quanto momento privilegiato di incontro tra cittadini e politici. A tal fine Giustizia Monetaria ha organizzato questo convegno, invitando rappresentanti di vari schieramenti del mondo politico e tutta la cittadinanza.

La partecipazione è
Per confermare la partecipazione,
potete scrivere alla segreteria
organizzativa spedendo a:
fax 02 7003 4634

Francis Bacon - drawings (collezione privata)

Sete di Giustizia - 7 marzo 2010 a Pescara

Siamo lieti di invitarVi al Convegno-Dibattito

'Sete di Giustizia'
Pescara, Piazza Italia,
Palazzo della Provincia di Pescara
Sala Consiliare
Domenica 7 marzo 2010 dalle ore 10,00

Il convegno si pone l'obiettivo di sensibilizzare tutti gli ambienti della socetà civile sul sistema monetario vigente.
I relatori illustreranno l'incidenza che c'é tra l'attuale moneta-debito (l'euro) e il malessere economico, sociale, morale e ambientale della nostra società.

Parteciperanno al convegno:
Introduzione: Antonio Demenego

Intervento: Bruno Tarquini
ex Procuratore Generale della Corte d'Appello

Francesco Cianciarelli
Gianluigi Muciaccio
Antonio Pimpini
Matteo Simonetti
Andrea Pauri
Michelangelo Altamore
Conclusioni e dibattito


Per le Associazioni: in allegato inviamo modulo di partecipazione. Per motivi organizzativi si prega di confermare la partecipazione via mail a oppure via FAX al seguente numero 085-4513722

Preghiamo di inoltrare l'invito ad Associazioni di Vs. conoscenza

Cliccare sui collegamenti You Tube, sono SPOT di Sete di Giustizia

Siamo fermamente convinti che il messaggio che si vuole diffondere meriti la massima considerazione ed il più ampio coinvolgimento possibile.
E questo, in virtù del fatto che - al di là e al di fuori delle appartenenze associative ideologiche politiche e partitiche - la materia di questo contendere possa rappresentare quel "minimo comune multiplo" che raduni e coinvolga fattivamente le donne e gli uomini di buona volontà, quel "nocciolo della questione" sulla cui forza intrinseca, sulla cui genuina bontà e profonda veridicità si possa tutti convenire ; quel punto fermo, quel punto di partenza che riesca ad avvicinare, se non a coalizzare cittadini che - avendone preso atto - lottino fianco a fianco per scardinare ALLA RADICE un sistema degenerato, degenerante e disperante : la "questione delle questioni", la madre di tutte le battaglie.
Se comprenderemo questo messaggio, tutto potrebbe divenire più chiaro e più facile nella lotta alle ingiustizie sociali alla cui base vi è sempre questo peccato originale, l'emissione della moneta all'origine, la più grande truffa di tutti i tempi, oggi la moneta viene emessa dalle banche centrali prestandola, prestano un valore monetario che invece è dovuto all'uomo, cosi da realizzare la rendita parassitaria da signoraggio ai danni del popolo.
Saranno pertanto illustrati - ovviamente - anche i vari aspetti della scuola monetaria del Prof. Giacinto Auriti che trattano della PROPRIETA' POPOLARE dela MONETA.

Fiduciosi in una Vostra risposta affermativa Vi porgiamo distinti saluti.
Coordinamento SdG

Per INFO Hotel e Ristorante convenzionato con l'evento AMBRA PALACE HOTEL Via Quarto dei Mille 28/30 65122 Pescara
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Esclusiva per il convegno SdG Camera singola € 45,00 compreso colazione Camera matrimoniale € 69,00 compreso colazione Pranzo € 16,00 a persona con 1/2 minerale più 1/4 di vino incluso

mercoledì 24 febbraio 2010

Greece will be start of sovereign default

Greece will be start of sovereign default domino effect, warns Ken Rogoff

The former chief economist of the International Monetary Fund has predicted "a bunch of sovereign defaults" in the next few years, and gave warning that Greece is likely to be the first domino of several to fall.

Greece will be start sovereign default domino effect, warns Ken  Rogoff
A carnival float in Patras depicts Greek anger at eurozone austerity demand. Its shows EU officials pulling receipts out of a Greek Presidential guard. Photo: Reuters

Professor Kenneth Rogoff, now a respected Harvard academic, also argued that substantial sovereign debt loads will force major global economies to tighten monetary policy, leading to further worldwide "shockwaves."

Prof Rogoff's vision of the world's governments weighed down with debt is not a new phenomenon.

"Greece is just the beginning," he said. "We usually see a bunch of sovereign defaults [in the years following a banking crisis]... I predict we will again. It's very hard to call the timing but it will happen."

As well as his time at the IMF – he was chief economist from 2001-2004 – Prof Rogoff is best known for predicting the collapse of a number of major banks in the summer of 2008, which came true with the implosion of Lehman Brothers, and the need for rescues of both Halifax Bank of Scotland and the Royal Bank of Scotland.

On Greece, Prof Rogoff expects the IMF – not the European Union – to eventually bail out of the Mediterranean nation. He said: "I don't think Europe's going to succeed."

He also takes a very dim view of the US's debt situation, saying the US "is in a state of paralysis in its fiscal policy". However, he believes America is more likely to tighten monetary policy ahead of spending cuts: "When they start tightening monetary policy even a little bit, it's going to send shockwaves through the system."

The majority of countries are now at a point where it would be wiser to "phase out fiscal stimulus," he said, "and start gradually tightening fiscal policy even if it meant some inflation."

Memo to Greece: Make War with Goldman

Memo to Greece: Make War Not Love with Goldman Sachs

In recent weeks, there has been much discussion about what to do about Greece. These questions become all the more relevant as the country attempts to float a multibillion-euro bond issue later this week. The Financial Times has called this fund-raising a critical test of Greece's credibility in financial markets as it battles with a spiraling debt crisis and strikes. The "credibility" of the financial markets is an important consideration in a country which has functionally ceded its sovereign ability to create currency, and thus remains dependent on the vagaries of the very banking institutions which helped create the mess in the first place.

Maybe Greece should secede from the European Union and default on its euro debt. Or go hat-in-hand to the International Monetary Fund (IMF) to beg for loans while promising to clean up its act. Or to the stronger Euro nations, hoping for charitable acts of forgiveness. Unfortunately, all of these options are going to mean a lot of pain and suffering for an economy that is already sinking rapidly.

And it is questionable whether any of them provide long term viable answers. Polls show that given the perception of fiscal excesses of Greece and the other countries on the periphery, the public in Germany opposes a bailout of these countries at its expense by a significant margin. Periphery countries such as Ireland that have already undertaken harsh austerity measures also oppose the notion of a bailout, despite -- nay, because of -- the tremendous pain already inflicted on their own respective economies (in Ireland's case, the banks are probably insolvent as well). The IMF route is also problematic, given that Greece probably doesn't qualify under normal IMF standards, and many euro zone nations would find this unpalatable from an ideological standpoint, as it would mean ceding control of EU macro policy to an external international institution with strong US influence.

The Wall Street Journal recently highlighted an article by Simon Johnson and Peter Boone, lamenting that the demands being foisted on Greece and other struggling Euronations would "massively curtail demand, lower wages and reduce the public sector workforce. The last time we saw this kind of precipitate fiscal austerity -- when nations were tied to the gold standard -- it contributed to the onset of the Great Depression in the 1930s." Where we disagree with Johnson and Boone is the suggestion that the IMF be brought in to craft a solution. Any help from this organization will come with tight strings attached -- indeed, with a noose around Greece's neck. Germany and France would be crazy to commit their scarce euros to a bail-out of Greece since they face both internal threats from their own taxpayers and external threats from financial vampires who are looking for yet another nation to attack.

Here's a more appropriate action: declare war on Goldman Sachs and other global financial firms that created this mess. Send the troops, the planes, the tanks, and the ships. Attack every outpost of the saboteurs on European soil. Blockade the airports and ports. Make Wall Street traders and CEOs fear for their lives, or at least for their freedom to travel. Build some Guantanamo-like facility to hold these enemy financial combatants until they can be tried, convicted, and properly punished.

Ok, if a literal armed attack on Goldman is too far-fetched, then go after the firm using the full force of the regulatory and legal systems. Close the offices and go through the files with a fine-tooth comb. Issue subpoenas to all non-clerical staff for court appearances. Make the internal emails public. Post the names of all managers and traders on Interpol. Arrest anyone who tries to board a plane, train, or boat; confiscate their passports; revoke their visas and work permits; and put a hold on their bank accounts until culpability can be assessed. Make life at least as miserable for them as it now is for Europe's tens of millions of unemployed workers.

We know that the Obama administration will not go after the banksters that created this global financial calamity. It has been thoroughly co-opted by Wall Street's fifth column, who hold most of the important posts in the administration. Europe has even more at stake and has shown somewhat more willingness to take action. Perhaps our only hope for retribution lies there.

Some might believe the term "banksters" is too mean. Surely Wall Street was just doing its job -- providing the financial services wanted by the world. Yes, it all turned out a tad unfortunate but no one could have foreseen that so many of the financial innovations would turn into black swans. And hasn't Wall Street learned its lesson and changed its practices? Fat chance. We know from internal emails that everyone on Wall Street saw this coming -- indeed, they sold trash assets and placed bets that they would crater. The crisis was not a mistake -- it was the foregone conclusion. The FBI warned of an epidemic of fraud back in 2004 -- with 80% of the fraud on the part of lenders. As Bill Black has been warning since the days of the Saving and Loan crisis, the most devastating kind of fraud is the "control fraud," perpetrated by the financial institution's management. Wall Street is, and was, run by control frauds. Not only were they busy defrauding the borrowers, like Greece, but they were simultaneously defrauding the owners of the firms they ran. Now add to that list the taxpayers that bailed out the firms. And Goldman is front and center when it comes to bad apples.

Lest anyone believe that Goldman's executives were somehow unaware of bad deals done by rogue traders, William Cohan reports that top management unloaded their Goldman stocks in March 2008 when Bear crashed, and again when Lehman collapsed in September 2008. Why? Quite simple: they knew the firm was full of toxic waste that it would not be able to continue to unload on suckers -- and the only protection it had came from AIG, which it knew to be a bad counterparty. Hence on March 19, Jack Levy (co-chair of M&As) sold over $5 million of Goldman's stock and bet against 60,000 more shares; Gerald Corrigan (former head of the NY Fed who was rewarded for that tenure with a position as managing director of Goldman) sold 15,000 shares in March; Jon Winkelried (Goldman's co-president) sold 20,000 shares. After the Lehman fiasco, Levy sold over $6 million of Goldman shares and Masanori Mochida (head of Goldman in Japan) sold $56 million worth. The bloodletting by top management only stopped when Goldman got Geithner's NYFed to produce a bail-out for AIG, which of course turned around and funneled government money to Goldman. With the government rescue, the control frauds decided it was safe to stop betting against their firm. So much for the "savvy businessmen" that President Obama believes to be in charge of Wall Street firms like Goldman.

From 2001 through November 2009 (note the date -- a full year after Lehman) Goldman created financial instruments to hide European government debt, for example through currency trades or by pushing debt into the future. But not only did Goldman and other financial firms help and encourage Greece to take on more debt, they also brokered credit default swaps on Greece's debt-making income on bets that Greece would default. No doubt they also took positions as the financial conditions deteriorated-betting on default and driving up CDS spreads.

But it gets even worse: An article by the German newspaper, Handelsblatt, ("Die Fieberkurve der griechischen Schuldenkrise", Feb. 20, 2010) strongly indicates that AIG, everybody's favorite poster boy for financial deviancy, may have been the party which sold the credit default swaps on Greece (English translation here).

Generally, speaking, these CDSs lead to credit downgrades by ratings agencies, which drive spreads higher. In other words, Wall Street, led here by Goldman and AIG, helped to create the debt, then helped to create the hysteria about possible defaults. As CDS prices rise and Greece's credit rating collapses, the interest rate it must pay on bonds rises-fueling a death spiral because it cannot cut spending or raise taxes sufficiently to reduce its deficit.

Having been bailed out by the Obama Administration, Wall Street firms are already eyeing other victims (and for allowing these kinds of activities to continue, the US Treasury remains indirectly complicit, another good reason why one shouldn't expect any action coming out of Washington). Since the economic collapse is causing all Euronations to run larger budget deficits and at the same time is raising CDS prices and interest rates, it is easy to pick off nation after nation. This will not stop with Greece, so it is in the interest of Euroland to stop the vampires now.

With Washington unlikely to do anything to constrain Goldman, it looks like the European Union, which is launching a major audit, just might banish the bank from dealing in government debt. The problem is that CDS markets are essentially unregulated so such a ban will not prevent Wall Street from bringing down more countries-because they do not have to hold debt in order to bet against it using CDSs. These kinds of derivatives have already brought down an entire continent -- Asia -- in the late 1990s , and yet authorities are still standing by and basically doing nothing when CDSs are being used again to speculatively attack Euroland. The absence of sanctions last year, when we had a chance to deal with this problem once and for all, has simply induced even more outrageous and fundamentally anti-social behavior. It has pitted neighbor against neighbor -- with, for example, Germany and Greece lobbing insults at one another (Greece has requested reparations for WWII damages; Germany has complained about subsidizing what it perceives to be excessive social spending in Greece).

Of course, as far as Greece goes, the claim now is that these types of off balance sheet transactions in which Goldman and others engaged were not strictly "illegal" under EU law. But these are precisely the kinds of "shadow banking transactions" that almost brought down the global financial system 18 months ago. Literally a year after the Lehman bankruptcy -- MONTHS after Goldman itself was saved from total ruin, it was again engaging in these kinds of deals.

And it wasn't exactly a low-level functionary or "rogue trader" who was carrying out these transactions on behalf of Goldman. Gary Cohn is Lloyd "We're doing God's work" Blankfein's number 2 man. So it's hard to believe that St. Lloyd did not sanction the activities as well in advance of collecting his "modest" $9m bonus for last year's work.

If these are examples of Obama's "savvy businessmen", then heaven help the global economy. The transaction highlighted, if reported that way in the private sector, would be accounting fraud. Fraud -- "Go to jail, do not pass Go" fraud. That senior bankers had no problem in structuring/recommending/selling such deals to cash-strapped governments should probably not surprise us at this point. However, it would be interesting to know if the prop trading desks of those same investment banks, purely by coincidence of course, then took long CDS (short the credit) positions in the credit of the countries doing the hidden swaps. A proper legal investigation by the EU could reveal this and certainly help to uncover much of the financial chicanery which has done so much destruction to the global economy over the past several years.

In this country, we have had a "war on terror" and a "war on drugs" and yet we refuse to declare war on these financial weapons of mass destruction. We all remember Jimmy Carter's "MEOW" -- the attempt to attack creeping inflation that was said to sap the strength of the US economy in the late 1970s. But Europe -- and indeed the entire globe -- faces a much more dangerous and immediate threat from Wall Street's banksters. They created this mess and are not only profiting from it, but are actively preventing recovery. They are causing unemployment, starvation, destruction of lives, and even violence and terrorism across the world. They are certainly more dangerous than the inflation of the 1970s, and arguably have disrupted more lives than Osama bin Laden -- whose actions led the US to undertake military actions in at least three countries. That should provide ample justification for Greece's declaration of figurative war on Manhattan.

However, in an ironic twist of fate, it was just announced that Petros Christodoulou will take over as the head of Greece's national debt management agency. He worked as the head of derivatives at JP Morgan, and also previously worked at Goldman -- the firm that got Greece into all this trouble!

Dimitri Papadimitriou has recently made what we consider to be an important plea for moderation of the hysteria about Greece's debt. Writing in the Financial Times, he complained that "The plethora of articles in your pages and others, some arguing in favour and other against a bail-out, contribute to market confusion and drive the country's financing costs to record levels. It is not yet clear that a bail-out is even needed, but this market confusion is rendering the government's ability to achieve its deficit goals ever more difficult."

Indeed, we suspect that the same financial firms that helped to get Greece into its predicament are profiting from -- and stoking the fires of -- the hysteria. He goes on, "what Greece really needs now is a holiday from further market confusion being created by contradictory, alarmist public commentary."

Greece, Euroland in general, and the rest of the world all need a holiday from the manipulation and destruction of our economies by Wall Street firms that profit from speculative bubbles, from burying firms, households, and governments under mountains and debt, and even from the crises that they create. Governments all over the globe should use all legal means at their disposal to ferret out the bad faith and even fraudulent deals that global financial behemoths are foisting on us.

This post originally appeared on New Deal 2.0 and New Economic Perspectives.