Saturday, November 20, 2010

The World Shorts the Dollar

A remarkable confluence of recent events has brought unprecedented but very welcome attention to both U.S. monetary policy and the global political economy in general.

First, Federal Reserve Board Chairman Ben Bernanke recently announced that the Fed would embark upon another round of monetary easing by purchasing $600 billion worth of U.S. Treasury debt. This amounts to an admission that markets have run out of patience with our profligacy, and therefore our own central bank literally must serve as the buyer of last resort for Treasury debt.

Second, World Bank president Robert Zoellick openly suggested that gold could play a helpful role in the global monetary system by serving as reference against more volatile fiat currencies. This is almost heresy coming from a neoconservative globalist like Mr. Zoellick. It hints at an obvious but unspoken truth that is anathema to politicians and central bankers alike: namely, that gold could be viewed as…. money!

Finally, Mr. Obama attended the G20 summit in South Korea last week and found a very chilly reception for his vision of American economic policy. Mr. Obama argued for continued worldwide stimulus, via continued debasing of the U.S. dollar, to bolster American exports. Several powerful European and Asian finance ministers, however, rejected this approach out of hand as nothing short of a currency war. They are committed to austerity measures at home, and don’t want to let the U.S. simply monetize its past sins at their expense.

All of these events culminated in a tremendous amount of political and media scrutiny aimed the Fed. Ordinary Americans are demanding answers and accountability, and they are putting heat on their political representatives in Washington to end the cozy “independence” from congressional oversight the Fed has enjoyed for so long.

In the 35 years I have been studying, speaking, and writing about monetary policy I have never before seen Congress or the financial press pay much attention to the Fed. Monetary policy has always been considered boring on Capitol Hill, something left to remote policy wonks far away from the din of presidential or congressional politics. Congress always has been eager to leave Fed governors well alone, with no oversight or accountability, as long as they played along and papered over the growing budget deficits.

But it’s amazing what a global economic meltdown will do to the political and media landscape. In just two short years, the Fed has become the hot topic and a lightning rod for criticism. While it is gratifying to see so many formerly uninterested politicians, economists, talk show hosts, and pundits suddenly rally to attack the Fed, one can only wonder whether they truly understand that central banking is inherently incompatible with our Constitution and a free market economy.

In other words, it’s not enough to show outrage at the latest Fed action or argue about the relative merits of Mr. Bernanke compared to his predecessors. To reclaim our dollar and our economy, Americans must oppose central banking per se. Fiat currencies cannot be “reformed” or “managed”. They are fundamentally subject to ruinous debasement courtesy of the political and economic ruling class. History shows that this is true in all nations at all times.

Measure to extend unemployment benefits fails House vote

The legislation would have allowed the unemployed to continue to receive benefits until Feb. 28. The benefits are now set to expire at the end of this month.


Legislation that would have extended unemployment benefits for an additional three months failed to earn the required supermajority in the House of Representatives on Thursday.

The final vote was 258-154, ordinarily sufficient to pass legislation. But Democrats brought the measure to the floor using a legislative tactic that required approval from two-thirds of the House.

Currently, benefits are set to expire on Nov. 30 for an estimated 4 million Americans. The measure would have allowed those unemployed individuals to continue receiving benefits until Feb. 28, 2011.

Democrats sought to portray Republicans as unsympathetic to the plight of Americans still struggling to seek employment, particularly as the holiday season is set to begin. Republicans have said any extension should only be passed if the $12.5-billion price tag were offset by spending cuts on other programs.

« Open Letter To Alan Simpson & Erskine Bowles Chairmen Of The U.S. Deficit Commission - Regarding Proposed Changes To Social Security »

Dear Esteemed Chairmen:

No huge surprise here. What's unfortunate for you is that for years, even decades - going back to Ross Perot - the American people have been prepared for and willing to accept changes (cuts) to Social Security. You, the politicians never gained the courage to ask, but I think for the most part the general public has been ready. And since I've been screaming about these issues my entire adult life, and have always pushed the concept of shared sacrifice as a means to budget sanity and limited government, I'm not comfortable with what I'm about to write, but it's inescapable after watching and recording a 32-month orgy of fiscal mayhem dominated by trillion-dollar bailouts, trillions in wasted stimulus, and trillions gifted to the military-industrial killing machine.

Fast forward from the Perot deficit awakening 20 years ago, and finally, you, the generationally-irresponsible political class seem to be facing up to the unfunded entitlement budget nightmare of your own creation - or at least you're in the discussion phase of 'facing it' - and what is the societal backdrop? Seething anger over the recession, the wars, multiple failed stimulus, dollar destruction, QE, and the government bailouts of favored industries.

So against this backdrop, your Commission now recommends cuts to Social Security and a hike in the retirement age to help us on our merry way to a fiscally sane future.

Here's my recommendation for you.

The American people are willing to sacrifice as part of a shared effort at righting our budgetary path, but they are not prepared to be sacrificial lambs led to the 'benefits and promises slaughterhouse' while the Wall Street Banker Pigs gorge on trillions in stealth FED and FDIC bailouts, ZIRP giveaways and a record $144 billion in bonuses - an amount equivalent to the 49th largest GDP in the world - $144 billion in bonuses being paid by criminally insolvent banks that are only still operating due to a Wall Street financed K-Street lobbying tsunami that forced FASB to change the accounting rules that now allow these same insolvent institutions of usury and arrogance to apply Faustian valuations to complete shit assets all over their lying, godforsaken, Enron resembling, off-balanced, imbalanced, bs-balanced, sheets.

Banks exist in the lala land of leveraged deferred tax assets representing most of tier-1 capital at Citigroup, of hundreds of billions of helocs at Wells Fargo worth pennies, but marked at dollars, of hundreds of billions of fraudulent MBS pumped out by Countrywide, whose liability now sits with Bank of America. This is a mere glimpse of the great banking lie that provides cover for the $144 billion insolvent bonus river that bathes the Street, all supported and paid for by taxpayers, Treasury and the Federal Reserve. Therefore, ultimately, taxpayers.

In this environment, selling 'cuts to social security' is not going to work, and considering the role you both played in creating the irresponsible federal spending machine that now controls Washington and has bankrupted future unborn generations, fuck you for even bringing it up.

Signed,

The Daily Bail

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Senate not scheduled to vote on extending jobless benefits

UPDATE: Republicans in the House have blocked a bill that would have extended unemployment benefits until the end of February, the Associated Press reports.

Two Democratic senators urged Congress to extend unemployment benefits for another year Wednesday, but no vote has been scheduled and the annual Thanksgiving recess is only days away.

"We are still in the process of trying to establish the schedule of the lame duck session, in terms of the remaining days of the session, so no specifics, but think we all understand that this is something that is going to have to be done," Senator Jack Reed said (D-RI) during a conference call.

"Congress must act now to preserve unemployment insurance for the two million Americans and 83,000 Pennsylvanians who will lose this financial lifeline at the end of the month," Senator Robert Casey (D-PA) added. "Doing nothing will hurt millions of Americans, job creation and the economic recovery."

The temporary extension of unemployment benefits are set to expire November 30th and nearly two million job-seeking Americans are expected to lose their benefits in December.

If no benefit extension is passed, an additional several hundred thousand unemployed workers are expected to lose their benefits every month thereafter.

"At this point it's not been scheduled," Reed said. "We're trying to make a case that there will be action but at this point I can't point to a specific time it will come up for a vote this week."

The Thanksgiving recess begins November 22nd and ends on the 26th, giving Congress until this Friday to pass an extension before the recess begins.

"Republicans are trying to re-write economics and reality," Reed said. "They want to provide $700 billion in tax cuts for the wealthiest Americans, but not pay for them. At the same time, they are demanding that emergency unemployment benefits for middle-class folks be fully paid for."

"That is a little like the dieter who orders a Diet Coke and a Big Mac."

On Wednesday, a bill was introduced to the House of Representatives that would extend the deadline to file for federal unemployment benefits to February 28th.

"Terminating this emergency unemployment assistance will not only devastate families, but it also will hurt the entire economy by depressing consumer confidence and demand," said Representative Sander Levin (D-MI), who is introducing the bill. "We simply cannot afford to conclude this Congress without responding to those Americans who have been most hurt by the recession."

Although Democrats believe the House will be able to pass the bill, Republicans are expected to block it in the Senate.

Hacker arrested after cracking Federal Reserve

A federal grand jury has indicted a Malaysian citizen for allegedly hacking into a computer network at the Federal Reserve Bank and for possessing more than 400,000 credit and debit card numbers.

Federal prosecutors also allege Lin Mun Poo, 32, made a career of compromising systems at financial institutions, major corporations and defense contractors. They say he sold or traded the information he found.

"In the case of the Federal Reserve Bank of Cleveland, the incident involved a test computer, which is used for testing software and applications," June Gates, public information manager, Federal Reserve Bank of Cleveland, tells Federal News Radio in an email. "The incident did not involve the Bank's live, production computer system, and no fed data or information was compromised."

Also according to the Justice Department, "in approximately August 2010, he hacked into the computer system of a Department of Defense contractor that provides systems management for military transport and other military operations, potentially compromising highly sensitive military logistics information."

Poo was arrested when he traveled to the U.S. in October. If convicted of the most serious charges, he faces up to 10 years in prison.

This story is part of Federal News Radio's daily Cybersecurity Update brought to you by Tripwire. For more cybersecurity news, click here.

Bernanke hits back at critics of US monetary policy

FRANKFURT — Federal Reserve chief Ben Bernanke Friday hit back at opponents of US monetary policy at an appearance in Germany, one of the fiercest critics of measures to stimulate the weak American economy.

Defending the recent decision to pump an extra 600 billion dollars into the financial system, Bernanke said US policy was not to blame for the current economic imbalances between advanced and developing countries.

And the measures served to calm tensions on the markets and should promote growth, he said.

"In the short term, rebalancing economic growth between the advanced and emerging market economies should remain a common objective, as a two-speed global recovery may not be sustainable," he said.

"The countries of the world must recognise their collective responsibility for bringing about the rebalancing required to preserve global economic stability and prosperity."

Bernanke was addressing a European Central Bank conference in Frankfurt, following sharp attacks on his policies by Germany, whose finance minister described as "hopeless" the Fed's so-called "quantitative easing."

The US has "already pumped endless amounts of money into the economy with extremely high budget deficits, and with a monetary policy which has already pumped in lots of money," Wolfgang Schaeuble said earlier this month.

"The results have been hopeless."

But Bernanke said that the policy, essentially printing money as life support for the flagging US economy, had already eased financial market tensions and should spur growth.

"Financial conditions eased notably in anticipation of the (Fed) Committee's announcement, suggesting that this policy will be effective in promoting recovery," he said.

The Federal Reserve boss also went on the attack over currency policy, hitting back at those who argue the vast injection of cash is aimed at keeping the dollar low to boost exports.

"The dollar?s role as a safe haven during periods of market stress stems in no small part from the underlying strength and stability that the US economy has exhibited over the years," Bernanke said.

"The best way to continue to deliver the strong economic fundamentals that underpin the value of the dollar, as well as to support the global recovery, is through policies that lead to a resumption of robust growth in a context of price stability in the United States."

In a thinly-veiled reference to China, accused of keeping its currency artificially low, he asked: "Why have officials in many emerging markets leaned against appreciation of their currencies toward levels more consistent with market fundamentals?"

"The principal answer is that currency undervaluation on the part of some countries has been part of a long-term export-led strategy for growth and development."

However, such a tactic "has demonstrated important drawbacks, both for the world system and for the countries using that strategy," he said.

Bernanke spoke as a cornucopia of world finance leaders descended on Frankfurt for conferences, with the current eurozone debt crisis high on the agenda.

Speaking at a separate conference, Greek Finance Minister George Papaconstantinou said that possible aid for Ireland would not be sufficient to calm turbulent bond markets in the 16-nation zone.

"Even if Ireland is helped, it cannot prevent the debt crisis from continuing," he said.

He added the markets would turn their focus to other debt-wracked countries such as Spain and Portugal.

Papaconstantinou's remarks came as international financial experts and Irish officials began tough negotiations on a possible bailout for the debt-ridden economy.

Also expected to speak in Frankfurt later Friday were International Monetary Fund chief Dominique Strauss-Kahn, European Central Bank President Jean-Claude Trichet and the head of the German central bank Axel Weber.

U.S. TAXPAYERS ARE PAYING FOR ISRAEL’S WEST BANK OCCUPATION

According to a June 2010 fact sheet on the USAID Internet site, last year American taxpayers funded the paving of 63 kilometers of asphalt roads in the West Bank.

By Akiva Eldar - Haaretz.com

Travelers along the “original” West Bank roads, the ones enabling drivers to bypass Palestinian villages, can see signs declaring “US AID from the American People.”

The roads are one of the initiatives of the United States Agency for International Development for building infrastructure in underdeveloped countries. Israel has already proudly left the club of developing countries and is not among the clients of USAID. Nevertheless, it appears the Smith family of Illinois is making the occupation a little less expensive for the Cohen family of Petah Tikva.

According to a June 2010 fact sheet on the USAID Internet site, last year American taxpayers funded the paving of 63 kilometers of asphalt roads in the West Bank. It also says completion of a road in the southern part of the West Bank dramatically increased the amount of trade between Dahriya and Beer Sheva.

What the site doesn’t say is that a significant segment of the road goes through Area C – the 60 percent of the West Bank under exclusive Israeli civilian and military control and responsibility under the interim agreement of 1995 (the second Oslo agreement ). The agreement states: “Territorial jurisdiction includes land (and ) subsoil.”

This is not the only occupation-perpetuating road funded by American money. Dror Etkes, an expert on the settlements, noticed a few days ago USAID workers energetically laying asphalt on two roads in the Samaria region (northern West Bank ) that crosses Area C. Israelis haven’t been traveling these roads for years now because the taxpayer (in this case, the Israeli taxpayer ) has already paved separate, wide, modern roads for them.

Etkes wondered how it is possible that the Obama administration, which is vociferously opposed to the continuation of the status quo in the West Bank, continues to subsidize the road for Israel. “If the state of Israel is insisting on continuing to hold on and de facto annex the West Bank,” he says, “it should also be allocating the money needed to take care of the infrastructure.”

I asked an American official why the administration isn’t demanding of Israel that it fulfill its obligations and pay the price of the occupation out of its own pocket.

“Who told you we aren’t demanding that?” replied the official. “We are also demanding a construction freeze in the settlements and you know at least as well as anyone else what is happening on the ground.”

It is worth mentioning that the when the Palestinians sought permission to pave a short road in Area C to enable access to the planned town of Rawabi, Israel pulled out the Oslo accord and kicked them down the stairs. The USAID tractors don’t have access to the area either.

However, when it suits his interest, Prime Minister Benjamin Netanyahu is a stickler for Oslo. A few days ago he announced that unilaterally declaring a Palestinian state would be considered a violation of the agreement. Tomorrow, incidentally, will mark the eighth anniversary of Foreign Minister Netanyahu’s statement on Israel radio that “all the Oslo agreements are null and void.”

A USAID spokeswoman responded that the program’s infrastructure projects “respond to the needs of the Palestinian people and are implemented in response to requests from the Palestinian Authority. Many of the USAID funded projects cross from one area to another in accordance with the needs of the Palestinian communities and the specific project. There are roads and water pipelines that cross through Area C or are adjacent to Area C as designs require and agreements with Civil Authorities allow.”

No way home

The Oslo agreement, which is so close to Netanyahu’s heart, also states that both sides see “the West Bank and Gaza Strip territory as a single territorial unit.”

Nevertheless, since the outbreak of the second intifada, Israel has cut off almost entirely the connection between these two areas.

Security authorities make a point of expelling Gazans from the West Bank and they do not allow residents of Gaza to reunite with their families in the West Bank.

A year ago, in response to a petition to the High Court of Justice by the Hamoked Center for the Defense of the Individual, the State Prosecutor’s Office said the policy does not apply to individuals who took up residence in the West Bank before the year 2000 and “about whom there exists no negative security material.”

Be that as it may, during this past year a number of Palestinians have been expelled from the West Bank even though they arrived their prior to the cut-off date, and had no “negative security material” against them. Several have applied to Hamoked for help.

One of them, M.N., 29, went to Gaza in 2004 to participate in the mourning for his father. Since then he has been stuck and is in hiding from Hamas, which has issued an arrest warrant for him.

The coordinator of permits at the Coordination and Liaison Office in the Israel Defense Forces has recommended that M.N.’s request to return to the West Bank be granted. In the opinion appended to the recommendation, the aforementioned response by the prosecutor to the High Court of Justice is cited.

But the High Court of Justice is one thing and the reality is another. The Liaison Office’s legal adviser rejected the recommendation and wrote that it is necessary “to be strict about consistency, paying attention to the fact that approving the request might be a precedent for approving similar requests.” In another case handled by Hamoked, the adviser wrote that G.J. entered the West Bank in 2000 and should not be expelled under the guidelines. So why has G.J. been sent to Gaza and not allowed back in the West Bank?

“The aforementioned is a bachelor and he has no family connection in Judea and Samaria,” was the response. Truly an excellent reason. The time has come for him to find a bride in Ramallah and marry.

Akiva Eldar is the chief political columnist and an editorial writer for Haaretz. His columns also appear regularly in the Ha’aretz-Herald Tribune edition. In May 2006 The Financial Times selected him among the most prominent and influential commentators in the world, “whose comments inspire callers from across the political spectrum”.

Obama’s Bribe

Palestinians Will be the Losers … Again

By JONATHAN COOK

Counterpunch

Watching the peace process between Israel and the Palestinians drag on year after year without conclusion, it is easy to overlook the enormous changes that have taken place on the ground since the Oslo Accords were signed 17 years ago.

Each has undermined the Palestinians’ primary goal of achieving viable statehood, whether it is the near-trebling of Jewish settlers on Palestinian land to the current numbers of half a million, Israel’s increasing stranglehold on East Jerusalem, the wall that has effectively annexed large slices of the West Bank to Israel, or the splitting of the Palestinian national movement into rival camps following Israel’s withdrawal from Gaza in 2005.

Another setback of similar magnitude may be unfolding as Barack Obama dangles a lavish package of incentives in the face of Benjamin Netanyahu in an attempt to lure the Israeli prime minister into renewing a three-month, partial freeze on Jewish settlement construction in the West Bank.

The generosity of the US president’s package, which includes 20 combat aircraft worth $3 billion and backing for Israel’s continued military presence in the Jordan Valley after the declaration of a Palestinian state, has prompted even Thomas Friedman of The New York Times to compare it to a “bribe”.

Israeli officials said yesterday they were still waiting to see a text of the deal worked out between Netanyahu and the US secretary of state, Hillary Clinton, in seven hours of negotiations.

In addition to the concession in the Jordan Valley and the offer of combat jets that would effectively double the annual aid from the US, the deal is said to include a promise by Washington to veto for the next year any UN resolutions Israel opposes and to refrain, after borders have been agreed, from demanding any future limits on settlement growth.

The signs are that Netanyahu will be able to secure the backing of his right-wing cabinet for a brief settlement freeze that this time, the US has indicated, will not include East Jerusalem.

So far, in attempting to resolve the conflict, Obama has nearly exhausted his political capital. There were intimations this week that the White House could not afford further humiliation and was going for broke.

The timetable for negotiations now calls for reaching an agreement on borders within three months — the duration of the settlement construction freeze — followed by a final resolution of the conflict within a year or so.

Washington’s hopeful logic is that a renewal of the freeze will be unnecessary in three months because an agreement on borders will already have established whether a settlement is to be considered included in Israel’s territory and therefore permitted to expand or inside Palestine and therefore slated for destruction.

In a similarly optimistic vein, the US apparently expects the problem of refugees simply to dissolve through the creation of a special international fund to compensate them. The right of return appears to be off the table.

If these obstacles can be surmounted this way – a very big “if” – only one significant point of contention, the future of East Jerusalem, remains to be resolved.

This is where things get more awkward. The US is not proposing that the three-month freeze apply to East Jerusalem, after settlement-building there caused friction between Israel and the US during the last moratorium.

This concession and the outlines of a previous US peace proposal under president Bill Clinton hint at Washington’s most likely strategy. East Jerusalem will be divided, with the large settlement blocs, home to at least 200,000 Jews, handed over to Israel while the Old City and its holy places fall under a complicated shared sovereignty.

In the face of this intense US-Israeli diplomacy, Palestinians are dismayed. They have described the agreement between the US and Netanyahu as “deeply disappointing” and are demanding from the White House similarly generous inducements to ease their path back to negotiations. The Arab League, which has taken a prominent role in overseeing the Palestinian negotiations, has also objected to the deal.

The Palestinians fear they will be left with a patchwork of disconnected areas – what Israel has previously termed “bubbles” – as their capital.

If the Palestinian Authority president, Mahmoud Abbas, can be made to swallow all this, which seems highly improbable, he will then have to contend with Hamas, the rival Palestinian faction, which can be expected to do everything in its power to disrupt such an agreement.

And then there is Netanyahu. Few Israeli analysts think he has suddenly become more amenable to the US plans.

Neve Gordon, a politics professor at Ben Gurion University in the Negev and author of an important study of the occupation, believes the Israeli prime minister is simply playing the part demanded by Obama.

“He is taking the US ‘merchandise’ on offer, but will hold firm on key issues that guarantee the talks’ failure. That way he gets the credit for keeping the negotiations on track and lets the Palestinians take the blame for walking out.”

This sounds suspiciously like a re-run of the last proper peace talks, at Camp David in 2000. Then, Israeli intransigence stalled the negotiations, but Yasser Arafat, the Palestinian leader, was blamed by the US and Israel for their collapse.

The Camp David failure led to the outbreak of Palestinian violence, the second intifada, and the demise of the Israeli peace camp. Mr Netanyahu may be prepared to risk a repeat of both such outcomes from these talks if it means he can avoid making any real concessions on Palestinian statehood.

Jonathan Cook

Jonathan Cook is a writer and journalist based in Nazareth, Israel. His latest books are “Israel and the Clash of Civilisations: Iraq, Iran and the Plan to Remake the Middle East” (Pluto Press) and “Disappearing Palestine: Israel’s Experiments in Human Despair” (Zed Books). His website is www.jkcook.net.

Peter Schiff: "Of Course We're Not Going To Pay Back The Chinese"

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Bird Flu Outbreak in Hong Kong

AFP

HONG Kong is scrambling to contain an outbreak of bird flu after recording its first human case of the illness since 2003.

A 59-year-old woman now in a serious condition in hospital.

The government raised the teeming city's avian influenza alert level to "serious", meaning there is a "high risk" of contracting the potentially fatal disease, a spokesman for the Department of Health told AFP.

Hong Kong recorded its last human case of bird flu in 2003, and had the world's first major outbreak among humans in 1997, when six people died of a then-unknown mutation of the virus.

Millions of poultry were culled in the 1997 outbreak, and the city of seven million people gave a preview of the full-blown panic that struck when the deadly respiratory disease SARS emerged in 2003, killing about 300 people.

Read Full Article

Peter Schiff: Fed Waging War

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Terrorism Cash Cow

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Bill Clinton: Haiti’s Neo-Colonial Overlord



Ashley Smith is a featured speaker at a "Day of Outrage in Harlem" rally and march in support of the people of Haiti, on November 20. The theme of the protest is, "U.S. Out of Haiti – Clinton Out of Harlem."
"Clinton has betrayed all his humanitarian promises and failed to collect even a fraction of the promised $10 billion for reconstruction."
The corporate media portrays former President Bill Clinton as a great humanitarian friend of Haiti. The truth could not be more different. He has always supported policies in the interests of multinational corporations and the Haitian ruling class at the expense of the country’s workers, urban poor and peasantry.

After the 1991 coup that toppled Haitian President Jean Bertrand Aristide, Clinton as President did maintain relatively ineffective sanctions. But he violated his campaign promise and continued George Bush Sr.’s policy of jailing Haitian refugees in Guantanamo. He also pressured Aristide to adopt free market economic policies as the condition of restoring him to power in 1994.
Clinton succeeded in getting Aristide to moderate his program of social reform and drop tariffs on rice to the advantage of U.S. Agribusiness. He then compelled Aristide’s successor, Rene Preval, to further deregulate the economy successfully turning Haiti into the most free market economy in the Western Hemisphere, and consequently its poorest.

"Clinton pressured Aristide to adopt free market economic policies as the condition of restoring him to power in 1994."
Confronted with this evidence, he recently apologized for impoverishing the lives of peasant farmers in Haiti. But as always with Clinton, his rhetoric could not be more different than his policies. After the second U.S.-backed coup against Aristide in 2004, Clinton has worked with former World Bank employee Paul Collier, multinational corporations and the Haitian elite to impose another free-market plan on Haiti. While U.N. troops have occupied Haiti since 2004, Clinton and Collier toured the country promoting sweatshops, tourism, and export-oriented agriculture.

After the devastating January 2010 earthquake in Port au Prince, Clinton became co-chair of Interim Haiti Recovery Commission. He is now the country’s neo-colonial overlord. He has betrayed all his humanitarian promises and failed to collect even a fraction of the promised $10 billion for reconstruction. And his reconstruction plan is the same free market plan he has been touting since 2004. He is putting Haiti up for sale to multinational capital.
The last thing Haiti needs is more "help" from Bill Clinton and the U.S. Instead, the U.S. and other imperial powers including the U.N. should get out of Haiti and pay reparations so that Haitians can rebuild their country in their own interests.

Wright Patman’s Prescription for Healing the Cancerous U.S. Banking System

I am scared. We all are scared. Our Wall Street obedient leaders who claim they are struggling valiantly to “solve” the banking crisis seem to meander uncertainly and ideologically, while they spend unimaginable Trillions of Dollars of our public money. All of this is using public money that we have borrowed, and we worry how we and our children will ever repay it. We worry that the Bail Out will do nothing for us.

Forty five years ago in 1964, Wright Patman had answers and solutions for our banking problems which he left for us in his Congressional Reports, in transcripts of Congressional Hearings, and in his speeches in the Congressional Record.

Wright Patman was an extremely well qualified expert on our side. He was a lawyer, a former District Attorney, a former Representative in the Texas Legislature, and a long time Congressman. Wright Patman served as a Congressman from the North East corner of Texas for 47 years beginning in 1929 and ending in 1976. He was Chairman of the United States House Committee on Banking and Currency until 1975. He was an avid New Dealer. He served in Congress on the banking committee at the time of the 1929 Stock Market Crash, the Great Depression, the New Deal recovery efforts, financing World War II, and the post war boom period. Unlike current Representatives and Senators, he was not taken in by private Wall Street Banks for one second and he fought to expose Wall Street Banking evils and power.

Patman from his long experience with our banks provides evidence that Thomas Jefferson’s 1802 view of private banks was accurate:

I believe that banking institutions are more dangerous to our liberties than standing armies. If the American people ever allow private banks to control the issue of their currency, first by inflation, then by deflation, the banks and corporations that will grow up around the banks will deprive the people of all property until their children wake-up homeless on the continent their fathers conquered.

Luckily for us, Patman summarized his long experience with Wall Street Banking in his 50 page report, A Primer on Banking published by the U.S. Government Printing Office in 1964. It was his gift for us, his warnings, and his suggested reforms that are very relevant today even though our banking problem has gotten many times worse.

WHO CREATES MONEY IN THE UNITED STATES?

Patman approvingly quoted Lincoln who said:

Money is the creature of law, and the creation of the original issue of money should be maintained as the exclusive monopoly of the National Government. The privilege of creating and issuing money is not only the supreme prerogative of Government, it is the Government’s greatest opportunity.

Our Constitution provides that Congress shall have the power “To coin money and regulate the value thereof.”

Unfortunately, under heavy lobbying by private bankers, Congress delegated the power to create money to a private group of bankers with the 1913 Federal Reserve Act and its 1934-35 Amendments. About this, Patman said:

In the US today, we have in effect two governments. We have the duly constituted government, then we have an independent, uncontrolled and uncoordinated government in the Federal Reserve, operating the money powers which are reserved to congress by the Constitution.

We still have two such governments today in 2009. We have

1. Our “We the People” Constitutional government of by and for the people. Our governmental powers are exercised for us by our elected representatives.

2. A government by a private oligarchy of 12 bankers which creates our money, regulates the amount in circulation, regulates the interest rate at which money shall be loaned to us, to businesses and to our government, whose sole legal obligation is to make as much profit for bankers as possible.

What is wrong with this?

It gives this tiny private bankers’ oligarchy dominant control over our government, our economy, our level of well being. The oligarchy can refuse to finance reforms and programs enacted by our constitutional government. The oligarchy can and does lobby congress extensively; it finances the re-election of those who favor it, and finances opponents of those who vote against its wishes.

Patman quotes a once famous British Chancellor of the Exchequer who said of private banks:

“They control the credit of the nation, direct the policy of the governments, and hold in their hands the destiny of the people.”

This mirrors the statement attributed to the legendary European banker Amschel Mayer Rothschild who allegedly said in 1838: “Permit me to issue and control the money of a nation, and I care not who makes its laws.”

This oligarchy in effect plans our economy, not to benefit us or our general welfare, but to earn the maximum private profit for them. Thus, for example, we can get health coverage for everyone only if it we pay 31 cents of every health care dollar for interest on loans, HMO profits and CEO salaries and bonuses. We cannot have Single Payer health coverage financed by the government by progressive income taxes.

It is undemocratic. These 12 bankers are responsible to no one. They are appointed every 12 years by the then sitting President on staggered terms. The law compels that the appointees be selected from a pool of bankers, and thus no appointees representing labor, the consumer, the voter or academic experts can be selected. The Accounting and Auditing Act of 1950 section, 31 USC 714(b), dictated that congressional audits of the Federal Reserve may not include “deliberations, decisions and actions on monetary policy matters.”1 According to the law, in other words, the Fed simply cannot be audited by Congress. We apparently can not find out the actual profits of the Fed.

The oligarchy by increasing the amount of money in circulation can cause inflation. By decreasing the amount it can cause a recession and leave millions jobless. It can cause “bubbles,” and it can also cause depressions, whichever will earn the maximum profit for them.

Patman summarizes it this way:

What may appear, then, to be a simple decision to rein in the money supply and raise interest rates is, in fact, a simultaneous decision about the whole range of economic life—the prices people pay, the incomes they earn, the level of prosperity and the dynamic thrust of the economy is permitted to develop. The fallout extends even further. As interest rates rise, a transfer of income also takes place—to the large holders of liquid assets and the large financial institutions. It is no accident that rising interest rates are accompanied by a boom in the market for the stocks of banks and life insurance companies. The major owners of these institutions—certainly concentrated among a tiny minority of families in the United States—receive gratuitous additions to their personal wealth as the value of their stock increases. This only reflects the fact that there has been a shift of income away from interest payers—all of us in our role as consumers—toward the substantial interest receivers—only a relative handful.

WHAT IS MONEY?

Patman has a very clear and accurate concept of money. Money is not real wealth; it is only a claim to wealth. While barter can be useful, it is far more convenient to have a medium of exchange that people agree has value. This need not be gold and it need not be any substance of real value. It can be shells, beads, notched sticks or printed paper greenbacks. The selected medium of exchange must be backed by the law and the courts in that it must be legally acceptable in full payment of debts and taxes. It adds to its stature to have it backed by a government guarantee and to have a tax system in place so that the government can make good on its guarantee if necessary. There are many advantages if the government is the sole creator of money. Letting private bankers create money creates a lot of problems, particularly if banks are not regulated.

HOW IS MONEY CREATED?

A government, whether a royal monarchy or a democracy, can simply print and issue greenbacks, or give recipients a government check. The government would incur no debt to anybody if this method were used, and if interest was to be charged, the government would get the interest. Our Constitution authorizes this method for us.

Under the exclusive franchise to manufacture money that we have delegated to the 12 bankers, these private bankers can simply “write a check” with absolutely nothing to back it up. They can create money out of thin air, loan it to us, to businesses, and to our government, and make a private profit from the interest charged. This private money manufacturing process is backed by our law that makes this money legal tender, and it is guaranteed by our government and hence by us taxpayers. It is magic money making scheme that makes private bankers wealthy beyond imagination. It is far better than all the casinos on the planet for making money. Patman did not use this description, but it is in fact a massive fraud on the public in that banks are loaning money that they do not have.

Bankers and their controlled mainstream media do not like to reveal their lucrative secret. As Patman says:

…some of those who do understand the workings of our monetary system seem to feel they are in possession of secrets which cannot be safely revealed to the public…..For this reason, it has been traditional for bankers and other private managers of money to cloak the working of the money system with a mantle of secrecy…..These officials seem very partial to the turns of phrase that imply that the supply of money—and interest rates—are subject to powerful economic laws over which men have no control.

Patman lays out the workings of this private money making franchise in a way that we all can understand.

It all began with the gold smiths of the late middle ages who held gold for wealthy persons who did not wish burden or the risk of carrying it around. The gold smiths issued receipts for the gold. People found it convenient to use these receipts as a medium of exchange rather than withdrawing gold, paying it to the creditor, with the creditor then depositing the gold with the gold smith. The gold smiths made loans based on their deposits. Then, since depositors rarely came at one time to withdraw the gold, they began to make loans of up to 10 times the amount of the actual gold on deposit. Nobody was any the wiser and the gold smiths got very rich. The gold smiths were creating money, ten times the amount of money they had on deposit. Banks now do the same thing. It is called “fractionalized reserve banking.” They loan a lot more than they have on deposit. What they have on “deposit” and call an “asset” for the purposes of the ratio will surprise you.

In 1964, there were at least 2 components of our money supply in circulation:

20 % was Coins and dollar bills minted and created by the U.S. Mint

80% was “Check book money” being money created by private commercial banks and by the private Fed simply by writing a check

“In 2005, the check book money, now generated by computer entries and not actual checks, was calculated to be 97.6% of our money supply. (Money as Debt, Helen Hodgson Brown, 2008, Third Millenium Press, Baton Rouge, page 26)”

Supposing a local bank had loan applications, but had no money. Where would it get it to loan? The local bank would borrow money from the Fed. Patman used $1,000 as a ridiculously low example simply for purposes of explanation. So the local bank borrows $1000 from the Fed. Where does the Fed get the money? It simply writes a check for it, although the Fed has no reserve deposit. “It creates money purely and simply by writing a check.”

In addition to the magic power to write a check out of thin air, there is a magic multiplier:

Each loan that a bank makes is considered a new addition to its “reserve” for the purpose of calculating the fractional reserve ratio. Thus it can loan 90% of the first $1000 loan or $900 to a second borrower, and 90% of that or $810 to a third borrower and continuing until it has loans outstanding of 10 times the $1000 created out of thin air or $10,000 drawing interest to profit the bank and its shareholders.

When we consider the Trillions of Dollars of debt now owed to private bankers, it becomes clear that Wall Street and its banks are collecting huge sums in interest. This magic process creates unimaginable hidden wealth for banks and their shareholders.

There is always a danger that frightened cash depositors will gang up on a bank and demand the withdrawal of their cash deposits. The Fed stands ready as the “banker’s bank” to make loans to the besieged bank to meet the threat. So long as the threat is local and confined, the whole magic system continues to function and to earn profit for the bankers.

WHAT CAN WE LEARN FROM PATMAN THAT WOULD HELP TODAY?

Since Patman wrote his Primer in 1964, the powers and activities of banks have compounded the wealth generated for the bankers and their shareholders. This is due to de-regulation, relaxed regulation, and the repeal of the Glass Steagall Act so as to permit banks to venture outside mere money lending. Banks could now invest in new ventures, invest in the stock and futures markets, in hedge funds, in various collateralized debt obligations, all with the sole legal imperative that they make profit for their shareholders. They still had no legal obligation to serve the public interest. While it lasted, this bubble made bank shareholders very wealthy. This tiny group of wealthy individuals uses its wealth to enhance its political power over elected officials. As we see from recent Bail Out events, this power over our government has become dominant. The powers of our government have been captured and used solely to benefit this tiny group, the top 1% of the wealthiest people in our nation.

Despite this vast mushrooming, Patman’s analysis of the underlying banking dynamics remains accurate and his remedies even more effective. Patman would recommend:

1. That the Federal Reserve Act be repealed and the legitimate functions of the Fed be made a division of the Treasury Department.
2. That the U.S. Government be the sole “coiner” of money and that it simply issue Greenbacks as needed to make the economy flourish, and to pay for public projects.
3. That fractionalized reserve banking be abolished. Local banks would be permitted to loan only on a 1 to 1 ratio of what they had on deposit and then only for a low rate of interest.
4. That local Banks be regulated again.

These reforms would halt the cancerous existing practice where all money rests on somebody’s debt. This would stop the endless U.S. policy of borrowing ever more money from the private banks and from foreign nations. We and our grandchildren would not have to pay off a crushing national debt. Our dollar would not be inflated.

We could finance our recovery from this depression. We could avoid going into an even deeper depression. Our local banks and businesses would function as they now do, but in a stable sustainable way. If the money supply of the U.S. was stabilized, it could lead to the U.S. dollar again becoming the world’s currency standard, the planet’s stable reserve currency. Lincoln’s “greatest opportunity” for our government would be realized.

President Reagan’s Assistant Secretary of the Treasury, Republican Paul Craig Roberts seems to agree with Democrat Wright Patman. In Counterpunch on 3-26-09 in an article entitled, “Is the Bail Out Breeding a Bigger Crisis,” Roberts wrote:

Could this huge debt issue be avoided if the government took over the banks and netted out the losses between the constituent parts? A staid socialized financial sector run by civil servants is preferable to the gambling casino of greed-driven, innovative, unregulated capitalism operated by banksters who have caused crisis throughout the world.

Perhaps the Federal Reserve should be socialized as well. The notion of an independent, privately-owned Federal Reserve system was never more than a ruse to get a national bank into place. Once the central bank is part of the state-owned banking system, the government can create money without having to accumulate a public debt that saddles taxpayers and future budgets with hundreds of billions of dollars in annual interest payments.

There is one startling difference between what Wall Street banks wanted in Patman’s day and what they want now. Wall Street banks used to be overly concerned about inflation of their dollars. Our market economy was then fairly stable and the wealthy wanted the purchasing power of their dollars preserved. They restricted the creation of money and raised interest rates, a “tight money” policy. Now, strangely enough, Wall Street is going all out to inflate dollars beyond measure. This must mean that Wall Street has secretly given up on our market economy, and now seeks to siphon off as many dollars as it can as quickly as it can. The wealthy can then invest their dollars in land, gold, silver, platinum, oil reserves, and in gated castles for themselves. They can thus reduce those of us who survive to the level of feudal serfdom where we eke out an existence by working their land.

Wall Street’s plan to rescue itself is a covert class war by the top 1% against the rest of us. Wall Street seeks to solve the problem of the huge public debt to China by inflating the dollar so that each of our dollars buys less and less. This will put us into poverty. China is well aware of this Wall Street strategy which involves cheating China also. China would be repaid with inflated dollars that will buy less and less. Strangely enough, we have a common interest with China in stopping this sly anti-social Wall Street scheme.

« Get A Rare Look Inside The Actual U.S. Treasury Auction Room - Where The $14T National Debt Goes For Love »

Video: CBS Evening News special report from Thursday night...

Solid clip that includes debt and deficit totals for every president since Reagan.

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From CBS - Debt and Deficits

The Treasury Auction room is the control center for government borrowing. CBS News Senior Business Correspondent Anthony Mason has been one of a few outsiders ever allowed inside.

"That room is essentially the American credit card machine. It's basically selling treasury bills, basically IOUs that we use to pay off the money that we are borrowing," Mason says. "I found that room kind of spooky. If we can't issue those IOU's - which keeps the government running on a day-to-day basis - then we can't run the country anymore. We don't have the money."

In the 1983 State of the Union speech, President Ronald Reagan said, "the deficit problem is a clear and present danger to the basic health of our republic." At that point the deficit was $207 billion. The national debt was $1.4 trillion.

The government will collect $2.3 trillion in taxes this year. That's well short of the $3.6 trillion it will spend. Fifty-five percent of that spending will go to mandatory expenses like social security, Medicare and Medicaid; 43 percent is called discretionary spending. That's money Congress controls and allocates to more than two dozen government departments. Two percent of the budget goes to Congressional pet-projects or earmarks.

"This government is too big and spends too much," President Bush said at the 1992 State of the Union address. At that time the deficit was $290 billion. The national debt was $4 trillion.

In the 1995 State of the Union address, President Clinton said, "Should we cut the deficit more? Well, of course we should. Of course we should." The deficit was $164 billion then, with the national debt at $4.9 trillion.

"Together we can restrain the spending appetite of the federal government, and we can balance the federal budget," President George W. Bush said in his 2007 State of the Union Address. The deficit was $160 billion at that point, with the national debt running at $8.9 trillion.

"We will work within a budget to invest in what we need and sacrifice what we don't," President Obama said in his 2010 State of the Union Address. The deficit is now $1.5 trillion, and the national debt is $13.8 trillion.

Continue reading at CBS...