1930s depression in sight

Daily Telegraph

BIS warns of Great Depression dangers from credit
spree

By Ambrose Evans-Pritchard

Last Updated: 9:02am BST 25/06/2007

The Bank for International Settlements, the world's
most prestigious financial body, has warned that years
of loose monetary policy has fuelled a dangerous
credit bubble, leaving the global economy more
vulnerable to another 1930s-style slump than generally
understood.

"Virtually nobody foresaw the Great Depression of the
1930s, or the crises which affected Japan and
Southeast Asia in the early and late 1990s. In fact,
each downturn was preceded by a period of
non-inflationary growth exuberant enough to lead many
commentators to suggest that a 'new era' had arrived",
said the bank.

The BIS, the ultimate bank of central bankers, pointed
to a confluence a worrying signs, citing mass issuance
of new-fangled credit instruments, soaring levels of
household debt, extreme appetite for risk shown by
investors, and entrenched imbalances in the world
currency system.

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"Behind each set of concerns lurks the common factor
of highly accommodating financial conditions. Tail
events affecting the global economy might at some
point have much higher costs than is commonly
supposed," it said.

The BIS said China may have repeated the disastrous
errors made by Japan in the 1980s when Tokyo let rip
with excess liquidity.

"The Chinese economy seems to be demonstrating very
similar, disquieting symptoms," it said, citing
ballooning credit, an asset boom, and "massive
investments" in heavy industry.

Some 40pc of China's state-owned enterprises are
loss-making, exposing the banking system to likely
stress in a downturn.

It said China's growth was "unstable, unbalance,
uncoordinated and unsustainable", borrowing a line
from Chinese premier Wen Jiabao

In a thinly-veiled rebuke to the US Federal Reserve,
the BIS said central banks were starting to doubt the
wisdom of letting asset bubbles build up on the
assumption that they could safely be "cleaned up"
afterwards - which was more or less the strategy
pursued by former Fed chief Alan Greenspan after the
dotcom bust.

It said this approach had failed in the US in 1930 and
in Japan in 1991 because excess debt and investment
build up in the boom years had suffocating effects.

While cutting interest rates in such a crisis may
help, it has the effect of transferring wealth from
creditors to debtors and "sowing the seeds for more
serious problems further ahead."

The bank said it was far from clear whether the US
would be able to shrug off the consequences of its
latest imbalances, citing a current account deficit
running at 6.5pc of GDP, a rise in US external
liabilities by over $4 trillion from 2001 to 2005, and
an unprecedented drop in the savings rate. "The dollar
clearly remains vulnerable to a sudden loss of private
sector confidence," it said.

The BIS said last year's record issuance of $470bn in
collateralized debt obligations (CDO), and a further
$524bn in "synthetic" CDOs had effectively opened the
lending taps even further. "Mortgage credit has become
more available and on easier terms to borrowers almost
everywhere. Only in recent months has the downside
become more apparent," it said.

CDO's are bond-like packages of mortgages and other
forms of debt. The BIS said banks transfer the
exposure to buyers of the securities, giving them
little incentive to assess risk or carry out due
diligence.

Mergers and takeovers reached $4.1 trillion worldwide
last year.

Leveraged buy-outs touched $753bn, with an average
debt/cash flow ratio hitting a record 5.4.

"Sooner or later the credit cycle will turn and
default rates will begin to rise," said the bank.

"The levels of leverage employed in private equity
transactions have raised questions about their
longer-term sustainability. The strategy depends on
the availability of cheap funding," it said.

That may not last much longer.

bukovsky warns of european dictatorship

Published on The Brussels Journal
(http://www.brusselsjournal.com)

Former Soviet Dissident Warns For EU Dictatorship

By Paul Belien

Created 2006-02-27 22:13

Bukovsky and Belien

Vladimir Bukovksy, the 63-year old former Soviet
dissident, fears that the European Union is on its way
to becoming another Soviet Union. In a speech he
delivered in Brussels last week Mr Bukovsky called the
EU a “monster” that must be destroyed, the sooner the
better, before it develops into a fullfledged
totalitarian state.

Mr Bukovsky paid a visit to the European Parliament on
Thursday at the invitation of Fidesz, the Hungarian
Civic Forum. Fidesz, a member of the European
Christian Democrat group, had invited the former
Soviet dissident over from England, where he lives, on
the occasion of this year’s 50th anniversary of the
1956 Hungarian Uprising. After his morning meeting
with the Hungarians, Mr Bukovsky gave an afternoon
speech in a Polish restaurant in the Trier straat,
opposite the European Parliament, where he spoke at
the invitation of the United Kingdom Independence
Party, of which he is a patron.


An interview with Vladimir Bukovsky about the
impending EUSSRIn his speech Mr Bukovsky referred to
confidential documents from secret Soviet files which
he was allowed to read in 1992. These documents
confirm the existence of a “conspiracy” to turn the
European Union into a socialist organization. I
attended the meeting and taped the speech. A
transcript, as well as the audio fragment (approx. 15
minutes) can be found below. I also had a brief
interview with Mr Bukovsky (4 minutes), a transcript
and audio fragment of which can also be found below.
The interview about the European Union had to be cut
short because Mr Bukovsky had other engagements, but
it brought back some memories to me, as I had
interviewed Vladimir Bukovsky twenty years ago, in
1986, when the Soviet Union, the first monster that he
so valiantly fought, was still alive and thriving.

Mr Bukovsky was one of the heroes of the 20th century.
As a young man he exposed the use of psychiatric
imprisonment against political prisoners in the former
USSR (Union of Soviet Socialist Republics, 1917-1991)
and spent a total of twelve years (1964-1976), from
his 22nd to his 34th year, in Soviet jails, labour
camps and psychiatric institutions. In 1976 the
Soviets expelled him to the West. In 1992 he was
invited by the Russian government to serve as an
expert testifying at the trial conducted to determine
whether the Soviet Communist Party had been a criminal
institution. To prepare for his testimony Mr Bukovsky
was granted access to a large number of documents from
Soviet secret archives. He is one of the few people
ever to have seen these documents because they are
still classified. Using a small handheld scanner and a
laptop computer, however, he managed to copy many
documents (some with high security clearance),
including KGB reports to the Soviet government.

An interview with Vladimir Bukovsky
Listen to it here

Paul Belien: You were a very famous Soviet dissident
and now you are drawing a parallel between the
European Union and the Soviet Union. Can you explain
this?

Vladimir Bukovsky: I am referrring to structures, to
certain ideologies being instilled, to the plans, the
direction, the inevitable expansion, the obliteration
of nations, which was the purpose of the Soviet Union.
Most people do not understand this. They do not know
it, but we do because we were raised in the Soviet
Union where we had to study the Soviet ideology in
school and at university. The ultimate purpose of the
Soviet Union was to create a new historic entity, the
Soviet people, all around the globe. The same is true
in the EU today. They are trying to create a new
people. They call this people “Europeans”, whatever
that means.

According to Communist doctrine as well as to many
forms of Socialist thinking, the state, the national
state, is supposed to wither away. In Russia, however,
the opposite happened. Instead of withering away the
Soviet state became a very powerful state, but the
nationalities were obliterated. But when the time of
the Soviet collapse came these suppressed feelings of
national identity came bouncing back and they nearly
destroyed the country. It was so frightening.

PB: Do you think the same thing can happen when the
European Union collapses?

VB: Absolutely, you can press a spring only that much,
and the human psyche is very resilient you know. You
can press it, you can press it, but don’t forget it is
still accumulating a power to rebound. It is like a
spring and it always goes to overshoot.

PB: But all these countries that joined the European
Union did so voluntarily.

VB: No, they did not. Look at Denmark which voted
against the Maastricht treaty twice. Look at Ireland
[which voted against the Nice treaty]. Look at many
other countries, they are under enormous pressure. It
is almost blackmail. Switzerland was forced to vote
five times in a referendum. All five times they have
rejected it, but who knows what will happen the sixth
time, the seventh time. It is always the same thing.
It is a trick for idiots. The people have to vote in
referendums until the people vote the way that is
wanted. Then they have to stop voting. Why stop? Let
us continue voting. The European Union is what
Americans would call a shotgun marriage.

PB: What do you think young people should do about the
European Union? What should they insist on, to
democratize the institution or just abolish it?

VB: I think that the European Union, like the Soviet
Union, cannot be democratized. Gorbachev tried to
democratize it and it blew up. This kind of structures
cannot be democratized.

PB: But we have a European Parliament which is chosen
by the people.

VB: The European Parliament is elected on the basis of
proportional representation, which is not true
representation. And what does it vote on? The
percentage of fat in yoghurt, that kind of thing. It
is ridiculous. It is given the task of the Supreme
Soviet. The average MP can speak for six minutes per
year in the Chamber. That is not a real parliament.

Transcript of Mr Bukovsky’s Brussels speech
Listen to it here

In 1992 I had unprecedented access to Politburo and
Central Committee secret documents which have been
classified, and still are even now, for 30 years.
These documents show very clearly that the whole idea
of turning the European common market into a federal
state was agreed between the left-wing parties of
Europe and Moscow as a joint project which [Soviet
leader Mikhail] Gorbachev in 1988-89 called our
“common European home.”

The idea was very simple. It first came up in 1985-86,
when the Italian Communists visited Gorbachev,
followed by the German Social-Democrats. They all
complained that the changes in the world, particularly
after [British Prime Minister Margaret] Thatcher
introduced privatisation and economic liberalisation,
were threatening to wipe out the achievement (as they
called it) of generations of Socialists and
Social-Democrats – threatening to reverse it
completely. Therefore the only way to withstand this
onslaught of wild capitalism (as they called it) was
to try to introduce the same socialist goals in all
countries at once. Prior to that, the left-wing
parties and the Soviet Union had opposed European
integration very much because they perceived it as a
means to block their socialist goals. From 1985
onwards they completely changed their view. The
Soviets came to a conclusion and to an agreement with
the left-wing parties that if they worked together
they could hijack the whole European project and turn
it upside down. Instead of an open market they would
turn it into a federal state.

According to the [secret Soviet] documents, 1985-86 is
the turning point. I have published most of these
documents. You might even find them on the internet.
But the conversations they had are really eye opening.
For the first time you understand that there is a
conspiracy – quite understandable for them, as they
were trying to save their political hides. In the East
the Soviets needed a change of relations with Europe
because they were entering a protracted and very deep
structural crisis; in the West the left-wing parties
were afraid of being wiped out and losing their
influence and prestige. So it was a conspiracy, quite
openly made by them, agreed upon, and worked out.

In January of 1989, for example, a delegation of the
Trilateral Commission came to see Gorbachev. It
included [former Japanese Prime Minister Yasuhiro]
Nakasone, [former French President Valéry] Giscard
d’Estaing, [American banker David] Rockefeller and
[former US Secretary of State Henry] Kissinger. They
had a very nice conversation where they tried to
explain to Gorbachev that Soviet Russia had to
integrate into the financial institutions of the
world, such as Gatt, the IMF and the World Bank.

In the middle of it Giscard d’Estaing suddenly takes
the floor and says: “Mr President, I cannot tell you
exactly when it will happen – probably within 15 years
– but Europe is going to be a federal state and you
have to prepare yourself for that. You have to work
out with us, and the European leaders, how you would
react to that, how would you allow the other
Easteuropean countries to interact with it or how to
become a part of it, you have to be prepared.”

This was January 1989, at a time when the [1992]
Maastricht treaty had not even been drafted. How the
hell did Giscard d’Estaing know what was going to
happen in 15 years time? And surprise, surprise, how
did he become the author of the European constitution
[in 2002-03]? A very good question. It does smell of
conspiracy, doesn’t it?

Luckily for us the Soviet part of this conspiracy
collapsed earlier and it did not reach the point where
Moscow could influence the course of events. But the
original idea was to have what they called a
convergency, whereby the Soviet Union would mellow
somewhat and become more social-democratic, while
Western Europe would become social-democratic and
socialist. Then there will be convergency. The
structures have to fit each other. This is why the
structures of the European Union were initially built
with the purpose of fitting into the Soviet structure.
This is why they are so similar in functioning and in
structure.

It is no accident that the European Parliament, for
example, reminds me of the Supreme Soviet. It looks
like the Supreme Soviet because it was designed like
it. Similary, when you look at the European Commission
it looks like the Politburo. I mean it does so
exactly, except for the fact that the Commission now
has 25 members and the Politburo usually had 13 or 15
members. Apart from that they are exactly the same,
unaccountable to anyone, not directly elected by
anyone at all. When you look into all this bizarre
activity of the European Union with its 80,000 pages
of regulations it looks like Gosplan. We used to have
an organisation which was planning everything in the
economy, to the last nut and bolt, five years in
advance. Exactly the same thing is happening in the
EU. When you look at the type of EU corruption, it is
exactly the Soviet type of corruption, going from top
to bottom rather than going from bottom to top.

If you go through all the structures and features of
this emerging European monster you will notice that it
more and more resembles the Soviet Union. Of course,
it is a milder version of the Soviet Union. Please, do
not misunderstand me. I am not saying that it has a
Gulag. It has no KGB – not yet – but I am very
carefully watching such structures as Europol for
example. That really worries me a lot because this
organisation will probably have powers bigger than
those of the KGB. They will have diplomatic immunity.
Can you imagine a KGB with diplomatic immunity? They
will have to police us on 32 kinds of crimes – two of
which are particularly worrying, one is called racism,
another is called xenophobia. No criminal court on
earth defines anything like this as a crime [this is
not entirely true, as Belgium already does so – pb].
So it is a new crime, and we have already been warned.
Someone from the British government told us that those
who object to uncontrolled immigration from the Third
World will be regarded as racist and those who oppose
further European integration will be regarded as
xenophobes. I think Patricia Hewitt said this
publicly.

Hence, we have now been warned. Meanwhile they are
introducing more and more ideology. The Soviet Union
used to be a state run by ideology. Today’s ideology
of the European Union is social-democratic, statist,
and a big part of it is also political correctness. I
watch very carefully how political correctness spreads
and becomes an oppressive ideology, not to mention the
fact that they forbid smoking almost everywhere now.
Look at this persecution of people like the Swedish
pastor who was persecuted for several months because
he said that the Bible does not approve homosexuality.
France passed the same law of hate speech concerning
gays. Britain is passing hate speech laws concerning
race relations and now religious speech, and so on and
so forth. What you observe, taken into perspective, is
a systematic introduction of ideology which could
later be enforced with oppressive measures. Apparently
that is the whole purpose of Europol. Otherwise why do
we need it? To me Europol looks very suspicious. I
watch very carefully who is persecuted for what and
what is happening, because that is one field in which
I am an expert. I know how Gulags spring up.

It looks like we are living in a period of rapid,
systematic and very consistent dismantlement of
democracy. Look at this Legislative and Regulatory
Reform Bill. It makes ministers into legislators who
can introduce new laws without bothering to tell
Parliament or anyone. My immediate reaction is why do
we need it? Britain survived two world wars, the war
with Napoleon, the Spanish Armada, not to mention the
Cold War, when we were told at any moment we might
have a nuclear world war, without any need for
introducing this kind legislation, without the need
for suspending our civil liberaties and introducing
emergency powers. Why do we need it right now? This
can make a dictatorship out of your country in no
time.

Today’s situation is really grim. Major political
parties have been completely taken in by the new EU
project. None of them really opposes it. They have
become very corrupt. Who is going to defend our
freedoms? It looks like we are heading towards some
kind of collapse, some kind of crisis. The most likely
outcome is that there will be an economic collapse in
Europe, which in due time is bound to happen with this
growth of expenses and taxes. The inability to create
a competitive environment, the overregulation of the
economy, the bureaucratisation, it is going to lead to
economic collapse. Particularly the introduction of
the euro was a crazy idea. Currency is not supposed to
be political.

I have no doubt about it. There will be a collapse of
the European Union pretty much like the Soviet Union
collapsed. But do not forget that when these things
collapse they leave such devastation that it takes a
generation to recover. Just think what will happen if
it comes to an economic crisis. The recrimination
between nations will be huge. It might come to blows.
Look to the huge number of immigrants from Third World
countries now living in Europe. This was promoted by
the European Union. What will happen with them if
there is an economic collapse? We will probably have,
like in the Soviet Union at the end, so much ethnic
strife that the mind boggles. In no other country were
there such ethnic tensions as in the Soviet Union,
except probably in Yugoslavia. So that is exactly what
will happen here, too. We have to be prepared for
that. This huge edifice of bureaucracy is going to
collapse on our heads.

This is why, and I am very frank about it, the sooner
we finish with the EU the better. The sooner it
collapses the less damage it will have done to us and
to other countries. But we have to be quick because
the Eurocrats are moving very fast. It will be
difficult to defeat them. Today it is still simple. If
one million people march on Brussels today these guys
will run away to the Bahamas. If tomorrow half of the
British population refuses to pay its taxes, nothing
will happen and no-one will go to jail. Today you can
still do that. But I do not know what the situation
will be tomorrow with a fully fledged Europol staffed
by former Stasi or Securitate officers. Anything may
happen.

We are losing time. We have to defeat them. We have to
sit and think, work out a strategy in the shortest
possible way to achieve maximum effect. Otherwise it
will be too late. So what should I say? My conclusion
is not optimistic. So far, despite the fact that we do
have some anti-EU forces in almost every country, it
is not enough. We are losing and we are wasting time.

More on this topic, see:

Czech President Warns Against Europeanism, 27 August
2005

Source URL:
http://www.brusselsjournal.com/node/865