behind grillo: bilderberg, aspen institute & amcham

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http://www.presstv.ir/detail/2013/02/21/290090/italy-risks-new-round-of-destabilization/

Berlusconi targeted, overthrown by CIA?

Webster G. Tarpley
Feb 21, 2013

This coming Sunday and Monday, Italians will go to the polls to choose a new parliament and thus a new prime minister, while setting the stage for the election of a new president of the republic shortly thereafter.

Most indications are that the most numerous faction in the coming parliament, with just over one third of the votes, will be the Common Good coalition, composed of the Democratic Party (the remains of the old Italian Communist Party), the Left Ecology Freedom movement of Nichi Vendola, which includes various paleocommunists, and some smaller forces. This coalition is led by Pier Luigi Bersani, a colorless bureaucrat. Ironically, despite its leftist rhetoric, the Common Good is the formation most likely to continue the austerity policies which are currently tearing Italy apart.

Coming in second with almost 30% should be the center-right coalition around the People of Freedom, the party of the irrepressible former prime minister, Silvio Berlusconi, joined by the Northern League of Umberto Bossi, a xenophobic group which also articulates the resentments of northern Italy against the south, the Mezzogiorno.

Another important leader is Giulio Tremonti, the former Minister of Economics and Finance. Berlusconi, a wealthy businessman and three-time prime minister, was most recently in power from 2008 to November 2011. Berlusconi’s fall had been prepared through a series of lurid revelations about his personal life, including an attack by the CIA document dump known as Wikileaks. Berlusconi’s second-place status represents a remarkable comeback, and the last polls show him closing on Bersani.

Third place with almost 20% is likely to belong to a new and unorthodox political formation, the Five Star Movement (5SM), where the dominant personality is the former Genoese comedian Beppe Grillo, a colorful and talented demagogue. The 5SM is anti-politician, anti-euro, anti-infrastructure, anti-tax, and anti-mainstream media. Like the GOP, they want to reduce the public debt, meaning they want deflation. Grillo proposes a guaranteed annual income for all Italians, a 30-hour work week, and a drastic reduction of energy consumption and of production. He demands free Wi-Fi for all. Without modern production, how can these benefits be provided?

Grillo wants to abort the infrastructure projects - like the new high-speed train tunnel between Turin and France and the bridge between Calabria and Sicily - upon which Italy’s economic future depends. He is long on petty bourgeois process reforms like term limits, media reform, corporate governance, and banning convicted felons from parliament, but short on defending the standard of living for working people. On a bizarre note, he has praised the British response to the 2008 banking crisis. As many as 100 members of the 5SM, many of them total political novices, and more than a few adventurers who have jumped on board Grillo’s bandwagon, may now enter parliament, with predictably destabilizing consequences. Grillo could be the vehicle for an Italian color revolution along the lines of Ukraine or Georgia.

In fourth place, with less than 10%, is expected to be the current prime minister of Italy, Mario Monti, a former eurocrat of the Brussels Commission who has led a brutal technocratic austerity regime since coming to power in November 2011 through a coup d’état sponsored by the International Monetary Fund and European Central Bank, and executed by Italian President Giorgio Napolitano with help from Mario Draghi at the European Central Bank.

Both Monti and Draghi are former employees of Goldman Sachs, the widely hated zombie bank. When Monti seized power, he was widely acclaimed as a savior and enjoyed an approval rating of 70%; his approval has now fallen to about 30%. Like Gorbachev, he is unpopular at home but remains the darling of foreign leaders. Even the London Financial Times is bearish on Monti, accusing him of starting his austerity regime when Italy was already in recession.

Among the also-rans are Civic Revolution of Antonio Ingroia, a merger of the Greens with Antonio Di Pietro’s anti-corruption forces left over from the “Clean Hands” movement of the early 1990s, which targeted politicians but did very little to attack the larger corruption of the Bank of Italy and the big banks.

Another smaller list is Stop the Decline, led by the strange Oscar Giannino, backed up by a clique of US-educated professors of neo-liberal austerity economics. This list was paid to poach votes from Berlusconi. But now Giannino has been hit with a scandal based on his false claim of holding a master’s degree from a Chicago university.

The Italian political landscape is extremely fragmented, so public opinion polls - which cannot by law be published after February 8 - are more than usually unreliable. Under the Italian system, the political force which comes in first gets 54% of the seats in the lower house. Multi-party coalitions must get 10% to enter parliament. If the 10% is not achieved, the individual parties fall back under the rule which prescribes that parties not in a coalition must get 4% to win seats.

Italian politics, which for many decades after World War II had eight parties, has undergone massive Weimarization, especially since Monti’s coup. There are now no fewer than 25 political parties or organizations. This time around, there are four new parties, including those of Monti and Grillo. Two parties, including one led by Gianfranco Fini, the president of the Chamber of Deputies, and another by former Defense Minister Ignazio LaRussa, have split from Berlusconi. Two parties have also split from the Democratic Party, including the libertarian Radicals of Marco Pannella and Emma Bonino.

Banks hope for Bersani-Monti regime to continue austerity

The banking community, as represented by Mediobanca and others, is hoping for a Bersani-Monti coalition government to continue the savage austerity policies that Monti’s technocratic ministers have been imposing over the last 15 months. Bersani’s party and its predecessors have always seen their business model as begging the big banks to let them join the government, in exchange for which they will break the labor movement, suppress strikes, and impose budget austerity across the board. Incredibly, Bersani has been one of Monti’s warmest admirers. Bersani has not learned the lesson of Weimar Germany, when the Social Democrats (SPD) supported Hunger Chancellor Heinrich Brüning’s austerity program, wrecking the economy and the political system, and opening the door to National Socialism.

Mediobanca concedes that a Bersani-Monti tandem will be weak, and might need more support from smaller parties, leading to instability with early elections likely in the short term. Although the Common Good will have a majority in the Chamber of Deputies due to the majority bonus, there is no bonus in the Senate, where most members are directly elected by winning their districts. This is where the Common Good plus Monti may fall short.

Some might say that Italians can choose among a genocidal professor, a party hack, a genial satyr, and a scurrilous clown. How did the current situation arise?

During the Obama years, the first goal of the US intelligence community has been to destroy the Berlusconi government, for geopolitical reasons. Based on Berlusconi’s close personal relationship with Putin, he had secured for Italy an important role in the construction of the Nordstream pipeline, and an even more important participation in the Southstream pipeline -- both projects which Washington wanted to sabotage.

Berlusconi also made overtures to President Lukashenko of Belarus, much demonized in Foggy Bottom. The State Department wants to turn the European Union against Putin’s Russia, but the pro-US eurocrats and eurogarchs complained that Italy was becoming an advocate for Moscow within the Brussels bureaucracy. Lucia Annunziata wrote in La Stampa of May 25, 2009 under the title “The Shadow of a Plot” that center-right circles believed US-Italian relations were being hurt by “the excessive closeness of premier Silvio Berlusconi to the Russian Prime Minister Putin.”

The London Economist commented: Italy is one of the countries which have gotten much closer to Moscow than Washington desires, starting from the [August 2008] crisis in Georgia. By 2010 at the latest, US agencies were fully mobilized to overthrow Berlusconi.

State Department campaign to topple Berlusconi, 2008-2011

One part of this effort involved Gianfranco Fini, the former neofascist whom Berlusconi had made President of the Chamber of Deputies in 2008. Fini had been a member of the official neofascist party. In July 2010, after a faction fight, Fini was expelled from Berlusconi’s party, managing to take with him 34 deputies and 10 senators in a move which weakened, but did not destroy, Berlusconi’s governing majority. It was later revealed that Fini’s actions had been closely coordinated with the US embassy in Rome.

During 2009, David Thorne took over as US ambassador to Italy. Thorne was a Yale roommate of John Kerry, who has just become US Secretary of State. Thorne, like Kerry and the Bushes, is a member of the infamous Skull and Bones secret society, and is the twin brother of Kerry’s ex-wife. Thorne’s first meeting on becoming ambassador was with Fini, and not with Berlusconi. Fini is also reported to be a close personal friend of Nancy Pelosi, when Speaker of the House had the same job as Fini. (Il Fatto Quotidiano, September 15, 2010)

Fini, true to form, is now a part of the pro-austerity With Monti For Italy coalition. Bur despite his US backing, Fini may be close to the last hurrah. He had rented a theater in Agrigento, Sicily for a major appearance, but found the premises empty except for a few dozen supporters.

When the Fini operation failed, the CIA turned to exposés of the wild parties at Berlusconi’s mansion in Arcore, near Milan, feeding an immense international propaganda campaign. In December 2009, Berlusconi was struck on the face and seriously injured by an alabaster model of the Milan Cathedral. Italian judges, some of them politically motivated, pursued scores of legal actions against Berlusconi. One of these judges, Ilda Boccassini, was a sympathizer of the left countergang Lotta Continua well into the 1980s. Wikileaks documents made public in December 2010 confirmed the deep hostility of the State Department to Berlusconi.

Giorgio Napolitano, Henry Kissinger’s favorite communist

The coup that finally ousted Berlusconi in November 2011 was managed by Giorgio Napolitano, the president of the Italian Republic and thus the head of state. The Italian presidency has often been almost a ceremonial office, but it acquires significant powers when governments fall, which is frequently. Napolitano has vastly expanded these powers.

For most of his life, Napolitano has been an active member of the Italian Communist Party. He belonged to the right-wing faction around Giorgio Amendola - Napolitano was known as Skinny Giorgio, and Amendola as Fat Giorgio. It has recently been revealed that between 1977 and 1981, Napolitano conducted secret meetings with the Carter administration’s ambassador to Rome, Richard Gardner of the Trilateral Commission. These meetings only became public knowledge in 2005, with the publication of Gardner’s memoirs, Mission Italy. This puts Napolitano in contact with the US embassy during the kidnapping and murder of former Italian Prime Minister Aldo Moro, in whose death US intelligence agencies played an important role.

Henry Kissinger once called Napolitano “my favorite communist.” Business Week referred to him as the point man in Italy for the New York Council on Foreign Relations. The Italian press has dubbed him King George. But thanks in large part to Putin’s support for the Italian prime minister, it took the CIA two years to overthrow Berlusconi. In the end, only economic and financial warfare, plus Napolitano’s treachery, would prove decisive. 
 

Mario Monti: Bilderberg, trilateral, Goldman Sachs

In October 2011, the Yale-educated economist Mario Monti, a eurogarch of the Brussels Commission from 1994 to 1999, was president of the Bocconi University of Milan, a business school. He had worked on the Santer, Prodi, and Barroso commissions in Brussels. He was and remains the European Chairman of the Trilateral Commission, founded by David Rockefeller, as well as a member of the secretive Bilderberg group. He was also a consultant for Goldman Sachs and Coca-Cola.

While Berlusconi was under siege by the Anglo-Americans, Napolitano plotted for months to make Monti the kingpin of a regime of technocrats - supposedly nonpartisan experts who did not represent any political party and could therefore more readily impose pitiless austerity. This was a formula the International Monetary Fund had been trying to force on Italy for 30 years and more.

A modern coup d’état using spreads, not tanks

The indispensable ingredient in the Napolitano-Monti coup was a broad-based and coordinated attack on Italian government bonds by Wall Street, the City of London, and their European satellites. This attack involved threats by ratings agencies to downgrade Italian debt, backed up by massive derivatives speculation against the bonds using credit default swaps (CDS) to increase the interest-rate premium - or spread - paid by Italy compared to Germany in borrowing. (The agencies were later investigated for fraud by Judge Michele Ruggiero of Trani.) Of course, the European Central Bank could at any time have wiped out the speculators by purchasing large quantities of Italian bonds in the open market and driving up the price.

But Napolitano and Monti knew that they could count on the new boss of the European Central Bank Mario Draghi to sabotage the Italian bonds. Draghi took over from the Frenchman Trichet in the night of Halloween 2011, and the attack on Italy began immediately on November 1.

During the summer of 2011, Berlusconi had resisted demands for draconian austerity, perhaps because he knew that Italy was too big to fail and that sooner or later Wall Street and London would have to back off. He was vilified for a lack of civic virtue. During the final attack on Berlusconi, Italian bond yields reached 7%, and the famous spread peaked at 575 basis points over the rate on German bonds. The New York Times cited reports that Draghi “had restricted… purchases of Italian bonds to put more pressure on Mr. Berlusconi to quit” and to extort more austerity from Italy. “If so, the pressure worked.” (NYT, November 9, 2011) The parliament was in panic.

On November 8, 2011 Napolitano appointed Monti, who had never been elected to any public office, as senator for life. This also meant immunity from prosecution for life, unless and until the Italian Senate voted to take this parliamentary immunity away. Also on November 8, Berlusconi concluded that he had lost his parliamentary majority. On November 10, 2011, the new senator for life Monti met with Napolitano at the Quirinal Palace for a two-hour discussion of economic “growth” by means of “structural reforms.” Napolitano still ridiculed rumors that he would make Monti the next prime minister. On the same day, Obama called Napolitano to assure him of US support in his management of the post-Berlusconi crisis. Just this month, Napolitano visited Obama with the obvious goal of getting more US support for Monti.

Berlusconi and other politicians like the anti-corruption activist Di Pietro were pressing for early elections to let the Italian people show what they wanted. But Napolitano was intent on carrying out his cold coup: “markets trumped traditional democratic processes,” wrote the New York Times on December 2, 2011. On November 13, Napolitano officially charged Monti with forming a government of non-party austerity technocrats, and Monti won a vote of confidence in the Chamber of Deputies by 556 to 61. Only the Northern League opposed Monti. This lopsided vote recalled a similar one carried out in the resort town of Vichy, France on July 10,1940 in which the National Assembly voted dictatorial powers for Marshal Pétain, effectively replacing the Third French Republic with a fascist regime. On that day, the vote -- managed by the infamous Pierre Laval -- had been 569 in favor, 80 against, and 18 abstentions.

Monti’s cabinet was composed of little-known figures, mainly from northern Italy, with Catholic, academic, or military backgrounds. One who has become infamous is Labor Minister Elsa Fornero, a professor who cried in public over her own cruelty when she presented her anti-retiree measures. There was the impression that the Monti cabinet were bit players reading lines that had been written by the IMF and the ECB.

Presidential powers from von Hindenburg to Napolitano

Napolitano was following in the footsteps of German Reich President Field Marshal von Hindenburg, who pushed aside the Reichstag (parliament) as the maker of governments when he named the austerity enforcer Heinrich Brüning as chancellor in March, 1930. After this point, no German government could obtain a governing majority, and all relied on Hindenburg’s emergency powers to stay in office -- including von Papen, von Schleicher, and finally Hitler in the first weeks of 1933. These were all called presidential governments, as Monti’s has been. By relegating the parliament to irrelevance, von Hindenburg contributed mightily to the atrophy and death of German democracy.

At the time, I called attention to the obvious coup d’état by Goldman Sachs and its allies, with a similar operation in Greece around the same time. Paolo Becchi, Professor of the Philosophy of Jurisprudence at the University of Genoa, noted that Napolitano “telling a technocrat from Brussels to form a government is nothing but a coup d’état ordered by powerful forces, partly from outside Italy, and managed by the President of the Republic.” Up until now, the bankers had been willing to govern indirectly, masking their power with the faces of politicians.

Now, the bankers wanted to seize power directly: “But it was necessary at least to keep up appearances. With an attitude which is typical of all the followers of Cataline [who attempted a coup against the Roman Republic in the time of Cicero], Monti’s main concern was to seize power with legal means.” Becchi added: “In the moment when political power is brought down to the level of financial power, a coup d’état is always possible, and so easy to carry out that almost nobody realizes it.” (Libero, December 1, 2011)

Monti’s economic measures aimed at shifting an initial €24 billion over three years of the cost of the economic depression away from bankers and speculators and onto the shoulders of working people. The minimum of years on the job to obtain a pension was raised from 40 years to 42 years and one month for men. The minimum age for old-age pensions was raised from 60 years to 62 and then to 66 in 2018. Increases in pension payments would generally be frozen. The property tax (IMU) was increased by 30% and extended to resident homeowners, who had previously been exempt. The value added tax (IVA) was raised from 21% to 23%. As camouflage, a luxury tax on yachts, private planes, and Ferraris was introduced. Only the Northern League and Di Pietro voted against these measures.

Then came a push to make Italy a hire and fire society on the American model, striking down protections that had been in place for decades. Taxi drivers, pharmacists, doctors, lawyers, and notaries were deprived of minimum fees for their services, and their professions were deregulated.

Thanks to Monti’s measures, the Italian unemployment rate has risen from 8.5% in November 2011 to 11.2% in February 2013, the worst in 13 years. Almost 3 million Italians are out of work, with 644,000 or 29% of them laid off on Monti’s watch. Youth unemployment is now at an all-time record of 37%. By December of 2012, industrial production, after falling every months since Monti took power, was down by 7% compared to December 2011.

Grillo: Endless referendums, endless instability

The early Northern League told Italians and foreigners and southerners were responsible for their problems. Grillo blames politicians and political parties. Bersani’s support for Monti’s austerity, combined with Berlusconi’s personal excesses, has focused new attention on the comedian Beppe Grillo and his 5SM. Grillo may well emerge as the big winner of these elections. Grillo has a recent precedent: the comedian Guglielmo Giannini, who in 1944 founded the Man In the Street (uomo qualunque) movement, an Italian precursor of French poujadisme.

Giannini appealed to the angry postwar petty bourgeoisie with populist themes of anti-politics, anti-politicians, anti-corruption, anti-government, deregulation, and anti-taxes. Grillo uses many of the techniques of Giannini, such as obscene and abusive slogans, or mocking the names of his opponents: for Grillo, Monti becomes Rigor Montis.

Grillo, ignoring the lessons of the Weimar Republic, recommends hyper-democracy as a method of governing. The basic approach to all controversies is to organize a referendum. This can work at the level of local government, where some of Grillo’s supporters started, but might lead to chaos if applied nationwide. Grillo wants a referendum on whether Italy should stay in the euro, an idea which appeals in Italy to a few ultra-lefts, but mainly to reactionaries. Grillo (like the framers of Weimar) focuses on the need of government to make sure that all voices receive representation, but neglects the equally imperative need on to promote majorities capable of deciding issues and exercising power.

Grillo mayor fails to solve pre-school issue in Parma

The first big success for Grillo came in Parma, traditionally the turf of the PCI/Democratic Party. Here Grillo’s candidate took over as mayor early in 2012. Within less than a year, Grillo was greeted by protests over the rising cost of living, especially for the mayor’s raising of the price of pre-school for working families, while eliminating multi-child discounts. Up to this point, Grillo had enjoyed all the advantages of the Muslim Brotherhood under Mubarak, or of Jesse Ventura running for governor of Minnesota, meaning the ability to criticize without any responsibility.

When confronted with an attack on his own record, Grillo responded with petulance, suggesting he cannot take criticism. Grillo has been declining television interviews, preferring to give speeches to large crowds in the piazza of many cities. But observers note that this is also a way to avoid probing questions from hostile journalists. In any case, big crowds do not necessarily indicate election majorities. Grillo portrays himself as a victim of the mass media, even though enjoys extensive coverage in the current phase. He is rich, but campaigns in a mini-van to increase his populist appeal.

According to Elisabetta Gualmini and Piergiorgio Corbetta in their survey of the Grillo movement entitled Il Partito del Grillo (Bologna: Il Mulino/Istituto Cattaneo, 2013), about 60% of Grillo’s support comes from angry, male, sometimes unemployed generation X technicians, IT and software personnel, and small businessmen born between 1969 and 1978, and thus aged between 35 and 44. There are few pensioners, few housewives, few women of any background. Over 50% describe themselves as extreme left, left, or center-left, while about 30% self-described as center-right to right. Grillo represents a protest movement that cuts across the other political parties.

An ominous symptom is the dictatorship of Grillo inside the party. In recent weeks, Grillo has ousted a regional councilor from Emilia-Romagna for complaining on television of the lack of democracy inside the 5SM. He also expelled a Bologna city councilwoman for taking part in Ballaró, a widely viewed television talk show, after Grillo banned such appearances, presumably to keep the spotlight on himself. Previously, he had expelled three candidates from Bologna and a member of the Ferrara city council. Grillo considers the 5SM is a trademark which he owns. The dissidents are generally excommunicated by means of a tweet. Does Grillo write the tweets, blog, scripts, and speeches by himself, or is he controlled and supported by a syndicate?

Grillo’s Svengalis: Casaleggio associates

Some say Grillo is a synthetic candidate. According to published accounts, Grillo’s Svengali and teleprompter is political consultant Gianroberto Casaleggio, 58, of Casaleggio Associates, a company specialized in political and media consulting and strategies for Internet marketing - more or less the methods which have put Grillo where he is today.

Casaleggio and Grillo confer by telephone on average three times a day. Casaleggio, like Grillo, sports the hair style of an aging freak, trying to look like John Lennon, but unlike Grillo usually wears a suit. (Tommaso Caldarelli, Giornalettismo, May 25, 2012) Casaleggio’s office is near Piazza Scala in Milan. The dominant partner at Casaleggio Associates is Enrico Sassoon, currently the director of the Italian edition of the Harvard Business Review.

Sassoon has worked for Pirelli, and is currently a leading light of the American Chamber of Commerce in Italy. Sassoon is also on the board of the Italian branch of the Aspen Institute, where his colleagues are mostly members of the Bilderberg group. Giampietro Zanetti, a Berlusconi backer, writes in his blog: “Who is behind Grillo? Bilderberg and the Aspen Institute!”

Casaleggio, who once advised Di Pietro and Olivetti, believes that “by 2018 the world will be divided into: the West with direct democracy and free access to the Internet, and the enemies of freedom like China-Russia-Middle East.” In 2020 there will be a new world war, with the population reduced by a billion, then catharsis, and finally rebirth in the name of Gaia, and world government.” (Marco Alfieri, La Stampa, May 26, 2012) Is this really what Grillo’s voters want?

Grillo and Casaleggio are the authors of a book called We Are At War - meaning that Grillo is the Guy Fawkes or Ludendorff of a war against political parties as such. The need to destroy political parties is one of the favorite themes of various disinformation channels of the US intelligence community, who see this as part of the effort to smash the national states and impose the Empire. A coincidence?

In 2012, the big political news from Europe was the emergence of Alexis Tsipras and Syriza to fight austerity in Greece with program, leadership, organization, and strategy, and not with utopias of participatory democracy. Grillo is the opposite of Syriza on most points, meaning that Italy now risks a new round of destabilization. Which method will prevail? 

imf revolutionary paper: 100% reserve backing

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http://www.telegraph.co.uk/finance/comment/9623863/IMFs-epic-plan-to-conjure-away-debt-and-dethrone-bankers.html

IMF's epic plan to conjure away debt and dethrone bankers 

So there is a magic wand after all. A revolutionary paper by the International Monetary Fund claims that one could eliminate the net public debt of the US at a stroke, and by implication do the same for Britain, Germany, Italy, or Japan.

Ambrose Evans-Pritchard
21 Oct 2012

One could slash private debt by 100pc of GDP, boost growth, stabilize prices, and dethrone bankers all at the same time. It could be done cleanly and painlessly, by legislative command, far more quickly than anybody imagined.

The conjuring trick is to replace our system of private bank-created money -- roughly 97pc of the money supply -- with state-created money. We return to the historical norm, before Charles II placed control of the money supply in private hands with the English Free Coinage Act of 1666.

Specifically, it means an assault on "fractional reserve banking". If lenders are forced to put up 100pc reserve backing for deposits, they lose the exorbitant privilege of creating money out of thin air.

The nation regains sovereign control over the money supply. There are no more banks runs, and fewer boom-bust credit cycles. Accounting legerdemain will do the rest. That at least is the argument.

Some readers may already have seen the IMF study, by Jaromir Benes and Michael Kumhof, which came out in August and has begun to acquire a cult following around the world. 

Entitled "The Chicago Plan Revisited", it revives the scheme first put forward by professors Henry Simons and Irving Fisher in 1936 during the ferment of creative thinking in the late Depression.

Irving Fisher thought credit cycles led to an unhealthy concentration of wealth. He saw it with his own eyes in the early 1930s as creditors foreclosed on destitute farmers, seizing their land or buying it for a pittance at the bottom of the cycle.

The farmers found a way of defending themselves in the end. They muscled together at "one dollar auctions", buying each other's property back for almost nothing. Any carpet-bagger who tried to bid higher was beaten to a pulp.

Benes and Kumhof argue that credit-cycle trauma - caused by private money creation - dates deep into history and lies at the root of debt jubilees in the ancient religions of Mesopotian and the Middle East.

Harvest cycles led to systemic defaults thousands of years ago, with forfeiture of collateral, and concentration of wealth in the hands of lenders. These episodes were not just caused by weather, as long thought. They were amplified by the effects of credit.

The Athenian leader Solon implemented the first known Chicago Plan/New Deal in 599 BC to relieve farmers in hock to oligarchs enjoying private coinage. He cancelled debts, restituted lands seized by creditors, set floor-prices for commodities (much like Franklin Roosevelt), and consciously flooded the money supply with state-issued "debt-free" coinage.

The Romans sent a delegation to study Solon's reforms 150 years later and copied the ideas, setting up their own fiat money system under Lex Aternia in 454 BC.

It is a myth - innocently propagated by the great Adam Smith - that money developed as a commodity-based or gold-linked means of exchange. Gold was always highly valued, but that is another story. Metal-lovers often conflate the two issues.

Anthropological studies show that social fiat currencies began with the dawn of time. The Spartans banned gold coins, replacing them with iron disks of little intrinsic value. The early Romans used bronze tablets. Their worth was entirely determined by law - a doctrine made explicit by Aristotle in his Ethics - like the dollar, the euro, or sterling today.

Some argue that Rome began to lose its solidarity spirit when it allowed an oligarchy to develop a private silver-based coinage during the Punic Wars. Money slipped control of the Senate. You could call it Rome's shadow banking system. Evidence suggests that it became a machine for elite wealth accumulation.

Unchallenged sovereign or Papal control over currencies persisted through the Middle Ages until England broke the mould in 1666. Benes and Kumhof say this was the start of the boom-bust era.

One might equally say that this opened the way to England's agricultural revolution in the early 18th Century, the industrial revolution soon after, and the greatest economic and technological leap ever seen. But let us not quibble.

The original authors of the Chicago Plan were responding to the Great Depression. They believed it was possible to prevent the social havoc caused by wild swings from boom to bust, and to do so without crimping economic dynamism.

The benign side-effect of their proposals would be a switch from national debt to national surplus, as if by magic. "Because under the Chicago Plan banks have to borrow reserves from the treasury to fully back liabilities, the government acquires a very large asset vis-à-vis banks. Our analysis finds that the government is left with a much lower, in fact negative, net debt burden."

The IMF paper says total liabilities of the US financial system - including shadow banking - are about 200pc of GDP. The new reserve rule would create a windfall [a large amount of money that is won or received unexpectedly]. This would be used for a "potentially a very large, buy-back of private debt", perhaps 100pc of GDP.

While Washington would issue much more fiat money, this would not be redeemable. It would be an equity of the commonwealth, not debt.

The key of the Chicago Plan was to separate the "monetary and credit functions" of the banking system. "The quantity of money and the quantity of credit would become completely independent of each other."

Private lenders would no longer be able to create new deposits "ex nihilo". New bank credit would have to be financed by retained earnings.

"The control of credit growth would become much more straightforward because banks would no longer be able, as they are today, to generate their own funding, deposits, in the act of lending, an extraordinary privilege that is not enjoyed by any other type of business," says the IMF paper.

"Rather, banks would become what many erroneously believe them to be today, pure intermediaries that depend on obtaining outside funding before being able to lend."

The US Federal Reserve would take real control over the money supply for the first time, making it easier to manage inflation. It was precisely for this reason that Milton Friedman called for 100pc reserve backing in 1967. Even the great free marketeer implicitly favoured a clamp-down on private money.

The switch would engender a 10pc boost to long-arm economic output. "None of these benefits come at the expense of diminishing the core useful functions of a private financial system."

Simons and Fisher were flying blind in the 1930s. They lacked the modern instruments needed to crunch the numbers, so the IMF team has now done it for them -- using the `DSGE' stochastic model now de rigueur in high economics, loved and hated in equal measure.

The finding is startling. Simons and Fisher understated their claims. It is perhaps possible to confront the banking plutocracy head without endangering the economy.

Benes and Kumhof make large claims. They leave me baffled, to be honest. Readers who want the technical details can make their own judgement by studying the text here.

The IMF duo have supporters. Professor Richard Werner from Southampton University - who coined the term quantitative easing (QE) in the 1990s -- testified to Britain's Vickers Commission that a switch to state-money would have major welfare gains. He was backed by the campaign group Positive Money and the New Economics Foundation.

The theory also has strong critics. Tim Congdon from International Monetary Research says banks are in a sense already being forced to increase reserves by EU rules, Basel III rules, and gold-plated variants in the UK. The effect has been to choke lending to the private sector.

He argues that is the chief reason why the world economy remains stuck in near-slump, and why central banks are having to cushion the shock with QE.

"If you enacted this plan, it would devastate bank profits and cause a massive deflationary disaster. There would have to do `QE squared' to offset it," he said.

The result would be a huge shift in bank balance sheets from private lending to government securities. This happened during World War Two, but that was the anomalous cost of defeating Fascism.

To do this on a permanent basis in peace-time would be to change in the nature of western capitalism. "People wouldn't be able to get money from banks. There would be huge damage to the efficiency of the economy," he said.

Arguably, it would smother freedom and enthrone a Leviathan state. It might be even more irksome in the long run than rule by bankers.

Personally, I am a long way from reaching an conclusion in this extraordinary debate. Let it run, and let us all fight until we flush out the arguments.

One thing is sure. The City of London will have great trouble earning its keep if any variant of the Chicago Plan ever gains wide support. 

france: l'apres capitalisme / eu cracks in the wall

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http://www.pauljorion.com/blog/?p=12782

Pour un changement de paradigme du droit des affaires

Valérie Bugault
10 juin 2010

La perte de cohésion du « droit » résulte de l’intrusion rapide et peu scrupuleuse de la conception anglo-saxonne de la loi dans notre univers juridique, notamment par le biais du lobbying. Jusqu’à cette intrusion, le système de droit français était conçu comme un ensemble cohérent et hiérarchisé de règles, dont la perfection historique date de 1804, avènement de notre fameux Code civil (ou Code Napoléon), souvent vanté et exporté.

Que le mélange des systèmes juridiques en vigueur ait précédé l’avènement du grand capital, en étant son instrument, ou qu’il n’ait fait que le faciliter, à son insu, importe finalement peu aujourd’hui. Le résultat, quoiqu’il en soit, est et reste la prise de pouvoir législative et politique par le grand capital. La suite est connue : de recherches de profits maximum en évasions fiscales bien organisées et réussies, le capitalisme a tôt fait de se transformer en « financiarisme » (néologisme évocateur), entraînant dans son sillage les dérives que l’on connaît et, pour finir, son autodestruction programmée.

Une succession d’événements, parmi lesquels l’instauration du régime juridique et fiscal dit des « stock options » et l’introduction de la fiducie (qui n’est autre que la transposition en droit interne du trust anglo-saxon, si utile aux paradis fiscaux), a finalement permis le triomphe de l’esprit « d’actionnariat » et la légitimation de la dominance du financier sur le politique. Le court-termisme inhérent à l’esprit d’actionnariat tient désormais lieu à la fois de politique et de stratégie. Heureusement secondé par l’instrumentalisation de l’éducation et des médias, cet esprit d’actionnariat a bientôt envahi tous les niveaux de la société, devenant le modèle à suivre, celui qui ouvre la voie de « l’ascenseur social ». Si quelqu’un avait eu l’idée de regarder cet ascenseur, il se serait pourtant vite aperçu de son immobilité et n’aurait pas tardé à conclure à une panne définitive. Seule la force de la croyance (en la toute-puissance du marché), qui balaye tout sur son passage, a rendu possible l’aveuglement collectif.

La complexité sans cesse croissante du droit en général et du droit de l’entreprise en particulier

S’agissant du droit de l’entreprise, le point essentiel à noter est que la multiplicité des structures juridiques et leurs différents régimes juridique, fiscal, social sans oublier comptable¹ favorisent les très grosses structures au détriment des petits entrepreneurs et sont, par essence, des facteurs anticoncurrentiels.

Les entreprises multinationales, au premier rang desquelles figurent les banques, utilisent et initient les méandres législatifs dans l’objectif de faire échapper, le plus possible, leurs bénéfices sans cesse croissants aux impositions étatiques. D’une part, le siège social des groupes est judicieusement localisé, d’autre part, en effectuant des restructurations « prix de transfert », les multinationales répartissent les activités du groupe en fonction de leur nature dans les Etats assurant le régime juridique et fiscal le plus accueillant à telle ou telle activité. Le tout assurant le maximum de profits aux multinationales ; profits répartis entre actionnaires et évasion fiscale (avant et/ou après répartition). Entre évasion et optimisation, ces entreprises ont acquis un statut extraterritorial et ne rendent véritablement de comptes à personne. La notion d’entreprise multinationale est ainsi devenue l’ennemie des Etats et, par voie de conséquence, des peuples.

Le développement croissant, tatillon et déraisonnable des subtilités juridiques, fiscales, comptables et sociales sert en réalité de vitrine présentable à toutes sortes de pratiques, malversations légales ou non, tendant à faire échapper les bénéfices des plus grosses entreprises à l’impôt ou à rendre présentables des bilans qui ne le sont pas. En ce sens, le développement immodéré des règles a non seulement permis l’évasion fiscale des plus grosses entreprises (notamment les entreprises financières) mais a aussi eu, dans le même temps, pour effet de rendre a priori coupables les petites structures : coupables de ne pas respecter la loi, d’oublier des délais, de croire, de bonne foi, entrer dans telle catégorie alors que « les services » les font entrer dans une autre etc., le tout assorti de pénalités. Les casuistes, héros des temps modernes, s’en donnent à cœur joie : ce qui est particulièrement vrai en droit fiscal mais s’applique maintenant aussi à toutes les branches du droit.

Ce mouvement de « technicité » a finalement atteint son objectif qui était d’entourer les flux mondiaux de capitaux et de marchandises de l’opacité la plus parfaite, pendant que l’attention était détournée, en interne, sur les prétendues illégalités des petites entreprises et, plus généralement, des « petits citoyens », « petits contribuables », sans oublier les « petits non citoyens » et « petits non contribuables ». Le phénomène de complexification de la règle s’avère en définitive être le moyen indispensable de la concentration des capitaux dans quelques mains bien avisées.

Le caractère non immuable du droit de l’entreprise : « ce qui est » n’a pas toujours été et ne sera pas toujours…

Ce phénomène de complexification du droit n’a pu se développer qu’à la faveur de la perte d’intégrité du législateur, vendu au plus offrant. Le législateur en cause est d’ailleurs difficile à cerner : les textes votés par le pouvoir législatif sont en réalité en très grande partie issus des différents ministères (les projets de lois), quand ils ne sont pas directement initiés par l’Elysée, sièges du pouvoir exécutif, sans toutefois être à l’abri de l’intervention de l’un ou de plusieurs parlementaires zélés (pouvoir législatif), à l’occasion soit d’une rare initiative (proposition de loi) parlementaire, soit d’un ou de plusieurs amendements. Notons au passage la violation officielle du principe de séparation des pouvoirs sans laquelle, pourtant, aucune constitution ne vaut (article XVI de la Déclaration des Droits de l’Homme et du Citoyen de 1789 en préambule à la constitution de la Vème République).

Par ailleurs, les projets de lois sont aujourd’hui loin d’être tous contrôlés par le Conseil d’Etat avant leur passage devant les Assemblées. C’est ainsi que les lois fourre-tout qui se sont multipliées ces dernières années ont été des moyens très efficaces de réformes informes et anonymes, le parfait vecteur de l’instrumentalisation du droit au profit du grand capital.

Le contexte brouillon de la création des textes est favorisé et aggravé par les possibilités suivantes :

- vote par un nombre de parlementaires réduit à sa plus simple expression, éventuellement à une période propice de l’année ;

- vote très rapide, faisant éventuellement suite à de longs débats ayant porté sur un autre sujet, à l’occasion d’un amendement de dernière minute.

Dans ce contexte, il devient très difficile au citoyen contribuable de distinguer la personne ou le groupe de personnes à l’origine de telle ou telle règle ; seul l’intérêt à défendre finit par apparaître aux yeux de tous, longtemps après le vote de ladite loi et à l’occasion de sa mise en application. Et nous ne parlons ici que des textes internes, et non des textes européens qui s’appliquent chez nous, votés (issus, encore rarement, du parlement de Strasbourg) ou non (issus de la commission).

Il est toujours possible de revenir en arrière, mais il faudrait pour ce faire que les peuples se réapproprient les valeurs aujourd’hui perçues comme surannées d’intégrité et de courage.

Il est aujourd’hui devenu urgent de préparer l’après-capitalisme décliné en « financiarisme ». Cet après-capitalisme se décline en une refonte du système des valeurs et une refonte de l’ordre civil. Comme le disait Ripert en 1951 :« On ne supprimera pas (le capitalisme) si rien n’a été préparé de ce qui pourrait le remplacer. Ce n’est pas en substituant un capitalisme d’Etat au capitalisme privé que l’on détruira l’esprit qui anime notre société toute entière… c’est bien un problème politique qui se pose… Le régime capitaliste est lié à un ordre civil. Qui veut le détruire, doit imaginer un autre ordre, c’est-à-dire d’autres règles, d’autres institutions ».²

Or, l’entreprise est aujourd’hui au premier plan de l’ordre civil, commençons donc par la réformer. S’agissant de la conception juridique actuelle de l’entreprise, rien de « ce qui est » n’est immuable, pas même la distinction, souvent détournée en pratique, entre société et association. En réalité, toutes ces structures ont des points communs, qui sont en même temps des besoins communs, essentiels. Besoins communs mis, par exemple, en exergue par la notion nouvelle d’EIRL (entreprise individuelle à responsabilité limitée).

Le détail des points communs à toute « entreprise » (au sens large) est simple : la réalisation d’une activité par des hommes qui travaillent, sous la direction éclairée d’autres hommes, le tout nécessitant des moyens matériels et financiers ; l’ensemble devant relever, comme toute construction humaine, d’un édifice équilibré assorti de contre-pouvoirs afin de parer aux éventuelles dérives d’un groupe par rapport à un autre. La question de la propriété de l’entreprise entre dans l’analyse des contre-pouvoirs à mettre en œuvre au regard de l’utilité sociale du rôle de chaque participant à l’entreprise.

L’entreprise est en effet une organisation sociale qui joue un rôle non seulement économique mais également sociétal : celui d’organiser, au niveau d’une société donnée, les modalités d’une activité afin de la rendre la plus sereine possible, ce qui passe par un nécessaire équilibrage des pouvoirs des participants à « l’activité » ; l’équité et l’équilibre sont en réalité les seuls barrages contre le chaos et la destruction.

On doit définitivement cesser de considérer l’entreprise comme le moyen d’amasser du capital : la chose doit être claire pour tous et entendue par tous.

Conclusion

Vous avez compris cher lecteur que ce texte n’est pas un plaidoyer pour « plus de droit » mais au contraire pour « mieux de droit ».

Il est plus que temps aujourd’hui d’observer, au regard du bien commun, une séparation claire des règles entre l’essentiel et l’accessoire, entre l’utile et le superflu, si propre à se transformer en matière polluante hautement inflammable.

Le peuple a ici une place à reprendre, place qu’il a depuis longtemps perdue et que les moyens modernes de communication lui permettraient aujourd’hui de réinvestir. Les grands choix de société doivent, sous peine de débordements violents, absolument être validés par ceux auxquels ils s’appliqueront.

Il importe par ailleurs de laisser à l’Homme, en particulier celui qui a des idées à mettre en œuvre, le maximum de liberté associé à un maximum de responsabilité. Cet objectif nécessite la refondation d’un cadre juridique, aussi bien au niveau du droit public qu’à celui du droit privé, de nature à garantir la sécurité juridique par l’organisation de contrepouvoirs effectifs ; tout ne peut et ne doit s’acheter, au même titre que tout ne peut et ne doit être considéré comme une « exception ».

La liberté de l’Homme se décline en liberté de penser, de s’exprimer, de pratiquer (le plus sereinement possible) l’activité qui lui convient au moment qui lui convient, et de se déplacer.

La liberté ainsi conçue a été et doit redevenir intangible et imprescriptible, elle est et doit rester une valeur qui ne se marchande pas. Insistons également sur le fait qu’il ne peut être question de dissocier la liberté de la responsabilité ; point de liberté sans responsabilité. Voilà une autre vérité éternelle, à respecter en tous lieux et de tout temps.

Pour finir, abordons l’essentiel : il ne semble ni nécessaire ni pertinent de supprimer la notion de propriété privée. L’histoire de l’URSS a amplement démontré que sans propriété privée, point d’idée mise en œuvre ; l’absence de motivation personnelle engendre finalement la fin du développement de la « collectivité ». Il importe de tirer, collectivement, des leçons des expériences passées : c’est à ce prix que nous progresserons, que la société progressera.

Si la propriété privée doit être respectée, elle doit en revanche absolument être limitée et encadrée. L’accaparement, que ce soit de biens matériels, immatériels ou de monnaie, qui est l’excès de propriété privée, doit être définitivement érigé en crime.

Il vous est ainsi proposé, à tous, de réfléchir à la société de demain, qui devra, si l’on souhaite le rétablissement de la démocratie :

- opérer un rééquilibrage des forces sociales à l’œuvre dans le concept d’entreprise ;

- supprimer les excès du droit de propriété en gardant à l’esprit que nul droit ne vaut sans devoir.

¹ Le régime comptable est plus attaché à la nature des opérations qu’à la structure juridique mais la tendance est la même que pour le droit : multiplication à l’infini des cas particuliers et développement de la casuistique

² Aspects juridiques du capitalisme moderne, n°151 p.346 et 347

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http://www.independent.co.uk/news/world/europe/francogerman-relations-cool-over-eurozone-crisis-1994953.html

Franco-German relations cool over eurozone crisis

John Lichfield in Paris
9 June 2010

Minutes before President Nicolas Sarkozy was to leave to fly to Berlin for a Franco-German summit, Chancellor Angela Merkel telephoned to postpone the meeting.

Officially, the cancellation was forced by a timetabling problem. Chancellor Merkel was embroiled in her emergency plans to cut €80bn (£66bn) from the German budget by 2014. In truth, the postponement is evidence that the Franco-German partnership, which has steered the European Union for half a century, is struggling to survive one of the worst crises in the history of the EU.

The Merkel-Sarkozy meeting was supposed to agree a joint position on the deficit crisis threatening the European single currency before a European summit in Brussels next Thursday. Officials in both France and Germany say that the two countries were so deeply divided that a meeting on Monday would have been pointless and failure might have caused a further market backlash against the euro.

Efforts will be made to identify at least some common ground before the postponed Franco-German summit takes place in Berlin next Monday. Personal relations between the two leaders are now so strained, however, that the new EU Council President, Herman van Rompuy, has had to be employed on occasion as a peacemaker and message-carrier.

Both Chancellor Merkel and President Sarkozy say that there should be a "European economic government" to narrow policy differences between countries using the euro and enforce the deficit and debt rules which have been trampled by all countries, save Luxembourg, in recent years. Paris and Berlin remain deeply opposed, however, on what "European economic government" should mean.

President Sarkozy wants to give increased political power to the informal eurogroup of the 16 countries which use the single currency. This consultative forum would become a de facto economic government overseeing national fiscal and spending policies.

Chancellor Merkel detests the idea of a powerful eurogroup dictating budget policy to Berlin. She wants decisions to be made by all 27 EU countries. She also wants tougher deficit-enforcing rules, including the power to force backsliding countries to go bankrupt rather than demand financial help from their partners. France hates this idea.

The Franco-German disagreement is not the first in the last 50 years but is potentially the most serious. The personal chemistry between the mercurial, tactile President Sarkozy and the stolid, unemotional Chancellor Merkel has never been good. But there has also been a wider divergence in German and French viewpoints and interests, which has been exposed by the debt and euro crisis.

The French press, and some French politicians, accuse the Germans of taking a narrow, national approach, which has, in the end, made the crisis worse. After refusing for many weeks to join a concerted but limited Greek bailout, Chancellor Merkel was forced by market pressure to agree a much larger, €500bn aid mechanism, they point out. The German press and politicians, no longer think in European terms, the French complain.

In Germany, France is accused of conspiring with the (French) head of the European central bank, Jean-Claude Trichet, and the French head of the International Monetary Fund, Dominique Strauss-Khan. Paris has bullied Ms Merkel, the German press complains, into conceding ground which suits French interests.

Reports in the Spanish press that Mr Sarkozy threatened to pull France out of the euro last month unless Ms Merkel conceded on the bailout mechanism for Greece have been denied in both Paris and Madrid. In the German press, the reports are taken to be "metaphorically" true, if not strictly accurate.

The chances of any agreement on long-term reforms of the political machinery of the euro next week are slender, French officials say. "The negotiations have not been going well," one senior French official told Le Monde. "The Germans have not been prepared to move forward."

Even the €80bn package of spending cuts agreed by Ms Merkel is an irritation and an embarrassment to Paris. France's budget deficit – 8 per cent of GDP – is higher than Germany's but Paris has so far announced only €15bn in cuts and an uncosted plan to bring its deficit within the official euroland limit of 3 per cent by 2013.

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http://www.guardian.co.uk/business/2010/jun/08/uk-rejects-eu-budget-scrutiny

UK rejects EU budget scrutiny plan

European commission's demand for advance vetting of national tax and spending plans is flatly rejected by British government

Ian Traynor in Brussels
8 June 2010

Britain rejected EU moves towards prior scrutiny by Brussels of national budgets today, insisting that only the House of Commons would be allowed to vet British tax and spending plans.

Under action aimed at boosting budgetary rigour and avoiding recurring Greek-style debt crises, the European commission and Herman van Rompuy, president of the European Council, are demanding that all 27 EU governments submit their budgets for "peer review" in Brussels before going before their legislatures.

Late on Monday, after chairing a meeting in Luxembourg of finance officials from the 27 countries, Van Rompuy announced a "strong convergence of views" on the need for vetting of budgets and phased penalties for countries breaching deficit and debt ceilings. "Rapid progress can be made. That was clear from the large consensus on all the main points," he said.

The Cameron-Clegg government promptly contradicted him. British officials insisted that the government would have no truck with the peer review. If the budget vetting went ahead, Cameron would be vulnerable to charges that he had allowed crucial sovereign powers to be transferred to the EU, something that he opposed.

Mark Hoban, financial secretary to the Treasury, attended the Luxembourg meeting for the chancellor, George Osborne. He said: "The budget will be presented to parliament first. There is no question of anyone other than MPs seeing it first. Once the chancellor has presented it to parliament, it is of course publicly available."

Van Rompuy and other European leaders want budget drafts to go before EU finance ministers and be examined by commission experts. "Not to be checked in detail or to be decided upon by the European institutions – that is the prerogative of the national parliaments," he said. "However, the main assumptions underlying the plans, like levels of growth or inflation, would be examined … A government presenting a budgetary plan with a high deficit will have to justify itself."

The council president, who heads a "task force" of officials from the 27 states on how to boost Europe's "economic governance", will report on the plan next week at an EU summit, meaning Cameron could be in for a bruising debut in Brussels.

us to gain more control of pakistan after nyc "attack"

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http://www.nation.com.pk/pakistan-news-newspaper-daily-english-online/print/Politics/09-May-2010/Pak-being-set-up-but-civilmly-leadership-remains-silent

Pak being “set up” but civil-mly leadership remains silent

Shireen M Mazari
1 day 16 hrs ago

Hillary Clinton has once again come into her own true self and issued a direct threat to Pakistan of “severe consequences” if the ‘terror attack’ of Times Square New York City had been successful and found to have definitively originated in Pakistan. It brings to mind an earlier moment when Hillary, during the course of her unsuccessful bid for the Democratic presidential nomination, had responded to a question on whether she would use tactical nuclear weapons against Pakistan in the context of a terror attack linked to Pakistan and she unhesitatingly declared “Yes”! She was also right up there with Bush on the question of the Iraq war until she realised how unpopular it was becoming within her own country. So she is very much in the same mould as Condi Rice!
However, her latest threat has established without an iota of doubt the larger US game plan for Pakistan, and the issue is not what the US plans to do so much as what our leadership is doing or not doing to protect itself from this increasingly threatening US agenda.

But first some serious questions that our leadership and our normally verbose Ambassador to Washington should have raised in the immediate aftermath of the Faisal Shahzad episode, which is beginning to look more and more like a deliberately created incident to suck Pakistan into not only doing the US bidding vis a vis North Waziristan but also to provide a scenario which would allow more US forces into the country and move the US further into forcibly taking control of our nuclear assets.

Why should one presume the whole incident was created?

First: How come the explosion did not go off?

Two: How come such an easy trail of evidence was laid to track Faisal Shahzad?

Three: How come, he confessed to everything so easily and immediately?

Four: How come the US immediately, as if already prepared, began demanding permission for more troops into Pakistan?

Five: How come the CIA immediately announced more drone attacks on Pakistan?
In other words, things moved in an almost synchronized manner in succession that they had to have been pre-planned.

Six: Why are the US government and media paying no heed to Shahzad’s alleged connection to the Yemeni cleric and to the Taliban’s clear denial of any link to Shahzad?

What is disturbing though are the immediate utterances and silence of the different Pakistani players - apart from the brief but necessary statement from the ISPR that there was no tangible evidence to link Shahzad to Waziristan and the militants there:

First: Why did our Ambassador to Washington maintain a strange silence in the immediate aftermath instead of seeking access to Faisal Shahzad, given that despite being a US citizen his Pakistani links were being played up?

Two: How come Foreign Minister Qureshi immediately declared that Shahzad’s action was in response to the drone attacks, even before Shahzad himself allegedly talked of the disturbing effect of drones? Is there a common script here? Did Qureshi not know that by making such a statement he was accepting Shahzad’s guilt? More important, how did he know the cause unless he had met Shahzad, knew him earlier or had been told by him that this was the reason behind his alleged action?

Three: In a similar vein, Interior Minister also made a similar statement as if Shahzad had been found guilty already.

Four: Why should the father of Shahzad have been arrested? Apparently it was given out that his arrest was to facilitate the FBI team but is it the job of the government to aid and abet the US or to protect its own citizens? It would appear the answer is the former for this government, in which case there is little difference in how this democratic government is treating its citizens and how Musharraf treated Pakistanis.

What is truly disturbing though is the civil and military leadership’s silence on questioning the US intent. Why are we allowing the US to threaten us while we continue to entertain their civil, military and intelligence teams/delegations? Why are we not insisting on our investigation team being in Washington if the US can send an FBI team to Pakistan? Why have we not called for a Joint Investigation on the Shahzad issue?

In the aftermath of the Clinton threat, at the very least shouldn’t the Pakistan government suspend cooperation with the US, at least temporarily? Should our ambassador not convey our displeasure at this overt threat? Stoppage of NATO supplies and the downing of a drone will send a clearer message than any apologetic mumblings from the leadership.

Finally, is our military prepared to compromise our defence and security, target more Pakistani civilians, simply to do the US bidding and commence a premature and hasty North Waziristan operation? Incidentally, if the government is unwilling to use the capability its air force has of shooting down drones, as was demonstrated to the PM recently, why are we acquiring such expensive systems? If we cannot or will not fight anyone but our own tribals, we need to review our military expenditures.

In conclusion, it will be worth painting once again the holistic picture that should now be crystal clear even to the most myopic Pakistani, in the light of the Clinton threat. Send in more US troops to destabilise Pakistan; push the military into North Waziristan, stretching its lines of communications and capabilities and aggravating the civil-military divide as well as the dormant ethnic and sectarian fault lines within the institution of the military, thereby undermining its long term cohesiveness; another operation would add to terrorism within Pakistan as will the increased drone attacks in FATA; convince the world that Pakistan is in disarray and there should be international control over its nukes through the UNSC - which effectively would mean US control.
Nor is the US agenda premised only on diplomatic-military tactics. There is a strong economic component also. After all, the IMF factor is not merely coincidental; nor are the new economic managers with strong US/IMF/World Bank connections who have been brought in recently. Add to all this the growing US intrusions already within Pakistan at multiple levels and the picture should become evident that Pakistan is being set up for destruction. What is less clear to some, though not to all, is why our own leadership should be complicit in this destruction?

greece: control the new drachma

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http://www.rense.com/general90/euro.htm

Soros, Goldman, Hedge Funds Attack Greece, Euro

Financial Warfare Exposed

Soros, Goldman Sachs, Hedge Funds Attack Greece To Smash Euro

By Webster Tarpley

3-4-10

(...)

Greece does not need an austerity program, as the Greek labor movement has eloquently argued in the course of their successful and admirable general strike last week. Greece does not need a bailout from Germany, the sinister International Monetary Fund, or from anyone else. Least of all does Greece need to accept the advice of Austrian school or Chicago schools charlatans who recommend the catharsis of a deflationary crash that would destroy an entire generation through unemployment, poverty, and despair. Greece needs to defend itself with a 1% Tobin tax on all derivatives and other financial transactions. Greece should take the lead in outlawing credit default swaps, which amount to issuing insurance without meeting the capital requirements of being an insurance company. Greece needs to enforce EU and national antitrust laws. If Soros and his gang succeed in breaking up the euro, Greece should make the best of it by immediately imposing heavy-duty exchange controls and capital controls to protect the new drachma, on the model of Malaysia a dozen years ago. Greece should shut down domestic zombie banks and seize its central bank and use it to issue 0% credit for industrial and agricultural hard commodity production. If the Greeks made plain what they intend to do if they are forced to fall back on the drachma, the financiers who fear such an example would have another reason to relent.

(...)

sovereign debt markets: fire in the house

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http://www.pimco.com/LeftNav/Featured+Market+Commentary/IO/2010/February+2010+Gross+Ring+of+Fire.htm

Investment Outlook

Bill Gross

February 2010

The Ring of Fire

Investment management is a privileged profession – not just for being paid by X-times what you’re really worth to society, but from the standpoint of longevity. If you’re good, and you at least give the impression that you still have most of your faculties, you can literally hang around forever. James Carville, the well-meaning but evil-lookin’ guy from the Clinton Administration once remarked that in his next life he’d like to come back as a bond manager. He had part of it right – the influence, the wealth, and even fame – but there was no need to imagine himself as some cryogenically preserved Wall Street version of Ted Williams – he was young enough at the time to make the leap and still have a 20-year career ahead of him. Other professions do not afford such opportunities – the gold watch at 65 is not only symbolic, but a statement in most professions that says you are more or less washed up. Athletes have at most 20 years and musicians seem to have that brief window of creation as well. The Beatles, for instance, were done after a decade’s time. Paul is still writing songs, but the magic clearly disappeared in the 70s and now his concerts are “garden parties” of remembrances as opposed to creation.

What I think is close to unique about investment management is that it’s really about the stewardship of capital markets, and that time weeds out the impostors, leaving the aging survivors to appear as wise and capable of guiding clients through the next crisis – whatever and whenever it might appear. That assumption has some logic behind it, but critically depends on the investor truly enjoying the game and – of course – holding on to at least a few billion brain cells that keeps him from being obviously senile or at least being accused of having “lost it.” An investment manager at 65 fears both. I remember having met John Templeton on the set of Wall Street Week nearly 20 years ago. I was a young buck and he was – well – on the downside of his career. About the only thing he could tell Rukeyser, it seemed to me, was to cite the rule of 72 and proclaim that stocks and the Dow would be at 100,000 by 2030 or something like that. Now, approaching that same age, I’m a little more understanding and a little less young-buckish. If that was his only lesson, then it was a pretty good one I suppose – Dow 5,000 and the New Normal notwithstanding. And despite the strikingly premature departure of Peter Lynch and the transition of George Soros to philanthropic pursuits, there are some great examples of longevity in this business. Warren Buffett, of course, comes immediately to mind, as does Dan Fuss of Loomis Sayles, who may wind up as the Bear Bryant or Adolph Rupp of the bond business. Peter Bernstein, who passed away but a few months ago, was a brilliant writer and commentator on the investment scene well into his 80s. So there’s hope for you still, James Carville, and, I suppose, for me as well. It’s quite a privilege to be a “steward of the capital markets,” to have done it well for so long and to still be able to walk up to the plate and face a 95-mile-an-hour fastball. Or, is it a curve? Time will tell.

There have been numerous changeups and curveballs in the financial markets over the past 15 months or so. Liquidation, reliquification, and the substituting of the government wallet for the invisible hand of the private sector describe the events from 30,000 feet. Now that a semblance of stability has been imparted to the economy and its markets, the attempted detoxification and deleveraging of the private sector is underway. Having survived due to a steady two-trillion-dollar-plus dose of government “Red Bull,” Adderall, or simply strong black coffee, the global private sector is now expected by some to detox and resume a normal cyclical schedule where animal spirits and the willingness to take risk move front and center. But there is a problem. While corporations may be heading in that direction due to steep yield curves and government check writing that have partially repaired their balance sheets, their consumer customers remain fully levered and undercapitalized with little hope of escaping rehab as long as unemployment and underemployment remain at 10-20% levels worldwide. “Build it and they will come” is an old saw more applicable to Kevin Costner’s Field of Dreams than to today’s economy. “Say’s Law” proclaiming that supply creates its own demand is hardly applicable to a modern day credit-oriented society where credit cards are maxed out, 25% of homeowners are underwater, and job and income creation are nearly invisible.

In this New Normal environment it is instructive to observe that the operative word is “new” and that the use of historical models and econometric forecasting based on the experience of the past several decades may not only be useless, but counterproductive. When leveraging and deregulating not only slow down, but move into reverse gear encompassing deleveraging and reregulating, then it pays to look at historical examples where those conditions have prevailed. Two excellent studies provide assistance in that regard – the first, a study of eight centuries of financial crisis by Carmen Reinhart and Kenneth Rogoff titled This Time is Different, and the second, a study by the McKinsey Global Institute speaking to “Debt and deleveraging: The global credit bubble and its economic consequences.”

The Reinhart/Rogoff book speaks primarily to public debt that balloons in response to financial crises. It is a voluminous, somewhat academic production but it has numerous critical conclusions gleaned from an analysis of centuries of creditor/sovereign debt cycles. It states:

1. The true legacy of banking crises is greater public indebtedness, far beyond the direct headline costs of bailout packages. On average a country’s outstanding debt nearly doubles within three years following the crisis.
   
   
2. The aftermath of banking crises is associated with an average increase of seven percentage points in the unemployment rate, which remains elevated for five years.
   
   
3. Once a country’s public debt exceeds 90% of GDP, its economic growth rate slows by 1%.

Their conclusions are eerily parallel to events of the past 12 months and suggest that PIMCO’s New Normal may as well be described as the “time-tested historical reliable.” These examples tend to confirm that banking crises are followed by a deleveraging of the private sector accompanied by a substitution and escalation of government debt, which in turn slows economic growth and (PIMCO’s thesis) lowers returns on investment and financial assets. The most vulnerable countries in 2010 are shown in PIMCO’s chart “The Ring of Fire.” These red zone countries are ones with the potential for public debt to exceed 90% of GDP within a few years’ time, which would slow GDP by 1% or more. The yellow and green areas are considered to be the most conservative and potentially most solvent, with the potential for higher growth.

A different study by the McKinsey Group analyzes current leverage in the total economy (household, corporate and government debt) and looks to history, finding 32 examples of sustained deleveraging in the aftermath of a financial crisis. It concludes:

1. Typically deleveraging begins two years after the beginning of the crisis (2008 in this case) and lasts for six to seven years.
   
   
2. In about 50% of the cases the deleveraging results in a prolonged period of belt-tightening exerting a significant drag on GDP growth. In the remainder, deleveraging results in a base case of outright corporate and sovereign defaults or accelerating inflation, all of which are anathema to an investor.
   
   
3. Initial conditions are important. Currently the gross level of public and private debt is shown in Chart 2.

Initial conditions are important because the ability of a country to respond to a financial crisis is related to the size of its existing debt burden and because it points to future financing potential. Is it any wonder that in this New Normal, China, India, Brazil and other developing economies have fared far better than G-7 stalwarts? PIMCO’s New Normal distinguishes between emerging and developed economic growth, forecasting a much better future for the former as opposed to the latter. Chart 3 displays a startling recent historical and IMF future forecast for government debt levels of developed and developing countries. “Escalating” might be a conservative future description for advanced countries. “Stable” might now be more applicable to many emerging sovereigns.

What then is an investor to do? If, instead of econometric models founded on the past 30–40 years, an analysis must depend on centuries-old examples of deleveraging economies in the aftermath of a financial crisis, how does one select and then time an investment theme that can be expected to generate outperformance, or what professionals label “alpha?” Carefully and cautiously with regard to timing, I suppose, but rather aggressively in the selection process under the assumption that it’s never “different this time” and that history repeats as well as rhymes. Reinhart and Rogoff’s book, if anything, points to the inescapable conclusion that human nature is the one defining constant in history and that the cycles of greed, fear and their economic consequences paint an indelible landscape for investors to observe. If so, then investors should focus on the following 30,000-foot observations in the selection of global assets:

1. Risk/growth-oriented assets (as well as currencies) should be directed towards Asian/developing countries less levered and less easily prone to bubbling and therefore the negative deleveraging aspects of bubble popping. When the price is right, go where the growth is, where the consumer sector is still in its infancy, where national debt levels are low, where reserves are high, and where trade surpluses promise to generate additional reserves for years to come. Look, in other words, for a savings-oriented economy which should gradually evolve into a consumer-focused economy. China, India, Brazil and more miniature-sized examples of each would be excellent examples. The old established G-7 and their lookalikes as they delever have lost their position as drivers of the global economy.
   
   
2. Invest less risky, fixed income assets in many of these same countries if possible. Because of their reduced liquidity and less developed financial markets, however, most bond money must still look to the “old” as opposed to the new world for returns. It is true as well, that the “old” offer a more favorable environment from the standpoint of property rights and “willingness” to make interest payments under duress. Therefore, see #3 below.
   
   
3. Interest rate trends in developed markets may not follow the same historical conditions observed during the recent Great Moderation. The downward path of yields for many G-7 economies was remarkably similar over the past several decades with exception for the West German/East German amalgamation and the Japanese experience which still places their yields in relative isolation. Should an investor expect a similarly correlated upward wave in future years? Not as much. Not only have credit default expectations begun to widen sovereign spreads, but initial condition debt levels as mentioned in the McKinsey study will be important as they influence inflation and real interest rates in respective countries in future years. Each of several distinct developed economy bond markets presents interesting aspects that bear watching: 1) Japan with its aging demographics and need for external financing, 2) the U.S. with its large deficits and exploding entitlements, 3) Euroland with its disparate members – Germany the extreme saver and productive producer, Spain and Greece with their excessive reliance on debt and 4) the U.K., with the highest debt levels and a finance-oriented economy – exposed like London to the cold dark winter nights of deleveraging.

Of all of the developed countries, three broad fixed-income observations stand out: 1) given enough liquidity and current yields I would prefer to invest money in Canada. Its conservative banks never did participate in the housing crisis and it moved toward and stayed closer to fiscal balance than any other country, 2) Germany is the safest, most liquid sovereign alternative, although its leadership and the EU’s potential stance toward bailouts of Greece and Ireland must be watched. Think AIG and GMAC and you have a similar comparative predicament, and 3) the U.K. is a must to avoid. Its Gilts are resting on a bed of nitroglycerine. High debt with the potential to devalue its currency present high risks for bond investors. In addition, its interest rates are already artificially influenced by accounting standards that at one point last year produced long-term real interest rates of 1/2 % and lower.

The last decade – the “aughts” – were remarkable in a number of areas: jobless recoveries in major economies, negative equity returns in U.S. and other developed markets, and of course the financial crisis and its aftermath. If an investment manager and an investment management firm proved to be good stewards of capital markets during the turbulent but vapid “aughts,” they may be granted a license to navigate the rapids of the “teens,” a decade likely to be fed by the melting snows of debt deleveraging, offering life for unlevered emerging and developed economies, but risk and uncertainty for those overfed on a diet of financed-based consumption. Beware the ring of fire!

William H. Gross
Managing Director

Past performance is not a guarantee or a reliable indicator of future results. Investing in the bond market is subject to certain risks including market, interest-rate, issuer, credit, and inflation risk; investments may be worth more or less than the original cost when redeemed. Investing in foreign denominated and/or domiciled securities may involve heightened risk due to currency fluctuations, and economic and political risks, which may be enhanced in emerging markets.

This article contains the current opinions of the author but not necessarily those of the PIMCO Group. The author’s opinions are subject to change without notice. This article is distributed for informational purposes only. Forecasts, estimates, and certain information contained herein are based upon proprietary research and should not be considered as investment advice or a recommendation of any particular security, strategy or investment product. Information contained herein has been obtained from sources believed to be reliable, but not guaranteed. No part of this article may be reproduced in any form, or referred to in any other publication, without express written permission of Pacific Investment Management Company LLC. ©2010, PIMCO

Bill Gross February 2010

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http://www.bloomberg.com/apps/news?pid=20601087&sid=aAd.sSfnhpTA&pos=6

Harvard’s Rogoff Sees Sovereign Defaults, ‘Painful’ Austerity

By Aki Ito and Jason Clenfield

Feb. 24 (Bloomberg) -- Ballooning debt is likely to force several countries to default and the U.S. to cut spending, according to Harvard University Professor Kenneth Rogoff, who in 2008 predicted the failure of big American banks.

Following banking crises, “we usually see a bunch of sovereign defaults, say in a few years,” Rogoff, a former chief economist at the International Monetary Fund, said at a forum in Tokyo yesterday. “I predict we will again.”

The U.S. is likely to tighten monetary policy before cutting government spending, sending “shockwaves” through financial markets, Rogoff said in an interview after the speech. Fiscal policy won’t be curbed until soaring bond yields trigger “very painful” tax increases and spending cuts, he said.

Global scrutiny of sovereign debt has risen after budget shortfalls of countries including Greece swelled in the wake of the worst global financial meltdown since the 1930s. The U.S. is facing an unprecedented $1.6 trillion budget deficit in the year ending Sept. 30, the government has forecast.

“Most countries have reached a point where it would be much wiser to phase out fiscal stimulus,” said Rogoff, who co- wrote a history of financial crises published in 2009. It would be better “to keep monetary policy soft and start gradually tightening fiscal policy even if it meant some inflation.”

Failed Marriage

Rogoff, 56, said he expects Greece will eventually be bailed out by the IMF rather than the European Union. Greece will probably announce an austerity program “in a few weeks” that will prompt the EU to provide a bridge loan which won’t be enough to save the country in the long run, he said.

“It’s like two people getting married and saying therefore they’re living happily ever after,” said Rogoff. “I don’t think Europe’s going to succeed.”

Investors will eventually demand higher interest rates to lend to countries around the world that have accumulated debt, including the U.S., he said. The IMF forecast in November that gross U.S. borrowings will amount to the equivalent of 99.5 percent of annual economic output in 2011. The U.K.’s will reach 94.1 percent and Japan’s will spiral to 204.3 percent.

“In rich countries -- Germany, the United States and maybe Japan -- we are going to see slow growth. They will tighten their belts when the problem hits with interest rates,” Rogoff said at the forum, which was hosted by CLSA Asia-Pacific Markets, a unit of Credit Agricole SA, France’s largest retail bank. Japanese fiscal policy is “out of control,” he said.

Euro Concerns

So far concerns about the euro zone’s ability to withstand the deteriorating finances of its member nations have outweighed the U.S.’s deficit woes, propping up the dollar.

“The more they suck in Greece, the lower the euro goes, because it’s not a viable plan,” Rogoff said. “Clearly the dollar is going to go down against the emerging markets -- there’s going to be concern about inflation and the debt.”

The dollar has surged more than 9 percent against the euro in the past three months. Ten-year Treasuries yielded 3.72 percent as of 10:16 a.m. in New York.

The U.S. government will delay any efforts to contain the deficit until Treasury yields reach around 6 percent to 7 percent, Rogoff said.

“The U.S. is in a state of paralysis in its fiscal policy,” he said. “Monetary policy will tighten first, and I don’t think it’s the right mix.”

Fed Exit

The Federal Reserve last week raised the discount rate charged to banks for direct loans, and plans to end its $1.25 trillion purchases of mortgage-backed securities in March. President Barack Obama’s administration is proposing a $3.8 trillion budget for fiscal 2011 to spur the recovery.

“When they start tightening monetary policy even a little bit, it’s going to send shockwaves through the system,” Rogoff said.

In an interview a month before Lehman Brothers Holdings Inc. went bankrupt in 2008, Rogoff said “the worst is yet to come in the U.S.” and predicted the collapse of “major” investment banks. His 2009 book “This Time Is Different,” co- written with Carmen M. Reinhart, charts the history of financial crises in 66 countries.

“We almost always have sovereign risk crises in the wake of an international banking crisis, usually in a few years, and that’s happening,” he said. “Greece is just the beginning.”

Greece’s debt totaled 298.5 billion euros ($405 billion) at the end of 2009, according to the Finance Ministry. That’s more than five times more than Russia owed when it defaulted in 1998 and Argentina when it missed payments in 2001.

The cost of protecting Greek bonds from default surged in January, then declined this month as concern eased over the country’s creditworthiness. Credit-default swaps on Greek sovereign debt have fallen to 356 basis points from 428 last month, according to CMA DataVision. That’s up from 171 at the start of December.

“Greece just highlights that one of those risks is sovereign default,” said Naomi Fink, a strategist at Bank of Tokyo-Mitsubishi UFJ Ltd. Still, “it doesn’t justify the situation where we’re all in a panic and are going back to cash in the post-Lehman shock.”

To contact the reporters on this story: Aki Ito in Tokyo at aito16@bloomberg.net; Jason Clenfield in Tokyo at jclenfield@bloomberg.net.

Last Updated: February 23, 2010 10:19 EST
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http://www.pauljorion.com/blog/

25 fév 2010

Feu en la demeure !

Paul Jorion

Messieurs, Dames, des instances européennes, je m’adresse à vous : il y a feu en la demeure!

Vous ne sauverez pas la Grèce en lui enjoignant de baisser le salaire de ses fonctionnaires. Vous ne sauverez pas la Grèce en l’encourageant à combattre la fraude fiscale. Vous ne la sauverez pas non plus en créant une… cagnotte (on tombe ici dans le dérisoire !). Il est beaucoup trop tard pour tout cela. Et de toute manière, le problème n’est pas là.

Le 3 février, je participais à l’émission « Le Débat / The Debate » sur France 24. Si vous parlez l’anglais, écoutez je vous en prie ce que je dis quand la discussion s’enlise sur le sujet de savoir si les statistiques économiques de la Grèce ont été bidouillées oui ou non, et si vous ne parlez pas l’anglais, lisez s’il vous plaît la façon dont je résume mon intervention :

Je dis qu’il y a à nouveau un petit jeu sur les Credit-Default Swaps (CDS). Cette fois, ce n’est plus 1) Bear Stearns, 2) Lehman Brothers, 3) Merrill Lynch, c’est 1) Grèce, 2) Portugal, 3) Espagne. Ce que font en ce moment les marchés financiers n’est pas sans rappeler l’opération de George Soros qui coula la livre britannique en 1992 (quand on pense que le renouveau de la « science » économique est entre ses mains !)

Votre cagnotte pour la Grèce, si péniblement rassemblée, sera emportée par la bourrasque en quelques heures, et il vous en faudra immédiatement quatre autres : une autre pour le Portugal, une pour l’Irlande, une pour Chypre et une beaucoup plus grosse que les quatre autres mises ensemble, pour l’Espagne.

Vous aurez alors quelques jours pour reprendre votre souffle parce que la victime suivante ne fait pas partie de la zone euro puisqu’il s’agira du Royaume-Uni.

Il n’est pas question de salaires trop élevés : il s’agit de dominos, et de la même manière que le nom de Lehman Brothers était écrit dans le ciel le jour où Bear Stearns est tombée, le nom du Portugal s’inscrira au firmament le jour où la Grèce fera défaut sur sa dette.

Alors que faire ? Tourner les projecteurs vers la cause. Vers la combinaison mortifère des notations de la dette publique des États par les agences de notation et les positions nues des Credit–Default Swaps, ces paris faits par des gens qui ne courent aucun risque mais qui créent du risque systémique à la pelle, dans un seul but : d’énormes gains personnels.

Il est temps, Messieurs, Dames, d’envisager l’interdiction des paris sur les fluctuations de prix.

Ne m’objectez pas que c’est compliqué : ce ne l’est pas, c’est déjà écrit en filigrane dans la norme comptable américaine FASB 133.

Ne me dites pas que cela va « affecter la liquidité » : à ce reproche, j’ai l’habitude de répondre que les parieurs ne créent de la liquidité que pour d’autres parieurs et que cela n’a donc aucune importance, mais aujourd’hui, j’ajouterai autre chose : « À ce stade-ci de désintégration probable de la zone euro : la liquidité, on s’en fiche ! »

(*) Un « article presslib’ » est libre de reproduction en tout ou en partie à condition que le présent alinéa soit reproduit à sa suite. Paul Jorion est un « journaliste presslib’ » qui vit exclusivement de ses droits d’auteurs et de vos contributions. Il pourra continuer d’écrire comme il le fait aujourd’hui tant que vous l’y aiderez. Votre soutien peut s’exprimer ici.