Naomi Klein/Democracy Now/Criminalization of Gov.

In Praise of a Rocky Transition
by Naomi Klein, The Nation, November 13, 2008

The more details emerge, the clearer it becomes that Washington's handling of the Wall Street bailout is not merely incompetent. It is borderline criminal.

"In a moment of high panic in late September, the US Treasury unilaterally pushed through a radical change in how bank mergers are taxed--a change long sought by the industry. Despite the fact that this move will deprive the government of as much as $140 billion in tax revenue, lawmakers found out only after the fact. According to the Washington Post, more than a dozen tax attorneys agree that "Treasury had no authority to issue the notice."

Of equally dubious legality are the equity deals Treasury has negotiated with many of the country's banks. According to Congressman Barney Frank, one of the architects of the legislation that enables the deals, "Any use of these funds for any purpose other than lending--for bonuses, for severance pay, for dividends, for acquisitions of other institutions, etc.--is a violation of the act." Yet this is exactly how the funds are being used.

Then there is the nearly $2 trillion the Federal Reserve has handed out in emergency loans. Incredibly, the Fed will not reveal which corporations have received these loans or what it has accepted as collateral. Bloomberg News believes that this secrecy violates the law and has filed a federal suit demanding full disclosure.

Despite all of this potential lawlessness, the Democrats are either openly defending the administration or refusing to intervene. "There is only one president at a time," we hear from Barack Obama. That's true. But every sweetheart deal the lame-duck Bush administration makes threatens to hobble Obama's ability to make good on his promise of change. To cite just one example, that $140 billion in missing tax revenue is almost the same sum as Obama's renewable energy program. Obama owes it to the people who elected him to call this what it is: an attempt to undermine the electoral process by stealth.

Yes, there is only one president at a time, but that president needed the support of powerful Democrats, including Obama, to get the bailout passed. Now that it is clear that the Bush administration is violating the terms to which both parties agreed, the Democrats have not just the right but a grave responsibility to intervene forcefully.

I suspect that the real reason the Democrats are so far failing to act has less to do with presidential protocol than with fear: fear that the stock market, which has the temperament of an overindulged 2-year-old, will throw one of its world-shaking tantrums. Disclosing the truth about who is receiving federal loans, we are told, could cause the cranky market to bet against those banks. Question the legality of equity deals and the same thing will happen. Challenge the $140 billion tax giveaway and mergers could fall through. "None of us wants to be blamed for ruining these mergers and creating a new Great Depression," explained one unnamed Congressional aide.

More than that, the Democrats, including Obama, appear to believe that the need to soothe the market should govern all key economic decisions in the transition period. Which is why, just days after a euphoric victory for "change," the mantra abruptly shifted to "smooth transition" and "continuity."

Take Obama's pick for chief of staff. Despite the Republican braying about his partisanship, Rahm Emanuel, the House Democrat who received the most donations from the financial sector, sends an unmistakably reassuring message to Wall Street. When asked on This Week With George Stephanopoulos whether Obama would be moving quickly to increase taxes on the wealthy, as promised, Emanuel pointedly did not answer the question.

This same market-coddling logic should, we are told, guide Obama's selection of treasury secretary. Fox News's Stuart Varney explained that Larry Summers, who held the post under Clinton, and former Fed chair Paul Volcker would both "give great confidence to the market." We learned from MSNBC's Joe Scarborough that Summers is the man "the Street would like the most."

Let's be clear about why. "The Street" would cheer a Summers appointment for exactly the same reason the rest of us should fear it: because traders will assume that Summers, champion of financial deregulation under Clinton, will offer a transition from Henry Paulson so smooth we will barely know it happened. Someone like FDIC chair Sheila Bair, on the other hand, would spark fear on the Street--for all the right reasons.

One thing we know for certain is that the market will react violently to any signal that there is a new sheriff in town who will impose serious regulation, invest in people and cut off the free money for corporations. In short, the markets can be relied on to vote in precisely the opposite way that Americans have just voted. (A recent USA Today/Gallup poll found that 60 percent of Americans strongly favor "stricter regulations on financial institutions," while just 21 percent support aid to financial companies.)

There is no way to reconcile the public's vote for change with the market's foot-stomping for more of the same. Any and all moves to change course will be met with short-term market shocks. The good news is that once it is clear that the new rules will be applied across the board and with fairness, the market will stabilize and adjust. Furthermore, the timing for this turbulence has never been better. Over the past three months, we've been shocked so frequently that market stability would come as more of a surprise. That gives Obama a window to disregard the calls for a seamless transition and do the hard stuff first. Few will be able to blame him for a crisis that clearly predates him, or fault him for honoring the clearly expressed wishes of the electorate. The longer he waits, however, the more memories fade.

When transferring power from a functional, trustworthy regime, everyone favors a smooth transition. When exiting an era marked by criminality and bankrupt ideology, a little rockiness at the start would be a very good sign."

Robert B. Reckmeyer, November 18th 2008

The criminalization of our government to the tune of trillions of $$$$$$ and both political parties are complicit in the crimes. They are either to weak to act or part of the scam. It all comes down to a spiritual dynamic, service to self (power and control) or service to others (love and compassion).

Years ago, from 1970 till 1982 (the last overt act in the indictment) I smoked pot and sold it on a large scale. I broke the law dealing with a natural herbal substance and I pled guilty for my illegal acts. Conversely I was sentenced to Federal Prison, served my eight (8) years (96 months) not an easy punishment for any man, woman or child. I did plead guilty, pay my debt (oppressive) and rebuild my life.

I came home joined the "system" paid my taxes, collected taxes on my employees and complied with the rules, regulations and laws of the land. Now I watch the fleecing of the public, through corrupt, illegal practices, protected by a criminal political system and I have to ask myself and every person reading this Blog, what the hell are we doing to stop this madness.

This great nation of ours is being liquidated my a criminal element, see the Bush Crime Family on my website, www.truth-in-government.com, both corporate, political, banksters (Anglo-American) and we sit back and do nothing! They loot our 401 k, our equity in our homes, our jobs and people are in a fog. May I suggest we organize and march on Washington demanding action to take back our government.

The first assessment of Obama does not look good. He is assembling a National Security Team that spells more of the same, not fundamental change. He has spoken of widening the war to Pakistan and has Zbigniew Brzezinski front and center.

I am as hopeful as any person but without grassroots action, nothing will really change. We can't just vote for change, we have to continue to bring the pressure on our government or it won't happen. The power elite are bringing their pressure on the government and trust me they won't let up until they own and control everything.

Peace

RR

USA Great Depression

Michel Chossudovski
Global Research
November 16, 2008

The financial crisis is deepening, with the risk of seriously disrupting the system of international payments.

This crisis is far more serious than the Great Depression. All major sectors of the global economy are affected. Recent reports suggest that the system of Letters of Credit as well as international shipping, which constitute the lifeline of the international trading system, are potentially in jeopardy.

The proposed bank "bailout" under the so-called Troubled Asset Relief Program (TARP) is not a "solution" to the crisis but the "cause" of further collapse.

The "bailout" contributes to a further process of destabilization of the financial architecture. It transfers large amounts of public money, at taxpayers expense, into the hands of private financiers. It leads to a spiraling public debt and an unprecedented centralization of banking power. Moreover, the bailout money is used by the financial giants to secure corporate acquisitions both in the financial sector and the real economy.

In turn, this unprecedented concentration of financial power spearheads entire sectors of industry and the services economy into bankruptcy, leading to the layoff of tens of thousands of workers.

The upper spheres of Wall Street overshadow the real economy. The accumulation of large amounts of money wealth by a handful of Wall Street conglomerates and their associated hedge funds is reinvested in the acquisition of real assets.

Paper wealth is transformed into the ownership and control of real productive assets, including industry, services, natural resources, infrastructure, etc.

Collapse of Consumer Demand

The real economy is in crisis. The resulting increase in unemployment is conducive to a dramatic decline in consumer spending which in turn backlashes on the levels of production of goods and services.

Exacerbated by neoliberal macro-economic policy, this downward spiral is cumulative, ultimately leading to an oversupply of commodities.

Business enterprises cannot sell their products, because workers have been laid off. Consumers, namely working people, have been deprived of the purchasing power required to fuel economic growth. With their meager earnings, they cannot afford to acquire the goods produced.

Overproduction Triggers a String of Bankruptcies

Inventories of unsold goods pile up. Eventually, production collapses; the supply of commodities declines through the closing down of production facilities, including manufacturing assembly plants.

In the process of plant closure, more workers become unemployed. Thousands of bankrupt firms are driven off the economic landscape, leading to a slump in production.

Mass poverty and a Worldwide decline in living standards is the result of low wages and mass unemployment. It is the outcome of a preexisting global cheap labor economy, largely characterized by low wage assembly plants in Third World countries.

The current crisis extends the geographic contours of the cheap labor economy, leading to the impoverishment of large sectors of the population in the so-called developed countries (including the middle classes).

In the US, Canada and Western Europe, the entire industrial sector is potentially in jeopardy.

We are dealing with a long-term process of economic and financial restructuring. In its earlier phase, starting in the 1980s during the Reagan Thatcher era, local and regional level enterprises, family farms and small businesses were displaced and destroyed. In turn, the merger and acquisition boom of the 1990s led to the concurrent consolidation of large corporate entities both in the real economy as well as in banking and financial services.

In recent developments, however, the concentration of bank power has been at the expense of big business.

What is distinct in this particular phase of the crisis, is the ability of the financial giants (through their overriding control over credit) not only to create havoc in the production of goods and services, but also to undermine and destroy large corporate entities of the real economy.

Bankruptcies are occurring in all major sectors of activity: Manufacturing, telecoms, consumer retail outlets, shopping malls, airlines, hotels and tourism, not to mention real estate and the construction industry, victims of the subprime mortgage meltdown.

General Motors has confirmed that "it could run out of cash within a few months, which could prompt one of the biggest bankruptcy filings in U.S. history". November 11, 2008)) In turn this would backlash on a string of related industries. Estimates of job losses in the US auto industry range from 30,000 to as much as 100,000.(Ibid).

In the US, consumer retail companies are in difficulty: the share prices of JC Penney and Nordstrom department store chains have collapsed. Circuit City Stores Inc. filed for Chapter 11 protection. The shares of Best Buy, the electronics retail chain, have plunged.

The Vodafone Group PLC, the world’s biggest mobile phone company not to mention InterContinental Hotels PLC are in difficulty, following the collapse of stock values. (AP, Nov 12, 2008). Worldwide, over two dozen airlines have gone under in 2008, adding to a string of airline bankruptcies in the course of the last five years. 30 October 2008). Denmark’s Second commercial airline Stirling has declared bankruptcy. In the US, a growing list of real estate companies have already filed for bankruptcy protection.

In the last two months, there have been numerous plant closures across America leading to the permanent layoff of tens of thousands of workers. These closures have affected several key areas of economic activity including the pharmaceutical and chemical industries, the automobile industry and related sectors, the services economy, etc.

US factory orders have declined dramatically. Research firm Autodata reported in October that "sales of cars and light trucks in September had declined 27 percent compared with a year earlier."(

Unemployment

According to the US Bureau of Labor Statistics, an additional 240,000 jobs were lost during the month of October alone:

"Nonfarm payroll employment fell by 240,000 in October, and the unemployment rate rose from 6.1 to 6.5 percent, the Bureau of Labor Statistics of the U.S. Department of Labor reported today. October’s drop in payroll employment followed declines of 127,000 in August and 284,000 in September, as revised. Employment has fallen by 1.2 million in the first 10 months of 2008; over half of the decrease has occurred in the past 3 months. In October, job losses continued in manufacturing, construction, and several service-providing industries…

Among the unemployed, the number of persons who lost their job and did not expect to be recalled to work rose by 615,000 to 4.4 million in October. Over the past 12 months, the size of this group has increased by 1.7 million."

The official figures do not describe the seriousness of the crisis and its devastating impact on the labor market, since many of the job losses are not reported.

The situation in the European Union is equally disturbing. A recent British report points to the potential plight of mass unemployment in North Eastern England. In Germany, a report published in October, suggests that 10-15% of all automotive jobs in Germany could be lost.

Job cuts have also been announced at General Motors and Nissan-Renault plants in Spain. Sales of new cars in Spain plummeted by 40 percent in October in relation to sales in the same month last year.

Bankruptcies and Foreclosures: A Money-spinning Operation for the Financial Giants

Among the companies on the verge of bankruptcy are some highly lucrative and profitable operations. The important question: who takes over the ownership of bankrupt giant industrial corporations?

Bankruptcies and foreclosures are a money-spinning operation. With the collapse in stock market values, listed companies experience a major collapse of the price of their stock, which immediately affects their creditworthiness and their ability to borrow and/ or to renegotiate debts ( which are based on the quoted value of their assets).

The institutional speculators, the hedge funds, et al have cashed in on their windfall loot.

They trigger the collapse of listed companies through short selling and other speculative operations. They then cash in on their large scale speculative gains.

According to a report in the Financial Times, there is evidence that the plunge of the US automobile industry was in part the result of manipulation: "General Motors and Ford lost 31 per cent to $3.01 and 10.9 per cent to $1.80 despite hopes that Washington may save the industry from the brink of collapse. The fall came after Deutsche Bank set a price target of zero on GM." (FT, November 14, 2008, emphasis added)

The financiers are on a shopping-spree. America’s Forbes 400 billionaires are waiting in limbo.

Once they have consolidated their position in the banking industry, the financial giants including JP Morgan Chase, Bank of America, et al will use their windfall money gains and bailout money provided under TARP, to further extend their control over the real economy.

The next step consists in transforming liquid assets, namely money paper wealth, into the acquisition of real economy assets.

In this regard, Warren Buffett’s Berkshire Hathaway Inc. is a major shareholder of General Motors. More recently, following the collapse in stock values in October and November, Buffett boosted his stake in oil producer ConocoPhillips, not to mention Eaton Corp, whose price on the NYSE tumbled by 62% in relation to its December 2007 high (Bloomberg).

The target of these acquisitions are the numerous highly productive industrial and services sector companies, which are on the verge of bankruptcy and/or whose stock values have collapsed.

The money managers are picking up the pieces.

Ownership of the Real Economy

As a result of these developments, which are directly related to the financial meltdown, the entire ownership structure of real economy assets is in turmoil.

Paper wealth accumulated through insider trading and stock market manipulation is used to acquire control over real economic assets, displacing the preexisting ownership structures.

What we are dealing with is an unsavory relationship between the real economy and the financial sector. The financial conglomerates do not produce commodities. They essentially make money through the conduct of financial transactions. They use the proceeds of these transactions to take over bona fide real economy corporations which produce goods and services for household consumption.

In a bitter twist, the new owners of industry are the institutional speculators and financial manipulators. They are becoming the new captains of industry, displacing not only the preexisting structures of ownership but also instating their cronies in the seats of corporate management.

No Reform Possible under the Washington-Wall Street Consensus

The November 15 G-20 Financial Summit in Washington upholds the Washington-Wall Street consensus.

While formally presenting a project to restore financial stability, in practice, the hegemony of Wall Street remains unscathed. The tendency is towards a unipolar monetary system dominated by the United States and upheld by US military superiority.

The architects of financial disaster under the 1999 Gramm-Leach-Bliley Financial Services Modernization Act (FSMA) have been entrusted with the task of mitigating the crisis, which they themselves created. They are the cause of financial collapse.

The G20 Financial Summit doesn’t question the legitimacy of the hedge funds and the various instruments of derivative trade. The final Communiqué includes an imprecise and blurred commitment "to better regulate hedge funds and create more transparency in mortgage-related securities in a bid to halt a global economic slide."

A solution to this crisis can only be brought about through a process of "financial disarmament", which forcefully challenges the hegemony of the Wall Street financial institutions including their control over monetary policy. "Financial disarmament" would also require freezing the instruments of speculative trade, dismantling the hedge funds and democratizing monetary policy. The term "financial disarmament" was initially coined by John Maynard Keynes in the 1940s.

Obama Endorses Financial Deregulation

Barack Obama has embraced the Washington-Wall Street consensus. In a bitter twist, former Congressman Jim Leach, a Republican who sponsored the 1999 FSMA in the House of Representatives is now advising Obama on formulating a timely solution to the crisis.

Jim Leach, Madeleine Albright and former Treasury Secretary Larry Summers, who also played a key role in pushing through the FSMA legislation, were in attendance at the November 15 G-20 Financial Summit, as part of President-elect Barack Obama’s advisory team:

"President-elect Barack Obama and Vice President-elect Joe Biden announced that former Secretary of State Madeleine Albright and former Republican Congressman Jim Leach would be available to meet with delegations at the G-20 summit on their behalf. Leach and Albright are holding these unofficial meetings to seek input from visiting delegations on behalf of the president-elect and vice president-elect.

Hold on for the ride..................

RR