112 G20 Summit secretly set up IMF as Global Central Bank - Ellen Brown

(1) G20 Summit secretly set up IMF as Global Central Bank - Ellen Brown
(2) IMF head rejects Tobin Tax
(3) Japanese consumer prices fall at record rate
(4) U.S. issues $7 trillion debt
(5) The Economy Is A Lie, Too - Paul Craig Roberts
(6) America's Failed Model - not looking so Super anymore
(7) U.S. relinquishes some control of the internet

(1) G20 Summit secretly set up IMF as Global Central Bank - Ellen Brown
From: Ellen Brown <ellenhbrown@gmail.com> Date: 02.10.2009 11:24 AM

http://www.huffingtonpost.com/ellen-brown/the-imf-catapults-from-sh_b_306665.html

The IMF Catapults From Shunned Agency to Global Central Bank

by Ellen Brown

October 1, 2009 07:20 PM

"A year ago," said law professor Ross Buckley on Australia's ABC News last week, "nobody wanted to know the International Monetary Fund. Now it's the organiser for the international stimulus package which has been sold as a stimulus package for poor countries."

The IMF may have catapulted to a more exalted status than that. According to Jim Rickards, director of market intelligence for scientific consulting firm Omnis, the unannounced purpose of last week's G20 Summit in Pittsburgh was that "the IMF is being anointed as the global central bank." Rickards said in a CNBC interview on September 25 that the plan is for the IMF to issue a global reserve currency that can replace the dollar.

"They've issued debt for the first time in history," said Rickards. "They're issuing SDRs. The last SDRs came out around 1980 or '81, $30 billion. Now they're issuing $300 billion. When I say issuing, it's printing money; there's nothing behind these SDRs."

SDRs, or Special Drawing Rights, are a synthetic currency originally created by the IMF to replace gold and silver in large international transactions. But they have been little used until now. Why does the world suddenly need a new global fiat currency and global central bank? Rickards says it because of "Triffin's Dilemma," a problem first noted by economist Robert Triffin in the 1960s. When the world went off the gold standard, a reserve currency had to be provided by some large-currency country to service global trade. But leaving its currency out there for international purposes meant that the country would have to continually buy more than it sold, running large deficits; and that meant it would eventually go broke. The U.S. has fueled the world economy for the last 50 years, but now it is going broke. The U.S. can settle its debts and get its own house in order, but that would cause world trade to contract. A substitute global reserve currency is needed to fuel the global economy while the U.S. solves its debt problems, and that new currency is to be the IMF's SDRs.

That's the solution to Triffin's dilemma, says Rickards, but it leaves the U.S. in a vulnerable position. If we face a war or other global catastrophe, we no longer have the privilege of printing money. We will have to borrow the global reserve currency like everyone else, putting us at the mercy of the global lenders.

To avoid that, the Federal Reserve has hinted that it is prepared to raise interest rates, even though that would mean further squeezing the real estate market and the real economy. Rickards pointed to an oped piece by Fed governor Kevin Warsh, published in The Wall Street Journal on the same day the G20 met. Warsh said that the Fed would need to raise interest rates if asset prices rose - which Rickards interpreted to mean gold, the traditional go-to investment of investors fleeing the dollar. "Central banks hate gold because it limits their ability to print money," said Rickards. If gold were to suddenly go to $1,500 an ounce, it would mean the dollar was collapsing. Warsh was giving the market a heads up that the Fed wasn't going to let that happen. The Fed would raise interest rates to attract dollars back into the country. As Rickards put it, "Warsh is saying, 'We sort of have to trash the dollar, but we're going to do it gradually.' ... Warsh is trying to preempt an unstable decline in the dollar. What they want, of course, is a stable, steady decline."

What about the Fed's traditional role of maintaining price stability? It's nonsense, said Rickards. "What they do is inflate the dollar to prop up the banks." The dollar has to be inflated because there is more debt outstanding than money to pay it with. The government currently has contingent liabilities of $60 trillion. "There's no feasible combination of growth and taxes that can fund that liability," Rickards said. The government could fund about half that in the next 14 years, which means the dollar needs to be devalued by half in that time.

The Dollar Needs to be Devalued by Half?

Reducing the value of the dollar by half means that our hard-earned dollars are going to go only half as far, something that does not sound like a good thing for Main Street. Indeed, when we look more closely, we see that the move is not designed to serve us but to serve the banks. Why does the dollar need to be devalued? It is to compensate for a dilemma in the current monetary scheme that is even more intractable than Triffin's, one that might be called a fraud. There is never enough money to cover the outstanding debt, because all money today except coins is created by banks in the form of loans, and more money is always owed back to the banks than they advance when they create their loans. Banks create the principal but not the interest necessary to pay their loans back.

The Fed, which is owned by a consortium of banks and was set up to serve their interests, is tasked with seeing that the banks are paid back; and the only way to do that is to inflate the money supply to create the dollars to cover the missing interest. But that means diluting the value of the dollar, which imposes a stealth tax on the citizenry; and the money supply is inflated by making more loans, which adds to the debt and interest burden that the inflated money supply was supposed to relieve. The banking system is basically a pyramid scheme, which can be kept going only by continually creating more debt.

The IMF's $500 Billion Stimulus Package: Designed to Help Developing Countries or the Banks?

And that brings us back to the IMF's stimulus package discussed last week by Professor Buckley. The package was billed as helping emerging nations hard hit by the global credit crisis, but Buckley doubts that that is what is really going on. Rather, he says, the $500 billion pledged by the G20 nations is "a stimulus package for the rich countries' banks."

Why does he think that? Because stimulus packages are usually grants. The money coming from the IMF will be extended in the form of loans.

These are loans that are made by the G20 countries through the IMF to poor countries. They have to be repaid and what they're going to be used for is to repay the international banks now. ... [T]he money won't really touch down in the poor countries. It will go straight through them to repay their creditors. ... But the poor countries will spend the next 30 years repaying the IMF.

Basically, said Professor Buckley, the loans extended by the IMF represent an increase in seniority of the debt. That means developing nations will be even more firmly locked in debt than they are now.

At the moment the debt is owed by poor countries to banks, and if the poor countries had to, they could default on that. The bank debt is going to be replaced by debt that's owed to the IMF, which for very good strategic reasons the poor countries will always service. ... The rich countries have made this $500 billion available to stimulate their own banks, and the IMF is a wonderful party to put in between the countries and the debtors and the banks.

Not long ago, the IMF was being called obsolete. Now it is back in business with a vengeance; but it's the old unseemly business of serving as the collection agency for the international banking industry. As long as third world debtors can service their loans by paying the interest on them, the banks can count the loans as "assets" on their books, allowing them to keep their pyramid scheme going by inflating the global money supply with yet more loans. It is all for the greater good of the banks and their affiliated multinational corporations; but the $500 billion in funding is coming from the taxpayers of the G20 nations, and the foreseeable outcome will be that the United States will join the ranks of debtor nations subservient to a global empire of central bankers.

(2) IMF head rejects Tobin Tax

http://www.reuters.com/article/usDollarRpt/idUSFCC00002920091002

IMF chief: "simplistic" financial tax won't work

Fri Oct 2, 2009 5:00am EDT

ISTANBUL, Oct 2 (Reuters) - International Monetary Fund Managing Director Dominique Strauss-Kahn said on Friday a "simplistic" tax on financial transactions would not be a good idea, but the IMF will continue work on proposals for systemic risk funding from the financial sector.

"I don't think that the very simplistic idea of just putting a tax on transactions will work; for many technical reasons I think it's very difficult to implement," Strauss-Kahn said at a briefing at the opening of IMF annual meetings here.

But he added that the idea of having money come from the financial sector to deal with systemic risks created by financial institutions is a good idea worth further study. The IMF will prepare a report on such special funding for the Group of 20 rich and developing economies, he added. (Reporting by David Lawder; Editing by Ruth Pitchford)

(3) Japanese consumer prices fall at record rate

From: geab@leap2020.eu Date: 01.10.2009 06:52 AM

The decline in Japanese consumer prices accelerated last month to the sharpest pace since records began in the early 1970s, fuelling fears that persistent deflation could weaken the country’s nascent recovery. Core consumer prices excluding fresh food, which have been falling since March, dropped 2.4 per cent in August from a year ago, compared with a 2.2 per cent decline in July, according to figures from the Statistics Bureau.

Financial Times

http://www.ft.com/cms/s/0/d95282c8-aca1-11de-a754-00144feabdc0.html

(4) U.S. issues $7 trillion debt
From: geab@leap2020.eu Date: 01.10.2009 06:52 AM

The U.S. government will have issued $7 trillion in bonds by the time the current fiscal year ends next week, but it expects the debt deluge to stabilize by mid 2010, a Treasury official said on Wednesday. Though markets and the economy are improving, efforts to provide a firm foundation for recovery will require increases to the U.S. Treasury's conventional bonds going forward, as well as debt securities that are indexed to inflation.

U.S. issues $7 trillion debt, supply to stabilize

By Burton Frierson Burton Frierson – Wed Sep 23, 12:45 pm ET

Yahoo/Reuters

http://news.yahoo.com/s/nm/20090923/bs_nm/us_usa_treasury_ramanathan

NEW YORK (Reuters) – The U.S. government will have issued $7 trillion in bonds by the time the current fiscal year ends next week, but it expects the debt deluge to stabilize by mid 2010, a Treasury official said on Wednesday.

Though markets and the economy are improving, efforts to provide a firm foundation for recovery will require increases to the U.S. Treasury's conventional bonds going forward, as well as debt securities that are indexed to inflation.

However, this expansion may take place in an environment where investors consider leaving the safe-haven Treasury market for riskier assets, and debt issuance is likely to level off mid next year, said Treasury Acting Assistant Secretary for Financial Markets Karthik Ramanathan.

"In fiscal year 2009, which ends next week, Treasury will have issued $7 trillion in gross issuance -- that's in a 12-month period," Ramanathan told a financial markets conference in New York.

"This issuance was necessary to meet nearly $1.7 trillion in net marketable borrowing needs, nearly $1 trillion more than what we raised last year," he added.

DEMAND TO WANE

The heavily-indebted U.S. government has seen tremendous demand for Treasury debt securities this year due to a flight-to-quality into the safe haven assets.

However, Ramanathan said some of this demand would begin to taper off and investors were likely to favor other sectors as the financial markets recovery continues. ...

(5) The Economy Is A Lie, Too - Paul Craig Roberts

From: IHR News <news@ihr.org> Date: 01.10.2009 04:40 PM

http://www.informationclearinghouse.info/article23550.htm

The Economy Is A Lie, Too

By Paul Craig Roberts

September 21, 2009 "Information Clearing House" --- Americans cannot get any truth out of their government about anything, the economy included. Americans are being driven into the ground economically, with one million school children now homeless, while Federal Reserve chairman Ben Bernanke announces that the recession is over.

The spin that masquerades as news is becoming more delusional. Consumer spending is 70% of the US economy. It is the driving force, and it has been shut down. Except for the super rich, there has been no growth in consumer incomes in the 21st century. Statistician John Williams of shadowstats.com reports that real household income has never recovered its pre-2001 peak.

The US economy has been kept going by substituting growth in consumer debt for growth in consumer income. Federal Reserve chairman Alan Greenspan encouraged consumer debt with low interest rates. The low interest rates pushed up home prices, enabling Americans to refinance their homes and spend the equity. Credit cards were maxed out in expectations of rising real estate and equity values to pay the accumulated debt. The binge was halted when the real estate and equity bubbles burst.

As consumers no longer can expand their indebtedness and their incomes are not rising, there is no basis for a growing consumer economy. Indeed, statistics indicate that consumers are paying down debt in their efforts to survive financially. In an economy in which the consumer is the driving force, that is bad news.

The banks, now investment banks thanks to greed-driven deregulation that repealed the learned lessons of the past, were even more reckless than consumers and took speculative leverage to new heights. At the urging of Larry Summers and Goldman Sachs’ CEO Henry Paulson, the Securities and Exchange Commission and the Bush administration went along with removing restrictions on debt leverage.

When the bubble burst, the extraordinary leverage threatened the financial system with collapse. The US Treasury and the Federal Reserve stepped forward with no one knows how many trillions of dollars to “save the financial system,” which, of course, meant to save the greed-driven financial institutions that had caused the economic crisis that dispossessed ordinary Americans of half of their life savings.

The consumer has been chastened, but not the banks. Refreshed with the TARP $700 billion and the Federal Reserve’s expanded balance sheet, banks are again behaving like hedge funds. Leveraged speculation is producing another bubble with the current stock market rally, which is not a sign of economic recovery but is the final savaging of Americans’ wealth by a few investment banks and their Washington friends. Goldman Sachs, rolling in profits, announced six figure bonuses to employees.

The rest of America is suffering terribly.

The unemployment rate, as reported, is a fiction and has been since the Clinton administration. The unemployment rate does not include jobless Americans who have been unemployed for more than a year and have given up on finding work. The reported 10% unemployment rate is understated by the millions of Americans who are suffering long-term unemployment and are no longer counted as unemployed. As each month passes, unemployed Americans drop off the unemployment role due to nothing except the passing of time.

The inflation rate, especially “core inflation,” is another fiction. “Core inflation” does not include food and energy, two of Americans’ biggest budget items. The Consumer Price Index (CPI) assumes, ever since the Boskin Commission during the Clinton administration, that if prices of items go up consumers substitute cheaper items. This is certainly the case, but this way of measuring inflation means that the CPI is no longer comparable to past years, because the basket of goods in the index is variable.

The Boskin Commission’s CPI, by lowering the measured rate of inflation, raises the real GDP growth rate. The result of the statistical manipulation is an understated inflation rate, thus eroding the real value of Social Security income, and an overstated growth rate. Statistical manipulation cloaks a declining standard of living.

In bygone days of American prosperity, American incomes rose with productivity. It was the real growth in American incomes that propelled the US economy.

In today’s America, the only incomes that rise are in the financial sector that risks the country’s future on excessive leverage and in the corporate world that substitutes foreign for American labor. Under the compensation rules and emphasis on shareholder earnings that hold sway in the US today, corporate executives maximize earnings and their compensation by minimizing the employment of Americans.

Try to find some acknowledgement of this in the “mainstream media,” or among economists, who suck up to the offshoring corporations for grants.

The worst part of the decline is yet to come. Bank failures and home foreclosures are yet to peak. The commercial real estate bust is yet to hit. The dollar crisis is building.

When it hits, interest rates will rise dramatically as the US struggles to finance its massive budget and trade deficits while the rest of the world tries to escape a depreciating dollar.

Since the spring of this year, the value of the US dollar has collapsed against every currency except those pegged to it. The Swiss franc has risen 14% against the dollar. Every hard currency from the Canadian dollar to the Euro and UK pound has risen at least 13 % against the US dollar since April 2009. The Japanese yen is not far behind, and the Brazilian real has risen 25% against the almighty US dollar. Even the Russian ruble has risen 13% against the US dollar.

What sort of recovery is it when the safest investment is to bet against the US dollar?

The American household of my day, in which the husband worked and the wife provided household services and raised the children, scarcely exists today. Most, if not all, members of a household have to work in order to pay the bills. However, the jobs are disappearing, even the part-time ones.

If measured according to the methodology used when I was Assistant Secretary of the Treasury, the unemployment rate today in the US is above 20%. Moreover, there is no obvious way of reducing it. There are no factories, with work forces temporarily laid off by high interest rates, waiting for a lower interest rate policy to call their workforces back into production.

The work has been moved abroad. In the bygone days of American prosperity, CEOs were inculcated with the view that they had equal responsibilities to customers, employees, and shareholders. This view has been exterminated. Pushed by Wall Street and the threat of takeovers promising “enhanced shareholder value,” and incentivized by “performance pay,” CEOs use every means to substitute cheaper foreign employees for Americans .

Despite 20% unemployment and cum laude engineering graduates who cannot find jobs or even job interviews, Congress continues to support 65,000 annual H-1B work visas for foreigners.

In the midst of the highest unemployment since the Great Depression what kind of a fool do you need to be to think that there is a shortage of qualified US workers?

(6) America's Failed Model - not looking so Super anymore

From: IHR News <news@ihr.org> Date: 01.10.2009 04:40 PM

Steven Hill -- The Guardian (Britain)

http://www.guardian.co.uk/commentisfree/cifamerica/2009/sep/15/europe-us-healthcare-economy

America's failed model for the world

Europeans keep asking me, has America lost its mind? From healthcare to its economy, the US is looking merely average

   o Steven Hill
   o guardian.co.uk, Wednesday 16 September 2009 16.00 BST

Europeans are shaking their heads over their American friends again. Whether talking to people in the street, in the cafés or to journalists or political leaders, everyone here asks me the same question: Has America lost its mind? Town halls filled with angry citizens, shouting at their elected leaders, some of them armed with guns and threatening signs? Besides the media spectacle of these neo-1776 revolutionaries, what is doubly perplexing to Europeans is the focus of the protests: healthcare.

What's strange to a European is that everyone here already has healthcare. The place that Donald Rumsdfeld once sneeringly called "old Europe" long ago solved this dilemma, producing quality healthcare for a fraction of the price that Americans pay. Many Europeans are astonished when they find out that 47 million Americans – larger than the populations of most European nations – don't have any healthcare at all except a hospital emergency room.

Contrary to stereotype, most of Europe doesn't use single payer, with France, Germany and others having evolved a "third way" that combines individual choice with private, nonprofit insurance companies and Medicare-like cost controls. Even countries like Croatia, Hungary and Slovenia, with per capita incomes only a fraction of that in the United States, have healthcare for all their people. Europeans simply don't understand how a wealthy United States could remain the last advanced nation that does not have universal healthcare.

Lounging one evening in one of Budapest's elegant thermal baths larger than an Olympic swimming pool, with Europeans of all ages and nationalities soaking their limbs in relaxed leisure, I was treated to a dose of the common wisdom that is taking hold here. Introducing myself as an American evinced a swift reaction from one sweating sauna companion:

"I don't understand you Americans. You blow billions on a useless war in Afghanistan and Iraq, and billions more to bail out banks that nearly bankrupted the world economy, but you don't ensure healthcare for your own people. Even Obama can't make a difference. It's as if your democracy doesn't work anymore."

He was Austrian but spoke in a near-perfect English that was as good grammatically as that spoken by some of my relatives.

And his reaction was typical. As Europeans watch the United States flailing about over something as basic as healthcare, they are reminded once again of the impotent US response following Hurricane Katrina. TV images of stranded, poor, black people in New Orleans have been melded to those of this new healthcare insurgency with pitch forks, leaving an indelible impression. The last remaining superpower is not looking so super anymore, whether in Iraq, Afghanistan, healthcare, the economy – not anywhere.

The global economic collapse, largely blamed on out-of-control Wall Street capitalism, is stinging here as well, though in most regions Europe has not suffered as much as America has. In my informal polling of small business and shop owners, they said the downtown had hurt, but only a little bit. Since the crisis, Europe has employed clever strategies – some of them since copied by the Obama administration, such as the popular "cash for clunkers" auto rebate programme – that have prevented it from suffering the doubling of unemployment that the US is enduring.

Indeed, Europe, once looked down upon by American pundits as the land of double-digit unemployment, currently has lower unemployment than the United States. Contrary to Europe's reputation as having a sick, sclerotic economy, its per capita economic growth rate actually was slightly higher than America's in the 10 years leading up to the economic crisis.

Still, a number of people fear that the worst is yet to come. And so Europeans appear both angry and perplexed by America's deregulated capitalism run amok, which has further served to undermine the American brand. As one Slovenian acquaintance, a representative of a consortium of small businesses said to me: "The US used to lecture us in Europe about just about everything, but what does America have to teach now? Maybe America should learn something from Europe."

Indeed, with Germany and France becoming the first major western economies to emerge from recession into positive growth, perhaps the US should learn something from our transatlantic cousins. But what might we learn?

Here's a clue, say some Europeans. German chancellor Angela Merkel once was asked by then-British prime minister Tony Blair what the secret was of her country's economic success, which includes being the world's largest exporter nation and running substantial trade surpluses. She famously replied: "Mr Blair, we still make things."

Werner Abelshauser, an economic historian at the University of Bielefeld in Germany, says the European way of running the economy "is fundamentally about firms that emphasise high-quality products and long-term relationships between suppliers and customers". Company managers set long-term policies, while market pressures for short-term profits are held in check. Gunter Verheugen, vice-president of the European Commission, echoed the virtues of Europe's strong, competitive industrial base, succinctly stating Europe's recipe for success: "Don't try to be cheaper. Try to be better."

But in the United States, for decades under the sway of the Reagan revolution's economic philosophy, which favoured corporate finance over manufacturing, the economy has seen a stark decline in manufacturing. Since the second world war, the financial sector in the United States has tripled in size as a percentage of the overall economy and of corporate profits. That increase accelerated during the eight years of the Bush administration, even as the US lost 5.5 million manufacturing jobs.

European capitalism for the most part didn't succumb to the financialisation that swept the United States in the 1980s, and which paved the way for the speculative bubbles that have now caused economic collapses in both 2001 and in 2008 (with notable exceptions in Britain, Spain and Ireland, similarly plagued by a collapsed housing bubble).

So from the other side of the pond, the city on the hill is looking pretty average these days. America is still a leader, but not the leader. That's a post-post-cold war concept that the world is still getting used to, and that Americans don't want to admit. But the evidence is everywhere, and especially obvious when you step outside the American bubble.

As one Viennese politician told me: "If the American model no longer is the blueprint for the world, what comes next?" Some Europeans think they have the answer, and much of the world is paying attention, even if most Americans still are not.

(7) U.S. relinquishes some control of the internet

By Bobbie Johnsom
The Guardian.uk
Thursday, Oct 1, 2009

http://www.guardian.co.uk/technology/2009/sep/30/icann-agreement-us
http://axisoflogic.com/artman/publish/Article_57077.shtml

After complaints about American dominance of the internet and growing disquiet in some parts of the world, Washington has said it will relinquish some control over the way the network is run and allow foreign governments more of a say in the future of the system.

Icann – the official body that ultimately controls the development of the internet thanks to its oversight of web addresses such as .com, .net and .org – said today that it was ending its agreement with the US government.

The deal, part of a contract negotiated with the US department of commerce, effectively pushes California-based Icann towards a new status as an international body with greater representation from companies and governments around the globe.

Icann had previously been operating under the auspices of the American government, which had control of the net thanks to its initial role in developing the underlying technologies used for connecting computers together.

But the fresh focus will give other countries a more prominent role in determining what takes place online, and even the way in which it happens – opening the door for a virtual United Nations, where many officials gather to discuss potential changes to the internet.

Icann chief Rod Beckstrom, a former Silicon Valley entrepreneur and Washington insider who took over running the organisation in July, said there had been legitimate concerns that some countries were developing alternative internets as a way of routing around American control.

"It's rumoured that there are multiple experiments going on with countries forking the internet, various countries have discussed this," he said. "This is a very significant shift because it takes the wind out of our opponents."

He added that the changes would prove powerful when combined with upcoming plans to allow web users to use addresses with names in Chinese, Arabic or other alphabets other than Latin. Many countries have lobbied for the shift in recent years, as the expansion of the web reaches out deeper into society and business.

While the issue reached critical mass in emerging economies such as China, it is not the only country that has lobbied for a change. Earlier this year European officials said that they did not think it was proper for America to retain so much control over the global computer network.

Viviane Reding, the EU's commissioner for information society and media, said she was pleased that Washington chose to make the shift.

"I welcome the US administration's decision to adapt Icann's key role in internet governance to the reality of the 21st century," she said. "If effectively and transparently implemented, this reform can find broad acceptance among civil society, businesses and governments alike."

Meanwhile Nominet - the British organisation that handles the day-to-day running of .uk domain names - said that Icann had started a trend for companies with internet influence to appear more open and accountable.

"Putting public interest first will also be a focus for the UK internet community over the coming months as there is growing support for Nominet to develop more of a public interest role," said Nominet's chief executive, Lesley Cowley.

The new agreement comes into force immediately. It replaces the old version which had been in place since 1998 and was scheduled to expire today.

Beckstrom suggested that bringing more countries to the table was the best way of ensuring the long term future of the internet.

"We're more global, period. The chances of the internet holding together just went up, the cohesion just went up," he said. "We expect more active involvement from governments, a higher level of participation from many governments and we're already hearing about more governments joining the team… This was, ironically, a power move from the US."