AOC & Ellen Brown
push Public Bank for Green New Deal. $ Hegemony ending - Michael Hudson
Newsletter published on February 6, 2019
(1) Alexandria
Ocasio-Cortez wants to fund Green New Deal with a Public Bank
(2) Germany's Green
Energy Revolution is funded with a Public Bank - Ellen Brown
(3) Call for Canada
Post to create a Postal Bank
(4) If we bail out a
bank, we'll nationalize it - Italian gov't
(5) Australian Banks,
mortgage brokers & insurance industry caned by Royal Commission
(6) Neocons' oversue
of Sanctions is ending Dollar Hegemoney - Michael Hudson
(1) Alexandria
Ocasio-Cortez wants to fund Green New Deal with a Public Bank
“‘Public banking’ are two words that send shivers down the
spine of Wall Street”
Public Banking Institute News: Jan 26, 2019
As Representative Alexandria Ocasio-Cortez takes a seat
on the House Financial Services Committee, her tweet saying she wants to get to
work on public banking was heard round the world. “I’m looking forward to
digging into the student loan crisis, examining for-profit prisons/ICE
detention, and exploring the development of public & postal banking,”
Ocasio-Cortez tweeted. The French press
agency AFP immediately caught on, writing “‘Public banking’ are two words that send
shivers down the spine of Wall Street.”
The French know this because Europe actually has public banks
and recognizes the efficiency of that model.
The House Financial
Services Committee has long been a major source of campaign contributions from
Wall Street for both Democratic and Republican lawmakers, so the response of
the financial services industry and Party leadership to this development may be
swift.
Meanwhile, the resulting media attention from AOC’s current
limelight presents a great opportunity to substantially advance the public’s
understanding of public banking and to gain the support of advocates, allied
organizations, and elected officials.
When North Dakota has budget woes, it simply takes a dividend
from its state-owned bank
North Dakota is facing important budget concerns due to the
continued slide in oil prices. Early this month, the North Dakota Legislature
lowered the amount of revenue the state can expect to collect from oil taxes by
$600 million for the next two year budget cycle. Oil is a major contributor to
the state’s wealth and the significant drop in energy tax revenue (despite
record levels of oil production) would be expected to have significant effects
on state spending. North Dakota, however, has a state bank. Eyeing the trend,
they have built into their budget the
transfer of a $140 million dividend from the Bank of North Dakota’s record
profits (p24 of link). These dividends are funds the state can tap in lieu of a
rainy day fund — one of the major benefits of having a state-owned public bank.
They will enable the state to buffer any budget woes brought about by volatile
swings in commodity prices and boom and
bust cycles.
(2) Germany's Green
Energy Revolution is funded with a Public Bank - Ellen Brown
The Financial Secret Behind Germany’s Green Energy
Revolution
by Ellen Brown
JAN 24, 2019
The "Green New Deal"
endorsed by Rep. Alexandria Ocasio-Cortez, D.-N.Y., and more than 40 other
House members has been criticized as imposing a too-heavy burden on the rich and
upper-middle-class taxpayers who will have to pay for it. However, taxing the
rich is not what the Green New Deal resolution proposes. It says funding would
come primarily from certain public agencies, including the U.S. Federal Reserve
and "a new public bank or system of regional and specialized public banks."
Funding through the Federal Reserve may be controversial, but
establishing a national public
infrastructure and development bank should be a no-brainer. The real
question is why we don’t already have one, as do China, Germany and other
countries that are running circles around us in infrastructure development. Many
European, Asian and Latin American countries have their own national development
banks, as well as belong to bilateral or multinational development institutions
that are jointly owned by multiple governments. Unlike the U.S. Federal Reserve,
which considers itself "independent" of government, national development banks
are wholly owned by their governments and carry out public development
policies.
China not only has
its own China Infrastructure Bank but has established the Asian
Infrastructure Investment Bank, which counts many Asian and Middle Eastern
countries in its membership, including Australia, New Zealand and Saudi Arabia.
Both banks are helping to fund China’s trillion-dollar "One Belt One Road"
infrastructure initiative. China is so far ahead of the United States in
building infrastructure that Dan Slane, a former adviser on President Donald
Trump’s transition team, has warned, "If we don’t get our act together very
soon, we should all be brushing up on our Mandarin."
The leader in
renewable energy, however, is Germany, called "the world’s first major
renewable energy economy." Germany has a public sector development bank called
KfW (Kreditanstalt für Wiederaufbau or "Reconstruction Credit Institute"), which
is even larger than the World Bank. Along with Germany’s nonprofit Sparkassen
banks, KfW has largely funded the country’s green energy revolution.
Unlike private commercial banks, KfW does not have to focus
on maximizing short-term profits for its shareholders while turning a blind eye
to external costs, including those imposed on the environment. The bank has been
free to support the energy revolution by funding major investments in renewable
energy and energy efficiency. Its fossil fuel investments are close to zero. One
of the key features of KfW, as with other development banks, is that much of its
lending is driven in a strategic direction determined by the national
government. Its key role in the green energy revolution has been played within a
public policy framework under Germany’s renewable energy legislation, including
policy measures that have made investment in renewables commercially
attractive.
KfW is one of the world’s largest development banks, with
assets totaling $566.5 billion as of December 2017. Ironically, the initial
funding for its capitalization came from the United States, through the Marshall
Plan in 1948. Why didn’t we fund a similar bank for ourselves? Simply because
powerful Wall Street interests did not want the competition from a
government-owned bank that could make below-market loans for infrastructure and
development. Major U.S. investors today prefer funding infrastructure through
public-private partnerships, in which private partners can reap the profits
while losses are imposed on local governments.
KfW and Germany’s Energy Revolution
Renewable energy in Germany is mainly based on wind, solar
and biomass. Renewables generated 41 percent of the country’s electricity in
2017, up from just 6 percent in 2000; and public banks provided over 72 percent
of the financing for this transition. In 2007-09, KfW funded all of Germany’s
investment in Solar Photovoltaic. After that, Solar PV was introduced nationwide
on a major scale. This is the sort of catalytic role that development banks can
play—kickstarting a major structural transformation by funding and showcasing
new technologies and sectors.
KfW is not only one of the biggest financial institutions but
has been ranked one of the two safest banks in the world. (The other,
Switzerland’s Zurich Cantonal Bank, is also publicly owned.) KfW sports triple-A
ratings from all three major rating agencies—Fitch, Standard and Poor’s, and
Moody’s. The bank benefits from these top ratings and the statutory guarantee of
the German government, which allow it to issue bonds on very favorable terms and
therefore to lend on favorable terms, backing its loans with the bonds.
KfW does not work through public-private partnerships, and it
does not trade in derivatives and other complex financial products. It relies on
traditional lending and grants. The borrower is responsible for loan repayment.
Private investors can participate, but not as shareholders or public-private
partners. Rather, they can invest in "Green Bonds," which are as safe and liquid
as other government bonds and are prized for their green earmarking. The first
"Green Bond—Made by KfW" was issued in 2014 with a volume of $1.7 billion and a
maturity of five years. It was the largest Green Bond ever at the time of
issuance and generated so much interest that the order book rapidly grew to
$3.02 billion, although the bonds paid an annual coupon of only 0.375 percent.
By 2017, the issue volume of KfW Green Bonds reached $4.21 billion.
Investors benefit from the high credit and sustainability
ratings of KfW, the liquidity of its bonds, and the opportunity to support
climate and environmental protection. For large institutional investors with
funds that exceed the government deposit insurance limit, Green Bonds are the
equivalent of savings accounts—a safe place to park their money that provides a
modest interest. Green Bonds also appeal to "socially responsible" investors,
who have the assurance with these simple and transparent bonds that their money
is going where they want it to. The bonds are financed by KfW from the proceeds
of its loans, which are also in high demand due to their low interest rates,
which the bank can offer because its high ratings allow it to cheaply mobilize
funds from capital markets and its public policy-oriented loans qualify it for
targeted subsidies.
Roosevelt’s Development Bank: The Reconstruction Finance
Corporation
KfW’s role in implementing government policy parallels that
of the Reconstruction Finance Corporation (RFC) in funding the New Deal in the
1930s. At that time, U.S. banks were bankrupt and incapable of financing the
country’s recovery. President Franklin D. Roosevelt attempted to set up a system
of 12 public "industrial banks" through the Federal Reserve, but the measure
failed. Roosevelt then made an end run around his opponents by using the RFC
that had been set up earlier by President Herbert Hoover, expanding it to
address the nation’s financing needs.
The RFC Act of 1932 provided the RFC with capital stock of
$500 million and the authority to extend credit up to $1.5 billion (subsequently
increased several times). With those resources, from 1932 to 1957 the RFC loaned
or invested more than $40 billion. As with KfW’s loans, its funding source was
the sale of bonds, mostly to the Treasury itself. Proceeds from the loans repaid
the bonds, leaving the RFC with a net profit. The RFC financed roads, bridges,
dams, post offices, universities, electrical power, mortgages, farms and much
more; it funded all of this while generating income for the government.
The RFC was so successful that it became America’s largest
corporation and the world’s largest banking organization. Its success, however,
may have been its nemesis. Without the emergencies of depression and war, it was
a too-powerful competitor of the private banking establishment; and in 1957, it
was disbanded under President Dwight D. Eisenhower. That’s how the United States was left without a development
bank at the same time Germany and other countries were hitting the ground
running with theirs.
Today some U.S. states have infrastructure and development
banks, including California, but their reach is very small. One way they could
be expanded to meet state infrastructure needs would be to turn them into
depositories for state and municipal revenue. Rather than lending their capital
directly in a revolving fund, this would allow them to leverage their capital
into 10 times that sum in loans, as all depository banks are able to do, as I’ve
previously explained.
The most profitable and efficient way for national and local
governments to finance public infrastructure and development is with their own
banks, as the impressive track records of KfW and other national development
banks have shown. The RFC showed what could be done even by a country that was
technically bankrupt, simply by mobilizing its own resources through a publicly
owned financial institution. We need to resurrect that public funding engine
today, not only to address the national and global crises we are facing now but
for the ongoing development the country needs in order to manifest its true
potential.
(3) Call for Canada
Post to create a Postal Bank
International News: Canada Post Union pitches postal banks in
arbitration talks
During the current arbitration talks at Canada Post, which
have followed last year’s rotating strikes, the
Canadian Union of Postal Workers (CUPW) has pitched a proposal that Canada Post create a Postal Bank.
Another demand is a proposal to convert their vehicle fleet from gas to electric
powered. By including these key public benefits in their agreement negotiations,
the Union breaks new ground as advocates.
Chris Arsenault
reports for the CBC:
“The proposed postal bank is aimed at rural residents,
including First Nations, who often don't have easy access to a bank branch, said
John Anderson, researcher with the Canadian Centre for Policy Alternatives. … It
would also benefit low-income Canadians, including pensioners and the working
poor who often depend on payday lenders for loans, cheque cashing and other
financial services. …
“‘The federal government — through its ownership of Canada
Post — is the only body that could bring modern financial services to every
community in Canada,’ Anderson said.”
(4) If we bail out a
bank, we'll nationalize it - Italian gov't
Italy Guns For Glass-Steagall-Type Law to Break Up Banks, Cut
Bailout Costs for Taxpayers
by Don Quijones
Feb 3, 2019
On Friday, Italy’s coalition government unveiled new banking
regulations that it hopes to pass in the coming months, including a rule that
would separate banks’ commercial and investment arms. It would be the Italian
equivalent of the Glass-Steagall Act, the 1933 U.S. law that separated
commercial banks that took deposits, made loans, and processed transaction, from
riskier investment banking activities. The law was designed to protect deposits.
Its repeal in 1999 led to the consolidation of the U.S. banking sector,
unfettered risk-taking by deposit-taking banks, and arguably the Financial
Crisis just eight years later.
In Italy investment and commercial banks have been able to
operate in unison since 1993, but that could all change if this new law is
passed. Breaking up the banks would remove a lot of the risk, such as
derivatives and other speculative instruments, from Italy’s deposit-taking
banks. Without these hedge-fund and investment-banking activities, large banks
such as Unicredit and Intesa Saopaolo would become smaller, less interconnected
and less systemically risky.
In an economy as large, chronically weak and systemically
risky as Italy’s, that would be no bad thing. The country has already
experienced a string of bank collapses in the last couple of years.
Less than a month ago, Italy’s populist government, in its
eighth month in power, held its nose, ate its words, and agreed to bail out mid-sized Banca Carige
with public funds, adopting virtually the exact same playbook it had
criticized its predecessor for using in the previous three bank resolutions.
If the government needs to pour capital into Carige it will take full control of the lender,
Deputy Prime Minister Di Maio told parliament’s lower house on Friday. Di Maio,
who is also industry and labor minister, said that after its precautionary
capitalization, Carige, with the State’s
help, "will become a bank for citizens". In other words, it will be a full-blown bank
nationalization, which both the European Commission and the ECB are likely
to oppose.
The Italian government is already the majority owner of the
perennially troubled Tuscan bank Monte dei Paschi di Siena (MPS) following the
Gentiloni administration’s controversial bailout of the lender in 2017. Despite
having billions of euros of public funds poured onto its balance sheet, and many
of its worst assets taken off its books, the 547-year-old bank is still not
nearly out of the woods.
A couple of weeks ago, its shares, which have lost almost
three-quarters of their value since being relaunched in October 2017, were
halted after plunging on news that the ECB had cautioned the lender about
potential funding and profitability risks it faced as well as its weakened
capital position. The central bank also told MPS to boost provisions against bad
loans in the coming years. Even following a record €24 billion sale of bad
loans, MPS’ soured loans are still equivalent to almost a fifth of its total
lending.
Italy’s banking sector as a whole holds the largest stock of
non-performing loans (NPLs) in the EU. The total gross stock of NPLs decreased
by approximately €50 billion during the first six months of €238 billion thanks
to a combination of direct sales and securitizations backed by the GACS
(Garanzia Cartolarizzazione Sofferenze) Government Guarantee Scheme, according
to the credit ratings agency DRBS. Italy’s gross NPL ratio is now down to 12.5%
from a mind-boggling peak of 18.2% in 2015. But it’s still three times the EU
average, which itself is verging on the high side.
Italy’s NPL problem could be exacerbated by the economy’s
recent slowdown. Economic output as measured by GDP shrank by 0.2% in the fourth
quarter, following a 0.1% drop in the third quarter, statistics agency Istat
reported on Thursday, putting Italy once again in a "technical recession." The
declines are small for now, but if they pick up momentum, triggering a fresh
cascade of bankruptcies, job losses, and mortgage defaults, the banks’ NPL
problems would swell with renewed vigor.
This is all happening at a time that monetary conditions in
the Eurozone are beginning to tighten. While the ECB’s Main Refinancing
Operations Announcement Rate remains anchored at 0%, the central bank has
finally ended its four-year QE program, one of the largest expansionary monetary
experiments of recorded history. Since QE funds were instrumental in keeping a
lid on Italian sovereign bond yields, this is bad news for both the Italian
government and the Italian banks that are among the biggest holders of Italian
government debt.
The ECB’s multiyear virtually-free-loans-for-banks (LTRO or
TLTRO) program has also, for now, apparently run its course. ECB Chairman Mario
Draghi recently said there are no plans to launch a new round of LTRO loans
unless there were guarantees that such funds would translate into lower lending
rates for bank customers. This is bad news for Italian banks since they were the
biggest recipients of the funds, accounting for one-third of the total money
issued.
It is against this backdrop that Italy’s populist government now seeks to
launch its own version of the Glass Steagall act. But getting it passed and
implemented is likely to be a gargantuan feat given the already parlous state of
Italy’s rickety banking system — and it’s going to do nothing to alleviate the
NPL problem.
The bill will face stiff opposition from the domestic banking
sector as well as the European Commission, which in 2017, under pressure from
Europe’s banking lobbies,abandoned its own pledge to break-up too-big-to-fail
lenders.
Since the global financial crisis, big banks on both sides of
the Atlantic have been fighting tooth and nail all regulatory attempts to split
their deposit-taking commercial units from their riskier investment banking
units. Such legislation would would make each entity smaller. And that is not in
the interests of the big banks, nor the ECB, which hopes to breathe life into a
new generation of trans-European super-banks by serving as matchmaker to
Europe’s largest domestic lenders.
(5) Australian Banks,
mortgage brokers & insurance industry to face Court action
Post royal commission report, banks will start a new lobbying
campaign — but customers pick up the bill
By business editor Ian Verrender
Posted yesterday at 3:57pm
The verdict is in and the sentence delivered.
But the fallout from the Hayne Royal Commission's explosive
report into the state of Australia's financial services sector will reverberate
through the community and the economy for years.
While its 76 recommendations have been accepted in principle
by both sides of the political divide, if history is anything to go by, the
lobbying campaign by the nation's financial powerhouses to limit the fallout
begins today.
Kenneth Hayne's forensic dissection of the banking, insurance
and wealth industries runs to just shy of 500 pages and, at times, makes for
ugly reading.
Rather than a radical overhaul, however, or a massive
restructure of the system, the royal commission has taken aim exactly where it
will hurt our major financiers.
If the report's recommendations are implemented in full,
secret commissions, underhand payments and product pushing will be banned.
From this point on, bankers and wealth managers should act in
the best interests of their clients. The very fact that this principle has had to be forced upon the industry
tells you everything that is wrong with the world of banking.
When that idea was pushed six years ago for financial
planners, the sector fought tooth and nail to thwart it, with some success.
...
Commissioner Hayne wants a corporate law enforcement agency
that enforces the law, one that starts with the premise of launching court action for breaches
rather than the softly, softly approach that has encouraged the major banks
to treat ASIC with contempt.
The free-for-all, or perhaps fee-for-all, approach to
financial services was facilitated by lax oversight and an industry built upon
bonuses and incentives.
At some stage, it developed into wholesale theft on a grand
scale, as illustrated through the "fee for no service scandal" unearthed in its
full horror by Mr Hayne.
"There is no doubt money was taken from clients," he
writes.
"Nor is there any basis for doubting that, when taken, the
taker did not intend returning it to the client."
On that basis, the commissioner reckons it would be open to a
jury to conclude that, in several instances, criminal activity has occurred.
Who will pay? Throughout the royal commission, the rumblings
from within the industry have been consistent and growing louder.
Any tightening of lending standards will cause the housing
market, already in serious decline, to crash. Banning sales commissions and
bonuses will decrease competition. Greater regulatory oversight and making bank
executives personally accountable will drive costs higher.
In other words, you, the customer, will pay.
It was the same card played by financial planners, who argued
that without trailing commissions, ordinary Australians wouldn't be able to
afford a financial planner. The commissions, however, didn't materialise out of
thin air. And the banks certainly weren't paying them.
What that argument carefully avoids is the extent to how much
consumers already have paid to support the corrupt system that has been
operating for years.
The compensation and remediation bill has been steadily
climbing in recent months as the banks themselves uncover the extent of the fee
gouging. Some analysts estimate a bill north of $6 billion.
That cash has funded not just the record earnings of
Australian banks — not surprisingly among the world's most profitable — but the
bonuses and salaries of those running them.
And as the commissioner points out, referring to a Treasury
analysis, adhering to the law, ensuring responsible lending and stamping out
corruption will likely enhance, rather than detract, from macroeconomic
performance.
Greed once was considered good. It is the driving force for
capitalism. Unfettered, however, it leads to the kind of behaviour unearthed by
the Hayne Royal Commission.
His report is a timely reminder that we all need
boundaries.
(6) Neocons' oversue
of Sanctions is ending Dollar Hegemoney - Michael Hudson
{Michael Hudson invented the term Dollar Hegemony, in his
book Superimperialism - Peter M}
FEBRUARY 1, 2019
Trump’s Brilliant Strategy to Dismember U.S. Dollar
Hegemony
by MICHAEL HUDSON
The end of America’s unchallenged global economic dominance
has arrived sooner than expected, thanks to the very same Neocons who gave the
world the Iraq, Syria and the dirty wars in Latin America. Just as the Vietnam War drove the United States
off gold by 1971, its violent regime
change warfare against Venezuela and Syria – and threatening other countries
with sanctions if they do not join this crusade – is driving European and other nations to
create their alternative financial institutions.
This break has been building for quite some time, and was
bound to occur. But who would have thought that Donald Trump would become the
catalytic agent? No left-wing party, no socialist, anarchist or foreign
nationalist leader anywhere in the world could have achieved what he is doing to
break up the American Empire.
The Deep State is reacting with shock at how this right-wing
real estate grifter has been able to drive other countries to defend themselves
by dismantling the U.S.-centered world order. To rub it in, he is using Bush and Reagan-era Neocon
arsonists, John Bolton and now Elliott Abrams, to fan the flames in
Venezuela. It is almost like a black political comedy. The world of
international diplomacy is being turned inside-out. A world where there is no
longer even a pretense that we might adhere to international norms, let alone
laws or treaties.
The Neocons who Trump has appointed are accomplishing what
seemed unthinkable not long ago: Driving
China and Russia together – the great nightmare of Henry Kissinger and
Zbigniew Brzezinski. They also are driving Germany and other European
countries into the Eurasian orbit, the "Heartland" nightmare of Halford
Mackinder a century ago.
The root cause is clear: After the crescendo of pretenses and
deceptions over Iraq, Libya and Syria, along with our absolution of the lawless
regime of Saudi Arabia, foreign political leaders are coming to recognize what
world-wide public opinion polls reported even before the Iraq/Iran-Contra boys
turned their attention to the world’s largest oil reserves in Venezuela: The
United States is now the greatest threat to peace on the planet.
Calling the U.S. coup being sponsored in Venezuela a defense
of democracy reveals the Doublethink underlying U.S. foreign policy. It defines
"democracy" to mean supporting U.S. foreign policy, pursuing neoliberal privatization of public infrastructure,
dismantling government regulation and following the direction of
U.S.-dominated global institutions, from the IMF and World Bank to NATO. For
decades, the resulting foreign wars, domestic austerity programs and military
interventions have brought more violence, not democracy.
In the Devil’s Dictionary that U.S. diplomats are taught to
use as their "Elements of Style" guidelines for Doublethink, a "democratic"
country is one that follows U.S. leadership and opens its economy to U.S. investment, and
IMF- and World Bank-sponsored privatization. The Ukraine is deemed
democratic, along with Saudi Arabia, Israel and other countries that act as U.S.
financial and military protectorates and are willing to treat America’s enemies
are theirs too.
A point had to come where this policy collided with the
self-interest of other nations, finally breaking through the public relations
rhetoric of empire. Other countries are proceeding to de-dollarize and replace what U.S.
diplomacy calls "internationalism" (meaning U.S. nationalism imposed on the
rest of the world) with their own national self-interest.
This trajectory could be seen 50 years ago (I described it in
Super Imperialism [1972] and Global Fracture [1978].) It had to happen. But
nobody thought that the end would come in quite the way that is happening.
History has turned into comedy, or at least irony as its dialectical path
unfolds.
For the past half-century, U.S. strategists, the State
Department and National Endowment for Democracy (NED) worried that opposition to
U.S. financial imperialism would come from left-wing parties. It therefore spent enormous resources manipulating
parties that called themselves socialist (Tony Blair’s British Labour Party,
France’s Socialist Party, Germany’s Social Democrats, etc.) to adopt neoliberal
policies that were the diametric opposite to what social democracy meant a
century ago. But U.S. political planners and Great Wurlitzer organists neglected the right wing, imagining
that it would instinctively support U.S. thuggishness.
The reality is that right-wing parties want to get elected,
and a populist nationalism is today’s road to election victory in Europe and
other countries just as it was for Donald Trump in 2016.
Trump’s agenda may really be to break up the American Empire,
using the old Uncle Sucker isolationist rhetoric of half a century ago. He
certainly is going for the Empire’s most vital organs. But it he a witting
anti-American agent? He might as well be – but it would be a false mental leap
to use "quo bono" to assume that he is a witting agent.
After all, if no U.S. contractor, supplier, labor union or
bank will deal with him, would Vladimir Putin, China or Iran be any more naïve?
Perhaps the problem had to erupt as a result of the inner dynamics of
U.S.-sponsored globalism becoming impossible to impose when the result is
financial austerity, waves of population flight from U.S.-sponsored wars, and
most of all, U.S. refusal to adhere to the rules and international laws that it
itself sponsored seventy years ago in the wake of World War II.
Dismantling international law and its courts
Any international
system of control requires the rule of law. It may be a morally lawless
exercise of ruthless power imposing predatory exploitation, but it is still The
Law. And it needs courts to apply it
(backed by police power to enforce it and punish violators).
Here’s the first legal contradiction in U.S. global
diplomacy: The United States always has
resisted letting any other country have any voice in U.S. domestic policies,
law-making or diplomacy. That is what makes America "the exceptional
nation." But for seventy years its diplomats have pretended that its superior
judgment promoted a peaceful world (as the Roman Empire claimed to be), which
let other countries share in prosperity and rising living standards.
At the United Nations, U.S. diplomats insisted on veto power.
At the World Bank and IMF they also made sure that their equity share was large enough to give
them veto power over any loan or other policy. Without such power, the
United States would not join any international organization. Yet at the same
time, it depicted its nationalism as protecting globalization and
internationalism. It was all a euphemism for what really was unilateral U.S.
decision-making.
Inevitably, U.S.
nationalism had to break up the mirage of One World internationalism, and with
it any thought of an international
court. Without veto power over the judges, the U.S. never accepted the
authority of any court, in particular the United Nations’ International Court in The Hague. Recently that court
undertook an investigation into U.S. war
crimes in Afghanistan, from its torture policies to bombing of civilian
targets such as hospitals, weddings and infrastructure. "That investigation
ultimately found ‘a reasonable basis to believe that war crimes and crimes
against humanity.’"1
Donald Trump’s National Security Adviser John Bolton erupted in fury, warning in
September that: "The United States will use any means necessary to protect our
citizens and those of our allies from unjust prosecution by this illegitimate court," adding that
the UN International Court must not be
so bold as to investigate "Israel or other U.S. allies."
That prompted a
senior judge, Christoph Flügge from Germany, to resign in protest. Indeed,
Bolton told the court to keep out of any affairs involving the United States,
promising to ban the Court’s "judges and prosecutors from entering the United
States." As Bolton spelled out the U.S. threat: "We will sanction their funds in the U.S.
financial system, and we will
prosecute them in the U.S. criminal system. We will not cooperate with the
ICC. We will provide no assistance to the ICC. We will not join the ICC. We will let the ICC die on its own.
After all, for all intents and purposes, the ICC is already dead to us."
What this meant, the German judge spelled out was that: "If
these judges ever interfere in the domestic concerns of the U.S. or investigate
an American citizen, [Bolton] said the American government would do all it could
to ensure that these judges would no longer be allowed to travel to the United
States – and that they would perhaps even be criminally prosecuted."
The original inspiration of the Court – to use the Nuremburg laws that were
applied against German Nazis to bring similar prosecution against any country or officials found
guilty of committing war crimes – had already fallen into disuse with the
failure to indict the authors of the Chilean coup, Iran-Contra or the U.S.
invasion of Iraq for war crimes.
Dismantling Dollar Hegemony from the IMF to SWIFT
Of all areas of global power politics today, international
finance and foreign investment have become the key flashpoint. International
monetary reserves were supposed to be the most sacrosanct, and international
debt enforcement closely associated.
Central banks have
long held their gold and other monetary reserves in the United States and
London. Back in 1945 this seemed reasonable, because the New York Federal
Reserve Bank (in whose basement foreign central bank gold was kept) was
militarily safe, and because the London Gold Pool was the vehicle by which the
U.S. Treasury kept the dollar "as good as gold" at $35 an ounce. Foreign
reserves over and above gold were kept in the form of U.S. Treasury securities,
to be bought and sold on the New York and London foreign-exchange markets to
stabilize exchange rates. Most foreign loans to governments were denominated in
U.S. dollars, so Wall Street banks were normally name as paying agents.
That was the case with Iran under the Shah, whom the United
States had installed after sponsoring the 1953 coup against Mohammed Mosaddegh
when he sought to nationalize Anglo-Iranian Oil (now British Petroleum) or at
least tax it. After the Shah was overthrown, the Khomeini regime asked its paying agent,
the Chase Manhattan bank, to use its
deposits to pay its bondholders. At the direction of the U.S. Government Chase refused to do so. U.S. courts then declared Iran to be in
default, and froze all its assets in the United States and anywhere else
they were able.
This showed that international finance was an arm of the
U.S. State Department and Pentagon. But that was a generation ago, and only
recently did foreign countries begin to feel queasy about leaving their gold
holdings in the United States, where they might be grabbed at will to punish any
country that might act in ways that U.S. diplomacy found offensive. So last
year, Germany finally got up the courage to ask that some of its gold be flown
back to Germany. U.S. officials pretended to feel shocked at the insult that it
might do to a civilized Christian country what it had done to Iran, and Germany
agreed to slow down the transfer.
But then came Venezuela. Desperate to spend its gold reserves to provide imports
for its economy devastated by U.S. sanctions – a crisis that U.S. diplomats
blame on "socialism," not on U.S. political attempts to "make the economy
scream" (as Nixon officials said of Chile under Salvador Allende) – Venezuela
directed the Bank of England to transfer some of its $11 billion in gold held in
its vaults and those of other central banks in December 2018. This was just like
a bank depositor would expect a bank to pay a check that the depositor had
written.
England refused to
honor the official request, following the direction of Bolton and U.S.
Secretary of State Michael Pompeo. As Bloomberg reported: "The U.S. officials
are trying to steer Venezuela’s overseas assets to [Chicago Boy Juan] Guaido to
help bolster his chances of effectively taking control of the government. The
$1.2 billion of gold is a big chunk of the $8 billion in foreign reserves held
by the Venezuelan central bank."2
Turkey seemed to be a likely destination, prompting Bolton
and Pompeo to warn it to desist from helping Venezuela, threatening sanctions
against it or any other country helping Venezuela cope with its economic crisis.
As for the Bank of England and other European countries, the Bloomberg report
concluded: "Central bank officials in Caracas have been ordered to no longer try
contacting the Bank of England. These central bankers have been told that Bank
of England staffers will not respond to them."
This led to rumors that Venezuela was selling 20 tons of gold
via a Russian Boeing 777 – some $840 million. The money probably would have
ended up paying Russian and Chinese bondholders as well as buying food to
relieve the local famine.3 Russia denied this report, but Reuters has confirmed
is that Venezuela has sold 3 tons of a planned 29 tones of gold to the United
Arab Emirates, with another 15 tones are to be shipped on Friday, February 1.4
The U.S. Senate’s Batista-Cuban hardliner Rubio accused this of being "theft,"
as if feeding the people to alleviate the U.S.-sponsored crisis was a crime
against U.S. diplomatic leverage.
If there is any country that U.S. diplomats hate more than a
recalcitrant Latin American country, it is Iran. President Trump’s breaking of
the 2015 nuclear agreements negotiated by European and Obama Administration
diplomats has escalated to the point of threatening Germany and other European
countries with punitive sanctions if they do not also break the agreements they
have signed. Coming on top of U.S. opposition to German and other European
importing of Russian gas, the U.S. threat finally prompted Europe to find a way
to defend itself.
Imperial threats are no longer military. No country
(including Russia or China) can mount a military invasion of another major
country. Since the Vietnam Era, the only kind of war a democratically elected
country can wage is atomic, or at least heavy bombing such as the United States
has inflicted on Iraq, Libya and Syria. But now, cyber warfare has become a way
of pulling out the connections of any economy. And the major cyber connections
are financial money-transfer ones, headed by SWIFT, the acronym for the Society
for Worldwide Interbank Financial Telecommunication, which is centered in
Belgium.
Russia and China have
already moved to create a shadow bank-transfer system in case the United States
unplugs them from SWIFT. But now, European countries have come to realize
that threats by Bolton and Pompeo may lead to heavy fines and asset grabs if
they seek to continue trading with Iran as called for in the treaties they have
negotiated.
On January 31 the dam broke with the announcement that Europe
had created its own bypass payments system for use with Iran and other countries
targeted by U.S. diplomats. Germany,
France and even the U.S. poodle Britain joined to create INSTEX — Instrument
in Support of Trade Exchanges. The promise is that this will be used only for
"humanitarian" aid to save Iran from a U.S.-sponsored Venezuela-type
devastation. But in view of increasingly passionate U.S. opposition to the Nord
Stream pipeline to carry Russian gas, this alternative bank clearing system will be ready and
able to become operative if the United
States tries to direct a sanctions attack on Europe.
I have just returned from Germany and seen a remarkable split
between that nation’s industrialists and their political leadership. For years,
major companies have seen Russia as a natural market, a complementary economy
needing to modernize its manufacturing and able to supply Europe with natural
gas and other raw materials. America’s New Cold War stance is trying to block
this commercial complementarity. Warning
Europe against "dependence" on low-price Russian gas, it has offered to sell
high-priced LNG from the United States (via port facilities that do not yet
exist in anywhere near the volume required). President Trump also is insisting
that NATO members spend a full 2 percent of their GDP on arms – preferably
bought from the United States, not from German or French merchants of death.
U.S. overplaying its position is leading to the
Mackinder-Kissinger-Brzezinski Eurasian nightmare that I mentioned above. In
addition to driving Russia and China together, U.S. diplomacy is adding Europe
to the heartland, independent of U.S. ability to bully into the state of
dependency toward which American diplomacy has aimed to achieve since 1945.
The World Bank,
for instance, traditionally has been
headed by a U.S. Secretary of Defense. Its steady policy since its inception
is to provide loans for countries to devote their land to export crops instead
of giving priority to feeding themselves. That is why its loans are only in foreign currency,
not in the domestic currency needed to provide price supports and agricultural
extension services such as have made U.S. agriculture so productive. By
following U.S. advice, countries have left themselves open to food blackmail – sanctions
against providing them with grain and other food, in case they step out of line
with U.S. diplomatic demands.
It is worthwhile to note that our global imposition of the
mythical "efficiencies" of forcing Latin American countries to become
plantations for export crops like coffee and bananas rather than growing their
own wheat and corn has failed catastrophically to deliver better lives,
especially for those living in Central America. The "spread" between the export
crops and cheaper food imports from the U.S. that was supposed to materialize
for countries following our playbook failed miserably – witness the caravans and
refugees across Mexico. Of course, our backing of the most brutal military
dictators and crime lords has not helped either.
Likewise, the IMF has been forced to admit that its basic
guidelines were fictitious from the beginning. A central core has been to enforce payment of official
inter-government debt by withholding IMF credit from countries under
default. This rule was instituted at a time when most official
inter-government debt was owed to the United States. But a few years ago Ukraine
defaulted on $3 billion owed to Russia. The IMF said, in effect, that Ukraine and other
countries did not have to pay Russia or any other country deemed to be
acting too independently of the United States. The IMF has been extending credit
to the bottomless it of Ukrainian corruption to encourage its anti-Russian
policy rather than standing up for the principle that inter-government debts
must be paid.
It is as if the IMF now operates out of a small room in the
basement of the Pentagon in Washington. Europe has taken notice that its own
international monetary trade and financial linkages are in danger of attracting
U.S. anger. This became clear last autumn at the funeral for George H. W. Bush,
when the EU’s diplomat found himself downgraded to the end of the list to be
called to his seat. He was told that the U.S. no longer considers the EU an
entity in good standing. In December, "Mike Pompeo gave a speech on Europe in
Brussels — his first, and eagerly awaited — in which he extolled the virtues of
nationalism, criticised multilateralism and the EU, and said that "international
bodies" which constrain national sovereignty "must be reformed or
eliminated."5
Most of the above events have made the news in just one day,
January 31, 2019. The conjunction of U.S. moves on so many fronts, against
Venezuela, Iran and Europe (not to mention China and the trade threats and moves
against Huawei also erupting today) looks like this will be a year of global
fracture.
It is not all President Trump’s doing, of course. We see the
Democratic Party showing the same colors. Instead of applauding democracy when
foreign countries do not elect a leader approved by U.S. diplomats (whether it
is Allende or Maduro), they’ve let the mask fall and shown themselves to be the
leading New Cold War imperialists. It’s now out in the open. They would make
Venezuela the new Pinochet-era Chile. Trump is not alone in supporting Saudi
Arabia and its Wahabi terrorists acting, as Lyndon Johnson put it, "Bastards,
but they’re our bastards."
Where is the left in all this? That is the question with
which I opened this article. How remarkable it is that it is only right-wing parties, Alternative
for Deutschland (AFD), or Marine le Pen’s French nationalists and those of
other countries that are opposing NATO
militarization and seeking to revive trade and economic links with the rest
of Eurasia.
The end of our monetary imperialism, about which I first
wrote in 1972 in Super Imperialism, stuns even an informed observer like me. It
took a colossal level of arrogance, short-sightedness and lawlessness to hasten
its decline — something that only crazed Neocons like John Bolton, Elliott
Abrams and Mike Pompeo could deliver for Donald Trump.
Notes
[1] Alexander Rubenstein, "It Can’t be Fixed: Senior ICC
Judge Quits in Protest of US, Turkish Meddling," January 31, 2019. https://www.mintpressnews.com/icc-judge-quits-turkish-meddling/254443/
[2] Patricia Laya, Ethan Bronner and Tim Ross, "Maduro
Stymied in Bid to Pull $1.2 Billion of Gold From U.K.," Bloomberg, January 25,
2019. https://www.bloomberg.com/news/articles/2019-01-25/u-k-said-to-deny-maduro-s-bid-to-pull-1-2-billion-of-gold.
Anticipating just such a double-cross, President Chavez acted already in 2011 to
repatriate 160 tons of gold to Caracas from the United States and Europe.
[3] Patricia Laya, Ethan Bronner and Tim Ross, "Maduro
Stymied in Bid to Pull $1.2 Billion of Gold From U.K.," Bloomberg, January 25,
2019,. https://www.bloomberg.com/news/articles/2019-01-25/u-k-said-to-deny-maduro-s-bid-to-pull-1-2-billion-of-gold
[4] Corina Pons, Mayela Armas, "Exclusive: Venezuela plans to
fly central bank gold reserves to UAE – source," Reuters, January 31, 2019. https://www.reuters.com/article/us-venezuela-politics-gold-exclusive/exclusive-venezuela-prepares-to-fly-tonnes-of-central-bank-gold-to-uae-source-idUSKCN1PP2QR
[5] Constanze Stelzenmüller, "America’s policy on Europe
takes a nationalist turn," Financial Times, January 31, 2019.
