9/19/8 Making Sense of the Crisis: Henry K. Liu, F.William Engdahl, Karl Marx & V.I. Lenin

We have pacified some thousands of the islanders and buried them; destroyed their fields; burned their villages, and turned their widows and orphans out-of-doors; furnished heartbreak by exile to some dozens of disagreeable patriots; subjugated the remaining ten millions by Benevolent Assimilation, which is the pious new name of the musket; we have acquired property in the three hundred concubines and other slaves of our business partner Sultan of Sulu, and hoisted our protecting flag over that swag. And so, by the Providences of God – and the phrase is the government's, not mine – we are a World Power Mark Twain

9/19/8 Making Sense of the Crisis: Henry K. Liu

Digest note: Readers know the mainstream media casts the monetary symptoms of this long-brewing, deep structural crisis of u.s.finance capital which finally erupted into public view, as the whole story. The news comes as an unfathomable shock to most people because this crisis has been disguised as isolated phenomena, bursting housing bubbles, downturns, etc.,to camouflage its systemic roots and nature, with its surface effects. Making sense of this irreversible crisis is critical.

Unlike WSJ, NYT etc. professional capitalist apologists, Henry K. Liu, a capitalist critic, is chairman of a New York-based private investment group, and F.William Engdahl, an independent anti-imperialist, are exceptional - political economists - whose analyses are important because they frame economics in its actual political context to provide an understanding of the 'big picture'. Not marxists, neither are blinded by the congenital anti-marxist credentials necessary for official propagandists, pundits and apologists who conceal the political-economic dynamic to exonerate capitalism and the systemic nature of its savage political-social impact: concealing the truth that, as the saying goes, it's the system, stupid - not bad politicians and policies. Reducing systemic political-economics to electoral politics is their job.

Nothing you read or hear from mainstream 'news' will tell you the meaning of the current desperation moves: massive privatizing of profits by nationalizing/'socializing' capital's debt. Translation: working people now officially owe/own the bill for the global devastation and destruction that this predatory system has produced in its rampage for total power and profits - in the name of 'stabilizing' it, and pacifying us, e.g. saving its ass so it can wreak even more havoc. An Arab proverb, "a mouth that prays, a hand that kills" sums it up.

Liu and Engdahl are is fearlessly independent, critical analysts, informed by a vast historical knowledge including - as all genuine political-economy must - Marx and Lenin's analyses of the nature of capital, its relation to the state, its trajectory and inherent contradictions. Both grasp and explore the global breadth and depth of this crisis that resulting u.s.world domination. Both make clear, contrary to propaganda, that the 'bailout' moves nationalizing/'socializing' the debt to privatize the gains,
is capitalist to the core.

The digest has illustrated and explained how, in deep crises, capitalism reveals the essence of its its the liberal democracy by institutionalizing 'national socialist', fascist measures. Politically beginning with the 911 pretext for a world war called a 'war on terror', 'the patriot act' and ensuing fascist infrastructure 'security' legalization of terror, torture and 'preemptive' war - all directed against countries and people obstructing a state terrorist war to secure u.s. world supremacy.

The systematic separation of capitalist politics and economics is essential to maintain public ignorance and patriotic loyalty: politics thus becomes electoral politics with its sham illusion of democratic control and change, while economics, totally unrelated, reduced to matters beyond our comprehension and control - except to vote for a new faces to carry out the same capitalist agenda posited as 'change' and 'solutions'.

Brief excerpts from both author's works will give you a sense of why you don't find their incisive and comprehensive analyses in mainstream media, and how they make sense of what's happening. While valuing their analyses, the digest has fundamental disagreements with such critics who, like Liu, as free-market capitalists, believe that despite its monstrous genesis and history, it can be salvaged by new 'models' and regulation. The problems are generated not by bad models and managers but by the very nature of capital itself as Marx analyzed in Capital.

Hopefully this whets your appetite to explore further, to understand why this is not true because capitalism's strategic vulnerability not only poses severe new dangers but rare historic opportunities for radical change. As Marx and other revolutionary leaders have said in so many words, understanding is the basis for conscious political action to change the world. Towards that end, as introduction, a brief excerpt from Lenin's still on-target, highly recommended, pamphlet "Imperialism the Highest Stage of Capitalism" that Liu mentions, revealing the roots and the nature of capital, why this U.S. crisis will have a huge global impact: imperialism is global capitalism and through WW2 the U.S. became the world-dominant power.

"Imperialism the Highest Stage of Capitalism"
by V. I. Lenin
LCW vol.22, http://www.marxists.org/glossary/frame.htm

Lenin enumerated the following five features characteristic of the epoch of imperialism:
The epoch of imperialism opens when the expansion of colonialism has covered the globe and no new colonies can be acquired by the great powers except by taking them from each other, and the concentration of capital has grown to a point where finance capital becomes dominant over industrial capital. Lenin enumerated the following five features characteristic of the epoch of imperialism:

(1) the concentration of production and capital has developed to such a high stage that it has created monopolies which play a decisive role in economic life; (2) the merging of bank capital with industrial capital, and the creation on the basis of this “finance capital”, of a financial oligarchy; (3) the export of capital as distinguished from the export of commodities acquires exceptional importance; (4) the formation of international monopoly capitalist associations which share the world among themselves, and (5) the territorial division of the whole world among the biggest capitalist powers is completed. Imperialism is capitalism at that stage of development at which the dominance of monopolies and finance capital is established; in which the export of capital has acquired pronounced importance; in which the division of the world among the international trusts has begun, in which the division of all territories of the globe among the biggest capitalist powers has been completed.
[Lenin, Imperialism the Highest Stage of Capitalism, LCW Volume 22, p. 266-7.]
"[Imperialism] is something quite different from the old free competition between manufacturers, scattered and out of touch with one another, and producing for an unknown market. Concentration [of production] has reached the point at which it is possible to make an approximate estimate of all sources of raw materials (for example, the iron ore deposits)... [throughout] the whole world. Not only are such estimates made, but these sources are captured by gigantic monopolist associations [now called multi-national conglomerates]. An approximate estimate of the capacity of markets is also made, and the associations "divide" them up amongst themselves by agreement. Skilled labor is monopolized, the best engineers are engaged; the means of transport are captured – railways in America, shipping companies in Europe and America. Capitalism in its imperialist stage leads directly to the most comprehensive socialization of production; it, so to speak, drags the capitalists, against their will and consciousness, into some sort of a new social order, a transitional one from complete free competition to complete socialization.

"Production becomes social, but appropriation remains private. The social means of production remain the private property of a few. The general framework of formally recognized free competition remains, and the yoke of a few monopolists on the rest of the population becomes a hundred times heavier, more burdensome and intolerable."
(p. 205)

"The development of capitalism has arrived at a stage when, although commodity production still "reigns" and continues to be regarded as the basis of economic life, it has in reality been undermined and the bulk of the profits go to the "geniuses" of financial manipulation. At the basis of these manipulations and swindles lies socialized production; but the immense progress of mankind, which achieved this socialization, goes to benefit... the speculators." (p. 206-207)

Monopoly, oligarchy, the striving for domination and not for freedom, the exploitation of an increasing number of small and weak nations by a handful of the richest or most powerful nations – all these have given rise to those distinctive characteristics of imperialism which compel us to define it as parasitic or decaying capitalism. … It would be a mistake to believe that this tendency to decay precludes the rapid growth of capitalism. It does not. In the epoch of imperialism, certain branches of industry, certain strata of bourgeoisie and certain countries betray… now one and now another of these tendencies. On the whole, capitalism is growing far more rapidly than before.”
Imperialism, the Highest Stage of Capitalism, VI Lenin, Selected Works in one volume, p 260

(ch.7) Parasitism and the Decay of Capitalism...parasitism is characteristic of imperialism... the deepest economic foundation of imperialism is monopoly. This is capitalist monopoly, i.e., monopoly which has grown out of capitalism and which exists in the general environment of capitalism, commodity production and competition, in permanent and insoluble contradiction to this general environment. Nevertheless, like all monopoly, it inevitably engenders a tendency of stagnation and decay....Certainly, the possibility of reducing the cost of production and increasing profits by introducing technical improvements operates in the direction of change. But the tendency to stagnation and decay, which is characteristic of monopoly, continues to operate, and in some branches of industry, in some countries, for certain periods of time, it gains the upper hand.... imperialism is an immense accumulation of money capital in a few countries, amounting, as we have seen, to 100,000-50,000 million francs in securities. Hence the extraordinary growth of a class, or rather, of a stratum of rentiers, i.e., people who live by “clipping coupons”, who take no part in any enterprise whatever, whose profession is idleness. The export of capital, one of the most essential economic bases of imperialism, still more completely isolates the rentiers from production and sets the seal of parasitism on the whole country that lives by exploiting the labour of several overseas countries and colonies....

Imperialism....CH. 10... the bourgeoisie to an ever-increasing degree lives on the proceeds of capital exports and by “clipping coupons”. It would be a mistake to believe that this tendency to decay precludes the rapid growth of capitalism. It does not. In the epoch of imperialism, certain branches of industry, certain strata of the bourgeoisie and certain countries betray, to a greater or lesser degree, now one and now another of these tendencies. On the whole, capitalism is growing far more rapidly than before; but this growth is not only becoming more and more uneven in general, its unevenness also manifests itself, in particular, in the decay of the countries which are richest in capital....

...the tendency of imperialism to split the workers, to strengthen opportunism among them and to cause temporary decay in the working-class movement, revealed itself much earlier than the end of the nineteenth and the beginning of the twentieth centuries; for two important distinguishing features of imperialism were already observed in Great Britain in the middle of the nineteenth century—vast colonial possessions and a monopolist position in the world market. Marx and Engels traced this connection between opportunism in the working-class movement and the imperialist features of British capitalism systematically, during the course of several decades. For example, on October 7, 1858, Engels wrote to Marx: “The English proletariat is actually becoming more and more bourgeois, so that this most bourgeois of all nations is apparently aiming ultimately at the possession of a bourgeois aristocracy and a bourgeois proletariat alongside the bourgeoisie. For a nation which exploits the whole world this is of course to a certain extent justifiable.”[15] Almost a quarter of a century later, in a letter dated August 11, 1881, Engels speaks of the “worst English trade unions which allow themselves to be led by men sold to, or at least paid by, the middle class”. In a letter to Kautsky, dated September 12, 1882, Engels wrote: “You ask me what the English workers think about colonial policy. Well, exactly the same as they think about politics in general. There is no workers’ party here, there are only Conservatives and Liberal-Radicals, and the workers gaily share the feast of England’s monopoly of the world market and the colonies.” [13] (Engels expressed similar ideas in the press in his preface to the second edition of The Condition of the Working Class in England, which appeared in 1892.)...

The distinctive feature of the present situation is the prevalence of such economic and political conditions that are bound to increase the irreconcilability between opportunism and the general and vital interests of the working-class movement: imperialism has grown from an embryo into the predominant system; capitalist monopolies occupy first place in economics and politics; the division of the world has been completed; on the other hand, instead of the undivided monopoly of Great Britain, we see a few imperialist powers contending for the right to share in this monopoly, and this struggle is characteristic of the whole period of the early twentieth century. Opportunism cannot now be completely triumphant in the working-class movement of one country for decades as it was in Britain in the second half of the nineteenth century; but in a number of countries it has grown ripe, overripe, and rotten, and has become completely merged with bourgeois policy in the form of “social-chauvinism”. [14] http://www.marxists.org/archive/lenin/works/1916/imp-hsc/ch10.htm

political-economic shift to state capitalism deepens...national socialism with a liberal face
Abroad, Bailout Is Seen as a Detour From Capitalism
By Nelson D. Schwartz
http://www.nytimes.com/2008/09/18/business/worldbusiness/18rescue.html?8...
PARIS — Is the United States no longer the global beacon of unfettered, free-market capitalism In extending a last-minute $85 billion lifeline to A.I.G., the troubled insurer, Washington has not only turned away from decades of rhetoric about the virtues of the free market and the dangers of government intervention, it has also likely undercut future American efforts to promote such policies abroad. “I fear the government has passed the point of no return,” said Ron Chernow, a leading American financial historian. “We have the irony of a free-market administration doing things that the most liberal Democratic administration would never have been doing in its wildest dreams.”
While they acknowledge the shock of the collapse of Lehman Brothers, the bailout package for A.I.G. on top of earlier government support for Bear Stearns, Fannie Mae, and Freddie Mac has stunned even European policy makers accustomed to government intervention in the economy. “For opponents of free markets in Europe and elsewhere, this is a wonderful opportunity to invoke the American example,” said Mario Monti, the former antitrust chief at the European Commission. “They will say that even the standard-bearer of the market economy, the United States negates its fundamental principles in its behavior.”. Mr. Monti noted that past financial crises in Asia, Russia, and Mexico brought government to the fore, “but this is the first time it’s in the heart of capitalism, which is enormously more damaging in terms of the credibility of the market economy.” In France, where the government has long supported the creation of national champions and worked actively to protect select companies from the threat of foreign takeover, politicians were quick to point out the paradox of what is essentially the nationalization of the largest American insurance company.

“Today the actions of American policy makers illustrate the need for economic patriotism,” said Bernard Carayon, a lawmaker of President Nicolas Sarkozy’s center-right governing party, UMP. “I congratulate them.” For the “evangelists of the market this is a painful lesson,” he added. We’re entering “an era where we have much more regulation and where the public and the private sector will mix much more.”

"...In fact, it really does look as if the foundations of US capitalism have shattered..."
'The World As We Know It Is Going Down'
http://www.spiegel.de/international/business/0,1518,druck-578944,00.html
09/18/2008
Panic is the word of the hour on Wall Street. Now even Morgan Stanley is fighting for survival. The commercial bank Wachovia and China's Bank Citic are being discussed as possible rescuers.... Morgan Stanley -- the venerable Wall Street institution and one of the last two US investment banks left standing -- had lost massive amounts and was fighting for survival. Media reports were saying that it was even in talks about a possible bail-out or merger. Rumor had it that possible suitors might include Wachovia or China's Bank Citic.
China?...
In fact, it really does look as if the foundations of US capitalism have shattered. Since 1864, American banking has been split into commercial banks and investment banks. But now that's changing. Bear Stearns, Lehman Brothers, Merrill Lynch -- overnight, some of the biggest names on Wall Street have disappeared into thin air. Goldman Sachs and Morgan Stanley are the only giants left standing. Despite tolerable quarterly results, even they have been hurt by mysterious slumps in prices and -- at least in Morgan Stanley's case -- have prepared themselves for the end.
"Nothing will be like it was before," said James Allroy, a broker who was brooding over his chai latte at a Starbucks on Wall Street. "The world as we know it is going down."
Many are drawing comparisons with the Great Depression, the national trauma that has been the benchmark for everything since. "I think it has the chance to be the worst period of time since 1929," financing legend Donald Trump told CNN. And the Wall Street Journal seconds that opinion, giving one story the title: "Worst Crisis Since '30s, With No End Yet in Sight."...

The most breathtaking aspect about this week's crisis, though, is that the life raft -- which Washington had only previously used to bail out the mortgage giants Fannie Mae and Freddie Mac -- is being handed out by a government whose party usually fights against any form of government intervention. The policy is anchored in its party platform. "I fear the government has passed the point of no return," financial historian Ron Chernow told the New York Times. "We have the irony of a free-market administration doing things that the most liberal Democratic administration would never have been doing in its wildest dreams." ...

Capitalism's bad apples: It's the barrel that's rotten
By Henry C K Liu
Henry C K Liu is chairman of a New York-based private investment group. His website is at http://www.henryckliu.com/
This article appeared in AToL on August 1, 2002
There is a general rule about the way society treats criminals: place responsibility for antisocial acts on the individual, thus absolving society from blame.
The mismatch between society's attitude toward heroes and criminals rests in society's claim of credit on heroes and rejection of responsibility for criminals. A criminal is one who has betrayed societal values by violating a prescribed code of conduct, who is deranged but not legally insane, a deviant, an anomaly, a manifestation of social disease, a virus against the system, a unit malfunction and a personal malfeasance.
Adolf Hitler was labeled a madman to protect German culture and fascism, notwithstanding the curious fact that Hitler rose to power in Germany in a discernible sociocultural context. Even organized warfare must be conducted within the limits of regulated behavior. War crimes and crimes against humanity are not tolerated.
Yet market fundamentalism argues for wholesale deregulation to allow economic crimes against humanity. Charles Ponzi was deemed an unprincipled conman to insulate unregulated capitalism itself from being revealed as a systemic Ponzi scheme... Obscene disparity of income is accepted as the heart rather than the cancer of finance capitalism [...]

Titanic Shift in Global Capital Market Power
By F. William Engdahl
22 January 2008
The worst financial crisis in US history is just now appearing in its real dimension. It spells the end of New York’s reign as the globally dominant financial power, the heart of the power of the American Century. It is a shift whose true significance has not yet been appreciated. It soon will be... The sharp declines in global stock markets on Monday, January 21 is a tiny hint of what will unfold. The driver is the US creature called financial securitization. It was valued in the trillions of dollars, nurtured and fully backed by a coalition of interests that included Alan Greenspan’s Federal Reserve, the US Treasury, the rating agencies, the Wall Street monoline insurers, hedge funds and the banks behind them. I will detail in further installments on this site, The Financial Tsunami (see parts I and soon II), the history and the scope of what is only now becoming obvious to many as the greatest financial crisis at least since 1929-31 and in my estimation, ever...

New centers to emerge

What is most likely to emerge from the ashes of the US securitization crisis? At this point, thanks to the colossally inept policies of an American Century establishment, grouped around the Bush-Cheney regime, trying to deny reality on the world stage through exercise of brute force politics, we will likely see the emergence of several distinct centers of global financial power, rather than one dominant center as had been the case first with the City of London after the Napoleonic wars, then with Wall Street after 1919.

One center will emerge around the growing size and depth of Euro capital markets. Here Britain’s decision to keep Britain out of the Eurozone since the Pound Sterling crisis in 1992 puts the City of London at a distinct disadvantage, though huge volumes of Euro bonds and stocks are traded by London banks. The problem with the Eurozone center is that it is geopolitically inadequate to replace the US superpower. It desperately needs raw materials and for that Russia, the Middle East and Africa are essential. China is becoming essential for trade outlets to replace the US market. Eurozone leaders have but dimly perceived their new geopolitical reality. They soon will.

The second center that will emerge will be based around the huge capital accumulations of dollar surplus countries especially since 2001 and the record high oil prices. These include the so-called Sovereign Wealth Funds, state-owned investment funds similar to the Norwegian Petroleum Fund, that have billions of dollars (and increasingly Euros) in capital that is looking to invest around the globe. The largest to date is that of the Emirates, including Dubai. They are believed to hold more than $800 billion in assets today. Saudi Arabia is planning to launch a similar wealth fund. China announced its $200 billion SWF last summer, and Russia, which now holds well over $400 billion in dollar reserves, is another major capital source.

The sharp declines in global stock markets on Monday, January 21 is a tiny hint of what will unfold. The driver is the US creature called financial securitization. It was valued in the trillions of dollars, nurtured and fully backed by a coalition of interests that included Alan Greenspan’s Federal Reserve, the US Treasury, the rating agencies, the Wall Street monoline insurers, hedge funds and the banks behind them. I will detail in further installments on this site, The Financial Tsunami (see parts I and soon II), the history and the scope of what is only now becoming obvious to many as the greatest financial crisis at least since 1929-31 and in my estimation, ever. [...]

F. William Engdahl is the author of Seeds of Destruction, the Hidden Agenda of Genetic Manipulation just released by Global Research. He also the author of A Century of War: Anglo-American Oil Politics and the New World Order, Pluto Press Ltd.. To contact by e-mail: info@engdahl.oilgeopolitics.net.

[...]
F. William Engdahl is the author of A Century of War: Anglo-American Oil Politics and the New World Order. He is a Research Associate of the Centre for Research on Globalization (CRG). His most recent book, which has just been released by Global Research is Seeds of Destruction, The Hidden Agenda of Genetic Manipulation. To e-mail: info@engdahl.oilgeopolitics.net.
http://www.engdahl.oilgeopolitics.net/print/Titanic%20Shift%20in%20Globa...

WORLD FINANCE

Why Bush Watergated Eliot Spitzer

The Financial Tsunami

Part I: Sub-Prime Mortgage Debt is but the Tip of the Iceberg
F William Engdahl, November 23, 2007

Part II: The Financial Foundations of the American Century
F William Engdahl, January 16, 2008

Part III: Greenspan’s Grand Design
By F. William Engdahl, January 22, 2008

The Financial Tsunami Part IV:
Asset Securitization-- The Last Tango
By F. William Engdahl, February 8, 2008

The Financial Tsunami Part V:
The Predators had a Ball
By F. William Engdahl, 22 February 2008

Titanic Shift in Global Capital Market Power
By F. William Engdahl, 22 January 2008
The worst financial crisis in US history is just now appearing in its real dimension. It spells the end of New York’s reign as the globally dominant financial power, the heart of the power of the American Century. It is a shift whose true significance has not yet been appreciated. It soon will be.

William Engdahl has written on issues of energy, politics and economics for more than 30 years, beginning with the first oil shock in the early 1970's.
He has contributed regularly to a number of publications, including Japan's Nihon Keizai Shimbun, Foresight magazine; Grant'sInvestor.com, European Banker and Business Banker International. He has also spoken at numerous international conferences on geopolitical, economic and energy subjects, and is active as a consulting economist.

Bailouts Will Push US into Depression
http://www.cnbc.com/id/26656750
CNBC.com 11 Sep 2008
The end result of the global economic slowdown may be the U.S. announcing national bankruptcy as the government cannot afford the bailouts that it promised and the market will not bail out the government, Martin Hennecke, senior manager of private clients at Tyche, told CNBC on Thursday. "We expect a depression in the United States. We expect a depression, very possibly, also in Europe," Hennecke said on "Worldwide Exchange. The estimated $300 billion cost of the Fannie/Freddie bailout will probably be considered as a loss that the government will have to take, therefore passing it on to taxpayers, he explained. "We already have $3 trillion of debt, as far as the U.S. government is concerned. These debt figures across the U.S. economy are rising very sharply." When the government can no longer pass the United States' "immense debt" on to taxpayers, it will turn to the holders of U.S. dollars, leading to the eventual downfall of the currency, Hennecke said. "Definitely, it (the dollar) is not a safe place to be invested in, as real inflation is closer to 10 or 11 percent than the actual inflation numbers given by the U.S. government," Hennecke said on "Worldwide Exchange"....

Super Capitalism, Super Imperialism and Monetary Imperialism
By Henry C.K. Liu
http://henryckl.ipower.com/page143.html
This article appeared in AToL on October 12, 2007

Part I: A Structural Link
Robert B. Reich, former US Secretary of Labor and resident neo-liberal in the Clinton administration from 1993 to 1997 wrote in the September 14, 2007 edition of The Wall Street Journal an Opinion piece: CEOs Deserve Their Pay, as part of an orchestrated campaign to promote his new book: Supercapitalism: The Transformation of Business, Democracy, and Everyday Life (Afred A. Knopf). Reich is a former Harvard professor and the former Maurice B. Hexter Professor of Social and Economic Policy at the Heller School for Social Policy and Management at Brandeis University. He is currently a professor at the Goldman School of Public Policy at the University of California (Berkley) and a regular liberal gadfly in the unabashed supply-side Larry Kudlow TV show that celebrates the merits of capitalism.

Reich’s Supercapitalism (2007) brings to mind Michael Hudson’s Super Imperialism: The Economic Strategy of American Empire (1972, 2003). While Reich, a liberal turned neo-liberal, sees “supercapitalism” as the natural evolution of insatiable shareholder appetite for gain, a polite euphemism for greed that cannot or should not be reined in by regulation, Hudson, a Marxist heterodox economist, sees “super imperialism” as the structural outcome of post-WWII superpower geopolitics with state interests overwhelming free market forces, making regulation irrelevant. While Hudson is critical of “super imperialism” and thinks that it should be resisted by the weaker trading partners of the US, Reich gives the impression of being ambivalent about the inevitability if not the benignity of “supercapitalsim”.

The structural link between capitalism and imperialism was first observed by John Atkinson Hobson (1858-1940), English economist, who wrote in 1902 an insightful analysis of the economic basis of imperialism. Hobson provided a humanist critique of neoclassical economics, rejecting exclusively materialistic definitions of value. With Albert Frederick Mummery (1855-1895), the great British Mountaineer who was tragically killed in 1895 by an avalanche whilst reconnoitering the Rakhiot Face of Nanga Parbat, an 8,000-meter Himalayan peak, Hobson wrote The Physiology of Industry (1889), which argued that an industrial economy requires government intervention to maintain stability, and developed the theory of over-saving that was given an overflowing tribute by John Maynard Keynes three decades later.

The need for governmental intervention to stabilize an expanding national industrial economy was the rationale for political imperialism. On the other side of the coin, protectionism was a governmental counter-intervention on the part of weak trading partners for resisting imperialist expansion of the dominant power. Historically, the processes of globalization have always been the result of active state policy and action, as opposed to the mere passive surrender of state sovereignty to market forces. Market forces cannot operate in a vacuum. They are governed by man-made rules. Globalized markets require the acceptance by local authorities of established rules of the dominant economy. Currency monopoly of course is the most fundamental trade restraint by one single dominant government.

Adam Smith published Wealth of Nations in 1776, the year of US independence. By the time the constitution was framed 11 years later, the US founding fathers were deeply influenced by Smith’s ideas, which constituted a reasoned abhorrence of trade monopoly and government policy in restricting trade. What Smith abhorred most was a policy known as mercantilism, which was practiced by all the major powers of the time. It is necessary to bear in mind that Smith’s notion of the limitation of government action was exclusively related to mercantilist issues of trade restraint. Smith never advocated government tolerance of trade restraint, whether by big business monopolies or by other governments in the name of open markets.

A central aim of mercantilism was to ensure that a nation’s exports remained higher in value than its imports, the surplus in that era being paid only in specie money (gold-backed as opposed to fiat money). This trade surplus in gold permitted the surplus country, such as England, to invest in more factories at home to manufacture more for export, thus bringing home more gold. The importing regions, such as the American colonies, not only found the gold reserves backing their currency depleted, causing free-fall devaluation (not unlike that faced today by many emerging-economy currencies), but also wanting in surplus capital for building factories to produce for domestic consumption and export. So despite plentiful iron ore in America, only pig iron was exported to England in return for English finished iron goods. The situation was similar to today’s oil producing countries where despite plentiful crude oil, refined petrochemical products such as gasoline and heating oil had to be imported.

In 1795, when the newly independent Americans began finally to wake up to their disadvantaged trade relationship and began to raise European (mostly French and Dutch) capital to start a manufacturing industry, England decreed the Iron Act, forbidding the manufacture of iron goods in its American colonies, which caused great dissatisfaction among the prospering colonials. Smith favored an opposite government policy toward promoting domestic economic production and free foreign trade for the weaker traders, a policy that came to be known as "laissez faire" (because the English, having nothing to do with such heretical ideas, refuse to give it an English name). Laissez faire, notwithstanding its literal meaning of “leave alone”, meant nothing of the sort. It meant an activist government policy to counteract mercantilism. Neo-liberal free-market economists are just bad historians, among their other defective characteristics, when they propagandize “laissez faire” as no government interference in trade affairs.

Friedrich List, in his National System of Political Economy (1841), asserts that political economy as espoused in England, far from being a valid science universally, was merely British national opinion, suited only to English historical conditions. List’s institutional school of economics asserts that the doctrine of free trade was devised to keep England rich and powerful at the expense of its trading partners and it must be fought with protective tariffs and other protective devises of economic nationalism by the weaker countries. Henry Clay’s “American system” was a national system of political economy. US neo-imperialism in the post WWII period disingenuously promotes neo-liberal free-trade against governmental protectionism to keep the US rich and powerful at the expense of its trading partners. Before the October Revolution of 1917, many national liberation movements in European colonies and semi-colonies around the world were influenced by List’s economic nationalism. The 1911 Nationalist Revolution led by Dr. Sun Yat-sen was heavily influenced by Lincoln's political ideas government of the people, by the people and for the people, and the economic nationalism of List until after the October Revolution when Dr. Sun realized that the Soviet model was the correct path to national revival.

Hobson’s magnum opus, Imperialism (1902), argues that imperialistic expansion is driven not by state hubris, known in US history as Manifest Destiny, but by an innate quest for new markets and investment opportunities overseas for excess capital formed by over-saving at home for the benefit of the home state. Over-saving during the industrial age came from Richardo’s theory of the iron law of wages according to which wages were kept perpetually at subsistence levels as a result of uneven market power between capital and labor. Today, job outsourcing that returns as low-price imports contributes to the iron law of wages in the US
domestic economy. See my AToL article: Organization of Labor Exporting Countries (OLEC).

Hobson’s analysis of the phenology (life cycles study) of capitalism was drawn upon by Lenin to formulate a theory of imperialism as an advanced stage of capitalism: “Imperialism is capitalism at that stage of development at which the dominance of monopolies and finance capitalism is established; in which the export of capital has acquired pronounced importance; in which the division of the world among the international trusts has begun, in which the division of all territories of the globe among the biggest capitalist powers has been completed.” (Vladimir Ilyich Lenin, 1870-1924, Imperialism, the Highest Stage of Capitalism, Chapter 7 - 1916).

Lenin was also influenced by Rosa Luxemberg, who three year earlier had written her major work: The Accumulation of Capital: A Contribution to an Economic Explanation of Imperialism (Die Akkumulation des Kapitals: Ein Beitrag zur ökonomischen Erklärung des Imperialismus, 1913). Luxemberg, together with Karl Liebknecht, founding leaders of the Spartacist League (Spartakusbund), a radical Marxist revolutionary movement that later renamed itself the Communist Party of Germany (Kommunistische Partei Deutschlands, or KPD), was murdered on January 15, 1919 by members of the Freikorps, rightwing militarists who were the forerunners of the Nazi Sturmabteilung (SA) led by Ernst Röhm.

The congenital association between capitalism and imperialism requires practically all truly anti-imperialist movements the world over to be also anti-capitalist. To this day, most nationalist capitalists in emerging economies are unwitting neo-compradors for super imperialism. Neo-liberalism, in its attempts to breakdown all national boundaries to facilitate global trade denominated in fiat dollars, is the ideology of super imperialism.

Hudson, American heterodox economist, historian of ancient economies and post-World War II international balance-of-payments specialist, advanced in his 1972 book the notion of 20th-century super imperialism. Hudson updated Hobson’s idea of 19th-century imperialism of state industrial policy seeking new markets to invest home-grown excess capital. To Hudson, super imperialism is a state financial strategy to export debt denominated in the state’s fiat currency as capital to the new financial colonies to finance the global expansion of a superpower empire. No necessity, or even intention, was entertained by the superpower of ever having to pay off these paper debts after the US dollar was taken off gold in 1971.

Monetary Imperialism and Dollar Hegemony
Super imperialism transformed into monetary imperialism after the 1973 Middle East oil crisis with the creation of the petrodollar and two decades later emerged as dollar hegemony through financial globalization after 1993. As described in my 2002 AToL article: Dollar Hegemony has to go, a geopolitical phenomenon emerged after the 1973 oil crisis in which the US dollar, a fiat currency since 1971, continues to serve as the primary reserve currency for international trade because oil continues to be denominated in fiat dollars as a result of superpower geopolitics, leading to dollar hegemony in 1993 with the globalization of deregulated financial markets. ...

Dollar hegemony advanced super imperialism one stage further from the financial to the monetary front. Industrial imperialism sought to achieve a trade surplus by exporting manufactured good to the colonies for gold to fund investment for more productive plants at home. Super imperialism sought to extract real wealth from the colonies by paying for it with fiat dollars to sustain a balance of payments out of an imbalance in the exchange of commodities. Monetary imperialism under dollar hegemony exports debt denominated in fiat dollars through a permissive trade deficit with the new colonies, only to re-import the debt back to the US as capital account surplus to finance the US debt bubble.
The circular recycling of dollar-denominated debt was made operative by the dollar, a fiat currency that only the US can print at will, continuing as the world’s prime reserve currency for international trade and finance, backed by US geopolitical superpower. Dollars are accepted universally because oil is denominated in dollars and everyone needs oil and thus needs dollar to buy oil. Any nation that seeks to denominate key commodities, such as oil, in currencies other than the dollar will soon find itself invaded by the sole superpower. Thus the war on Iraq is not about oil, as former Federal Reserve Chairman Alan Greenspan suggests recently. It is about keeping oil denominated in dollars to protect dollar hegemony. The difference is subtle but of essential importance.

Since 1993, central banks of all trading nations around the world, with the exception of the US Federal Reserve, have been forced to hold more dollar reserves than they otherwise need to ward off the potential of sudden speculative attacks on their currencies in unregulated global financial markets. Thus “dollar hegemony” prevents the exporting nations, such as the Asian Tigers, from spending domestically the dollars they earn from the US trade deficit and forces them to fund the US capital account surplus, shipping real wealth to the US in exchange for the privilege of financing further growth of the US debt economy. Not only do these exporting nations have to compete by keeping their domestic wages down and by prostituting their environment, the dollars that they earn cannot be spent at home without causing a monetary crisis in their own currencies because the dollars they earn have to be exchanged into local currencies before they can be spent domestically, causing an excessive rise in their domestic money supply which in turn causes domestic inflation-pushed bubbles. Meanwhile, while the trade-surplus nations are forces to lend their export earnings back to the US, these same nations are starve for capital as global capital denominated in dollars will only invest in their export sectors to earn more dollars. The domestic sector with local currency earnings remain of little interest to global capital denominated in dollars. As a result, domestic development stagnates for lack of capital. Dollar hegemony permits the US to transform itself from a competitor in world markets to earn hard money, to a fiat-money-making monopoly with fiat dollars that only it can print at will. Every other trading nation has to exchange low-wage goods for dollars that the US alone can print freely and that can be spend only in the dollar economy without monetary penalty.

The Victimization of Japan and China
Japan is a classic case of a victim of monetary imperialism. In 1990, as a result of Japanese export prowess, the Industrial Bank of Japan was the largest bank in the world, with a market capitalization of $57 billion. The top nine of the 10 largest banks then were all Japanese, trailed by Canadian Alliance in 10th place. No US bank made the top-ten list. By 2001, the effects of dollar hegemony have pushed Citigroup into first place with a market capitalization of $260 billion. Seven of the top ten largest financial institutions in the world in 2001 were US-based, with descending ranking in market capitalization: Citigroup ($260 billion), AIG ($209 billion), HSBC (British-$110 billion), Berkshire Hathaway ($100 billion), Bank of America ($99 billion), Fanny Mae ($80 billion), Wells Fargo ($74 billion), JP Morgan Chase ($72 billion), RBS (British-$70 billion) and UBS (Swiss-$67 billion). No Japanese bank survived on the list.

China is a neoclassic case of dollar hegemony victimization even though its domestic financial markets are still not open and the RMB yuan is still not freely convertible. With over $1.4 trillion in foreign exchange reserves earned at a previously lower fixed exchange rate of 8.2 to a dollar set in 1985, now growing at the rate of $1 billion a day at a narrow range floating exchange rate of around 7.5 since July 2005, China cannot spend much of its dollar holdings on domestic development without domestic inflation caused by excessive expansion of its yuan money supply. The Chinese economy is overheating because the bulk of its surplus revenue is in dollars from exports that cannot be spent inside China without monetary penalty. Chinese wages are too low to absorb sudden expansion of yuan money supply to develop the domestic economy. And with over $1.4 trillion in foreign exchange reserves, equal to its annual GDP, China cannot even divest from the dollar without having the market effect of a falling dollar moving against its remaining holdings.

The People's Bank of China announced on July 20, 2005 that effective immediately the yuan exchange rate would go up by 2.1% to 8.11 yuan to the US dollar and that China would drop the dollar peg to its currency. In its place, China would move to a “managed float” of the yuan, pegging the currency’s exchange value to an undisclosed basket of currencies linked to its global trade. In an effort to limit the amount of volatility, China would not allow the currency to fluctuate by more than 0.3% in any one trading day. Linking the yuan to a basket of currencies means China's currency is relatively free from market forces acting on the dollar, shifting to market forces acting on a basket of currencies of China’s key trading partners. The basket is composed of the euro, yen and other Asian currencies as well as the dollar. Though the precise composition of the basket was not disclosed, it can nevertheless be deduced by China’s trade volume with key trading partners and by mathematic calculation from the set-daily exchange rate.

Thus China is trapped into a trade regime operating on an international monetary architecture in which it must continue to export real wealth in the form of underpaid labor and polluted environment in exchange for dollars that it must reinvest in the US. Ironically, the recent rise of anti-trade sentiment in US domestic politics offers China a convenient, opportune escape from dollar hegemony to reduce its dependence on export to concentrate on domestic development. Chinese domestic special interest groups in the export sector would otherwise oppose any policy to slow the growth in export if not for the rise of US protectionism which causes shot-term pain for China but long-term benefit in China’s need to restructure its economy toward domestic development. Further trade surplus denominated in dollar is of no advantage to China.

Emerging Markets Are New Colonies of Monetary Imperialism

Even as the domestic US economy declines since the onset of globalization in the early 1990s, US dominance in global finance has continued to this day on account of dollar hegemony. It should not be surprising that the nation that can print at will the world’s reserve currency for international trade should come up on top in deregulated global financial markets. The so-called emerging markets around the world are the new colonies of monetary imperialism in a global neo-liberal trading regime operating under dollar hegemony geopolitically dominated by the US as the world’s sole remaining superpower....

...corporations routinely and effectively manipulate consumer preference and market acceptance often through if not false, at least misleading advertising, not for the benefit of consumers, but to maximize return on faceless capital raised from global capital markets. The subliminal emphasis by the corporate culture on addictive acquisition of material things, coupled with a structural deprivation of adequate income to satisfy the manipulated desires, has made consumers less satisfied than in previous times of less material abundance. Corporations have been allowed to imbed consumption-urging messages into every aspect of modern life. The result is a disposable culture with packaged waste, an obesity crisis for all age groups, skyrocketing consumer debt, the privatization of public utility that demand the same fee for basic services from rich and poor alike, causing sharp disparity in affordability. It is a phenomenon described by Karl Marx as a “fetish of commodities”.

Marx’s Concept of Fetish of Commodities
Marx wrote in Das Kapital, Volume One, Part I: Commodities and Money, Chapter One: Commodities, Section I: “The relation of the producers to the sum total of their own labor is presented to them as a social relation, existing not between themselves, but between the products of their labor. This is the reason why the products of labor become commodities, social things whose qualities are at the same time perceptible and imperceptible by the senses. … … The existence of the things quâ commodities, and the value relation between the products of labor which stamps them as commodities, have absolutely no connection with their physical properties and with the material relations arising there from. It is a definite social relation between men that assumes, in their eyes, the fantastic form of a relation between things. In order, therefore, to find an analogy, we must have recourse to the mist-enveloped regions of the religious world. In that world, the productions of the human brain appear as independent beings endowed with life, and entering into relation both with one another and the human race. So it is in the world of commodities with the products of men’s hands. This I call the Fetishism which attaches itself to the products of labor, as soon as they are produced as commodities, and which is therefore inseparable from the production of commodities. This Fetishism of Commodities has its origin … in the peculiar social character of the labor that produces them.”

Marx asserts that “the mystical character of commodities does not originate in their use-value” (Section 1, p. 71). Market value is derived from social relations, not from use-value which is a material phenomenon. Thus Marx critiques the Marginal Utility Theory by pointing out that market value is affected by social relationships. For example, the marginal utility of door locks is a function of the burglary rate in a neighborhood which in turn is a function of the unemployment rate. Unregulated free markets are a regime of uninhibited price gouging by monopolies and cartels.

Thus the nature of money cannot be adequately explained even in terms of the material-technical properties of gold, but only in terms of the factors behind man’s desire and need for gold. Similarly, it is not possible to fully understand the price of capital from the technical nature of the means of production, but only from the social institution of private ownership and the terms of exchange imposed by uneven market power. Market capitalism is a social institution based on the fetishism of commodities.... transnational corporations have transcended national boundaries. Yet in each community these transnational corporations operate, they have the congenital incentive, the financial means and the legal mandate to manipulate the fetishism of commodities even in distant lands....

Superman Capitalism
As promoted by his permissive WSJ Opinion piece, a more apt title for Professor Reich’s new book would be: Superman Capitalism, in praise of the super-heroic qualities of successful corporate chief executive officers who deserve superstar pay. This view goes beyond even fascist superman ideology. The compensation of corporate CEOs in NAZI Germany never reached such obscene levels as those in US corporate land today. Reich argues that CEOs deserve their super-high compensation, which has increased 600% in two decades, because corporate profits have also risen 600% in the same period. The former Secretary of Labor did not point out that wages rose only 30% in the same period. The profit/wage disparity is a growing cancer in the US-dominated global economy, causing over-production resulting from stagnant demand caused by inadequate wages...

Income inequality in the US today has reached extremes not seen since the 1920s, but the trend started three decades earlier. More than $1 trillion a year in relative income is now being shifted annually from roughly 90,000,000 middle and working class families to the wealthiest households and corporations via corporate profits earned from low-wage workers overseas....

The Financial Tsunami
Part V: The Predators had a Ball
By F. William Engdahl, 22 February 2008
http://www.engdahl.oilgeopolitics.net/print/The%20Financial%20Tsunami%20...

Colossal Collateral Damage
The multi-trillion dollar US-centered securitization debacle began to unravel in June 2007 with the liquidity crisis in two hedge funds owned by Bear Stearns, one of the world’s largest and most successful investment banks.... market operators chose ways to “securitize” risky assets by promoting high-yielding, high-risk assets, without clearly marking their risk. Additionally, credit-rating agencies turned a blind eye to the inherent risks of the products. The fact that they were rarely traded meant even the approximate value of these structured financial products was not known. [1]...

With that collapse of confidence among banks in the international inter-bank market, the heart of global banking and which trades in Asset Backed Commercial Paper, the banking system stared a systemic crisis in the face. A crisis now threatened of a domino collapse of banks akin to that in Europe in 1931, when the French banks for political reasons pulled the plug on the Austrian Creditanstalt. Greenspan’s New Finance was at the heart of the new instability. It was his Age of Turbulence, to parody the title of his ghost-written autobiography.[2]

The world financial system had faced a systemic crisis threat as recently as the September 1998 collapse of the Long-Term Capital Management (LTCM) hedge fund in Greenwich, Connecticut. Only extraordinary coordinated central bank intervention then, led by Greenspan’s US Federal Reserve, prevented a global meltdown. That LTCM crisis contained the seed crystal of all that is going wrong with the multi-trillion dollar asset securitization markets today....

To cover their losses LTCM and its banks began a panic sell-off of anything it could liquidate, triggering panic selling by other hedge funds and banks to cover exposed positions. In response, the US stock market dropped 20%, while European markets fell 35%. Investors sought safety in US Treasury bonds, causing interest rates to drop by over a full point. As a result, LTCM’s highly leveraged investments started to crumble. By the end of August 1998, it lost 50% of the value of its capital investments.

In the summer of 1997 amid the hedge fund-led attacks on the vulnerable currencies of Thailand, Indonesia, Malaysia and other Asian high-growth “Tiger” economies, Malaysia’s Prime Minister Mahathir Mohamad openly called for greater international control on the murky speculation of hedge funds. He named the name of one of the largest involved in the Asian attacks, George Soros’ Quantum Fund. Because of US pressure from the Treasury Department by Secretary Robert Rubin, the former head of Goldman Sachs, and from the Greenspan Fed, no oversight of opaque offshore hedge funds was ever undertaken. Instead they were let to grow into funds holding more than $1.4 trillion in assets by 2007....

The point about that LTCM crisis that rocked the foundations of the global finance system, was who was involved and what economic assumptions they used—the very same fundamental assumptions used to construct the deadly-flawed risk models of the asset securitization debacle...

The elegance of securitization of loans such as home mortgages for the issuing bank was that they could take the loan or mortgage and immediately sell it on to a securitizer or underwriter who bundled hundreds of such loans into a new Asset Backed Security. This seemingly genial innovation was far more dangerous than it sounded. Lending banks no longer needed to carry a mortgage loan on its books for 20-30 years as was traditional. They sold it on at a discount and used the cash to turn the next round of credit issuing. That meant as well that the lending bank now no longer had to worry if the loan would ever be repaid....

It didn’t take long before lending banks across the United States realized they were sitting on a bonanza bigger than the California gold rush. With no worry about whether a borrower of a home mortgage, say, would be able to service the debt for the next decades, banks realized they made money on pure loan volume and resell to securitizers. Soon it became commonplace for banks to outsource their mortgage lending to free-lance brokers. Instead of doing their own credit checks they relied, often exclusively, on various online credit questionnaires, similar to the Visa card application where no follow-up was done. It became common practice for mortgage lenders to offer brokers bonus incentives to bring in more signed mortgage loan volume, another opportunity for massive fraud. The banks got more gain from making high volumes of loans then selling for securitization. The world of traditional banking was being turned on its head.

As the bank no longer had an incentive to assure the solidity of a borrower through minimum cash down payments and exhaustive background credit checks, many US banks, simply to churn loan volume and returns, gave what they cynically called “Liars’ Loans.” They knew the person was lying about his credit and income to get that dream home. They simply didn’t care. They sold the risk once the ink was dry on the mortgage... banks could set up myriad wholly-owned separate entities to process the booming home mortgage business. The giant of the process was Citigroup, the largest US bank group with over $2.4 trillion of group assets.

Citigroup included Travelers Insurance, a state-regulated insurer. It included the old Citibank, a huge retail lending bank. It included the investment bank, Smith Barney. And it included the aggressive sub-prime lender, CitiFinancial, according to numerous consumer reports, one of the most aggressive predatory [6] lenders pushing sub-prime mortgages on often ignorant or insolvent borrowers, often in poor black or Hispanic neighborhoods. It included the Universal Financial Corp. one of the nation’s largest credit card issuers, who used the so-called Law of Large Numbers to grow its customer base among more and more dodgy credit risks.

Citigroup also included Banamex, Mexico’s second largest bank and Banco Cuscatlan, El Salvador’s largest bank. Banamex was one of the major indicted money laundering banks in Mexico. That was nothing foreign to Citigroup. In 1999 the US Congress and GAO investigated Citigroup for illicitly laundering $100 million in drug money for Raul Salinas, brother of the then-Mexican President. The investigations also found the bank had laundered money for corrupt officials from Pakistan to Gabon to Nigeria.

The Tsumani is only beginning

The nature of the fatally flawed risk models used by Wall Street, by Moody’s, by the securities Monoline insurers and by the economists of the US Government and Federal Reserve was such that they all assumed recessions were no longer possible, as risk could be indefinitely diffused and spread across the globe. All the securitized assets, the trillions of dollars worth, were priced on such flawed assumption. All the trillions of dollars of Credit Default Swaps—the illusion that loan default could be cheaply insured against with derivatives—all these were set to explode in a cascading series of domino-like crises as the crisis in the US housing market unraveled. The more home prices fell, the more mortgages facing sharply higher interest rate resets, the more unemployment spread across America from Ohio to Michigan to California to Pennsylvania to Colorado and Arizona. That process set off a vicious self-feeding spiral of asset price deflation.

The sub-prime sector was merely the first manifestation of what was to unravel. The process will take years to wind down. The damaged products of Asset Backed Securities were used in turn as collateral for yet further bank loans, for leveraged buyouts by private equity firms, by corporations, even by municipalities. The pyramid of debt built on assets securitized began to go into reverse leverage as reality dawned in global markets that no one knew the worth of the securitized paper they held.

In what would be a laughable admission were the consequences of their criminal negligence not so tragic for millions of Americans, Standard & Poors, the second largest rating agency in the world stated in October 2007 that they “underestimated the extent of fraud in the US mortgage industry.” Alan Greenspan feebly tried to exonerate himself by claiming that lending to sub-prime borrowers was not wrong, only the later securitization of the loans. The very system they worked over decades to create was premised on fraud and non-transparency.

Credit Default Swap crisis next

As of this writing, the next ratchet down in the US financial Tsunami was the monocline insurers where, short of a US government nationalization, no solution was feasible as the unknown risks were so staggering. That problem was discussed in the previous Part IV.

Next to explode will be the imminent probability of meltdown in the $45 trillion market in Over-the-Counter Credit Default Swaps (CDS), the brainchild of J.P. Morgan.

As Greenspan made certain, the CDS market remained unregulated and opaque, so that no one knew what the scale of the risks in a falling economy were. Because it is unregulated it often was the case that one party to a CDS resold to another financial institution without informing the original counterparty. That means it is not obvious that were an investor to try to cash in his CDS he could track down its payer of the claim. The CDS market was overwhelmingly concentrated in New York banks who held swaps at the end of 2007 worth nominally $14 trillion. The most exposed were J.P. Morgan Chase with $7.8 trillion and Citigroup and Bank of America with $3 trillion each.

The problem had been exacerbated by the fact that of the $45 trillions of credit default swaps, some 16% or $7.2 trillion worth were written to protect holders of Collateralized Debt Obligations where the mortgage collateral problems were concentrated. The CDS market was a ticking time bomb with an atomic detonator. As the credit crisis spreads in coming months, corporations will be forced to default on their bonds and writers of CDS insurance will face exploding claims and non-transparent rules. A claims settlement procedure for a market nominally worth $45 trillion did not exist as of February 2008.

As hundreds of thousands of Americans over the coming months find their monthly mortgage payments dramatically reset according to their Adjustable Rate Mortgage terms, another $690 billion in home mortgage debt will become prime candidates for default. That in turn will lead to a snowball effect in terms of job losses, credit card defaults and another wave of securitization crisis in the huge market for securitized credit card debt. The remarkable thing about this crisis is that so much of the sinews of the entire American financial system were tied in to it. There has never been a crisis of this magnitude in American history.

At the end of February the Financial Times of London revealed that US banks had “quietly” borrowed $50 billion in funds from a special new Fed credit facility to ease their cash crisis. Losses at all the major banks from Citigroup to J.P.Morgan Chase to most other major US bank groups continued to mount as the economy sank deeper into a recession that clearly would turn in coming months into a genuine depression. No Presidential candidate had dared utter a serious word about their proposals to deal with what was becoming the greatest financial and economic meltdown in American history.

By the early days of 2008 it was becoming clear that Financial Securitization would be the Last Tango for the United States as the global financial superpower.

The question now was posed what new center or centers of financial power could conceivably replace New York as the global nexus. That we will examine in Part VI.

China paper urges new currency order after "financial tsunami"
Tue Sep 16, 2008
Threatened by a "financial tsunami," the world must consider building a financial order no longer dependent on the United States, a leading Chinese state newspaper said on Wednesday.
The commentary in the overseas edition of the People's Daily said the collapse of Lehman Brothers Holdings Inc (LEH.P) "may augur an even larger impending global 'financial tsunami'."
The People's Daily is the official newspaper of China's ruling Communist Party, and the overseas edition is a smaller circulation offshoot of the main paper. Its pronouncements do not necessarily directly reflect leadership views, but this commentary by a professor at Shanghai's Tongji University suggested considerable official alarm at the strains buckling world financial markets. "The eruption of the U.S. sub-prime crisis has exposed massive loopholes in the United States' financial oversight and supervision," writes the commentator, Shi Jianxun. "The world urgently needs to create a diversified currency and financial system and fair and just financial order that is not dependent on the United States."...

Vice Premier Wang Qishan, on a visit to the United States, told U.S. trade officials in a meeting on Tuesday that China and the United States needed to maintain close economic ties with global markets going through such turbulence. "The Chinese government is well aware of the fact that the United States, which is the world's largest developed country, and China, which is the world's largest developing country, should have constructive and cooperative economic and trade relations," he said.
China is a major buyer of U.S. Treasury bonds, and through its sovereign wealth fund it has taken stakes in two large U.S. financial institutions.
http://news.yahoo.com/s/nm/20080917/bs_nm/financial_china_usa_dc&printer...

Socialism or Barbarism
By Frank Scott
18/09/08 "ICH"
...While the dreadful Bush regime nears its end, the policies in place since long before it took power will continue destroying the American empire no matter which new gang attempts to control the crumbling operation. But so long as major media serve as stenographers for establishment power, the public will continue to be treated as preschool children and given naps between sweet treats and nursery rhymes. In fact, if we let under paid child care workers take over our government and media, we’d all be much better served....
Many of us...believe that the awesome majesty of the universe was created by something with a penis, so nothing should surprise us when we who vote for them swallow the fantastic fables and lunatic legends perpetuated by our consciousness controllers. No better example, perhaps even beyond the foreign policy fiasco of Russia and Georgia, exists than the recently completed conventions of our ruling Hypocratic and Theocratic parties. These massive tv productions, with programmed crowds that make a reality tv show audience seem like a bunch of hermeneutics of philosophy grad students, approach the spectacle of American Idol or the Olympics but with less real meaning.

Accepting an increase in warfare in Afghanistan so we can decrease warfare in Iraq as its hopeful signs of “change we can believe in”, the ecstatic crowd at the Hypocratic Con indulged in group hysteria over selection of our first semi-black candidate, who will do exactly what his white owners demand. This amounts to positive change in a population reduced to finding progress in the look of a performer, while totally neglecting the substance of actual performance...
Meanwhile, the Theocratic party gang picked a previously unknown woman from Alaska for vice president, stressing the importance of whether the men's or lady’s room is used before the executive sends troops to their death. Should the Theocratic ticket somehow succeed - against all odds but given the dreadful nature of the Hypocrats, all things are possible - many may wish for a quick demise at the top so that this woman can take over and quickly bring down the entire facade of empire. While opposition hit teams dig up dirt and trash her character, she may turn out to be the closest thing to an average american in the entire multi billion dollar fiasco. She certainly believes in the penis bearing creator of all and everything, opposes abortion, shoots guns, supports the market, loves Israel and has a family. Perfect. She could take over tomorrow.

But seriously folks, as the old comics used to say, what can we do about a situation that gets crazier and more frightening even as mainstream mind shapers depict it as logical, democratic and sanity enhancing? More than ever, we need to question everything we are told by major media and our corporate government and to believe nothing until we are convinced by material evidence from sources we can trust. This means we should also question some of the gibberish that poses as independent media or online detective work, since many of the stories carried are on a par with the science fiction and fantasy we are given by our main stream consciousness corporadoes. Be critical and skeptical of all, and if you haven't the time to investigate, find someone you trust who has the time. And then continue being careful and critical of that source.

This government is a tragedy but it will be followed by one that is as tragic in that it will support the system with only cosmetic changes that may please some sectors - temporarily - while destroying others. Which is exactly what we are doing now, and have done for far too long. It is fast coming to a point at which we, and all inhabitants of the planet will have to act as though it’s all of us or none of us. And in the words of Rosa Luxemburg in the 20th century, echoed by Hugo Chavez, Evo Morales and growing numbers around the world in the 21st, we will face a choice: socialism or barbarism.

"If war aims are stated which seem to be solely concerned with Anglo-American imperialism, they will offer little to people in the rest of the world. The interests of other peoples should be stressed. This would have a better propaganda effect."
- Private memo from The Council of Foreign Relations to the US State Department, 1941
http://www.sunnahonline.com/ilm/contemporary/0013.htm

"We have about 60% of the world’s wealth but only 6.3% of its’ population. In this situation we cannot fail to be the object of envy and resentment. Our real task in the coming period is to devise a pattern of relationships which will permit us to maintain this position of disparity. We need not deceive ourselves that we can afford today the luxury of altruism and world benefaction. We should cease to talk about such vague and unreal objectives as human rights, the raising of living standards and democratisation. The day is not far off when we are going to have to deal in straight power concepts. The less we are then hampered by idealistic slogans, the better."
- George Kennan, former Head of the US State Department Policy Planning Staff, Document PPS23, 24th February 1948

"Strikes at population targets (per se) are likely not only to create a counterproductive wave of revulsion abroad and at home, but greatly to increase the risk of enlarging the war with China and the Soviet Union. Destruction of locks and dams, however – if handled right – might offer promise. It should be studied. Such destruction does not kill or drown people. By shallow-flooding the rice, it leads after time to widespread starvation (more than a million) unless food is provided – which we could offer to do ‘at the conference table’."
- John McNaughton, US State Department