Category: Economics


William Engdahl

The role as world reserve currency is something no financial hegemon in history has willingly surrendered. It took two world wars for the City of London and Bank of England to reluctantly concede hegemony of the Pound Sterling to the Dollar. As Henry Kissinger is said to have remarked decades ago, “If you control the money, you can control the entire world.” Whether or not Kissinger ever said that publicly, he and his patron, David Rockefeller, certainly believed it. Now, with US government debt shooting past $19 trillion and the true state of the American economy and its infrastructure at its worst since the Great Depression, with most Americans living on the brink of financial disaster, the brilliant financial engineers of Wall Street and Washington have once again come up with a scheme to prolong the role of Dollar as King in the world economy.

The recent Panama Papers revelations by a select group of Western mainstream media including the New York Times, BBC and Süddeutsche Zeitung, were notable as a brazen attempt to attack foreign leaders such as Russia’s Vladimir Putin and China’s Xi Jinping for alleged corruption. Notably, the leaked files of the Panama law firm, Mossack Fonseca, so far have failed to leak even one significant name of a US citizen hiding money in offshore accounts of the Panama facilitators.

While the world’s eyes were on the identities of alleged offshore money holders, they failed to consider the longer-term consequence of the huge revelations. The one country so far to benefit from the Panama Papers revelations is the country that is rapidly becoming the new “Panama” or better, the new Switzerland, namely the United States of America, the initiator of attacks on other hot money havens offshore over the past two decades.

Golden Dollar Era

Over the past seventy two years ever since the US and select wartime allied governments met in Bretton Woods, New Hampshire in 1944 to decide the shape of the postwar monetary order, the US dollar has reigned supreme in the world economy. By end of the War in 1945 the US Federal Reserve held the overwhelming bulk of world monetary gold.

As war erupted in Europe in September 1939 with Hitler’s and Stalin’s dismemberment of Poland, European gold was flooding into the United States. In 1935 US official gold reserves had been valued at just over $9 billion. By 1940 after the onset of war in Europe, they had risen to $20 billion. As desperate European countries sought to finance their war effort, their gold went to the United States to purchase essential goods. By the time of the June 1944 convening of the international monetary conference at Bretton Woods, the United States controlled fully 70% of the world’s monetary gold, an impressive advantage. That 70% did not even include calculating the captured gold of the defeated Axis powers of Germany or Japan, where exact facts and data were buried in layers of deception and rumor.

For the following quarter century, the gold-backed US dollar reigned supreme as the rest of the world, especially war-ravaged Western Europe, scrambled to find dollars to pay US imported goods to rebuild their industrial base. The dollar was literally “as good as good,” much as the Pound Sterling had been a century earlier.

Yet by the end of the 1960’s the dollar world had undergone significant change. The economies of France and especially of West Germany had emerged with a new state-of-the-art industrial base and was rapidly becoming an export power challenging American obsolescent industrial goods. The US industrial base had last undergone substantial modernization some three decades before. Europe and later Japan, were posing a competitive challenge to US industry. More alarming for Wall Street banks like David Rockefeller’s Chase Manhattan, Citibank or JPMorgan, as US trade dollar earnings of German companies like Mercedes, VW or BMW or Siemens were accumulating in the coffers of the German Bundesbank or Bank of France during the 1960’s an alarming change in policy emerged.

French President Charles de Gaulle, acting on advice of his conservative financial adviser, Jacques Rueff, ordered the Bank of France to begin to redeem its rapidly accumulating trade surplus dollars for gold, something then legal under the rules of Bretton Woods. The conservative German Bundesbank followed in demanding US gold for dollars. In 1968 in one of the first crude versions of their Color Revolutions, the CIA and US State Department toppled President de Gaulle in the events known as the May 1968 student revolt. Despite the replacement of de Gaulle by former Rothschild banker, Georges Pompidou, the foreign demand for Federal Reserve gold redemptions increased as Washington budget deficits to finance the ill-conceived Vietnam War exploded.

By August 1971, President Nixon was advised by his Assistant Treasury secretary, Paul Volcker, a former executive at Rockefeller’s Chase Manhattan Bank, to essentially tear up the Bretton Woods Treaty and declare the US dollar a free-floating paper no longer redeemable in gold. The Federal Reserve’s gold reserves over the previous several years had been drained by foreign central banks fearful of the import of US dollar inflation as Washington refused pleas to devalue the dollar to re-stabilize the system. Rueff and France were calling for a 100% dollar devaluation against the Franc or Deutschmark.

Petrodollar era is born

By 1973, in developments I describe in detail in my book, A Century of War, as well as in Myths, Lies & Oil Wars, Wall Street and the Federal Reserve “solved” the problem of a dollar in free-fall—it had devalued some 40% against the Franc, D-mark and Yen after August, 1971—by orchestrating, with the skillful and deceitful diplomacy of then-Secretary of State, Henry Kissinger, an OPEC oil price embargo following outbreak of the October, 1973 Yom Kippur War. By early 1974 the price of OPEC oil had been set some 400% above that of 1971. The dollar value soared against other major currencies as Germany, France and the rest of the oil-hungry world scrambled to find 400% more dollars to import their oil. Kissinger at the time wrote about “recycling petrodollars.” The dollar would be backed, not by gold, but by oil.

To be certain that the petrodollar system held, and that OPEC, led by Saudi Arabia, would never be tempted to sell for D-marks, Francs or Yen as those countries tried, Washington took special measures. On June 8 1974, US Secretary of State

Henry Kissinger signed an agreement establishing a US-Saudi Arabian Joint Commission on Economic Cooperation. Its official mandate was co-operation in the field of finance.”

By December 1974 the US Treasury had signed an agreement in Riyadh with the Saudi Arabian Monetary Agency, whose mission was, “to establish a new relationship through the Federal Reserve Bank of New York with the (US) Treasury borrowing operation. Under this arrangement, SAMA will purchase new US Treasury securities with maturities of at least one year,” explained Assistant Secretary of the U.S. Treasury, Jack F. Bennett, later to become a director of Exxon. Wall Street banker, David Mulford of Credit Suisse-FirstBoston was sent by Washington to SAMA in to seal the deal.

Bennett’s memo was addressed to Secretary of State Kissinger, dated February 1975, explaining the arrangements agreed two months before. As part of the secret agreements between Washington and Riyadh negotiated by Bennett, Saudi Arabia, in return for generous US defense equipment purchases and guarantees of its military security, agreed that OPEC would accept only US dollars for their oil, not German Marks despite their clear value, not Japanese Yen nor French Francs or even Swiss Francs, but only American dollars.

That was the essence of the petrodollar system which over the past decade or more has been eroding as Russia, China, Iran and even the EU challenge the role of the dollar as reserve currency. Russia and China, in a defensive move have agreed to energy trade for oil and gas paid not in dollars but in own currencies. Iran recently announced it will accept only Euros for its oil. More and more the days of the dollar demise are being proclaimed.

A new Narco-dollar system?

Now, however, it appears the financial wizards of Wall Street and the US Treasury have come up with a new life-extension idea.

In what must be termed at least a clever attempt to solve the looming crisis of the dollar, a new role of the dollar is emerging from the rubble of the offshore banking crisis triggered by the suspicious hacking of the Panama Papers. The under-regulated United States is rapidly becoming the “new Switzerland” in attracting “hot money” which includes everything from narco dollars from the international drug traffic to hiding of funds offshore by corrupt politicians.

For the past decade or more the US Government and revenue agency have pressured discreet offshore banking centers from Switzerland to the Cayman Islands to British Virgin Islands and beyond allegedly to clamp down on US tax-evading citizens hiding money abroad from the IRS or terrorists moving money to finance Al Qaeda and the likes. But the US government itself has rigidly refused to abide by the new international money reporting rules it caused to be created.

Now, according to a January report in the Bloomberg financial magazine, the result is that the United States itself, in places like Reno, Nevada or South Dakota or Wyoming, are fast becoming the “new Switzerland” hot or secret money havens.

Bloomberg quotes a Zurich attorney, Peter A. Cotorceanu, a lawyer at Anaford AG, “The USA, which has been so sanctimonious in its condemnation of Swiss banks, has become the banking secrecy jurisdiction du jour…That ‘giant sucking sound’ you hear? It is the sound of money rushing to the USA.”

The attraction of secrecy havens inside the US comes from the fact that a very strict money reporting standard set out by the Paris-Based OECD in 2014 has not been signed by four countries: Bahrain, Nauru, Vanuatu—and, guess who…the United States.

In the last months, taking advantage of the Washington hypocrisy, some of the world’s largest private banking managers including Rothschild Trust North America LLC. based in Reno, Nevada. Geneva-based Cisa Trust Co. SA, which advises wealthy Latin Americans, is applying to open in Pierre, South Dakota to “serve the needs of our foreign clients,” said John J. Ryan Jr., Cisa’s president.

Trident Trust Co., one of the world’s biggest providers of offshore trusts, moved dozens of accounts out of Switzerland, Grand Cayman, and other locales and into Sioux Falls, South Dakota in December, ahead of a January 1 disclosure deadline. Commenting on the new phenomenon, Andrew Penney of Rothschild & Co. stated that the US “is effectively the biggest tax haven in the world.”

Making the process even more positive for the dollar, a 2010 USA law, the Foreign Account Tax Compliance Act, or Fatca, requires financial firms to disclose foreign accounts held by US citizens and report them to the IRS or face steep penalties. With the US refusing to sign the OECD disclosure rules, US offshore dollars are also flooding back into Reno and other new US banking secrecy havens.

Further, to make other offshore banking centers unattractive, a law implemented in 2011 requires Panama-registered agents to provide client information when requested on all new incorporations, and the British Virgin Islands has adopted restrictions on due diligence. In an investors’ conference recently in San Francisco, Rothschild’s Penney stated in remarks cut from the published version of his remarks, that the US Government lacks “the resources to enforce foreign tax laws and has little appetite to do so.” ix

Now with one of the largest international offshore money facilitators, Panama’s Mossack Fonseca, admitting it is being forced to wind down, the way is clear to make the USA the new Switzerland or Panama. Drug cartels of the world are already clearly informed and a good share of the estimated $1.6 trillion of criminal funds annually are searching new safe havens in Reno and other US hot money havens. From a golden dollar to a petro dollar to now a narco dollar. It’s pretty pathetic for the country that was once the world’s leading industrial technology leader.

F. William Engdahl is strategic risk consultant and lecturer, he holds a degree in politics from Princeton University and is a best-selling author on oil and geopolitics, exclusively for the online magazine “New Eastern Outlook”

http://journal-neo.org/2016/05/09/from-golden-dollar-to-petro-dollar-to-narco-dollar/

Western Peoples Are Being Re-Enserfed

By Paul Craig Roberts

Following the collapse of the Western Roman Empire, free farmers were defenceless in the face of Viking, Magyar, and Saracen raiders. The need for protection led to the enserfment of free people who accepted the suzerainty of those able to provide walled defenses and armed fighters to ward off attacks. As time passed, the attacks ceased but the feudal arrangements persisted, and the system became exploitative.

Today jobs offshoring and the financialization of the economy are again enserfing the people, but the cause is debt, not armed invaders. Today’s rentier class, unlike the one that emerged from feudalism, has never provided any service in exchange for the debt peonage that it has imposed.

Below is an excerpt from the Introduction to the German edition of Michael Hudson’s book, Killing the Host to be published in November by Klett-Cotta:

Today’s reversal of progressive values is a historical transition point much like what occurred from the Roman Republic to Empire during the century of Social War, 133-29 BC. Rome’s debtors and plebs lost in a wave of political violence. It was by murder that the oligarchic party prevented the reforms of Tiberius Gracchus in Rome after 133 BC. Julius Caesar suffered a similar fate in 44 BC after moving to take the demos into his camp. Other politicians urging debt cancellation also were killed.

Rome survived not by prosperity at home but by looting foreign regions. Arminius made a brave stand to resist Rome in 9 AD in the Teutoburg forest. But by that time the die was cast. Over the next few centuries the oligarchs imposed debt bondage on a quarter of the population, plunging the imperial economy into serfdom.

Are we going down a similar road today, leading to debt peonage and war against countries daring to resist? As the modern Rome, the United States is backing creditor-oriented rules throughout its economic sphere. This book describes the cruel creditor rulings imposed on Argentina as setting legal precedent for holdouts and vulture funds to block any government from reaching agreement with bondholders to bring its debts in line with the ability to pay. The world’s debtor economies are to be treated as Germany was in the 1920s, or face being broken as Greece has been.

Western civilization stands at a turning point between creditor and debtor interests similar to that of Rome two thousand years ago – a clash over what kind of economic society will emerge for the rest of this century. Samuel Huntington coined the term “clash of civilizations” in 1992. But he was not referring to the West’s own internal financial war by today’s oligarchy to reverse the Enlightenment’s program to free industrial capitalism from post-feudal rent seeking and financialization.

Neoliberals depict today’s neo-rentier Counter-Enlightenment as the end of history, as if the conflict has been settled and there can be no revival of the classical struggle to make economies more equitable. That was Francis Fukuyama’s message in The End of History and the Last Man. Like Huntington’s essay it was published in 1992, in the wake of dissolution of the Soviet Union and its replacement by privatizers using shock therapy to destroy that nation’s industrial base. But in a February 1, 2012 interview with Der Spiegel, Fukuyama acknowledged that his paean to neoliberalism had been premature: “Obama had a big opportunity right at the middle of the crisis. That was around the time Newsweek carried the title: ‘We Are All Socialists Now.’ Obama’s team could have nationalized the banks and then sold them off piecemeal. But their whole view of what is possible and desirable is still very much shaped by the needs of these big banks.”

Europe is being asked to endorse the ECB supplying more liquidity to the banks, as if bank loans will finance new capital investment and employment, not deeper debt deflation. Voters are being asked to trust the trickle-down promise that privatizing the public domain will deliver infrastructure services more efficiently and at lower cost. The reality is that predatory tollbooth rents and interest charges will be factored into the prices that new monopolists set.

Such asset stripping and debt deflation can spread throughout the world only if no better alternative is seen. My aim in this book has been to outline such an alternative, based on the classical analytic tools and policy reform developed from the 17th through early 20th centuries to free economies from unearned rentier income and predatory finance.

A dream that history will work out for the best because of some natural selection of the most fair, productive and peaceful societies leaves out of account the threat posed by vested interests, capped by today’s financial oligarchy. Today’s debt deflation and austerity is not a survival of the technologically fittest mode of economic organization. It is a regressive rentier policy by post-feudal vested interests fighting to retain their special privileges and prevent themselves from being taxed and regulated.

The question is whether voters will let neoliberal managers concentrate power in the hands of the One Percent and treat debtors like Allied creditors treated Germany a century ago. Even worse, will they follow their Roman predecessors and drive their empire into a Dark Age?

It is a sign of the possible future that as the world’s leading financial and military power, the United States suffers from one of the most extreme concentrations of income and wealth. The One Percent have monopolized the gains that are reported, and these gains are not really an addition to national prosperity. They are a transfer of economic rent and interest – and property – from the 99 Percent to the top of the economic pyramid.

Today’s national income statistics do not label economic rent as such. A misleading intellectual map is drawn to distract attention from the actual dynamics at work. This book describes how high finance has politicized its power grab by using junk economics to depict the financial sector and its rent-extracting clients as “job creators,” not job destroyers. Using a rhetoric of “personal responsibility” to blame the victims for their indebtedness, its moral philosophy is that all debts must be paid, without regard for how this tears society apart.

There is an alternative. Achieving it requires understanding the dynamics at work and distinguishing between earned and unearned income, between productive and unproductive means of gaining wealth. That is the antidote to the neo-rentier power grab.

 

By Dr. Paul Craig Roberts

I, Michael Hudson, John Perkins, and a few others have reported the multi-pronged looting of peoples by Western economic institutions, principally the big New York Banks with the aid of the International Monetary Fund (IMF).

Third World countries were and are looted by being inticed into development plans for electrification or some such purpose. The gullible and trusting governments are told that they can make their countries rich by taking out foreign loans to implement a Western-presented development plan, with the result being sufficient tax revenues from economic development to service the foreign loan.

Seldom, if ever, does this happen. What happens is that the plan results in the country becoming indebted to the limit and beyond of its foreign currency earnings. When the country is unable to service the development loan, the creditors send the IMF to tell the indebted government that the IMF will protect the government’s credit rating by lending it the money to pay its bank creditors. However, the conditions are that the government take necessary austerity measures so that the government can repay the IMF. These measures are to curtail public services and the government sector, reduce public pensions, and sell national resources to foreigners. The money saved by reduced social benefits and raised by selling off the country’s assets to foreigners serves to repay the IMF.

This is the way the West has historically looted Third World countries. If a country’s president is reluctant to enter into such a deal, he is simply paid bribes, as the Greek governments were, to go along with the looting of the country the president pretends to represent.

When this method of looting became exhausted, the West bought up agricultural lands and pushed a policy on Third World countries of abandoning food self-sufficiency and producing one or two crops for export earnings. This policy makes Third World populations dependent on food imports from the West. Typically the export earnings are drained off by corrupt governments or by foreign purchasers who pay little while the foreigners selling food charge much. Thus, self-sufficiency is transformed into indebtedness.

With the entire Third World now exploited to the limits possible, the West has turned to looting its own. Ireland has been looted, and the looting of Greece and Portugal is so severe that it has forced large numbers of young women into prostitution. But this doesn’t bother the Western conscience.

Previously, when a sovereign country found itself with more debt than could be serviced, creditors had to write down the debt to an amount that the country could service. In the 21st century, as I relate in my book, The Failure of Laissez Faire Capitalism, this traditional rule was abandoned.

The new rule is that the people of a country, even a country whose top offiials accepted bribes in order to indebt the country to foreigners, must have their pensions, employment, and social services slashed and valuable national resources such as municipal water systems, ports, the national lottery, and protected national lands, such as the protected Greek islands, sold to foreigners, who have the freedom to raise water prices, deny the Greek government the revenues from the national lottery, and sell the protected national heritage of Greece to real estate developers.

What has happened to Greece and Portugal is underway in Spain and Italy. The peoples are powerless because their governments do not represent them. Not only are their governments receiving bribes, the members of the governments are brainwashed that their countries must be in the European Union. Otherwise, they are bypassed by history. The oppressed and suffering peoples themselves are brainwashed in the same way. For example, in Greece the government elected to prevent the looting of Greece was powerless, because the Greek people are brainwashed that no matter the cost to them, they must be in the EU.

The combination of propaganda, financial power, stupidity and bribes means that there is no hope for European peoples.

The same is true in the United States, Canada, Australia, and the UK. In the US tens of millions of US citizens have quietly accepted the absence of any interest income on their savings for seven years. Instead of raising questions and protesting, Americans have accepted without thought the propaganda that their existence depends upon the success of a handful of artificially created mega-banks that are “too big to fail.” Millions of Americans are convinced that it is better for them to draw down their savings than for a corrupt bank to fail.

To keep Western peoples confused about the real threat that they face, the people are told that there are terrorists behind every tree, every passport, under every bed, and that all will be killed unless the government’s overarching power is unquestioned. So far this has worked perfectly, with one false flag after another reinforcing the faked terror attacks that serve to prevent any awareness that this a hoax for accumulating all income and wealth in a few hands.

Not content with their supremacy over “democratic peoples,” the One Percent has come forward with the Trans-Atlanta and Trans-Pacific partnerships. Allegedly these are “free trade deals” that will benefit everyone. In truth, these are carefully hidden, secret, deals that give private businesses control over the laws of sovereign governments.

For example, it has come to light that under the Trans-Atlantic partnership the National Health Service in the UK could be ruled in the private tribunals set up under the partnership as an impediment to private medical insurance and sued for damages by private firms and even forced into abolishment.

The corrupt UK government under Washington’s vassal David Cameron has blocked access to legal documents that show the impact of the Trans-Atlantic partnership on Britain’s National Health Service. [1]

For any citizen of any Western country who is so stupid or brainwashed as not to have caught on, the entire thrust of “their” government’s policy is to turn every aspect of their lives over to grasping private interests.

In the UK the postal service was sold at a nominal price to politically connected private interests. In the US the Republicans, and perhaps the Democrats, intend to privatize Medicare and Social Security, just as they have privatized many aspects of the military and the prison system. Public functions are targets for private profit-making.

One of the reasons for the escalation in the cost of the US military budget is its privatization. The privatization of the US prison system has resulted in huge numbers of innocent people being sent to prison, where they are forced to work for Apple Computer, IT services, clothing companies that manufacture for the US military, and a large number of other private businesses. The prison laborers are paid as low as 69 cents per hour, below the Chinese wage.

This is America today. Corrupt police. Corrupt prosecutors. Corrupt judges. But maximum profits for US Capitalism from prison labor. Free market economists glorified private prisons, alleging that they would be more efficient. And indeed they are efficient in providing the profits of slave labor for capitalists.

Here is a news report on UK Prime Minister Cameron denying information about the effect of the Trans-Atlantic partnership on Britains’ National Health:

http://www.theguardian.com/business/2016/jan/26/anger-government-blocks-ttip-legal-documents-nhs-health-service

The UK Guardian, which often has to prostitute itself in order to maintain a bit of independence, describes the anger that the British people feel toward the government’s secrecy about an issue so fundamental to the well being of the British people. Yet, the British continue to vote for political parties that have betrayed the British people.

All over Europe, the corrupt Washington-contolled governments have distracted people from their sellout by “their” governments by focusing their attention on immigrants, whose presence is a consequence of the European governments representing Washington’s interests and not the interest of their own peoples.

Somthing dire has happened to the intelligence and awareness of Western peoples who seem no longer capable of comprehending the machinations of “their” governments.

Accountable government in the West is history. Nothing but failure and collapse awaits Western civilization.

Paul Craig Roberts has had careers in scholarship and academia, journalism, public service, and business. He is chairman of The Institute for Political Economy.

Notes:

1. http://www.globalresearch.ca/cameron-desperate-to-stop-scandal-as-secret-plans-to-sell-the-national-health-service-are-discovered/5504306

The original source of this article is Institute for Political Economy
Copyright © Dr. Paul Craig Roberts, Institute for Political Economy, 2016

Prof Michel Chossudovsky
The dramatic collapse of the Shanghai stock exchange has been presented to public opinion as the result of a spontaneous “market mechanism”, triggered by weaknesses in China’s economy.

The Western media consensus in chorus (WSJ, Bloomberg, Financial Times) portend that Chinese stocks tumbled due to “uncertainty” in response to recent data “suggesting a downturn in the world’s second-largest economy”.  

This interpretation is erroneous. It distorts the workings of stock markets which are the object of routine speculative operations. An engineered decline in the Dow Jones, for instance, can be precipitated in various ways: e.g. short selling, betting on the decline of the Dow Jones Industrial Average in the options market, etc. 1

Amply documented, financial markets are rigged by the megabanks. Powerful financial institutions including JP Morgan Chase, HSBC, Goldman Sachs, Citigroup, et al and their affiliated hedge funds have the ability of “pushing up” the stock market and then “pulling it down”. They make windfall gains on the upturn as well as on the downturn. This procedure also applies to the oil, metals and commodity markets.

It’s financial fraud or what former high-level Wall Street insider and former Assistant HUD Secretary Catherine Austin Fitts calls “pump and dump,” defined as “artificially inflating the price of a stock or other security through promotion, in order to sell at the inflated price,” then profit more on the downside by short-selling. “This practice is illegal under securities law, yet it is particularly common,”  (See Stephen Lendman, Manipulation: How Financial Markets Really Work, Global Research, March 20, 2009

The Shanghai Stock Exchange Collapse

The Shanghai SSE Composite Index  progressed over the last year from approximately 2209 on August 27, 2014 to more than 5166 on June 21st, 2015 (circa 140% increase); then from June 21st it collapsed by more than 30 percent in a matter of two weeks to 3507 (July 8).

A further collapse occurred starting on August 19, in the week immediately following the Tianjin explosions (August 12, 2015) culminating on Black Monday August 24th (with a dramatic 7.63 percent decline in one day).

Did the Tianjin Explosion contribute to exacerbating “uncertainty” with regard to the Chinese equity market?

The evolution of the SSE over that one year period has nothing to do with spontaneous market forces or real economy benchmarks. It has all the appearances of a carefully engineered speculative onslaught, an upward push and a downward pull.

The possibility of market rigging was investigated by the Chinese authorities in July 2015 following the June 21 meltdown of the Shanghai Stock Exchange (see graph above):

The regulator said [Report July 3] that it would be looking into whether parties were mis-selling financial products.  ….

The China Securities Regulatory Commission (CSRC) said it would base its investigation on reports of abnormal market movements from the stock market and futures exchanges.

…. Some reports have accused overseas investors of driving prices down by short-selling stocks on Chinese bourses, meaning they were betting on stocks falling.

…  Any criminal cases will be transferred to the police, the regulator said.

The China Financial Futures Exchange (CFFEX) has suspended 19 accounts from short-selling for a month, reports Reuters news agency, citing unnamed sources. (BBC, August 25, 2015, emphasis added)

The media consensus (as well as statements emanating from the Chinese authorities) was that Chinese financial actors rather than foreign banks could have been behind the process of stock market rigging: “Overseas investors have limited access to Chinese markets”. Market manipulation did not emanate from foreign sources, according to the Global Times.

This assessment, however, does not take into consideration that Goldman Sachs, JP Morgan Chase, HSBC et al are major financial actors within China, operating in Shanghai through Chinese financial proxies in partner joint ventures.

Moreover, these Western financial institutions are known to have played an overriding role in manipulating stock markets as well foreign exchange markets:

Regulators fined six major banks a total of $4.3 billion for failing to stop traders from trying to manipulate the foreign exchange market, following a yearlong global investigation.

HSBC Holdings Plc, Royal Bank of Scotland Group Plc, JPMorgan Chase & Co, Citigroup Inc, UBS AG and Bank of America Corp all faced penalties resulting from the inquiry, which has put the largely unregulated $5-trillion-a-day market on a tighter leash, accelerated the push to automate trading and ensnared the Bank of England.

Dealers used code names to identify clients without naming them and swapped information in online chatrooms with pseudonyms such as “the players”, “the 3 musketeers” and “1 team, 1 dream.” Those who were not involved were belittled, and traders used obscene language to congratulate themselves on quick profits made from their scams, authorities said. (Reuters, November 11, 2014).

Goldman Sachs among other major financial institutions operates out of Shanghai since 2004 under a joint venture arrangement with the Beijing Gao Hua Securities Company.

Goldman is known to use so-called “high frequency trading programs” in stock market transactions:

“Markets can be rigged with computers using high-frequency trading programs (HFT), which now compose 70% of market trading; and Goldman Sachs is the undisputed leader in this new gaming technique. (See Ellen Brown,  Stock Market Collapse: More Goldman Market Rigging, Global Research, May 8, 2010)

Another factor which has facilitated speculative operations on the Shanghai Stock Exchange has been the integration of the Hong Kong and Shanghai stock markets in 2014 under the so-called “Stock Connect” link.  The procedure enables foreigners to buy Chinese A shares listed on the Shanghai exchange out of Hong Kong, with “limited restrictions”, namely full access to China’s equity market.

Financial Warfare

These engineered upward and downward swings of the Shanghai Composite Index ultimately result in the confiscation of  billions of dollars of money wealth including Chinese State funds provided by the People’s Bank of China to prop up the Shanghai Stock Market. Where does the money go. Who are the recipients of this multi-billion dollar trade?

In response to the August meltdown, the People’s Bank of China “offered 150 billion yuan ($23.43 billion) worth of seven-day reverse repurchase agreements, a form of short-term loans to commercial lenders.”. This money was wasted. It did not result in reversing the meltdown of the Shanghai stock exchange.

Geopolitics

Geopolitical considerations are also relevant. While the Pentagon and NATO coordinate military operations against sovereign countries, Wall Street carries out concurrent destabilizing actions on financial markets including the rigging of the oil, gold and foreign exchange markets directed against Russia and China.

Is the “possible” rigging of the Shanghai Stock Exchange part of a broader package of US actions against China which consists in weakening China’s economy and financial system?

Does China’s financial collapse serve broader US foreign policy interests which include routine threats directed against China, not to mention US military deployments in the South China Sea?

Are we dealing with “financial warfare” directed against a competing World economic power?

It is worth noting that speculative procedures (rigging) have also been used in the oil and foreign exchange markets against the Russian Federation. Combined with the sanctions regime, the objective was to push down the price of crude oil (as well as the value of the Russian rouble),  with a view to weakening the Russian economy.

“Obama’s ‘Pivot to Asia’ directed against China is reinforced through concurrent destabilizing actions on the Shanghai stock exchange. The ultimate intent is to undermine –through non-military means– the national economy of the People’s Republic of China.” (Michel Chossudovsky, US-NATO Military Deployments, Economic Warfare, Goldman Sachs and the Next Financial Meltdown, Global Research, August 8, 2015

Note 

1. The latter is one among several instruments used by speculators. There is no buy sell transaction of shares of company listed on the stock exchange: a bet is placed on an upward or downward movement of the DJIA. It’s an index fund:  ask and put options.

Disclaimer: The contents of this article are of sole responsibility of the author(s). The Centre for Research on Globalization will not be responsible for any inaccurate or incorrect statement in this article.

What is the relationship between war in a military theater and “economic warfare”? 

An act of war is invariably an economic undertaking which supports dominant corporate interests. The conduct of US-NATO military operations is carried out on behalf of powerful financial institutions. 

US led wars in the Middle East under the humanitarian mantle of the “global war on terrorism” largely serve the interests of Wall Street, the Anglo-american oil conglomerates, the so-called ‘defense contractors”, the biotech conglomerates (Monsanto et al), Big Pharma and the corporate media.

But modern warfare is by no means limited to the sphere of military and intelligence operations. Washington not only imposes economic sanctions on countries which do not support its imperial agenda, it also fosters the outright destabilization of national economies. While the Pentagon and NATO coordinate military operations against sovereign countries, Wall Street carries out concurrent destabilizing actions on financial markets including the rigging of the oil, gold and foreign exchange markets directed against Russia and China.

It’s called “financial warfare”, it’s part of the same global agenda, it’s implemented alongside and in coordination with the Worldwide deployment of the US-NATO’s military machine.

In this regard, Obama’s “Pivot to Asia” directed against China involving the deployment of US naval forces in the South China Sea, is reinforced through concurrent destabilizing actions on the Shanghai stock exchange. The ultimate intent is to undermine –through non-military means– the national economy of the People’s Republic of China.

War and Financial Warfare

Is financial warfare coordinated with political decision-making pertaining to major military and intelligence operations?

Acts of financial warfare require intelligence;  they often require consultation and coordination at the highest levels of government. While the decision making process between the military-intelligence apparatus and the corporate financial system is by no means integrated, it nonetheless overlaps through a system of cross appointments and consultations.

Overlapping appointments

Amply documented, the mega-banking institutions on Wall Street and their related hedge funds exert their influence at the highest levels of the US government including the State Department, the Pentagon and the White House.

The system of cross-appointments together with corporate lobbying is part of this process.  National security advisers and former Pentagon officials are appointed to the World Bank,  etc.  Former prime ministers, senior government officials take on consulting positions with major banking institutions,  CIA officials are involved as advisers in key trade negotiations, etc. Conversely, Wall Street bankers are appointed to key positions in government.

In early August, Goldman Sachs appointed NATO’s former Secretary General Anders Fogh Rasmussen as a financial consultant.

Over the last five years (2009-2014), Rasmussen was actively involved in coordinating NATO’s humanitarian bombing raids in the Middle East not to mention NATO military deployments on Russia’s doorstep in Eastern Europe, the Baltic States and the Black Sea.

During his stint as Prime Minister of Denmark (2001-2009), Rasmussen was involved (under a neoliberal policy agenda) in dismantling Denmark’s welfare state alongside the privatization of state assets.

Rasmussen’s consulting advice will be used as part of Goldman’s political lobbying in the EU, namely the process of influencing political and strategic decision making.

Moreover, Goldman’s multibillion dollar investment decisions, its inside trading operations, its various speculative actions on the commodities, forex, precious metals markets, etc, require detailed inside information/ political coordination pertaining to geopolitical and military affairs.

Rasmussen joins a long list of  prominent officials and political personalities who are acting as consultants for Goldman Sachs.

Mayor of Chicago Rahm Emanuel who was Obama’s Chief of Staff, was also consultant to Goldman. His role “was to “introduce us to people”, in the words of one Goldman Sachs partner at the time.”

Peter Sutherland who was EU commissioner, trade negotiator and subsequently Secretary General of the World Trade Organization (WTO) was appointed in 2005 to Goldman Sachs as a non-executive Chairman. He ended his 20 year stint with Goldman in 2015.

Robert Zoellick, former president of the World Bank joined Goldman Sachs in 2013 as chairman of the bank’s board of international advisers. Zoellick had previously held several high ranking positions in the US administration. He was Deputy Secretary of State (2005–2006) under the Bush administration.

It works both ways: government officials are appointed to Goldman; in turn Goldman Sachs officials are appointed to key positions in government.  George W. Bush’s Secretary of the Treasury Henry Paulson (2006-2009) (image left) was a former Goldman Sachs chairman and CEO. He was appointed to the Treasury two years before the 2008 financial crash.

These appointments enable Goldman Sachs among other Wall Street mega banks to manipulate government policy.

It also provides them with an inroad into the corridors of the Treasury, not to mention the central banks: e.g, the notorious appointment of  a former Goldman Sachs official (and Canadian citizen) Mark Carney to the position of governor of the Bank of England. Carney previously held  the position of Governor of the Bank of Canada. He also heads the G20′s Financial Stability Board.

Mario Draghi, was vice chairman and managing director of Goldman Sachs International (2002–2005), before his appointment as Governor of the Bank of Italy (2005-2009). In 2011, he was appointed Governor of the European Central Bank (ECB).

Goldman Sachs is a Trojan Horse with its former banking officials deployed in key governmental positions.  These appointments provide Goldman Sachs with the ability to influence and oversee the conduct of macro-economic policy.
Moreover, their former officials will provide them with inside information emanating from within the governmental structure. –i.e market rigging by major financial institutions will invariably require advanced knowledge regarding actions or decisions taken  within the government and military-intelligence apparatus.

Regulating The Next Wall Street Financial Crash 

Barely acknowledged by the financial media, another notorious appointment of a Goldman official pertains to the Security and Exchanges Commission (SEC)  In May 2015, Goldman official Andrew J. “Buddy” Donohue  was appointed SEC chief of staff for Mary Jo White which enables him to “regulate Wall Street” so to speak on behalf of Wall Street.

This is a timely appointment. Financial markets including the multi-trillion trade in derivatives are in a state of disarray. They are exceedingly unstable, largely as a result of market rigging and speculative activity by powerful actors, not to mention the lack of regulatory procedures.

Goldman Sachs Inc. played a central role in the 2008 financial meltdown, with their former chairman and CEO Henry Paulson in charge of the US Treasury.

In a bitter irony, Institutional speculators  are in charge of regulating financial markets. The next financial crash, were it to occur, will be be “regulated” by the SEC with former Goldman Sachs official Andrew J. “Buddy” Donohue in the driver’s seat, acting on behalf of a handful of “too big to fail, too big to jail” financial institutions.

Let us not despair: Goldman Sachs does not control the US Treasury.  It’s in the hands of a former Citigroup official Jacob Lew -who according to expert opinion is slated to act “responsibly” in the case of a stock market crisis.

During his stint at Citigroup which preceded the 2008 financial crisis, Lew was in charge of a speculative hedge fund investment unit which consisted according to a 2010 Huffington Post Report in shorting or betting “on the housing market to collapse.”:

[Concern was expressed when he was appointed Budget Director regarding] his unit’s investments in a hedge fund that bet on the housing market to collapse — a reality suffered by millions of American homeowners.  … But in an age in which the housing collapse led to a financial upheaval that cost 8 million American jobs and plunged the nation into its deepest recession since the Great Depression, bets [coordinated by Jack Lew] that profited off the collapse may not be perceived in the best light.

It is worth noting that Treasury Secretary Jack Lew was also involved in what is best described as “legal tax evasion” through the transfer of Citigroup funds to the Cayman islands. According to the Weekly Standard (February 2013), Jack Lew:

oversaw as many as a hundred Cayman Island investments when he worked at Citi Bank as chief operating officer of the alternative investment services unit, SEC disclosures reveal. It has previously been reported that Lew himself had been invested in a fund that was based in the Cayman Islands.  …

SEC documents ending in the year 2007 reveal that at least 90 subsidiaries of Citi were based in the Cayman Islands. A couple weeks later, in January 2008, Jack Lew took the high-ranking executive job at Citi.

Names of the Citi subsidiaries include: Asia Mortgage Finance, Azabu Credit Management Company Ltd., Alternative Investments MGR, Ltd., Asia Enterprise III Offshore L.P., Baltic Pharma Limited, BISYS Hedge Fund Director Services Limited, Brennan Limited, and many, many more.

By the end of 2008 that number of Citi subsidiaries in the Cayman Islands, which fell under the jurisdiction Lew was in charge of, jumped to 113.

In the 2012 presidential campaign, the Obama campaign called Mitt Romney’s own Cayman Island investments “bets against America.”

But only months after the election ended, Obama nominated his former chief of staff Jack Lew, who himself had similar investments and even oversaw investment funds there, to be the next treasury secretary.

When asked this morning [February 13, 2013]  at a Capitol Hill hearing about his investment in the Cayman Islands-based fund, Lew plead ignorance. He claimed today that he “actually didn’t know” the fund he invested in was housed in the Cayman Islands. Besides, he said, my “benefit was really very small.”

Financial Meltdown. Could it happen Again?

Who are the main actors?

We are dealing with a complex process of rigging and manipulation. This article has skimmed the surface focussing on selected key appointments on behalf of Wall Street’s mega banks.

Let us address the issue of so-called “fiscal responsibility”:

A speculator and tax evader (Jack Lew) is in charge of fiscal and monetary policy at the US Treasury and the regulation of major US stock markets at the Security and Exchange Commission (SEC) is in the hands of Goldman Sachs, which also means that the SEC cannot be used to indict Goldman Sachs, CitiGroup et al. on charges of inside trading and financial fraud.