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Governments-Bank-Corporate sector fraudulently create deficits and then impose austerity measures-Part 2 (Final)
‘Invisibilizing the Workers Who Actually Do the Work’ – Transcript of CounterSpin's special Labor...
Gates Foundation’s “Corporate Merry-go-round”: Spearheading the Neo-liberal Plunder of African Agriculture
This is not what the GMO industry wanted to see: banner headlines in major newspapers and across the internet exposing the fraud behind GMOs. But this constitutes much more than a PR nightmare. The story behind the headlines shakes the very foundations upon which the industry is built.
“Contrary to the assertions of its proponents, the massive enterprise to reconfigure the genetic core of the world’s food supply is not based on sound science but on the systematic subversion of science – and it would collapse if subjected to an open airing of the facts.”
“convince the public and government officials, through the dissemination of false information, that there was an overwhelming expert consensus, based on solid evidence, that the new foods were safe. Yet this, as Druker points out, was clearly not true.”
“Druker describes how amazingly successful the biotech lobby has been – and the extent to which the general public and government decision makers have been hoodwinked by the clever and methodical twisting of the facts and the propagation of many myths. Moreover, it appears that a number of respected scientific institutions, as well as many eminent scientists, were complicit in this relentless spreading of disinformation.”
“It will go a long way toward dispelling the confusion and delusion that has been created regarding the genetic engineering process and the foods it creates. Although this book tells a story that’s in many ways distressing, it’s important that it has finally been told because so much confusion has been spread and so many important decision-makers have apparently been deluded.”
“Contrary to the assertions of its proponents, the massive enterprise to reconfigure the genetic core of the world’s food supply is not based on sound science but on the systematic subversion of science – and it would collapse if subjected to an open airing of the facts.”
“Steven Druker’s investigation into the history of fraud and deceit that ushered in the era of GM deserves serious consideration before we take actions that will irreversibly alter the European food supply.”
PAUL JAY, SENIOR EDITOR, TRNN: Welcome to The Real News Network. I'm Paul Jay in Baltimore. And welcome to this week's edition of The Black Financial and Fraud Report with Bill Black, who now joins us from Kansas City, Missouri.
Bill's an associate professor of economics and law at the University of Missouri–Kansas City. He's a white-collar criminologist, a former financial regulator, author of the book The Best Way to Rob a Bank Is to Own One.
Thanks for joining us again, Bill.
BILL BLACK, ASSOC. PROF. ECONOMICS AND LAW, UMKC: Thank you.
JAY: So what are you working on this week?
BLACK: So I got to play historical detective, and the question was, we had just gotten through this savings and loan debacle. We were up to over 1,000 felony convictions of—just in major cases. George Akerlof and Paul Romer had said, hey, now we know how to prevent these crises.
JAY: What year are we in?
BLACK: We're in 1993. The national commission to investigate the causes of crisis says that fraud was invariably present at the typical large failure. And the new administration comes in, Bill Clinton and Al Gore, and they want to reinvent government.
So, what's been the big success story that all the public administration scholars are writing up? Well, it's been the effort to re-regulate the savings and loans. This is the greatest success against elite white-collar criminals, and it's a sexy story because we take on all these powerful politicians and such.
And so the mystery I was trying to investigate is why right at that time does the administration turn its back on preventing frauds and start adopting exactly the practices that we had warned were bound to produce widescale looting.
JAY: Okay. Let me add quickly a little bit of context here. And make sure—and tell me if I'm wrong here, Bill. Bill was a financial regulator. He was involved in investigating the whole savings and loans crisis. And so you were in the middle of all of this.
BLACK: That's right. We had led this effort, and we, you know, went up against the Keating Five, the five U.S. senators who tried to prevent us from cracking down on Charles Keating, and they removed our jurisdiction. And this was in all of the media. It was a really big deal, and it was treated as the great success story.
And then comes in the Clinton administration, and they want to reinvent government and make it much more effective. And you're going, hey, we are the folks who've done exactly that. The media is praising us. The public administration scholars are praising us. The white-collar criminologists are praising us. The economists are praising us. And instead they do a 180 when they come in and they move completely away from the things that work against fraud and they move completely to the things we warned produce a criminogenic environment that produces widescale fraud.
JAY: For example?
BLACK: So, for example, they deregulate it. So Akerlof and Romer, their famous line is that the economists lacked a theory before 1993 about fraud, and so they didn't see what the regulators in the field saw from the beginning, that deregulation was bound to produce looting—"bound" is their word, "looting" is their word. And then, of course, they supply that theory in 1993.
So this is exactly the same time the new administration comes in. And it now has the theory, has the benefit of what causes disaster, and it has the benefit of knowing what prevents the disaster and how you take on these elite frauds. And so you might think they would say, hey, this is a great model; we want to reinvent government; let's do it along these lines. Instead, they do exactly the opposite.
So, what do they do? They deregulate. And they start by doing what the agencies can do on their own. And so they get rid of the underwriting requirements as their very first thing they do in financial regulation. That's the worst possible thing. That's what makes possible the liar's loans that you see. And remember, this is right after our success in 1990, 1991 in cleansing the industry of liar's loans and preventing that crisis in savings and loans.
What's the next thing they do? They come and they instruct us—and I personally witnessed this—that we are to refer to the banks and the savings and loans as our customers, we the regulators, and we are to think of the banks and the savings and loans as our customers, and we are to think of how we can provide service—those are all direct quotations from how we were trained. And, of course, we rebelled and said this was obscene, this, completely improper; it will destroy effective regulation and such.
What else did they do? Well, they closed down the prosecution of savings and loan frauds. Now, we [inaud.] many times about having over 1,000 felony convictions in major cases alone, but that pipeline was still going. There would have been thousands of additional convictions, but the Clinton administration took away the FBI agents and most of the prosecutors and reassigned them to other things, which largely brought an end to the prosecutions and such. So they did everything in every possible way.
So I'm wondering what could cause this. And it turns out there's actually books by the people that were in charge of the reinventing effort, and they explain—and this is a book by Bob Stone, Confessions of a [Civil] Servant or something like that, who says, we had a meeting with Al Gore right at the beginning of the reinvention effort, and I told Al Gore my three lessons for how to reinvent a large entity like the federal government.
Now, the first two are just propaganda things. You know, tell simple stories with props and repeat them over and over and over again. But the third was: don't waste one second worrying about fraud, waste, and abuse. Now, that is an almost word-for-word quotation of what he told Al Gore. And after Al Gore heard that, Al Gore put Mr. Stone in charge of the reinvention of government effort.
JAY: And what's the explanation of why one shouldn't spend one cent on this?
BLACK: One second.
JAY: One second.
BLACK: One second of time on it. Stone isn't big on explanations, right? These are just diktats that he comes up with. They don't come from theory. They don't come from any real experience. He just doesn't much like anybody who worries about fraud.
And his—there was a second guy at the meeting, and this guy got made a major leader in reinvention as well by Al Gore at the end of this meeting on the strength of the following statement, which again is in Bob Stone's book. And the statement was, to Gore, that the United States of America was the last bastion of communism, the U.S. government was. Right? So this is the land—.
JAY: What is that supposed to mean?
BLACK: Well, that was supposed to mean that the U.S. government still had monopolies. Right? So there were some things that only the U.S. government did, and that supposedly made us Bolsheviks. It's the bizarrest thing you can imagine.
JAY: Okay. Well, let me ask you this, 'cause, I mean, that's pretty nutty. This idea that you shouldn't spend one second going after fraud and the big banks, there seemed to have been a bit of a theory to it (I've heard, at any rate), which is that you need this ability—if you crack down on fraud, you'll limit innovation in the finance field, and for the American banks to be competitive and deal with this global, complex structure, they need to be innovative, so live with fraud. So if I have that rationale right, how much is that still the rationale of the Obama administration?
BLACK: Well, it isn't—they actually don't make that rationale. He does launch an attack on the inspector generals using that ground, and he says, you know, they worry about fraud within the government, and that's very bad, because they imperil innovation. And you are correct that that remains, in the Obama administration, one of the excuses for why we shouldn't take fraud seriously.
But this is the intellectual history, and this is where much of the damage was done that the Bush administration then compounded, and produced the most criminogenic environment in history for this widescale fraud. And that's only the Clinton side of it, and then eventually some Bush.
But simultaneously what's happening on the Republican side is that Alan Greenspan is going around giving his favorite stump speech as a chairman of the Federal Reserve, which the lesson of it is also don't worry about fraud, fraud takes care of itself. And that comes from Chicago school economists—or, actually, law and econ folks, who actually didn't have degrees in economics, Easterbook and Fischel. Fischel eventually becomes dean of the UChicago Law School; Easterbrook, Seventh Circuit jurist, former UChicago law professor. And their famous line is a rule against fraud is not necessary or even particularly important in the securities context.
Now, they're coming from the side that the markets instantly and reliably remove all fraud. And that, by the way, if there was any intellectual input at all to the Clinton administration's thing on fraud, that's probably the same thing, because you see from these readings, this detective work I did, they are just in thrall to the private industry. They assume—in fact, they're nastier by far than President Reagan in describing the federal government, and they just love the private sector, and in particular they love all the things about the private sector that were building up to produce one fraud epidemic after another.
JAY: And has that changed at all in the current administration?
BLACK: No. In particular what they loved was performance pay, which of course is not really tied to performance and creates both the incentive to loot and the method to loot through a seemingly normal corporate mechanism that makes it far harder to prosecute. And so their big recommendation inside the government was to bring performance pay within the government. And their rationale for how to use that was then that you should—and this is a quotation from the granddaddy of all of this, who, by the way, is a journalist, Mr. Osborn—you should not ever, quote, "tolerate resistance," unquote.
JAY: And let me just—again, in terms of the Obama administration, any change in this culture?
BLACK: A strong embrace of the culture, even after the Enron-era frauds, even after the current level of frauds. And by the way, the book that I've been quoting from in substantial part, Mr. Stone's book, was published, hardcover, in 2002, soft cover in 2004, and has no mea culpas about, you know, we missed all of this, and doesn't even, for example, mention Enron's failure, so just does not take into account the disasters that occurred when they used this so-called performance pay.
But, again, that's—as a social scientist, that's the big motif. This is consistently written as propaganda, as journalistic stories. And this is not data-driven, it's not theory-driven. It was a bunch of just-so stories. And it was dishonest just-so stories, where all the contrary stories, you know, that disproved it and were vastly larger were simply ignored.
JAY: Alright. Thanks for joining us, Bill.
BLACK: Thank you.
JAY: And thank you for joining us on The Real News Network.
DISCLAIMER: Please note that transcripts for The Real News Network are typed from a recording of the program. TRNN cannot guarantee their complete accuracy.
In reality, the diminutive, corporate-media inflated rally in DC was organized by the very corporate-financier special interests that have been wreaking terrible havoc on both the human population and the environment of this planet for decades. They are demanding action from a government that already represents their interests. Their demands are policies, particularly financial tax schemes that they themselves created and are are best positioned to benefit from while making no discernible impact on the very real environmental threats we collectively face.
Image: Rampant CO2, high global temperatures, rising sea levels. A look into the future? No, this is Mesozoic North America 250-65 million years ago. Climate change has happened long before humanity’s emergence, it will happen again, with or without us. The key to preserving what we as humans value, including not only our cities, towns, and countrysides, but also ecosystems and species – is to devise technical, pragmatic solutions to ensure no matter what the climate does, we can not only survive, but thrive.
Yahoo! News’ report, “40,000 People Reported at Climate Change Rally,” mentions 350.org as one of the rally’s organizers and key representatives. Upon 350.org‘s “Friends & Allies” page, an extensive list of human rights and environmental racketeers can be found, all either linked, or directly connected to big-oil, big-finance, big-agri, and big-defense.
The World Wildlife Fund (WWF) and its “Earth Hour” for instance, includes Fortune 500 corporations (page 24, .pdf) (and here) Walmart, Unilever, Coca-Cola, draconian intellectual property racketeer Christopher Dodd representing the Motion Picture Association of America (MPAA) as a director, Bank of America, Google, and others.
While the WWF claims having big corporations as partners is “good news” for the environment, implying that they are shifting toward environmental responsibility – in reality it is exactly the other way around. Corporations are co-opting genuine concern for the environment to further enrich themselves and to create global frameworks that eliminate indigenous competition over resources they themselves are already exploiting and plan to continue exploiting.
The lack of real, pragmatic solutions, or even an honest scientific discussion on issues like climate change are particularly telling. This collection of organizations falling under the 350.org website have also been key in pushing other establishment agendas, most notably regime change and political subversion worldwide, couching a corporate-fascist warmongering agenda behind liberal concerns for “freedom,” “democracy,” and “human rights.”
Real Environmental Threats
The climate of Earth has always changed throughout its natural history, and many times before the existence of man, has changed so dramatically that it has caused mass extinction events. 65 million years ago, for example, Antarctica was a thriving ecosystem covered in temperate forests inhabited by dinosaurs. The global temperatures were higher, sea levels were higher, and carbon dioxide (CO2) levels were many times higher than they are today. Higher temperatures, sea levels, and CO2 levels made the planet more habitable, not less. This changed however, and to the detriment of many species that are now extinct.
Before the Cretaceous period, there have been many points throughout Earth’s natural history, that were we as humans to travel back, would find uninhabitable. The atmosphere has been in a state of perpetual change, the biology driven by this change has likewise continuously evolved. There is no “norm” in terms of geology, biology, or climate. The only constant is the inevitability of its constant change.
The climate will change with or without us. To ensure the survival of what we value in terms of human society, history, and infrastructure, as well as ecosystems and individual species we desire to preserve, we must come up with something better than “carbon neutrality” implemented by giving bankers yet another derivative to trade, and energy companies a legal framework to maintain monopolies over powering human civilization.
Part of the solution is not only leveraging technology to protect our towns, cities, and countrysides from adverse weather, flooding, and changes in temperature through innovative infrastructure projects, but undermining, decentralizing, and eventually eliminating permanently these corporate monopolies that are demonstrably destroying the environment.
Strange that 350.org wasn’t marching against genetically modified organisms (GMO) and Monsanto’s pursuit of overwriting the planet genetically. Could a planet face a more dire threat than being overwritten genetically, its very essence mutilated by profiteering corporations? Strange that 350.org‘s “Friends & Allies” don’t demand an end to profiteering wars around the planet that see tons of depleted uranium, with a half-life of billions of years, being dumped in both human and natural habitats the world over. Strange that 350.org, and “Friends & Allies” like WWF have in fact partnered with Fortune 500 corporations that perpetuate global monopolies, centralized manufacturing and distribution (and profits) that encourage wasteful supply chains, unhealthy socioeconomic trends, incur large amounts of garbage, and require the very petroleum and CO2 producing processes they allegedly were in Washington to oppose.
Indeed, 350.org and partners like the WWF do not represent corporations joining environmentalists, but rather represent environmentalists being co-opted and manipulated by the very special interests committing real harm to this planet.
Don’t Demand Action – Be the Action
Waving around placards as part of a big-business rally couched behind environmentalism, demanding action from a government big-business already fully owns, simply legitimizes and manufacturers public consent for more of the same. More schemes, more waste, more fraud, more abuse, while the environment continues to unravel and a host of problems both directly and indirectly related continue to grow.
Real solutions generally don’t involve corporations or governments, in fact, as a necessity must exclude them. The marriage between corporate interests and government regulations should be something all of us can agree on, regardless of where we sit on the political or environmental spectrum.
Real solutions involve a real education in science, technology, design, and manufacturing. This empowers people in all levels of society to accurately assess problems and apply local solutions. This, coupled with modern manufacturing technology enables more to be done on a local level, short-circuiting the petroleum intensive logistical chains WWF sponsors like Walmart couldn’t live without.
Organic farming on a local level coupled with local farmers’ markets eliminates entirely the need for Monsanto poison, fertilizers, and genetically modified franken-crops, along with the replacement of the petroleum intensive logistical networks that distribute big-agri’s products. 3D printing, computer-controlled manufacturing, and local hackerspaces that encourage local entrepreneurship accelerate technological development and solutions that allow us to live the lives we wish to lead while doing so more efficiently in terms of energy, waste, and environmental impact.
In fact, when you think about it, almost all of these real solutions involve real community and local action, not placard-waving trips to Washington. These are not solutions that involve policies, taxes, and regulations, but rather technology, education, constructive, pragmatic, technical solutions that not only would make our environment more livable, but make our local economies and communities more viable and self-sufficient. The catch is, and the reason why this isn’t being done, you will notice that none of these activities require WWF sponsors like Walmart, Nike, IBM, Toyota, Bank of America, Coca-Cola, HSBC, Citi, IKEA, Nokia, etc.
We all desire cleaner air, healthier food, safer water, and greener parks. Waiting for a corporate-financier establishment to give it to us, when they themselves are the ones that have denied us of these essentials is the height of both naivety and futility.
Does it make sense then, to see why real problems and their solutions have become the target of hijackers like the corporate conglomeration that is 350.org and the WWF? Does it make sense to see them offering “alternative” centralized, corporate dependent solutions that replace local activism and tangible, technological solutions?
Why travel to Washington D.C. and demand non-solutions to real problems when you can organize locally and begin making this planet livable in very real, tangible, pragmatic, and measurable ways?
(Photo: Flip the Debt via Facebook)On Monday, a grassroots, anti–corporate tax-dodging coalition called Flip the Debt crashed a "Fix the Debt" party at St. Anselm's College in New Hampshire hosted by Honeywell CEO David Cote to tell the gathered deficit hawk disciples that paying their "damn taxes" would be a better solution than crippling the nation with fiscal austerity measures.
The CEO-led Fix the Debt campaign promotes fear over the national debt as a guise for lowering the corporate income tax rate and cutting necessary social support programs like Social Security and Medicare.
Three minutes into Cote's keynote address, the first protestor stood up in the conference room and spoke out:
Fix the Debt claims to seek bipartisan solutions to reduce the deficit, but Fix the Debt is nothing more than a CEO lobby whose real objective is huge corporate tax breaks and drastic cuts in Social Security, Medicare and Medicaid. David Cote and his CEO friends receive a lot from government: In 2011, Honeywell received $725 million in government deals, making it the 35th largest federal contractor. However, Honeywell and other companies pay next to nothing in taxes. Honeywell's tax rate from 2008-2011 was 2 percent. Does anyone in this room pay 2 percent?
"Fix the Debt is going to be met by opposition everywhere it goes, because everyone knows it's a fraud" another added, before leading the group in the chant: "Read our lips. Pay your taxes!"
The group kicked off two weeks ago with the launch of a 'debt clock' and rally in New York City. The clock has thus far calculated that at least $2.3 trillion has been stolen by corporations and the top 1% (heavily represented within Fix the Debt) who exploit "loopholes, tax havens and tax cuts." That figure, according to the group, grows by nearly $100 billion annually.
Laying out the goals of the group, Flip the Debt co-founder Gan Golan said, "We will disrupt Fix the Debt meetings across the country to elevate our message that the biggest corporations in the country aren't paying taxes, and now they want the rest of us to pay for it."
On their website, the group adds: “We wouldn’t have to make these cuts, and we could invest in putting America back to work, if only [corporations] pay their fair share. So we say, rather than ‘fix the debt,’ let’s ‘flip the debt’ and put responsibility where it belongs. Hey 1%! Pay your damn taxes.”
One of the protestors produced this video of Monday's demonstration.
A cross section of kill-to-injury ratios of major mass shootings suggests that if Adam Lanza acted alone in carrying out the Sandy Hook Elementary School carnage he was among the most accurate killers in modern history, exceeding even the lethal damage meted out by Al Capone’s machine gun-wielding henchmen in the infamous St. Valentine’s Day Massacre.
|Incident, # of shooters, weapon(s) used||Shot||Killed||Wounded||Kill-to-wounded ratio|
|SANDY HOOK (2012) 1 shooter, AR-15, .223||27||26 (96.2%)||1 (3.8%)||26:1|
|Aurora, CO (2012) 1 shooter, AR-15, .223||71||12 (16.9%)||59 (83%)||1:5|
|Tucson, AZ (2011) 1 shooter, Glock 9mm||14||6 (42.8%)||8 (57.1%)||1:1.2|
|N. Ill. U (2008) 1 shooter, 9mm||26||5 (20%)||21 ((80%)||1:4|
|Virginia Tech (2007) 1 shooter, 9mm pistol||49||32 (68%)||17 (32%)||2:1|
|Columbine, CO (1999) 2 shooters, 12 ga., 9mm||33||12 (36%)||21 (64%)||1:2|
|U. Iowa (1991) 1 shooter/.38 spec.||6||5 (83%)||1 (16%)||5:1|
|Stockton, CA (1989) 1 shooter AK-47||35||5 (14%)||30 (86%)||1:6|
|École Polytechnique/Montreal Massacre (1989) 1 shooter, Ruger Mini 14 .223||27||14 (52%)||13 (48%)||1.1:1|
|Cal. St. Fullerton (1976) 1 shooter .22 LR semi-auto||9||7 (78%)||2 (22%)||3.5:1|
|U. Texas Tower (1966) 1 shooter||48||16 (33%)||32 (67%)||1:2|
|St. Valentine’s Day Massacre (1929) 2 shooters, .45 submachine guns||7||6 (85.8%)||1 (14.2%)||6:1|
Never mind the facts, however. The public has been repeatedly told by corporate news media that the December 14, 2012 incident was exclusively carried out by the awkward 20-year-old man with virtually no firearms or military training.
“The debate over gun violence gained urgency after a gunman killed 20 first-graders and six adults on December 14 at Sandy Hook Elementary School in Newtown, Connecticut,” Reuters observed as recently as February 7. “The killer, 20-year-old Adam Lanza, used a Bushmaster AR-15 type assault rifle to shoot his victims before killing himself.”
Over the past seven weeks mainstream media have spoken in one earsplitting voice to drive home the now familiar “lone gunman” storyline ostensibly proffered by law enforcement while dismissing a multitude of important evidence indicating a far more complex scenario.
Indeed, as information recently pointed to by Digital Journal indicates, in a widescale rush to judgment major news media have neglected vital information and statements from Connecticut state authorities suggesting that Lanza may have had accomplices.
In a December 26 court plea to postpone release of contents yielded through five search warrant, Connecticut State Attorney General Stephen Sedensky argued that unsealing such findings might “seriously jeopardize” the investigation by divulging evidence heretofore known only to other “potential suspects.”
Pointing to “information in the search warrant affidavits that is not known to the general public,” Sedensky also argued that opening the warrants would “identify persons cooperating with the investigation, thus possibly jeopardizing their personal safety and well-being.”
The prosecutor’s statement came less than two weeks after Connecticut State Police Lieutenant J. Paul Vance told reporters how there were “some cards that we’re holding close to our vest.”
In light of the above and alongside a wealth of additional evidence calling the “official story” into question, the corporate news media’s long-running and continued emphasis of the “lone gunman” narrative appears increasingly fraudulent. The question remains whether this is merely a case of slipshod reporting or part of a more intentional mass deception against the American public.
 Thomas Ferraro and Richard Cohen, “House Democrats to Unveil Gun Control Package; Mirrors Obama’s,” NBC/Reuters, February 7, 2013.
 Ralph Lopez, “Sandy Hook DA Cites ‘Potential Suspects,’ Fears Witness Safety,” Digital Journal, February 5, 2013.
Renowned author Dr. Edward Herman spoke with the Voice of Russia regarding the facts surrounding the Srebrenica Massacre, the pretext for the “humanitarian” invasion of the former Yugoslavia, and takes apart the “official” ; version that has always been promoted by the West.
Dr. Herman reveals that there were in fact multiple massacres at Srebrenica, and that the killing of Bosnian-Muslim soldiers at Srebrenica (the West’s pretext) was in response to the killing of over 2,000 Serb civilians, mostly women and children, at the location.
Robles: My first question is about “The Srebrenica massacre” and the way that the establishment manipulated the media. Can you tell us, or give us some insights, on that?
Herman: The Srebrenica massacre, actually I always put it in quote marks, because actually there were lots of massacres in the Srebrenica area, the one before July 1995 there were vast numbers of Serbs killed by Muslim, Bosnian Muslim, forces who went out of Srebrenica.
One estimate is that there were more than 150 Serbs villages that were totally wiped out and one study gives actually gives the names of 2,383 Serb civilians who were killed between 1992 and July, 1995. So then we’d call that “the first Srebrenica massacre”. Then in July 1995…
Robles: Just to be very clear, these were Serbs, that were being killed.
Herman: Yes! We’re talking about 2,383 Serb civilians killed before July 1995. And the Bosnian Serb Army took over Srebrenica in July, 1995, and there were deaths and executions after that. That’s what’s called in the West “the Srebrenica massacre”, but, in fact, that’s really mainly a political construct.
The numbers executed there were probably in the order of between 500 and 1,000. In other words, less than half of the number of Serbs civilians killed before July, 1995.
And the Western claim is that 8,000 men and boys were executed in the quote Srebrenica massacre, but notice these were men, always men, all men, they were all soldiers, whereas those 2,383 civilians killed included very large numbers of women and children.
We’re talking about the execution in the second massacre of essentially army people. And of course they had never proved that there were 7,000 or 8,000, even men and boys killed. The bodies in the graves added up to something like 2,500.
A lot of those bodies were combat deaths. One of the beauties of the Western propaganda system is that all the bodies they found after July, 1995, they count as executed, even though we know very well that a large number were killed in combat.
Herman: Also another important fact about the Srebrenica massacre is that all those killings of Serbs took place coming out of an area that was supposed to be a “safe haven”. Srebrenica was a safe place, a safe haven. It was supposed to be demilitarized, but it never was.
So the Bosnian Muslim soldiers would come out to Srebrenica and they would kill Serb civilians. This is all completely ignored in the Western media. It’s as if the Serbs came in July and started to kill arbitrarily.
In fact, the U.N. military in that area, a French offical name Phillip Movion, was asked by the Yugoslav tribunal, “Why the Serbs did it?”
He said he’s absolutely convinced that they did it because of what the commander of Srebrenica’s Bosnian Muslims did to the Serbs before July 1995.
This is the UN Army head, but you won’t see that in the Western press!
In other words, the first massacre is what led to the lesser second massacre of namely military aged people.
The whole business of the Srebrenica massacre is a gigantic political fraud. There was a massacre, but it was a responsive vengeance massacre, women and children were not killed.
One of the features of the “quote” Srebrenica massacre, that is the second one, is that 20,000 Srebrenica women and children were bussed to safety by the Serb army. Women and children were not killed, only military aged people and a very large fraction of those that did die, died in combat.
So my own estimate, as I said, is that maybe there were 500 to 1,000 executions. Vengeance executions.
Robles: I’m sorry. How many?
Herman: 500 to 1,000 I would say.
Robles: 500 to 1,000.
Herman: Yes. So there was a significant massacre, but put it in its context! This was a war, this was an army that had seen their own civilians massacred on a much larger scale. That is completely suppressed in the West, as if the Serbs came in to Srebrenica and started to kill because of a blood lust! It’s absolutely a fraud!
So, I regard the Srebrenica massacre as a tremendous propaganda triumph. The West wanted to go after Serbia and they avoided peace. They needed this massacre.
Robles: You said, about 2,380 civilians, women and children mainly…
Herman: Serbian women and children, yes.
Robles: … were killed initially. This was the Srebrenica…
Herman: The first massacre between 1992 and July 1995. These were Serb civilians. There were also hundreds of Serb military killed in that period, I am just talking about civilians!
Robles: The civilians, right! And then in retaliation approximately 2,500 Muslim… Bosnian Muslims soldiers were killed.
That’s misleading, because the thrust of the 8,000 claim is that they were executed but those 2000-plus that were killed, a very large fraction were killed in combat.
Robles: In combat. Okay, I see. I see.
Herman: Yes, and the executions were, as I say probably in the order of 500 to 1,000.
Robles: Okay. So those were Bosnian Muslims who were found to be directly responsible for killing massive numbers of Serbian civilians. Right?
Herman: The Serbs actually had lists of Bosnian Muslim soldiers they wanted to get, but I can’t honestly say they were the only ones who were executed. But certainly, a significant number of those executed were on those lists, those vengeance lists.
Edward S. Herman is an American economist and media analyst with a specialty in corporate and regulatory issues as well as political economy and the media.
He’s a Professor Emeritus of Finance at the Wharton School at the University of Pennsylvania. He’s also the author of several books, namely “Manufacturing Consent” which he wrote with Noam Chomsky and “The Srebrenica Massacre: Evidence, Context and Politics”.
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James S. Henry is a leading economist, attorney and investigative journalist who has written extensively about global issues. James served as Chief Economist at the international consultancy firm McKinsey & Co and as an investigative journalist his work has appeared in numerous publications like Forbes, The Nation, and the The New York Times. He was the lead researcher of the recently released report titled “'The Price of Offshore Revisited.'
PAUL JAY, SENIOR EDITOR, TRNN: Welcome to The Real News Network. I'm Paul Jay in Baltimore.Lanny Breuer, who's head of the Criminal Justice Division at the Justice Department, has announced he's stepping down. According to The Washington Post, quote, Breuer is widely credited with aggressively going after white-collar crime in the aftermath of the crisis. Well, a recent PBS documentary suggests a somewhat different description of how Breuer has done on this front. Here's a clip towards the end of the film.~~~MARTIN SMITH, CORRESPONDENT, PBS FRONTLINE: You gave a speech before the New York Bar Association, and in that speech you made a reference to losing sleep at night worrying about what a lawsuit might result in at a large financial institution. Is that really the job of a prosecutor, to worry about anything other than simply pursuing justice?LANNY BREUER, ASSIST. ATTORNEY GENERAL, U.S. DEPARTMENT OF JUSTICE: Well, I think I am pursuing justice, because if I bring a case against institution A, and as a result of bring that case there's some huge economic effect, if it creates a ripple effect so that suddenly counterparties and other financial institutions or other companies that had nothing to do with this are affected badly, it's a factor we need to know and understand.TED KAUFMAN, FMR. U.S. SENATOR (D-DE): That was very disturbing to me, very disturbing. That was never raised at any time during any of our discussions. That is not the job of a prosecutor, to worry about the health of the banks, in my opinion. The job of prosecutor is to prosecute criminal behavior. It's not to lie awake at night and kind of decide the future of the banks.NARRATOR (VOICEOVER): So far in civil proceedings the government has levied several billion dollars in penalties for misconduct in a crisis that's cost investors and homeowners many hundreds of billions of dollars. But to date not one senior Wall Street executive has been held criminally liable by the Department of Justice for activities related to the financial crisis.~~~JAY: Now joining us to talk about the record of the Justice Department in relation to this type of crime or fraud and prosecuting or lack of it is James Henry. James is a leading economist, attorney, investigative journalist who's written extensively about global issues. He served as the chief economist at the international consultancy firm McKinsey & Company. As an investigative journalist, his work has appeared in numerous publications like Forbes, Nation, and The New York Times. Thanks for joining us again, James.JAMES S. HENRY, ECONOMIST, LAWYER, AND INVESTIGATIVE JOURNALIST: You're quite welcome.JAY: So talk a bit about this, this conundrum, you could say, that Brewer says he was faced with, more or less that if he goes after executives from the big banks, even though he kind of acknowledges it was probably fraud and the FBI agent or FBI official in the film says, you know, if he thinks it was not unintentional the way banks did things—a pretty understated way to say it. But Breuer says he couldn't have done it, because the systemic implications were just too big—not his words, but that's what he's saying.HENRY: Yeah. I mean, that's what he made a statement in September of last year in a speech, saying that he was kind of up nights worrying about what would happen to these massive institutions if he indicted some of these senior executives criminally. I think a lot of outsiders would say that's nonsense, that, you know, you could clearly just put some of the executives in jail—and I think that's what they were actually expecting—without jeopardizing the institutions themselves. Maybe some of these institutions deserve to be corporately indicted and made examples of, and maybe the entire—you know, kind of the salutary effect on the banking system would be great enough to justify putting one of them out of its misery because of the effect it would have on all the others.So I think there's at least a strong argument that this Justice Department, when it came to large financial institutions, was asleep at the switch. And we have no indictments or prosecutions of any individual senior Wall Street executive in the last four years.JAY: What for you is the sort of two or three most outstanding examples of fraud that should have been prosecuted?HENRY: Well, we now see a lot of private lawsuits going on from investors in some of the securitized mortgage packages and people who bought things like CDOs from Goldman Sachs at the same time Goldman Sachs was shorting these securities themselves. So these private suits and the law firms that have been prosecuting them have managed to turn up, you know, reams of evidence of real fraud. And it's all emerging in the course of these private law suits which are about to unfold.It's ironic, given all that evidence, that the Justice Department, with its thousands of attorneys, and, you know, the SEC be able to help out as well, couldn't come to a similar kind of finding, couldn't turn up the whistleblowers that even in the PBS documentary, you know, investigative journalists were able to surface in a matter of weeks. And the New York State attorney general's office has piggybacked already on some of these private lawsuits and has—pursuing its own investigations of some of the largest firms on Wall Street, including Goldman Sachs, JPMorgan, Citibank, Bank of America.These major institutions have basically walked away from justice when it comes to the federal government, and it's been left to the private lawsuits and to the SEC, to the state of New York, to actually piggyback on these private lawsuits and make these cases. It begs the question of, you know, whether or Lenny Breuer and his team was really doing their job when it came to these major financial institutions. They seem to have a soft place in their hearts. And that also extends to other kinds of corporate crime, for example the settlements that they engaged in with HSBC and the money laundering, the tap on the wrist that UBS got for being at the heart of the Libor scandal. It's not just the bank crises; it's also these other kind of shenanigans. So, many of us have been expecting the Justice Department to act here, but they haven't.JAY: So let's talk a little bit about the bigger picture here. The power of finance seems to be such, the biggest financial institutions, their hold over Congress, their hold over the Obama administration, their hold over the Justice Department, it seems to be so deep and profound that they can't be regulated, they can't be prosecuted. Where does this lead? Where does this go?HENRY: I think you can't even get them out of the Treasury Department. I mean, Obama's pick for the successor to Tim Geithner this month is taking office at the Treasury, the secretary of Treasury, is Jacob Lew, who is the guy who was running Citibank's global private banking department in 2006, you know, and then moved on to the White House chief of staff. But here we have, right at the core of power, another senior Wall Street executive.Now, I think Ted Kaufman, who was a senator from Delaware in 2010, then retired, and was a big proponent of prosecutions, basically said that, you know, Wall Street calls the shots in Washington. Dick Durbin said they own this town. And I think that's not only due to financial influence and contributions; it's also due to the fact that there's this revolving-door policy of basically gifting the Treasury Department to former executives from the major banks. You know, we have Bill Daley from JPMorgan, vice chairman of JPMorgan, serving as Obama's chief of staff. It's hard to imagine those folks being tough on the institutions that have provided their bread and butter. And so the track record is entirely consistent with this evidence that we see from the Justice Department's failure to prosecute any of these major institutions.JAY: I mean, I don't think it's anything new with the Obama administration, but Barack Obama the candidate was heavily financed by Wall Street. Everyone was kind of surprised in the primaries that he was actually raising more money than Hillary Clinton was on Wall Street.HENRY: You know, Wall Street's contributions from 1990 to 2008 was an average of $2,500 per day per congressman. You know, it's just hard to compete with that kind of immediate financial clout.And I think there's also a kind of insidious influence on just the ideology. You know, we've had presidential candidate after presidential candidate basically arguing for hands off when it comes to financial regulation—don't really have a good explanation from those folks about what went wrong in 2008. I guess it was, you know, just bad weather. But, you know, to this day, we really haven't had a fundamental, deep examination of the role of the private sector financial institutions in the policies that led to that very, very costly collapse that we're still paying for.JAY: Isn't some of this kind of so inherent in the way the global capitalist system works right now—and it's not new, but it's reached new heights, meaning that the size of the global economy's just so big, there is so much capital moving back and forth, the enterprises, global companies, are so big and operate on such a scale that you need banks that can operate in massive ways? On the other hand, when they get so big, you can't regulate them—they're essentially above the law. I mean, it's a conundrum, is it not?HENRY: If one of these institutions were indicted corporately and made an example of and exposed to the world for their behavior, you'd have a very, very profound effect on the behavior of the whole industry, because they all—you know, they say that bankers could exchange strategies and no one would care, 'cause they all basically pursue the same strategies.JAY: But that's sort of my point, like, if one of them was indicted, if some modest legislation was passed. But my point is you can't even pass the modest reforms. You can't even indict one institution. You can't—the power finance has over the politics, you can't even get, you know, simple, modest things changed in terms [crosstalk]HENRY: Yeah, I think that's the dilemma, that this has been an issue where it's very difficult to mobilize masses of Americans to understand. You know, it's not like on the gun control issue we seem to be making some progress now because people are outraged at a relatively simple situation and they can understand what they need to do about it; in the case of the banking institutions, everyone believes it's so terribly complicated that we have to defer to, you know, the Illuminati. So that's kind of the problem.And then this is an ideal case for presidential leadership. This is exactly where the president should be focusing his attention, because he does have the intellectual horsepower and support in his own team to get this kind of legislation done.JAY: So far what we've seen, he appoints and nominates these people, not prosecute.HENRY: I think his basic interest is not in economics. It's in more political issues. And he's kind of put the Treasury on autopilot. He's trusted to Tim Geithner to run the Treasury. And, you know, he's the technocrat who's been not only head of the New York Fed, but also was a senior official at the IMF. So it's not an area that Obama really wants to worry about in addition to everything else in foreign policy and, you know, the complicated domestic issues that he faces anyway.So he wanted, I think, to assume—part of his stance here has been to say, okay, let Treasury run the economy. And that's been a mistake.JAY: Yeah. Well, it's been a mistake for most Americans. It may have been the right call for some of the mavens of Wall Street, but it wasn't a very good call for anybody else.HENRY: You know, as many of his, you know, people on his political team have been saying, well, this will help us raise money from Wall Street. And indeed it has. I mean, he basically raised a lot more than people expected, given that Romney was in the race, from the very people that have made this economic crisis.JAY: Right. Thanks for joining us, James.HENRY: You're quite welcome.JAY: And thank you for joining us on The Real News Network.
EndDISCLAIMER: Please note that transcripts for The Real News Network are typed from a recording of the program. TRNN cannot guarantee their complete accuracy.
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Liberty and Justice Are Not Irreconcilable
I voted for Gary Johnson (and am a huge fan of Ron Paul), and respect and fully-support the libertarian passions for freedom and free markets.
But I am also a tireless crusader for enforcing the rule of law.
You might assume that these are opposite philosophies. For example, a reader asks:
Your work on the dangers of the American nuclear industry has been really comprehensive, and you have drawn attention to the deception, manipulation, neglect, and willful ignorance of the nuclear industry. For example, I just watched the Al Jazeera video you posted earlier this year (3/12), in which the NRC and the nuclear industry are (rightly) criticized for waiting for harm to happen, instead of preventing it. At the same time, you identify as libertarian, and I believe you supported Gary Johnson in the presidential election. He is opposed to public regulation of industry and has said that post-harm lawsuits -- for example, in medical contexts -- are sufficient to encourage businesses to self-regulate for public safety. Could you please explain how you reconcile the libertarian position against regulation with your clear recognition that too-loose self-regulation of the nuclear industry imperils the public?
Nuclear Power Would Not Exist In a Free Market
Initially, it is undisputed that nuclear power plants would not exist if operators had to obtain funding and insurance through the free market. Private insurers won’t touch nuclear energy. Investors run the other way, because the odds of losing all of their investment are so high.
No private company in the world would operate a nuclear plant unless the government put a very low cap on liability. In many parts of the world, governments cap liability at a mere $13 billion dollars.
This is a little insane, given that “the risk of a nuclear catastrophe … could total trillions of dollars and even bankrupt a country”.
If there was a free market in energy, nuclear power would be over … immediately.
Nuclear power is a viable source for cheap energy only if it goes uninsured.
Governments that use nuclear energy are torn between the benefit of low-cost electricity and the risk of a nuclear catastrophe, which could total trillions of dollars and even bankrupt a country.
The cost of a worst-case nuclear accident at a plant in Germany, for example, has been estimated to total as much as €7.6 trillion ($11 trillion), while the mandatory reactor insurance is only €2.5 billion.
“The €2.5 billion will be just enough to buy the stamps for the letters of condolence,” said Olav Hohmeyer, an economist at the University of Flensburg who is also a member of the German government’s environmental advisory body.
The situation in the U.S., Japan, China, France and other countries is similar.
“Around the globe, nuclear risks — be it damages to power plants or the liability risks resulting from radiation accidents — are covered by the state. The private insurance industry is barely liable,” said Torsten Jeworrek, a board member at Munich Re, one of the world’s biggest reinsurance companies.
In financial terms, nuclear incidents can be so devastating that the cost of full insurance would be so high as to make nuclear energy more expensive than fossil fuels.
Ultimately, the decision to keep insurance on nuclear plants to a minimum is a way of supporting the industry.
“Capping the insurance was a clear decision to provide a non-negligible subsidy to the technology,” Klaus Toepfer, a former German environment minister and longtime head of the United Nations Environment Programme (UNEP), said.
U.S. News and World Report reports:
The disaster insurance for nuclear power plants in the United States is currently underwritten by the federal government, Cooper says. Without that safeguard, “nuclear power is neither affordable nor worth the risk. If the owners and operators of nuclear reactors had to face the full liability of a Fukushima-style nuclear accident or go head-to-head with alternatives in a truly competitive marketplace, unfettered by subsidies, no one would have built a nuclear reactor in the past, no one would build one today, and anyone who owns a reactor would exit the nuclear business as quickly as possible.”
In other words, this is not a free market. Instead, the public has funded the nuclear industry. As such, we - the owners - should get some control over how nuclear plants operate.
Free Market Champions Demand Prosecution of Fraud
Nuclear meltdowns, the financial crisis and the Gulf oil spill all happened for the same reason: fraud to make a few more pennies, and a subsequent cover-up to try to protect the wrongdoers and continue "business as usual". And see this.
This is not free market economics.
Indeed, the father of free market economics - Adam Smith - leading Austrian economists, and other free market advocates are for the prosecution of fraud:
There is a widespread myth that free market supporters are against regulation or prosecuting fraud.
In fact, Adam Smith – the father of free market capitalism – was for regulation of banks, and believed that trust is vital for a healthy economy. Because strong enforcement of laws against fraud is a basic prerequisite for trust, Smith would be disgusted by the lack of prosecution of Wall Street fraudsters today.
Smith railed against monopolies and their corrupting influence. And Smith was pro-regulation, so long as the regulation benefited the little guy, as opposed to the wealthiest:
When the regulation, therefore, is in support of the workman, it is always just and equitable; but it is sometimes otherwise when in favour of the masters.
Richard Posner – one of the leading proponents over the course of many decades for removing the reach of the law from the economy – has now changed his mind.
So has another leading proponent of deregulation and turning a blind eye towards fraud: Alan Greenspan.
While some promoters of a fake version of Austrian economics are anti-regulation and against prosecuting fraud, the main Austrian economists were unambiguously for them.
William K. Black – professor of economics and law, and the senior regulator during the S&L crisis – notes that leading Austrian free market economists said that fraud must be prosecuted:
Real Austrian economists … hate elite frauds and want them prosecuted vigorously. Ludwig von Mises and Friederich Hayek are the two most famous Austrian economists.
Hayek, F.A. The Road to Serfdom
To create conditions in which competition will be as effective as possible, to prevent fraud and deception, to break up monopolies— these tasks provide a wide and unquestioned field for state activity.
The Constitution of Liberty
There remains, however, one other kind of harmful action that is generally thought desirable to prevent and which at first might seem distinct. This is fraud and deception. Yet, though it would be straining the meaning of words to call them ‘coercion,’ on examination it appears that the reasons why we want to prevent them are the same as those applying to coercion. Deception, like coercion, is a form of manipulating the data on which a person counts, in order to make him do what deceiver wants him to do. Where it is successful, the deceived becomes in the same manner the unwilling tool, serving another man’s ends without advancing his own. Though we have no single word to cover both, all we have said of coercion applies equally to fraud and deception.
With this correction, it seems that freedom demands no more than that coercion and violence, fraud and deception, be prevented, except for the use of coercion by government for the sole purpose of enforcing known rules intended to ensure the best conditions under which the individual may give his activities a coherent, rational pattern…..
Liberty not only means that the individual has both the opportunity and the burden of choice; it also means that he must bear the consequences of his actions…. Liberty and responsibility are inseparable.
Government ought to protect the individuals within the country against the violent and fraudulent attacks of gangsters, and it should defend the country against foreign enemies.
Black also notes that fraud is a leading cause of financial bubbles and malinvestment – two of the greatest sins which Austrian economists rightly fight against.
Unless financial fraud is prosecuted, bubbles will be blown … and when they burst, the economy will tank. Fraud – along with bad Federal Reserve policy – is what causes bubbles in the first place.
The Proof Is In the Pudding: Fewer Prosecutions Equals a Worse Economy
The economy is worse than it has been since the Great Depression, if not before.
Everyone Supports Laws Protecting Contract and Private Property Rights
Even the most radical free market advocates support laws protecting contract and private property rights. In other words, they support the judicial branch of government and the basic laws Congress passes to support such rights.
There are obviously good, pro-competitive laws and bad, anti-competitive laws.
Paul Craig Roberts – a true conservative, who was a Wall Street Journal editor and Assistant Secretary of the Treasury under Ronald Reagan, and is widely credited with being the “father of supply-side economics” – points out:
Regulation can increase economic efficiency and … without regulation external costs can offset the value of production.
Thirty-three years ago in an article in the Journal of Monetary Economics (August 1978), “Idealism in Public Choice Theory,” I developed a model to assess the benefits and costs of regulation. I argued that well-thought-out regulation could be a factor of production that increases GNP. For example, regulation that contributed to the quality and safety of food and medicines contributed to specialization in production and lower costs, and regulations enforcing contracts and private property rights add to economic efficiency.
On the other hand, bureaucracies build their empires and extend their regulations into the realm of negative returns. Moreover, as regulations increase, economic managers spend more time in red tape and less in productive activity. As rules proliferate, they become contradictory and result in paralysis.
I had hopes that my analysis would result in a more thoughtful approach to regulation, but to no avail. Liberals continued to argue that more regulation was better, and libertarians maintained than none was best.
Do Anti-Law Advocates Really Want Anarchy?
All sports need a referee. Some players will be bigger or more talented than others, which is great. They have a better chance of outcompeting the other guy and winning.
But without basic rules and referees, ruthless players might use a knife or kick the other guy in the knee. Perhaps we could suspend all rules, and maybe everyone would whip out a knife break the other guy’s kneecap. That’s fine … but that’s not the game of football.
Radicals who believe that we should not have any laws against fraud are implicitly arguing for anarchy. They might not use that word, but that is what they’re arguing for.
But the same Founding Father who argued for periodic revolutions to keep the government honest also argued against tearing down something unless you have something better in mind to replace it? Thomas Jefferson, the most vocal advocate of the citizens’ right to revolt to ensure honest government also cautioned against tearing something down unless it was for the express purpose of replacing it with something better.
Real, deep-thinking anarchists (as opposed to those using fake anarchy philosophy in order to promote lawlessness by the super-elite) are not for destroying all organization. Instead, they argue for self-organization and self-regulation. See this, this and this.
JP Morgan and Goldman Sachs aren’t reining in one another’s fraud. Bank of America and MF Global didn’t police each other’s fraud. Tepco and BP didn’t make sure the companies made accurate reports about their safety measures. Solyndra and Koch Industries didn’t guard against abuse by the other company.
So if one wants to argue that the Federal government should not regulate financial players, fine (perhaps our country is too big and complex to manage, and the federal government has become too corrupt) … but who should?
The states? Cities? Communities? Neighbors?
Human beings have the ability to form social contracts. Our D.C. government has largely breached it social contract with the people.
But we shouldn’t tear down the federal government unless we replace it with something better.
No one wants to tear down the state of organization so completely that we go back to monkeys (without the ability to talk), or one-celled critters . . . so the question is how do we want to organize?
Do you want to live as a “savage”? In reality, the natives had survival skills, cultural traditions, and knowledge developed over many hundreds or thousands of years (including knowledge gained before the migration from Asia to America), stored in the database of oral traditions. The settlers had traditions and knowledge as well. If we tear away all of that organization, life is going to be pretty challenging.
It is easy for a teenager to criticize his parents, but a lot harder to actually create a better adult life for himself. A teenager looks silly and immature when he criticizes everything his parents do without understanding the challenges he’ll face as an adult. But a young person who rebels against his parents and then creates a better adult life is doing important and heroic work.
In other words, anarchy as an economic model could work if economic players organized in such a way as to police against fraud and criminal behavior (the equivalent of pulling out a knife or taking out someone’s kneecap in the middle of a football game).
This is a long-winded way of saying that we should not stop the government from enforcing fraud laws unless we come up with a more effective way to stop fraud.
The Real Problem ...
While liberals tend to distrust big corporations and conservatives tend to distrust the federal government, it is really the malignant, symbiotic relationship between the two is the root problem.
Maybe ... but the root problem is that corrupt government officials and corrupt corporate fatcats have merged into a crime syndicate.
Do you get it? Before we can have a real free market, we need to burst the bubble of fraud.
We all need to step out of the left-right dichotomy which is distracting us and dumbing us down.
We need liberty and justice.
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Private military contracting has ballooned into an industry worth more than $100bn a year. (Photograph: Goran Tomasevic/Reuters)In early 1995, Sierra Leone was on the brink of collapse. A violent civil war had ravaged the country, leaving thousands dead and countless others wounded. The insurgent rebels, infamous for recruiting child soldiers, were just weeks from the beleaguered capital, Freetown, and appeared unassailable.
Several months later, however, the tide had turned: the government's authority was strengthened, rebel forces were repelled, and control over the country's major economic assets was restored. Executive Outcomes, a private military contractor armed with helicopters and state of the art artillery, helped change the course of the war.
Nearly every tool necessary to wage war can now be purchased: combat support, including the ability to conduct large-scale operations and surgical strikes; operational support, like training and intelligence gathering; and general support, like transportation services and paramedical assistance. The demand for these services, in turn, has ballooned: the gross revenue for the private military contractor industry is now in excess of $100bn a year.
The privatization of conflict is no longer a trend. It's the norm.
The United States relied so heavily on contractors during the recent Iraq war that no one knows with certainty how many were on the ground. In late 2010, the United Arab Emirates, fearful that the Arab uprisings might spread to the Gulf, paid Erik Prince, the founder of Blackwater Worldwide, $529m to create an elite force to safeguard the emirate. And today, Russia is openly considering forming a cadre of private military contractors to further its interests abroad.
Yet, the laws that govern this industry tell a different story. Instead of a transnational system with meaningful collaboration, we have a patchwork of state laws that allow companies to forum-shop and circumvent regulations. Contractors can likewise relocate, as they typically rent the equipment necessary to complete their contracts; their primary source of capital is human, not physical.
In addition to closing loopholes, states must monitor contractors, and prosecute them when they commit crimes. To this day, not a single contractor has been successfully prosecuted for its role in the Abu Ghraib prison atrocities or the Nisour Square massacre, in which 17 Iraqi civilians were killed.
Contractors claim that their services are market- and self-regulated. They contend that wanton violence would stop governments from seeking their assistance. Yet, the theatre of war often obscures their activities.
In its final report to the US Congress, the Commission on Wartime Contracting found that the US government lost more than $30bn to contractor waste and fraud in Afghanistan and Iraq. Also, corporations can rename and rebrand, thereby mitigating reputational harm. Consider Blackwater USA, which changed its name to Xe Services LLC, and then to Academi – all in the last four years.
The UN working group on the use of mercenaries has suggested that certain military functions, like combat services and interrogation, not be outsourced to private contractors. Its guidelines should be followed. Outsourcing foreign policy goals undermines democratic oversight because contractor activities, including casualties, typically escape public scrutiny. It can also allow states to evade legislative oversight.
The greatest check against war is the horror of war itself. Yet, as the physical distance between warring states grows, so does the temptation to loosen our moral compass. Violence that lacks immediacy is easier to ignore. Permitting third parties to wage war for profit risks a world in which war is not the last resort but an economic transaction in which the victims are faceless and nameless.
And so, we return to Sierra Leone. Although the intervention by Executive Outcomes is sometimes touted as illustrating the viability of military contractors, history suggests otherwise. The contractor was later accused of interfering in domestic politics to pursue financial gain, and an associated firm received payment through diamond mine concessions, which compromised the country's economic future.
Moreover, violence resumed after Executive Outcomes left Sierra Leone. It became clear that the government had over-relied on the contractor and undercut its own institutions.
The fog of war is hazy enough. We don't need additional, unregulated cloud cover.
© 2012 Guardian News and Media Limited
Fraudulent Chinese corporations are nothing new - we have been warning about them since late 2010, spurring the creation of a cottage industry focused exclusively on unmasking such public reverse merger companies (and generating trading profits along the way). One company, however, which apparently was completely unaware of the how pervasive Chinese corporate fraud, is industrial machine titan Caterpillar. This was made clear when, after hours on Friday night of course, the company revealed that it had been misled by "deliberate, multi-year, coordinated accounting misconduct" at a subsidiary of a Chinese company it acquired last summer, leading it to write off most of the value of the deal. In the process it would also take a $580 million, or $0.87 cent charge to earnings, which would wipe out more than half its expected earnings of $1.70 for the fourth quarter of 2012. One wonders, however, is there more to this story than just a case of a gentle, naive board duped by fraudulent, evil, cunning "Chinamen" which may have watched one too many episodes of Autonomy does Hewlett Packard?
Reuters has more details on the Fraud:
Caterpillar closed the purchase of ERA Mining Machinery Ltd and its subsidiary Siwei, China's fourth-largest maker of hydraulic roof supports, last June, paying HK$5.06 billion, or $653.4 million. ERA had been publicly traded in Hong Kong, doing business through Siwei, which is known for making equipment to support roofs in mines.
A member of the Caterpillar board during the course of the Siwei deal told Reuters the board was distracted at the time by a larger transaction and paid relatively little attention to the Siwei acquisition.
"It came as a complete surprise to us," the former board member said of the fraud, speaking on condition of anonymity because of the sensitivity of the situation. "It was presented to us as a pretty straightforward transaction. It's a shame. It should have been investigated further."
The source said the driving force behind the deal was Ed Rapp, the former Caterpillar chief financial officer who now serves as a group president with responsibility for China, among other operations. The source said it was Rapp who presented the deal to the board and pushed for its completion.
A Caterpillar spokesman declined to comment on Rapp's role in the deal. Rapp could not be immediately located for comment.
In a statement, Caterpillar said an ongoing investigation launched after the deal closed "determined several Siwei senior managers engaged in deliberate misconduct beginning several years prior to Caterpillar's acquisition of Siwei."
According to a question-and-answer dialog Caterpillar included in its statement, the company found discrepancies in November between the inventory in Siwei's books and its actual physical inventory, triggering the probe.
The company also said it had replaced several senior managers at Siwei, adding that their conduct was "offensive and completely unacceptable."
So the board was "distracted"? Perhaps, the board was perfectly "tracted" and instead what the board did was pay close attention to what Hewlett-Packard did with Autonomy, where the allegations of fraud are still an open-ended case of he said, she said, and immediately saw an opportunity to use a tiny bolt on acquisition in a country which is the source of its entire marginal growth, as a scapegoat on which to pin everything that was going wrong in China, and maybe the world.
Recall from the Q2 CAT earnings release warning profusely about what is going on in China:
In China, we are lowering production levels and have started to export machines to other regions of the world. However, the construction industry in China is still weak and our dealers are reducing their inventories of new machines, further reducing our shipments. While our inventory of new machines in China increased, the combination of our finished inventory and dealer machine inventory was about flat with the end of the first quarter of 2012. We are working to lower finished inventory, but given the weak construction equipment industry in China it will be a gradual reduction throughout 2012. We are being appropriately cautious—we intend to lower inventory, but are considering our supply chain and are acting in an orderly manner. In addition, we are trying to balance our actions—the industry in China has been weak over the past year, but can move quickly when it turns around.
As we began 2012, our expectations for sales in China were higher, and we built substantial new machine inventory in the first quarter to support what is usually a seasonally strong quarter. First-quarter sales were lower than expected, and we ended the first quarter with higher inventory in China. We developed and are executing a plan for an orderly reduction of China inventory that includes lower production, merchandising programs to improve sales and the export of machines from China to other parts of the world.
We remain very positive on long-term industry growth in China and our strategy to grow our business there. Our plans for the remainder of 2012 reflect an orderly ramp down of production that considers our entire supply chain in China. Given the current low rate of sales and the production ramp down, it will likely take the rest of 2012 to reduce inventory to appropriate levels.
Subsequently, in Q3 CAT did all it could to telegraph that things in China may finally be improving, so no need to change anything about how business is conducted there:
From an economic standpoint, we are expecting slightly better world growth in 2013 with modest improvement in the United States, China and most of the developing world, but continuing difficulty in Europe.
"We are taking a pragmatic view of 2013—we're not expecting rapid growth, and we're not predicting a global recession. At this point, we expect 2013 sales will be similar overall to 2012, but with a slightly weaker first half and a slightly better second half. While machine deliveries to end users have continued to hold up, our sales will probably remain relatively weak early in 2013 as dealers are likely to continue reducing inventories. When expected dealer inventory reductions level off, and easing actions by central banks and governments around the world begin to improve economic growth, we expect our business will begin to improve. While there's reason for optimism, and we're not expecting a global recession in 2013, we are prepared and stand ready to take action no matter what happens to the global economy," Oberhelman added.
Betting one's business model on the "easing actions by central bankers" - brilliant. But let's leave that for another day (yet one does wonder: was one of the "actions" the board was "prepared to take" in case of global recession, the release of news of massive fraud at a small Chinese subsidiary, thereby being excused for missing earnings by half?)
Reuters said as much:
The Siwei deal came as part of Caterpillar's larger ambitions in China. In early 2012, it added Jon Huntsman, the former U.S. ambassador to China, to its board of directors.
The company, which already has 23 manufacturing facilities in China and four more under construction, said the Siwei episode would not change its strategy in the country.
Of course it won't change the strategy: in fact, CAT will welcome the acquisition of futher such EPS-charge off enabling microcaps. After all, all it takes for the company to pull a get out of jail card by missing EPS by half in any given quarter, is for it to blame lax accounting and someone else's fraud for the problem.
Because who is to say what is really going on? Naturally, nobody will trust the Chinese side of the story now. As for CAT: well, let's say operating earnings were so horrible that not even all the GAAP accounting magic in the world could make the company beat earnings estimates. So what does the company do? It takes a "charge" which allows it to mask a whopping one-eighth of its entire full year EPS miss courtesy of a perfectly convenient scapegoat. As for what is really going on behind the scenes - it could be due to Chinese business imploding, or global economic conditions getting so bad the firm just can't find a way to offset the losses, or anything else. Alas, we will never know as the official spian has been released.
But in the meantime, business in China continues as usual of course, now that CAT has reset losses with enough of a buffer to last it one more quarter. And if Chinese growth, and by growth we mean the construction of empty cities and hollow malls, does not pick up, well then - some other "manager" will be thrown under the bus for pushing a "distracted" board to purchase yet another Chinese microcap, whose books everyone is shocked, shocked, to learn were cooked end to end.
We look forward to even more high flying companies whose stock price has been pulled artificially higher due to the relentless ramp in ES by prop desk of primary dealers, to come up with comparable excuses for why earnings will miss. Because if it is not some softward glitch's fault, it is some manager, or some auditor, or some accountant, or some M&A advisor, or some regulator.
Whose fault it never, ever is, is the ever declining global cash flow in a world in which the stock market and the economy have now hopelessly and laughably disconnected.
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Sandwiched between revelations of mounting losses ($5.8 billion and rising) at JP Morgan in the face of bungled bets by a trader known as the London Whale, and allegations of money laundering for Mexican drug cartels and breaches of U.S. sanctions by HSBC, the disclosures of deliberate rigging of the Libor rate by Barclay’s Bank might appear mundane and a trifle boring in comparison. It is, however, this scandal about an arcane interest rate that most starkly exposes the rotten core of the global financial system.
Barclays paid a fine of $450 million and saw the ignominious exit of its CEO Bob Diamond in a deal with U.S. and British regulatory agencies that involves an agreement to defer prosecution and drop criminal charges in two years if the bank does not commit any federal crimes “after the execution of this agreement.” But this might just be the tip of the iceberg. About twenty other global banks are currently being probed, and the full scale of the scandal is yet to be seen. The Economist, while decrying the “casual dishonesty” revealed in the email exchanges of the “banksters” (including promises of expensive champagne in return for favors!), pronounced this global finance’s “tobacco moment,” when it is forced to acknowledge its destructive practices, with potentially huge settlement costs, reminiscent of the settlements of around $200 billion made by U.S. tobacco companies in 1998 following a protracted lawsuit.1 But the scandal is not simply one of colossal greed and hubris. It is about systemic failure. It is about the fictions and illusions that form the basis of today’s complex global financial system.
The Libor is the London Inter-Bank Offer Rate—the rate at which leading banks can borrow from each other in the London markets. It is, however, not simply the banking system’s cost of borrowing or obtaining funds; it has emerged as the anchor of about $800 trillion worth of international financial transactions.2 A brief outline of the history of the process by which the Libor has become a fulcrum of the global financial system is necessary if we are to understand the significance of the current scandal.
The Libor and the Dawn of Neoliberalism
The origin of the Libor is rooted in the explosion of private financial flows in the international monetary system and more specifically the Eurodollar market (constituted by dollar-denominated bank deposit liabilities held in foreign banks or foreign branches of U.S. banks) in the 1970s. This explosion was itself an outcome of the resurgence of finance and the rise of neoliberalism. The sharp hike in interest rates in the United States in 1979—the Volcker anti-inflation shock, aimed in part at lowering wage rates by increasing unemployment—signaled the aggressive promotion of financial openness and integration as a way out of the crisis of the 1970s.3 This agenda served to buttress the growing power of U.S. corporate and financial capital globally. This “coup of finance” hinged on preserving and extending the pivotal place of the United States in international financial markets, and securing the global hegemony of the dollar after the collapse of the Bretton Woods system of fixed exchange rates.4
The Eurodollar market emerged even as the U.S. government was attempting to restrict capital outflows to reduce growing balance of payments deficits. U.S. banks resorted to the Eurodollar markets (primarily in London) as a way of evading restrictive capital controls and protecting their earnings. This offshore market was also a profitable place for Germany and Russia to park their dollar surpluses. Although international financial business was now based more on dollars than sterling, Eurodollar deposits helped to preserve London as a financial center in the face of the erosion of sterling’s importance as an international reserve. At the same time, its ties to the international hegemony of the dollar were cemented5 and the United Kingdom was drawn more closely “into the American imperial embrace.”6
The Big Bang reforms of 1986 in Britain were an important milestone in this process. In the United States, financial deregulation had been set in motion with the Deregulation of Monetary Control Act of 1980. This culminated almost two decades later with the final dismantling of the regulatory framework of the Glass-Steagall Act (legislated in response to the Great Depression, it had separated commercial from investment banking) by means of the Gramm-Leach-Bliley Act of 1999, giving legislative sanction to the erosion of the regulatory firewall between security traders and deposit bankers. This deregulatory agenda was echoed in the Big Bang reforms of banking in Britain in 1986. These reforms blurred the distinction between stockbrokers, investment advisers, and “jobbers” who created the markets in shares. Britain’s permissive regime brought an influx of U.S. banks and huge bonanzas for bankers. The stodgy world of banking was transformed into a heady world of cutthroat deal-making.
Through the 1970s, the oil surpluses of the OPEC countries were channeled through the Eurodollar markets and recycled to developing countries, especially Latin America, in the form of syndicated offshore dollar loans. The floating of the dollar in 1973 also fostered the growth of futures and swaps: derivatives that allowed international investors to hedge the risks of exchange rate and interest rate fluctuations. The investors and bankers who sought to rake in earnings and fees in these rapidly growing markets for new and exotic instruments of loan syndication and financial derivatives found themselves in desperate need of a benchmark against which to price their deals. The payments in the syndicated sovereign loan market, for instance, were based on some measure of a benchmark risk-free borrowing rate plus a risk premium based on assessments of the borrowing country’s capacity to repay the loan.
A key requirement of a benchmark is that it must bear a stable relationship to the prices of other securities and that it be liquid.7 The U.S. Treasury bill rate was one such price, but the volatility of this market in the late 1970s, a period of high inflation in the United States, prompted a search for new benchmarks around which bankers could structure their deals. Futures contracts on the three-month U.S. Treasury bill were introduced in this context as a way to tame the turbulence of the U.S. Treasury bill markets. Even as the Latin American debt crisis brought the bonanza of syndicated sovereign loans to an abrupt halt in the 1980s, U.S. financial markets were further jolted by the failure of the Continental Illinois Bank in 1984. The sudden surge in demand for safe U.S. Treasury bills led to huge losses for those who had used them as hedges for their purchases of private financial assets (since the price of Treasury bills rose while that of private financial assets fell). Such episodes underscored finance’s search for an alternative benchmark more aligned with the prices of private assets.8
Eurodollar futures contracts had begun to be traded in London in the early 1980s. In 1982 the volume of three-month Eurodollar futures transactions (at around $8 billion) was about one-third the volume of futures transactions in three-month U.S. Treasury bills (around $25 billion). By 1986 the volume of Eurodollar futures had risen to about $50 billion (about ten times the volume of corresponding U.S. Treasury bill futures transactions).9 The percentage share of Eurodollar transactions to all money market transactions—from where the wider financial system draws its short-term liquidity funds—rose from less than 5 percent in 1980 to about 50 percent by 1985.10 Since Eurodollar deposits were emerging as a major source of short-term funding for banks, the offshore Eurodollar borrowing rate emerged as an obvious anchor (the risk-free rate) for the proliferating financial trading. Particularly since financial institutions were finding that the prices of derivatives based on these offshore Eurodollar rates were closely aligned to their own borrowing costs. But in the early 1980s, there were not enough trades for a market-based index for Eurodollar deposits, and the Federal Reserve could not set and enforce targets for this rate like it could for the Federal Funds rate (the rate at which banks could borrow reserves overnight from each other). International financial markets felt hampered by a lack of standard reference rates. The solution was found through the offices of the British Bankers’ Association (BBA), the leading lobbying group of London Banks, with the blessing of the Bank of England.
In 1986, the BBA introduced a new benchmark rate, based on the average of daily estimates from the leading banks. The primary purpose of this new benchmark, the Libor, was to set a rate for dollar deposits held outside the United States and also to serve as a reference rate for a range of securities. Banks seeking to reduce their risk in a context of volatile interest rates found a closer approximation to their actual borrowing costs in this benchmark. The newly introduced standard came to be adopted as the basis of a variety of securities and derivatives (like interest rate swaps) that the banks used to hedge their risky portfolios. It was also adopted as the basis for the resetting of rates on long-term loans in line with the banks’ actual variable costs of funds. The volume of three-month Eurodollar futures contracts doubled between 1986 and 1988 to about $100 billion, while the share of Eurodollar transactions in short-term money market activity crossed 75 percent.11 Facilitated by the surge in Eurodollar lending in the syndicated loans market, the huge interest rate swap market, and later the markets for newer and more complex securities and derivatives got a huge boost.
And so, privately mediated financial instruments came to eclipse the publicly issued U.S. Treasury bill as the source of unregulated liquidity generation for the bloating global financial system. This is not to suggest that the U.S. Treasury bill was completely displaced. As the credit crisis of 2008 revealed, it remained the safe haven when the privately mediated mechanisms of liquidity generation and funding crashed in the wake of the collapse of Lehman Brothers.12 It is at the apex of the monetary hierarchy. In fact, a key indicator of financial distress is the difference between the interest rate banks charge each other on three-month loans (the three-month Libor) and the interest rate on three-month U.S. Treasury bills. A widening spread reflects the higher costs of unsecured interbank lending in a situation of evaporating confidence and growing uncertainty. At the peak of the credit crisis in 2008, this spread had risen to about 450 basis points (4.5 percent) from normal levels of between fifty and one hundred basis points (0.5–1 percent). Banks were finding it harder and harder to borrow from other banks, and interbank lending, which is not based on collateral, dried up. The Federal Reserve had to step in to fund the failing banks and restore lending. Even though private agents are a primary driving force in the money market, these decentralized parallel monetary mechanisms are, in the final instance, backstopped by the state and the market for U.S. Treasury bills.
The Emperor Has No Clothes!
So how is the Libor actually set? There are now rates set for deposits in ten currencies with fifteen maturity periods, for a total of 150 Libor rates. The borrowing rate is set daily by the BBA, on the basis of submissions by a panel of banks, for each of these ten currencies and fifteen maturities. The three-month dollar Libor is one of the most important of these rates. It is supposed to indicate what a bank would pay to borrow dollars for three months from other banks, at 11:00 AM on the day it is set. There are currently eighteen banks on the dollar Libor panel (including Citibank, JP Morgan, and Bank of America).
Each participating bank has to answer the question: At what rate could you borrow funds, were you to do so by asking for and then accepting interbank offers in a reasonable market size, just prior to 11:00 AM? The top quarter and bottom quarter estimates are then discarded, and the Libor is the trimmed average of the remaining submissions, (also known as fixings) calculated and posted by Thomsons-Reuters, the leading business data provider. The idea is that this process of trimming will get rid of outliers and rogues, and the number churned out will be a reasonably accurate gauge of the market. Libor thus claims to measure the rate at which banks can borrow from one another.
But in the real world, banks do not generally lend to each other for longer periods without adequate collateral. Interbank lending takes place through money market funds, but only for short periods. This means that quotes for longer periods are based on estimates and not on actual flows. The submissions are the banks’ own estimates of what they think they would have to pay to borrow if they needed money, and the body charged with collecting this information is not an independent regulatory agency but the banking sector’s own lobby group—the BBA. The calculation is undertaken by a data provider that derives huge chunks of its earnings from the same banking sector! The Libor is an accurate reflection of the state of funding liquidity only if most of the banks submit an honest assessment of the rate at which they believe they can borrow on a given day. The self-regulatory process of rate setting itself provides no checks and balances but relies on the integrity and discipline of markets to ensure the calculations are in line with real market conditions.
What the Barclays settlement has shown is that the bank’s submissions “were over a long period tainted by self-interest, whether to help some of its derivatives traders or out of a desire to protect its reputation in the market.”13 Groups of traders actively conspired with brokers to influence the banks’ rate submissions for the London rate. Banks colluded to push the rates in desired directions. The BBA, a group that had in its 2011 internal newsletter bragged about its lobbying victories and spent an estimated $8 million on lobbying in 2011, is hardly a body that would crack the whip on the sector it represents.14
What this boils down to is the mind-boggling revelation: this crucial rate that is the pivot of trillions of dollars worth of derivatives and loans is in a sense a fiction. “There simply is not enough trading, particularly at longer six-month and twelve-month lending periods, to be sure that the rate genuinely reflects the market.”15 As a senior trader said, “you have this vast overhang of financial instruments that hang their own fixes off a rate that doesn’t actually exist.”16 To make things even murkier, those involved in setting the rates had every incentive to lie, since not only did their banks stand to profit or lose, depending on the level at which the Libor was set each day, their own earnings hinged on these numbers. The Financial Services Authority “has identified price-rigging dating back to 2005, yet some current and former traders say that problems go back much further than that.”17 A former trader at the London office of Morgan Stanley has suggested that such misreporting of rates was fairly common practice even in 1991, a mere five years after the system was put in place.18
There have been, broadly speaking, two kinds of manipulations. The first category was designed to bolster traders’ profits. Traders nudged the money market desks of their banks to massage submissions in order to rake in the gains from deals they brokered. Requests were also passed on to these desks in collusion with counterparts at other banks. So a trader could ask the submitter of the fixings to keep the “fixings” high (or low) until certain deals went through. By keeping rates artificially raised or lowered, traders were guaranteed to make money on these deals. Where the income they paid out was fixed to the Libor, a lower rate reduced the payout; where their earnings were linked to the rate, a hike boosted these earnings. Far from being a manifestation of rogue trading, this pervasive rigging is a reflection of monopoly and cartel-like practices in the closed, clubby world of financiers.
A second category of manipulations, which emerged in the wake of the subprime market collapse, was the submission of artificially low rates. The motivation here was more complicated. Banks that were vulnerable sought to protect their reputations and their continued access to credit by obfuscating the actual difficulties they faced in borrowing. High borrowing costs signaled lack of credit worthiness. In fact, the persistently high Libor rates in 2008 were a sign of credit market distress. But, given the fragile state of investor confidence, persistently high Libor rates were seen, both by banks, regulators, and the central banks as an obstacle to restoring the credit engine.
Barclays’ high Libor submissions as the crisis was unfolding had thus prompted serious concern at the Bank of England. The recent travails of Royal Scotland bank had sent jitters though the financial markets, and Barclays was widely perceived to be the next to fail. The high rates were a signal of Barclays’ growing difficulties in borrowing from the market. There were numerous discussions between Bank of England officials and Barclays’ management (including the controversial phone conversations between bank managers and Paul Tucker, the deputy governor of the Bank of England) through this period. In May 2008, there were some reports of banks low-balling their borrowing rates to avoid looking desperate for cash. Timothy Geithner, who was then head of the New York Federal Reserve, sent a memo to Governor of the Bank of England Mervyn King outlining concerns (though no allegations of outright rigging) about the Libor and making recommendations to beef up its credibility. Given the close connections between private banks, central banks, and regulatory agencies, it is hardly credible that the scale of Libor manipulations caught the central bankers and regulators by surprise. The complete failure of the Central Bankers and regulators to respond reflects the structural stranglehold of private finance.
The relation between the state and the financial system erected on the complex interaction of private and public liquidity generation is fraught with contradiction. There has been a ratcheting up of state support of the banking system not just over the past three years or even the past few decades, but over the past century. However, the bulging safety net stokes even greater speculative and risk-taking behavior. Government interventions that rescue banks from their follies in order to restore stability, in effect, revive and reinvigorate the speculative juggernaut. The state again intervenes to rescue the financial institutions in the wake of the catastrophic bust that inevitably follows. The concentration and growing size of the institutions that need to be bailed out give rise to a dramatic scaling-up of central bank support to the financial system, even as regulatory control is being systematically weakened. As the bets keep increasing in size, the scope of the necessary intervention also grows, so that the cost of each successive meltdown becomes even larger. This destructive relationship has been christened “the doom loop.”19 In the process the state and central banks get more deeply implicated in the imperative to shore up the financial system and become hostage to the actions of private finance.
It is not surprising, given the immense control exercised by the Banking lobby, that any attempt at regulatory reform is resisted and stymied. The fundamental weakness of the Libor seems to have been ignored in the interests of protecting the financial system. It has been argued that the easing of the Libor rates late in 2008 was for the greater public good—a sort of collateral cost of preventing the complete collapse of the financial system. The truth is that it is simply testimony to how the power and influence of Wall Street continued to shape the response of the major central banks—the Bank of England and the Federal Reserve—even after its actions brought the global economy to the brink.
The deep ties and interpenetration between the government and financial sector also forged a common worldview that served the imperatives of finance and the neoliberal distaste for hindering, in any way, its forage for profits. The irony is that the neoliberal rhetoric of free markets that is deployed to justify obscene levels of profiteering and deter any forms of regulation is promoting a financial system where markets and market discipline have been banished! It is bad enough that in the world of exotic custom-built financial products and over the counter derivatives, the “models” spawned by the industry have completely usurped the role of the “market” that economic theory celebrates. As the conjurors of these models reaped fat profits from transactions that were conducted without any transparent process of price discovery through a market mechanism, they were immunized from the consequences of their actions. What we now know is that even these models are built around a notional price where no real market exists. Key features of a “properly functioning market”—wide and free participation and genuine price discovery—are conspicuously absent in the setting of the Libor. Pricing is based on private, self-reported quotes of a small clique of powerful banks without any reference to tangible financial transactions. These same banks also controlled the BBA, the organization that actually posts the daily Libor. While vociferously maintaining that self–regulation and unregulated market forces are the most effective form of discipline for this ballooning sector, the financial oligarchy colluded to preempt any genuine competitive process, or any form of accountability.
Equally blatant forms of collusion have recently come to light in the context of the municipal bond-rigging scam involving major banks, including J. P. Morgan Chase, Bank of America, UBS, Lehman Brothers, and Bear Stearns, who conspired and colluded to deliberately rig the public bids on municipal bonds, a business worth about $3.7 trillion. Towns and municipalities that borrow by issuing municipal bonds to finance various projects have also turned to brokers on Wall Street to handle investment of some of this money instead of keeping it idle over the course of the project. The bonds are supposed to be submitted to a competitive auction (of at least three bids), but what the brokers actually did was allow the bankers to collude to carve out chunks of business. The brokers charged with getting municipalities the best deal actually let the prearranged “winner” have a “last look” at the bids of the competitors, thus allowing the bank to make the lowest possible winning bid. “By shaving tiny fractions of a percent off their winning bids, the banks pocketed fantastic sums over the life of these multimillion-dollar bond deals,” while the broker collected not just fees and commissions but also a fat bribe. Four banks that took part in the scam (UBS, Bank of America, Chase, and Wells Fargo) have agreed to pay $673 million in damages. This is likely to be just a fraction of the actual sums skimmed from public projects all over the United States. Yet for the bankers concerned, this was a perfectly fair auction, since, despite the fact that the secret collusion resulted in lower returns to the municipalities, they still got the highest of the bids. The sharing of the extra margins between the colluding bankers was just extra topping on the cake!20
This same hubris of the financial oligarchs at the center of the complex financial infrastructure, who are in effect deciding market prices in a manner that leaves their clients with as bare a minimum as they can get away with, is evident in the Libor riggings. Bob Diamond, the Barclays CEO, complained in a memo to the staff after the fines scandal hit the headlines that, “We all know these events are not representative of our culture…on the majority of days, no requests were made at all.” Behind this arrogance is a perverse sense of entitlement to immunity from the disciplining ravages not simply of the law but of the market. Instead of the competitive markets espoused in the neoliberal dogma, the field was a hotbed of moral hazard, conflict of interest, and outright criminal fraud.
The Libor scandal is not about the risky bets or bad judgment of rogue traders, but the deliberate strangling of market forces in the pursuit of profits. The story of how such an obviously flawed rate came to enjoy such a central place in the global financial system is in the end a story about how corporate, financial capital was powerful enough to set in place institutional mechanisms to ensure the deliberate subversion of any efforts or any market forces that would stifle their pursuit of profits.
A Fantasy Built on Fiction, Breeding Illusion
Although the difference between the reported Libor rate and the actual borrowing costs might seem small, the total amount of money involved is huge, given that Libor rates affect contracts worth hundreds of trillions of dollars. The rate with which the traders and bankers were playing determines the prices that people and corporations around the world pay for loans or receive for their savings. And the mechanism set up allowed the bankers to dictate the rate, which was a pivotal determinant of their earnings, by conjuring these numbers literally out of thin air!
Adjustable-rate mortgages had been allowed in the U.S. mortgage sector after the St Germaine Depository Institutions Act of 1982. Today, about 90 percent of U.S. commercial and mortgage loans are linked to the Libor.21 In 1999, following the urgings of banking lobbies, the U.S. Student Loan Marketing Agency switched from pricing loans off the Treasury bill rates to using the Libor as a benchmark for loans. It is used as a benchmark to set payments on about $350 trillion worth of derivative contracts.22 The Libor, a fictional number based on good faith estimates of those whose earnings fluctuate dramatically with miniscule gyration of this same rate, is now an integral part of the hardwire of the financial system.
And while the banking system has raked in vast sums due to these manipulations, those on the wrong side of these deals have faced huge losses. Among those who have been defrauded through such deliberate rigging are municipalities like Baltimore. Bankers have embedded interest-rate swaps in many long-term municipal bonds, persuading municipalities and states to issue bonds and simultaneously enter into swaps. In these arrangements, the banks agreed to make variable-rate payments to the issuers, and the issuers, in turn, agreed to make fixed-rate payments to the banks involved. The City of Baltimore had entered into interest rate swaps worth $100 million, swapping fixed interest payment to banks for variable Libor-linked receipts. “Forty U.S. states currently allow municipalities to enter into swap agreements. The total estimated amount in 2010 was between $250–500 billion.”23 The artificial low-balling of the Libor after 2008 meant losses of millions of dollars annually to these government bodies. Such losses deprived these agencies of money at a time of prolonged recession and acute fiscal crisis, exacerbating job losses, and strangling public services. Pension funds that were entrusted with household savings were also ripped off though such manipulations.
And if that was not bad enough, after the crisis, when the State was forced to step in to shore up collapsing financial markets, the Treasury bailout programs used this artificially low Libor as the basis for lending to the banks under the Term Asset Backed Securities Loan Facility. And this despite the misgivings expressed by Timothy Geithner in his email to Mervyn King just a few months earlier! Not only did the structurally flawed rate receive further official sanction, but the rescued banks also ended up getting money at excessively cheap rates, skimming off the public exchequer. Meanwhile, families facing foreclosures of their homes or debts in significant excess of the value of their homes received no such relief.
The British government has announced a review of the Libor-setting process, to investigate ways of improving regulation and governance. Under consideration are recommendations like expanding the panel of banks submitting rates and exploring the possibility of a credible third party to monitor and collate submissions. Alternatives to Libor are being discussed. The bankers, however, do not see either the U.S. Treasury bill rate or the U.S. federal funds rate as a suitable benchmark for the parallel shadow financial system of derivatives and financial engineering, tethered as they are to state policy. An alternative that is finding favor with the bankers is an overnight index rate based on the weighted average of the interest rates paid each day on General Collateral Finance Repurchase Agreements (Repos), using the most traded collateral repos like U.S. government securities. This index will be given a further boost by U.S. Treasury Department moves to offer new floating-rate securities based on this index, as it attempts to maintain surging investor demand for government bonds. These proposals seek a patchwork fix of a system that has been usurped by the financial oligarchy for its own unfettered enrichment, when what is needed is an overhaul! The parties involved are, in the end, only trying to replace the fiction at the center without dispelling the neoliberal illusion that fostered the speculative juggernaut that enriched finance.
Even as the Libor scandal has turned the spotlight on the fundamentally flawed mechanisms of rate setting, Wall Street has been waging its battle against transparency in price setting on other fronts. This can be seen, for instance, in the strong pushback from the bank lobby against the Commodity Futures Trading Commission’s proposal that derivative trading facilities provide market participants with easily accessible prices on a centralized electronic screen and eliminate the one-to-one dealings between traders and investors. While espousing the neoliberal credo, and celebrating the virtues of “self-regulation,” the financial oligarchy continues to resist any attempt to curb its monopolistic stranglehold. Not only is regulatory control being preempted, the financial oligarchy also seeks immunity from market discipline.
The absence of the force of market discipline was, paradoxically enough, part of the argument against the socialist planning project, during a debate that took place before the Second World War between the advocates of capitalist markets and the defenders of planning—the “socialist calculation debate.” Ludwig Von Mises, an economist and philosopher of the Austrian school, argued that even if planners sought to mimic price signals, they could not create a disciplining mechanism analogous to the market, and could not therefore capture capitalism’s socially beneficial dynamism.24 It would seem that neoliberal orthodoxy and the hegemony of market fundamentalism has been instrumental in bringing into being a system plagued by this very failing!
- Syndicated loans are provided by a group or syndicate of banks to a borrowing sovereign or corporation. The rate on the loan is the benchmark rate plus some risk premium.
- Interest rate swaps allow two parties to negotiate a “swap” of payments from fixed rate and floating rate contracts. The floating rates are normally calculated on the basis of a benchmark like the Libor.
- A repo (repurchase agreement) is a method of short-term borrowing. The borrower “sells” a security to the lender with the understanding that the asset would be bought back at a higher price. The higher price represents the interest rate on the loan.
Ramaa Vasudevan is an assistant professor of economics at Colorado State University. She is a member of the Union for Radical Political Economics and an associate of the Dollars and Sense Collective.
- ↩ “The LIBOR Affair: Banksters” (online video), Economist blogs, July 7, 2012, http://economist.com
- ↩ “The LIBOR Scandal: The Rotten Heart of Finance,” Economist, July 7, 2012, http://economist.com.
- ↩ Gerard Dumenil and Dominique Levy, The Crisis of Neoliberalism (Cambridge, MA: Harvard University Press, 2010) and Capital Resurgent (Cambridge, MA: Harvard University Press, 2004).
- ↩ Ramaa Vasudevan, “Finance Imperialism and the Hegemony of the Dollar,” Monthly Review 59, no.11 (April 2008): 35–50.
- ↩ Ibid.
- ↩ Leo Panitch and Sam Gindin, “Finance and the American Empire,” in Leo Panitch and Colin Leys, eds., Socialist Register 2005: The Empire Reloaded (New York: Monthly Review Press, 2005), 54.
- ↩ Jacob Wintellberg and Phillip Woolridge, “Interbank Rate Fixings During the Recent Turmoil,” BIS Quarterly Review, March 2008, http://bis.org.
- ↩ Robert N. McCauley, “Benchmark Tipping in the Money and Bond Markets,” BIS Quarterly Review, March 2001, http://bis.org.
- ↩ Ibid.
- ↩ Ibid.
- ↩ Ibid.
- ↩ Ramaa Vasudevan, “The Credit Crisis: Is the International Position of the Dollar at Stake?” Monthly Review 60, no.11 (April 2009): 24–35.
- ↩ “Fixing Libor,” Financial Times, June 27, 2012, http://ft.com.
- ↩ Melanie Newman, “British Bankers Association Claimed Key Lobbying Victories,” Guardian, July 9, 2012, http://guardian.co.uk.
- ↩ Michael Mckenzie and Brooke Masters, “After Libor—The Search for a New Benchmark,” Financial Times, July 10, 2012, http://ft.com.
- ↩ “The LIBOR Scandal: The Rotten Heart of Finance.”
- ↩ Ibid.
- ↩ Douglass Keenan, “My Thwarted Attempts to Tell of LIBOR Shenanigans,” Financial Times, June 26, 2012, http://ft.com.
- ↩ Andrew Haldane and Piergiorgio Allessandri, “Banking on the State, Presentation at Federal Reserve Bank of Chicago,” September 2009, http://bis.org.
- ↩ Matt Taibbi, “The Scam Wall Street Learned from the Mafia,” Rolling Stone, July 5, 2012, http://rollingstone.com.
- ↩ Mariane Ojo, “LIBOR, EURIBOR and the Regulation of Capital Markets: The Impact of Eurocurrency markets on Monetary Setting Policies,” Munich Personal REPEC Archive Paper No 42093, October 20, 2012, http://mpra.ub.uni-muenchen.de.
- ↩ Gillian Tett, “Libor Affair Shows Banking’s Big Conceit,” Financial Times, June 28, 2012, http://ft.com.
- ↩ “The Libor Probes: An Expensive Smoking Gun,” Economist, April 14, 2012, http://economist.com.
- ↩ Ludwig Von Mises, “Economic Calculation in the Socialist Commonwealth,” in Freidrich Von Hayek, ed., Collectivist Economic Planning (London: Routledge and Kegan Paul, 1935).
Greg Palast: Koch brothers could save two billion dollars a year if they can replace Venezuelan heavy crude crude with Canadian tar sands - one of the dirtiest sources of carbon emissions on the planet.
Greg Palast is a BBC investigative reporter and author of Vultures' Picnic. Palast turned his skills to journalism after two decades as a top investigator of corporate fraud. Palast directed the U.S. governmentʼs largest racketeering case in history– winning a $4.3 billion jury award. He also conducted the investigation of fraud charges in the Exxon Valdez grounding.
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Greg Palast is a BBC investigative reporter and author of Vultures' Picnic. Palast turned his skills to journalism after two decades as a top investigator of corporate fraud. Palast directed the U.S. governmentʼs largest racketeering case in history– winning a $4.3 billion jury award. He also conducted the investigation of fraud charges in the Exxon Valdez grounding.
PAUL JAY, SENIOR EDITOR, TRNN: Welcome to The Real News Network. I'm Paul Jay in Baltimore. And welcome to the first of what will be a regular series of interviews with Greg Palast called The Palast Report. He now joins us from New York City.Greg is a BBC investigative reporter. He writes in The Nation and Vice magazine. He's the author of the New York Times bestseller The Best Democracy Money Can Buy, and latest book is Billionaires & Ballot Bandits.Thanks very much for joining us.GREG PALAST, JOURNALIST AND AUTHOR: Glad to be with you, Paul.JAY: So what are you working on this week?PALAST: Ooh. I've been kind of playing with this oozing black snake, this kind of viperous tube of sludge called the XL Keystone Pipeline. And so I've been investigating by kind of pushing myself through this sludge pipe and seeing what is stuck in the ooze. And what I have found here is a fascinating story of the pipeline, the Koch brothers. And the story took me all the way back to Venezuela and Hugo Chávez. So that's what I'm working on right now, this untold story of Chávez, the Koch brothers, and the XL.JAY: So connect these three big dots.PALAST: Three big dots. Okay. The XL pipeline, Keystone pipeline, is the proposed pipeline, extension of a pipeline that would take tar sands oil from Canada—what they do is they have, you know, big bulldozers that rip up the earth, they melt the dirt, they melt the sludge, and there's this heavy goo that's kind of like hot asphalt, which they want to move down to refineries, down to Houston, Texas. And my first question was: what? Why? You know, isn't Texas where oil comes from? In fact, that's our big oil-exporting state, is Texas. So why are we taking oil from Canada past the north, the northern interior of the U.S., where we can use heating oil? Why are we taking it down to Houston? [incompr.] to Newcastle to the Gulf coast. And the answer is: Koch. The Koch brothers are the owners of the big refineries, like the Flint Hills refinery, along the Gulf coast of Texas. And you have to understand, refineries, these kind of giant filth machines, are actually very sensitive instruments. They can't just suck up and refine any old oil and throw filth into the air; they're very specialized machines. And the Gulf coast refineries, especially those controlled by the Koch brothers in Flint Hills, can really only handle heavy crude oil. So the stuff that's in Texas itself, West Texas crude, which is light and sweet, it's good oil; it's not filled with a lot of crappy sulphur. That's no good for the Texas refineries. Rather, they need that heavy, gunky stuff which is ultrapolluting. So there is a controversy right now, and there will be a big demonstration against the XL Keystone pipeline on February 17 in Washington. And I wanted to know why we're taking oil from Canada across the entire United States to Texas. And, again, it's because the Kochs want it. Now, why do they want it? The answer is, right now they're getting their oil—the only place they can get lots of heavy crude oil—if you want heavy crude, you've got to get it from a heavy dude named Hugo Chávez, the president of Venezuela. And one thing about Chávez, who I've known for many years, is that he doesn't let go of his nation's oil on the cheap. He is a cornerstone of OPEC. And Venezuela's been selling heavy crude at a premium to the price paid in Texas, because it costs more to get heavy oil from Venezuela than it does to get light oil down the road from Texas. But they have no choice, the Koch brothers, but paying Hugo for his gunky oil.Now, on the other hand, the Canadians not only are selling for less than Texas oil—they're selling, as of today—if you check out this week's reports, about $33 a barrel less is the price of West Canada Sands (WCS) oil, as they call it, versus WTI, the West Texas Intermediate. So you're saving about $35 a barrel—$35 a barrel—if you can get the oil from Canada as opposed to Venezuela. So they've got to cut off Chávez and they've got to bring the oil in from Canada. And that's the reason why we are talking about endangering the most sensitive aquifers and important—that is, water sources in America—to have a pipe with the filthiest oil in the planet, the most polluting oil on the planet, to drag it all the way from Canada all the way down to Texas so that the Koch brothers at Flint Hills can make—their savings would be about $2 billion a year that the Koch brothers will make off our risking the aquifers across the United States.JAY: So is the Koch brothers' refinery—it was primarily built to deal with Venezuelan oil?PALAST: They bought it that way. So, see, in other words, the Koch brothers—I've been investigating the Koch brothers. If you read Billionaires & Ballot Bandits, my latest book, I have several chapters on the Koch brothers. I've been investigating these guys for 17 years. In fact, when I first wrote about them for The Guardian, I called them the richest guys you've never heard of. Now you've heard of them.But the way that they make their money is not by, you know, being entrepreneurs or good investors or job creators. Their entire operation, the two brothers Koch, Dave and Charles, each worth over $20 billion, they make their money on political plays. So they'll take Sunoco, which wasn't making any money from its refinery in Texas having to buy from Venezuela, they took over Flint Hills and figured, a-ha, we'll just do the political play. If we can use our political muscle to jam a pipeline through the guts of the United States down to Texas—you know, and most people would think that that's mad, taking tar oil from Canada and bringing it to the Texas, to the Gulf coast—we can make a killing. And by the way, they're making an extra killing. When the Republicans were talking about the XL Keystone pipeline making us energy-independent—first of all, that assumes, by the way, that Canada is a suburb of Seattle—.JAY: Well, there's some truth to that, but go on.PALAST: Yeah, I know. Some Canadians feel that it works that way. We're not energy-independent if it comes from Canada. But if it comes from Canada, let's assume that this is our buddies, because they'll give us the oil cheap, and that's what makes them our buddies.It also undermines Hugo Chávez. They have to undermine Chávez, which they want to do for geopolitical reasons.But then the oil will not be used in the United States. It will be refined mostly for gasoline that will be sold at a premium in the Caribbean. Remember, these refineries are in the Gulf coast. Selling it, then running that stuff back into New Jersey is not a moneymaker. The way you make the money is you sell gasoline in places that don't have the refining capacity and will pay a premium, like, you know, Jamaica, Santa Domingo. That's where your money's going to be made. So this is oil from Canada which will then go into the Koch refineries and sold into the Caribbean. And we are paying the price in two ways—one, the massive danger of a break in these pipelines, which happen all the time. And that would be disastrous, given the areas it's going across. And the second is that because it will now open up new fields in Canada, because it will now make more tar sands finds economic, 'cause they'll have a market for it, we're going to have a massive, massive, massive increase in global warming chemicals that will be thrown into the air by the process of both the drilling, the refining, and the ultimate use of this product, which is the absolutely filthiest, filthiest oil—.JAY: Yeah, I think that Canadian tar sands, I think, is number-one or close to number-one producer of carbon emissions in a single place on the planet.PALAST: Yeah. I mean, Alberta is basically one big—is becoming a big dirt smokestack.Now, Obama has not made a decision on this. That is, he was afraid to approve Keystone XL pipeline before the election because he knew he would be lynched by environmentalists and people of Kansas, Nebraska, where the pipeline comes down. But now that the election's over, look out. In fact, my money would be on Obama approving the Keystone XL. There is a tremendous amount of pressure from the Koch brothers and from other oil interests, plus it plays into the administration's game of a widescale attack on Hugo Cházez. And that, by the way, includes the choice of John Kerry, who started this week as our new secretary of state. Senator Ketchup is—remember, his fortune is based on marrying into Mrs. Ketchup, Mrs. Heinz, and Heinz has had a running battle with Venezuela because Heinz property was confiscated by Chávez's government in a land-reform move. So, you know, if your—those tomatoes going into those bottles have now—those plants, ketchup plants were taken over by the Chávez government for the workers there. And so John Kerry is a longtime Chávez hater.This administration has totally swallowed, repeated, and amplified the anti-Venezuelan propaganda and foreign policy of George Bush.JAY: Alright. Thanks very much, Greg. And Greg will be back in a couple of weeks to tell us what he's working on. Thanks for joining us. PALAST: You're very welcome, Paul.JAY: And thank you for joining us on The Real News Network.
EndDISCLAIMER: Please note that transcripts for The Real News Network are typed from a recording of the program. TRNN cannot guarantee their complete accuracy.
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Look out, the "fixers" are coming.
Top corporate chieftains and Wall Street gamblers want to tell Washington how to fix our national debt, so they've created a front group called "Fix the Debt" to push their agenda. Unfortunately, they're using "fix" in the same way your veterinarian uses it — their core demand is for Washington to spay Social Security, castrate Medicare and geld Medicaid.
Who's behind this piece of crude surgery on the retirement and health programs that most Americans count on? Pete Peterson, for one. For years, this Wall Street billionaire, who amassed his fortune as honcho of a private equity outfit named Blackstone, has runs a political sideshow demanding that the federal budget be balanced on the backs of the middle class and the poor. Fix the Debt is just his latest war whoop, organized by a corporate "think tank" he funds.
This time, Peterson rallied some 95 CEOs to his plutocratic crusade, including the likes of General Electric boss Jeffrey Immelt and Honeywell chief David Cote. (Note: Both Immelt and Cote, while cheering for cuts to programs that we working Americans pay into, are themselves taking money hand over fist from taxpayers in terms of military contracts and corporate subsidies for their corporations. But they aren't concerned about defense spending and ending subsidies that benefit their bottom line.)
All of them are not merely "One Percenters," but the top one-tenth of One Percenters. Of course, a group of pampered, narcissistic billionaires would not make a credible sales argument for this dirty work. Having elites piously preach austerity to the masses would be as ineffective as having Col. Sanders invite a flock of chickens to Sunday dinner.
Presented with this image problem, Fix the Debt needed to give their campaign a more benign image, and Peterson and Co. followed a tried-and-true formula of political deceit. As described by Mary Bottari of the Center for Media and Democracy, the trick is to "gather a bipartisan group of 'serious' men, hire a PR firm to place them on TV shows, blanket the media with talk of a looming crisis and pretend to have grassroots support."
In this case, a collection of former member of Congress, each of whom had a reputation for being moderate to the extreme, were recruited to give the campaign a sheen of high public purpose. Backed by a $40 million budget put up by the corporate interests, these "elder statesman" are now the face of Fix the Debt, doing dozens of TV interviews, hosting breakfast sessions with members of Congress, making speeches about "mutual sacrifice" and generally going all-out to sell the financial elite's snake oil.
But wait — being an elder does not automatically mean you're a statesman. Let's peek at the resumes of these so-called public-spirited fixers of the debt. Start with Jim McCrery, a former GOP lawmaker from Louisiana. While urging Congress to cut people's programs, he's also a top-paid lobbyist pushing Congress to give more tax subsidies to America's richest people and to such multinational corporations as General Electric.
Former Democratic Sen. Sam Nunn is a fixer, too — but he's also paid $300,000 a year to be on the board of directors for General Electric. Likewise, Democrat Erskine Bowles, a co-founder of the fixers' front group, is on the board of Morgan Stanley, drawing $345,000 a year. And former GOP Sen. Judd Gregg takes about a million bucks a year as advisor to and board member for such giants as Goldman Sachs and Honeywell.
Fix the Debt is nothing but another corporate fraud. I wouldn't let this gang of fixers touch pet my dog, much less my Social Security!
© 2012 Creators Syndicate
National radio commentator, writer, public speaker, and author of the book, Swim Against The Current: Even A Dead Fish Can Go With The Flow, Jim Hightower has spent three decades battling the Powers That Be on behalf of the Powers That Ought To Be - consumers, working families, environmentalists, small businesses, and just-plain-folks.
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“India is on fast track to bring agriculture under corporate control... Amending the existing laws on land acquisition, water resources, seed, fertilizer, pesticides and food processing, the government is in overdrive to usher in contract farming and encourage organized retail. This is exactly as per the advice of the World Bank and the International Monetary Fund as well as the international financial institutes.”
“Agriculture has been systematically killed over the last few decades… the World Bank and big business have given the message that this is the only way to grow economically… Sixty percent of the population lives in the villages or in the rural areas and is involved in agriculture, and less than two percent of the annual budget goes to agriculture… When you are not investing in agriculture, you think it is... not performing. You are not wanting it to perform... Leave it to the vagaries or the tyranny of the markets… agriculture has disappeared from the economic radar screen of the country… 70 percent of the population is being completely ignored…”
“In the last 10 years, we had 36 lakh crore going to the corporates by way of tax exemptions... They just created 1.5 crore jobs in the last ten years. Where are the exports? … The only sector that has performed very well in this country is agriculture... Why do you want to move the population... Why can’t India have its own thinking? Why do we have to go with Harvard or Oxford economists who tell us this?” (36 lakh crore is 36 trillion; 1.5 crore is 15 million)
“Greenpeace notably decides its opinions must prevail regardless of others, so it arrogates to itself the right to tear up and destroy things it doesn’t like. That is absolutely typical of people who are unable to convince others by debate and discussion and in the last century such attitudes, amplified obviously, ended up killing people that others did not like. But the same personality type the authoritarian, ‘do as I tell you’, was at the root of it all. Such groups therefore sit uneasily with countries that are democracies.”
“It would be nice if you could say you are a democrat and believe that argument is better than destruction but argument that deals with all the facts and does not select out of those to construct a misleading programme. Misleading selection of limited information is causing considerable problems in various parts of the world that leads some into very violent behaviour, particularly in religious belief. I am sure you agree that this is not a good way forward… Whatever their [farmers’] choice is… they must be allowed to make that decision… That is the nature of every democracy that I hope all will finally live under?”
“Anyone who’s seen the recent virally circulated Venn diagrams of the personnel overlap between Monsanto and USDA personnel, or Pfizer and FDA, will immediately know what I’m talking about… A model of capitalism in which the commanding heights of the economy are an interlocking directorate of large corporations and government agencies, a major share of the total operating costs of the dominant firms are socialized (and profits privatized, of course), and “intellectual property” protectionism and other regulatory cartels allow bureaucratic corporate dinosaurs… to operate profitably without fear of competition." Kevin Carson, Center for a Stateless Society.
Tony Trewavais wrote his letter after reading my article ‘So You Want to Help Africa Mr Paterson? Then Stop Promoting Ideology and Falsehoods to Push GMOs’. The article originally appeared on a number of prominent websites. On Global Research, the piece appeared under a different title ‘The Propaganda Campaign in support of GMOs’ (read here).
“Most objectors in this area have a political programme not a scientific one but they like to bend science to their own political point of view. Science is by its nature not politics or political propaganda or anything like it. It deals with evidence not superstition, or political or social philosophies. If you have a political programme then please stop trying to justify it by claiming it has scientific support; it does not.”
Despite its claims to the contrary, the sector cannot win the scientific debate, so it resorts to co-opting key public bodies or individuals to propagate various falsehoods and deceptions. Part of the deception is based on emotional blackmail: the world needs GMOs to feed the hungry, both now and in the future. This myth has been blown apart. In fact, the organisation GRAIN highlights that GMOs have thus far have actually contributed to food insecurity!
“If agroecological approaches can currently match yield that can be attained by using modern farming methods then by all means use it.”
“But if not and my understanding is that currently it cannot, then they should not be the farming method of recommended choice at present.”
“No-one with any concern for humanity or the welfare of its population should currently consider any other alternative. The groups that campaign for this kind or that kind of farming method and destroy crops to try and bounce others into their point of view have lost that fundamental concern for their own species.”
The story goes like this: India is an economic miracle, a powerhouse of growth. It is a nation that increasingly embodies the spirit of entrepreneurship. And the proof? Until recently, India had year on year 9% GDP growth (or thereabouts).
“We don’t think how our farmers on whose toil we feed manage to sustain themselves; we fail to see how the millions of the poor survive. We look at the state-of-the-art airports, IITs, highways and bridges, the inevitable necessities for the corporate world to spread its tentacles everywhere and thrive, depriving the ordinary people of even the basic necessities of life and believe it is development.” – Sukumaran CV
“Agriculture has been systematically killed over the last few decades. And they are doing deliberately because the World Bank and big business have given the message that this is the only way to grow economically… Sixty percent of the population lives in the villages or in the rural areas and is involved in agriculture, and less than two percent of the annual budget goes to agriculture… When you are not investing in agriculture, you think it is economically backwards, not performing. You are not wanting it to perform. You are ensuring that the price they get today under the MSP (Minimum Support Price) has also being withdrawn. Leave it to the vagaries or the tyranny of the markets… Twenty-five crore people in this country are agricultural landless workers. If we give these people land, these people are also start-ups, these people are also entrepreneurs... But you are only giving these conditions to industry... agriculture has disappeared from the economic radar screen of the country… 70 percent of the population is being completely ignored…”
“When we talk about budgets, it’s going to be populism or reforms. What is reforms? … if you don’t give anything to industry, they call it ‘policy paralysis’. But if you give them all kinds of dole then they think it is growth, they think it is a dream budget. In the last 10 years, we had 36 lakh crore going to the corporates by way of tax exemptions. Where are the jobs? They just created 1.5 crore jobs in the last ten years. Where are the exports? ... The only sector that has performed very well in this country is agriculture. Year after year we are having a bumper harvest. Why can’t we strengthen that sector and stop the population shift from the villages… Why do you want to move the population just because Western economists told us we should follow them. Why? Why can’t India have its own thinking? Why do we have to go with Harvard or Oxford economists who tell us this?”
Speaking last week in Pretoria, former UK Environment Minister Owen Paterson described critics of GMOs as comprising part of a privileged class that increasingly fetishizes food and seeks to turn their personal preferences into policy proscriptions for the rest of us. He called them backward-looking and regressive. He claimed their policies would condemn billions to hunger, poverty and underdevelopment because of their insistence on mandating primitive, inefficient farming techniques.
“… the ‘Green Blob’ – a reference to a 1950s Sci-Fi movie starring Steve McQueen in which a blob-like alien attacks Earth and swallows everything in its path: the environmental pressure groups, renewable energy companies and some public officials who keep each other well supplied with lavish funds, scare stories and green tape. This tangled triangle of unelected busybodies claims to have the interest of the planet and the countryside at heart, but it is increasingly clear that it is focusing on the wrong issues and doing real harm while profiting handsomely.”
“There are many impediments standing between the vision of agricultural progress and Africa, of course, but none is more pernicious than the Blob. It is supported by massive funding provided by the EU itself, as well as numerous church and humanitarian groups, and the well-meaning but misguided generosity of the privileged classes in Europe and elsewhere. It has undue influence in the media, government and international institutions. Unfortunately, few question either its credentials or motives.” (see the full text of the speech here)
Paterson then proceeded to proclaim the virtues of GMOs and laid out a series of slurs, falsehoods and cherry-picked proclamations that anyone would be forgiven for thinking had come straight from the pen of a GMO agribusiness employee. But it wouldn’t have been the first time would it? In the case of this bit of poetry that Paterson likes so much, it came courtesy of Syngenta.
No, such practices are commonplace. Indeed, across the globe uncaged corporate parrots seem to be perched on the highest of ledges:
“We have had the National Academies of Science give a clean chit of biosafety to GM crops — doing that by using paragraphs lifted wholesale from the industry’s own literature! Likewise, Ministers in the PMO who know nothing about the risks of GMOs have similarly sung the virtues of Bt Brinjal and its safety to an erstwhile Minister of Health. They have used, literally, 'cut & paste' evidence from the biotech lobby’s 'puff' material. Are these officials then, 'uncaged corporate parrots'?” Aruna Rodrigues, writing about the situation in India here in The Hindu.
Some points to consider for any rational thinking person
You would if you are the US government, which has done exactly that, as described in Drukers new book 'Altered Genes, Twisted Truth: How the Venture to Genetically Engineer Our Food Has Subverted Science, Corrupted Government and Systematically Deceived the Public' (Clear River Press, March 2015).
“It is these powerful corporations (not a ‘green blob’), whose owners are part of the privileged class that seek to turn their vested interests into policy proscriptions for the rest of us. It is this backward-looking and regressive class whose policies have already condemned tens of millions to hunger, poverty and underdevelopment. It is this privileged class (not a ‘green blob’) that has swallowed up everything in its path facilitated by public officials who are well supplied with lavish funds, scare stories and ‘green revolution’ rhetoric. This tangled triangle of unelected, unaccountable corporations claims to have the interest of the planet and the countryside at heart, but it is increasingly clear that it is focusing on the wrong issues and doing real harm while profiting handsomely. There are many impediments standing between the vision of agricultural progress and Africa, of course, but none is more pernicious than this group that is supported by massive profits often secured from fraudulent practices and by often well-meaning but gullible people who buy into its rhetoric. It has undue influence in the media, government and international institutions. Fortunately, there are many who question its credentials and motives.”
Readers are urged to read this to appreciate why Paterson has got is so wrong.
It was a case of Modi mania when Narendra Modi and his BJP ‘swept’ to power in last year’s Indian general election. It was however hardly the sweeping endorsement from the voters that much of the corporate media liked to portray it as. The BJP might have took 282 of the 543 seats in the Lok Sabha, but it ‘swept’ to power on only 31 percent of the vote.
“In the wake of media reports about the Maharashtra Govt granting No Objection Certificates (NOCs) for the open air field trials of GM crops in the state, the Coalition for a GM Free India along with the Coalition for a GM Free Maharashtra has sent a letter… to the Chief Minister of Maharashtra urging him not to overlook the growing scientific evidence on the adverse impacts of GM crops as well as the public opposition to it. The fact that the announcement regarding approvals of field trials was made on the sidelines of an event arranged by the International biotechnology industry lobby group, ISAAA, shows in a way the influence International biotech giants like Monsanto as well as their Indian promoters have in every government. Besides this there seems to be no basis on which these open trials could be permitted at a time every other credible agency be it the Parliamentary Standing Committee on Agriculture or the Supreme Court appointed Technical Expert Committee or the TSR Subraminiam committee appointed by the Union Minister of Environment, Forests and Climate Change to look into environmental laws in the country have cautioned against any open release of GMOs at this juncture…” (see here)
“… understand how Monsanto could better engage with societal stakeholders surrounding our business and how best to communicate the social value our company brings to the table.” (see here)