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We have featured many articles on these pages extolling the virtues of Panama as an expat destination. Here is another. It gives yet another perspective that readers dreaming or seriously considering a move may find useful. The writer is an Israeli-born real estate agent who has been living in Panama for the last 20 years ... and he loves the country.
The USA was once the greatest ... well the greatest of everything on earth (I am referring to good things, not bad things). However, that is now changed. Not because of the economic crisis, but because of what brought on the economic crisis. I think all the reasons for this catastrophic situation can be summed and explained by one dominating reason. I call it the Enron Syndrome: The Enron Syndrome can be defined as the change in the allegiance of the boards of directors of American companies. The directors role by definition is to protect the stock holders' interests and prevent the management of a company from acting against these interests. Regretfully the boards of directors of American companies nowadays represent their own personal interests (many times collaborating with management, for example by giving $18 billion in bonuses at the end of 2008) in clear contrast with the stock holders' interests. (This idea was developed by my brother who is a business professor, not me. and I believe in giving the credit to the person it belongs to.)
This reality can be changed very easily by putting to use all the new communication instruments (mainly internet) and making the board of director's decisions, regarding management and directors compensation, subject to stock holders' scrutiny in real time, and creating the mechanism for vetoing "doubtful" decisions.
The question is what can be done, on a personal level, in the meantime, until these changes take place. Keeping money in the bank is not a solution, because the banks, to put it mildly, do not inspire confidence. The answer, then, is to look for other venues of investment, especially if you are at an age nearing retirement.
I would suggest the following formula: Buy a house in the U.S., taking advantage of the low prices of today, and rent it. Then move to another country, where the dollar can buy a lot more than in the U.S., and live on your U.S. rent.
We can think of better ways to create an income source than via illiquid investments in an incipient Marxist/totalitarian country.
I recommend the Republic of Panama as the ideal place to live in. I am an Israeli born real estate agent working in the Republic of Panama. I am not a professional financial advisor and give my personal opinion only. So my advice should be checked and rechecked to see if it applicable to you. However I have been living in the Republic of Panama for the last 20 years, and I love the country. As an outsider, I may be more aware of all aspects of its beauty and I hope I can relay to you some of them. So please read on.
The republic of Panama is Paradise on earth. It is considered one of the best places in the world to retire in. There is no one reason for that statement. It is an accumulation of facts that make Panama that special place you will want to live in and while there, love every minute of it.
(1) The People: I had friend from Chile. He was an older guy, of around 73 years old, that lived next to me in the building I was living in at the time. He managed to put in words what I felt about the Panamanian people. He said that all his life, after living in many countries all over the world, he looked for a place to live, where people that he saw for the first -- and last -- time in an elevator, would greet him with a "Hello" or a "Good Morning" when he entered that elevator. He told me that, thank God, at his old age, and after looking for that same thing in many countries across the world, he found that place in Panama.
Another anecdote: I was looking for a house in Gamboa (a small neighborhood near Panama City, on the banks of the Panama Canal, half an hours' drive from the city), in which I had never been before. I did not know the place so I had to ask for directions. I saw some firemen washing their red fire truck and stopped next to them, asking for directions to the street the house was on. They did not just show me the direction by pointing a finger and telling me when and in which direction I should turn, but took out a map they had there, showed me on the map how to get to where I was going, and even made a sketch of the relevant streets and intersections on the way to the place I was going to. They also offered to accompany me to show me the way. I took the sketch, declined the offer to accompany me, and got to the house I was looking for without a hitch. By the way, so you do not get the wrong impression, I am not a young woman and was not dressed in a low cut dress at the time I was asking for directions from the firemen. I am a 55 year old man. I am telling you that just so you know that I received that help because the people I asked were nice people and wanted to help, and not because of some physical attributes I might have had.
Does Panama have its share of crooks and criminals and all the "bad guys" that any other country has? Of course it does. But the everyday Joe and Jane are nice people. This fact was demonstrated very clearly when the dictator Noriega was in power. The democratic forces in the country held many rallies and demonstrations against the dictatorship. However, all political activity stopped from Thursday afternoon to Monday morning. People were so easy going that they did not spoil their weekend for some "insignificant" theme like freedom. By its people being so easy going, Panama was spared the bloody conflicts of other countries in Central America, and the reconciliation process, after Noriega was ousted, was fast and almost totally painless.
(2) The climate: Panama is a tropical country. It is 8 degrees north of the equator. (The geographical definition of a tropical country is any country that is less than 10 degrees north or south of the equator.) It is a long and narrow strip of land (the part most narrow is where the Panama Canal cuts the country in half, and its width there is only about 60 miles) lying from east to west. On its north shores are the Atlantic Ocean and the Caribbean Sea, and on its south shores -- the Pacific Ocean. As a tropical country, it is never cold in Panama. On the contrary, most of the days are very warm. In Panama City there is no oppressive heat, like in the desert, but the temperature is around 30 degrees Celsius (86° Fahrenheit) during the day. The humidity is also high.
However if you leave the city and go into the country side, no more than an hour and a half drive from the city, you can get to areas, that are a little further away from the oceans, and are on a little higher elevation than sea level, and get to THE BEST WEATHER IN THE WORLD: One of the best places to live and enjoy that "best weather in the world" is Sora. Sora is a small town, 18 kilometers (11 miles) northwest from the main highway. The access road is a two lane road and is in very good repair. It is around 550 meters (1,800 feet) above sea level. From some parts of it, there is a beautiful view of the Pacific Ocean, and from other parts there is beautiful Mountain View. In most of the houses in sora there is no heating or cooling apparatus, because there is no need for any, all year round. During the day the temperature is around 27° Celsius (80.6° Fahrenheit) and at night it goes down to around 23-24° Celsius (73-75° Fahrenheit). Because of its elevation, during the hours of the day there is usually a soft breeze coming from the sea that caresses the face and keeps the body cool. Of course there are other places similar in the Republic of Panama, but Sora is a place where there are lots for sale, a place I know personally, and love, and that is why it told you, my readers, about it.
(3) The Economy: I will not tire you by giving you an Economic analysis of the Panamanian economy (I am not qualified). Besides, the U.S. economic crash proved that economic analysis is, to put it mildly, not an exact science. So I will leave the right to make big mistakes in their economic analysis to the professionals and will limit myself to give you some basic information that I think may be of interest.
Panama's economy is based on service rather than production. There are hardly any big factories. The biggest I can think of right now, are the factories of the companies that manufacture cement.
The legal currency in Panama is the U.S. dollar, a fact that gives the Panamanian economy a lot of stability, and saved the economy from that crazy run of hyperinflation that plagued many Latin American countries in the past two decades.
The Panama Canal is one of the main sources of income of the Panamanian government. The Canal is going now through a very important phase of widening, making it deeper, and building new locks so it can service bigger ships. This mega-project (together with other major mega-projects) will inject big quantities of money into the economy Panama, and this is one of the things that, in my opinion will help Panama pass this world wide economic slowdown better than other countries will.
However, the biggest income source of the Panamanian economy is not the Canal. It is tourism: The tourism industry can be divided into commercial tourism and leisure tourism. The business tourism comes mainly to the Panama Free Zone. Panama has the second biggest trade Free Zone in the world (after Hong Kong). Many business persons come to Panama from all over Latin America to buy in the Free Zone. The Free Zone is a relatively small area where several thousand companies conduct their business. These companies import merchandise (mostly from the Far East, mainly from China) and sell this merchandise all over the Latin American continent. Its big advantage is that because of the big concentration of companies in a small area, it is very comfortable to conduct business. There is no time lost on transporting oneself from one store to another. A person that comes to buy, after entering the Free Zone, does not have to use a car in order to get from one company to another. This person walks the short distances between the different companies, and has a huge variety to choose from in any given type of merchandise (shoes, jeans, kitchen appliances and so on) ew a complete variety of merchandise he or she may need in order to resupply his or her department store.
The leisure tourist is a person that comes to Panama to enjoy its great weather, its amazing beaches and its very unique wild life and ecology. For Example, Panama has the biggest variety of birds in the world. Panama is the bridge between the cold northern part of the American continent and the warm south. In the fall, migrating birds have to fly over it going south, and in the spring, these same birds have to fly over it going back north. Panama has a lot to offer the person who comes to "fry" his body on its beautiful beaches, to enjoy its natural treasures, or to lose his money in its many casinos. It is very hard not to have fun as a tourist in Panama.
As I said above, I do not want to give a boring economic analysis of the real estate situation in Panama. However I would like to comment on it, because nobody can disregard this issue at the present. The building boom Panama enjoyed in the past four years has not yet been affected by the crash in the U.S., as far as apartment prices are concerned. However, nobody thinks this crisis will pass by, without leaving its mark. The first to suffer will be the land owners that wanted to sell their land to developers. I think they will not find too many buyers at the present, so they will probably not sell, and wait for better times. There will be bargains to find if a land owner is really desperate and wants to sell at any price. However the majority will not sell if they cannot receive the high prices they have become accustomed to before the crash (which were still bargain prices in comparison to Costa Rica for example). As far as apartment prices are concerned, in my opinion, there will be a price reduction of the high class apartments, which will come to not more than 25% decrease (I repeat -- it is only my opinion). In the middle price range the reduction will reach 10-12%, and in the low priced apartments there will be no price change.
An American couple that wants to live in Panama can get an apartment in Panama City or in the interior of the Republic for very reasonable prices.
Because the buck takes you further along the road to happiness in Panama than in the U.S., it is very logical to move to Panama, especially in these hard times. In order to demonstrate just how much further the buck takes you along the road to happiness in Panama than in the U.S., please ask yourself, who in the USA can afford a maid that will come to his house 5 days a week or will live there, in the house, and take care of all the daily house chores. In Panama most middle class families have a maid. In the U.S. it is only the very rich that can afford a maid on a regular basis. I know that many Americans, for some reason, do not like to have a maid. Maybe having a maid is regarded by them as exploiting that person. This point of view is totally wrong. The maid enjoys having a steady income as much as you will enjoy having your house taken care of. Another reason I would recommend taking a maid, apart from the added comfort of living a maid can provide, is that having to talk with your maid will force you to learn Spanish. Take a maid and be nice to her -- that is all. It is a win/win situation.
Working as a maid is very common in Panama. The lucky ones find good families and work with them for many years (30-40 is not uncommon). The maids become an integrated part of the house hold and are considered many times as friends or even as part of the family.
Again, two examples:
I was sitting at a friend's house, and his maid came in after walking the dog. I asked him since when does he have a dog, and he answered that the dog is not his, it is the maid's dog. The maid was a "live in" maid, but she had satisfied her love for animals and had her own dog.
Another example, a good friend of mine, told me that she is looking for a nice used car to buy. She told me that the car is for the maid's son. I asked how come she wants to buy a car for the maid's son, and she explained that the boy grew in her house as a brother. His mother came to them looking for a job with a baby in her arms when my friend was just a young girl, and her parents decided to accept her. She told me that when they were growing up she, her brother and her sister and the maid's son were treated the same. After all, it was impossible for any human being to give candy to her and her two siblings and at the same time deny candy from the 4th child because he is the maid's son. It was impossible to tell her and her two siblings to go wash before their bedtime and not to insist with the maid's son to act the same way. So gradually the maid's son stopped being "the maid's son" and became an additional brother to her. And now that he is all grown up, he needs a car because he is starting collage, and she will get one for him.
What I was trying to show with these two stories is that having a maid does not mean that you are degrading anybody. It is up to you to make sure you are not.
I will stop writing here, because if I do not, you will get bored and not read my next article. What I was trying to do in this one is to make you aware of some of the opinions I hold, that can help you get out of a hard situation, and at the same time show you the Republic of Panama, through the eyes of one of its many lovers.
Justin Raimondo offers his view of events to come, as the soon to be late/great American Empire winds down. The empire is financially exhausted, and exhausted in many other ways as well. But it is still lethal, given a military budget that is larger than the rest of the world combined and still growing.
Raimondo outlines the likely denouement in the economic and military spheres. As usual he offers a keen insight into the hubristic mindset of the ruling class. While the American empire “has reached the end of its tether” ... “its rulers continue to act as if nothing untoward is happening. We are barreling forward, on the power of sheer momentum ...” Because of its military power America still has the power to do a lot of damage, and is thus likely to drag others down with it as it fades from the scene, kicking and screaming.
The analysis is already lengthy, thus one cannot blame Justin for failing to cover certain other elements of the decline. Along with the ruling class we observe that many/most Americans also do not get that the world as they have known it is no more and never will be again. Being simplistic, the "right wing" Bush followers still think American can boss the world around and tell everyone how to live. The socialist Obama supporters still act as if the main issue is how to divide up the pie even as the pie is shrinking rapidly. Besides living on borrowed money and time, people are living with obsolete worldviews.
Now if everyone could just get real, a fair amount of damage could be averted. “It is not yet too late to draw back from the abyss and chart a more moderate course, something less dramatic than a crash landing.” But: “Like drug addicts who cannot and will not kick their habit, the leaders of the American government ... are too far gone to ever change. Their very idea of themselves is imbued with a sense of entitlement and aristocratic noblesse oblige. They feel that they are doing us all a very great favor by consenting to rule over us and determine the fate of entire peoples, indeed of the entire globe.”
I am not cheered by the subject of my talk here today, which is the decline and fall of the American empire, first, because I am an American, and, second, because the description of America as an empire fits it all too well. When you remember that the American Revolution was fought against an imperial power, that the U.S. was born in a struggle against an occupying army, and that its victory against the British was an inspiration to anti-imperialist liberals everywhere, it is a shaming thing to have to come here to describe how it ended in tragedy, betrayal, and a short and ugly decline.
That decline was not written in the stars but made inevitable by the actions of individual men (and women!), the men and women who rule us, the elites in government and the corporate world, in the media and the white-collar classes. Their mindset was best summed up by an anonymous top White House official who spoke to journalist Ron Suskind, in answer to objections against the Iraq war and the Bush administration's policy of preemptive warfare:
“The aide said that guys like me were ‘in what we call the reality-based community,’ which he defined as people who ‘believe that solutions emerge from your judicious study of discernible reality.’ ...
“‘That is not the way the world really works anymore,’ he continued. ‘We are an empire now, and when we act, we create our own reality. And while you are studying that reality -- judiciously, as you will -- we will act again, creating other new realities, which you can study too, and that is how things will sort out. We are history’s actors ... and you, all of you, will be left to just study what we do.’”
While undoubtedly pandemic in Washington, this kind of thinking characterized not only the Bush administration, but was and is emblematic of the ruling elites in every Western country. The ancient Greeks had a word for it: hubris, which might be defined as a kind of overweening pride, one that impelled mere mortals to believe they could act like gods. It was considered the worst kind of sin. This mental attitude permeates modern culture, at least in the West, and while its roots are psychological, the first evidence of the crisis is manifest in the economy.
We have heard reference to "the bubble," and to the alleged "danger" of deflation, as the root of the problem. A radical contraction of economic activity, millions unemployed, corporate giants felled -- suddenly, we are told, trillions of dollars have disappeared, overnight, like the mist that rises from the river at dawn. Where did it go? Whose pocket is it in? Or was it never really there in the first place?
For years we have gone into debt and printed money to cover the interest, while the principal goes unpaid. Increasingly a nation that makes nothing but pronouncements and complicated financial instruments too complex to be understood, the costs of empire have been borne by the long-suffering taxpayers while the benefits have been gobbled up by our one and only industry with any prospects for growth, and that is the military-industrial complex.
The United States is essentially an empire that has gone bankrupt. We are like some once very grand family fallen on hard times, who have had their house foreclosed and sit quietly waiting in the parlor, pretending that nothing unusual is happening, while the sheriff is on the way to throw us out on the street. Human beings are creatures of habit: They still continue to act in the old ways long after circumstances have changed. The other day, President Barack Obama announced the next major phase in the "war on terrorism" he inherited from George W. Bush: We are sending 17,000 more troops to Afghanistan, doubling the number of American troops in that country, and have begun to launch cross-border attacks in Pakistani territory. The war on terrorism is expanding even as the American economy continues to shrink. How will we pay for it?
Anyone who seriously believes that the U.S. will pull back, that it will give up its claim to the job of world policeman -- or even reduce its international presence to any significant degree -- is dreaming. Indeed, the current financial crisis may very well prove to be an incentive for an increased presence, and specifically an escalation of the so-called "war on terror."
To begin with, increased government spending is the essential core of our new president's philosophy: A nation that spent itself into penury is going on a shopping spree in order to "stimulate" the economy. Now there are only so many domestic boondoggles that can be found to absorb all these dollars, short of handing out bags of freshly printed bills to his supporters or throwing it out of an airplane. If we go overseas, however, there are plenty of fresh opportunities to throw money around like there is no tomorrow: Look at that so-called embassy they are building in Iraq, which is bigger than the Vatican and contains an entire self-contained city, complete with movie theaters, shopping malls, and everything necessary to the happiness of a human being except bordellos. And of course this city masquerading as an "embassy" must be defended, it must not fall victim to America's enemies -- and it will take many thousands of American soldiers to safeguard it. I have news for you: We are not leaving Iraq any time soon, in spite of what our president may say.
Take this extravagant approach to "nation-building," as those social engineers in the Pentagon would put it, and apply it to every theater in our ever expanding "war on terrorism," which extends throughout the Middle East and cuts a wide swathe through Central Asia. So many bases to build! So many battles to fight! So much cash to bribe the locals with!
In Iraq, that is precisely what the U.S. military did: They went around with blocks of cash, hundred dollar bills stacked like bricks, and passed it out to their allies. That is what the so-called "Anbar Awakening" was all about: the Americans simply paid their adversaries to switch sides. That famous "surge" we keep hearing about was due almost entirely to this campaign of systematic bribery.
The hero of the Iraqi "surge," Gen. David Petraeus, was hailed by the Bush administration as a strategic genius and paraded before Congress as the final authority on all matters military. The Obama administration is following suit, openly adopting his vaunted "counterinsurgency" doctrine as the "smart" way to fight terrorism. They mean to apply his methods in Afghanistan. But this new military doctrine involves more than just good old fashioned bribery with cold cash. It also means that the Americans will embark on an ambitious plan of "nation-building," which, in the words of one advocate ensconced at the well-connected Center for a New American Security, means building roads, schools, clinics -- in short, it means building the physical and social infrastructure of a nation, or, more accurately, a colony.
This monumental effort will unleash a veritable cornucopia of U.S. tax dollars and provide plentiful outlets for American exporters -- the real purpose of all foreign aid. It will also absorb lots of idle manpower that would otherwise be committing crimes and causing all sorts of problems on the home front: The ranks of the unemployed will be significantly trimmed if, in the present circumstances, only we can entice our underclass into the military. Let them commit their crimes abroad -- then, instead of putting them in jail, we can give them a medal.
The new leaders of the American government are convinced that government spending is the key to economic recovery, and that includes military spending. A longtime complaint we hear in America is that Americans do not seem to build real products, anymore: heavy machinery, cars, the big stuff. Yet the military sector is doing just fine, even as the rest of the economy wilts. The military-industrial complex is making record profits, and this indicates a growing trend in the international division of labor. If China is the global factory, South and Central America the agricultural hinterlands, and Europe the historical repository of the Western tradition, then America seems fated to become the world's military arsenal, a natural development of its role as the self-appointed global cop.
Like the Romans, the Americans will keep the peace and provide a ready market for consumer goods produced by its colonies, protectorates, and allies, in exchange for pledges of loyalty to the imperial center and tribute passed under the table. The American writer Chalmers Johnson, in his trilogy on the nature and origins of imperialism or interventionism, paints a more detailed and updated picture of how the American version of this system works. Huddling under the American military umbrella, and an arrangement that allows protected colonial industries full access to American markets, our overseas provinces are nominally "independent," as in Roman times, yet allow the presence of American military bases on their territory. An American empire of bases spans the globe and gives the U.S. military the ability to strike anywhere with a fair amount of speed. The Bush doctrine of preemption was not just empty talk: America, as crippled by spasms of economic pain as she is, retains its status as the hyperpower, in purely military terms. The empire may have reached -- and passed -- its apogee, but there is no telling how long it will take for the whole massive edifice to come down.
The ruling elite is naturally consumed by a desire to avoid the complete economic collapse of their system, which is founded on fraud and coercion. Their reaction, so far, has been to pursue precisely those policies which led to the crisis in the first place: they have embarked on a spending spree, with the big banks getting the largest share of the loot, and the rest going to bread and circuses for the commoners. This, however, will lead inevitably to hyperinflation such as we saw in Weimar Germany, or as we see today in Zimbabwe. These are extreme examples, but is it necessary to remind you that we are living in extreme times?
In America, we are already seeing the rhetoric of war applied to the economic realm: We are fighting a "war on recession," our elected leaders tell us, and their media echo chamber repeats the phraseology, as anyone who opposes the "war on recession" and the economic policies of the current administration is deemed unpatriotic. Republican supporters of the Iraq war were constantly invoking a similar mantra during the heyday of the Bush years, when they accused the Democrats of wanting Bush to fail -- with the more fanatic neocons labeling all antiwar voices as treasonous. Today a right-wing radio talk-show host is vilified as a traitor for wanting President Obama to fail as he moves to extend the power and reach of government in the economic realm. I can guarantee that this sort of intimidation will shortly make inroads in the international sphere. It will be suddenly discovered, if it has not already, that the real problem is global in scope and can only be solved by international economic regulators with the power of force behind them. The current crisis is bound to produce a crop of cranks and would-be visionaries with endless schemes for a global fix. We will hear all kinds of non-threatening phrases like “global governance,” “multilateral integration,” and doubtless other harmless- and even benevolent-sounding euphemisms for what amounts to a world government.
This is one way to solve the problem of a tottering U.S. hegemon, and that is to take the multilateral approach. Let the old imperialist powers of Europe team up with their avid American pupils and take on Afghanistan, Pakistan, and so on into the wilds of Central Asia. But how to finance this gigantic projection of imperial restoration and renewal? The answer is a world central bank, as advocated by John Maynard Keynes, the New Deal-era economist who is the inspiration behind the Obama administration's economic program. This would give the evolving world government a means to finance itself and its operations, including military operations: A world central bank with a single hand on the lever, to inflate at will. Countries with too much of a trade surplus, or a deficit, would be "disciplined" by the central authority.
The neoconservatives also have their own version of "global governance," but theirs is a markedly more ideological -- and militaristic -- version, although both American liberals and conservatives have signed on to the proposal made by presidential candidate John McCain that America and its allies should form a "League of Democracies." Admission to this League would be open to Georgia, a country where it is dangerous to criticize the president, but not Belarus, where it is also dangerous to criticize the president. It would amount to an American version of the Warsaw Pact.
Barring that somewhat grandiose flight of fancy, however, we are left with NATO, Obama's chosen instrument of multilateral military action. While most of the action is likely to take place, initially, in Afghanistan and Pakistan, the entire ring of former Soviet states bordering the battlefield will take on new strategic significance as the central arena in America's endless war on terrorism shifts eastward.
This means an all-out confrontation with Russia, and the groundwork has already been laid for that. You will note that the Obama administration, while critical of their Republican predecessors on the Iraq question, are following in the path of Bush when it comes to the Russian question. It was Vice President Dick Cheney, you will recall, who first took out after Vladimir Putin, after the neoconservative guru and "dark prince" Richard Perle demanded that Russia be thrown out of the G-8 for the "crime" of opposing the neocon agenda in the Middle East. Under Bush, a provocative missile shield was begun with American aid in Poland and the Czech Republic. With NATO troops stationed practically at the gates of Moscow, and NATO's massed armies protected by a missile shield, Putin is staring down a gun barrel. Vice President Joe Biden came to Munich a couple of months ago to let the Russians know that we are not dropping our gun, but we may be willing to deal. Yet Putin is unlikely to cooperate in isolating Iran, abandoning Syria, and allowing Georgia to invade its neighbors and kill U.N.-sanctioned Russian peacekeepers at will. The price of dropping that gun to his head is that he must forget about forging an independent foreign policy in a multi-polar world, because that is what represents a real threat to the imperial restoration project undertaken by the present American administration.
NATO is their chosen instrument, and the history of this alliance underscores a libertarian insight, which is that no government program ever ends, once it has started -- it merely develops a new rationale and a new title. Or sometimes the old title suffices, as in the case of NATO. Here is an institution that was founded in the fear of a Communist invasion, led by the Soviet Union, with Stalin at its head. Yet Stalin, as any student of Marxist history knows, was an advocate of "socialism in one country." The advocates of a world revolution, led by the Red Army, were followers of the founder of that army, Leon Trotsky. Trotsky, as we know, lost out to Stalin and was exiled and then assassinated by Stalinist agents.
By the way, many of Trotsky's most influential and prominent followers, in the United States, wound up as the most vehement anti-Communists, even more so than the conservatives, whom they soon joined with to fight the Cold War. They supported the creation of NATO, advocated a policy of what they called "rollback," and went on to become known as the neoconservatives, the architects of our present troubles, in many respects.
In any case, Stalin's Russia was no real threat to Europe, simply because the Soviet system was not economically viable. As early as 1920, the Austrian economist Ludwig von Mises had predicted the inevitable collapse of Soviet socialism, and the intervening 70 years or so, in terms of the history of ideas, is but the blink of an eye. What power our enemies wielded was yielded to them by the West. The Warsaw Pact countries overrun by the Red Army in the wake of World War II were virtually handed over to Stalin by Roosevelt at Yalta, yet the Russians had neither the capacity nor the desire to occupy the rest. They let Yugoslavia out of their grasp, and it was not long before the rest followed. The early uprisings in Poland, Hungary, and elsewhere were premonitions of what was to come.
The implosion of the Communist empire in 1989 ended whatever rationale NATO may once have had, and yet still, like the immortal vampire, the beast lives on! Always alert for fresh rationales for military action, the War Party made an example out of Serbia, asserting its right to bring "order" to the post-Soviet "chaos". On some pretext or other, which invariably turns out to be either completely made up or greatly exaggerated, the War Party intervenes on an "emergency" basis, as in the case of the alleged genocide in the former Yugoslavia. A crusade is launched, in the name of "humanitarianism," and off the fighter planes go to bomb some of the oldest cities in Europe, including such targets as television stations and other civilian targets.
This was the first phase of the confrontation with Russia, undertaken by Bill Clinton and bound to be pursued by President Obama. The same crowd that launched a war against a European nation that had never attacked the U.S. or posed a credible threat to our security, is now back in power in Washington, and they have a visceral hatred of Russia that Obama did not bother to hide during the presidential campaign. During the presidential debates, he competed with Hillary Clinton to see who could be more anti-Russian. Now with Hillary at his side as his secretary of state, and an even more pious and self-righteous tone than Bill Clinton could ever muster, the drive to take NATO into the very heart of the former Soviet empire is continuing apace.
Georgia, Ukraine, and Azerbaijan are actively seeking NATO membership, and it is only the reluctance of some of the Europeans that prevents each country in Europe, in addition to the U.S., from being embroiled in the endless ethnic disputes roiling a very troubled part of the world. President Obama has expressed support for extending NATO's tentacles into the Caucasus, and our present policy does not look all that much different than the expansionism of the Bush years.
There can be no doubt that the U.S. has been engaged in a long-term project to encircle the former Soviet Union and make inroads where opportunity presents itself -- or can be created. That is what the so-called color revolutions were all about. Funded and supported politically by U.S. government agencies, and given plenty of cover in the international media, these supposedly "spontaneous" rebellions that installed pro-U.S. governments from in Georgia, Ukraine, and elsewhere, were and are a direct threat aimed at Moscow, with the ultimate color revolution meant to take place in Russia itself.
"Soft power" is a phrase we should expect to hear a lot more of in the age of Obama: It is much more comforting and pacific-sounding than "regime change" or just plain old "war," yet it is a war executed sometimes with violence but most often by other means. The U.S. has an entire government agency, the National Endowment for Democracy, which employs "soft power" as an ancillary to our ongoing military efforts throughout the world. Expect this aspect of our interventionist foreign policy to pick up speed in the coming years.
This soft power, however, has its hard counterpart in the growing size and scope of the U.S. military machine. America's so-called defense budget is currently larger than all the military budgets of all the other nations on earth combined -- and still President Obama has said he means to increase it! It is never enough, not if you are the hyperpower. There is no security at the top of the world. Our uneasiness and fear arises from the very fact of our supremacy -- and our certain knowledge that it cannot last forever.
Our rulers are still living in the heyday of their power and cannot reconcile themselves to the fact that an era is coming to an end. Like drug addicts who cannot and will not kick their habit, the leaders of the American government are too far gone to ever change. Their very idea of themselves is imbued with a sense of entitlement and aristocratic noblesse oblige.
The fear that the end is upon us, that the entire economic structure of the West could come tumbling down, has our ruling elites in a panic. And yet even as the banks fail, people are thrown out of work, and the economic gears stop turning, still the machinery of empire will continue, albeit somewhat less efficiently than before. That is because our rulers are held captive by their own mindset -- they are still living in the heyday of their power and cannot reconcile themselves to the fact that an era is coming to an end. They are determined to hold on to the insignia of power, even if their ramshackle empire is a bit frayed around the edges. They are still living inside the bubble of fake prosperity and breathing air permeated by their own hubris. Like drug addicts who cannot and will not kick their habit, the leaders of the American government, my government, are too far gone to ever change. Their very idea of themselves is imbued with a sense of entitlement and aristocratic noblesse oblige. They feel that they are doing us all a very great favor by consenting to rule over us and determine the fate of entire peoples, indeed of the entire globe.
There are those of us, in America and elsewhere, who would rather they did not do us this favor, and would prefer that, instead of favoring us with their schemes to save the world, they would retire to private life and tend to their own gardens, rather than meddling in everybody else's.
That, however, is not likely to happen, unless these people are forcibly retired, and a movement is growing, in my country and yours, to make this a real possibility. A huge antiwar movement greeted the Bush administration's war on Iraq, and eventually -- give it time -- a similar movement will develop and come out into the streets around Obama's continuation of that same war in Afghanistan and beyond.
I am hopeful about this, and, although no one can predict when and how it will take shape, I have confidence -- faith, if you will -- in the essential goodness of humanity, which will always come forward, in some form, to oppose cruelty and injustice. However, today I want to concentrate on the counter-movement to this positive trend, in part because its form can easily be foreseen, and also because it poses an immediate threat on account of the crisis of empire, that is, the economic crisis.
Times of economic turmoil always produce demagogues, of the Right and the Left, and some who defy all political categories. Europe has already seen what hyperinflation can do to a nation's politics: The history of Weimar Germany tells us all we need to know about the horrific possibilities. An impoverished people who have once known prosperity is prey to all sorts of demonic explanations for its plight: There are plenty of scapegoats, hate-objects whose existence is pointed to as the source of our plight. When people feel buffeted about like feathers in the wind, helpless to control their fate, that is when they turn to leaders, to mass movements, to anything to which they can surrender their individual will and find glory -- however phony -- in something greater than themselves. This is invariably the state, the race, or some other collective construction, such as the proletariat, or the common people -- choose your poison. In any case, these movements are authoritarian, by their very nature, and very often outwardly aggressive. War is the essence of their foreign policy, very often, because it is necessary for the governing party to direct the anger and frustration of the people outward, rather than inward, at themselves.
Extreme nationalism is historically the given a great impetus by economic hard times, and the greater the crisis the more unreasoning and violent the movement becomes. Economic protectionism is always a feature of these eras, and there is another fuse waiting to be lit, because if goods do not cross borders, then armies soon will. Trading partners do not make war on each other: The moment trade barriers go up, the prospects for armed conflict rise.
In times of economic stress, the authority and power of the central state tends to expand, and this provides the War Party with the perfect war-making instrument. As Randolph Bourne, the great American liberal opponent of World War I put it: “War is the health of the state.” War provides the framework and mindset that cedes all authority to the state and gives it free reign over the destiny of individuals. A command economy is organized along military lines, and anyone who disobeys orders -- or, worse, questions the mission -- is a traitor, to be cast out. As governments accrue more power to themselves, they seek out ways to expand and complete their control -- and war is the perfect pretext, the ideal atmosphere in which to enforce this type of mindless conformity.
Now I have been saying two things: (1) that the American empire has reached the end of its tether, and (2) that its rulers continue to act as if nothing untoward is happening. We are barreling forward, on the power of sheer momentum, along the same path set for us since the end of the Second World War. Having reached the pinnacle of power, we are still the hyperpower, albeit a bankrupt one -- that is, America is a power that can yet do a lot of damage in the world. We may be going down, but we are sure to take more than a few of you along with us. And that likelihood I regret very much.
George Soros, the financier and would-be philosopher, has written a book entitled The Bubble of American Supremacy, which I must confess to not having read, but certainly the title describes what is going on these days. The "bubble" of American prosperity, and, indeed, of the West, has been founded on debt, and a lot of assumptions that turned out to be flat-out wrong. The economic consequences of the bubble's sudden deflation are all around us, and yet that is only the most visible and obvious damage. The real damage has been done by the mindset -- and the culture -- that flourished in the heyday of the bubble, when the boast of that U.S. government official who claimed to be creating a new reality seem almost credible, at least to the more deluded among our ruling elite. In America, we succumbed to the myth of history as a straight-line progression upward, out of the darkness and into the light -- led, of course, by our very own government. Everyone was getting richer -- as long as the Federal Reserve kept priming the pump -- and soon the whole world would be in their grasp
The end of the American empire has been proclaimed many times, yet it has always defied the prophets of doom. The Marxists divined our doom in the mysteries of the dialectic, the Malthusians saw our demise in the calculations of the demographers, the born-again Christians who take the Bible literally have insisted and continue to claim that the end of the world itself is foreordained by the Holy Word of God, that the final battle of good against evil is nigh on a plain called Armageddon.
The Marxists, while exulting in the economic tsunami now engulfing Wall Street, have so far failed to explain how and why their own system, when it was tried, preceded the American capitalist model in death. Their mono-causal schema -- which points to the supposed inner contradictions of the market economy as the cause of its ultimate undoing -- also fails to explain why the socialist economies of the European Union are suffering even more dramatically. As an accurate guide to the future of the U.S., and its position as the so-called hyperpower, Marx is about as useful as Malthus, i.e., not at all.
As for the Christians, I will leave it to the theologians to argue over that. I will just note that they, like the Marxists, the Malthusians, and the neo-Malthusian global warming alarmists, see our doom written in the stars. For these sorts of people, the clock is always ticking: The countdown to death is always ringing in their ears. One feels sorry for such people, to a certain extent: They are clearly projecting the knowledge of their own impending death on the universe at large. They walk around in a state of perpetual fear mixed with glee, as the darker the outlook the more their forebodings of doom are confirmed. Surely they must be cheered by the sight of the world economy imploding, even as they, like the rest of us, suffer the consequences.
These prophets of doom, most of them cranks and ideological axe-grinders, have been writing America's obituary for years. This time, however, there is a difference -- because this time the crisis is real. It is not yet too late to draw back from the abyss and chart a more moderate course, something less dramatic than a crash landing.
Instead of a pragmatic, realistic approach to attaining that limited objective, it seems we are committed to a Quixotic quest for the unattainable.
On March 26 the Washington Times published an article which reported that the Obama administration is committed to a goal of “rebuilding” Afghanistan into a modern nation, i.e., something which is unattainable and over which a lot of blood and money can be spilled in not attaining it. William Lind notes that this indicates how little “change” the Obama administration has brought: “The differences between the neo-liberals and the neo-cons are few. Both are militant believers in Brave New World, a Globalist future in which everyone on earth becomes modern.”
With the usual fanfare, the Obama administration has proclaimed a new strategy for the war in Afghanistan. On the surface, it does not amount to much. But if a story by Bill Gertz in the March 26 Washington Times is correct, there is more to it than meets the eye. Gertz reported that:I have not seen similar stories in other papers, so it is possible Gertz is not correct. But if he is, the Obama administration has just made the Afghan war its own, and lost it.
- The Obama administration has conducted a vigorous internal debate over its new strategy for Afghanistan ...
- According to two U.S. government sources close to the issue, senior policymakers were divided over how comprehensive to make the strategy ...
- On the one side were Vice President Joseph R. Biden, Jr. and Deputy Secretary of State James B. Steinberg, who argued in closed-door meetings for a minimal strategy of stabilizing Afghanistan ...
- The goal of these advocates was to limit civilian and other nonmilitary efforts in Afghanistan and focus on a main military objective of denying safe haven to the Taliban and al Qaeda terrorists.
- The other side of the debate was led by Richard C. Holbrooke, the special envoy for the region, who along with U.S. Central Command leader Gen. David H. Petraeus and Secretary of State Hillary Rodham Clinton fought for a major nation-building effort.
- The Holbrooke-Petraeus-Clinton faction, according to the sources, prevailed. The result is expected to be a major, long-term military and civilian program to reinvent Afghanistan from one of the most backward, least developed nations to a relatively prosperous democratic state.
Ironically, the reported decision duplicates the Bush administration's error in Iraq, another lost war (the next phase in Iraq's Sunni-Shiite civil war is now ramping up). The error, one that no tactical or operational successes can overcome, is setting unattainable strategic objectives.
Short of divine intervention, nothing can turn Afghanistan into a modern, prosperous, democratic state. Pigs will not only fly, they will win dogfights with F-15s before that happens. The most Afghanistan can ever be is Afghanistan: a poor, backward country, one where the state is weak and local warlords are strong, plagued with a drug-based economy and endemic low-level civil war. That is Afghanistan at its best. Just achieving that would be difficult for an occupying foreign power, whose presence assures that war will not be low-level and that no settlement will be long-term.
In fact, even the minimalist objectives reportedly urged by Vice President Biden are not attainable. We cannot deny safe haven in Afghanistan for the Taliban, because the Taliban are Afghans. They represent a substantial portion of the Pashtun population. The most we can hope to obtain in a settlement of the Afghan war is the exclusion of al Qaeda. That is a realistic strategic objective, because al Qaeda is made up of Arabs, i.e., foreigners, whom the Afghans dislike the same way they dislike other foreigners. The Taliban's commitment to al Qaeda is ideological, and the right combination of incentives can usually break ideological commitments.
Instead of a pragmatic, realistic approach to attaining that limited objective, it seems we are committed to a Quixotic quest for the unattainable. Again, that guarantees we will lose the Afghan war. No means, military or non-military, can obtain the unattainable. The circle cannot be squared.
Here we see how little "change" the Obama administration really represents. The differences between the neo-liberals and the neo-cons are few. Both are militant believers in Brave New World, a Globalist future in which everyone on earth becomes modern. In the view of these ideologues, the fact that billions of people are willing to fight to the death against modernity is, like the river Pregel, an unimportant military obstacle. We just need to buy more Predators.
Meanwhile, the money is running out. The ancien regime syndrome looms ever larger: We not only maintain but increase foolish foreign commitments, at the same time that debt is piling up, those willing to lend become fewer and we are reduced to debasing the currency. Historians have seen it all before, many, many times. It never has a happy ending.
It appears Afghanistan will be the graveyard of yet another empire.
LARRY SUMMERS, TIM GEITHNER AND WALL STREET’S OWNERSHIP OF GOVERNMENT
“People like Rubin, Summers and Gensler shuffle back and forth from the public to the private sector and back again, repeatedly switching places with their GOP counterparts in this endless public/private sector looting.”
Glenn Greenwald worked as a Constitutional and civil rights litigator prior to becoming a columnist and blogger for Salon. Salon's political orientation would be classified as "liberal," in the current sense of the term. Greenwald's three books in the last three years, e.g., A Tragic Legacy, were all strongly anti-Bush, but he describes himself as neither liberal nor conservative. (Greatly to his credit in our eyes, he has not voted at all.) He emphasizes that he is a strong advocate for U.S. constitutional "balance of powers" and for constitutionally-granted civil and political rights. Here is how he described what happened to the U.S. Presidency under Bush in the preface to his book How Would a Patriot Act?:
“Over the past five years, a creeping extremism has taken hold of our federal government, and it is threatening to radically alter our system of government and who we are as a nation. This extremism is neither conservative nor liberal in nature, but is instead driven by theories of unlimited presidential power that are wholly alien, and antithetical, to the core political values that have governed this country since its founding”; for, “the fact that this seizure of ever-expanding presidential power is largely justified through endless, rank fear-mongering -- fear of terrorists, specifically -- means that not only our system of government is radically changing, but so, too, are our national character, our national identity, and what it means to be American. ...
“It is incumbent upon all Americans who believe in that system, bequeathed to us by the founders, to defend it when it is under assault and in jeopardy. And today it is ...
“I did not arrive at these conclusions eagerly or because I was predisposed by any previous partisan viewpoint. Quite the contrary.”
So notwithstanding his Salon platform, Greenwald does not worship at the altar of either political party, nor are his views strongly molded by drinking at the libertarian/anarchist Lew Rockwell/Mises Institute philosophical well -- to whose advocates the below is nothing new and, indeed, utterly unsurprising. Rather, if one had to peg him, his worldview harkens back to the anti-authority/anti-“establishment” 1960s ... before that movement became ossified and corrupted.
With that as background: Greenwald here describes a "tawdry and transparent" corruption which "has fueled and continues to fuel a fraud so enormous and destructive as to be unprecedented in both size and audacity" -- the none-to-well-hidden de facto merger between Wall Street and the U.S. federal government. Alleged reformer Obama is maintaining virtually identical policies in this domain as the Clinton and Bush administrations. The more things change ...
White House officials yesterday released their personal financial disclosure forms, and included in the millions of dollars which top Obama economics adviser Larry Summers made from Wall Street in 2008 is this detail:
Lawrence H. Summers, one of President Obama's top economic advisers, collected roughly $5.2 million in compensation from hedge fund D.E. Shaw over the past year and was paid more than $2.7 million in speaking fees by several troubled Wall Street firms and other organizations. ...
Financial institutions including JP Morgan Chase, Citigroup, Goldman Sachs, Lehman Brothers and Merrill Lynch paid Summers for speaking appearances in 2008. Fees ranged from $45,000 for a Nov. 12 Merrill Lynch appearance to $135,000 for an April 16 visit to Goldman Sachs, according to his disclosure form.
That is $135,000 paid by Goldman Sachs to Summers -- for a one-day visit. And the payment was made at a time -- in April, 2008 -- when everyone assumed that the next President would either be Barack Obama or Hillary Clinton and that Larry Summers would therefore become exactly what he now is: the most influential financial official in the U.S. Government (and the $45,000 Merrill Lynch payment came 8 days after Obama's election). Goldman would not be able to make a 1-day $135,000 payment to Summers now that he is Obama's top economics adviser, but doing so a few months beforehand was obviously something about which neither parties felt any compunction. It is basically an advanced bribe. And it is paying off in spades. And none of it seemed to bother Obama in the slightest when he first strongly considered naming Summers as Treasury Secretary and then named him his top economics adviser instead (thereby avoiding the need for Senate confirmation), knowing that Summers would exert great influence in determining who benefited from the government's response to the financial crisis.
Last night [April 3], former Reagan-era S&L regulator and current University of Missouri Professor Bill Black was on Bill Moyers' Journal and detailed the magnitude of what he called the on-going massive fraud, the role Tim Geithner played in it before being promoted to Treasury Secretary (where he continues to abet it), and -- most amazingly of all -- the crusade led by Alan Greenspan, former Goldman CEO Robert Rubin (Geithner's mentor) and Larry Summers in the late 1990s to block the efforts of top regulators (especially Brooksley Born, head of the Commodities Futures Trading Commission) to regulate the exact financial derivatives market that became the principal cause of the global financial crisis. To get a sense for how deep and massive is the on-going fraud and the key role played in it by key Obama officials, I highly recommend watching that Black interview (it can be seen here and the transcript is here).
This article from Stanford Magazine -- an absolutely amazing read -- details how Summers, Rubin and Greenspan led the way in blocking any regulatory efforts of the derivatives market whatsoever on the ground that the financial industry and its lobbyists were objecting:
As chairperson of the CFTC, Born advocated reining in the huge and growing market for financial derivatives. ... One type of derivative -- known as a credit default swap -- has been a key contributor to the economy's recent unraveling. ...
Back in the 1990s, however, Born's proposal stirred an almost visceral response from other regulators in the Clinton administration, as well as members of Congress and lobbyists. ... But even the modest proposal got a vituperative response. The dozen or so large banks that wrote most of the OTC derivative contracts saw the move as a threat to a major profit center. Greenspan and his deregulation-minded brain trust saw no need to upset the status quo. The sheer act of contemplating regulation, they maintained, would cause widespread chaos in markets around the world.
Born recalls taking a phone call from Lawrence Summers, then Rubin's top deputy at the Treasury Department, complaining about the proposal, and mentioning that he was taking heat from industry lobbyists. ... The debate came to a head April 21, 1998. In a Treasury Department meeting of a presidential working group that included Born and the other top regulators, Greenspan and Rubin took turns attempting to change her mind. Rubin took the lead, she recalls.
“I was told by the secretary of the treasury that the CFTC had no jurisdiction, and for that reason and that reason alone, we should not go forward,” Born says. ... It seemed totally “inexplicable to me,” Born says of the seeming disinterest her counterparts showed in how the markets were operating. “It was as though the other financial regulators were saying, ‘We don't want to know.’”
She formally launched the proposal on May 7, and within hours, Greenspan, Rubin and Levitt issued a joint statement condemning Born and the CFTC, expressing "grave concern about this action and its possible consequences." They announced a plan to ask for legislation to stop the CFTC in its tracks.
Rubin, Summers and Greenspan succeeded in inducing Congress -- funded, of course, by these same financial firms -- to enact legislation blocking the CFTC from regulating these derivative markets. More amazingly still, the CFTC, headed back then by Born, is now headed by Obama appointee Gary Gensler, a former Goldman Sachs executive (naturally) who was as instrumental as anyone in blocking any regulations of those derivative markets (and then enriched himself by feeding on those unregulated markets).
Just think about how this works. People like Rubin, Summers and Gensler shuffle back and forth from the public to the private sector and back again, repeatedly switching places with their GOP counterparts in this endless public/private sector looting. When in government, they ensure that the laws and regulations are written to redound directly to the benefit of a handful of Wall St. firms, literally abolishing all safeguards and allowing them to pillage and steal. Then, when out of government, they return to those very firms and collect millions upon millions of dollars, profits made possible by the laws and regulations they implemented when in government. Then, when their party returns to power, they return back to government, where they continue to use their influence to ensure that the oligarchical circle that rewards them so massively is protected and advanced. This corruption is so tawdry and transparent -- and it has fueled and continues to fuel a fraud so enormous and destructive as to be unprecedented in both size and audacity -- that it is mystifying that it is not provoking more mass public rage.
All of that leads to things like this, from [the April 4] Washington Post:
The Obama administration is engineering its new bailout initiatives in a way that it believes will allow firms benefiting from the programs to avoid restrictions imposed by Congress, including limits on lavish executive pay, according to government officials. ...
The administration believes it can sidestep the rules because, in many cases, it has decided not to provide federal aid directly to financial companies, the sources said. Instead, the government has set up special entities that act as middlemen, channeling the bailout funds to the firms and, via this two-step process, stripping away the requirement that the restrictions be imposed, according to officials.
In one program, designed to restart small-business lending, President Obama's officials are planning to set up a middleman called a special-purpose vehicle -- a term made notorious during the Enron scandal -- or another type of entity to evade the congressional mandates, sources familiar with the matter said.
If that is not illegal, it is as close to it as one can get. And it is a blatant attempt by the White House to brush aside -- circumvent and violate -- the spirit if not the letter of Congressional restrictions on executive pay for TARP-receiving firms. It was Obama, in the wake of various scandals over profligate spending by TARP firms, who pretended to ride the wave of populist anger and to lead the way in demanding limits on compensation. And ever since his flamboyant announcement, Obama -- adopting the same approach that seems to drive him in most other areas -- has taken one step after the next to gut and render irrelevant the very compensation limits he publicly pretended to champion (thereafter dishonestly blaming Chris Dodd for doing so and virtually destroying Dodd's political career). And the winners -- as always -- are the same Wall Street firms that caused the crisis in the first place while enriching and otherwise co-opting the very individuals Obama chose to be his top financial officials.
Worse still, what is happening here is an exact analog to what is happening in the realm of Bush war crimes -- the Obama administration's first priority is to protect the wrongdoers and criminals by ensuring that the criminality remains secret. Here is how Black explained it last night:
Black: Geithner is charging, is covering up. Just like Paulson did before him. Geithner is publicly saying that it is going to take $2 trillion — a trillion is a thousand billion — $2 trillion taxpayer dollars to deal with this problem. But they are allowing all the banks to report that they are not only solvent, but fully capitalized. Both statements cannot be true. It cannot be that they need $2 trillion, because they have masses losses, and that they are fine.
These are all people who have failed. Paulson failed, Geithner failed. They were all promoted because they failed, not because ...
Moyers: What do you mean?
Black: Well, Geithner has, was one of our nation's top regulators, during the entire subprime scandal, that I just described. He took absolutely no effective action. He gave no warning. He did nothing in response to the FBI warning that there was an epidemic of fraud. All this pig in the poke stuff happened under him. So, in his phrase about legacy assets. Well he is a failed legacy regulator. ...
The Great Depression, we said, "Hey, we have to learn the facts. What caused this disaster, so that we can take steps, like pass the Glass-Steagall law, that will prevent future disasters?" Where is our investigation?
What would happen if after a plane crashes, we said, “Oh, we don’t want to look in the past. We want to be forward looking. Many people might have been, you know, we don’t want to pass blame.” No. We have a nonpartisan, skilled inquiry. We spend lots of money on, get really bright people. And we find out, to the best of our ability, what caused every single major plane crash in America. And because of that, aviation has an extraordinarily good safety record. We ought to follow the same policies in the financial sphere. We have to find out what caused the disasters, or we will keep reliving them. ...
Moyers: Yeah. Are you saying that Timothy Geithner, the Secretary of the Treasury, and others in the administration, with the banks, are engaged in a cover up to keep us from knowing what went wrong?
Black: Absolutely.
Moyers: You are.
Black: Absolutely, because they are scared to death. ... What we are doing with -- no, Treasury and both administrations. The Bush administration and now the Obama administration kept secret from us what was being done with AIG. AIG was being used secretly to bail out favored banks like UBS and like Goldman Sachs -- Secretary Paulson's firm, that he had come from being CEO. It got the largest amount of money. $12.9 billion. And they did not want us to know that. And it was only Congressional pressure, and not Congressional pressure, by the way, on Geithner, but Congressional pressure on AIG.
Where Congress said, "We will not give you a single penny more unless we know who received the money." And, you know, when he was Treasury Secretary, Paulson created a recommendation group to tell Treasury what they ought to do with AIG. And he put Goldman Sachs on it.
Moyers: Even though Goldman Sachs had a big vested stake.
Black: Massive stake. And even though he had just been CEO of Goldman Sachs before becoming Treasury Secretary. Now, in most stages in American history, that would be a scandal of such proportions that he would not be allowed in civilized society.
This is exactly what former IMF Chief Economist Simon Johnson warned about in his vital Atlantic article: "that the finance industry has effectively captured our government -- a state of affairs that more typically describes emerging markets, and is at the center of many emerging-market crises." This is the key passage where Johnson described the hallmark of how corrupt oligarchies that cause financial crises then attempt to deal with the fallout:
Squeezing the oligarchs, though, is seldom the strategy of choice among emerging-market governments. Quite the contrary: at the outset of the crisis, the oligarchs are usually among the first to get extra help from the government, such as preferential access to foreign currency, or maybe a nice tax break, or -- here is a classic Kremlin bailout technique -- the assumption of private debt obligations by the government. Under duress, generosity toward old friends takes many innovative forms. Meanwhile, needing to squeeze someone, most emerging-market governments look first to ordinary working folk -- at least until the riots grow too large. ...
As much as he campaigned against anything, Obama railed against precisely this sort of incestuous, profoundly corrupt control by narrow private interests of the Government, yet he has chosen to empower the very individuals who most embody that corruption. And the results are exactly what one would expect them to be.
Greenwald and Democracy Now!’s Amy Goodman were on Bill Moyers’ Journal program after the Black interview discussing the media's role in this establishment corruption -- video of segment here. Greenwald was also on C-SPAN’s Washington Journal with the primary topic being the blatant, sleazy oligarchical control of both the Executive and legislative branches -- viewable here.
Update: Just to get a sense for how propagandistic, sycophantic and fact-free are the most extreme Obama worshippers in our "journalist" class, consider this recent article from The New Republic’s Noam Scheiber in which he urged the White House to "free its economic oracle" -- Summers -- and defended and praised Summers on the ground that "his exposure to Wall Street over the years has been limited."
As Jonathan Schwarz asks, citing the massive compensation on which Summers engorged himself by feeding at the Wall Street trough last year: "I wonder what would have constituted ‘significant’ exposure to Wall Street? Maybe if he had worked for D.E. Shaw full time? (Amazingly, Summers was paid $5.2 million for a part-time position.)"
LOOTING BY U.S. GOVERNMENT AT ALL-TIME HIGHS
There is absolutely no way that theft through such transfers can ever create prosperity or employment.
Mike Rozeff lays things out even more bluntly than Glenn Greenwald immediately above. "Reformer" Obama continues to facilitate the theft by the insiders from the rest of us of his predecessors, and in overdrive.
There are two bull markets going on right now. They are in U.S. government looting. They are Congressional looting and Federal Reserve (FED) looting. They are bull markets for the government, banks, and select beneficiaries. They are bear markets for the Americans being looted, which is most of us.
These bull markets in looting are at all-time highs. Never before has the amount of looting reached such astronomical heights, either in absolute terms or relative to other measures like population or product.
The looters are promoting their looting with a stream of false advertising and mis-information. They are claiming one false rationale after another. They are making out like their looting is essential to American prosperity and employment. There is no basis for these claims. The looting is transferring wealth from those who have created it to those who have not. It is outright theft by government. There is absolutely no way that theft through such transfers can ever create prosperity or employment.
Article 17 of the U.N. Declaration of Human Rights states:The U.S. government and the FED are engaged in massive violations of the right to own property, which entails the right not to be deprived of it arbitrarily. They are violating our rights to own property by taking that property from us for themselves and others. They are looting us.
- Everyone has the right to own property alone as well as in association with others.
- No one shall be arbitrarily deprived of his property.
The Congress and the FED are depriving many Americans of their property for the benefit of a select few. That makes their looting arbitrary. Their looting is both unjust and unjustifiable. They are doing this under the U.S. Constitution, but this makes it no less arbitrary. Populations have been exterminated under constitutions. Only by stretching the U.S. Constitution beyond all proper grounds have they grasped the power to loot so rapaciously and openly.
The U.S. Constitution says that no person shall "be deprived of life, liberty, or property, without due process of law; nor shall private property be taken for public use, without just compensation."
The government's looting of private property, taken for public use, without just compensation is at an all-time high.
The bull market in government looting kicked off in 2007. It now amounts to multiple trillions of dollars. It rises at least to $8 trillion. This includes money already spent and money guaranteed to defunct, ailing, and insolvent institutions. There is no end in sight. Both Congress and the FED have promised even more.
This theft is not and will not be evenly spread over all Americans, born and unborn. But to get some idea of its immensity, there are about 100 million households in the U.S. A trillion dollars is $10,000 per household. Eight trillion dollars is $80,000 per household. It is $26,667 for every man, woman, and child in America. The looting shows up in the form of debt and debt-like tax obligations that Americans will pay. The $8 trillion bill and rising is addressed to them.
Even before the government engineered this looting, Americans were already deeply in debt. Non-mortgage debt is about $8,460 for every man, woman, and child. The total of this consumer credit came to $2.5 trillion in 2007. Mortgage debt came to another $14.6 trillion. See here. This debt, accumulated over many years by many Americans, added up to $17.1 trillion. The U.S. government, in a little over a year, is looting Americans and adding to their debt by another $8 trillion.
The amount of this brazen violation of property rights is astounding. The minimum value of a human life is often estimated as the present value of the future income of that person. Juries often award wrongful death damages that average $500,000 to $800,000. At the higher figure, which produces a lower number of equivalent human lives, $8 trillion is equivalent to 10 million human lives. Suppose that the U.S. government exterminated 10 million persons, each worth $800,000. That amounts to $8 trillion.
In my mind, the government looting is equivalent to a massive genocide of 10 million human beings. These things cannot accurately be measured, I grant. The additional poverty, misery, travail, lower income, and other consequences that stem from this looting cannot be measured; and they cannot be accurately compared with the loss of human lives. I grant that. Yet human necessity requires us to make an inaccurate comparison in order to grasp, even faintly, the meaning of the looting that is going on.
The latest Geithner plan is not included in the $8 trillion total. That plan is, again, outright looting. It is a wealth transfer from taxpayers to banks that have made bad loans. It is just as much theft as the transfer payments from taxpayers to the creditors of the AIG company.
One sure effect of theft is that the victim is made poorer. He has to work to make up for what he has lost. He is set back. It is as if he were a slave who had worked for the thieves. Looting enslaves. The American government is enslaving the American people to a massive extent. It will not matter what the GDP numbers show if a good part of it is work effort devoted to paying debts and taxes. That is money that otherwise could have gone to meeting the needs and wants of the victims.
The massive victimization of the American people through the looting of the Bush-Obama-Bernanke regimes will be felt as time passes. The rulers count on spreading out the pain and obscuring its cause. The cause is an $8 trillion rape. The cause is outright looting. The cause is outright violation of property rights.
I hope for a bear market in faith and trust in government.
DID GOLDMAN SACHS GOOSE OIL LAST SUMMER?
How the world works, lesson #3.
And speaking of Wall Street corruption and government complaisance, Citibank's, Merrill Lynch's and especially Goldman Sachs's fingerprints are on last summer's oil price spike. If so they were guilty of various substantial ethical and legal breachs. Care to bet whether there is a legitimate investigation of this entirely credible theory/accusation?
When oil prices spiked last summer to $147 a barrel, the biggest corporate casualty was oil pipeline giant Semgroup Holdings, a $14 billion (sales) private firm in Tulsa, Oklahoma. It had racked up $2.4 billion in trading losses betting that oil prices would go down, including $290 million in accounts personally managed by then chief executive Thomas Kivisto. Its short positions amounted to the equivalent of 20% of the nation's crude oil inventories. With the credit crunch eliminating any hope of meeting a $500 million margin call, Semgroup filed for bankruptcy on July 22.
But now some of the people involved in cleaning up the financial mess are suggesting that Semgroup's collapse was more than just bad judgment and worse timing. There is evidence of a malevolent hand at work: Oil price manipulation by traders orchestrating a short squeeze to push up the price of West Texas Intermediate crude to the point that it would generate fatal losses in Semgroup's accounts.
"What transpired at Semgroup was no less than a $500 billion fraud on the people of the world," says John Catsimatidis, the billionaire grocer turned oil refiner who is attempting to reorganize Semgroup in bankruptcy court. The $500 billion is how much the world would have overpaid for crude had a successful scam pushed up oil prices by $50 a barrel for 100 days.
What is the evidence of this? Much is circumstantial. Proving oil-trading manipulation is difficult. But numerous people familiar with the events insist that Citibank, Merrill Lynch and especially Goldman Sachs had knowledge about Semgroup's trading positions from their vetting of an ill-fated $1.5 billion private placement deal last spring. "Nothing has been proven, but if somebody has your book and knows every trade, it would not be difficult to bet against that book and put the company into a tremendous liquidity squeeze," says John Tucker, who is representing Kivisto.
What is known for sure is that Goldman Sachs, through J. Aron & Co., its commodities trading arm, was in prime position to use such data -- and profited handsomely from Semgroup's fall. J. Aron was Semgroup's biggest counterparty, trading both physical oil flowing through pipelines and paper oil, in the form of options and futures.
When crude oil peaked in July, Semgroup ran out of cash to meet margin requirements on options contracts it had with Aron, contracts on which it had paper losses of $350 million. Desperate to survive, Semgroup asked Aron to pony up $430 million it owed on physical oil. Aron said no, declared Semgroup in default on its contracts and demanded immediate payment of losses.
Some answers may emerge in late March when former FBI director Louis Freeh releases a report on the trading surrounding Semgroup's demise. He was hired by Semgroup and given subpoena power by the bankruptcy court judge in Delaware. Meanwhile the Securities & Exchange Commission is investigating, and lawyers involved in the bankruptcy say that Manhattan District Attorney Robert Morgenthau's office is looking into the actions of New York firms in the collapse. His office declines to comment.
Goldman says only that any allegations of oil price manipulation are "without foundation." Merrill and Citi declined comment.
Goldman and Aron (where Goldman Chief Executive Lloyd Blankfein got his start) have had a deep connection with Semgroup. In 2004 two former Goldman bankers bought a 30% stake in Semgroup for $75 million through their New York private equity firm, Riverstone. Both men, Pierre Lapeyre and David Leuschen, had helped form Goldman's commodity trading business, and Leuschen had been a director at Aron.
In late 2007 Semgroup entered into an oil-trading agreement with Aron. The companies began trading both oil futures and physical crude. Aron sent much of the oil it bought from Semgroup to a Coffeyville, Kansas refinery in which Goldman owns a 30% stake.
Semgroup's troubles mounted in the first quarter of 2008, when it had to post $2 billion in margin to cover losses. Goldman offered to underwrite a $1.5 billion private placement. Kivisto's attorney Tucker and others believe that it was in the Wall Street research for this offering that Semgroup's trading bets became fatally exposed. In April the banks (Merrill Lynch and Citibank were co-underwriters) required that Semgroup submit its trading positions to a stress test, a process one source describes as a "proctology exam." Goldman ended up abandoning the placement as investors balked at braving the liquidity crunch.
Meanwhile the futures markets had gotten wacky. On June 5, with no news catalysts, oil futures spiked $5 a barrel, the biggest one-day jump since the outbreak of the first Gulf war. The next day, on no news, the price jumped another $10 to $138. Traders say that in the days leading up to the $147 peak on July 12 there was the smell of blood in the water. "We just kept bidding the market higher," one trader says.
According to a trading summary submitted with court documents, Semgroup had entered into some terribly costly trades with Aron. In February 2008 Semgroup sold Aron call options on 500,000 barrels of oil for July delivery with a strike price of $96 per barrel. That meant that at the peak Semgroup's loss on each of those barrels was $51, or $25.5 million on that trade. Goldman says it "cannot comment on the trading positions of counterparties."
Shortly before it filed for bankruptcy, Semgroup sold its trading book to Barclays Capital. Barclays' bold bet was that the price of crude would fall, erasing the losses. It is believed that 30 days later Barclays was sitting on a $1 billion gain as oil indeed fell, to $114 a barrel. Barclays would not comment other than to confirm it still owns the book. That prices plunged after Semgroup failed is more evidence of manipulation, says Catsimatidis: "With the portfolio in Barclays' hands they could not squeeze the shorts anymore. The jig was up, and oil collapsed." [Annotated chart here.]
Since the bankruptcy, Aron has agreed to pay Semgroup only $90 million to settle up accounts. That is not enough for the dozens of oil producers who still have not been paid for $430 million in oil that Semgroup delivered to Aron. "We sued J. Aron because Semgroup did not do it," says Phillip Tholen, chief financial officer of oil company Samson Resources. "I cannot fathom why they would not file against J. Aron for those monies."
One possible answer: the Goldman connection. Going after Aron's cash would complicate matters with Riverstone, which still wields sway over the board. The creditors have reason to keep Riverstone and Goldman happy. The duo has teamed up to buy myriad energy assets in recent years, most notably a $22 billion leveraged buyout of pipeline king Kinder Morgan. They are likely to team up again to buy choice Semgroup assets out of bankruptcy.
A SAD CASE OF TRIAL BY “PERP WALK”
Redemption eludes one falsely accused of financial crimes.
There is plenty of crime originating from Wall Street, but not all financial collapses stem from illegal doings. Plenty of those emanate from the time-tested formula of taking on too much leverage near the peak of a boom. You do not even need a central bank to make that happen, just lots of gullible purchasers of debt issues.
Which does not mean that the innocent do not get accused during the search for scapegoats following a financial collapse. You have to keep the public uproar quelled somehow, and the government will naturally seek out the most convenient targets which also divert attention from government culpability.
Electrical utilities empire head Samuel Insull was the 1920s version of taking a fundamentally decent business and leaving it fatally exposed to a downturn in attempting to grow too fast. His main “crime” was drawing in so many small investors who bought into the story near the top. Public anger over the subsequent disaster led to Insull facing numerous charges in three different trials. He was acquitted of all charges each time. Back then juries understood the difference between bad business judgement and financial chicanery. Yet Insull is remembered by history as a crook, thanks in large part to the government publicity seekers of the day who made a showcase out of Insull.
On Wall Street they know that when the tide goes out, the muck gets exposed. Well, the tide sure is out this year and a lot of muck is in view. There is Bernard Madoff, of course. And others in the investment business have been taking the televised "perp walk." It is much used by prosecutors hoping to show that they are tough on bad guys, and hoping that the voters will take notice.
The perp walk is nothing new. When Richard Whitney, former president of the New York Stock Exchange and perhaps the most famous broker in the country in the 1930s, was found to be an embezzler, the Manhattan district attorney, Thomas E. Dewey, arrested him personally and made sure that reporters had been tipped off in advance. Still glowing in the light of the flashbulbs, Dewey was elected governor of New York four years later.
Rudy Giuliani also put his career in the fast lane with high-profile, high-publicity arrests of Wall Streeters. Indeed, some said he "patented the perp walk," although some of the people he arrested this way, such as Richard Wigton and Tim Tabor of Kidder Peabody, who were charged with insider trading, saw the charges later dropped for lack of evidence. Giuliani's conviction of principals in the Princeton/Newport racketeering case in the late 1980s was later overturned when an appeals court ruled that the alternative-investment firm's deeds did not constitute a crime.
As long as the history of financial crooks may stretch, there is also a long history of men being accused falsely of financial misdeeds. Consider Samuel Insull, whose photograph showing him entering the Cook County Jail in 1934 was on the front page of nearly every newspaper in the country. Once among the richest of men, Insull was charged with embezzlement, mail fraud and other crimes after the collapse of his empire of electric utilities. Franklin D. Roosevelt, not waiting for a jury verdict, decried "The Ishmaels and Insulls, whose hands are against every man."
Samuel Insull was born in England in 1859, the son of a preacher. By the time he was 14, he was working as a clerk for an auction house. When he was barely out of his teens, George Gourard hired him as a secretary. Luckily for Insull, Gourard was the London representative of Thomas Edison, already world-famous as an inventor. Insull so impressed Gourard with his capacity for hard work, intelligence and organization that Gourard sent him across the Atlantic to work for Edison himself, as his private secretary.
Within a few years Insull was Edison's most trusted business adviser. The fledgling General Electric company, founded by Edison, was not doing well. Edison decided to put Insull in charge. Within a few years, he turned the company around and started it towards its century-long role as a leading industrial and financial corporation. By the time he was 33, Insull was earning $36,000 a year, at a time when $2,000 was a comfortable middle-class income.
But Insull wanted to be on his own. He accepted, at 1/3 his previous salary, the presidency of Chicago Edison, one of that city's many power companies (and, despite the name, not controlled by Thomas Edison). Insull soon became president as well of Commonwealth Edison, Chicago's other major power company. In 1907, he merged them and secured a 40-year franchise for the new company to be the city's exclusive supplier of electricity.
It was an exciting time to be in the electricity business. American electric usage in 1902 had been a mere 6 billion kilowatt hours. By 1929, it would be 118 billion kwh [11%+ growth per year]. (It was 4 trillion kwh in 2007.) Insull transformed the nascent industry. He introduced metering, and he established the steam turbine as the main means of generating electricity, two innovations that greatly lowered power costs, thus boosting demand still further. If Thomas Edison and George Westinghouse are the fathers of electricity, Insull is the father of the abundant, cheap, and dependable supply of electricity, without which Edison and Westinghouse would be historical footnotes.
By the 1920s, Insull was the head of a vast electric empire that supplied 1.8 million households. But it was highly leveraged. Insull had raised the use of holding companies to a high art, building a pyramid of debt-heavy concerns.
As long as the revenue flowed smoothly up the pyramid, this worked well. In the first eight months of 1929, as the frenzy on Wall Street reached its climax, stock in Insull Utility Investments went from $30 a share to $147. But in the aftermath of the crash, Insull's financial house of cards quickly began to crumble.
He tried desperately to save it, especially for the small customers whom he had urged to buy the stock. He borrowed $5 million personally and turned it over to the company, sold his 4,000-acre country estate, turned in his $500,000 life insurance policy. Finally, he turned over all his personal assets ... to no avail. In April 1932, the Insull empire -- or what was left of it -- went into receivership, owing $800 million, a colossal sum by the standards of the day.
Both state and federal authorities tried to exploit the public fury at the disaster (Insull was receiving upward of 20 death threats a day). Afraid that he could not get justice under the circumstances, Insull fled abroad two months after the failure. But he was taken into custody and extradited to face numerous charges in 1934.
The government tried to use Insull's own books to convict him, but as a county sheriff on the jury noted, most crooks either kept no books, falsified them or destroyed them. Insull had done none of those things. The jury found him not guilty in five minutes flat. Twice more he was tried and acquitted on related charges.
Samuel Insull had been guilty of nothing more than bad business judgment, but he is remembered with Ponzi and other real crooks. As former Labor Secretary Ray Donovan, famously asked after being found not guilty of corruption, "Where do I go to get my reputation back?"
SHORT TAKES
Supremely Destructive Stupidity
The U.S. Supreme Court ruled that drug maker Wyeth could be held liable for harm notwithstanding that its drug was inappropriately administered by a third party despite the FDA-approved warning label. So following all the rules, never mind common sense and basic justice, is no barrier to liability, especially when some other government client -- the trial lawyers here rather than a pharmaceutical company -- stands to benefit.
Innovation flourishes in a benign environment of low taxes, a sensible judiciary and commonsense regulation. The U.S. Supreme Court recently rendered a decision that is harshly hostile to medical innovation -- and to other kinds, as well.
In the case Wyeth v. Levine the Court gave a bright green light to personal injury lawyers filing crippling lawsuits against pharmaceutical companies. The plaintiff alleged that a Wyeth drug, Phenergan, was improperly injected, with the result that Ms. Diana Levine lost an arm to gangrene. She understandably sued the hospital -- a physician's assistant did indeed inject the drug directly into the vein, despite a clear warning on the label that read: "Inadvertent intra-arterial injection can result in gangrene of the affected extremity." Yet Levine also sued Wyeth. After all, why not go after a deeper pocket for some real money? Her suit alleged that Wyeth should have put an even stronger warning on its label.
Wyeth's label had been specifically approved by the FDA. The Supreme Court nonetheless ruled that despite the warning label and despite the fact that this particular product was inappropriately administered by a third party, Wyeth could still be held liable for harm. In other words, instead of one warning label appropriately approved by a federally warranted agency, drugmakers must now gird themselves for warning labels as judged by 50 states and who knows how many other jurisdictions. This will sharply raise the cost of bringing new medicines to market by substantially increasing the risk of doing so. Companies can now suffer substantial losses when their products are improperly used even when users are amply warned. Bizarre. And highly destructive.
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