Lining Up for the Wall Street Gravy Train

British economist John Maynard Keynes, believed in capitalism, but he was also sharply critical of its structural flaws. He summed it up succinctly like this:

“Our analysis shows… that long-run development is not inherent in the capitalist economy. Thus, specific ‘development factors’ are required to sustain a long-run upward movement.”

What Keynes was alluding to is the fact that mature capitalist economies tend towards stagnation. What happens, is that the rate of return on investment begins to dwindle as overcapacity builds. That causes declining profits which lead to belt-tightening, rising unemployment and falling demand. As investment drops off further, growth slows correspondingly and the economy dips into a protracted slump. This corrosive stagnation is the challenge that all advanced capitalist economies face. The solution–as Keynes notes–lies in “specific development factors”, which in today’s terms means “financial innovations”.

Financial innovation, like derivatives contracts and securitization, have created vast new opportunities for investment and profitmaking. This complex netherworld of highly-leveraged debt-instruments and off-balance sheet operations, constitutes a shadow economy where the process of capital accumulation persists despite pervasive inertia in the underlying economy. This is why the Fed and the Treasury have been doing their best to stitch the system back together without changing its basic structure. The same is true of Congress, which has gone to great lengths to preserve the profit-generating instruments which brought the global financial system to the brink of disaster. This is from the Wall Street Journal:

“Lobbying by Wall Street has blunted efforts to step up regulation on derivatives trading by carving out exceptions or leaving the status quo in place. Derivatives took blame for some of the worst debacles of the financial crisis. But a year after regulators and critics began calling for an overhaul in the way they are traded, some efforts have been shelved and others have been watered down.

The two main issues concerning regulators were trading and clearing of swaps, which allow investors to bet on or hedge movements in currencies, interest rates and many other things. Swaps generally trade privately, leaving competitors and regulators in the dark about the scope of their risks. In November 2008, the chairman of the Senate Agriculture Committee proposed forcing all derivatives trading onto exchanges, where their prices could be publicly disclosed and margin requirements imposed to insure that participants could make good on their market bets.

But a financial-overhaul bill passed by the House of Representatives on Dec. 11 watered down or eliminated these requirements. The measure still allows for voice brokering and allows dealers to use alternatives to public exchanges.” (“How Overhauling Derivatives Died” Randall Smith and Sarah Lynch, WSJ)

“Voice brokering” is Wall Street parlance for making a deal over the phone. It makes a joke out of the anemic regulations passed into law by congressmen who are essentially agents of Wall Street.

The bottom line is that financial institutions will not be forced to trade trillions of dollars of derivatives on public exchanges where margin requirements would protect taxpayers against potential losses. Instead, Congress has given Wall Street the green light to continue selling products that are insufficiently capitalized so they can keep raking in gigantic profits. That means it’s only a matter of time before another one of the financial giants keels over from its bad bets. It will be AIG all over again.

But derivatives are just part of the problem. The real issue is a financial model that doesn’t really work and offers no tangible benefit to society. In its present form, the system–with its exotic OTC markets, its off-book SIVs and SPEs, and its opaque Dark Pools and High Frequency Trading– is more snake oil than high finance. It does not “efficiently allocate capital to productive activity” as advertised, but–more often than not–diverts it away from production altogether into paper claims on all manner of financial exotica. So called “innovations” have had less to do with increasing the overall vitality of the economy or improving living standards than they do with circumventing regulations to enhance earnings by maximizing leverage. Deregulation has utterly transformed the system; creating a financial Frankenstein that hides its activities off public exchanges, that transfers the risk of losses onto the taxpayer, and that requires explicit government guarantees just to attract investment. It’s a mug’s game where only a small group of high-stakes speculators come up winners.

The same is true of the Fed’s emergency lending programs. They’re just another swindle wrapped in fancy public relations ribbon. Ostensibly, the facilities are supposed to provide cheap capital in exchange for dodgy collateral. But that’s not a loan; it’s a subsidy, and it helps to obscure the true, market price of the assets. As systemic regulator, the Fed has every right to provide liquidity during times of market stress or turbulence. But it does not have the right to help financial institutions conceal their losses by paying exorbitant prices for downgraded junk bonds. That’s picking winners and losers, which is far beyond the Fed’s mandate.

Quantitative easing (QE) is another Fed boondoggle. The program has been hyped as a way to get the banks to increase lending to businesses and consumers by creating over $1 trillion of excess bank reserves. But instead of increasing lending, QE does the exact opposite; it creates generous incentives for not lending. The banks who qualify have been taking the Fed’s zero-rate reserves and exchanging them for safe, 10-year Treasury bonds which yield 3.5%. What a deal! Fed chairman Ben Bernanke has promised to maintain this policy for “an extended period” which means the banks will continue to reap the benefits of this stealth bailout for the foreseeable future.

This is the real reason the banks aren’t lending, because the Fed is paying them not to. It’s not a matter of creditworthy applicants. It’s a matter of hopelessly mangled monetary policy. The ongoing credit contraction can be blamed on one man alone; Ben Bernanke.

Even though QE is mainly a backdoor way to recapitalize the banks; some lending has continued, although not to consumers and businesses. So where has the money gone? Here’s part of the answer from the Wall Street Journal:

“Former Salvadoran finance minister Manuel Hinds points out in the latest issue of International Finance that banks have indeed been shirking on their day job of transforming increased deposits into increased private-sector credit. But they haven’t quit entirely. In fact, they’ve funneled significant new funds into nonbank financial institutions—which have not lent them on. What’s happening is that U.S. banks have been behaving exactly like developing country banks during earlier crises, such as Indonesian banks in the late 1990s—raising lending to their worst borrowers to keep them alive, lest the banks themselves collapse from their borrowers’ defaults.

For U.S. banks, these zombie borrowers are their affiliated financial entities set up to manage so-called off-balance-sheet activities—such as the famous SIVs (structured investment vehicles) created by Citigroup and others during the boom. Thus, the massive fiscal and monetary bailouts of the banks have served to worsen the credit misallocation that led to the general economic collapse in 2008.” (“Prepare for a Keynesian Hangover”, Ben Steill, Wall Street Journal)

So the banks are not only taking depositors money and using it in high-risk derivatives transactions and currency “carry trades”, they’re also propping up the long daisy-chain of insolvent creditors whose default could domino Lehman-like through the entire financial system. Funny how the media skips little tidbits like this when they give their rosy evening roundup.

And then there’s this; on Christmas Eve, the Treasury Dept announced that it would lift existing caps on the mortgage-finance giants Fannie Mae and Freddie Mac. The two GSE’s will no longer be limited to a ceiling of $200 billion in losses each. Although, the Treasury’s action looks like it was designed to support the housing market, the real beneficiaries are the banks whose balance sheets are coming under greater pressure from the relentless uptick in foreclosures. It is widely believed that Treasury is laying the groundwork for a major revision of the Obama’s mortgage modification program which has, so far, been a dismal failure. If the critics are right, the administration is planning to slash the principle on millions of mortgages sometime in 2010, thus shifting the sizable losses onto the US taxpayer. Otherwise, the banks will face potential losses on another 4 million foreclosures in the next year alone. (according to Credit Suisse)

Economist Dean Baker says that the Treasury’s surprise announcement is an indication that Fannie and Freddie may have paid too much for the mortgage-backed securities they bought back in 2008 when the GSE’s were used as a dumping ground for distressed bank assets. Here’s Baker:

“This would mean that they were paying too much for mortgages and mortgage-backed securities bought from banks after the financial meltdown was already in full swing. This was the original purpose of the TARP program. Of course, TARP came with at least some restrictions and disclosure requirements. If Fannie and Freddie are overpaying for mortgages, then there are no conditions whatsoever put on the banks that get the money.” (Fannie Mae and Freddie Mac: Just a four Letter Word, Dean Baker, Huffington Post)

The Treasury’s action is tantamount to another stealth bailout by industry reps working within the Obama administration. All policymaking seems to revolve around two fundamental tenets: Increase the profit potential for the big Wall Street banks, and crimp the flow of credit to the real economy to increase privatization, crush the labor movement, and reduce the population to third world poverty. That’s Neoliberalism in a nutshell and, apparently, Obama’s economic dogma. In fact, as economist L. Randall Wray points out, Obama’s new health care bill is just more of the same; another ginormous handout to Wall Street disguised as public policy. Here’s Wray:

“There is a huge untapped market of some 50 million people who are not paying insurance premiums—and the number grows every year because employers drop coverage and people can’t afford premiums. Solution? Health insurance “reform” that requires everyone to turn over their pay to Wall Street. Can’t afford the premiums? That is OK—Uncle Sam will kick in a few hundred billion to help out the insurers. Of course, do not expect more health care or better health outcomes because that has nothing to do with “reform” … Wall Street’s insurers… see a missed opportunity. They’ll collect the extra premiums and deny the claims. This is just another bailout of the financial system, because the tens of trillions of dollars already committed are not nearly enough.”(Healthcare Diversions Part 3: The Financialization of Health and Everything Else in the Universe” L. Randall Wray)

It’s no wonder that the Obama administration’s appeal to China to “expand its domestic market” focuses exclusively on health care and retirement programs. Wall Street is just lining up for the next gravy train.

What Should Be Done in Palestine

Israel Shamir’s Talk at the Ankara Conference…

Dear Turkish friends and fellow guests from abroad,

I am glad to speak again to you, the people of our great neighbour and former sovereign Turkey. Your latest developments inspire optimism. You are doing fine! Turkey is growing stronger and more independent; your leaders’ obsession with joining the European Union has been exorcised. You have restored the power of the parliament, bridled military excesses, streamlined your economy and improved relations with Syria and Iran. Turkey is no longer an American colony. You stopped joint air force exercises with Israel and the US. You expressed your clear anger over the horrors of Gaza. Now you pay more attention to the area where you live; you play an important role already and are destined to play an even greater role. So much depends on you! We feel it every day in Palestine.

I will not waste your time describing the horrors of Zionist rule in Palestine. You already know them, you’ve seen them on TV – dreadful pictures of burned schools and napalmed children, of the Gaza blockade, of check points, of night arrests. It is now exactly one year since the Jewish onslaught on Gaza, last year’s Christmas war which Israel began while the world was holidaying. Your president, Mr Gul, said a few days ago to our president, Mr Peres, that he will not visit Israel while the siege of Gaza continues, and that was a very good decision. Indeed, it is urgent to lift the Gaza siege, because no building materials are being allowed to enter Gaza for the repair of homes. Instead, the Israeli siege is being tightened with active help of Egypt. However beyond Gaza problem we must look for a bigger picture.

We are being told that the Gaza problem is that of Hamas intransigence, that it is Gaza’s own fault. If only Gaza wouldn’t embrace radical Islam, Israel would accommodate Gaza’s needs. Let us have a look outside of Gaza, at the West Bank’s jewel, el Bireh, the twin city of Ramallah, the seat of Israel-approved ruler Mahmud Abbas. This is a most prosperous city of wonderful villas with a lot of greenery and purring Mercedes cars, and a beautiful view. El Bireh decided to build a football stadium; they asked for money and they received funds from France, Germany and the World Football Association, FIFA. The football stadium was built within the city of el Bireh’s limits. Immediately, the Israeli court ruled: the stadium must be destroyed, because it is within the eyesight of a Jew.

Do you understand this? Mahmud Abbas is the most compliant Palestinian leader now or ever; he is doing everything that Israel asks. His police kindly retreat when Israeli security jeeps drive into his cities to arrest whomever they wish. He arrests every activist who speaks against Israeli excesses. He even fired the most senior Palestinian diplomat, Dr. Afif Safieh, the former ambassador to Washington, London, Vatican and Moscow because he spoke out against the Israeli war on Gaza. Every Islamist, every supporter of Islam in the West Bank is (or was) in Abbas’ jail. Abbas is an implacable enemy of radical Islam. You can’t be more conciliatory towards Israel than Mahmud Abbas. And still, he can’t even build a stadium for kids to kick ball in his own city, because the Jews will not allow it.

So, although Gaza is in a dreadful situation, the problem is not only Gaza. Islam or not Islam is not even a question we should be pondering. It makes no difference. Islamists are in Abbas’ jail, yet Abbas can’t even build a stadium. Stadium, not medreseh. Fatah member Marwan Barghuti and leftist PFLP leader Ahmed Sadat are in Israeli jails together with Hamas MPs.

The problem is the Jewish state. Not only does it besiege Gaza and destroy a football stadium in el Bireh. These are local problems, painful but local. The Jewish state focuses Jewish power all over the world into action. Without a Jewish state, this power would disperse; it would remain local, it would remain chaotic, probably it would be subdued by the forces of assimilation. Israel focuses these chaotic forces and concentrates them into action.

This action is against Islam. Not only against Islam, but Dar ul Islam (the Islamic world) is a prime target. In the US, the Jewish Neocons led their country into a crusade against Iraq and Afghanistan; now they are spearheading the push against Iran. They have formed a powerful front against President Obama and have turned him into a laughing stock after he uttered a few words of wisdom about Palestine. In Europe, if you inspect the coffers of anti-Muslim neo-Nazi groups, you’ll find that they thrive on Jewish support. In Russia, Jewish nationalists and Zionists try to rally the Russians against their Muslim brethren. Sometimes they do it under cover of the Russian Church, or of Russian nationalism. I wrote about this recently, as I had discovered that the most fervently anti-Muslim forces in Russia are organised by crypto-Zionists.

Even if a Palestinian state were to be established and recognised, it wouldn’t stop Israeli attempts to undermine its neighbours, to bomb Iran, to sow the seeds of discord from Russia to France, from Turkey to India. Israel’s too powerful intelligence services would keep meddling. Neither would it neutralise the armed forces of Israel, and you know as well as anybody that the generals do not give up their toys, their privileges or their influence easily. The Israeli military machine is so powerful that it would seek to exercise its might. Remember the Israel-Egypt peace treaty: when it was concluded, the first thing Israel did was invade Lebanon.

The bad influence of Zionism on Jews all over the world would not vanish in case of a “two states’ solution. In 1920, Winston Churchill published an article (Illustrated Sunday Herald, February 8, 1920, pg 5) titled: «Zionism or Bolshevism». (http://www.library.flawlesslogic.com/ish.htm ). There he noted that many Jews tend to embrace the cause of social equality (for him it was “impossible equality”), and the best way to stop by far too dynamic and powerful Jews from promoting equality is to infect them with Zionism. His project was supported by the might of the British Empire and by money of wealthy anti-equality Jews. Zionism won. Equality was defeated. If we defeat Zionism, equality will have another chance. And a two states’ solution will not defeat Zionism.

In short, even if Mahmud Abbas’s dream of limited independence were to be realised, it wouldn’t be good enough for the region, and it wouldn’t be good enough for the world: Israel in its form of Jewish-supremacist state can’t become a peaceful neighbour.

Supremacism leads to wars. Only a democratic state, the successor of Israel and the PNA, would be able to live in peace. Compare it to South Africa: as long as it was a white-supremacist state, it was the source of warfare and trouble all over Africa. After its supremacism was exorcized, it became peaceful. In the same vein, independent Palestine would be just another Bantustan of the type rightly rejected by South Africans.

But I do not think that even this very limited cause of limited independence for Palestine is likely to be achieved. We have been told – for sixteen years! – that there is a peace process that will lead to a “two states solution”. This is a fairy tale. If the Jews will not allow even the most loyal and obedient of el Bireh’s kids to play football, do you think they will allow them to have an independent state? Why would they?

The Jews write frequently of how they envisage Palestinian independence. (I refer here to the most enlightened left-wing Jewish politicians!) They speak of a Palestine broken into a few enclaves surrounded by a wall and barbed wire, its airspace and all of its borders controlled by Israel; its water to remain under Jewish control. And this is the best they can dream of.

If you want to have Two States, it can happen only if the Jews plead for it like they did in 1947. They did so then, and they will do so again only if they feel that the alternative, a single democratic state for all inhabitants of Palestine, is on the table. This is what they are afraid of: full democracy, full equality in the whole of the land. So even for practical reasons, we should call, not for independence of some partitioned bits and pieces, but for the whole lot: Let Palestine be united, let all of its inhabitants have equal rights, and afterwards they can discuss two states for ever and ever. The first thing is equality, the rest can wait.

Speaking frankly, this mythic Two State Solution can’t even be envisaged. Jews and Palestinians live all over Palestine, and they can’t be physically separated without a huge turmoil that would remind us of 1921 in Turkey and Greece, with Turks leaving Salonika and Greeks leaving Smyrna. This is not something one would like to see happen.

The West gave Nansen his Nobel Peace prize for the transfer of Greeks and Turks. In my view, this was a terrible calamity, never to be repeated. Partitions are awful; it is like sawing a living man into two parts. Nor is it necessary. Greeks and Turks could live together as they did for four hundred years; separation did nothing good for them. Separation of Israelis and Palestinians would be equally evil.

Now, Zionists often remind Turks of your so-called “Kurd problem”. This comparison is wrong, because every Kurd in Turkey has Turkish citizenship and has all the rights every Turkish citizen has; while Palestinians usually have no citizenship of the state of Israel and enjoy no rights. But in one sense this comparison is right: it is impossible to separate Kurds from Turkey, because people of Kurdish descent live everywhere from Diyarbakir to Istanbul. Likewise, it is impossible to separate Palestinians from the immigrant populations which are called “Jews”.

Indeed, the whole story of Palestine is a story of immigrants taking over a country. Such things happen: immigrants from Britain took over North America and Australia. This is a sad thing, but it happened. Now it is not realistic to hope that they will sail back to England – they won’t. It is wrong to try and create an “independent state” for the native Americans – such independent states are called “reservations”. The right answer is equality for native and immigrant alike. Some Jews would complain that they want a state of their own. We shall answer them: you have built on sand, and a house built on sand can’t stand forever. If you want a state of your own without anybody else, find yourself a lonely uninhabited island. Palestine was, and is, populated; the best you can wish is to be equal citizens in Palestine with everybody else.

I spoke about this solution in the year 2001, when our country was torn by intifada al Aksa. It was right then, and it is right now. At that time I said: there is no other solution but a one-state solution. People, and even good people, activists, friends of Palestine said: no, we are very close to the two states’ solution. I did not believe it then, I do not believe it now. There is only one good way out, and that is the way of equality and democracy, of deconstructing the Jewish state by forcing it to give full rights to all Palestinians under its rule.

So this is the goal we should strive for: full equality and integration of Palestine and Israel, South African style. Nothing less.

This does not mean that there is nothing to be done until that moment. Turkey can do a lot even now, even today, beyond expressions of solidarity. The Jewish state is a horrible example of injustice gone unpunished. For instance, an Israeli officer Captain R murdered a 13-year old girl, Iman al Hams. He shot her within eyesight of his soldiers and said that even a three-year-old Palestinian should be killed if she comes close to Jewish positions. The Jewish court absolved Captain R of all guilt; the Israeli Army promoted him to major and another court awarded him damages for the mere discussion of his crime. Last week, yet another Jewish judge gave another huge compensation to the same murderer.

Turkey, as the former ruler of Palestine, could fill in the void of justice by bringing this Captain R to trial. Sooner or later he will leave the sanctuary of the Jewish state and travel somewhere for a holiday. A Turkish warrant for his arrest should await him wherever he goes. And not only him, but the Jewish ‘judges’ who covered up his crime and became accessories after the murder should be tried too. This is not a job for amateurs, but for a state with all its tools. If present Turkish law does not allow for this, let the law be updated by taking a leaf from the Israeli book. According to Israeli law, if a Turk does wrong to a Jew in Turkey, he may be snatched, arrested, tried and punished in Israel. Turkey should introduce a symmetrical law, covering offences against Palestinians who otherwise are not protected by law.

Turkey could also take the initiative to stop the still looming Israeli-American aggression against Iran. If they do take Iran, Turkey will be encircled and cut off. The fate of Palestine also depends on the fate of Tehran.

My New Year’s wish to you: be yourself, be Turks, and live in harmony and friendship with your neighbours, with Russia, Iran, Syria, Greece and with all the successor states of the Ottoman Empire. You are needed for the world and for Palestine.

Russia’s Daring Vote

Russia’s vote to endorse the Goldstone Gaza report in the United Nations Human Rights Council last Friday was an important, milestone event both for Palestine and for Russia. For Palestine, this vote opened a way to try and sentence Israeli mass-murderers, and thus ushered Israel into a new era of responsibility after a long period of Wild West-style, Colt-45 justice. For Russia, this vote has proved to its own country and to the world that it is free from American and Zionist diktat and able to navigate its own policy.

This story began on Christmas with the Israeli onslaught on defenceless Gaza. Taking advantage of the holiday lull, the Israeli army killed hundreds of Palestinian children and other civilians by indiscriminate use of white phosphorus and artillery. The world was horrified, and the UN Human Rights Council appointed Judge Richard Goldstone, a former prosecutor for Rwanda and Yugoslavia, to find out the facts.

Many people doubted his impartiality: Goldstone is a Jew — a self-described Zionist, well-connected to Israel – he sits on the board of its University and his daughter even lived in Tel Aviv for a while. Goldstone was guided by his conscience and not by his blood. He went to Gaza, invested a lot of time and effort, and concluded: Israel has committed war crimes and crimes against humanity. He recommended the case be transferred to the ICC court in the Hague. Israel did not cooperate and tried to undermine and block the report, but failed. That was the first Israeli defeat.

The second defeat occurred a few days later. The Fatah chairman, Ramallah PNA ruler Mahmud Abbas, was ready to do anything in order to remain in power after his electoral defeat. Netanyahu threatened him with taking away the broadcasting frequency for a second mobile phone provider – Abbas promptly called his representative in Geneva and ordered him to put the Goldstone report on a slow, very slow burner. Popular indignation was furious; he was called `traitor’ and worse. Facing revolt and sure political demise, Abbas u-turned once again and ordered his ambassador to proceed at full speed. Thus Bibi undermined and delegitimised his agent Abbas, while the report made its way to the council anyway. That was the second defeat.

Israel was infuriated by this development. The Jewish State considered itself invulnerable behind the triple defense of the Sixth Fleet, the US Senate and the Holocaust Museum. President Obama’s soft request to freeze the settlement building was met in Tel Aviv by what Internet chat calls “lol”. He was ridiculed. Ehud Barak and Bibi Netanyahu even sped up their building plans in the West Bank and East Jerusalem in order to show that they could not care less. And now, all of a sudden, Jewish ministers of state are going to be judged as if they were Serbs or Sudanese.

Israeli leaders activated their main reserves, the US State Department and the Lobby. A few days ago I spoke with Martin Indyk, former US ambassador to Tel Aviv, and he confirmed that the US State Department will do all it can to stop the Goldstone report before it gets to the Security Council. Another American veto would not look good. Worse, an insulted and hurt Obama might just forget to veto an anti-Israeli decision.

Israel began courting Russia, hoping to build bridges and to enlist Moscow in its cause. Avigdor Lieberman, Israeli Moldova-born Foreign minister, met ten times with his Russian counterpart Sergey Lavrov; Netanyahu flew to Moscow on a “secret mission” for a talk with Medvedev, and President Peres met with Medvedev in Sochi. They wanted Russian support for Iran sanctions and for silencing the Goldstone report. They said to the Russians that it would create a dangerous precedent: If today they judge Israeli ministers and generals for Gaza, tomorrow they will judge Russian ministers and generals for Chechnya. This is a false comparison: Chechens are Russian citizens with full rights, Gazans have no rights at all; Chechens are free to travel and live in Moscow or elsewhere, Gazans are not allowed to leave their concentration camp. Though Russia’s campaign against Chechen separatists was bloody and cruel, it could not be compared with the cold-blooded murder the Israelis unleashed on Gaza.

Moreover, the precedents were established a long time ago, when Milosevic the Serb was tried in The Hague. The question is whether the Jews are indeed above the law. Israeli observers were certain that Russia would stand by them. There is a small but profitable trade between the two countries; there is a Russian immigrant community in Israel; there are many bilateral relations. Beside, Russia has traditional interests in the Holy Land, and hundreds of thousands of Russian pilgrims make their way to the Holy Sepulchre.

On top of all this, Russia was interested in hosting a Moscow Middle East Peace Conference, in direct continuity with the Madrid Conference of 1989. There is also a powerful Zionist lobby in Moscow. True, some of the most obnoxious oligarchs are gone, whether to a Siberian jail or to exile in Tel Aviv or London. Power is now concentrated in the hands of Putin and Medvedev, and money is respected but not more than that. But there are many very wealthy Russian Jews who like to play the Jewish Lobby game.

Some arguments by the Zionist Lobby for supporting Israel were spectacularly feeble. They said that Russia should be forever grateful to Israel because it had allowed a few Russian wives to leave Gaza just before their homes were bombed to smithereens. If you buy that one, you may also buy their argument for bombing Iran: in 1836 (sic!), the Persians had lynched Russian playwright and diplomat Alexander Griboedov, who had sneaked into a harem and gotten caught.

Notwithstanding, the Russians disregarded the US and Israel’s overtures and stalwartly voted to endorse Goldstone’s report. They were joined by their three allies, China, India and Brazil, together representing the lion’s share of mankind’s human resources – of oil, of industry.

The Chinese sage Mencius (or Mengzi 372-289 BC) went to see t King Hui who said: “Old man, since you dared the distance of 1000 li to come here, you may know of a way to profit my state.” Mencius replied: “Why should you ever mention the word `profit’? What counts is benevolence and righteousness. If the King says `How can I profit my country?’ the high officials will say, `how can we profit our fiefs?’, and the intellectuals and the commoners will say: `How can we profit ourselves?’ If the upper and lower classes strive to snatch profit one from another, the state will be endangered.”

Apparently the Eurasian landmass of Russia, China and India prefer benevolence and righteousness, while the Anglo-American world prefers lust for gain. Russian leaders Putin and Medvedev were very outspoken in their objections to the Israeli plans to attack Iran. They spoke against the sanctions, too, and here they were fully supported by China. At the same time, Turkey refused to let the Israeli Air Force join its joint maneuvers with the US. The Zionist-run US immediately withdrew from the maneuvers as well. The position of Turkey is extremely relevant: This is the old imperial power that protected and controlled the Middle East for centuries. Turkey, together with Russia and Greece, are the main heirs to Byzantium. If we want to help Turkey to support the Palestinian cause we must not allow the Zionists to play the Armenian card right now. When Turkey joins Russia and China, they can decide quite a bit. They have put paid to the notion of Israeli impunity. One can’t overestimate the importance of the Russian vote:

1. This vote confirmed the principle of equality. All human beings are equal. If the ICC can judge Milosevic and Burundians and Sudanese, they can also judge Jewish ministers and generals.
2. This vote demonstrated that Russia is independent, not only of Washington, but even of Tel Aviv. The Zionist Lobby in Russia is powerful, but not omnipotent.
3. This vote saved innumerable children, women and men from death. After this vote, an Israeli general will have to think twice before dropping a bomb on a civilian target. This will save Israeli children as well from retaliation.
4. Russia regained its position lost by Gorbachev and Yeltsin. Russia became again a leader of the free world, I mean the world free of US bases. Moscow’s position was decisive in forming China’s position as well.
5. It seems that the main weapon of Zionists, their voice, has worn out. Once upon a time they could convince individuals and nations as easily as the sirens by the charm of their persuasion. Now the witch of Zion had lost her charm.

A few years ago I wrote: “The world needs Russia, for since her star was obscured in 1990, for almost twenty years the runaway train of the US and the loose cannon of Israel made a mess on the planet. Russia must stop their orgy of aggression and regain its place as the ultimate protector of the weak and the meek. This is her manifest destiny”. The Geneva vote proved that Russia has done just that. We may once again connect our hopes with Russia in her friendship with China. They also can stop Israel from hurting itself and others.

So many people in the US and France, in Egypt and Palestine are tired of Israeli intransigence, egotism, hypocrisy and impunity. That is why so much hope was invested in Barack Obama after his Cairo talk. Obama had promised to cut Israel down to size, but meanwhile Israel cut him down to smaller-than-life. That is why the US is going down just like the Titanic, undermined by a Lobby iceberg and fleeced by financial wizards. Now Russia is coming under tremendous pressure from the US and other Zionist-led groups and states. We should pray she will withstand it and maintain her and our dignity.

Do Not Blame Barack

Contrary to what my title indicates, I probably judge Barack Obama more harshly than most reading this page. I don’t think he is just a misguided ideologue or merely a creature of expediency. I believe, practically speaking, that he is an evil man. That is to say, while he is largely ignorant like so many others, he has developed an affinity for evil. He mistakes it for good.

Yet, to be blunt, Obama doesn’t alarm me as much as the average American. To explain why, I’ll present something Roman philosopher and statesman Marcus Tullius Cicero said 2000 years ago when lamenting Julius Caesar’s rise to dictator:

Do not blame Caesar, blame the people of Rome who have so enthusiastically acclaimed and adored him and rejoiced in their loss of freedom and danced in his path and gave him triumphal processions . . . . Blame the people who hail him when he speaks in the Forum of the ‘new, wonderful good society’ which shall now be Rome’s, interpreted to mean ‘more money, more ease, more security, more living fatly at the expense of the industrious.’ Julius was always an ambitious villain, but he is only one man.

Barack Obama is only one man. A bad man, yes, but he is a symptom more than a cause. Without millions of fawning Americans, he would just be a community agitator, vainly preaching Alinsky principles from a soapbox. Of course, he is a symptom that exacerbates the underlying problem, and symptomatic treatment — to ease immediate pain and hardship — is certainly in order. But it is only the worst of physicians who focuses only on symptoms while ignoring the cancer eating away at the patient’s midst.

Some of us lament the presence of self-professed communists such as Van Jones — and other assorted intellectual mutants, such as Cass Sunstein and John Holdren — in government, and how we elected a man who broke bread with self-professed communists such as Bill Ayers. But why complain now? We’ve had self-professed communists such as Bill Ayers — and other assorted intellectual mutants, such as Ward Churchill, Cass Sunstein and John Holdren — in academia for many decades. And good Americans still donated money to universities and still sent their most precious possessions, their children, to them. So, should it be any surprise that millions of these children would, knowing nothing and feeling all the wrongs things, flock to the polls and cast votes for people just like their teachers and professors? You may say that their parents knew nothing of these universities’ true nature. But it was their place to find out. And Obama did not create the modern academy. He is more a creation of it.

We also criticize Obama for saying “We no longer are [just] a Christian nation” and while speaking in Turkey that “We do not consider ourselves a Christian nation or a Jewish nation or a Muslim nation.” But can we really say he’s wrong? Has Christmas not become completely commercialized? How many of us say grace with our families before meals? How many of us pray every day? How many Americans subscribe to the modern perversion of the “separation of church and state” idea? How many of us say “God Bless” upon parting? Have the majority of American “Christians” not descended into moral relativism? It is here that some will call me a religious nut. All right, but I simply note that a Christian nation would actually practice Christianity and that if we are satisfied to be only nominally Christian, it lends weight to the argument that we’re not actually Christian. Of course, we certainly can condemn Obama for attending a pseudo-Christian church and being part of the problem, but he didn’t create our secular age. He is more a creation of it.

One thing Obama certainly did help create is the tea-party phenomenon. It is the largest, most impressive grassroots movement I can remember and I truly hope it grows beyond what even the most zealous reader would prefer. Yet, when I hear the protesters complain about the violation of the Constitution, I have to wonder where they’ve been. Did they miss the activist 1947 “separation of church and state ruling”? Have they learned about FDR’s New Deal and LBJ’s Great Society? Don’t they realize that the federal government long ago exceeded its constitutional bounds? Where is the constitutional mandate for Uncle Scam to involve itself in and/or fund housing, food stamps, farm subsidies, Medicaid, global-warming research, mass transit, and school sports programs? The fact is that most things the federal government has its claws into are none of its affair. Thus, to only now complain about constitutional trespasses is like having finally noted the invasion of Poland when the Nazis started bombing Great Britain.

We also have to ask how serious most Americans really are about respecting the Constitution. Here’s a little test for them: Are you willing to give up your Social Security in the name of constitutional adherence?

I thought so.

The average American has his version of acceptable constitutional violation, Ruth Bader-Ginsburg has hers, and Obama has his. And Obama didn’t create the “living document” mentality. He is more a creation of it.

Then there is our putrid popular culture. Effete Hollywood types — such as the Obama sycophants in this bizarre Harpo Productions video — thuggish rappers, MTV stoner types and the rest of our decadence czars helped galvanize the youth and propel the empty vessel to victory. Yet, while entertainment is a bastion of the left, it’s not entirely a creation of it. The reality is that we, the people, empowered them. We watched their movies; laughed at their salacious jokes; were titillated by their prurience; and tolerated their mainstreaming obscenity, homosexuality and gratuitous violence. We allowed our children to dress in their ghetto styles and imbibe pure and utter filth. Like with so many other things, we helped create our entertainment — a major symptom of spiritual malaise — and then it helped induce many secondary symptoms. And one of them is Obama.

Of course, nothing is more associated with that symptom than the Shill Media, but I think you know what’s coming. Who bought the mainstream papers for all those decades, watched the nightly news and bought all the lies? “How could people know?” you ask? Well, some certainly knew — and some of those knew better than others.

Like Cicero, I’m sure I sound quite condemnatory, but I’m not here to lay a curse or consign anyone to Hell. I don’t want to be found guilty of the George Bernard Shaw mistake G.K. Chesterton criticized most colorfully when he wrote

It is not seeing things as they are to think first of a Briareus with a hundred hands, and then call every man a cripple for only having two. It is not seeing things as they are to start with a vision of Argus with his hundred eyes, and then jeer at every man with two eyes as if he had only one. And it is not seeing things as they are to imagine a demigod of infinite mental clarity, who may or may not appear in the latter days of the earth, and then to see all men as idiots.

In reality, for us to have avoided that ever-repeated pattern of civilizational decline, the common man would have to be a very uncommon man, something, in the least, like a sublime moral philosopher. And, certainly, no person will have, metaphorically speaking, a hundred industrious hands, a hundred all-seeing eyes or even come close to enjoying demigod-like mental clarity. Yet a nation doesn’t have to resign itself to being blind and crippled, either. We can usually manage one more hand and eye.

Truth be known, when we elected Obama, the nation said “Look, ma, no hands!” with its eyes closed. It required corrupted judgment to be blind to what Obama was. Note that “corrupted” is different than “corrupt.” When saying a computer file is corrupted, there is no implication that it’s evil; rather, it simply means it no longer functions as it should.

This partially explains why facts often don’t matter today. Just as correct input may not yield correct output if fed into a malfunctioning computer, all the necessary facts may not yield a correct conclusion when processed by a corrupted mind. And anyone with a properly functioning virtue file would have sensed the lack of same in Obama. After all, there were so many indications, from his radical associations to his tolerance for infanticide (that’s what you call a clue) to the fact that he once allowed his then two-year-old daughter to listen to rap to his empty sloganeering. Yes, we could’ve . . . known.

Yet my point here is not about the average person, who isn’t reading substantive commentary anyway. It’s that even most of us who oppose Obama and are political are just political, content to fight the battle with one hand and one eye. So many of us — this includes readers and commentators — are satisfied with boilerplate; it’s Alinsky this and Alinsky that, San Fran Nan, Afghanistan and the Taliban, this bill and that political shill. This isn’t to say there’s not a place for such things, as many do need a course in politics 101. But if we want to have any chance of winning the war, we must move on to graduate work and fight it on the deepest levels, the spiritual and cultural. We must scrutinize ourselves and evaluate how we have been complicit in empowering the culture that spawns Barack Obamas. We must remember that those of us who are engaged are a minority weighed against an apathetic majority. A few stones however, can be substantial enough to tip the scales against a million pebbles. But this can only happen if we so greatly increase the weight of our virtue that it outweighs the vice that is everywhere.

I once heard a man of the cloth put it perfectly, saying “Everyone is in a different stage of conversion.” Every thought we contemplate, word we utter and action we take move us closer to or further away from perfection. And it’s always time for another hand and another eye.

Will Israel Fall In Five Years?

“The undersigned therefore take this means of publicly presenting a few salient facts concerning Begin and his party; and of urging all concerned not to support this latest manifestation of fascism.” ~ Albert Einstein, signatory to Letters to the Editor, New York Times, December 4, 1948.

Online reports of a study by the U.S. Central Intelligence Agency cast doubt over the survival of Israel beyond the next two decades. Regardless of the validity of the report, with what is now known about the costs in blood and treasure that the U.S.-Israeli relationship has imposed on the U.S., its key ally, Israel could fall within five years.

For more than six decades, American support for Israel has relied on the ability of pro-Israelis to dominate U.S. media, enabling Tel Aviv to put a positive spin on even its most extreme behavior, including its recent massacre in Gaza. With access to online news coverage, that Zionist bias is becoming apparent and the real facts transparent.

Though Americans seldom show a strong interest in foreign affairs, that too is changing. While few of them grasp the subtleties of one-state versus two-state proposals, many have seen online the impact of a murderous Israeli assault on Palestinian civilians that was timed between Christmas and the inauguration of Barack Obama.

The leaders of the 9-11 Commission acknowledged that its members would not allow testimony on the impetus for that attack. Yet the report confirmed that the key motivation was the U.S.-Israeli relationship. With access to online news, more Americans are asking why they are forced to support a colonial Apartheid government.

With the election of yet another extremist Israeli government led by yet another right-wing Likud Party stalwart, it’s clear that Tel Aviv intends to preclude peace by continuing to build more settlements. With that stance, Israel not only pushed Barack Obama into a corner, it also forced U.S. national security to make a key strategic decision: Is Israel a credible partner for peace? By any criteria, the answer must be a resounding “No.”

That inescapable conclusion leaves Americans with few options. After all, the U.S. is largely responsible for the legitimacy granted this extremist enclave in May 1948 when Harry Truman, a Christian-Zionist president, extended nation-state recognition. He did so over the strenuous objections of Secretary of State George Marshall, the Joint Chiefs of Staff, the fledgling CIA and the bulk of the U.S. diplomatic corps.

By December 1948, a distinguished contingent of Jewish scientists and intellectuals warned in The New York Times that those leading the effort to establish a Jewish state bear “the unmistakable stamp of a Fascist party.” Albert Einstein joined concerned Jews who cautioned Americans “not to support this latest manifestation of fascism.”

Only in the past few weeks has the momentum emerged to subject Israel to the same external pressures that were brought to bear against Apartheid South Africa. After more than six decades of consistent behavior—and clear evidence of no intent to change—activists coalesced around the need to boycott Israeli exports, divest from Israeli firms and impose sanctions against Israel akin to those it seeks against others.

The focal point for peace in the Middle East should not be those nations that do not have nuclear weapons but the one nation that does. Absent external pressure, Israeli behavior will not change. Absent pressure—and likely force—applied by the U.S. as the nation that has long enabled this behavior, Colonial Zionism will continue to pose a threat to peace. Occupying powers are not known to voluntarily relinquish lands they occupy. Likewise for their readiness to surrender nuclear arms.

An End to Jewish Fascism?

The key issue need no longer be a subject of endless debate. There must be a one-state solution consistent with democratic principles of full equality. Informed Americans are no longer willing to support a theocratic state in which full citizenship is limited to those deemed “Jewish” (whatever that means). If local birth rates suggest an eventual end to the “Jewish state,” then so be it. Why wait two decades when this nightmare can be drawn to a close in less than five years?

Forget about a return to pre-1967 borders, instead return to pre-1948 borders. Designate Jerusalem an international city under U.N. protection and dispatch multi-national forces to maintain peace. Palestinians should have a right of return, including the ability to recover properties from which they fled under an assault by Jewish terrorists. If Colonial Zionists (aka settlers) want compensation for “their” property, let them seek restitution from the Diaspora that encouraged their unlawful occupation.

Those who consider themselves “Jewish” can remain as part of an inclusive democracy. Or they can depart. Americans must consider how many of these extremists it wants to welcome to a nation already straining under an immigration burden. A reported 500,000 Israelis hold U.S. passports. With more than 300,000 dual-citizens residing in California alone, that state may require a referendum on just how many Zionists it wishes to receive. Likewise for Russia from which many “Jews” fled, including some 300,000 Russian émigrés who support the Likud Party but have yet to be certified as Jewish.

Zionists originally saw Argentina and Uganda as desirable venues to establish their enterprise. They may wish to apply there for resettlement. The question of why Palestinians (or Californians) should bear the cost of a problem created by Europeans six decades ago is one that Tel Aviv has yet to answer except by citing ancient claims that it insists should take precedence over two millennia of Palestinian residence.

By withdrawing Israel’s status as a legitimate “state,” those Jews long appalled by the behavior of this extremist enclave can no longer be portrayed as guilty by association. That long overdue shift in status is certain to benefit the broader Jewish community. By shutting down Israel’s nuclear arms program and destroying its nuclear arsenal, the world can be spared the key impetus now driving a nuclear arms race in the region.

Unless pro-Israelis can create another crisis by inducing an invasion of Iran (or a race war), Americans will soon realize that only one “state” had the means, motivation, opportunity and stable nation-state intelligence required to fix the intelligence that led the U.S. to invade Iraq consistent with the expansionist goals of Colonial Zionism.

Intelligence now working its way to transparency will soon confirm that, but for Zionists within the U.S. government, 9-11 could have been prevented and war in Iraq avoided. To date, this extremism has been enabled by a series of weak U.S. presidents. For the U.S. to restore its credibility requires that it not only lead the effort to shut down the Zionist enterprise but that it also share responsibility for its behavior to date.

The ADL Thought Police

When sociology Professor Bill Robinson stared down the Anti-Defamation League, it looked like a victory for academic freedom. Yet was it? Robinson was portrayed as an anti-Semite because he sent an email to students featuring a photo essay critical of Israel that had circulated online for weeks. While University of California administrators dallied, the ADL and its international network turned up the heat—signaling academics worldwide they could be next.

It looked like progress when the faculty at UC Santa Barbara urged “changes in procedures to avoid improprieties and abuses in the future….” But was it? By then the ADL campaign had created the intended chilling effect. This silencing campaign was featured news for five time-critical months while a newly elected U.S. president was reassessing U.S.-Israeli relations. How can anyone calculate the full extent of the damage—not only to Robinson’s reputation and to the stature of the University of California but also to national security?

So where’s the victory? Clearly Robinson deserves acclaim for resisting pressure as the ADL deployed its most seasoned operatives, including Marvin Heir, a rabbi at the Simon Wiesenthal Center in Los Angeles. Only an investigation can identify who mobilized the donor community that threatened UCSB Chancellor Henry Yang with the withdrawal of funds.

What was the motivation for this high profile intimidation campaign? Was the ADL driven simply by the discomfort that two students voiced on their receipt of his email criticizing Israeli policy? Or did the ADL network have its sights on a broader strategic goal?

Facts have since proven it was largely pro-Israelis who fixed the intelligence that manipulated the U.S. to invade Iraq. That same network has now mobilized to expand that war to Iran. A key barrier: the global condemnation of Israel’s brutal assault on Gaza. How does Tel Aviv limit the public relations fallout? On what leverage points should Israel focus to contain the censure while continuing to obscure Israel and pro-Israelis as the common source of this manipulation?

Aiding an enemy within?

The Founders faced a similar challenge during the Revolutionary War. How could they distinguish patriots from those loyal to a foreign nation? Knowing the vast risks that accompany betrayal, they lowered the evidentiary standard for treason. Guilt still required proof beyond a reasonable doubt but a conviction only required evidence of “adhering” to an enemy or giving them “aid and comfort.” To remove all doubt about the gravity of this capital offense, they even included those relaxed standards in Article III of the U.S. Constitution.

Fast-forward two centuries to the Information Age and consider the challenge of distinguishing friend from foe. With a new president sworn into office on a platform promising change, how should Tel Aviv continue to conceal the fact that it was pro-Israelis who deceived the U.S. to wage war in Iraq for the expansionist goals of Greater Israel?

During the Democratic presidential primaries, Senator Barack Obama promised no change in U.S.-Israeli relations. But that pledge was made while he and Hillary Clinton were vying for the pro-Israeli vote. What about now—particularly now that he knows Israel scheduled its assault on Gaza between Christmas and the Obama inaugural—knowing that interval would ensure Tel Aviv could operate largely free of official criticism?

Campaigning for president is one thing. Serving as commander in chief is another. What became of the prospects for change after this professor of constitutional law took a constitutional oath that obliged him to defend the U.S. from all enemies—both foreign and domestic?

Based on the success of pro-Israelis in inducing the U.S. to invade Iraq, how does this international network best expand this war to Iran? To succeed again, how can Tel Aviv best control the risk that facts unhelpful to its agenda find their way into the marketplace of ideas?

How about this for a psyops strategy: launch an intimidation campaign on a high-profile campus and portray a critic as an anti-Semite for sharing photos that had been circulating for weeks on the Internet. Then threaten his job, smear his reputation, put him in fear of his physical safety and threaten to withhold critical funding. Then see if on-campus critics still dare to speak out.

While the Faculty Senate should be commended for its stance, one must ask: what took so long? And what will be done to ensure that never again is a professor on any University of California campus subjected to such abuse with the complicity of university administrators? What steps will be taken to ensure this conduct does not recur on campuses nationwide?

Where was UC President Mark Yudof as this intimidation campaign progressed with such well-timed success? What role was played by the pro-Israeli bias of his wife, Judith, the immediate past president of the United Synagogue of Conservative Judaism representing 760 synagogues?

Where was the Board of Regents while this silencing campaign advanced between the invasion of Gaza and President Obama’s White House meeting with Likud Prime Minister Benjamin Netanyahu? Did Board of Regents chairman Richard Blum harbor an undisclosed bias that precluded him shutting down this ADL operation? How about his wife, pro-Israeli U.S. Senator Dianne Feinstein, chairman of the Senate Intelligence Committee? What role did bias play in a community-wide smear campaign led by Arthur Gross-Schaefer, a Santa Barbara rabbi?

Was this only an offense against a courageous professor who fought on while university administrators retreated? Or was this assault more strategic? The Faculty Senate cannot on its own correct these wrongs because key offenders remain beyond their reach. What they can—and must—do is dismiss any faculty member complicit in this operation, condemn any university administrator who failed to act promptly and rebuke complicit operatives in the community.

The reputation of Prof. Robinson was only grist for the same mill that churned out the phony intelligence required to induce the U.S. to war in Iraq. That same network of deceit now seeks to catalyze war with Iran. Robinson was not the target. His reputation was collateral damage. The target was the mindset of academics that—because of this assault—hesitated to criticize Israel.

Until steps are taken to deter future offenses, these psychological operations (psyops) will continue and the reputation of the U.S. will continue to be collateral damage. Most ominous of all, those who wage war “by way of deception” (the motto of the Israeli Mossad) will continue to displace the facts on which self-governance depends. Progress must be measured by how many educators grasp that what was done to one could be done to all.

Education – The ultimate battlefield

In unconventional warfare, the battlefield is the shared field of consciousness. Where does a “consensus” reside? That’s where battles are now waged for public opinion. Those who targeted University of California, Santa Barbara Professor Bill Robinson know that victory flows to those most adept at influencing the consensus mindset. Few know that better than the Anti-Defamation League.

For seasoned combatants, the psyops challenge lies in how best to displace facts with beliefs. The only modern component of this ancient craft is the means for taking such manipulation to global scale. The duplicity is the same regardless whether the operation creates a shared belief in Iraqi WMD, a shared consensus in the infallibility of unfettered financial markets or a shared opinion that Israel is a democracy and an ally. All false yet all widely believed to be true.

Robinson was smeared as an anti-Semite for sharing a photo essay with his students that was critical of Israeli policy. That essay first appeared in Adbusters, a magazine subtitled The Journal of the Mental Environment. That essay has since been posted on a website maintained by UCSB students in defense of academic freedom: http://sb4af.wordpress.com/robinson-case/

Kalle Lasn, founding editor of Adbusters, is a graphic artist who eventually awoke to the harm he was doing as an advertising executive. An Estonian, he saw firsthand how the Soviets exerted virtual control by manipulating the mental environment. In March 2004, Lasn published an article in Adbusters pointing out that, whereas less than two percent of Americans are Jewish, 26 of the top 50 neoconservatives advocating war in Iraq are Jewish (52%).

He titled the article: “Why Won’t Anyone Say They’re Jewish?” By ADL standards, that meant he was an “anti-Semite”—just for asking the question. What’s since been confirmed is that the bulk of those who fixed the intelligence around that predetermined goal were either Jewish or assets developed by operatives who were Jewish.

Displacement is how warfare is waged in the Information Age: displacing facts with beliefs. Why would anyone expect otherwise? Jewish critics of Israeli policy are “self-hating.” Non-Jewish critics are anti-Semites, Jew haters and/or Holocaust deniers. Although those charges are fast losing their potency from overuse, their toxicity still retains enough force to silence critics—as shown by the global traction gained by this thought control operation on a University of California campus.

Sir Gerald Kaufman, British founder of Independent Jewish Voices, uses his position as a Member of Parliament to criticize Israeli policy. Members of his family perished at the hands of the Nazis and in the Holocaust. As one of the U.K.’s harshest critics of Israeli policies, he routinely compares the Jewish state’s treatment of Palestinians to Nazi Germany’s treatment of Jews—the same analogy for which Robinson (also Jewish) was smeared as an anti-Semite.

Kaufman’s heartfelt speech on Israel’s incursion into Gaza, given on the floor of the House of Commons, is a must-see for those concerned that criticism of Israeli policy remains absent on the floor of the U.S. Congress. http://www.youtube.com/watch?v=qMGuYjt6CP8 [Readers can draw their own conclusions as to who would be motivated to corrupt this YouTube version of his remarks.]

The psyops specialists who coordinated this on-campus silencing campaign know where modern wars are waged: in the shared mindset. The war fought to invade Iraq was waged in the mental environment long before U.S. troops invaded Iraq. Now the U.S. appears guilty by its association with an extremist enclave infamous worldwide for its prowess at waging war by way of deception—and for its aptitude at deceiving the U.S. to fight those wars.

The U.S. invaded Iraq only after facts were displaced by manipulated beliefs. The litany of manufactured beliefs is long and varied: Iraqi WMD, Iraqi ties to Al Qaeda, Iraqi meetings with Al Qaeda in Prague, Iraqi acquisition of yellowcake uranium from Niger and the list goes on. None were factual; all were deployed to deceive. And to advance an Israeli agenda.

Remember the campaign to discredit Joe Wilson overseen by (Jewish) White House operative Lewis Libby, Vice President Cheney’s Chief of Staff? A former U.S. Ambassador to Iraq, Wilson was targeted by Libby for exposing the phony intelligence on uranium from Niger. Campaigns to deceive and discredit have long been key weapons in the Israeli arsenal of deceit.

Remember how Colin Powell was dispatched by pro-Israeli war-planners to the U.N. Security Council just weeks before the March 2003 invasion? Why Powell? To associate his hard-earned credibility with what we now know was false intelligence about Iraq’s mobile biological weapons laboratories. At every turn we find the displacement of facts with beliefs to manipulate decision-makers. That operation successfully discredited not only Powell and the U.S. but also the U.N., an organization that Tel Aviv fears may yet hold Israel accountable for its conduct under international law.

Intelligence on which the U.S. relied was fixed by pro-Israelis in pursuit of a predetermined agenda: the expansionist goals for Greater Israel. Phony intelligence persuaded Washington decision-makers to dispatch the U.S. military to wage a preemptive war not for American interests but for Tel Aviv. When waging unconventional warfare, by the time you see troops on the ground, those complicit are often pre-staging the next venue—as now with the Israeli push to attack Iran.

The ADL-coordinated intimidation campaign launched on the UCSB campus reflects the face of fascism in the Information Age. To respond effectively, the Senate Faculty must provide the tools that enable those targeted to grasp how facts are displaced with induced beliefs—in plain sight and, to date, with legal impunity. No one likes to be deceived. Once “the mark” grasps how they were manipulated, they will see for themselves who is complicit and why. That’s when long overdue accountability can begin.

To focus only on the means (such as the attack on Robinson) leaves the end obscure. And leaves the mark—including UC students—without the tools required to defend against such duplicity. For educators, that shortcoming would transform this potential triumph into an academic tragedy.

Anti-Zionists: The New Heretics

“Those who fail to learn from history are doomed to repeat it.”– George Santayana

How quickly we forget. With the Inquisition still fresh in memory, America’s Founders embraced democracy as a means to protect liberty from the manipulations of faith. That’s why facts were enshrined at the core of self-governance grounded in the rule of law. The duplicity at the heart of the U.S.-Israeli relationship puts that founding principle at risk.

For seven terrifying centuries, heretics were punished under canon law. In 1633, Italian astronomer Galileo Galilei was condemned for “grave suspicion of heresy” when he showed that the Sun—not the crown—was the center of the universe despite what the King’s subjects—with help from the Church—had been induced to believe.

With the merger of church and state in the 4th Century Roman Empire, anyone daring to dispute papal authority—by challenging with facts the One True Faith—was condemned as both a heretic and an enemy of the state. That practice continues in modern times.

The New Heretics are those few who challenge America’s faith in its “special relationship” with an extremist enclave granted nation state recognition in 1948 by a Christian-Zionist president, Harry Truman. Critics of this enclave invite condemnation as “anti-Semites,” a modern form of social excommunication.

Defenders of the Zionist Faithful were forced to become more vigilant in monitoring this heresy after Israeli troops used U.S.-provided arms and munitions to kill more than 1,400 Palestinians in Gaza, one-third of them reportedly children.

That well-timed attack, planned for more than a year, was scheduled between Christmas and the January 20th presidential inaugural. Within 48 hours of ending its assault, Israel had dispatched an army of bloggers to counter anti-Zionist websites. By early February, the Anti-Defamation League was bemoaning a “pandemic of anti-Semitism.” The massacre fueled outrage worldwide even as the ADL portrayed that anger as “anti-Semitism.”

By early March, Israeli policy was being described as a threat to international peace and security, a violation of international human rights and a crime against humanity. By associating the U.S.—its ally—with this behavior, the U.S.-Israeli “special relationship” fueled anti-American hatred, fanned the flames of extremism and set the stage for more terrorism. Meanwhile a wave of modern-day excommunications swept college campuses:

• At Hampshire College in Massachusetts, students urged the school to divest from firms whose operations support the Israeli occupation of Palestine. When Israeli policies were compared to apartheid-era South Africa, Zionist Law Professor Alan Dershowitz condemned the students as “rabidly anti-Israel” (enemies of the state).

• At Canada’s Ottawa College, Students Against Israeli Apartheid were prohibited from displaying a poster condemning Zionist policies that president Jimmy Carter had already condemned in his 2007 book, Palestine: Peace Not Apartheid.

• At the University of California, Santa Barbara, Professor William Robinson (Jewish) was attacked as an anti-Semite in an ADL-coordinated silencing campaign. His heresy: sharing with students a photo-essay critical of Israeli policy that had circulated for weeks online. [See “Treason in Plain Sight? ^[1]” and “The ADL Thought Police. ^[2]”]

Media-Manipulated Mindsets

Meanwhile Pope Benedict XVI attacked an Argentine cleric whose excommunication he had lifted. As head of the Roman Catholic Church, Benedict claimed he was unaware that Bishop Richard Williamson had challenged key facts of the Holocaust. When condemned by the Pontiff, Williamson apologized. The Vatican insisted he recant, a concept lifted directly from the Inquisition.

Critics suspect this early February dispute was meant to distract attention from the carnage in Gaza and create sympathy for Israel by evoking memories of the Holocaust. No media outlet mentioned that this German Pope, the first since 1523, previously led the Vatican’s Congregation for the Doctrine of the Faith, a direct descendant of the Church’s 16th century tribunal, the Supreme Sacred Congregation of the Universal Inquisition.

Media Magnate Haim Saban an “Israeli-American”

The fiercest condemnation of the bishop’s reluctance to recant came not from Rome but from Angela Merkel in Berlin who was elected German Chancellor in 2005. No media outlet mentioned that in 2003 Zionist media mogul Haim Saban acquired control of ProSiebenSat.1, Germany’s second largest broadcaster.

While wielding a major opinion-shaping media outlet during Merkel’s ascendancy as Germany’s first female chancellor, Saban described himself as an “Israeli-American” and “a one-issue guy and my issue is Israel.” Steve Rattner, Saban’s financial adviser, explained the motive for his media acquisition: “He thinks Germany is critical to Israel.” Rattner re-emerged as president Barack Obama’s auto industry “car czar” before resigning in mid-July due to a pension fund scandal.

To put these media-dependent developments in historical perspective requires a grasp of how—in the Information Age—warfare is waged not on a traditional battlefield but in the shared field of consciousness. In the public’s shared mindset—where consensus opinions are created, shaped and sustained—facts are routinely displaced with what “the mark” can be induced to believe.

That’s why national security agencies must monitor media czars such as Saban who is candid about using his influence to advance Zionist goals. In June 2006, a Saban-led group acquired Univision, the largest Spanish-language broadcaster in the U.S. With Latinos the fastest-growing voting bloc in the U.S., Univision is critical to Israel’s ability to sustain its control of U.S. foreign policy. Univision is the fifth largest television network in the U.S., reaching 98% of Spanish-speaking households through 62 television stations, 90 affiliate stations and more than 2,000 cable affiliates. [See “How the Israel lobby took control of U.S. foreign policy. ^[3]”]

For a system of self-governance reliant on informed consent, it is difficult to overstate the threat to democracy when policy-making is filtered through the pro-Israeli bias of media-owning Zionists. In addition to emerging as a reliable EU advocate for Israeli policies, Merkel threatened to arrest Williamson for Holocaust denial on a EU-wide warrant. A search of her phone records would doubtless uncover a discussion with a key supporter, Haim Saban.

Zionists and the lawmakers they groom are well positioned to advance a modern-day Inquisition—as when Bishop Williamson simultaneously faced arrest in Europe and expulsion from Argentina, the site of a seminary he directed and home to the largest Jewish population in Latin America.

The People In Between

In October 2007, Defense Secretary Robert Gates coined a generic phrase to describe the most perilous combatants when waging what he called “unconventional warfare.” A former C.I.A. Director, he portrayed this enemy as “the people in between.” Between Galileo and the facts was Church doctrine deployed to displace science with beliefs or, in modern-day parlance, with consensus opinion. Between the German people and the ballot box was Haim Saban for whom the election of Angela Merkel was critical to Israel. Next is Univision.

To gain credence (believability) for the displacement of facts with beliefs requires that the public’s shared mental environment be fed a steady diet of supportive impressions. Thus the agenda-advancing assistance when “unrelated” events emerge in the same timeframe to reinforce the intended orthodoxy. For example, following the Israeli assault on Gaza, news reports in February included several high profile accounts, including:

• The suspension of U.K. diplomat Rowan Laxton for allegedly making anti-Semitic remarks while riding an exercise bike in a London gymnasium.

• Reports of police protection provided in Dubai to Andy Ram, an Israeli tennis star, reinforcing the media-induced narrative that Israelis were at risk.

• A White House announcement that the Obama administration would attend a planning session for a 2009 World Conference Against Racism but may boycott it.

These narrative-advancing impressions were reinforced by the release in 2008 of eight Holocaust-themed films, including The Reader starring Kate Winslet who received a high profile Academy Award for best actress in a leading role. She even joked about the influence wielded by pro-Israelis in Hollywood and popular culture. In a 2005 filming of Extras, a comedy series in which she played herself, an actor congratulated her on her role in a Holocaust-related film, to which she responded:

“I don’t think we need another film about the Holocaust, do we? It’s like, how many have there been? We get it. It was grim. Move on. No, I’m doing it because I’ve noticed that if you do a film about the Holocaust, [you're] guaranteed an Oscar. I’ve been nominated four times—never won. The whole world is going, ‘Why hasn’t Winslet won one?’ That’s it. That’s why I’m doing it. Schindler’s bloody List. The Pianist. Oscars coming out of their ass!”

Duplicity – From Antiquity to Modernity

Framers of the U.S. Constitution viewed democracy as a form of governance that resides not in a royal court or the papacy but in a mindset shared by its participants. Where else could self-governance reside? Thus the key role envisioned for media as an “in-between” domain essential to convey the facts required for informed consent. Absent widespread access to unbiased information, liberty would succumb to the exploitation of those skilled at preying on ignorance and beliefs. On that key point, the Framers were proven correct.

Thus the perils when those who mean to live free rely on media with an undisclosed bias. It is precisely such “people in between” that routinely displace facts with what an unsuspecting public (“the mark”) can be deceived to believe. In an Information Age, such fraudulent behavior is not akin to treason, that agenda-advancing duplicity is treason. Haim Saban is unusual only in conceding the pro-Israeli bias he brings to his media operations.

This duplicitous modus operandi works the same in modernity as in antiquity. The impact on informed consent is identical regardless whether the media-enabled deceit is a false belief in Iraqi WMD, a consensus faith in the infallibility of unfettered financial markets, or a shared opinion that this Zionist enclave is a democracy and an ally rather than what the oft-recurring fact patterns confirm: an enemy within.

Such treachery is at least as old as the use of canon law to silence critics of Church doctrine. The only modern component of this deceitful craft is the global reach of contemporary media and its capacity to manipulate minds and emotions on an unprecedented scale.

A 1578 handbook for inquisitors explained that its harsh penalties were “for the public good in order that others may become terrified and weaned away from the evils they would commit.” The New Heretics chronicle the costs of the U.S.-Israel relationship in blood, treasure, insecurity and credibility. Those who yearn for freedom from such manipulation can no longer afford America’s entangled alliance with an extremist enclave notorious for waging war by way of deception.

The Financial War Against Iceland

Being defeated by debt is as deadly as outright military warfare.

by Prof Michael Hudson

Global Research – Iceland is under attack – not militarily­ but financially. It owes more than it can pay. This threatens debtors with forfeiture of what remains of their homes and other assets. The government is being told to sell off the nation’s public domain, its natural resources and public enterprises to pay the financial gambling debts run up irresponsibly by a new banking class. This class is seeking to increase its wealth and power despite the fact that its debt-leveraging strategy already has plunged the economy into bankruptcy. On top of this, creditors are seeking to enact permanent taxes and sell off public assets to pay for bailouts to themselves.

Being defeated by debt is as deadly as outright military warfare. Faced with loss of their property and means of self-support, many citizens will get sick, lead lives of increasing desperation and die early if they do not repudiate most of the fraudulently offered loans of the past five years. And defending its civil society will not be as easy as it is in a war where the citizenry stands together in coping with a visible aggressor. Iceland is confronted by more powerful nations, headed by the United States and Britain. They are unleashing their propagandists and mobilizing the IMF and World Bank to demand that Iceland not defend itself by wiping out its bad debts. Yet these creditor nations so far have taken no responsibility for the current credit mess. And indeed, the United States and Britain are net debtors on balance. But when it comes to their stance vis-à-vis Iceland, they are demanding that it impoverish its citizens by paying debts in ways that these nations themselves would never follow. They know that it lacks the money to pay, but they are quite willing to take payment in the form of foreclosure on the nation’s natural resources, land and housing, and a mortgage on the next few centuries of its future.

If this sounds like the spoils of war, it is – and always has been. Debt bondage is the name of this game. And the major weapon in this conflict of interest is how people perceive it. Debtors must be convinced to pay voluntarily, to put creditor interests above of the economy’s prosperity as a whole, and even to put foreign demands above their own national interest. This is not a policy that my country, the United States, follows. But popular discussion in Iceland to date has been one-sided in defense of creditor interests, not that of its own domestic debtors.

Ultimately, Iceland’s adversary is not a nation or even a class, but impersonal financial dynamics working globally and domestically. To cope with its current debt pressure, Iceland must recognize how uniquely destructive an economic regime its bankers have created, through self-serving legislation and outright fraud. With eager foreign complicity, its banks have managed to create enough foreign debt to cause chronic currency depreciation and hence domestic price inflation for many decades to come.

To put Iceland’s financial dilemma in perspective, examine how other countries have dealt with huge debt obligations. Historically, the path of least resistance has been to “inflate their way out of debt.” The idea is to pay debts with “cheap money” in terms of its reduced purchasing power. Governments do this by printing money and running budget deficits (spending more than they take in through taxes) large enough to raise prices as this new money chases the same volume of goods. That is how Rome depreciated its currency in antiquity, and how America managed to erode much of its own debt in the 1970s – and how the dollar’s falling international value has wiped out much of the U.S. international debt in recent years. This price inflation reduces the debt burden – as long as wages and other income rise in tandem.

Faced with an unprecedented explosion of debt obligations – many of them apparently fraudulent, and certainly in violation of traditional credit practice – Iceland has turned this inflationary solution inside out. Instead of permitting the classic credit cure of inflating the currency, it has created a dream economy for creditors, preventing the classical escape from debt. Iceland has found a way to inflate its way into debt, not out of it. By indexing debt to the rate of inflation, it has guaranteed a unique windfall for banks that vastly increases what they receive in a “down market,” at the expense of wage earners and industrial profits. Linking mortgage loans to the consumer price index (CPI) in the face of a depreciating currency and heavy balance-of-payments drain to foreigners can have only one result: destruction of Iceland’s society and its traditional way of life.

Iceland needs to repudiate this debt bomb. Under present policy its debts will never lose value, because they are indexed to inflation. This in turn is being caused in large part by foreign debt service collapsing the currency, raising import prices and thus causing even larger debt payments in an endless treadmill. The economy shrinks, wages fall and assets lose value, yet debt obligations continue to grow and grow. The resulting evisceration of wages, living standards and consumer spending will further shrink the economy – a prescription for economic virus that threatens to plague Iceland for many decades if it is not reversed now. Capital formation will plunge as consumers lack money to spend. Many may not have enough to survive. The economy will be “crucified on a cross of gold,” to use William Jennings Bryan’s famous phrase in the 1896 American presidential election when he advocated an inflationary coinage of silver to alleviate debt pressure on U.S. farmers and labor.

Another side to the discussion?

Despite having spent the past half-century focusing on countries with balance-of-payments problems, even I find Iceland’s uniquely self-destructive financial regime shocking. Before you dismiss my candor, I should offer a short personal résumé so that you understand that my conclusions are based mainly on having been an insider to the game of imperial-style plundering of nations for forty years. In the mid-1960s I was the balance-of-payments economist for the Chase Manhattan Bank and then for Arthur Anderson, and later for the United Nations Institute for Training and Research (UNITAR). I have taught international economics at the graduate level since 1969, and now head an international group on economic and financial history based at Harvard. In 1990 at Scudder Stevens and Clark, I organized the world’s first sovereign-debt fund. All these jobs involved analyzing the limited ability of debtor countries to pay – how much could be extracted from them through foreign-currency loans and how much public infrastructure was available to be sold off in a voluntary virtual foreclosure process by countries willing to submit to creditor-dictated rules.

I first wrote about monetary imperialism in the 1970s in my book Super Imperialism. It should have been entitled “Monetary Imperialism” because it detailed how replacing gold with paper dollar IOUs for trade and balance-of-payments deficits in 1971 allowed the United States to exploit the rest of the world without limit. Phasing out gold payments among central banks in favor of fiat paper money allowed the United States to run up massive debts equal to its cumulative payments deficit, far beyond its ability to pay. It currently owes over $4 trillion, while running a chronic trade deficit with enormous overseas military spending, financed entirely by other countries through their central banks. This is euphemized as the “international monetary system.”

I also was an advisor to the Canadian government in the 1970s. My main work was to write a monograph explaining why countries should not borrow in foreign currencies, but should monetize their own credit for domestic spending and investment. In recent years I have taught in Latvia and given this same advice to its officials. I provide this background because it has obvious relevance to Iceland’s financial situation today. It has broken the cardinal rule of international finance: Never borrow in a foreign currency for credit that you can create freely at home. Governments can inflate their way out of domestic debt – but not out of foreign debt. That is a large part of the problem that Iceland now faces.

The main thrust of my comments therefore will focus on the international dimension of Iceland’s debt problem, especially with regard to its relations with Europe. It therefore is relevant to look at what is happening in today’s “expanded Europe.” As the financial press has been reporting, post-Soviet economies have met with disastrous results after having moved to join the European Union during the past decade. The recent riots of debtors, farmers and labor union members from the Baltics to Hungary are symptomatic of the deep economic woes surging over these countries. Resentment is growing that instead of helping them industrialize and become more efficient, Europe and its Lisbon Treaty simply handed matters over to its bankers, who looked at these countries simply as credit customers to be loaded down with debt – not for loans to build up manufacturing and the infrastructure sorely needed by these countries, but loans mainly against existing real estate and infrastructure collateral already in place. That is the quickest way to make money, after all – and finance traditionally has lived in the short run.

This problem was bound to arise, given Europe’s postindustrial faith that whatever increases “wealth” – even by the trick of puffing up real estate and other asset prices – is as productive as building new industrial capacity and infrastructure. The result of this ideology was a set of bubble economies built on debt-financed real estate and stock market inflation. Such bubbles always burst at some point. Only belatedly are nations re-discovering the classical axiom that the only way to pay for imports on a sustainable basis is to produce exports.

Unfortunately, neither foreign banks nor European advisors encouraged this. Their policy de-industrialized the post-Soviet countries, which financed deepening trade deficits by borrowing in foreign currency against their real estate. The Baltic States borrowed euros, sterling and Swiss francs, mainly from Swedish banks to finance a real estate bubble, while Hungary and its Central European neighbors borrowed heavily from Austrian banks. Their economies are shrinking now that their casino economies gambling on asset-price inflation have burst. Rental income and hence property prices are plunging, and exchange rates are following suit. This makes a foreign-currency mortgage cost more than local property is yielding. The result is widespread mortgage default, causing severe losses for Swedish and Austrian banks.

Bad real estate debts also are pulling down banks in the two leading creditor nations, Britain and the United States. Real estate prices, stock market prices and employment are going down in a straight line unprecedented even in the Great Depression of the 1930s. This has turned the neoliberal financial dream of “creating wealth” by inflating asset prices, by creating credit without actually increasing tangible capital formation (wages and living standards) into a nightmare. Just as individuals can’t live off a credit card forever, neither can nations. As any classical economist knows, societies that only manufacture debt are unsustainable. Casinos may be fun places to visit (customers pay by losing their money), but no place to live. The same is true of casino economies.

No help from the EU or the current global economy

The European Union is not in a position to offer much help in solving Iceland’s financial problems. The continent’s integration in the 1950s was pioneered by social democrats and pro-industrial idealistic capitalists such as Konrad Adenauer and Charles de Gaulle hoping to end the continent’s internecine wars forever. They succeeded, by forming the seven-nation Common Market in 1957. But further European expansion occurred largely on the financial sector’s terms. That is the source of problems fracturing “old” and “new” Europe today. It is the context in which Iceland’s debt problem is now being played out.

It seems natural enough for people to pay debts that have been taken on honestly. The normal expectation is that people will borrow – and banks will make loans – only for sound investments, ones that are able make a profit enabling the debtor to pay back the lender with interest. This is how banks have worked for many centuries – hence, the image of the prudent bankers who says “no” to any questionable deals brought before them.

At least that was the old way of doing things. Almost nobody anticipated a world in which bankers would create credit irresponsibly, leading to the massive defaults we are seeing throughout the world today. In the United States, for example, no less than a third of home mortgages have fallen into a state of Negative Equity. That is to say, the mortgage exceeds the market price of the real estate pledged as collateral. The U.S. national debt has tripled during the past year, from $5 trillion to $15 trillion as a result of financial bailouts including the government taking on the $5.2 trillion mortgage-packaging giants, Fannie Mae and Freddie Mac. A single insurance company, A.I.G., has been slated to receive a quarter-trillion dollars of bailout money, and a single bank, Citibank, has received over $70 billion and still counting. The stocks of these hitherto financial giants have fallen to just pennies, and Congress is now debating whether finally to nationalize them and wipe out their stockholders and even their bondholders.

In Britain much the same has occurred. Sitting in the lounge of Heathrow airport last month, I watched the hearings on BBC where members of Parliament expressed amazement that the most seriously affected banks were not led by bankers but by marketing men. Their job was not to calculate prudent loans, but to sell as much debt as possible, without regard for the debtor’s ability to pay. The result is that the Bank of England – like the U.S. Treasury – is printing new bonds whose interest charges will have to be paid by taxes on labor and industry.

How can Iceland be expected to cope in this kind of financial environment? To get a perspective on what would be a dystopian future, one may look at the dress rehearsal for the so-called financial “reforms” played out in the 1990s in Russia and other post-Soviet countries. These are reforms that creditors – including the European banks, I’m sorry to say – now wish to impose on Iceland. In Russia, life expectancies sharply declined, while health, prosperity and hope withered as outside forces imposed austerity measures and high interest rates. Russians woke up to find that the devastation of the reforms foisted on them were as severe as the Second World War in reducing population, destroying industry, spreading disease and losing control of their economy. Living standards plunged, especially for retirees, while employment prospects closed for the young. Much the same occurred throughout the former Soviet Union.

This policy remains the “fix” for debtor countries: Sell off assets for pennies on the dollar to kleptocrats across the globe, and gut the nation’s social welfare programs just at a time they are needed most. By contrast, look at the nations calling most loudly for Iceland to pay the loans made by global speculators and arbitrageurs. They include the largest debtor nations, headed by the United States and Britain, led by politicians who never would dream of imposing such hardship on themselves. While cutting their own taxes and increasing their own government budget deficits, these nations are attempting to extricate financial tribute from smaller, weaker countries that they can bully, as they did to Third World debtors in the 1980s and ’90s.

Dismantling industrial capitalism

This is a crisis that calls for blunt truths. What creditor nations and their international financial institutions are promoting is not capitalism as traditionally understood. Instead of helping industrialize the countries to which they extended credit so as to make them viable and self-reliant with new means of paying for their imports – and indeed, paying the debts taken on to rebuild their productive capacity – European planners oversaw the dismantling of manufacturing.

Even worse, they did so in a way that empowered a neo-feudal set of financial oligarchs. Indebted economies have been turned into a gaggle of casinos, with special games (e.g., opaque financial instruments such as credit-default swaps) reserved exclusively for insiders. Even to get into this game, one must be at last a millionaire, signing legal releases that one can afford to lose the entire investment and still survive economically. The European Union thus adds insult to injury by presenting its financial agencies euphemistically as donors bringing aid. They turn out to be the same ideologues that have crippled industrial capitalism across the globe by proliferating debt-leveraged gambles that have redistributed wealth upwards wherever they have operated.

This policy creates debt peonage for most citizens, above all in the newer countries seeking to join the European Union. Even in the richest nation on earth – the United States – nearly half of all citizens now have no net worth, and the gulf between the wealthiest 10 percent and the rest of society has widened geometrically since 1980. This is the unfair system that the world’s top creditors would export to Iceland – if they can convince its voters to accept neoliberal debt pyramiding as a way to get rich. The recent riots throughout the post-Soviet states suggest that this plan is not working. Their populations are now feeling how deeply the so-called financial reforms (e.g., financial deregulation) promoted by European banks and the Lisbon Agreements have polarized their economies.

Recognizing the enemy within

The only defense against such disastrous policy is to recognize that there are better alternatives. It simply is not possible for today’s astronomically indebted economies to “work their way out of debt” with the old trick of inflating the money supply. Trying to do so will collapse the currency’s exchange rate and divert so much revenue to pay creditors – and transfer so much property out of local hands – that a new kind of post-capitalist, non-production/consumption economy will be created, one less and less able to be self-reliant and independent, to say nothing about being just and sustainable.

Iceland’s financial crisis today is less an issue of international law as of outright lawlessness perpetrated by the purveyors of so-called free market democracy. Nations pressing Iceland for payment impose one set of laws for others while following quite a different set for themselves. Preaching to Iceland about international law, the United States and Great Britain themselves have broken the clearest of international laws – those against waging aggressive war. Their propagandists are skillful at using the language of capitalism and morality, yet they are neither capitalist nor moral. Their financial strategy is to play an ages-old psychological game. Make countries like Iceland feel guilty about being debtors rather than recognizing they have been victims of an international Ponzi scheme. In a nutshell, the game is to lay down “laws” for debtors in the form of destructive austerity programs fashioned by irresponsible and indeed, parasitic creditors. This “aid advice” ends in outright asset stripping, both public and private.

Asset stripping to pay debts has caused collapse time and again in history, but is strangely downplayed in today’s academic curriculum as an “inconvenient truth” as far as vested financial interests are concerned. Income is siphoned off by a scheme that is elegant and simple. Hapless victims – and now entire economies, not just individuals – are maneuvered onto a debt treadmill from which there is no escape. Creditors pile on credit and let the debts grow at the “magic of compound interest,” knowing that their loans cannot be repaid – except by asset sell-offs. No economy’s productivity can keep pace with exponentially compounding debt. Whatever was owned (and indeed, financed originally by public debt but now paid off) is stripped away for interest payments that never end. The aim is for these payments to absorb as much of the surplus as possible, so that the national economy in effect works to pay tribute to the new global financial class – bankers and money managers of mutual funds, pension funds and hedge funds.

The product they are selling is debt. They build up their own wealth by indebting others, and then forcing sell-offs to buyers who take on their own debt in the hope of making asset-price gains as property prices are impossibly inflated relative to the wages of living labor. This has become the new, euphemistically dubbed post-industrial form of wealth creation – a strategy that is now collapsing economies throughout the world.

The role of the United States

The United States has trapped other countries into a nightmarish system in which they have little practical choice but to recycle their excess balance-of-payments dollar inflows back to the United States, mainly in the form of loans to the U.S. Treasury. When foreign central banks receive dollars for their exports (or for the sale of their companies), they are limited in what they can do with these dollars. The U.S. Congress will not let them buy up important domestic companies or resources, and will not part with U.S. gold holdings. So foreign central banks are obliged to buy Treasury bonds – or, as the supply of these bonds has run out (being limited by the domestic budget deficit), mortgage-backed securities issued by the now-public Fannie Mae and Freddie Mac packagers of subprime mortgages. These two semi-official agencies were formally nationalized last year after a series of financial frauds and disastrous investments wiped out their capital, obliging the U.S. Government to step in and mollify governments from China to Israel whose central banks had been recycling their surplus dollar inflows into these securities.

Icelanders should keep one basic principle uppermost in their minds. The United States is the world’s largest debtor nation, and will never repay its own foreign debt. Over and above its presently outstanding four trillion dollars, its Treasury intends to keep on issuing new paper IOUs in exchange for the goods, services and real assets of China, Japan and other creditor nations – until governments stuck with these paper dollars turn their back on this Madoff-Ponzi scheme (note that these schemes always are named for American operators), recognizing what Adam Smith explained in The Wealth of Nations: No nation has ever repaid its debts. Small nations like Iceland, along with small taxpayers in wealthy countries, may be coerced with propaganda, mind games and outright threats into paying – until they have no assets left to hand over. But the big boys are above the law. They control the courts (which often rule without much regard for the actual law), just as they write history and newspaper coverage – and business school curricula – to serve their own interests.

The second important principle is how radically today’s post-capitalist order has inverted traditional ways of making money. Instead of making profits on new capital investment, the easiest path to quick riches in today’s global financial system is to foreclose at pennies on the dollar, and make a “capital gain” by flipping property onto world financial markets that are being inflated by central banks. While financial spokespersons promise that “there is no such thing as a free lunch,” today’s hit-and-run financial bubble, fraud and insider privatizations culminating in public-sector bailouts (“socializing the risk” while privatizing the profits and capital gains) – has become all about obtaining a free lunch.

Iceland’s zero-sum financial gamble

But it is a zero-sum gambling game, with losers on the other side of the table from the winners. One party’s gain is another’s loss – and indeed, this kind of game ends up shrinking the economy by diverting resources away from real investment in tangible capital formation. Unlike industrial capitalism, which employs labor and invests in capital equipment to turn raw materials into salable commodities, today’s post-industrial financialized system only offers the virtual (and temporary) wealth of asset bubbles. Its financial managers claim to be acting in the tradition of classical economists and share their concept of free markets, but in actuality they have been part of an intellectual fraud that depicts their system as something other than the financialized wealth extraction on the real economy of production and consumption that it is. Financialized wealth is extractive, not productive. That is because loans, stocks and bond securities are claims on wealth, not real wealth itself.

This is the context in which today’s financial war against Iceland is being waged. Homeowners are paying tribute, not in the form of taxes to an invading occupying force, but in interest to local sponsors of the debt pyramiding that has got Iceland into such deep trouble, and to the international creditors and enablers of this over-financialization of the economy. The nation’s public domain, its land and geothermal resources, its tourist industry and public assets are being eyed by foreign creditors as prey to be seized in the way that has occurred in many Third World countries. It is what ruined Turkey and Egypt in the late 19^th century and brought down other kingdoms for centuries before that. Yet many Icelanders are heading into this future voluntarily, as if it somehow is fair rather than an exercise in predatory finance led by nations that have shown no willingness (or ability) to pay their own international debts.

Nations know when they are being attacked militarily. Defense forces fight to prevent invaders from seizing their land and imposing tribute. No country would think of welcoming a foreign army to do what William the Conqueror did to England after 1066. He ordered his accountants to compile the Domesday Book within thirty years (it was ready by 1086), calculating the rental value of English land in order to tax it for the Crown.

That is how most of Europe’s kingdoms were created. The rent was paid to the companions of military warlords, and their heirs ruled as absentee Lords for nine centuries. They quickly moved to keep what started out as royal revenue for themselves, celebrating this as the victory for free-market “democracy” in the Magna Carta liberatum (1215) and subsequent Revolt of the Barons (1258-65). Today, these lords of the land and those who have bought their property have run up mortgage debt, paying creditors what formerly was paid first as taxes and then taken as rent.

What took centuries to achieve in feudal Europe is now being threatened in Iceland, compressed into the space of just a decade or so. And in many ways this financial situation doesn’t make sense – unless one looks through history to see how the same tragedy has happened again and again.

The United States, Britain and the International Monetary Fund (“the global investment community”) are couching their demands for draconian austerity policies in the language of capitalism. But what they actually are promoting is a financial system that threatens to end in debt peonage, not democratic capitalism. Across the globe, from the Baltics to Hungary in Europe, and indeed from Russia to China, riots and wildcat strikes recently have broken out to protest this post-capitalist financial dynamic. It already has destroyed the industrial capacity of debtor countries subjected to the cruel austerity programs imposed by the IMF as acting agent for the global financial class. This merely repeats what the British did in India. Industrial growth has been replaced with a financialized real estate bubble. The “final stage” of this dynamic is to foreclose and sell off the assets of debtors at giveaway prices. Talk about democracy from the financial elite is a public-relations cover story. Their “magic of compound interest” sales pitch threatens to destroy entire nations.

Fortunately, this need not happen in countries that do not impose debt leveraging on themselves, but only in countries that let the public utility of money and credit creation be privatized in the hands of a cosmopolitan financial class. Iceland still has an alternative future before it, if voters recognize this in time. But to achieve the better future that most of its citizens want, it must understand the predatory debt trap into which it has fallen – or more accurately, been pushed by believing in the same illegitimate financial doctrine that has ruined Russia and other post-Soviet economies, as well as Third World countries before them under decades of IMF “austerity plans” designed to stifle domestic growth (and competition) and economic stability to pay foreign creditors. History provides tragic examples – the aftermath of World War I, and England itself in the centuries of its seemingly perpetual wars with France.

Industrial economies reverting to “tollbooth economies”

The world is plunging “back to the future,” to an epoch of neo-feudalism and debt peonage. It is a travesty of the promise of industrial capitalism as it seemed to be evolving on the eve of the 20^th century and the Progressive Era of social democracy. What was not recognized was the financial time bomb implanted in the DNA of Europe as it evolved out of the Middle Ages.

As European feudalism gave way to the formation of nation-states, most kingdoms became dependent on foreign loans to fight their wars – starting with the Crusades, whose looting of Byzantium provided an enormous influx of gold and silver. This is what broke down Church bans on usury. Once governments paid interest to elite Church orders such as the Templars and Hospitallers, it became permissible for banks to join in lending at interest – to kings, the nobility and the merchant classes as major customers.

The birth of international post-medieval banking proved disastrous for many family banks that foundered on what turned out to be bad loans to the leading powers of early Europe, from Spain to France and England. The historian Richard Ehrenberg notes that Spanish bankruptcies “occurred at intervals of about twenty years – 1557, 1575, 1596, 1607, 1627, 1647,” often being rationalized by pious allusions to Church prohibitions against usury. England declared bankruptcy under Edward III in 1339, and Charles II shut down the Exchequer in 1672 and suspended payment on its floating debt. Wiping out debts was the only way to retain basic economic and political relations and national independence. In view of this long experience, England’s advice to Iceland today is in the character of “Do as we say, not as we ourselves have done and are doing.”

Central banks were formed to advance credit to governments, and commercial banks to help finance the Industrial Revolution’s expanding trade and related infrastructure spending, mining and shipping, capped by infrastructure monopolies such as canals, railroads and ports, and later by fuel and power. The medieval epoch’s “primitive accumulation” – the extraction of revenue by military seizure – was replaced by the more peaceful and seemingly civilized practice of creditors appropriating the economic surplus by making interest-bearing loans, and by foreclosing on property when the interest charges could not be paid.

In recent years financial managers have persuaded many countries to sell off public enterprises like their water or energy supplies, mainly to raise the money to pay debts or to cut taxes on the highest wealth brackets. This sale of the “commons” by naïve, myopic leaders (and the “useful idiots” promoted by financial lobbyists to be their economic advisors) turns debtor countries into “tollbooth economies” in which basic services become a vehicle to extract greater and greater portions of national income and wealth for the benefit of the few. This is the antithesis of “free markets” as classical economists understood the term. They are markets designed and controlled by the financial sector to appropriate for itself the surplus produced by labor and tangible capital investment.

To promote this siphoning off of surplus income, the rich have funded extensive disinformation (propaganda) campaigns around the world. Their tactic is to use familiar and revered ideological terms such as “free markets,” “economic democracy” and “fairness” to win the hearts and minds of the population while actually imposing a set of policies in stark contrast to Enlightenment ideology, classical political economy, Progressive Era reform and 20^th century social democracy – the ideals of freedom-loving peoples everywhere. Financial lobbyists have spent billions of dollars spent on public-relations think tanks to achieve this ideological con job. They have endowed business schools and gained control of government agencies to promote their creditor-oriented point of view, headed by central banks to serve as the ideological wedge for today’s anti-democratic forces. This is the ideology that has pushed much of the Third World into poverty since the 1960s, as well as today’s tragically debt-ridden post-Soviet economies.

Financial warfare

Finance seems at first sight to be quite different from outright warfare. Everyone knows well enough that invading armies do not come on friendly terms. Foreign navies and troops are not welcomed, even if they promise to help build up the economy by constructing new roads and bridges (the better for their tanks and troops to travel on), hydropower and geothermal stations to export electricity (keeping the earnings for themselves), hotels and spas for themselves and foreigners to enjoy (and keep the rental incomes and site values), and create detailed statistical analyses (such as the Domesday Book alluded to above) to manage the economy in their favor.

Today this financial strategy has become multilateral. The IMF acts as enforcer for global creditors to appropriate the income of real estate, national infrastructure and industry as a financial boondoggle. What is remarkable is that countries throughout the world are losing their economic and fiscal independence peacefully – at least it is peaceful when target countries do not fight back. (Chile, Cuba and Iran are object lessons for the punitive economic sanctions imposed on countries that do not accept today’s predatory economic ethic.) Financial conquest is thus more covert than military warfare. It relies more on the educational and psychological dimension, and is most successful when the victim does not even realize it is being attacked.

But the effects are as devastating on human life as what Russia suffered at the hands of Western “reformers” in the 1990s. The financial austerity imposed by creditor-run regimes shortens life spans, reduces birth rates, and increases labor flight, suicide rates, disease, alcoholism and drug abuse. Just as war kills an economy’s males of fighting age (25-35), financial austerity drives them to emigrate to find work. This is why U.S. investor Warren Buffett has called collateralized debt obligations (CDOs), credit default swaps and similar debt-leveraging instruments “weapons of mass financial destruction.”

Consider the role of banking in this neo-feudal order. Banks do not create credit to finance manufacturing – that is done mainly out of retained earnings and equity. Banks create credit primarily to lend against collateral already in place – loans that simply extract money from the economy. This is an inherently destructive act, one that is anti-capitalist in the sense that it undercuts industrial growth in favor of interest extraction and short-term speculative gains.

The trick is to get this policy welcomed as if it were progress, as “post-industrial” rather than a lapse backward. Only today is it becoming apparent that the collateral-based lending of banks “creates wealth” mainly by inflating asset-price bubbles, especially in real estate. Bankers calculate how much debt a given flow of residential or commercial real estate income can support, and create enough credit to make a loan large enough to absorb this surplus revenue. Bankers do the same with industry by lending corporate raiders enough money in take-over “junk” bonds to turn profits into a flow of interest payments for themselves, and with capital gains for the raiders. Central banks fuel this process by swamping economies with easy credit (that is, debt) that keeps the financial sector fat while impoverishing the increasingly indebted nation.

Finance thus is the historical antithesis of property, sanctifying its own right to expropriate indebted property owners. Originally denounced by Christianity, Judaism and Islam, interest-bearing debt has sanctified itself as the predominant form of wealth. This is not what the classical economists and democratic political reformers expected to see. They explained how to avoid this economic dystopia by appropriate government tax policy and regulation to minimize the economic role and political power of post-feudal bankers and rentiers. (Rentiers are people who live off interest and rents, that is, off absentee incomes paid on a regular basis. A rente was a French government bond paying interest at regular intervals; the idea was extended to landlords.)

How banks and the financial sector gained dominant power

This supremacy of the banks and the financial sector took thousands of years to achieve. It was not easy to overthrow traditional social values and to impoverish so many economies by subordinating customary property relations with legal priority for creditors. Iceland only recently has come under this kind of financial attack by creditors operating globally. Bankers managed to convince ambitious fortune-seekers that the way to wealth and economic growth lay in debt leveraging, not in staying free of debt. Selling debt as their product, banks and speculators at the world’s financial core needed to prepare for what they must have known would lead to economic collapse and destroyed economies throughout history. They prepared the path to ruin by ideological engineering aimed at shaping how populations think about history, so as to accept debt pyramiding as a good economic strategy.

As an example of their warped thinking, consider an attractively priced home. Would you rather own 100% of a home free of all debt with a market value of 100,000 euros if free of debt – or, would you rather own 60% of the same home at an inflated market price valued at 250,000 euros? In the second scenario you would have 50,000 euros of “surplus wealth” (60% x 250,000 = 150,000 euros, compared to 100,000 in the first example). People across the globe have been convinced that the second scenario represents “wealth creation.” What is overlooked is that the higher-priced home carries interest charges on its higher market price. This charge would amount to 6,000 euros a year, or 500 euros a month, at 6% interest. The same property is worth more, but includes a much larger debt overhead – income for the financial sector.

In Iceland – but nowhere else – home mortgages have a uniquely bad twist. Creditors have managed to protect the weight of their claims on debtors by indexing mortgage loans to the nation’s consumer price inflation (CPI) rate. Each month the debt principal is increased by the CPI increase – and so is the interest charge. During 2008 that index rose by 14.2%, so a 100,000-euro mortgage at the start of 2008 would have grown to 114,230 euros by yearend. These monthly adjustments also would added an entire percentage point onto the interest payment – an extra 100 euros to be paid to creditors monthly, in addition to the growing principal to be amortized. Talk about making money without effort …!

Such heavy debt charges would shrink any economy, and that is what is happening in Iceland. Prices for real estate declined by an estimated 21 percent for housing in 2008. So in the above example, the market price of the house worth 100,000 euros at the beginning of the year would have been worth only 79,000 at yearend, while the mortgage would have grown by 14% to 114,230. This would have plunged the homeowner 35,000 euros into negative equity – a remarkable 35% change.

In every other country, investors lose out when prices decline for real estate, stocks and bonds, while creditors find the purchasing power of their loans eroded by inflation. That is how most countries have “inflated their way out of debt” for many centuries. But Iceland’s creditors have created a system in which their position actually is improved as the rest of the economy suffers inflationary price erosion. Their claims rise in proportion to the rate at which consumer-price inflation eats away at wages and business profits. Where is the sense in this?

What makes this so ironic is that the purpose of calculating the consumer-price index in all countries has been to support consumer income. It was to protect wage earners and retirees against inflation eating away at their ability to maintain their standard of living. That is why in the United States, Social Security retirees receive an annual cost-of-living adjustment based on the CPI. But Iceland inverts this political aim, protecting the claims of creditors against debtors (and hence against most wage-earners). The creditor’s objective is to maximize the power of debt over living labor. That is the literal meaning of “mortgage:” a “dead hand” of the past over the present, of past wealth and credit over the living. For Iceland the debts run up during the “wealth creation” phase of the financial bubble are to be left in place and even grow at an accelerating rate reflecting the pace of currency depreciation and hence import prices and consumer prices generally. Debtors lose out as prices plunge for the homes they own, while creditors maintain their economic grip intact and even strengthen their hand by increasing their take.

Turning economic power into political power

Creditors in most countries have been able to turn their economic power into political power with the aim of shifting the tax burden off themselves and onto labor and industry. The final coup de grace occurs when they get the government to bail them out from their losses on bad loans. In the United States, Congress has tripled the national debt in less than a year to bail out creditors with little thought of helping debtors, or even of prosecuting the massive financial fraud involved in its subprime real estate bubble and the sale of junk mortgages to gullible foreign buyers.

Iceland’s citizens will own a smaller and smaller proportion of their homes as its banks become the main claimants on the nation’s property value. By subjecting Iceland to this unique kind of financial squeeze, Icelandic policy stands in diametrical contrast to that of the United States. The U.S. policy is to stabilize its economy and avoid depression by writing down debts to bring them in line with today’s lower market prices and, more specifically, to bring carrying charges on mortgage debt within the ability of homeowners to pay no more than 32% of their income. Other countries also are writing down their debts to bring them in line with the ability to pay. But Iceland is subjecting its own homeowners and consumers into debt deflation and plunging them into Negative Equity status – by law!

The only way its banks can succeed in this ploy is to keep Iceland’s voters unaware of what is happening in the rest of the world – and indeed, to block the government from drawing up a balance sheet of the nation’s debts, a roster of whom these debts are owed to, and a calculation of the economy’s ability to pay.

Iceland’s present policy will lower disposable income for homeowners and other debtors – the great majority of its citizens – while wealth gushes to the top of the economic pyramid, to those who are creating as much credit as they can find borrowers for. The result is not what former Federal Reserve chairman Alan Greenspan and President George W. Bush claimed to be creating in America – an “ownership” society. It really is a “loanship” society, an economy of ersatz assets in which debt pyramiding – owning less and less of a home or other asset – seemed to be a strategy for growing richer instead of the debt trap it is. Has Iceland fallen into a similar semantic trap?

Pensions and retirement

As in the United States, Iceland has convinced labor to “prefund” its retirement. The idea is to save up in advance, so as to provide for retirement in a purely financial way. Of course, the most important way to support retirees is to see that they can afford the basic goods and services needed to live. To the extent that “financializing” an economy ends up eroding the “real” economy, pension funding – and government Social Security funds (regressive taxes that enable the Treasury to cut taxes for the higher wealth brackets) – tends to shrink the economy rather than provide for the expansion in output needed to support an aging population. As matters stand, pension savings are mobilized to increase the volume of interest-extracting debt and fuel financial bubbles (as in America’s “pension-fund capitalism” that pushed up stock markets in the past). Pension savings works against employment most visibly when they are lent to corporate raiders who pay off their bondholders by downsizing the work force and squeezing more “productivity” out of the remaining employees. Economic “growth” under such circumstances takes the form of a financial and property-sector overhead, not growth or stability in living standards or the capacity to produce.

Allowing economies to be crippled with interest payments was unthinkable until recently. To achieve so radical a break in the public’s idea of prosperity and self-reliance, it has been necessary for creditors to wipe out knowledge of how legal systems have been amended to put creditor interests above those of debtors over the past eight centuries – and how the leading classical economists and Enlightenment cultural and religious leaders sought to subordinate creditor interests to those of growth and prosperity for the economy at large. But the new banking class has been clever enough to hire the best propagandists money can buy while remaining blind to the havoc they are wreaking with people’s lives.

The debt game

Like many people, Icelanders tend to think of debt in personal terms, as if creditors are neighbors much like themselves. The normal thing to do when problems arise would be to sit down and reach a common agreement. But Iceland’s creditors are impersonal billion-dollar financial conglomerates, and creditor-debtor relations under such conditions are inherently adversarial, as anyone who has had a recent disagreement with a bank can attest. Whatever creditors can gain in today’s highly politicized, legalistic and ideological tug-of-war will be the debtor’s loss. And the magnitude of Iceland’s prospective loss threatens to plunge its economy into depression for generations, turning it into a Third World oligarchy, or worse, a dictatorship. The price of paying its debts thus threatens to be loss of its national identity and a loss of its future.

The trick is to fool debtors into thinking that “free markets” means paying one’s debts. Creditors can succeed in letting debt leveraging and “the magic of compound interest” empty out economies only by diverting attention from what Adam Smith and other classical economists warned against. For them, a free market was one free of debt – especially foreign debt. In The Wealth of Nations (especially Book V, chapter 3), Smith warned against creditors becoming “free” enough to disable the ability of governments to protect citizens from creditors – especially the Dutch, who were the major investors in British monopolies created to be sold to pay for that nation’s seemingly eternal wars with France. The problem was that creditors sought to extract the wealth of nations for themselves, not to create wealth. Their greed was destructive to society as a whole, because it was easier to simply strip assets than to create real capital.

That is the problem with creditors historically. They tend to care only about how to extract as much as they can, as quickly as possible. “A creditor of the public, considered merely as such,” wrote Smith, “has no interest in the good condition of any particular portion of land, or in the good management of any particular portion of capital stock. As a creditor of the public he has no knowledge of any such particular portion. He has no inspection of it. He can have no care about it. Its ruin may in some cases be unknown to him, and cannot directly affect him.” The problem obviously is worst with absentee creditors.

Smith concluded: “When national debts have once been accumulated to a certain degree, there is scarce, I believe, a single instance of their having been fairly and completely paid. The liberation of the public revenue, if it has ever been brought about is by bankruptcy; sometimes by an avowed one, but always by a real one, though frequently by a pretended payment.”

Adam Smith’s portrait is engraved on England’s £20-pound note, and Andrew Jackson on the US $20 bill. The irony is that Smith denounced public debts and urged wars to be financed on a pay-as-you-go basis so that people would feel their burden – and stay out of debt. As for Andrew Jackson, he closed down the Second Bank of the United States, accusing bankers of ruining the nation and seeking to destroy democracy. Bankers and finance therefore leave something important out of the account when it comes to the views of their own patron saints of democratic free markets.

As noted above, creditors for many centuries now have suffered bankruptcies when foreign countries default. That is the norm, not the exception. Yet today’s popular media greet every new default as “unanticipated” and “surprising,” as if it were not the bankers’ fault that they failed to understand the market’s inability to pay. Dumbed-down economics textbooks chime in with their inbred ignorance voiced by the financial sector’s proverbial “useful idiots” prattling about “equilibrium” and “automatic stabilizers.” These un-learned academics are useful to the bankers because of the passion with which they proclaim that all debts should and can be paid by suitable “adjustments” (including what turns out to be economic and demographic collapse). The question being asked with a straight face is: If it is the fault of victims rather than the bankers, then is it not proper for governments to bail out the banks?

The tacit assumption is not that bankers’ exorbitant greed is achieved at the expense of the economy at large, but that the financial sector’s prosperity is a precondition for the economy to grow. The bankers try to cap matters by trotting out poor retirees (like the widows and orphans of old – presumably those living on “fixed incomes” in the form of trust funds) whose meager savings should be supported. Doing so just happens to save the financial oligarchy of billionaires at the top of the economic pyramid, but not the proverbial victims.

The use of human shields such as union members concerned about the investments of their pension funds to protect the wealth of the kleptocrats is likewise shameless. Wall Street sages in the United States, for example, shed crocodile tears over the fate of the working people suffering from the stock market collapse, knowing full well that financial assets are heavily concentrated at the top of the economic pyramid, with workers having, only a meager share of those stocks and bonds. Ignored is the fact that the government could bail out failing pension funds (like Social Security) directly at just a small fraction of the cost of propping up the assets of the affluent.

Likewise, the volume of government bailout money for the financial sector ostensibly to deal with the subprime mortgage crisis – about $13 trillion during 2008-09 – clashes with the fact that the total value of mortgage debt owed by all households in the entire United States is only $11 trillion as of yearend 2008! The bailout funds ended up being used mainly to buy other banks to create even larger financial conglomerates “too big to fail,” to pay executives whose greed for short-term gains and bonuses caused the financial meltdown, and to pay dividends to stockholders to support their stock price and hence the value of stock options that financial managers gave themselves. The closest parallel to this scandal is the “watered stock” practices of Wall Street’s railroad barons and other financial manipulators in the late 19^th-century Gilded Age.

There was a time when banks hesitated to make loans irresponsibly, that is, beyond the ability of debtors – and entire national economies – to generate a surplus to pay their creditors. My job as balance-of-payments economist for the Chase Manhattan Bank in the 1960s was to calculate how much export earnings and other foreign exchange the major Latin American countries could generate. Their balance-of-payments surplus represented how much they could afford to borrow. The aim of New York banks was to lend Third World countries money to absorb their entire economic surplus. From the bankers’ point of view, that was what a national surplus was for – not to sustain higher living standards or invest in becoming economically self-sufficient, but simply to pay creditors. And “wealth” was defined as the capitalized value of the entire economic surplus they could generate – discounted at the going rate of interest, as if it all could be paid as debt service, so that the entire surplus would be paid to carry the debt.

This certainly is not a model of human progress. But it was that decade’s version of “wealth creation,” and it is the concept of “wealth creation” in terms of the market value of debt-financed asset prices that Alan Greenspan would foist on the United States in the 1990s to convince it that an asset bubble was the path to postindustrial wealth, not the road to debt serfdom.

So Adam Smith was right. Today, creditors and bondholders care about foreign economies only to the extent that they can charge interest that will absorb their entire economic surplus. Until recently, creditors thought that lending more than can be repaid would be “irresponsible.” Not any more.

Political checks and balances on the economy

The best path for nations is to put their own economic growth before the interests of creditors. For many generations this ethic supported a set of political checks and balances that kept the growth of international debt in terms considered to be tolerable – much too heavy by the free-market standards of Smith and John Stuart Mill, but not so high as to prompt widespread defaults and debt repudiation.

This ethic has changed in recent years. Countries have accepted creditor propaganda that debts are a “point of honor,” much as the poor believe that paying their debts – even when they are in negative equity – is the “honest thing to do.” Obviously this ethic is not self-applied to the world’s largest financial institutions or real estate speculators. But Iceland accepted it in what is a characteristic of small, closely-knit communities where the word of neighbors is their bond. The root of Iceland’s ethic is mutual aid and prosperity for all. It is a fine, highly socialized attitude, and therefore tragic that it has helped lead the nation to fall prone to the snake oil of debt peonage.

Political leaders who fail to recognize the fact that checks and balances are a proper function of government are liable to sacrifice their nation’s hope for economic growth and rising living standards in a vain attempt to pay creditors. Such attempts must be in vain, because “the magic of compound interest” is a cruel myth: In reality every rate of interest implies a doubling time, and no economy’s “real” growth ever has been able to grow exponentially at a fast enough rate to pay the debts that keep accruing interest.

In today’s deregulated environment where “the sky’s the limit,” these accruals have been recycled in yet new loans. These then are packaged and resold, loading the economy down with more and more debt that so far has been almost impossible to track. And to cap matters, financial speculators then place trillions of dollars of bets on whether the debts can be paid or not, and how much their market prices are likely to change. What was supposed to be a financial system designed to fund new capital investment to produce more and raise living standards has turned into a casino economy – where gamblers are staked by the bankers to play the debt game, with the government standing by to make the winners “whole” in cases where the debtors have lost too much of their play-money to pay up.

Debts that can’t be paid, won’t be

Every economist who has looked at the mathematics of compound interest has pointed out that in the end, debts cannot be paid. Every rate of interest can be viewed in terms of the time that it takes for a debt to double. At 5%, a debt doubles in 14½ years; at 7 percent, in 10 years; at 10 percent, in 7 years. As early as 2000 BC in Babylonia, scribal accountants were trained to calculate how loans principal doubled in five years at the then-current equivalent of 20% annually (1/60^th per month for 60 months). “How long does it take a debt to multiply 64 times?” a student exercise asked. The answer is, 30 years – 6 doubling times.

No economy ever has been able to keep on doubling on a steady basis. Debts grow by purely mathematical principles, but “real” economies taper off in S-curves. This too was known in Babylonia, whose economic models calculated the growth of herds, which normally taper off. A major reason why national economic growth slows in today’s economies is that more and more income must be paid to carry the debt burden that mounts up. By leaving less revenue available for direct investment in capital formation and to fuel rising living standards, interest payments end up plunging economies into recession. For the past century or so, it usually has taken 18 years for the typical real estate cycle to run its course.

Nations that have not paid their debts

Let us draw up a roster of nations that have annulled their debts – or run them up with no intention of paying. The list starts with the world’s largest debtor, the United States. Its government owes $4 trillion to foreign central banks. A moment’s thought will show that there is no way it can pay, even if it wanted to do so. The United States is running a chronic trade deficit, on top of which is a deepening outflow of military spending. In addressing this chronic living beyond the nation’s international financial means, American diplomats are almost the only ones in the world who conduct international diplomacy the way that textbooks assume that all countries should do: They act purely and ruthlessly in their own national interest. This interest lies in getting the proverbial free lunch, by giving IOUs for other countries’ real resources and assets, with no intention or ability to pay.

U.S. officials already have suggested that this debt be wiped out. Their plan would convert it into “paper gold.” Foreign central banks would simply stamp their U.S. Treasury bonds “good only for payment among central banks and the International Monetary Fund.” No other nation would be allowed to wipe out its debts in this way. Only the debtor at the center would be able to continue issuing debt-money without foreign constraint.

To be sure, U.S. diplomats have freed countries from debt when they have a political reason to do so. The most famous modern example of an economy-wide debt cancellation is that of Germany in 1947. The Allies cancelled German personal and business debt, on the ground that most were owed to former Nazis. The only debts left on the books were current wage-debts that employers owed to their work force, and basic working balances for companies and families.

A generation earlier, in 1931, the Allies wiped out Germany’s reparations debt stemming from World War I, and negotiated a moratorium on their arms debts to the United States. The world’s leading governments realized that keeping these debts on the books would collapse the global economy. But by the time they reached this conclusion it already was too late. The combination of Inter-Ally arms debts owed to the United States and the reparations debts imposed by the Allies largely to pay America already was one of the major factors pushing the world into a depression.

The U.S. economy was collapsing under the weight of its domestic debt pyramiding. Other countries had used less debt leveraging, but all ended up writing off large swaths of real estate and business debts during the Depression Years. By the time the Second World War ended in 1945, most countries were free of debt. Prices reflected direct production costs, with minimum diversion of revenue to pay banks, absentee property owners and other rentiers.

In the postwar period the World Bank lent dollars for governments to build infrastructure – only to turn around a generation later and help loot what it had financed. After Mexico and other Latin American governments announced that they were insolvent in 1982, U.S. diplomats organized a debt write-down in the form of “Brady bonds.” By 1990, Argentina and Brazil had to pay 45% on new dollarized foreign debt, and Mexico paid 23%.

Having stuck Third World countries with debts beyond their ability to pay, the IMF and World Bank used their creditor leverage to force governments to impose draconian austerity plans that had the effect of preventing growth toward industrial and agricultural self-sufficiency, thereby also crushing prospects for competitiveness. The IMF and World Bank then demanded that debtor countries sell off their public infrastructure, land, subsoil rights and other assets to pay the debts that these institutions sponsored so irresponsibly. (If IMF loans were not simply irresponsible, then they knowingly crippled debtor-country economies.) It is an age-old story of conquest, now accomplished without conventional warfare.

Two thousand years ago Rome stripped Asia Minor and other provinces and colonies of money using military force. Its financial oligarchy then translated their economic power into political power, destroying democracy and bringing on centuries of Dark Ages. The historical lesson is that economies taken over by creditors are plunged into depression as predatory lending strips away the surplus, leaving nothing remaining for subsistence, let alone capital renewal. This prevents nations from paying their debts, leading to widespread foreclosure, an extreme polarization of property and wealth, and impoverishment of its people. The ensuing lack of prosperity ends up crippling the ability to sustain a military overhead, and such countries tend to be conquered, as the Goths overran Rome. Outsiders always were at the gates – but it was the hollowing out of Rome’s domestic economy that left it prone to conquest.

Most recently, creditor-sponsored dirigiste takeover of national economic and social institutions has turned Russia, the Baltic States and other post-Soviet economies into neoliberal kleptocracies, driving skilled labor abroad in tandem with capital flight. Latvia is being pushed back toward subsistence life on the land. Creditor mismanagement is the most important problem that any country today should strive to avert.

Creditors play the terrorism card

9/11 signaled the beginning of a new power grab in the United States and Britain. U.K. officials have used anti-terrorist legislation to seize Icelandic assets abroad. What makes this so ironic is that throughout history it has been creditors who have used violence against debtors, not the other way around. I know of only one exception, and it did not involve bloodshed: Jesus overthrew the tables of the moneychangers in Jerusalem’s temple. It is the only record of a violent act in his life.

Psychologists have explained the creditor proclivity for violence by the tendency for rentiers to fight for unearned income – inheritance, or other “free wealth” that they have obtained without effort of their own. People who work for a living and are able to support themselves believe that they can survive, and so there is less of the kind of panic that creditors and other free lunchers feel at the thought that their extractive revenue may end. They fight passionately against the prospect of having to live on what they produce or earn by their own merits. So the last thing that rentiers really want is a free market. In a shameless irony, they tend to accuse populations of being terrorists if they seek to defend themselves against predatory creditors and land-grabbers!

Describing creditor violence, Plutarch describes how Sparta’s king Agis IV and his successor Cleomenes III sought to cancel the debts late in the 3^rd century BC. The city-state’s creditors murdered Agis, drove Cleomenes to suicide in exile, and killed Sparta’s next leader, Nabis – and then called in Rome to fight against pro-debtor democracies throughout Greece. Livy and other Roman historians describe how a century later, in 133 BC, the Roman Senate responded to the Gracchi Brothers attempt at debt and land reform by pushing the democratic Senators over the cliff to their death, inaugurating a century of bloody civil war.

In the 19^th century the United States sent gunboats to collect debts from Latin American countries, installing collectors at the local customs houses. England applied similar imperial force to ruin India, Egypt and Turkey, stripping their assets with debt and plunging their populations into poverty that persists to the present day. More recently, America’s hand in the violence that overthrew Chile’s elected president Salvador Allende has continued this policy. Having south to isolate the Soviet Union, Cuba and other countries that rejected creditor-oriented rules and rentier property interests, the United States then capped its Cold War victory over the Soviet Union by promoting a flat-tax regime that imposed the fiscal burden entirely on labor and industry, not on finance and real estate. Instead of being democratized, the post-Communist countries were steered directly into oligarchic kleptocracies that ran up rising debts to the West.

This is just the opposite of the free markets that were promised them back in 1990-91. Instead of economic growth, the “real” economy of production and consumption shrunk, even as foreign financial inflows inflated property prices for housing and office space, fuel and public utilities. Real estate and utility services hitherto provided freely or at subsidy to the economy at large were turned into a predatory vehicle for foreigners to extract income, putting the domestic population on rations, much as what occurs under military occupation. Yet the public media, academic centers and parliaments have persuaded populations that this is part of a natural order, even the product of how a free-market is supposed to operate, rather than a retrogression back to quasi-feudal institutions. The simplistic idea is that making money is itself “capitalist” ipso facto, regardless of whether industrial capital is being created or dismantled and stripped.

How hard times affect people

Public health reports throughout the world document how lifespans shorten as economic inequality and poverty increase. The moral is that “debt kills,” by impoverishing and destroying populations. Those who try to defend themselves are branded as terrorists by their financial predators. Malthus’s population doctrine, after all, was composed to rationalize the free lunch of his landlord class, and World Bank policies to reduce the populations of indebted Third World countries likewise was the natural complement to the financial asset stripping it endorsed. Fewer people to feed, clothe and house in a situation where investors seek mainly the public enterprises for whose construction governments have already run into foreign debt, plus land and resources supplied by nature rather than by human labor.

Nowhere is the violence of creditors more pronounced than in their destruction of education, especially economic studies and knowledge of history. The first act of the Chicago Boys (University of Chicago monetarists, headed by Nobel Prize winner Milton Friedman) in Pinochet’s Chile after the 1974 military coup was to close down every economics and social science department in the nation, except for the monetarist stronghold at the Catholic University where they held sway. The idea was to strip academia of any alternative point of view. Matters are not much different in other countries. At a post-Keynesian economics conference in Berlin on “financialization” last November, I heard many complaints that alternative views to Chicago School orthodoxy were unable to get a hearing in the leading European academic journals. And just this March at the Eastern Economic Association’s annual meeting in New York City, I heard similar complaints that alternative economic ideas were excluded from the major refereed journals in which aspiring academics must gain entry in order to be promoted to tenure track jobs at most U.S. universities. An intellectual Iron Curtain has been lowered by dysfunctional “free market” orthodoxy. Evidently a free market in ideas is anathema to financial free marketers. With such strong intellectual control, of course, overt violence is unnecessary.

Such intellectual intolerance is in the DNA of the creditor mentality because it cannot withstand awareness and understanding of its destructive effects. The “miracle of compound interest” is not achievable in practice beyond the short run. To pretend that it may form the basis for a sustainable model of wealth creation does violence to rationality and economic logic. This is why the economic theory that creditors prefer – and subsidize – is learned ignorance propagated by useful idiots. Its role is to distract attention from society’s most important economic dynamics, those of finance and property polarization via debt, evidently on the premise that what is not seen or analyzed will not be regulated or taxed. One is reminded of Baudelaire’s quip: “The devil wins at the point where he convinces people that he does not exist.” A “free market” for rentiers thus is one “free” of alternative ideas.

That is the political function of mainstream economic theory today. And to cap matters, the creditor-oriented worldview does similar violence to the teachings of world’s major religions.

Christian endorsement of debt cancellation and Clean Slates

From at least as early as 2400 BC it was normal for Sumerian and Babylonian rulers to annul the population’s personal and agrarian “barley” debts upon taking the throne for their first full year of rule. In addition to annulling these debts, Mesopotamian Clean Slates freed bondservants and restored self-support land to former owners who had forfeited their crop rights to foreclosing creditors. The Babylonian word for these Clean Slates was andurarum, and Jewish law adopted them with the cognate Hebrew word deror. But by the first millennium BC, kings had come to represent local oligarchies, so Mosaic Law took Clean Slates out of the hands of rulers and placed them at the center of Judaic religion in the Jubilee Year of Leviticus 25. Like Babylonian law, it cancelled personal debts, freed bondservants and restored land tenure to its “original” holders.

Debt cancellation is at the heart of the laws of Exodus, Leviticus and Deuteronomy calling for debts to be cancelled periodically, and to liberate indebted bondservants. Ezra and Nehemiah describe how they returned from Babylon to restore order by canceling the debts – and re‑discovering the Book of Deuteronomy. But creditor oligarchies were on the rise throughout the Mediterranean region in the centuries that followed. By the time of Jesus the mainstream of Jewish leadership had mounted an attack on the Jubilee Year, endorsing Rabbi Hillel’s prosbul, a legal clause by which creditors forced debtors to sign away their rights to debt annulment at the Jubilee. In his first sermon, Jesus sought to retain the Jubilee year by unrolling the scroll of Isaiah and announcing that he had come to proclaim the Year of Our Lord.

The Jewish oligarchy appealed to Rome to crucify Jesus. As he and his followers gained adherents by advocating debt forgiveness, Rome used violence against them. But Christianity grew by creating communities of mutual aid. Upon achieving political power, the new religion’s most important economic achievement was to outlaw debt bondage throughout Western civilization. However, the idea of a Clean Slate had to be postponed until the Day of Judgment at the end of history.

As creditors drove the post-Roman economy into a Dark Age, Christians banned the charging of interest altogether, even on commercial “silver” loans. Ancient languages had no words to distinguish “interest” from “usury.” This distinction was drawn only in the 13^th century, as Church theologians applied the term “interest” to commercial loans in which “silent backers” advanced money to entrepreneurs. It was permissible for bankers to charge a foreign-exchange agio premium (that typically included an interest charge in practice), as long as the charge could be justified by their own labor and related outlays to provide money-transfer and loans. However, mortgages loans and personal loans were deemed usurious. The 13^th-century Churchmen treated usury as theft and hence in violation of the Eighth Commandment: “Thou shalt not steal.”

From antiquity through medieval European times, most theft took the form of usury, getting debtors to forfeit collateral they had pledged in exchange for emergency funds. Thomas Aquinas and Martin Luther in 1516 warned that this practice destroyed cities much as a worm destroys an apple from within its core. John Calvin in 1565, the last year of his life, likewise defined usury and fraud as theft on a plane with highwaymen and robbers. This ethic produced a line of development extending down to only a generation ago as Western law became more humane toward debtors. Debtors unable to pay are no longer turned into bondservants to their creditors, and debtors’ prisons have been closed down. Bankruptcy laws permit individuals (and corporations) to annul debts when they cannot pay.

But this eight-century-long historical trend is now being confronted with an anti-Enlightenment threatening to reverse it. In the United States, credit card companies have given enormous sums of campaign contributions to politicians willing to rewrite the bankruptcy laws to make home mortgage debts permanent and beyond the power of judges to write down. Wealthy individuals with more than one home can have their own mortgage debts on these properties written down, but homeowners with just a single residence are confronted with a lifetime of debt peonage. This is just the reverse of ancient law that protected the self-support land of citizens, but not their townhouses and other surplus property.

Credit without oligarchy

Most societies throughout history have sought to provide credit legally in ways that do not permit creditor oligarchies to emerge. Today’s creditor advocates are at war with the spirit of this idea. And in taking this position, they reject the thrust of the Enlightenment’s anti-usury laws, classical political economy’s distinction between productive and sterile investment, the St. Simonian attempt at financial reform, and the Progressive Era’s attempt to mobilize national credit to fund productive industrial investment rather than being extractive, benefiting only the few. The classical idea of economic freedom itself was formulated as the antithesis to feudal-epoch finance. And the ideal of freedom from predatory finance is what is being threatened today, as if society has forgotten how long and hard the reform struggle has been.

The fight to end debt bondage and debtors prisons took many centuries to achieve its humanitarian objective. Handel’s Messiah is a staple of the Christmas and Easter season celebrating the life and teachings of Jesus Christ. What has been forgotten is the context in which Handel arranged the first performance of this oratorio in Dublin, on April 13, 1742. It was a charity concert for the benefit “of the Prisoners in several Gaols, and for the Support of Mercer’s Hospital in Stephen Street, and of the Charitable Infirmary on the Inn’s Quay.” Enough money was raised to free a hundred and forty two prisoners. The oratorio’s text accordingly contained references to “breaking bonds asunder” and “casting away yokes,” recalling the early Christian belief that the Messiah’s reign would bring liberty (Hebrew deror or debt cancellation) and release (Greek aphesis) from debt bondage. The “redeemer” was literally the redeemer from debt.

This recalls the original, literal meaning of the Lord’s Prayer. It refers not only to forgiving sins and sinners in the abstract, but specifically to “forgive us our debts” – a translation distorted in much modern reading. “Sin” was the word for “debt” in all Indo-European languages: Schuld (the root of German sollen and English should), and devoir, the root of English debt. It meant obligation – referring in ancient practice to the obligation of an offender to make good payment to atone for his offense, as in European wergild tradition. The original debts were not paid to the rich, but by them, for manslaughter or physical wergild injury to their victims (who typically had to settle for payment rather than taking revenge). Today’s offenders disrupting social harmony are wealthy creditors, but society is paying money to them, not fining them. Seen from the ancient perspective, it is as if indebted society owes retribution to the rich. No wonder the spirit of modern religion has so thoroughly overturned that of its origins!

It therefore seems remarkable that in our own epoch – strained as it is by unprecedented and questionably created debt overhead that reduces not just individuals but entire nations to debt servitude – no major opposition has appeared on religious grounds. Churches have avoided the issue that was the cornerstone of so much of their earlier concern, and moved toward other concerns rather than remaining on the high ground of alleviating the debt burden.

Back to basics, and a call for transparent statistics

The classical economics of Adam Smith and John Stuart Mill, the Progressive Era reforms and Social Democracy are rooted in the moral philosophy of the 17^th- and 18^th-century Enlightenment. The labor theory of value can be traced from the 13^th-century Schoolmen via John Locke to Adam Smith and the Scottish Deists, via David Ricardo’s isolation of economic rent (what Mill called the “unearned increment” that landowners and others receive “in their sleep” rather than through their own labor) as an element of price in excess of cost-value. The distinction between intrinsic value and market price led to socialist and progressive theories of a just society free of economic privilege, free of prices in excess of socially necessary costs of production and of rentier income and wealth without effort.

The common thread in these ideas is that people deserve to receive the fruits of their labor. This means bringing prices in line with actual labor-costs of production. It also means that one’s wealth should be limited to only what one creates – not land and natural resources, or monopoly privileges to extract income via control of roads, the right to create money and other natural monopolies. The aim of social reform for many centuries has been to purge capitalism of its legacy of absentee rentier property ownership patterns and creditor-oriented laws inherited from medieval times. The way to do this is to treat banking like transportation and the broadcasting spectrum, as a public utility to form a just fiscal base, not something to be privatized so that individual rentiers can tax society at large for what rightly is a public utility.

Beyond creating a travesty of international law, rentier interests have turned seemingly empirical statistics into a fictitious set of accounts that understate actual returns to the finance, insurance and real estate (FIRE) sector and the magnitude and information on land and other wealth ownership and distribution. Recent U.S. news has seen a fight by Wall Street to count short-term trading gains in stocks, bonds and financial derivatives as “capital” gains taxed at only a fraction of wages and profits. The financial managers in charge of national statistics likewise describe economy’s largest asset category, real estate, in largely fictitious economic terms. U.S. Federal Reserve statistics on asset values meanwhile depict the rise in real estate prices not as higher land valuation – which the land-price maps of major cities show to be the cause of rising prices, fueled by an exponentially expanding pyramid of credit relative to a fairly fixed land area – but as “replacement cost” of buildings. The inflation of real estate prices is assigned to “capital,” not land. This enables real estate owners to avoid paying income tax by depreciating their property as if it is wearing out, not rising in value. Buyers can start writing off the price of an already written-off building as soon as they buy it, treating its “wearing out” as a tax credit – even though older buildings bring a premium over today’s cost-cutting construction practices. This write-off, of course, is not granted to homeowners, only to absentee owners.

In the sphere of financial wealth, banks have fought truth-in-lending regulations for years in order to conceal the real interest rate their customers are having to pay when all the fees and other charges are added on. They are fighting tooth-and-nail against “mark to market” accounting practices that would oblige them to let depositors and investors know how much their assets actually are worth – and hence, how much they have lost by irresponsible gambling. Whereas economic textbooks claim that a precondition of market efficiency is full knowledge of the market (otherwise, how can a market be deemed to be provide informed choice?), the financial sector always has fought tooth and nail against realizing this condition in practice.

Today the financial sector claims that the U.S. crisis was brought on not by bad investments by bank conglomerates and pension funds or misleadingly high credit ratings given to securities belatedly admitted to be junk, but by banks having to admit that the collateralized debt obligations (CDOs) and credit-default swaps they had been selling to global investments were in fact worthless from the outset. On March 12, 2009, the U.S. Congressional subcommittee in charge of financial reporting backed the bank lobbyists in “freeing” them from having to reveal their actual condition and (lack of) value of the securities they have been pawning off. As a New York Times reporter summed up the issue: “Next time you hear a banker denounce mark-to-market rules, ask if he runs his business that way. Will he offer you a mortgage loan based on what you think your home should be worth, which you can repay only if you make a lot more money than anyone will pay you? … maybe that is not such a good idea. The banks already tried that, with liars’ loans. Those loans did not work out so well.”[1]

This helps explain why every new press release of bad financial news is greeted with the adjectives “unexpected,” “surprising,” “unforeseeable,” “once-in-a-century” and kindred terms. The financial sector seeks to free itself from criticism rather than taking the blame for having plunged headlong over the debt cliff. It can succeed in this economic fiction in proportion to the degree to which the public can be blocked from understanding just what is going on and how the financial sector gains at the expense of the economy at large. Shaping popular perception becomes the name of the game, and statistics are depicted as “empirical” reality rather than the result of intensive lobbying to promote politicians willing to back a distorted economic roadmap.

The problem goes to the very foundation of economic theory. Any set of statistics reflects categories in economic theory, and in recent years the Chicago School has taken the lead in what is now a nationwide trend to exclude the history of economic thought from the academic curriculum. One can get all the way through a Ph.D. without having surveyed the evolution of classical economics from the Physiocrats through Adam Smith, John Stuart Mill and the Progressive Era reformers. The essence of social reform throughout the Enlightenment, and indeed extending all the way back to the Church Schoolmen is no longer taught – the distinctions between earned and unearned income and wealth, and productive and unproductive (or “sterile”) employment and investment. Post-classical thought insists that all income is productive in proportion to whatever it earns – including the collection of economic rent or extortion of monopoly super-profit, or financial charges for interest and credit card fees, and the exorbitant salaries and bonuses that financial managers pay themselves. All revenue – and therefore, all wealth – appears to be “earned.” By their definition. This denies the concept of “investment in zero-sum activities that merely transfer income into the unproductive sector’s pockets, in contrast to creating income.

As a guide to policy reform, classical economics aimed at creating an economic and fiscal system that would bring market prices in line with technologically necessary costs of production. All such costs ultimately are reducible to labor. The necessary complement to the labor theory of value (adjusted for different grades of labor, the cost of their education and the linkage between wage levels and productivity) was the analysis of economic rent – an institutional add-on reflecting property ownership patterns, financial charges and taxes, not inherent costs of production. The classical reform program was to minimize the cost of production and of living, making economies more competitive by purifying industrial capitalism and removing its remaining feudal legacies, above all the right of hereditary absentee owners (landlords) to siphon off a rental charge for access to land for sites supplied by nature and given value by local public spending (e.g., “location, location, and location,” as real estate agents explain matters to prospective buyers) – and the right of bankers to charge for creating credit that governments could freely create themselves.

Fighting against progressive reforms, banks and other financial institutions have sought to preserve their special privileges by law, minimizing taxes on themselves by shifting the burden onto labor and industry. What they have achieved by financializing economies is (1) to raise the cost of living and the cost of doing business; (2) to free their major customers – mortgage borrowers – from taxation so as to leave as much surplus as possible available to be paid as interest; (3) to collect revenue hitherto used to finance the public sector by capitalizing it into interest charges and to inflate the price of housing and other real estate and privatized monopolies; (4) to effectively shift taxes onto labor and industry, thereby raising prices and undermining the competitive power of financialized economies. This is a travesty of classical “free market” policy. It is a policy for predators that mainly burdens economies with high interest and fees while also making the tax burden more oppressive while they reap the benefits.

John Maynard Keynes believed that the proper task of governments was to prevent over-indebtedness from leading to economic depression. He concluded his General Theory (1936) with a call for “euthanasia of the rentier.” Hoping to make credit productive, not extractive, his followers have advocated making banking a public utility so as to steer debt creation to fund growth in the means of production, not economic overhead by inflating property bubbles. Radical as this may appear today, this was the aim of the 19^th century classical economists, and underlay the financial reforms that shaped the 20^th-century economic takeoff. Only quite recently has the global financial press rediscovered this logic in the wake of today’s bubble meltdown. In a recent Financial Times column, Martin Wolf pointed out that in view of the huge bailouts that banks are demanding from the government to make the industrial economy and labor force pay for their losses, “banks are not commercial operations; they are expensive wards of the state and must be treated as such.” He concludes: “The UK government has to make a decision. If it believes that costly bail-out must be piled upon ever more costly bail-out, then the banking system can never be treated as a commercial activity again: it is a regulated utility – end of story. If the government does want it to be a commercial activity, then defaults are necessary, as some now argue. Take your pick. But do not believe you can have both. The UK cannot afford it.”[2] Neither can Iceland or any other country.

Backed by global creditors, the IMF wants to keep its power

But the financial sector is fighting back. Its global lobbyist, the International Monetary Fund, has sought to consolidate financial control of economies irreversibly. Article VIII of its charter, drawn up in a period of reaction against the blocked currency practices and tariff protectionism of the 1930s, rules that once a country has removed controls on its “current account” transactions, it is not legal to re-impose any new controls. The current account is defined to include not only import and export trade in goods and services, but also interest on foreign debt and the remittance of profits on foreign-owned investment. In the 1930s, interest payments were conceptually integrated with credit and debts on capital account. But in the 1940s the IMF and other countries changed their balance-of-payments accounting formats away from this logic.

Ostensibly aimed at freeing trade, the IMF’s Article VIII in reality created “free capital movements,” that is, the ability of financial gangs to freely raid currencies such as occurred in the 1997 Asian crisis and similar speculations. Governments were not permitted to protect their currency and exchange rates by limiting such raids or erecting barriers to predatory credit and destructive debt (or from U.S.-subsidized agricultural exports, for that matter). The legal effect of the IMF’s ruling was to block governments from regulating their financial sector, despite its rentier role as a public utility. For Iceland, this means that the government cannot keep the nation’s international debt within the economy’s ability to carry. The most basic criterion for national sovereignty thus is ruled illegal!

In practice, nearly every country has simply added the interest accrual onto its national debt balance each year. Nominally, it “borrows the interest,” but the effect is more like an accrual than a true new loan. Over time these public debts grow at an exponential rate – far in excess of the “real” economy’s rate of growth, a recurring theme in today’s post-classical economies.

Lessons for Icelandic financial policy

The first thing that Iceland needs to do is to realize that it is under financial attack from outside as well as from within – by foreigners supported by a domestic banking class. To succeed, these creditors are trying to convince the population that all debt is productive, and that the economy benefits to the extent that its net worth rises (the price of assets in excess of debt). The fatal error is the assumption that prices will never go down, and if they do, debts should be left in place even when this causes negative equity. To their erroneous way of thinking, a price plunge (recession or depression) is an accident that happens once in a century, not the inevitable result of debts growing at compound interest without a concurrent increase in earning power to pay higher prices and interest.

This deceptive mythology is capped by a mind game being played with Icelandic voters. The game is to promote the myth that there is no alternative but to pay the debts that a few insiders have rung up, debts that accrue interest when they go unpaid. This myth can be dispelled by recognizing that the volume of debt payments being demanded is beyond the country’s capacity to pay. The financial strategy is to postpone awareness of this fact as long as is possible, so as to proceed with the foreclosure and voluntary pre-bankruptcy sell-off of national assets to pay creditors. The one question that creditors do not want to be asked is, “Just how do you propose that we should pay you?” Creditors hesitate to come right out and answer, “By shrinking your economy, by shifting your wealth and property into the hands of a small and shrinking financial oligarchy, and by pricing your labor and industry out of world markets as a result of the heavy financial charges built into your pricing system.” They prefer to act “surprised” when economic force majeur obliges economies to replace defined-benefit pension programs with “defined contribution” plans in which all that workers know is how much they pay into the plan, not what they will end up with.

Iceland as a model test case for economic justice

The realization of the impossibility of paying its debts while maintaining a fair society with a financially level playing field in which people live by what they produce (rather than a debt peonage society headed by creditors) will help Iceland confront reality sooner rather than later. Some form of Clean Slate moratorium should be inevitable. The extent cannot be known until an accounting of who owes what to whom is made. But as a sovereign nation, Iceland can apply whatever economic laws it wishes, as long as these do not discriminate specifically against foreigners. (That can be the result of a general law, as long as foreigners are subject to the same laws as domestic citizens.)

Global creditors will complain mightily, hoping to convince Iceland to let finance make itself an extra-legal sector, beyond the scope of national law to regulate – or to tax. The aim is to place financial dynamics beyond the ability of legal systems throughout the world to contain or otherwise control, so as to make debt collection autonomous from democratic regulation. To achieve this victory, financial interests seek to dismantle the power of governments to limit the ability of creditors to engage in predatory lending and foreclosure. Financial lobbyists accuse government power of being a “road to serfdom,” whereas in reality only governments can protect populations from creditor-imposed debt peonage.

As another tactic in today’s debt crisis, creditors are trying to rush matters. The United States provides an object lesson in the pitfalls of not giving the government enough time to reason things through so as trace how the losses came to be suffered. Treasury Secretary Paulson represented the interest of his own firm, Goldman Sachs, in ramming through an $800 billion “bailout” giveaway package to Wall Street’s leading investment bankers. The sum included $180 billion dispersed so far to A.I.G. to pay speculators in derivatives (including $12 billion to its largest counterparty, Paulson’s own firm,), and $45 billion for Citigroup to pay its counterparty gamblers on the winning side of casino-style bets.

95% of American voters opposed this giveaway. The Treasury Secretary made the usual glib promises that this package would be used largely for debt relief and mortgage renegotiation. It was all a lie -which Mr. Paulson clearly knew to be a lie, because the terse three-page draft law he sent to Congress demanded that no government or law enforcement agency could punish financial lying under his program. The bankers took the money and ran. They used the money to pay themselves enormous bonuses and dividends to stockholders in a vain effort to support the stock price – and to buy smaller banks so as to create yet more giant financial conglomerates “too big to fail,” that is, too big to fail without bringing the entire U.S. financial system crashing down.

Unfortunately, a rush to judgment will give money to bankers irrecoverably. They then will do like U.S. Federal Reserve Chairman Ben Bernanke has done, and wring their hands and offer crocodile tears of apology. Such talk is costly! American voters are now angrier than ever at the government for voting this giveaway.

On national television on March 15, Mr. Bernanke used a false analogy already popularized by President Obama. He asked what people should do if an irresponsible smoker let his bed catch fire so that the house burn down. Should the neighbor say, “it’s his fault, let the house burn”? This would threaten the whole neighborhood, Mr. Bernanke said. The implication, he said, was that economic recovery required a strong banking and financial system.

But banking houses are not in the same neighborhood where most people live. In effect the United States is taking over houses that have not burned down, throwing out their owners and occupants to turn over to the culprits who burned down their own house. To Mr. Bernanke the “solution” to the debt problem is to get the banks lending again. They are to lend enough money so that their clients can borrow the money to pay them the stipulated interest charges. The aim is a return to “normalcy,” defined as new exponential growth in the volume of debt – more of the bubble economics that has just crashed all around us!

Iceland can lead the way

This clearly is not something that Iceland can afford. In fact, the United States cannot afford it either, as much real estate already has sunk into negative equity so that banks are not going to be willing to lend in any event. Fortunately, Iceland’s situation is so extreme that it may be saved even from the thought of creating yet new debt. It can face the financial problem and start to write down the debt overhead, to bring it in line with the economy’s ability to pay or in many cases simply write it off altogether.

First, Iceland needs to take a census of the magnitude of debts owed at home and abroad, and of the institutions to which these debts are owed. Second, it needs to assess the economy’s ability to pay these debts. This was the principle on which the world’s creditor nations founded the Bank for International Settlements in 1931, to assess Germany’s capacity to pay. Reference must be made both to the magnitude of debt relative to current price trends for the collateral supposedly backing this debt, and to the economy’s ability to produce a domestic-currency and foreign-exchange surplus over and above basic needs, including capital replenishment to grow at historical rates over time.

By insisting on a fully transparent financial analysis of who owes how much to whom, Iceland can toss the ball back into the creditors’ court and ask the bankers to explain just how they propose that Iceland should pay – and what they anticipate will be the economy-wide effect of such payment. How much can Iceland afford to pay in the next few years without losing its democratic home ownership and property ownership patterns and without abandoning its social democratic public policies? How can Iceland pay its debts without bankrupting itself, abandoning its social democracy and polarizing its hitherto homogeneous population between a tiny creditor oligarchy and the rest of the population? The island is in danger of creating a new ruling class that will control its destiny for the next century. Again, Adam Smith warned that financial oligarchies act with concern only for how much they can extract, not what they can help produce. They are not good forward planners and do not act responsibly because it is easier for creditors to strip assets than to create new capital.

In taking this position Iceland will simply be following the moral philosophy laid down by every major religion and every body of ancient and modern law as a core principle: the idea that credit must be kept within the ability to pay. It is obvious enough that global lenders have extended credit far beyond Iceland’s ability to pay. For over two centuries the United States has an excellent tradition in how to deal with this problem. Already in the colonial period New York State enacted the Fraudulent Conveyance law, which has remained on the books ever since New York joined the new nation. The problem it faced was British creditors and speculators coming to upstate New York to cheat local farmers out of their rich, well-situated land. The ploy was to extend a loan to a needy farmer, and then call it in just before harvest-time when the debtor lacked the money to pay. Alternatively, the speculator might simply lend more than the farmer could afford to pay even under normal conditions. So New York blocked this predatory practice by passing a law saying that if a bank or other creditor made a loan without knowing just how the debtor was to repay it, the loan would be declared null and void. It would be wiped off the books.

This law received considerable attention in the 1980s when Drexel Burnham and its emulators began providing junk-bond credit to corporate raiders. Companies defended themselves by pointing out that the only way that these high-interest bonds could be paid was by breaking up the target company and downsizing its labor force. But most of all, the law has international relevance. Most U.S. bank consortia have a New York City lead bank negotiate with Third World governments and other foreign borrowers. So far, none of these debtors have sought to annul their loans on the ground that the only way they can pay is to sell off their public enterprises and other government assets. But the enabling legislation is there, and provides an excellent model for Iceland to emulate. By pursuing this policy Iceland would achieve the kind of economic freedom defined by the classical economists – a market free of technologically unnecessary overhead charges, headed by surplus extraction by a vested oligarchy.

For financial interests, by contrast, their idea free market is one that leaves them free to do the economic planning “free” from government regulation and democratic constraint on their extractive, predatory credit and foreclosure practices. Wherever they have gained sway they have shrunk economies. Since the 1960s their proxies at the IMF and World Bank have imposed austerity programs on Third World countries, extending foreign-currency loans whose effect has been to make these countries more dependent and driven them even deeper into debt. In the post-Soviet economies since 1991, financial strategists have focused on prying away public enterprise, selling it off or using it as collateral for loans. The result of “financializing” these economies has been to provide a free field for predatory vested interests in league with globalized domestic financial oligarchies. In sum, the neoliberal model victimizes debtors, preventing them from paying their debts. Instead of funding new capital formation, it strips economies of their assets and empties them out. Ultimately this drags down the creditor economies themselves, as occurred in ancient Rome, medieval Spain, and the United States and Britain in the Great Depression (not to mention what is unfolding today).

Iceland is facing a bold con job. Should it feel obliged to pay countries that have no intention of ever paying their own debts? To get paid, creditors must convince their prey to accept the falsehood that debts can and indeed should be paid. The lie is that they can be paid without dismantling social democracy, selling off the public domain and polarizing society between creditors and debtors.

The point of reference should be Iceland’s broad long-term picture – the economy’s survival and growth prospects for the future. Foreign-currency loans should be denominated in domestic currency at written-down (and de-indexed) interest rates, or repudiated outright. The guiding principle should be to annul debts taken out under terms that are destructive and extractive.

As for the nitty-gritty of negotiating a resolution to Iceland’s debt crisis, the nation needs to re-frame the terms of the debate by removing fictitious assumptions that have no basis in reality. The first trammel of the mind is the assumption that Iceland needs to negotiate in a way that wins the creditors’ approval in a compromise. It is not possible for any fair agreement to be reached in this way. Any negotiation between creditors and debtors is adversarial, and creditors have spent many decades refining demagogic public relations ploys to divert attention to abstractions about “fairness.” A typical ploy is to ask whether it is fair for some debtors to receive larger write-offs than others. Is it fair for the most highly indebted individuals to gain the most – more than people who were more responsible? The aim here is to inflame popular resentment that some debtors will get a bigger write-off than others (and some debtors are indeed as as guilty as the perpetrators who sold them on the idea that home prices only go up), so as to blame the poor and most highly indebted rather than reckless creditors.

The real issue is the health of the overall economy. The parties seeking the most are not the most indebted individuals, but the largest creditors. Their aim is to increase their dominion over the rest of society. Above all, their aim is to maximize the power of debt over labor. The worse the economy does, the stronger the creditor position will grow. This is a recipe for economic suicide that will lead to outright debt peonage as domestic depression intensifies. Creditors everywhere else in the world are writing down their claims for payment to reflect plunging property values. Iceland has an opportunity to make itself a model test case for economic justice. What better time to post the basic principle of what is to be saved – an unsupportable debt burden that must collapse in the end, or a society’s survival? Will the government defend its citizens from financial predators, or turn the economy over to them? That is the question.

NOTES

[1] Floyd Norris, “The Problem? Bankers Point to the Rules,” The New York Times, March 13, 2009.

[2] Martin Wolf, “Big risks for the insurer of last resort,” Financial Times, March 6, 2009.

The Madoff Affair

A Guide to the Perplexed Antisemite…

The thinking-man’s antisemite would be baffled what to make out of Madoff Affair. Should he rejoice or bewail? If you read Jewish newspapers, you’d think that “antisemites” – the vast majority of mankind, according to Jewish sources (“scratch a goy and you’ll find an anti-Semite”) – should be bursting with joy.

Bradley Burston enthused in Haaretz: “For the true anti-Semite, Christmas came early this year. The anti-Semite’s new Santa is Bernard Madoff. The answer to every Jew-hater’s wish list. The Aryan Nation at its most delusional couldn’t have come up with anything to rival this”. He is echoed by the execrable Lipstadt: “He is an antisemite’s dream. The worst of them could not have dreamt up such a story.” And the ADL confirms: “We expect the antisemites to have a field day. They will exploit it.”

One would think that Jewish mega-cheats are a rare species, like white ravens. This is hardly the case. Dr. William Pierce made his valuable observation some years ago: “Jews aren’t the only crooks, but they’re certainly the biggest crooks. If you hear about a 100-thousand-dollar swindle, it could be anybody. If you hear about a 100-million-dollar swindle, then you know that it has to be a Jew.” Even more so if we hear about a 50-billion-dollar swindle!

Pierce reminded his readers about Michael Milken, Ivan Boesky, Marty Siegel, Dennis Levine and the insider-trading scandal that nearly wrecked Wall Street a dozen years ago– and incidentally bankrupted tens of thousands of ordinary Americans who lost their investments as a result of the artificial manipulation of stock prices. Every major actor in that scandal was a Jew.

“Remember the enormous savings-and-loan catastrophe during the 1980s that ended up costing American taxpayers 500 billion dollars? A big part of the reason for the collapse of the savings-and-loan industry in the 1980s was the huge investments in so-called ‘junk bonds’ by so many savings-and-loan institutions. And the man behind the junk bonds –the financial genius persuading the savings-and-loans to buy them–was none other than Michael Milken.”

One can fine-tune Pierce: the big crooks and swindlers are not necessarily Jews but they are devoted to Jewish causes, be it the Holocaust cult or the Zionist cause. When it comes to charity, an American cheat, whether goy or Jew, does not care for poor Americans or for starving Africans. He gives his tithe to the Jewish cause. This was the case with Madoff. He contributed a lot to Jewish causes, so he had to be a swindler. (In “The Man Higher Up” from my book Pardes, I explain why).

So, why should the proverbial antisemite rejoice at Madoff’s fall, if it was as much to be expected as the morning dawn? Is it because there were “a number of prominent Diaspora Jews among the victims, including Nobel laureate Elie Wiesel, movie director Steven Spielberg, and real-estate magnate Mortimer Zuckerman”, as the Wall Street Journal reported?

James Petras thinks it should rather disappoint antisemites: “Madoff struck a severe blow against anti-Semites who claim that there is a ‘close-knit Jewish conspiracy to defraud the Gentiles’, laying that canard to rest once and for all. Among Bernard Madoff’s principal victims were his closest Jewish friends and colleagues, people who shared Seder meals and frequented the same upscale temples in Long Island and Palm Beach.” [An edited version of Petras’ article is appended below.]

This is also the view of Michael Hoffman: “Madoff’s enormous heist … undercuts a stereotype of the Jew-haters: that Jews are always …robbing gentiles and profiting communally from the rip-off. This is sheerest ignorance… Contrary to the received opinion, Judaism is not good for Jews. They may cheat the gentiles first, but sooner or later they’ll give each other a haircut too.” Hoffman goes even further and says, “The biggest victims of Judaism are not gentiles but Jews themselves.”

One hesitates to disabuse his noble heart. Though Hoffman’s generous statement certainly is correct in a deep spiritual sense, the Judaic strategy, in the medium-run, is a winning one in the practical sense. From bankruptcy to bankruptcy, from swindle to swindle, from one insurance fraud to the next — the aggregate wealth of the Jewish community permanently grows thanks to intra-Jewish philanthropy. Yes, Spielberg and Yeshiva University lost some cash in this debacle, but otherwise, billions of dollars came in and remained within the Jewish community. One may view Madoff as a Jewish suicide bomber: he blew himself up financially, and the immediate losses to a few Jewish investors were just so much collateral damage. But the bottom line was a major, permanent transfer of gentile wealth to the Jews.

As always, denunciations of antisemitism serve to cover up the hard facts. We hear of ruined Jewish investors, BUT the majority of Madoff’s fools were non-Jewish, correctly observed Peter Myers’ correspondent Leo Schmit from Kandahar, Afghanistan. “The majority of Madoff’s fools were non-Jewish individuals, banks, funds and firms. The claim that Jewish foundations are taking the ‘biggest hit’ is evidently not true. The harm to Jewish foundations is dwarfed by the damage done to numerous financial institutions, funds and firms as listed by Henri Blodget.” Besides, the Jewish American investors (as opposed to the European non-Jews and their banks) will get their investment back under the US government’s financial fraud protection scheme.

So, antisemites have no reason to rejoice. A Jewish crook is nothing new; a successful Jewish crook is nothing new, either. Jews did not lose, they won. Their complaints and regrets are as true as Madoff’s accounting. Dr Petras’ joy was premature, too, as he wrote: “The swindle may lessen funding for AIPAC’s purchase of Congressional influence and financing of propaganda campaigns in favor of a pre-emptive US military attack against Iran.” Not so fast, Jim! Even if some Jewish and Zionist organizations lost money, the total sum of Jewish holdings increased, and this new wealth will again find its way to the Zionist Lobby and other such bodies. Does this mean that nothing can be done about it? No. Where there is a will, there is a way.

While it would be unfair to confiscate the private funds of innocent Jewish individuals in compensation for the Jewish fraudsters’ misdeeds, the holdings of “the Jewish people” are fair game. Now these vast holdings are mortmain, as was Church property in the Middle Ages. Mortmain, or “Dead Hand”, means one can’t sue them. All losses are yours, while only the profits are theirs. Such a regime is too good to last forever. The Reformation would never have taken place but for the Dead Hand rule of the Church holdings. The princes finally had to expropriate the Church, otherwise it would have become too powerful and undermined their own economic dominion. Now is the time to deal with the Jewish Dead Hand. They benefited from Madoff’s misdeed, now let them pay for it.

These holdings are controlled by still uncaught Madoffs and other Zionist leaders. The Jewish National Fund (JNF) “is a multi-national corporation with offices in about dozen countries world-wide. It receives millions of dollars from wealthy Jews around the world, most of which are tax-exempt contributions. JNF’s aim is to acquire and develop lands exclusively for the benefit of Jews. It leases land to Jews only.” Our friend Jonathan Cook from Nazareth described it as a racist institution of immense wealth and power. The JNF received funding from Madoff, and moreover, other people who earned money through Madoff’s schemes also supported the JNF.

Another possible mortmain body with vast holdings is the Conference on Jewish Material Claims against Germany. This Fund, according to Haaretz, received billions dollars’ worth of real estate in East Germany under a clause in German law that recognizes it as the owner of all assets belonging to Holocaust victims without heirs. Do not worry: this money is not helping poor old Jews anyway. A Haaretz headline relates that “Survivors get tiny slice of Holocaust compensation”. This bulk of cash should be used to pay the defrauded gentiles.

While we’re at it, these and other Jewish communal bodies may be charged not only for the relatively tiny losses caused by Madoff, but for the much bigger ones caused by the Talmud-swearing Alan Greenspan and his Yeshiva-comrade Ben Bernanke. There is no reason to hate Greenspan or to call him Public Enemy Number One: it will be enough to revert his main deed, the massive transfer of wealth from ordinary Americans to the super-rich and from them to the Jewish causes. Among these latter, the Simon Wiesenthal Tolerance Center should also be a prime target; this could save Jerusalem from the monstrosity that organization plans to build in the centre of Jerusalem on top of Mamilla Cemetery. (In order to be ‘tolerant’, by Simon Wiesenthal Tolerance standards, you must support gag laws and the bombing of Iran!)

Expropriation of these bodies will not harm a single honest person of Jewish origin. It’s the other way around: it would remove the major reason for antagonism between Jews and non-Jews. Jews would know that there are no separate funds to take care of them and would recognize that they are in one boat with their non-Jewish fellow-citizens. And then the Jewish Lobby would shrink to its natural size of, say, Cuban Lobby, and the US would recover from its sickness.

We, the Israelis, would be the biggest beneficiaries of such a move. Isaac Deutscher ascribed the negative developments in Israel to the influence of super-rich American Jews: “A wealthy American Jew is at heart proud to be a member of the Chosen People, and in Israel he exercises his influence in favour of religious obscurantism and reaction. He keeps alive the spirit of racial-talmudic exclusiveness and superiority. It feeds and inflames the antagonism towards the Arabs”. If they are made to pay for their tricks, not only antisemites, but Jews as well will have good reason to rejoice.

A native of Novosibirsk, Siberia, a grandson of a professor of mathematics and a descendant of a Rabbi from Tiberias, Palestine, he studied at the prestigious School of the Academy of Sciences, and read Math and Law at Novosibirsk University. In 1969, he moved to Israel, served as paratrooper in the army and fought in the 1973 war.

After his military service he resumed his study of Law at the Hebrew University of Jerusalem, but abandoned the legal profession in pursuit of a career as a journalist and writer. He got his first taste of journalism with Israel Radio, and later went freelance. His varied assignments included covering Vietnam, Laos and Cambodia in the last stages of the war in South East Asia.

In 1975, Shamir joined the BBC and moved to London. In 1977-79 he wrote for the Israeli daily Maariv and other papers from Japan. While in Tokyo, he wrote Travels with My Son, his first book, and translated a number of Japanese classics.

Email at: info@israelshamir.net

Israel Shamir is a regular columnist for Underground Dissident