Friday, January 21, 2011

Huffington Post Joins CIA Controlled "Main Stream Media"

By: Dr. J. P. Hubert

After 6 years, the Huffington Post has become indistinguishable from the rest of the CIA controlled main stream media. Case in point; recently Howard Fineman, (formerly of Newsweek Magazine and an MSNBC contributor) became a senior editor "overseeing and steering The Huffington Post's political coverage from its Washington bureau." 

Fineman is an extremely influential member of the elite media who can be counted upon to faithfully parrot the CIA's current "party-line" along with his ideological kindred spirit, Chris Matthews ("Hard Ball", MSNBC), albeit from what will appear to be a more left wing portion of the political spectrum.

Extent of Intelligence Service Capture of Elite Media

This writer has long suspected that Chris Matthews and Bob Woodward are both CIA cutout's/agents (it is well known that Woodward began his career in Naval Intelligence as did Lee Harvey Oswald who is now known to have been a US intelligence double agent not an actual defector to the USSR). All three (Woodward, Matthews, and Fineman) and now the Huffington Post can be counted upon to  disallow serious discussion of conspiracy theories e.g. the JFK, RFK, MLK assassinations, 911, or the true nature of the Apartheid regime of modern Israel and the deleterious effect US support for its ethnic cleansing policies in the West Bank and Gaza have on US national Security. These topics are verboten among the elite media which henceforth includes the Huffington Post

Conspiracy theorist Bob Fox recently wrote an article entitled "The Huffington Hoax" for an excerpt from which follows:
"The MSM (including The Huffington Post) as a whole does not want the truth of the JFK assassination or the events of 9/11 ever to come out. Why? Because they are almost as guilty as the forces that truly committed those heinous crimes. Why? Because they helped cover up the true facts about what really happened during those events. It's too late now to come clean. That is why the Discovery Channel has put out their attempt at disinformation with recent shows about the JFK assassination on the network."

It appears that Dylan Ratigan of MSNBC who is also a writer for the Huffington Post has not yet been totally captured by the US intelligence apparatus.  If he persists in his current truth-telling activities, Ratigan's career will likely be negatively impacted in one form or another. At present his insights vis a vis the 6 trans-national corporate entities that control Congress through campaign contributions is "spot-on." Whether by accident or good fortune, it is still possible to occassionally find news/commentary of value at the Huffington Post although it no doubt will become increasingly more difficult as time goes on as Bob Fox has argued.

Fineman: Barack Obama is a Center-left President

At his new postion with the Huffington Post we can be sure that Howard Fineman will do nothing to threaten the "Regime's" ultimate control.  He will continue to claim no doubt that Barack Obama is a center-left President while in reality, the current President is to the right of George W. Bush on American foreign policy (read "war-making") and more fascist than either Bush or Cheney on suspension of the human rights of individual American citizens.

Obama Falsely Depicted as a Left-Wing Socialist

Fineman's portrayal of Barack Obama is largely synonymous with the views of the Tea Party and other members of the more traditional neoconservative/neofascist right-wing who persist in falsely portraying President Obama as a democratic Socialist. Nothing could be further from the truth. Obama has been more supportive of the so-called Military Industrial Complex, Wall Street, and the Health Insurance monopoly than George W. Bush ever was. He is in fact a great friend of "Big-Business" despite the fact that the business (in order to support the fiction that he is a socialist) community persistently labels him a left-wing socialist. The more Big-Business complains about how anti-business Obama is, the easier it is for him to do their bidding. The sophistry involved is truly breathtaking.

Operation Mockingbird Still in Effect

As many readers are aware, decades ago Operation Mockingbird was instituted by the CIA in an attempt to enlist members of the elite media in its quest to control American news coverage in a way that was completely supportive of its largely clandestine/immoral activities. Recall that Carl Bernstein of the Washington Post documented the extent of this infiltration over 30 years ago in his extensive article for Rolling Stone, October, 20, 1977.

Today, the major broadcast, cable TV and print outlets are all under the control of the "Regime." The Huffington Post is one of the largest and first internet based alternative media entities to come under the control of the MIMIC (media, intelligence, military, industrial, complex). Given that attempts are being successfully made to further restrict internet freedom under the guise of insuring it, the recent co-opting of the Huffington Post by US intelligence ala Operation Mockingbird is disturbing and probably indicative of a worrisome trend.

Thursday, January 20, 2011

False Flag Attacks: 911, Anthrax, Other?

Anthrax Coverup: A Government Insider Speaks Out

Submitted by davidswanson on Tue, 2007-07-03 20:08

By Steve Watson

Is it possible that the anthrax attacks were launched from within our own government? A former Bush 1 advisor thinks it is.

Francis A. Boyle, an international law expert who worked under the first Bush Administration as a bioweapons advisor in the 1980s, has said that he is convinced the October 2001 anthrax attacks that killed five people were perpetrated and covered up by criminal elements of the U.S. government. The motive: to foment a police state by killing off and intimidating opposition to post-9/11 legislation such as the USA PATRIOT Act and the later Military Commissions Act.

"After the September 11, 2001, terrorist attacks, the Bush Administration tried to ram the USA PATRIOT Act through Congress," Boyle said in a radio interview with Austin-based talk-show host Alex Jones. "That would have set up a police state.

"Senators Tom Daschle (D-South Dakota) and Patrick Leahy (D-Vermont)
were holding it up because they realized what this would lead to. The first draft of the PATRIOT Act would have suspended the writ of habeas corpus [which protects citizens from unlawful imprisonment and guarantees due process of law]. Then all of a sudden, out of nowhere, come these anthrax attacks."

"At the time I myself did not know precisely what was going on, either with respect to September 11 or the anthrax attacks, but then the New York Times revealed the technology behind the letter to Senator Daschle. [The anthrax used was] a trillion spores per gram, [refinedwith] special electro-static treatment. This is superweapons-grade anthrax that even the United States government, in its openly proclaimed programs, had never developed before. So it was obvious to me that this was from a U.S. government lab. There is nowhere else you could have gotten that."

Boyle's assessment was based on his years of expertise regarding America's bioweapons programs. He was responsible for drafting the Biological Weapons Anti-Terrorism Act of 1989 that was passed unanimously by both houses of Congress and signed into law by President George H.W. Bush.

After realizing that the anthrax attacks looked like a domestic job, Boyle called a high-level official in the FBI who deals with terrorism and counterterrorism, Marion "Spike" Bowman. Boyle and Bowman had met at a terrorism conference at the University of Michigan Law School. Boyle told Bowman that the only people who would have the capability to carry out the attacks were individuals working on U.S. government anthrax programs with access to a high-level biosafety lab. Boyle gave Bowman a full list of names of scientists, contractors and labs conducting anthrax work for the U.S. government and military.

Bowman then informed Boyle that the FBI was working with Fort Detrick on the matter. Boyle expressed his view that Fort Detrick could be the main problem. As widely reported in 2002 publications, notably the New Scientist, the anthrax strain used in the attacks was officially assessed as "military grade."

"Soon after I informed Bowman of this information, the FBI authorized the destruction of the Ames cultural anthrax database," the professor said. The Ames strain turned out to be the same strain as the spores used in the attacks.

The alleged destruction of the anthrax culture collection at Ames, Iowa, from which the Fort Detrick lab got its pathogens, was blatant destruction of evidence. It meant that there was no way of finding out which strain was sent to whom to develop the larger breed of anthrax used in the attacks. The trail of genetic evidence would have led directly back to a secret government biowarfare program.

"Clearly, for the FBI to have authorized this was obstruction of justice, a federal crime," said Boyle. "That collection should have been preserved and protected as evidence. That's the DNA, the fingerprints right there. It later came out, of course, that this was Ames strain anthrax that was behind the Daschle and Leahy letters."

At that point, recounted Boyle, it became very clear to him that there was a coverup underway. He later discovered, while reading David Ray Griffin's book on the 9/11 attacks, The New Pearl Harbor, that Bowman was the same FBI agent who allegedly sabotaged the FISA warrant for access to [convicted co-conspirator] Zacharias Moussaoui's computer prior to 9/11. Moussaoui's computer contained information that could have helped prevent the attacks on the World Trade Center and the Pentagon.

In 2003, Bowman was promoted and given the Presidential Rank Award by FBI Director Robert S. Mueller. Senator Chuck Grassley (R-Iowa) wrote a letter to
Mueller, chastising the organization for granting such an honor to an agent who had so obviously compromised America's security.

During the anthrax scare, the House of Representatives was officially shut down for the first time in the history of the republic. Once opposition from Leahy and Daschle evaporated in the wake of the attempts on their lives, the USA PATRIOT Act was rammed through. Testimony by Representative Ron Paul (R-Texas) revealed that most members of Congress were compelled to vote for the bill without even reading it.

"They were going to move to suspend the writ of habeas corpus, which is all that really separates us from a police state," Boyle said. "And that is what they have done now with respect to enemy combatants [in the Military Commissions Act of 2006]." Boyle added that lawmakers are now arguing that Amendment XIV, which guarantees due process of law to all Americans, does not mean what it has been taken to mean and that, under the Military Commissions Act, any U.S. citizen can be stripped of citizenship and be labeled an enemy combatant.

Continued Boyle: "In other words, they have taken the position that at some point in time, if they want to, they can unilaterally round up United States native-born citizens, as they did for Japanese-Americans in World War II, and stick us into concentration camps." Boyle asserted that top officials, such as White House legal advisor John Yoo and former Assistant Attorney General Jack Goldsmith (now a professor at Harvard Law School), are pushing for the legalization of torture as well.

"The Nazis did the exact same thing," said Boyle. "They had their lawyers infiltrating law schools. Carl Schmidt was the worst, and he was the mentor to Leo Strauss, the [ideological] founder of the neoconservatives. So the same phenomenon that started in Nazi Germany is happening here, and I exaggerate not. We could all be tortured; we could all be treated this way."

Boyle stressed that it is vital to keep up the pressure on Senator Leahy, who now chairs the Senate Judiciary Committee, giving him subpoena power. Since Leahy was himself a target, he may have sufficient motivation to get to the bottom of the attacks. The FBI and the Justice Department have so far refused full disclosure to Congress.

In addition to his credentials as a government advisor, Boyle also holds a doctorate of law magna cum laude and a Ph.D. in political science, both from Harvard University. He teaches international law at the University of Illinois at Champaign-Urbana. Boyle also served on the Board of Directors of Amnesty International (1988-92) and represented Bosnia-Herzegovina at the World Court.

Boyle alleged that due to his activities as a lawyer, he was interrogated by an agent from the CIA/FBI Joint Terrorism Task Force in the summer of 2004. The agent tried to recruit him as an informant to provide the FBI with information on his Arab and Muslim clients. When he refused, according to Boyle, the FBI placed him on the government's terrorism watch lists.


Ten False Flag Operations that Shaped our World

Joe Crubaugh
May 21st, 2010

The most commonly known false flag operations consist of a government agency staging a terror attack, whereby an uninvolved entity gets blamed for the carnage. As at least two millennia have proven, false flag operations, with healthy doses of propaganda and ignorance, provided a great recipe for endless war.

In “War is a Racket”, Two-time Medal of Honor recipient Major General Smedley Butler wrote: “I spent 33 years and four months in active military service and during that period I spent most of my time as a high class muscle man for Big Business, for Wall Street and the bankers. In short, I was a racketeer, a gangster for capitalism. I helped make Mexico and especially Tampico safe for American oil interests in 1914. I helped make Haiti and Cuba a decent place for the National City Bank boys to collect revenues in. I helped in the raping of half a dozen Central American republics for the benefit of Wall Street. I helped purify Nicaragua for the International Banking House of Brown Brothers in 1902-1912. I brought light to the Dominican Republic for the American sugar interests in 1916. I helped make Honduras right for the American fruit companies in 1903. In China in 1927 I helped see to it that Standard Oil went on its way unmolested.”

You may not have heard of these operations, but perhaps you have heard of these?


Synthetic Terror: There Is No “War On Terror”

May 21st, 2010

The thesis of Webster Tarpley’s 911 Synthetic Terror: Made in USA has been enthusiastically received with its working model of the 9/11 plot: a covert network of moles, patsies, and a commando cell in the privatized intelligence services, backed by corrupt political and corporate media elites.

"Denial is the default condition."

"Al-queda is a British/American 'countergang' designed to obstruct Arab nationalism."

"CIA and MI6 teamed up with secretive powerful elements of European intelligence services to orchestrate terrorist attacks."

"There is an Oligarchical consensus for constant war because the Oligarchy benefits from it. They have manufactured a largely fictitious external enemy."

"The 'War on Terror' is completely fabricated."


Also see: War and Truth by Nafeez Mosaddeq

and: False Flag Operations: The Crisis Route to the New World Order


Do the Tuscson, Arizona shootings represent an M-K Ultra inspired kind of "False Flag" operation?

Wednesday, January 19, 2011

The Logic of Imperial Insanity and the Road to World War III

Editor's NOTE:

This piece is simply outstanding. While quite lengthy, it is extremely insightful and nicely explains much of what is currently transpiring at the level of international politics.

--Dr. J. P. Hubert

By Andrew Gavin Marshall

Global Research
January 14, 2011

Defining the Imperial Stratagem

In the late 1990s Brzezinski wrote up the design for America’s imperial project in the 21st century in his book, “The Grand Chessboard.” He stated bluntly that, “it is imperative that no Eurasian challenger emerges, capable of dominating Eurasia and thus of also challenging America,” and then made clear the imperial nature of his strategy:

To put it in a terminology that harkens back to the more brutal age of ancient empires, the three grand imperatives of imperial geostrategy are to prevent collusion and maintain security dependence among the vassals, to keep tributaries pliant and protected, and to keep the barbarians from coming together.[1]

He further explained that the Central Asian nations (or “Eurasian Balkans” as he refers to them):

are of importance from the standpoint of security and historical ambitions to at least three of their most immediate and more powerful neighbors, namely Russia, Turkey and Iran, with China also signaling an increasing political interest in the region. But the Eurasian Balkans are infinitely more important as a potential economic prize: an enormous concentration of natural gas and oil reserves is located in the region, in addition to important minerals, including gold.[2]

Brzezinski emphasizes “that America's primary interest is to help ensure that no single power comes to control this geopolitical space and that the global community has unhindered financial and economic access to it.”[3]

Obama as a Rabid Imperialist

Obama wasted no time in rapidly accelerating America’s imperial adventures. While dropping the term “War on Terror” from usage, the Pentagon adopted the term, “overseas contingency operations.”[4] This was to be the typical strategy of the Obama administration: change the appearance, not the substance. The name was changed, but the “War on Terror” remained, and not only that, it was rapidly accelerated to a level that would not have been possible if undertaken by the previous administration.

The current expansion of American imperialism globally has been rapidly accelerated since Obama became President, and seems intent on starting and expanding wars all over the world. When Obama became President, America and its Western allies were engaged in a number of wars, occupations and covert destabilizations, from Afghanistan, Iraq, Somalia, to the Congo, and Obama took office in the midst of Israel’s brutal assault against Gaza. From the beginning of his presidency, Obama immediately justified Israel’s vicious attack against innocent Palestinians, rapidly accelerated the war and occupation of Afghanistan, expanded the war into Pakistan, started a new war in Yemen, and supported a military coup in Honduras, which removed a popular democratic government in favour of a brutal dictatorship. Obama’s administration has expanded covert special operations throughout the Middle East, Central Asia and the Horn of Africa, and is paving the way for a war against Iran.[5] In fact, the Obama administration has expanded Special Operations forces into 75 countries around the world (compared with a height of 60 during the Bush regime). Among the many countries with expanded operations are Yemen, Colombia, the Philippines, Somalia, Pakistan, among many others.[6] Further, in recent months, the Obama administration has been saber rattling with North Korea, potentially starting a war on the Korean Peninsula. With the creation of the Pentagon’s Africa Command (AFRICOM), American foreign policy on the continent has become increasingly militarized.

No continent is safe, it seems. America and its NATO cohorts are undertaking a seemingly insane foreign policy of dramatically accelerating overt and covert military imperialism. This policy seems to be headed for an eventual confrontation with the rising eastern powers, in particular China, but potentially India and Russia as well. China and America, specifically, are headed on an imperial collision course: in East Asia, South Asia, Central Asia, the Middle East, Africa and Latin America. The competition for access to resources is reminiscent of the ‘Great Game’ of the 19th century, of which Afghanistan was a central battlefield.

One would think that in the midst of a massive global economic crisis, the worst the world has ever seen, the major nations would scale back their imperial over-reach and militarism in order to reduce their debts and preserve their economies. However, there is an ‘imperial logic’ behind this situation, and one that must be placed within a wider geopolitical context.

Conceptualizing the Rise of China

First, we must properly address the nature of China’s rise in the world order. What we are witnessing is an historically unique situation. For the first time, the rise of a ‘new’ power is taking place not in the context of rising against the hegemonic powers of the time, but within the hegemonic order. In short, China’s rise has not been a rise against America, but rather a rise within the American world order. Thus, China has risen as much as the West has allowed it to rise, but that does not mean that China will not seek to serve its own interests now that it has accumulated significant global status and power. China has risen by integrating with the Western-dominated economic system, and in particular the Western banking and central banking systems. China and America are economically dependent upon one another, as America purchases China’s cheap products, and China funds America’s debt. In effect, China is also funding America’s imperial adventurism.

Thus, we are presented with a unique situation: one of mutual dependence and competition. While China and America are dependent upon one another, they are also each other’s greatest competitors, specifically in terms of access to and control over resources. For example, China supports both Iran and Sudan. These two nations are major targets of American imperial ambitions, not because of any humanitarian or anti-terrorism concerns (although that is the propaganda espoused most often), but because of the significant resources and strategic relevance of these nations. As they are not subservient to the West and specifically America, they are considered ‘enemy nations’, and thus the media focus on demonizing these nations so that the public is supportive of military or other means of implementing “regime change.” China supports these nations because of its access to their resources, and as a counter to American influence.

Global Governance

To add another complex feature to this story, we must place this conflicting relationship in the context of the global economic crisis and the world response to it. The G20 is the principle forum for ‘global governance,’ in which the nations of the world are working together to increasingly integrate their governance approaches on a global scale. The economic crisis has provided the impetus to spur on calls for and the implementation of plans to construct a system of global economic governance: a global central bank and global currency. So, as China and America are seeking to further integrate economically and globally, they are also competing for access to and control over resources.

The logic behind this is that both powers want to be able to negotiate the process of constructing a system of global governance from a more secure standpoint. While it is generally acknowledged that the world is witnessing “the rise of the East,” in particular with China and India, we see the center of global power moving from the Atlantic to the Pacific. Several commentators for years have been analyzing and discussing this issue; however, the fact that power has been centered in the Atlantic for the past 500 years means that it will not be so easily moved to the Pacific. In fact, the Western powers not only acknowledge the rise of the East, but that the East has risen because they have allowed it to and aided it in this process. The Western powers have done this not out of some benevolent design, but because the organized intellectual powers of the West (namely, the principle think tanks and banking interests) have sought to create a perfect global system of governance, one in which power does not sway from nation to nation, or West to East, but rather that power is centralized globally. This is obviously a long-term project, and will not (if ever) be realized for several more decades. Yet, it is through crises – economic, political, and social – that this process of global governance can be rapidly accelerated.

See: “Crisis is an Opportunity”: Engineering a Global Depression to Create a Global Government

Understanding Imperial Dynamics

There is another dynamic to this complicated relationship that must be addressed, that of the internal dynamics between the political, economic and military elite of the dominant nations. For the sake of time, I will focus on the two principle nations: America and China. America’s national security apparatus, namely the Pentagon and intelligence services, have long worked in the service of the economic elite and in close cooperation with the political elite. There is a network that exists, which President Eisenhower called the “military-industrial complex” where the interests of these three sectors overlap and thus America is given its imperial impetus.

It is within the major think tanks of the nation, specifically the Council on Foreign Relations (CFR), where cohesion between these sectors is encouraged and managed. The think tanks, and the CFR most especially, are the policy-makers of the American Empire. Think tanks bring together elites from most power sectors of society – the military, political, corporate, banking, intelligence, academia, media, etc. – and they discuss, debate and ultimately produce strategy blueprints and recommendations for American foreign policy. Individuals from these think tanks move in and out of the policy-making circles, creating a revolving door between the policy-planners and those that implement them. The think tanks, in this context, are essentially the intellectual engines of the American Empire.

Still, we must not assume that because they are grouped together, work together, and strategize together, that they are identical in views or methods; there is significant debate, disagreement and conflict within and between the think tanks and policy-making circles. However, dissent within these institutions is of a particular nature: it focuses on disagreement over methods rather than aims and objectives. To elaborate, the members (at least the powerful members) of think tanks like the Council on Foreign Relations do not disagree on the cause of empire and supporting American hegemony, that is a given, and is not often even discussed. That is the environment in which the elite operate.

What is up for debate and discussion is the methods used to achieve this, and it is here where significant conflicts arise between elites. Bankers and corporations seek to protect their financial and economic interests around the world. Military officials are concerned with preserving and expanding American hegemony, and are largely focused on potential rivals to American military power, and tend to favour military options of foreign policy over diplomatic ones. Political representatives must be concerned with the total influence and projection of American power – economically, militarily, politically, etc. – and so they must weigh and balance these multiple interests and translate it into a cohesive policy. Often, they lean towards the use of military might, however, there have been many incidents and issues for which political leaders have had to reign in the military and pursue diplomatic objectives. There have also been instances where the military has attempted to reign in rabidly militaristic political leaders, such as during the Bush administration with the neo-conservatives pushing for direct confrontation with Iran, prompting direct and often public protests and rebuttals from the military establishment, as well as several resignations of top-ranking generals.

These differences are often represented directly within administrations. The Kennedy years, for example, saw a continual conflict between the military and intelligence circles and the civilian leadership of John Kennedy. His brief term as President was marked by a constant struggle to prevent the military and intelligence services of America – particularly the Joint Chiefs of Staff and the CIA – from starting wars with Cuba, Vietnam and the Soviet Union. The Cuban Missile Crisis was resolved only after Robert Kennedy, JFK’s brother and the Attorney General, convinced the Russians that Kennedy was at risk of being overthrown in a military coup, which would result in a direct nuclear war against the USSR.

See: The National Security State and the Assassination of JFK

Thus, within the key policy circles – namely the think tanks and presidential cabinets – there is always a delicate balancing act of these various interests. Fundamentally, with American power, they all rest and support American corporate and banking interests. Diplomacy, especially, is concerned with supporting American corporate and financial interests abroad. As the Wikileaks diplomatic cables have revealed in a number of cases, diplomats directly intervene on behalf of and work with various corporate interests. US diplomats acted as sales agents to foreign governments promoting Boeing planes over European competitors, they pressured the government of Bangladesh to reopen a widely-opposed mine in the country operated by a British company, they lobbied the Russian government directly on behalf of the interests of Visa and Mastercard, engaged in intelligence sharing with Shell in Nigeria, and in the Central Asian republic of Kyrgyzstan, US diplomats worked with major British business interests and British Prince Andrew, who stated that, “the United Kingdom, Western Europe (and by extension you Americans too,” were “back in the thick of playing the Great Game,” and that, “this time we aim to win!”[7]

The military, in turn, acts in the interests of the corporate and financial elite, as those countries that do not submit to American economic hegemony are deemed enemies, and the military is ultimately sent in to implement “regime change.” Strategic concerns are de facto economic concerns. The military is concerned with preserving and expanding American hegemony, and to do so they must be focused on threats to American dominance, as well as securing strategic locations in the world. For example, the war in Yemen, a country with very little to offer economically, has a lot to do with strategic-economic interests. The ‘threat’ in Yemen is not in the form of al-Qaeda, though that is what is most propagandized, but rather it is the fact that the long-supported dictatorship of President Saleh, who has been in power since 1978, is threatened by a rebel movement in the North and a massive secessionist movement in the South, as the central government controls barely one-third of the country. In short, Yemen is on the verge of revolution, and thus, America’s trusted ally and local despot, President Saleh, is at risk of being usurped. Thus, America has heavily subsidized Yemen’s military, and has even directly launched cruise missiles, sent in Special Forces and other forms of assistance to help Yemen’s dictator suppress, repress and ultimately crush these popular people’s movements for independence and liberty.

Now why is this a strategic-economic concern to America, for a country that has little dwindling resources to offer? The answer is in Yemen’s geographic location. Directly below Saudi Arabia, a revolutionary government that would be highly antagonistic towards America’s trusted Saudi proxy state would be a threat to America’s interests throughout the entire Middle East. It would be likely that Iran would seek to ally itself and aid such a government, allowing Iran to expand its own political influence in the region. This is why Saudi Arabia is itself taking direct military action in Yemen against the rebels in the North, along its border. The Saudi elite are fearful of the rebellious sentiments spreading into Saudi Arabia itself. No wonder then, that America recently signed off on the largest arms deal in U.S. history with Saudi Arabia, totaling $60 billion, in an effort to support operations in Yemen but principally to act as a counter to Iranian influence in the region. Further, Yemen sits atop the Gulf of Aden, directly across from the Horn of Africa (namely Somalia), connecting the Black Sea to the Arabian Sea, which is itself one of the major oil transport routes in the world. Strategic control over the nations lining the Gulf of Aden is of primary interest to American imperial strategists, whether they are military, political or economic in nature.

Yemen is also directly across the water from Somalia, another country ravaged by the American war machine. As the diplomatic cables confirmed, in 2006, “the Bush Administration pushed Ethiopia to invade Somalia with an eye on crushing the Union of Islamic Courts,” which is exactly what happened, and Somalia has been a ‘failed state’ mired in civil war ever since.[8] The piracy that has exploded in the waters off of Somalia are a result of the massive toxic waste dumping and over-fishing done by European and American and other major shipping lines, and have served as an excuse for the militarization of the waters. In this context, it would be unacceptable from a strategic standpoint to allow Yemen to fall from American influence. Thus, America is at war in Yemen.

See: Yemen: The Covert Apparatus of the American Empire
China, alternatively, does not have such direct cohesion between its political, economic and military sectors. China’s military is intensely nationalistic, and while the political elite are more cooperative with U.S. interests and often work to achieve mutual interests, the military sees America as a direct challenge and antagonistic (which of course, it is). China’s economic elite, specifically its banking elite, are heavily integrated with the West, so much so that it is very difficult to separate the two. There is not such an integration between the Chinese and American military establishments, nor is there an internal dynamic within China that reflects the American system of empire. The divisions between military, political and economic circles are more pronounced within China than in America. The Chinese political leadership is put into a very challenging situation. Determined to see China advance economically, they must work with America and the West. However, on key political issues (such as with Taiwan), the political leadership must adhere to an intensely nationalistic approach, which is counter to U.S. interests, and supportive of Chinese military interests. Increasing military superiority is seen as a key aspect and objective of China’s increasing political dominance in the world scene. As one top Chinese general stated in 2005, “China should use nuclear weapons against the United States if the American military intervenes in any conflict over Taiwan.” The General cited “war logic” which “dictates that a weaker power needs to use maximum efforts to defeat a stronger rival.” His view suggested that elements within the Chinese military are ‘determined’ to respond with extreme force if America intervenes in any potential conflict over Taiwan, saying that, “We Chinese will prepare ourselves for the destruction of all the cities east of Xian. Of course the Americans will have to be prepared that hundreds of cities will be destroyed by the Chinese.”[9]

The Logic of Competitive Co-Operation

The Chinese military must be ready to protect its economic interests abroad if it is to have control over its own economic growth and thus maintain international power. Thus, China’s political impetus to support and increase its international influence is very conflicting. On the one hand, this means actively cooperating with America and the West (primarily in economic matters, as we see with the G20, where China is engaging in the dialogue and the implementation of global governance arrangements); and on the other hand, China must also challenge America and the West in order to secure its own access to and control over vital resources necessary for its own economic and political growth. China is placed in a paradoxical situation. While working with the West to construct the apparatus of global governance, China does not want to be dictated to, and instead wants a strong negotiating position in these arrangements. So while engaging in discussions and negotiations for the construction of a system of global governance, China must also actively seek to increase its control over key strategic resources in the world in order to strengthen its own negotiating position. It is often the case that when warring parties come to the table for negotiations, the on-the-ground operations are rapidly accelerated in order to strengthen the negotiating position of the respective party.

This was the case during the Rwandan Civil War, where throughout the Arusha Peace Process, the Rwandan Patriotic Front (RPF), heavily supported by America against the Rwandan government (which was supported by France and Belgium), rapidly accelerated its military campaign, thus gaining the upper hand during negotiations, which worked in its favour, ultimately resulting in the Rwandan genocide (which was sparked by the RPF’s assassination of the Rwandan president), and the RPF usurped power in Rwanda. This is also the case in Israel-Palestine “peace” negotiations, such as during the Oslo process, where Israel rapidly accelerated its expansion of settlements into the occupied territories, essentially ethnically cleansing much of the Palestinian populations of the West Bank and Gaza Strip. This expanded process of ethnic cleansing is what the Western political leaders and media call a “peace process.” Thus, when Palestinians react to this ethnic cleansing and expansion of the settlements (which is an inherently violent process), or a suicide bombing or mortar attack takes place in reaction to this expansion of settlements, Western political leaders and media blame the Palestinians for breaking a period of “relative peace” or “relative calm.” Apparently, it is considered to be “relative peace” if only Palestinians are being killed. Thus, Israel always ensures that through any negotiation process, its interests are met above all others.

So we see this logic with China and America today. While not directly at war with one another, they are each other’s greatest competition. This competition is prevalent in Central Asia, where America is seeking dominance over the region’s enormous natural gas reserves, thus depriving China of access to and control over these vital strategic resources. It is also heavily present in Africa, where China has presented an alternative to going to the World Bank and IMF for African governments to get loans and support in exchange for resource access. In this context, America established its newest Pentagon command, Africa Command (AFRICOM) to merge American diplomatic, civil society and military policy in Africa under command of the Pentagon. In the Middle East, America is primarily dominant, thus leaving China pushed to ally itself with Iran. In South America, China is allying itself with the somewhat progressive governments which rose in opposition to American military and economic hegemony over the region.

This logic holds for both America and China. Both seek to secure a dominant position while engaging in discussions and the implementation of a global governance apparatus. This leads both powers to seek cooperation and mutual benefit, yet, simultaneously, compete globally for control of resources. This is magnified by the global economic crisis, which has revealed the weaknesses of the global economy, and indeed the global monetary and banking systems. The world economy is on the verge of total collapse. The next decade will be scarred by a new Great Depression. This provides a further impetus for both of these powers to rapidly accelerate their control over resources and expand their military adventurism.

The American Empire is in decline, and is utterly bankrupt; however, its elites, which are in fact more global than national in their ideology and orientation, are seeking to not simply have American power disappear, or be replaced with Chinese power, but rather to use American power to construct the apparatus of a new global structure of authority, and that the American Empire will simply fade into a global structure. This is a delicate balancing act for the global elite, and requires integrating China and the other dominant powers within this system. It also inherently implies the ultimate domination of the ‘global south’ (Africa, Latin America, and parts of Asia). This is an entirely new process being undertaken. Empires have risen and fallen throughout all of human history. This time, the fall of the American Empire is taking place within the context of the rise of a totally new kind of power: global in scope, structure and authority. This will no doubt be one of the defining geopolitical events of the next several decades.

Historically, periods of imperial decline are marked by a rapid acceleration of international conflict and war, as the declining power seeks to control as much as it can as fast as it can (thus we see America’s seemingly insane expansion of war, conflict and militarization everywhere in the world), while rising powers seek to take advantage of this decline in order to accelerate the collapse of the declining power, and secure their position as the next dominant power. Yet, in this geopolitical landscape of the 21st century, we are faced with this entirely new context, where the decline of one empire and the rise of a new power are taking place while both seek to integrate and construct an entirely new system and structure of power, yet both seek to secure for themselves a dominant position within this new structure. The potential for conflict is enormous, possibly resulting in a direct war between America and China, or in a mass of global proxy wars between them.

This new century will indeed be an interesting one. The prospects of a new global war are increasing with every accelerated military adventure. The primary antagonist in this theatre of the absurd is without a doubt, the United States. If the world is headed for World War III, it is because America has made such a situation inevitable. One cannot preclude that for many global elites, such a result may be desirable in and of itself. After all, World War I provided the impetus for the formation of the League of Nations, and World War II provided the push for the United Nations to “secure peace between nations.” In a world largely run by global strategists, it would be naïve to assume that it has not occurred to some that a new world war could be precisely the event they need to convince the people of the world to accept their desired system of global governance; no doubt to secure ‘world peace.’ At least, I am sure it will be sold under that pretense.


[1] Brzezinski, Zbigniew. The Grand Chessboard: American Primacy and its Geostrategic Imperatives. Basic Books, 1997: Page 40
[2] Ibid, page 124.
[3] Ibid, page 148.
[4] Scott Wilson and Al Kamen, 'Global War On Terror' Is Given New Name, The Washington Post, 25 March 2009.
[5] MARK MAZZETTI, U.S. Is Said to Expand Secret Actions in Mideast, The New York Times, 24 May 2010.
[6] Karen DeYoung and Greg Jaffe, U.S. 'secret war' expands globally as Special Operations forces take larger role, The Washington Post, 4 June 2010.
[7] Eric Lipton, Diplomats Help Push Sales of Jetliners on the Global Market, The New York Times, 2 January 2011; Fariha Karim, WikiLeaks cables: US pushed for reopening of Bangladesh coal mine, The Guardian, 21 December 2010 ; Luke Harding and Tom Parfitt, WikiLeaks cables: US 'lobbied Russia on behalf of Visa and MasterCard', The Guardian, 8 December 2010; David Smith, WikiLeaks cables: Shell's grip on Nigerian state revealed, The Guardian, 8 December 2010 ; Borzou Daragahi and Alexandra Sandels, CENTRAL ASIA: WikiLeaks dispatches reveal a Great Game for the 21st century, Babylon & Beyond: LA Times Blog, 14 December 2010
[8] Rob Prince, WikiLeaks Reveals U.S. Twisted Ethiopia's Arm to Invade Somalia, Global Research, 26 December 2010.
[9] JOSEPH KAHN, Chinese General Threatens Use of A-Bombs if U.S. Intrudes, The New York Times, 15 July 2005.

Andrew Gavin Marshall is a Research Associate with the Centre for Research on Globalization (CRG). He is co-editor, with Michel Chossudovsky, of the recent book, "The Global Economic Crisis: The Great Depression of the XXI Century," available to order at He is currently working on a forthcoming book on 'Global Government'.

Tuesday, January 18, 2011

Ike was right all along: The danger of the military-industrial complex

Fifty years ago, President Eisenhower warned of the danger of the 'military-industrial complex'. The huge budget and reach of America's modern defence industry has proved him correct, says Rupert Cornwell

By Rupert Cornwell

January 17, 2011 "The Independent" - - If you doubt, half a century on, that Dwight Eisenhower had it right, then consider the advertisements on WTOP, the Washington region's all-news radio station. Every big metro area in the US has one, where car dealerships tout their bargains, and fast food chains promote a new special offer.

WTOP has all that. But it boasts other advertisers too, with names such as Boeing, Lockheed Martin and General Dynamics.

Of course, the average listener can't remotely afford a brand new military aircraft, or a state-of-the-art battlefield management system. But that's not the point. These almost otherworldly ads, with patriotic music playing softly in the background, are aimed at a very restricted audience: the government that is their only customer for such wares. For the rest of us, they are proof that in the capital of the world's richest democracy, the defence industry is a very big player indeed.

Exactly 50 years ago, on January 17 1961, Eisenhower delivered one of the most celebrated farewell speeches in American history, whose fame has only increased over the decades, eclipsed not even by JFK's inspirational inaugural that followed three days later. Kennedy might have projected the dynamism of youth. But the old soldier won the prize for prescience.

In his speech, Eisenhower warned about the growth of a 'military-industrial complex,' and the risks it could pose. "The potential for the disastrous rise of misplaced power," Ike said, "exists and will persist." His anxieties back then were prompted by the ten-fold expansion of the US military after two world wars, and by the development of a "permanent arms industry of vast proportions". Today, the proportions of both the military and the industry that serves it are vaster than ever.

Adjusted for inflation, US national security spending has more than doubled since Eisenhower left office. Year after year, the defence budget seems to rise – irrespective of whether the country is actually fighting major wars, regardless of the fact that the Soviet Union, the country's former global adversary, has ceased to be, and no matter which party controls the White House and Congress.

One common thread however exists: the military-industrial complex, or perhaps (as Eisenhower himself described it in a draft of his speech that was later amended) the military-industrial-congressional complex. Others have referred to the beast as the "Iron Triangle".

In one corner of the triangle stands the arms industry. The second is constituted by the government, or more precisely the Pentagon, the end-consumer of the industry's output. In a totalitarian state, such as the Soviet Union, that combination would be sufficient. The US however is a democracy, and a third corner is required – an elected legislature to vote funds to pay for the arms. This is Congress, made up of members who rely on the defence industry for many jobs in their states and districts, and for money to help finance their every more expensive re-election campaigns.

But maybe even triangle is an inadequate description. Today, more than ever, a fourth element underpins the military-industrial complex. It is the extraordinary prestige, verging on veneration, Americans accord their armed forces. Whatever the country's soldiers need, the general public broadly believes, they should have.

In fact, the MIC is not the largest show in town. According to the specialist website of the same name that tracks US defence spending, the total value of contracts issued by the Pentagon since October 2006 exceeds $1.1 trillion, while total military spending in that period tops $2.5 trillion. But even these gigantic sums pale beside a health-care sector now accounting for a sixth of the entire national economy.

The difference of course is that the MIC basks in the reflected glory of the military, shown by poll after poll to be the most trusted institution in the land. In terms of trust and admiration, the health insurance and drug companies rank right down there with Wall Street and the banks.

Nonetheless Eisenhower's warning has never ceased to resonate since his death in 1969. Indeed, it is one reason that in the stock market of posthumous presidential reputations, few have risen like his.

When he delivered that farewell address, America couldn't wait to be rid of him. Ike was regarded as senile and semi-detached, utterly out of touch with the times. The future lay with Kennedy, symbol of vigour, youth and novelty. But the old general knew whereof he spoke. Indeed, the MIC had worried him for years.

A treasure trove of old documents, covered with dirt and pine needles and discovered last year at a cabin in Minnesota once owned by Eisenhower's chief speechwriter Malcolm Moos, reveals that the 34th president had been working on the speech since mid-1959. It went through at least 21 drafts; in a later one, the "congressional" reference was struck out because, it is supposed, Ike did not want to upset old friends on Capitol Hill. But the "military" part was there from the outset.

At the time, the speech raised few eyebrows. Now its words are viewed as prophetic, and the man who spoke them is deemed one of America's greater presidents. From today's anxious vantage point, the 1950s are remembered as a golden age of order, contentment and certainty. Ike himself is perceived as a wise and measured statesman who most certainly would never have led the US into the ruinous Iraq adventure.

In fact, for all his strictures about the MIC, the worst has not come to pass. Wars have always been good business for weapons manufacturers – and so it has been with Korea, Vietnam, Afghanistan and Iraq. The arms industry therefore was never going to be very happy with the notion of a "peace dividend" at the end of the Cold War.

But it is a leap to describe modern America as a "warfare state" – in which the Iraq war, say, was the direct result of a colossal conspiracy by the arms industry to force the country into a conflict purely to enrich itself. As for the ultimate nightmare, a military take-over akin to the one that came close to in John Frankenheimer's fictional 1964 political thriller Seven Days in May, that is simply inconceivable.
(Editor: I strongly disagree. The assassination of John F. Kennedy was in fact a coup de' tat or violent overthrow of an elected government and it can no longer be seriously contested in light of evidence brought to light in the wake of the JFK Act)

The true tragedy is not quite the one that Eisenhower imagined. The US by itself accounts for roughly half of military spending worldwide. How much better if some of that money would be used to improve the country's education and infrastructure, or provide health care for all, or increase foreign aid, rather than on protecting America from threats that geography alone renders illusory.

In reality, the dangers of Eisenhower's "military-industrial complex" are not new; from the earliest days of the Republic, political leaders have warned of them. "Overgrown military establishments," George Washington said in his own farewell address of 1796, "are under any form of government inauspicious to liberty." Nor is the concept confined to America.

In the Soviet Union, the ultra-secret arms industry devoured a third or more of GDP (compared to around 4 per cent in the US currently) and was a cornerstone of Communist power. Or, closer to home, consider Krupp in Germany during two world wars, or later Dassault in France, or Vickers and British Aerospace in the UK. But nowhere has the synergy between government and defence manufacturers, most of them headquartered a lobbyist's lunch drive from the Capitol, been as entrenched as in the US.

Ah yes, some say, but the tide is now starting to turn. After experiencing some contraction in the 1990s, the industry enjoyed a boom after 9/11. But the deep recession of 2008-2009 and the continuing colossal deficits will not spare even the hitherto sacrosanct Pentagon budget.

Once again, one might note, Eisenhower hit the mark in January 1961. Back then, budgets were more or less balanced, and the possibilities of the future seemingly boundless. Even so he urged his countrymen to "avoid the impulse to live only for today, plundering for our own ease and convenience the precious resources of tomorrow". That of course is what has happened with the "credit card" wars of Iraq and Afghanistan, whose costs will burden American taxpayers for years to come.

Nor is that reality lost on Robert Gates, the Defence Secretary, who back in May was warning that Congress could not, and would not, write blank cheques for ever. The Pentagon had to make every dollar count, he said, rather than indulge in such projects as "$20m howitzers, $2bn bombers, and $6bn destroyers." Alas, as Gates knows full well, the arms contract that comes on budget has yet to be invented.

Since then of course Republicans have taken back the House of Representatives, which controls the pursestrings of government, a victory driven by a Tea Party movement vowing to eradicate deficits. Last week, Gates announced $78bn of cuts over the next five years, to pre-empt demands from deficit hawks for even greater reductions. But the MIC has survived far worse, and will most certainly survive this modest downturn in its fortunes.

For one thing, even when the Pentagon wants to cut a programme, Congress – prodded by its defence contractor benefactors – sometimes won't let it. Take the case of the back-up second engine for the F-35 Joint Strike Fighter, the most expensive procurement programme in even the Pentagon's extravagant history, at a total of $382bn or a mere $112m per aircraft. The Pentagon doesn't want the second engine, to be built by GE and Rolls-Royce, and nor does the White House. But it gets funded anyway.

And so the show goes on. The Republicans may vote through some shrinking of the military budget. But giant arms projects, however wasteful, provide jobs and exports at a time when the broader economy struggles to do either. Congress will not sacrifice them lightly.

At the same time, the infamous "revolving door" between the Defense Department, the top military contractors, their lobbyists and congressional staffers will continue to spin, strengthening a commonality of viewpoint between the separate components of the MIC, and tightening the bonds of the "Iron Triangle".

Campaign contributions meanwhile will grow even more important. Defence companies give money to sitting Congressmen who have fought their corner. True, in the ferociously anti-incumbent mid-terms of last November, they could not save Ike Skelton, their ally and chairman of the House Armed Services Committee, from defeat.

But financial support from Boeing workers was key in the re-election of Senator Patty Murray from Washington State, where she has fought hard to save Boeing jobs threatened if the company loses its bid for a $35bn tanker contract, for which the European-based EADS is also competing. That battle, incidentally, is also playing out in its own fierce ad war on WTOP, aimed at the same audience of government and Congress.

And even if budgetary pressures temporarily compress the market for top-of-the-line military hardware, fear not. The demand for national security and intelligence in the "war on terror" continues to surge – to the point that a Washington Post investigation last summer found that 33 facilities for intelligence work, equal to three new Pentagons, have gone up around Washington alone since 9/11.

Most fundamentally, there remains the popularity of all things military, at a time when civilian leaders with the stature and experience to challenge the Pentagon brass, and by extension the MIC, are few. George HW Bush was the last commander-in-chief to have tasted war and its horrors. His son famously had not, and – perhaps to make up for it – gave the military everything it wanted, and more. So maybe there is only one answer. America should elect a general as commander-in-chief. Like Dwight D. Eisenhower.

Monday, January 17, 2011

Professor Jim Fetzer Interviews Author Russ Baker

Russ Baker is the author of the recent book Family of Secrets: The Bush Dynasty, the Powerful Forces that put it in the White House, and what their Influence Means for America (New York: Bloomsburry Press, 2009). It is an extremely interesting work.

Professor Jim Fetzer conducted two interviews with Mr. Baker on his Real Deal Podcasts which I wholeheartedly recommend. They can be accessed HERE... Scroll down the home page to the entries for November 22 and November 24 respectively.
Please visit Russ Baker's Family of Secrets and Who, What, Why sites for additional important information.

Russ Baker on George W. Bush

Family of Secrets Revelations:
Learn why the conventional understanding of Watergate gets the story wrong. Discover how Nixon was implicated in a sprawling plot to which he was not a party, and how an aggressive effort was mounted to use the ‘facts’ of the case to force him from office. Read new revelations about the precise involvement of Poppy Bush, Bob Woodward and White House counsel John Dean in this still-mysterious American epic.

Also learn:

•Why George H.W. Bush can’t remember where he was on November 22, 1963
•Why oilman George H.W. Bush shows up in early CIA documents
•The real story behind George W. Bush’s missing military service
•The inside scoop on the Bushes and Saudi influence in America
•The strange saga of Harvard University and its endowment
•The untold real story behind George W. Bush’s religious awakening
•Never before told anecdotes from George W. Bush’s wild past
•How the CIA monitors the White House and its occupants
•Why Barack Obama and his supporters should read this book


Editor's NOTE: 

Famed JFK Assassination author James DeEugenio has written a negative review of Russ Baker's book particularly the claim that George H. W. Bush was involved in the Watergate Episode. De Eugenio's book review should be read and his arguments seriously considered.

America's Economic and Social Crisis

Editor's NOTE:

It is clear that the Federal Reserve System exists for the benefit of the plutocrats and against the interests of the populace.

Recall that prior to the assassination of John F. Kennedy, there was talk in the nation of abolishing the Federal Reserve. This policy prescription of the Kennedy administration no doubt contributed to the multiple reasons (on the part of the assassination conspirators) why the power elites wanted him killed. In the almost 50 years since the murder of JFK, the situation has only worsened.

The Federal Reserve is not only complicating the true economic progress of the nation, it serves an otherwise unnecessary function. Ellen Brown's solution outlined below is worthy of consideration.

--Dr. J. P. Hubert

The Fed has Spoken: No Bailout for Main Street

by Ellen Brown
Global Research
January 13, 2011

The Federal Reserve was set up by bankers for bankers, and it has served them well. Out of the blue, it came up with $12.3 trillion in nearly interest-free credit to bail the banks out of a credit crunch they created. That same credit crisis has plunged state and local governments into insolvency, but the Fed has now delivered its ultimatum: there will be no “quantitative easing” for municipal governments.

On January 7, according to the Wall Street Journal, Federal Reserve Chairman Ben Bernanke announced that the Fed had ruled out a central bank bailout of state and local governments. "We have no expectation or intention to get involved in state and local finance," he said in testimony before the Senate Budget Committee. The states "should not expect loans from the Fed."

So much for the proposal of President Barack Obama, reported in Reuters a year ago, to have the Fed buy municipal bonds to cut the heavy borrowing costs of cash-strapped cities and states.

The credit woes of state and municipal governments are a direct result of Wall Street’s malfeasance. Their borrowing costs first shot up in 2008, when the “monoline” bond insurers lost their own credit ratings after gambling in derivatives. The Fed’s low-interest facilities could have been used to restore local government credit, just as it was used to restore the credit of the banks. But Chairman Bernanke has now vetoed that plan.

Why? It can hardly be argued that the Fed doesn’t have the money. The collective budget deficit of the states for 2011 is projected at $140 billion, a mere drop in the bucket compared to the sums the Fed managed to come up with to bail out the banks. According to data recently released, the central bank provided roughly $3.3 trillion in liquidity and $9 trillion in short-term loans and other financial arrangements to banks, multinational corporations, and foreign financial institutions following the credit crisis of 2008.

The argument may be that continuing the Fed’s controversial “quantitative easing” program (easing credit conditions by creating money with accounting entries) will drive the economy into hyperinflation. But creating $12.3 trillion for the banks – nearly 100 times the sum needed by state governments -- did not have that dire effect. Rather, the money supply is shrinking – by some estimates, at the fastest rate since the Great Depression. Creating another $140 billion would hardly affect the money supply at all.

Why didn’t the $12.3 trillion drive the economy into hyperinflation? Because, contrary to popular belief, when the Fed engages in “quantitative easing,” it is not simply printing money and giving it away. It is merely extending CREDIT, creating an overdraft on the account of the borrower to be paid back in due course. The Fed is simply replacing expensive credit from private banks (which also create the loan money on their books) with cheap credit from the central bank.

So why isn’t the Fed open to advancing this cheap credit to the states? According to Mr. Bernanke, its hands are tied. He says the Fed language is limited by statute to buying municipal government debt with maturities of six months or less that is directly backed by tax or other assured revenue, a form of debt that makes up less than 2% of the overall muni market. Congress imposed that restriction, and only Congress can change it.

That may sound like he is passing the buck, but he is probably right. Bailing out state and local governments IS outside the Fed’s mandate. The Federal Reserve Act was drafted by bankers to create a banker’s bank that would serve their interests. No others need apply. The Federal Reserve is the bankers’ own private club, and its legal structure keeps all non-members out.

Earlier Central Bank Ventures into Commercial Lending

That is how the Fed is structured today, but it hasn’t always been that way. In 1934, Section 13(b) was added to the Federal Reserve Act, authorizing the Fed to “make credit available for the purpose of supplying working capital to established industrial and commercial businesses.” This long-forgotten section was implemented and remained in effect for 24 years. In a 2002 article called “Lender of More Than Last Resort” posted on the Minneapolis Fed’s website, David Fettig summarized its provisions as follows:

· [Federal] Reserve banks could make loans to any established businesses, including businesses begun that year (a change from earlier legislation that limited funds to more established enterprises).

· Reserve banks were permitted to participate [share in loans] with lending institutions, but only if the latter assumed 20 percent of the risk.

· No limitation was placed on the amount of a single loan.

· A Reserve bank could make a direct loan only to a business in its district.

Today, that venture into commercial banking sounds like a radical departure from the Fed’s given role; but at the time it evidently seemed like a reasonable alternative. Fettig notes that “the Fed was still less than 20 years old and many likely remembered the arguments put forth during the System's founding, when some advocated that the discount window should be open to all comers, not just member banks.” In Australia and other countries, the central bank was then assuming commercial as well as central bank functions.

Section 13(b) was repealed in 1958, but one state has kept its memory alive. In North Dakota, the publicly owned Bank of North Dakota (BND) acts as a “mini-Fed” for the state. Like the Federal Reserve of the 1930s and 1940s, the BND makes loans to local businesses and participates in loans made by local banks.

The BND has helped North Dakota escape the credit crisis. In 2009, when other states were teetering on bankruptcy, North Dakota sported the largest surplus it had ever had. Other states, prompted by their own budget crises to explore alternatives, are now looking to North Dakota for inspiration.

The “Unusual and Exigent Circumstances” Exception

Although Section 13(b) was repealed, the Federal Reserve Act retained enough vestiges of it in 2008 to allow the Fed to intervene to save a variety of non-bank entities from bankruptcy. The problem was that the tool was applied selectively. The recipients were major corporate players, not local businesses or local governments. Fettig writes:

Section 13(b) may be a memory, . . . but Section 13 paragraph 3 . . . is alive and well in the Federal Reserve Act. . . . [T]his amendment allows, "in unusual and exigent circumstances," a Reserve bank to advance credit to individuals, partnerships and corporations that are not depository institutions.

In 2008, the Fed bailed out investment company Bear Stearns and insurer AIG, neither of which was a bank. John Nichols reports in The Nation that Bear Stearns got almost $1 trillion in short-term loans, with interest rates as low as 0.5%. The Fed also made loans to other corporations, including GE, McDonald’s, and Verizon.
In 2010, Section 13(3) was modified by the Dodd-Frank bill, which replaced the phrase “individuals, partnerships and corporations” with the vaguer phrase “any program or facility with broad-based eligibility.” As explained in the notes to the bill:

Only Broad-Based Facilities Permitted. Section 13(3) is modified to remove the authority to extend credit to specific individuals, partnerships and corporations. Instead, the Board may authorize credit under section 13(3) only under a program or facility with “broad-based eligibility.”

What programs have “broad-based eligibility” isn’t clear from a reading of the Section, but long-term municipal bonds are evidently excluded. Mr. Bernanke said that if municipal defaults became a problem, it would be in Congress’ hands, not his.

Congress could change the law, just as it did in 1934, 1958, and 2010. It could change the law to allow the Fed to help Main Street just as it helped Wall Street. But as Senator Dick Durbin blurted out on a radio program in April 2009, Congress is owned by the banks. Changes in the law today are more likely to go the other way. Mike Whitney, writing in December 2010, noted:

So far, not one CEO or CFO of a major investment bank or financial institution has been charged, arrested, prosecuted, or convicted in what amounts to the largest incident of securities fraud in history. In the much-smaller Savings and Loan investigation, more than 1,000 people were charged and convicted. . . . [T]he system is broken and the old rules no longer apply.

The old rules no longer apply because they have been changed to suit the moneyed interests that hold Congress and the Fed captive. The law has been changed not only to keep the guilty out of jail but to preserve their exorbitant profits and bonuses at the expense of their victims.

To do this, the Federal Reserve had to take “extraordinary measures.” They were extraordinary but not illegal, because the Fed’s congressional mandate made them legal. Nobody’s permission even had to be sought. Section 13(3) of the Federal Reserve Act allows it to do what it needs to do in unusual and exigent circumstances to save its constituents.

If you’re a bank, it seems, anything goes.

So Who Will Save the States?

Highlighting the immediacy of the local government budget crisis, The Wall Street Journal quoted Meredith Whitney, a banking analyst who recently turned to analyzing state and local finances. She said on a recent broadcast of CBS's "60 Minutes" that the U.S. could see "50 to 100 sizable defaults" in 2011 among its local governments, amounting to "hundreds of billions of dollars."

If the Fed could so easily come up with 12.3 trillion dollars to save the banks, why can’t it find a few hundred billion under the mattress to save the states? Obviously it could, if Congress were inclined to put non-bank lending back into the Fed’s job description. Then why isn’t that being done? The cynical view is that the states are purposely being kept on the edge of bankruptcy, because the banks that hold Congress hostage want the interest income and the control.

Whatever the reason, Congress is standing down while the nation is sinking. Congress must summon the courage to take needed action; and that action is not to impose “austerity” by cutting services, at a time when an already-squeezed populace most needs them. Rather, it is to create the jobs that will generate real productivity. To do this, Congress would not even have to go through the Federal Reserve. It could issue its own debt-free money and spend it on repairing and modernizing our decaying infrastructure, among other needed works. Congress’ task will become easier if the people stand with them in demanding action, but Congress is now so gridlocked that change may still be long in coming.

In the meantime, the states could take matters in their own hands and set up their own state-owned banks, on the model of the Bank of North Dakota. They could then have their own very-low-interest credit lines, just as the Wall Street banks do. Rather than spending or selling off valuable public assets, or hoarding them in massive rainy day funds made necessary by the lack of ready credit, states could LEVERAGE their assets into a very strong and abundant local credit system, following the accepted business practices of the Wall Street banks themselves.

The Public Banking Institute is being launched on January 13 to explore that alternative. For more information, see THIS...

Sunday, January 16, 2011

What Chance a U.S. Default?

By James Politi

January 14, 2011 "Financial Times" -- It was the most startling of warnings. If the U.S. does not get its finances in order “we will have a European situation on our hands, and possibly worse”, claimed Paul Ryan, the new Republican chairman of the House of Representatives budget committee.

As it stands today, the U.S. borrows about 40 cents of every dollar it spends. Curbing the budget deficit has been the stated mission of Mr. Ryan, a rising Republican star, for several years. But such calls for action have multiplied in Washington in recent months, igniting what some say is the fiercest debate over fiscal and budgetary policy in decades.

The risks are big. If the government rushes into austerity, cutting too much and too quickly, it could stunt economic recovery. But if the political system cannot forge some kind of consensus on steps to restore U.S. deficits to sustainable levels, the danger is potentially even greater: a sovereign debt crisis in the world’s largest economy.

“It’s a weak period for the economy, so I don’t think you want to do serious deficit reduction anyway, but we are playing a dangerous game and we will start to pay a price for fiscal irresponsibility,” says Ethan Harris at Bank of America Merrill Lynch.

The big fear is that if no action is taken, investors might eventually punish the US for its fiscal laxity. That would raise borrowing costs for businesses and consumers, force severe austerity measures and risk social unrest. Not only America’s triple-A credit rating could be threatened; some point to consequences in foreign affairs and defence as well. Mike Mullen, chairman of the joint chiefs of staff, last year warned that the debt pile could limit the flexibility of the US in funding its military – in his eyes the “most significant threat to our national security”.

So far, capital markets have not reacted much to the dismal long-term outlook. The 10-year Treasury yield, for instance, has been trading this week well below 3.4 per cent, close to historical lows although it has risen in recent months. Still, a growing number of voices are calling for a deal to address America’s strained public finances, even if it means tackling programs such as retirement benefits and health care for the elderly that have long been protected.

Yet whether this anti-deficit rhetoric translates into a meaningful turn towards austerity in the coming months – and leading into the 2012 presidential election – is much in doubt, for two main reasons: severe political divisions and the continuing fragility of the economic recovery.

“It’s not urgent but at some point it’s going to become more urgent,” says Phillip Swagel, who was a senior economic official in the George W. Bush administration. “Clearly the markets don’t think we’re Argentina, but we should send them a signal that they are right, that we will address the issue.”

A deal extending Bush-era tax cuts and unemployment benefits in December failed to send that message, adding $858-billion to long-term deficits without any commitment to reductions in the future, even though supporters argue that if the measures boost growth, America’s budgetary position will improve too.

But more big tests of America’s commitment to fiscal discipline are looming. On Jan. 25, President Barack Obama will lay out his legislative priorities for 2011 in his State of the Union address to Congress, and measures to reduce long-term deficits are expected to be on the agenda.

Some policies have already been flagged. In December, the president announced a two-year freeze on pay for civilian government workers, a nod to the need for budget cutting to begin at some point. The Pentagon has also been trying to get ahead of the game: last week it announced that it would trim its annual budgets of more than $500-billion by a combined $78-billion over the next five years compared with earlier projections. (Editor: No where near large enough cuts for a total budget of over 1 trillion dollars annually when all of the black-ops and war-making expenditures are included).

These measures will be incorporated into the White House’s proposed annual budget, to be presented in mid-February. Other steps could also be included, such as possible additional plans to cut discretionary spending across government agencies, start tackling social security reform and set a framework for tax reform.

Much attention will be paid to both the scope of these proposals and how specific they are, and to signs of the seriousness of the administration’s commitment to deficit reduction.

Mr. Obama’s new economic team certainly bodes well for fiscal hawks, including as it does Jack Lew as budget director and Gene Sperling as head of the National Economic Council. The two are back in the same roles they held under Bill Clinton in the 1990s, when the U.S. reduced its deficit through negotiations between a Democratic White House and a Republican Congress. Mr. Clinton left office with a budget surplus.

Few expect the administration to take the aggressive approach sought by some prominent Democrats such as John Podesta of the Center for American Progress, a think tank with close ties to the Obama White House. This would involve cuts to large programs such as Social Security and Medicare, followed swiftly by a move towards tax reform. But it is unlikely to happen, because it could expose the administration to a barrage of attacks from both its Democratic base and from Republicans.

Nevertheless, Mr. Lew maintains that the administration’s resolve on deficit reduction is clear. “We need to have a bipartisan effort, which will address the serious fiscal challenges before us while at the same time promoting an agenda that will build the foundation of the American economy in the future, which to us means continuing to invest in education and innovation even while we make reductions in other places,” he says.

But Republicans, who gained control of the House of Representatives in elections last November, partly on a message of fiscal rectitude and opposition to government spending, have other things in mind. They envisage spending cuts on a much larger scale than what is palatable to the White House or many congressional Democrats – and could resist any attempt by the administration to press ahead with new stimulus measures.

Many Republicans have shown little willingness to consider tax increases as part of any deficit reduction package – which many economists believe to be an essential component of a deal. The result could easily be gridlock, with both parties and the White House trading accusations, and investors and businesses growing increasingly nervous about America’s ability to deal with the debt problem.

Meanwhile, a deadline that will force the two parties to engage – and probably battle – on fiscal issues is close. Any time between March 31 and May 16, the Treasury estimates, U.S. debt will hit its congressionally mandated limit of nearly $14.3-trillion. If the administration and Capitol Hill cannot agree on a deal to raise that threshold, the U.S. would have to shut down the government and default on its international debt obligations – potentially triggering the debt crisis that for the moment seems so distant.

Many Republicans have insisted that a higher debt ceiling should be tied to their aggressive spending cut targets, setting the stage for a big political showdown as the date approaches.

The administration does not believe the debt limit should be used as a bargaining chip to extract concessions. “Our view is a clean debt bill is the only responsible thing to advocate – and we’re clearly going to have to engage in Congress on this,” says Mr. Lew. “We have no alternative but to raise the debt ceiling and it would be irresponsible to use the need to raise the debt limit as a way to force a crisis that could undermine the US economy and its standing in the world very severely.”

Lawmakers as well as analysts expect in general that over the next few months a limited agreement – possibly on its own, and possibly involving the enactment of some deficit reduction measures proposed by the administration plus some new ones – will be reached. But while such an accord could placate investors in U.S. debt for some time, it will probably only delay America’s reckoning with its unsustainable public finances rather than correct the course.

America’s budget deficit in the year to last September amounted to about $1.3-trillion – the second highest on record. Over the next several years, as the economic recovery advances and the impact of emergency spending measures taken during the recession start to wane, the country’s deficits are expected to shrink naturally.

But the relief will be temporary: because of the retirement of the baby-boomer generation, which starts in earnest this year, the cost of government healthcare and pension programmes is projected to soar. According to a report issued last month by an 18-member bipartisan commission on fiscal responsibility, by 2025 tax revenues will be sufficient to finance only interest payments – which are projected to soar from their current $2-trillion a year to more than $1-trillion – and entitlement programmes, with no room for anything else.

“Every other federal government activity – from national defence and homeland security to transportation and energy – will have to be paid for with borrowed money,” it warns. By 2035, rising debt could reduce gross domestic product per capita by as much as 15 per cent. That would imply a harsh reduction in Americans’ standard of living.

This gloomy picture is what could eventually cause a crisis in international capital markets. It is also what drove the commission, led by Erskine Bowles, former White House chief of staff under Mr Clinton, and Alan Simpson, former Republican senator from Wyoming, to attempt what had rarely been tried before in Washington: to craft a detailed template to solve the country’s budget woes, offering Americans and their lawmakers a concrete glimpse of what it would take to correct the problem.

The plan recommended a total of $3,900bn in deficit reduction by 2020, with a three-to-one ratio of spending cuts to tax increases. The commission proposed raising the state pension age, curbing government healthcare and limiting popular tax breaks such as the ability to deduct interest paid on mortgages. (Editor: but no massive cuts in war-making or an end fo the US empire signalling that the ruling class is not serious about reducing the budget deficit or the national debt. Presumably, these folks can simply move to another country when the American economy finally implodes).

Some potential options to cut the deficit – such as a consumption or value added tax, or a tax on carbon – were sidelined as politically infeasible. That contributed to a surprising level of agreement on the recommendations, with 11 panellists voting in favour of the package, including six sitting lawmakers. Still, this was not enough to force a vote in Congress on the measures, which would have required a 14-member majority.

The failure of the Simpson-Bowles commission to reach the required threshold is what left America’s fiscal fate in the hands of the ordinary political process, from the White House to congressional leaders such as Kent Conrad, chairman of the Senate budget committee, as well as Mr. Ryan. Turning back to Europe’s debt woes, Mr. Ryan declares: “This is not who we are, and this is not the fate that we want to have.”

However avoiding that fate – and ushering in a new era of U.S. fiscal responsibility – will require a level of political harmony that, in spite of a growing awareness of the problem, still seems elusive.