Friday, October 14, 2016

The War for the Dollar

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The presidential campaign of 2016 is the most divisive in living memory. The spectacle is riveting. People all over the world tune into it as if it were their own election. Well they might.

The campaign is different because it is driven by a deep and bitter divide among the capitalist class: whether to risk war with Russia, or not. There is also a real danger of war with China. Not since 1860 has a presidential election been affected by a basic divide among the propertied classes.

There is a War Party that is tremendously strong. Its candidate is Hillary Clinton. Wall Street and Big Oil are among its constituents. The New York Times runs one Clinton campaign piece after another in the guise of “news articles.” The rest of the mainstream media do the same.

Speaking to the American Legion on August 31 in Cincinnati, Hillary Clinton said, “As President, I will make it clear that the United States will treat cyberattacks just like any other attack. We will be ready with serious political, economic, and military responses . . . You’ve read reports. Russia’s hacked into a lot of things, China has hacked into a lot of things.” (1)

But there is no evidence against Russia or China. What Hillary Clinton says is that she will militarily go after whomever she wants based on nothing other than her say-so. The mainstream media gave no coverage to her recklessly provocative remarks.
Donald Trump, for his part, told the “Commander in Chief” forum that, “I think I would have a very, very good relationship with Putin, and I think I would have a very, very good relationship with Russia.” (2) He speaks for a faction of the capitalist class that sees the risk of war with Russia and China as just too dangerous.

Both candidates speak for opposed factions of the ruling class. In no way can these statements be treated as “personal opinions.”

Why is the War Party bent on a hideously dangerous course? The political reasons are easy to see.

After the dismemberment of the Soviet Union in 1991 the United States emerged as an unrivaled “superpower.” But now, the key element of U.S. dominance in the Middle East and the Persian Gulf is slipping. The decline of U.S. power in the Middle East is primarily due to the long, dogged resistance of the peoples. Added to that, Russia’s part in resisting regime change in Syria is taken by U.S. imperialism as an acute challenge. Russia also has close relations with Iran. Threats against Russia and China but won’t change that. So far the U.S. has worked things out with Germany. It works things out with Japan. Why not work things out with Russia and China? 
It is because other things are at work. There are economic developments that contribute to the growth of tensions. They are not always so easy to see. The care and feeding of the Almighty Buck, the United States dollar itself, is of foremost and fundamental importance. For decades the U.S. dollar has been unrivaled as the world’s main reserve currency. U.S. financial institutions swing enormous power and profits from it.

This is capitalistic stuff par excellence. Most of us aren’t capitalists. Hence the issue is not obvious to us. Let’s have a closer look.

Countries keep foreign currencies in reserve for use in international trade. By far the largest reserves are in U.S. dollars. There are a number of reasons. Some countries have large trade surpluses with the United States. If they exchange the dollars for their own currency their goods will become more expensive in the United States Instead they keep the money in reserve. Or, they can use their dollars on international markets. Dollars can always be used to buy oil, for instance. It may be advantageous in multilateral trade involving more than two countries to use dollars rather than the countries’ own currencies.

At the end of 2014 the US dollar comprised 63.1% of world foreign reserves. The euro was a distant second at 22.1%. (3) At the end of 2015 world reserves stood at around $13.1 trillion in dollar equivalents. China and Japan held $3.3 trillion and $1.26, respectively. The Euro Zone came in at $761.7 billion.

In 2014 the U.S. trade deficit came in at $760 billion. U.S. trade deficits have been the case since the 1970s. What is supposed to happen is goods imported to the U.S. become more expensive, U.S. goods sold abroad get cheaper, and trade comes back into balance. But it doesn’t happen that way! It isn’t just a matter of how the United States can manage such a thing. It is a question of how it can be handled on all sides. It’s mainly possible because other countries hang on to upwards of $8 trillion in reserves, of which over $6 trillion is in U.S. Treasury bills. (4)

One advantage to the United States is that we can go on buying huge amounts of goods from other countries without the prices rising. But if import prices rose we’d make more stuff here. There would be more jobs, employers would make more money. Why don’t we do that?

A big part of the answer is that the dollar’s unchallenged status as a reserve currency enables the big banks and financial companies to make much a great deal more money than they otherwise could.

International trade must be brokered, i.e., managed with the help of financial intermediaries. Brokerage is commonly needed in domestic commerce, and is a necessity for international trade.

Suppose Alice in Iowa contracts with Bob in Paris to buy 1000 boxes of French chocolates for $10,000 American. She sends a check. Bob takes the check to the bank and cashes it for the equivalent in French francs. No problem. 

But: Bob never sends the chocolates. Paris is a long way to go for Alice. She doesn’t speak the language. She must find an attorney. Repayment of her money will take a long time and little will be left after expenses. She’s stuck.

Sam knows the pitfalls of foreign trade. He makes the same deal with Bob. Before he sends any money, he goes to the local branch of Citigroup and pays the bank to post a performance bond on the deal. 

If Bob doesn’t send the chocolates, the bank reimburses Sam. Bob is now messing with Citigroup. He’s toast. The next time, if there is a next time, he sends the chocolates.
Sellers can also purchase performance bonds or other financial instruments to secure their interests. As well, brokerages offer many other services. They are absolutely necessary to the world market. Bank of America describes its services as follows:

“Leverage our comprehensive platform to connect with institutions or individuals in more than 140 currencies and 200 countries while increasing your speed, efficiency and visibility. With our on-the-ground presence in 44 countries, direct membership in multiple clearing systems around the world, and a multi-year commitment to expanding our banking platform, we are uniquely positioned to enable local access and direct connectivity wherever you do business. In addition, we offer leading-edge solutions to help you collect, process, apply and report on your global receivables and migrate from paper to electronic processing with guidance at every step.” (5)

Citigroup describes its operations similarly, and adds: “Citi Transaction Services is the trusted custodian of over U.S. $12.8 trillion in assets, resulting from our full range of world-class domestic and global custody services.” (6)

Profits of .1% against total assets under management would come to $12.8 billion. Not bad.

The other U.S. bank holding companies of similar in size are Wells Fargo and JP Morgan Chase. All four offer the same services for international trade.

International trade and brokerage are glued together by financial electronic messaging networks. The largest is the Society for Worldwide Interbank Financial Telecommunications system, or SWIFT. It was started in 1974. Previous communication systems were slow, insecure, and subject to human error. SWIFT assigns each bank or other institution with a unique eight-character identification code to ensure accuracy. Message encryption and authentication are offered.

Financial messaging networks handle not only bank, but also securities and treasury transactions. SWIFT transmits payments, transfers, and instructions to nearly 10,000 institutions around the world. Volume is around 24,000,000 messages per day. Total world export trade has increased by more than 45 times in constant prices since 1974. (7) That degree of growth would not have been possible without the networks.

At times, however, it appears that the messaging networks are not so secure. It is by means of surveillance of messaging networks that the U.S. government, the hitman and enforcer of the big banks, can unilaterally impose sanctions on whatever country or individual that it sweet pleases. 

In 2015 the French bank BNP Paribas, the fourth largest bank in the world, was penalized $9 billion by action brought against it in the U.S. District Court of the Southern District of New York, the court having jurisdiction over Wall Street.

A Reuters report said, “Prosecutors said BNP also evaded sanctions against entities in Iran and Cuba, in part by stripping information from wire transfers so they could pass through the U.S. system without raising red flags.” (8)

Oh. That’s interesting. The messaging networks are supposed to be secure. How did the U.S. Department of Justice find that out? Is the financial integrity of the networks compromised? Do the institutions served by the network know the U.S. Department of Justice surveils their messages? Maybe BNP did not. 

That’s only the start. BNP was convicted of “conspiring to violate the International Emergency Economic Powers Act (IEEPA) and the Trading with the Enemy Act (TWEA) by processing billions of dollars of transactions through the U.S. financial system on behalf of Sudanese, Iranian and Cuban entities subject to U.S. economic sanctions.” (9)
These are United States laws. BNP broke no French laws. (During WW II U.S. corporations flouted the TWEA at will. New Jersey Standard Oil, IBM, Ford, and GM and many others traded with the Nazis all during the war.) The prosecution accused BNP of “falsifying” transactions with Iran and Cuba. How could BNP “falsify” business that was legal in France? And if it concealed its business from U.S. scrutiny, so what, the U.S. has no legitimate interest in the matter. Nonetheless BNP was forced to eat humble pie and play along with the farce. Not even France, a NATO “ally” of the United States and the sixth largest country in the world economically, was immune to this shocking violation of its sovereignty.

Even worse, the so-called “violations” involved transactions with Cuba, Iran and Sudan. The harm done the first two countries by U.S. imperialism need not be repeated here. Sudan has been wracked for decades by civil and ethnic conflicts. Millions have died or been displaced Sudan is rich in oil, natural gas, copper and uranium ores. The United States has long been deeply entangled in the carnage. Sara Flounders wrote in 2006 that:
“U.S. policy revolves around shutting down the export of oil through sanctions and inflaming national and regional antagonisms. For over two decades U.S. imperialism supported a separatist movement in the south of Sudan, where oil was originally found. This long civil war drained the central government’s resources. When a peace agreement was finally negotiated, U.S. attention immediately switched to Darfur in western Sudan.” (10)

Even so, the Justice Department charged BNP with harming people in Sudan by doing business that U.S. imperialism does not like. The hypocrisy and lawbreaking are breathtaking.

The interlock of U.S. brokerages and messaging networks allows the United States to impose sanctions worldwide, unilaterally, and in specificity.

The Department of the Treasury maintains a Specially Designated Nationals (SDN) list. It is “a list of individuals and companies owned or controlled by, or acting for or on behalf of, targeted countries. It also lists individuals, groups, and entities, such as terrorists and narcotics traffickers designated under programs that are not country-specific.” (11) The SDNs have their assets blocked, and “U.S. persons are generally prohibited from dealing with them.” There are so many SDN entries that Treasury maintains a search tool on them that uses “fuzzy logic” to match inexact search terms.

A list of SDNs in Russia and Ukraine was published on Sep. 1, 2016. It included 17 individuals including Eduard Basurin, Defense Minister of the Donetsk People’s Republic, an insurgent region that rebelled against the fascist regime in Ukraine imposed by the United States in 2014.

The list also includes an engineering company in St. Petersburg, shipyards, the Salvation Committee of Ukraine, which calls for elections to replace the U.S.-installed government, and many other entities. It would be cumbersome have to enforce so many sanctions, but the treatment of BNP stands as a warning.

Opposition is rising, however. In 2015 the United States imposed penalties on Volkswagen for violations of emissions requirements. The scandal was a great setback to the manufacturer. The settlement may cost Volkswagen more than $13 billion. The European Union—read Germany—then imposed a $14.5 fine on Apple for taxes not paid in Ireland. Going back to the mortgage bubble in the U.S. that burst in 2006, the U.S. Justice department is now seeking penalties as high as $14 billion against Deutsche Bank for its practices in the bubble. Political consequences are part of the picture, as Germany has become increasingly critical of cold war-style U.S. actions against Russia.

Also, China’s rise poses an emergent challenge to dollar dominance. In January of this year China launched a new international development bank called the Asian Infrastructure Investment Bank (AIIB) at a ceremony led by Chinese President Xi Jinping. It would fund projects like roads, hydropower and urban development. It is expected to lend $10 billion-$15 billion a year for the first five or six years. While loans at first would be made in U.S. dollars, the bank may raise capital in other currencies including the euro and yuan.

China has stated that it opposes a global financial order that it says is dominated by the United States and does not adequately represent developing nations. Its success would be as much a political as an economic achievement, a sign that U.S. financial domination of the world is coming to an end.

The new bank is generally recognized as a challenge to U.S.-dominated International Monetary Fund (IMF) and World Bank (WB.) U.S. allies including Australia, Britain, German, Italy, the Philippines and South Korea have agreed to join. So far thirty founding countries have ratified the AIIB agreement. Other countries have until the end of the year to join.

U.S. imperialism is not sitting by. In June of this year, the United States sent a carrier task force into the South China Sea in defiance of China’s claims to sovereignty in those waters. Admiral John Richardson, U.S. Chief of Naval Operations, was aboard the carrier John C. Stennis. (12)

Richardson told the media that the task force was surrounded by Chinese naval vessels, some passing by on regular business but others specifically shadowing the US task force. He said “there were dozens of encounters” between the two fleets that were “by and large, performed according to a ruleset that had been established” between US and China called the Code for Unplanned Encounters at Sea (CUES). That the CNO was on hand shows that Washington well understood the challenge it was giving to China.

At about the same time an international tribunal in The Hague was convened on charges brought against China concerning the South China Sea. Issues included China’s construction of artificial islands, and claims to sovereignty in the sea. China’s construction of a large artificial island on an atoll known as Mischief Reef was cited. China built a military airstrip, naval berths and sports fields on the island.

On July 12 the tribunal found that China’s claims of historic rights over most of the South China Sea and sovereignty over the region had no legal basis. The decision is considered legally binding but there is no mechanism for enforcing it. China did not bow down. It had refused to participate in the tribunal, and it said it would not abide by the decision.

The economic prospects of loss of empire added to the political ones explain the full scope of the rise in tensions with Russia and China. The War Party arises, driven mad. Another faction of the capitalist ruling class reacts, seeing a retrenchment to America First as preferable to war with Russia and China. The latter are right, but the crazed don’t care. The issue invades the presidential election.

Even if the America Firsters win, there is no guarantee the War Party will concede anything; and vice-versa. We must be prepared for anything.

David Hungerford is a political activist who lives in New Jersey. His concerns include civil and human rights, problems of war and peace, and political economy.

US Bringing World to the Brink of Nuclear War

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What’s happening in Syria has been going on for over five years and it's not a civil war.

U.S. imperialism has been exporting disaster around the world for over a century now, but not since the “Cuban” missile crisis in 1962, has the U.S. put the world on the brink of such a disaster as we are witnessing today. 

The conflict began as a U.S.-funded effort to depose President Bashar Assad and install a puppet government in Damascus friendly to U.S. interests. I am sure there are some legitimate forces in Syria who oppose the government of Assad, but the U.S. does not care about democracy—afterall Assad was elected by his people.

Also in Syria, approximately one dozen militias are not only trying to overthrow the Assad government but they are also fighting amongst themselves . The ranking Democrat on the U.S. Congressional House Intelligence Committee, uber-Zionist Adam Schiff of California, said of the phenomena of CIA-funded militias fighting in places like Aleppo, “It’s part of the three-dimensional chess game.” This chess game, played by empires for millennia, profit the wealthy and as always, the people pay the heavy price.

Today we learned that China is contemplating joining Russia and Syria in their alliance to protect the sovereignty of Syria and for stabilization in the Middle East.

The U.S. has long invaded and provoked weaker countries like Afghanistan and Iraq which have little hope of retaliating but nonetheless use what resources they have to fight off U.S. imperialism. However, provoking Russia in places like Syria and Ukraine seems to be the height of arrogance and stupidity on the part of the U.S.

For many years, Russian President Vladimir Putin has been the rational actor in this insane U.S. provocation, but Russia is getting ready to fight back—reportedly holding civil defense drills, warning Russians abroad, and even testing nuclear missiles.

Some of us see no hope for the mis-leaders here in the U.S. to provide some sanity in its foreign policy. In the last U.S. presidential debate between Hillary Clinton and Donald Trump, the war criminal Clinton reaffirmed her hardcore stance to go to war with Russia, through Syria, if necessary. Clinton also declared her support for a "no fly zone" over Syria, which the chair of the U.S. Joint Chiefs of Staff Joseph Dunford said would require 70,000 U.S. troops to maintain and would definitely mean war with Russia.

Even though Russia has been invited into Syria by the government—as rational people who are filled with apprehension over the reality of this danger—we should be calling on all world leaders to pause in their rush to war.

But the only thing that can really stop imperialist carnage is an international working-class force, refusing to be used as cannon-fodder for capitalism, and instead fighting for socialism.

Our very survival as a species depends on international solidarity.

The “major and deadly” wars to come

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The Atlantic Council, a leading US geopolitical strategy think tank, published a report on September 20 titled The Future of the Army. The document outlines the far-reaching preparations that are underway for the United States, in the report’s own words, to fight “major and deadly” wars between “great powers,” which will entail “heavy casualties” and “high levels of death and destruction.”
The report confirms that the world stands closer to war than at any time since 1939.
The document was co-authored by Lt. General David Barno, who commanded the US-led force in Afghanistan from 2003 to 2005, having previously taken part in the US invasions of Grenada in 1983 and Panama in 1989. It was published by the Atlantic Council’s Brent Scowcroft Center on International Security, named after a leading military adviser to the Ford, Nixon, George H. W. Bush and Obama administrations.
It presents a picture of the near future (2020-2025) as a horrifying dystopia, characterized by spiraling inequality, economic insecurity and perpetual war. “Today’s world of haves and have-nots will be greatly magnified,” it states, “with those fortunate enough to have employment and access to stunning technology living in stark contrast to the hundreds of millions struggling to survive in disrupted environments.”
This world “will be marked by the breakdown of order, widespread violent extremism and aggressive large states.” The world situation will be driven by “unpredicted and unpredictable events,” including the possibility of “a nuclear exchange.” Noting that “urban operations will increasingly dominate land warfare,” the Atlantic Council predicts that armies will operate “in densely packed metropolitan areas where civilian populations are a part of the battlefield.”
Speaking of the present situation, the report declares that “the United States has entered an era of perpetual war.” It notes, “After fifteen years, the wars in Afghanistan and Iraq are still continuing.” There is, additionally, “an increasing number of conflicts in the gray zone, whose primary characteristic is ambiguity—about their objectives, participants, and even outcomes, since they clearly lack defined end points.”
But, as the document cautions, “The Army cannot focus solely on these types of conflicts.” It must prepare for what “we’ve called ‘the next big war’—involving very capable adversaries, high levels of death and destruction, and perhaps hundreds of thousands of US troops.”
The Atlantic Council roots the likelihood of such a war in what it calls “Russia’s resurgence,” which requires NATO to “seriously prepare for the possibility of a Russian attack on one or more of its members for the first time since the end of the Cold War.” China, likewise, has “become increasingly aggressive.”
Noting that 5,366 US soldiers died during the Iraq war, the report declares that “the next big war” will see levels of violence and death far beyond what has been seen in Iraq, Afghanistan and Syria. It bemoans the fact that Army “personnel have not been psychologically hardened by personal experience for the grim task of fighting through heavy losses to battlefield victory.” It warns that “current Army leaders have little if any experience with the extreme battlefield stresses caused by overrun units and heavy casualties,” adding, “These stresses were common during past US conflicts and could likely be so again during a future big war.”
“A future major war against a great power competitor might,” according to the report, “require the Army to grow by several orders of magnitude in order to prevail.” To make this possible, the Army must begin making plans for a “mass mobilization.” As the Atlantic Council explains, “The growing threats in today’s world” mean that the Army “must once again build a mobilization plan to rapidly grow the size of the Army to meet a national crisis of existential danger.” In other words, it must prepare to institute a draft.
Finally, there must be active preparations for an intervention—or even takeover—by the military in the event of what the report calls a “breakdown of civil order”—a euphemism for the emergence of a political challenge from below to the domination of the ruling class. The Atlantic Council notes that “the large-scale disruption of civil order…would almost certainly engage much of the Army in providing extensive support to civil authorities throughout the country.”
Totally left out of this analysis, except as the object of military repression, are the American people. It never occurs to those engaged in the preparation of these policies to consult the population. It is taken for granted that it must acquiesce to a course of action that will result in death and destruction on a horrific scale.
None of this is being discussed or even hinted at in the US elections. The media and the establishment candidates are seeking to bury the real issues at stake. The questions of life and death are deliberated away from the cameras. They are the purview of the “deep state”—the Pentagon, the intelligence agencies and their associated think tanks.
One can be certain that in the second mud-slinging match between Hillary Clinton and Donald Trump, scheduled for October 9, none of the issues raised in the Atlantic Council report will be addressed. Regardless of whether Trump or Clinton wins next month’s election, the war preparations will go ahead. In the United States, dominated by an immensely powerful financial oligarchy and the vast national security apparatus in its employ, elections serve as little more than a façade for policies determined behind the scenes and kept out of public view.
There is no way for workers to oppose the drive to war by voting for either Clinton or Trump, or, for that matter, the candidates put forward by the third-rate capitalist parties, the Greens and the Libertarians.
Nothing can stop the drive to war except the mobilization of the international working class.

Russia responds to US threats with blunt warning over use of force in Syria

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Russian Foreign Ministry spokeswoman Maria Zakharova issued a stark warning to Washington Saturday, declaring that any move by the US to directly attack Syrian government forces could result in “total war” and produce “tectonic shifts” in the country and throughout the Middle East.
Russia’s warning came almost a year to the day after the Kremlin initiated air strikes against Islamist targets in Syria. Moscow intervened to prop up the Assad regime, which hosts Russia’s only naval base outside of the former Soviet Union. The intervention drew immediate condemnation from Washington, the country that bears responsibility for initiating the Syrian civil war in 2011 to bring about regime change in Damascus.
A year on, Zakharova raised the prospect of the eruption of a much wider war with incalculable consequences. Noting Washington’s preference to pursue its policy goals with the use of force, she stated, “It usually ends with one thing—a full-scale war.” She then proceeded to warn of the impact on the broader region, adding, “If the US starts a direct aggression against Damascus and the Syrian army, this will lead to scary, tectonic shifts not only on the territory of Syria, but in the whole region as well.”
These comments reflect the growing concern about Washington’s increasingly provocative and aggressive stance towards Russia over Syria, expressed recently in veiled threats to unleash CIA-sponsored terrorists against Moscow and a willingness among senior political and military circles to contemplate all-out war. At the same time, they show that the Kremlin’s attempt to defend the interests of Russia’s oligarchy by propping up its sole ally in the Middle East offers no counterweight to this war drive, but only exacerbates the danger of a military clash between the world’s two biggest nuclear powers.
Chief responsibility for this danger, however, lies with the United States. Zakharova’s comments were undoubtedly a response to the Obama administration’s ever more aggressive stance towards Moscow in recent days.
On Friday, the New York Times, which only a day earlier branded Russia an “outlaw state,” released a transcript of a closed-door discussion it had obtained between Secretary of State John Kerry and a collection of US-aligned Syrian activists on the sidelines of last month’s UN General Assembly. In it, Kerry said he and many others in the Obama administration had pushed for military action and were frustrated by the adherence to diplomatic avenues with Russia and Syria. “I think you’re looking at three people, four people in the administration who have all argued for use of force, and I lost the argument,” Kerry told his audience, before adding, “You have nobody more frustrated than we are.”
Kerry’s remarks were released only two days after he threatened to end all bilateral cooperation with Russia over Syria and in the midst of a presidential campaign in which Russia is being routinely demonized. They provide yet more confirmation that the ceasefire deal he struck with Russian Foreign Minister Sergei Lavrov last month, which collapsed after the US bombed a Syrian army position, was nothing more than a tactical maneuver. The aim was to buy time for Washington’s proxy Islamist forces to regroup and rearm, while allowing the US to prepare for a major escalation of the Syrian war.
Zakharova’s comments also were a reaction to those of State Department spokesman John Kirby, who menaced Moscow last Wednesday with the potential unleashing of Islamist extremists against Russian interests, not just in Syria, but within Russia’s own borders.
“Extremist groups will continue to exploit the vacuums that are there in Syria to expand their operations, which could include attacks against Russian interests, perhaps even Russian cities. Russia will continue to send people home in body bags, and will continue to lose resources, perhaps even aircraft,” Kirby said. Given Washington’s long record in collaborating with Jihadi terrorist groups going back to the 1980s, the meaning of such comments was unmistakably clear.
Russian aircraft continued to support a brutal offensive by Syrian government forces over the weekend with repeated air strikes on Aleppo. One of the city’s main hospitals, known as M10, was struck for a third time in a week Saturday, killing two patients, injuring many more and putting the facility out of service. According to UN figures, at least 320 civilians have been killed in eastern Aleppo and hundreds more have been injured since the collapse of the ceasefire. Allegations of the use of bunker-buster bombs, cluster munitions and phosphorus have been made.
Pro-government forces gained control of northern districts of Aleppo Sunday and the Syrian military command announced that it was prepared to give safe passage guarantees to rebels who left the city. Up to 10,000 government soldiers and aligned militias from Lebanon’s Hizbollah and Iraqi Shia fighters are reportedly preparing to launch an offensive on Aleppo’s eastern districts.
The attempts by the US and its Western allies to seize on the casualties caused and destruction wrought by Syrian and Russian bombardments are utterly hypocritical. US ambassador to the UN Samantha Power, French Foreign Minister Jean-Marc Ayrault and his British counterpart Boris Johnson have all accused Russia of “war crimes” or “barbarism” while blithely ignoring the atrocities perpetrated by the so-called moderate opposition. Extremist militias shelled government-held areas of Aleppo over recent days, killing 18 and injuring over 60 on Friday and injuring a further 13 on Saturday. No outcry has been heard in the mainstream media on behalf of these civilians killed, likely by US-supplied munitions.
More fundamentally, US imperialism is to blame for fomenting the Syrian conflict through its systematic promotion and financing of forces aligned to al-Qaida, which have formed the backbone of the rebel forces since 2011. The Obama administration, its Gulf allies and Turkey have recklessly stoked the civil war with the aim of bringing about regime change in Damascus, even as the casualties have mounted and surpassed half a million by many estimates. Last month, chairman of the Joint Chief of Staff General Joseph Dunford explicitly told Congress that achieving the US goal of controlling air space over Syria and establishing a “no-fly” zone would require war with Damascus and Moscow.
This makes clear that Washington will stop at nothing to secure the consolidation of its hegemony over the energy-rich Middle East, a critical component of its broader strategy of establishing unchallenged domination over the Eurasian land mass.
In Syria, Washington has stoked ethnic and religious divisions by backing competing and even directly hostile groups in its desperate bid to secure its predatory interests. In northern Syria, the US is continuing to supply weapons to Kurdish fighters aligned with the People’s Protection Units (YPG) and Democratic Union Party (PYD), forces which have been coming under attack since late August from a Turkish incursion to which Washington has also provided assistance.
But there are indications that tensions between Ankara and Washington are growing. Turkish President Recep Tayyip Erdogan criticized Washington last week for its latest shipment of arms to the YPG and suggested that Ankara’s support in fighting ISIS was conditional on the US abandoning the Kurds. Referring to the future offensive to seize control of Raqqa, ISIS’s capital, Erdogan said, “Of course, if the United States wants to do the Raqqa operation with the YPG and the Democratic Union Party, we as Turkey will not take part in this operation; but if they exclude the YPG and PYD from this affair, then of course we will conjoin this struggle together with the United States.”
Senior Turkish military officials are reportedly discussing crossing the Euphrates River, which the US considers to mark the limit of Kurdish control. Reports have also raised the possibility of talks on a Turkish-Russian agreement on Syria when Russian President Vladimir Putin possibly visits Turkey October 11.
Erdogan noted last week that Turkish troops had already established a “safe zone” of 900 square kilometers in Syria, an area that could be massively expanded to 5,000 square kilometers.
One of the next targets identified by Turkey is the ISIS-controlled city of Al-Bab, which US Defense Secretary Ashton Carter has urged Turkey to avoid because Washington wants Kurdish control to be established there. Al-Bab is considered key for the offensive on Raqqa, meaning that whoever holds power there could significantly influence the operation to conquer the ISIS capital.

US Officially Enters War with Yemen Amid Charges of Saudi War Crimes

U.S. launched strikes against Houthi rebels for first time just as Human Rights Watch accused Saudi-led coalition of war crimes for funeral bombing

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The U.S. officially entered war with Yemen late Wednesday, launching strikes on Houthis for the first time, purportedly in retaliation for attempted missile attacks on American warships earlier this week.

An anonymous U.S. spokesperson said the strikes destroyed three radar installations used to target the USS Mason over the past four days. The American warship had been operating out of the Bab al-Mandeb waterway between Yemen and East Africa, the Guardian reports.

U.S. officials claimed to Reuters that there were "growing indications" the rebels or allied forces had carried out strikes on Sunday, which saw two coastal cruise missiles launched at the warship, but not reaching it. However, Houthi rebels have denied any involvement, stating that allegations otherwise from U.S. officials were pretext to "escalate aggression and cover up crimes committed against the Yemeni people."

In addition to making the U.S. an official combatant in the war, the strikes further complicate a tense situation on the ground in Yemen, where the Saudi Arabia-led coalitionbombed a funeral ceremony on Saturday, killing by some estimates at least 155 people. It prompted human rights advocates on Capitol Hill and beyond to implore the U.S. to stop supporting the Saudi campaign, although the Obama administration recently authorized a $1.13 billion arms sale to the Gulf kingdom.

The campaign began in March 2015 and according to recent figures has killed at least 6,500 people, more than half of them civilians, and injured 32,000. As the New York Timessummed up on Thursday:

Despite skepticism in Washington about the wisdom of the campaign, the Obama administration threw its support behind the Saudis, in part because it needed support in Riyadh for the nuclear deal it was then negotiating with Iran, a bitter enemy of Saudi Arabia.

Human Rights Watch on Thursday declared the funeral bombing "an apparent war crime," writing in a news brief, "[w]hile military personnel and civilian officials involved in the war effort were attending the ceremony, the clear presence of several hundred civilians strongly suggests that the attack was unlawfully disproportionate."

Likewise, on Wednesday, even before the U.S. launched the missiles, Rep. Ted Lieu (D-Calif.) urged the administration to cut ties with Saudi Arabia over the more than 70 strikes the coalition has carried out in Yemen that he described as unlawful.

"It appears that either the Saudi coalition is intentionally targeting civilians or they are not distinguishing between civilians and military targets. Both would be war crimes," Lieu wrote in a letter to U.S. Secretary of State John Kerry.

"Immediately stopping the aiding and abetting of the Saudi military coalition would not only help reduce the legal risk to U.S. officials, it would send a strong message to the world that the U.S. respects the law of war and basic human rights," the letter continued. "As you know, the State Department has an entire office dedicated to preventing foreign entities from committing war crimes. The credibility of that office has been shredded by the U.S.-enabled airstrikes on civilians in Yemen."

But as political professor and Middle East expert Christopher Davidson posited on Thursday, keeping the war going is exactly the point.

By launching the strikes on Wednesday, "the U.S. has made a direct, but very limited intervention to ensure that no one side is really able to get the upper hand in the country's slow-burning conflict," he said in a statement for the Institute for Public Accuracy. "[T]he longer the current Yemen conflict lasts, the longer the arms race will keep going, and the more dependent both Saudi and Iranian clients will be on support from their patrons."

The Empire Strikes Back

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A decade ago left-wing governments, defying Washington and global corporations, took power in Brazil, Argentina, Paraguay, Venezuela, Uruguay, Bolivia and Ecuador. It seemed as if the tide in Latin America was turning. The interference by Washington and exploitation by international corporations might finally be defeated. Latin American governments, headed by charismatic leaders such as Hugo Chavez in Venezuela, Luiz Inácio Lula da Silva in Brazil, Evo Morales in Bolivia and Rafael Correa in Ecuador, won huge electoral victories. They instituted socialist reforms that benefited the poor and the working class. They refused to be puppets of the United States. They took control of their nations’ own resources and destinies. They mounted the first successful revolt against neoliberalismand corporate domination. It was a revolt many in the United States hoped to emulate here.

But the movements and governments in Latin America have fallen prey to the dark forces of U.S. imperialism and the wrath of corporate power. The tricks long practiced by Washington and its corporate allies have returned—the black propaganda; the manipulation of the media; the bribery and corruption of politicians, generals, police, labor leaders and journalists; the legislative coups d’état; the economic strangulation; the discrediting of democratically elected leaders; the criminalization of the left; and the use of death squads to silence and disappear those fighting on behalf of the poor. It is an old, dirty game.

President Correa, who earned enmity from Washington for granting political asylum to Julian Assangefour years ago and for closing the United States’ Manta military air basein 2009, warned recently that a new version of Operation Condor is underway in Latin America. Operation Condor, which operated in the 1970s and ’80s, saw thousands of labor union organizers, community leaders, students, activists, politicians, diplomats, religious leaders, journalists and artists tortured, assassinated and disappeared. The intelligence chiefs from right-wing regimes in Argentina, Bolivia, Chile, Paraguay, Uruguay and, later, Brazil had overseen the campaigns of terror. They received funds from the United States and logistical support and training from the Central Intelligence Agency. Press freedom, union organizing, all forms of artistic dissent and political opposition were abolished. In a coordinated effort these regimes brutally dismembered radical and leftist movements across Latin America. In Argentina alone 30,000 people disappeared.

Latin America looks set to be plunged once again into a period of dictatorial control and naked corporate exploitation. The governments of Ecuador, Bolivia and Venezuela, which is on the brink of collapse, have had to fight off right-wing coup attempts and are enduring economic sabotage. The Brazilian Senate impeached the democratically elected President Dilma Rousseff. Argentina’s new right-wing president, Mauricio Macri, bankrolled by U.S. hedge funds, promptly repaid his benefactors by handing $4.65 billion to four hedge funds, including Elliott Management, run by billionaire Paul Singer. Thepayout to hedge fundsthat had bought Argentine debt for pennies on the dollar meant that Singer’s firm made $2.4 billion, an amount that was 10 to 15 times the original investment. The previous Argentine government, under Cristina Fernández de Kirchner, had refused to pay the debt acquired by the hedge funds and acidly referred to them as “vulture funds.”

I interviewed Guillaume Long, Ecuador’s minister of foreign affairs and human mobility, for my show “On Contact” last week. Long, who earned a doctorate from the Institute for the Study of the Americas at the University of London, called at the United Nations for the creation of a global tax regulatory agency. He said such an agency should force tax-dodging corporations, which the International Monetary Fund estimates costs developing countries more than $200 billion a year in lost revenue, to pay the countries for the natural resources they extract and for national losses stemming from often secret corporate deals. He has also demanded an abolition of overseas tax havens.

Long said the neoliberal economic policies of the 1980s and ’90s were profoundly destructive in Latin America. Already weak economic controls were abandoned in the name of free trade and deregulation. International corporations and banks were given a license to exploit. “This deregulation in an already deregulated environment” resulted in anarchy, Long said. “The powerful people had even less checks and balances on their powers,” he said.

“Neoliberalism is bad in most contexts,” Long said when we spoke in New York. “It’s been bad in Europe. It’s been bad in other parts of the world. It has dismantled the welfare state. In the context where we already have a weak state, where institutions are not consolidated, where there are strong feudal remnants, such as in Latin America, where you don’t really have a strong social contract with institutions, with modernity, neoliberalism just shatters any kind of social pact. It meant more poverty, more inequality, huge waves of instability.”

Countries saw basic services, many already inadequate, curtailed or eliminated in the name of austerity. The elites amassed fortunes while almost everyone else fell into economic misery. The political and economic landscape became unstable. Ecuador had seven presidents between 1996 and 2006, the year in which Correa was elected. It suffered a massive banking crisis in 1999. It switched the country’s currency to the U.S. dollar in desperation. The chaos in Ecuador was mirrored in countries such as Bolivia and Argentina. Argentina fell into a depression in 1998 that saw the economy shrink by 28 percent. Over 50 percent of Argentines were thrust into poverty.

“Latin America,” Long said, “hit rock bottom.”

It was out of this neoliberal morass that the left regrouped and took power.

“People came to terms with that moment of their history,” Long said. “They decided to rebuild their societies and fight foreign interventionism and I’d even say imperialism. To this day in Latin America, the main issue is inequality. Latin America is not necessarily the poorest continent in the world. But it’s certainly the most unequal continent in the world.”

“Ecuador is an oil producer,” Long said. “We produce about 530,000 barrels of oil a day. We were getting 20 percent royalties on multinationals extracting oil. Now it’s the other way around. We pay multinationals a fee for extractions. We had to renegotiate all of our oil contracts in 2008 and 2009. Some multinationals refused to abide by the new rules of the game and left the country. So our state oil company moved in and occupied the wells. But most multinationals said OK, we’ll do it, it’s still profitable. So now it’s the other way around. We pay private companies to extract the oil, but the oil is ours.”

Long admitted that there have been serious setbacks, but he insisted that the left is not broken.

“It depends on how you measure success,” he said. “If you’re going to measure it in terms of longevity, and how long these governments were in power—in our case we’re still in power, of course, and we’re going to win in February next year—then you’re looking at, more or less in Venezuela 17 years [that leftist governments have been in power], in Ecuador now 10, and in Argentina and Brazil it’s 13.”

“One of the critiques aimed at the left is they’re well-meaning, great people with good ideas but don’t let them govern because the country will go bust,” he said. “But in Ecuador we had really healthy growth rates, 5 to 10 percent a year. We had lots of good economics. We diversified our economy. We moved away from importing 80 percent of energy to [being] net exporters of electricity. We’ve had big reforms in education, in higher education. Lots of things that are economically successful. Whereas neoliberal, orthodox economics was not successful in the previous decade.”

Long conceded that his government had made powerful enemies, not only by granting political asylum to Assange in its embassy in London but by taking Chevron Texaco to court to try to make it pay for the ecological damage its massive oil spills caused in the Amazon, where the company drilled from the early 1960s until it pulled out in 1992. It left behind some 1,000 toxic waste pits. The oil spills collectively were 85 times the size of the British Petroleum spill in the Gulf of Mexico and 18 times the size of the spill from the Exxon Valdez. An Ecuadorean court ordered Chevron Texaco to pay $18.2 billion in damages, an amount later reduced to $9.5 billion. The oil giant, however, has refused to pay. Ecuador has turned to international courts in an attempt to extract the money from the company.

Long said that the different between the massive oil spills elsewhere and the Ecuadorean spills was that the latter were not accidental. “[They were done] on purpose in order to cut costs. They were in the middle of the Amazon. Normally what you’d do is extract the oil and you’d have these membranes so that it doesn’t filter through into the ground. They didn’t put in these membranes. The oil filtered into the water systems. It polluted all of the AmazonRiver system. It created a huge sanitary and public health issue. There were lots of cancers detected.”

Long said his government was acutely aware that Chevron Texaco has “a lot of lobbying power in the United States, in Wall Street, in Washington.”

“There are a lot of things we don’t see,” he said of the campaign to destabilize his government and other left-wing governments. “Benefits we could reap, investments we don’t get because we’ve been sovereign. In the case of [Ecuador’s closing of the U.S.] Manta air base, we’d like to think the American government understood and it was fine. But it was a bold move. We said ‘no more.’ We declared it in our constitution. We had a new constitution in 2008. It was a very vibrant moment of our history. We created new rules of the game. It’s one of the most progressive constitutions in the world. It actually declares the rights of nature. It’s the only constitution that declares the rights of nature, not just the rights of man. We made Ecuadorean territory free of foreign military bases. There was no other way. But there are consequences to your actions.”

One of those consequences was an abortive coup in September 2010 by members of the Ecuadorean National Police. It was put down by force. Long charged that many of the Western NGO’s in Ecuador and throughout the region are conduits for money to right-wing parties. Military and police officials, along with some politicians, have long been on the CIA’s payroll in Latin America. President Correa in 2008 dismissed his defense minister, army chief of intelligence, commanders of the army and air force, and the military joint chiefs, saying that Ecuador’s intelligence systems were “totally infiltrated and subjugated to the CIA.”

“There is an international conspiracy right now, certainly against progressive governments,” he said. “There’s been a few electoral setbacks in Argentina, and Venezuela is in a difficult situation. The media frames it in a certain way, but, yes, sure, Venezuela is facing serious trouble. There’s an attempt to make the most of the fall of prices of certain commodities and overthrow [governments]. We just saw a parliamentary coup in Brazil. [President Rousseff had been] elected with 54 million votes. The Labor Party in Brazil [had] been in power for 13 years. The only way they [the rightists] managed to get rid of it was through a coup. They couldn’t do it through universal suffrage.”

Long said that even with the political reverses suffered by the left it will be difficult for the rightists to reinstate strict neoliberal policies.

“You have a strong, disputed political ground between a traditional right and a radical left,” he said. “A radical left, which has proved it can reduce poverty, it can reduce inequality, it can run the economy, well, it’s got young cadres that have been [government] ministers and so on. I reckon that sooner or later it will be back in power.”

Corporate leviathans and the imperialist agencies that work on their behalf are once again reshaping Latin America into havens for corporate exploitation. It is the eternal story of the struggle by the weak against the strong, the poor against the rich, the powerless against the powerful, and those who would be free against the forces of imperialism.

“There are no boundaries in this struggle to the death,” Ernesto “Che” Guevarasaid. “We cannot be indifferent to what happens anywhere in the world, for a victory by any country over imperialism is our victory; just as any country’s defeat is a defeat for all of us.”

Deutsche Bank and the global financial crisis

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Deutsche Bank’s shares plunged to record lows this week, sparking talk of a government bailout to avert a new financial crash. The turmoil surrounding Germany’s biggest bank demonstrates that all of the contradictions of the global financial system that led to the meltdown of 2008 are once again erupting. Now, however, these contradictions are fuelling and intersecting with economic and political tensions between the major powers. These geo-political conflicts are, in turn, intensifying the financial crisis.
The financial position of Deutsche Bank has been of concern for a number of years, with the International Monetary Fund saying last June that it appeared to be “the most important net contributor to systemic risks in the global financial system.” But the immediate cause of the present crisis was political.
After a protracted investigation, the US Department of Justice moved last month to impose a $14 billion penalty on Deutsche Bank for fraudulent practices in relation to the US sub-prime mortgage market in the lead-up to the 2008 crisis. Both the substance of this decision and the circumstances surrounding it indicate that it was a calculated move to hit Germany’s only major international bank.
The decision was leaked to the Wall Street Journal, rather than being discussed behind closed doors so that a private settlement could be reached. It emerged in the midst of rising tensions between the US and the European Union, particularly with Germany.
Following the EU decision to hit Apple with a €13 billion back tax bill—a step that met with trenchant criticism from US government and corporate circles—the Justice Department move in relation to Deutsche Bank was widely regarded in European circles as payback. Tensions over the Apple penalty and its implications for US investment and profit-making in Europe had been compounded by the virtual scuttling of the US-sponsored Trans-Atlantic Trade and Investment Partnership by Germany and France.
The Deutsche Bank share plunge was halted on Friday, at least for now, on the back of news that the US was prepared to lower its fine to $5.4 billion. This, however, will prove at most to be a short-lived ceasefire in an ongoing economic and financial war.
The conflicts are not temporary phenomena, but are rooted in two interconnected objective developments: the ongoing stagnation in the world economy, marked by low growth levels, declining trade, lower investment and falling productivity, and the development of a massive financial bubble reflected in the rise of stock and bond markets.
The contradiction between booming financial markets and intractable slump in the underlying economy is assuming an ever more explosive form. Notwithstanding the illusion that money can simply beget more money through speculation and central bank stimulus, financial assets represent, in the final analysis, a claim on the wealth produced in the real economy.
For decades, financial assets were roughly equivalent in size to global gross domestic product. But the rise of financialisation, starting in the 1980s, led to a situation where, by the time of the 2008 crisis, these assets were more than 360 percent of global GDP. This ratio has only increased since then as a result of the extraordinary monetary policies—the pumping of trillions of dollars into the financial system and ultra-low and even negative interest rates—adopted by the world’s major central banks.
Commenting on the Deutsche Bank crisis, one financial analyst told the Financial Times: “Investors are now worried that sooner or later there will be a heavy price to pay for the current market distortions.” The market distortions, however, are only the immediate expression of profound contradictions in the very foundations of the global financial system.
Under conditions where financial asset claims vastly outweigh real wealth, each section of finance capital must turn ever more viciously against its rivals in an attempt to eliminate them.
These tendencies find particular expression in Deutsche Bank. For decades, it worked in close collaboration with key sections of German large-scale industry. But with the growth of global finance capital, this business model became increasingly unviable, and at the end of the 1980s Deutsche Bank sought to turn itself into a global investment bank and aggressively targeted its rivals, particularly US banks. Its criminal activities in the US sub-prime market, mirroring those of US competitors such as Goldman Sachs, were part of this process.
While American banks were strengthened by the bailouts organised by the US government, the financial position of Deutsche Bank has been steadily eroded.
Without a bailout, it needs to raise more capital from the market in order to compete. But the ultra-low and negative interest rate regime, set in place by the major central banks, means that its basic business model has been adversely affected and profit expectations have been lowered. Under conditions where Deutsche Bank continues to hold on its balance sheet high levels of toxic derivative assets and the prospects for a serious revival of world trade and economic growth become increasingly remote, its counterparties demand ever higher rates of return on credit.
As the Wall Street Journal noted: “Deutsche Bank’s biggest problem isn’t just that it needs capital, but that it will find it very hard to raise any,” since it will “struggle to convince investors that it can make a return that beats its cost of capital in the years ahead.”
Just as rival gangs conduct a turf war of each against all in a bid to strengthen their own position, so Deutsche Bank has been targeted. Hedge funds and speculators have had a field day betting against the bank.
In a statement to employees on Friday, Deutsche Bank CEO John Cryan alluded to the forces at work, declaring that in banking, trust was everything, and that “there are currently forces at play in the market that want to weaken this trust in us.”
Deutsche Bank is not the only target. The wider dimensions of the conflict were given voice in a statement this week by Valdis Dombrovskis, a vice-president of the European Commission. He declared that reforms to global banking being pushed by the United States, which would lead to “significant increases in capital requirements shouldered by Europe’s banking sector,” would not be accepted.
While not directly naming the US, he said: “We want a solution that works for Europe and does not put our banks at a disadvantage compared to our global competitors.”
The way in which the insoluble contradictions of the global capitalist economy are fuelling geo-political tensions, and vice versa, as revealed in the Deutsche Bank crisis, is of profound significance. As the tormented history of the 20th Century shows, it is an indubitable expression of a global breakdown of the capitalist system that leads inexorably, unless prevented by the international working class, to world war.