Wednesday, March 4, 2009

Memos Provide Blueprint for Police State

Memos Provide Blueprint for Police State

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Seven newly released memos from the Bush Justice Department reveal a concerted strategy to cloak the president with power to override the Constitution. The memos provide "legal" rationales for the president to suspend freedom of speech and press; order warrantless searches and seizures, including wiretaps of US citizens; lock up US citizens indefinitely in the United States without criminal charges; send suspected terrorists to other countries where they will likely be tortured; and unilaterally abrogate treaties. According to the reasoning in the memos, Congress has no role to check and balance the executive. That is the definition of a police state.

Who wrote these memos? All but one were crafted in whole or in part by the infamous John Yoo and Jay Bybee, authors of the so-called "torture memos" that redefined torture much more narrowly than the US definition of torture, and counseled the president how to torture and get away with it. In one memo, Yoo said the Justice Department would not enforce US laws against torture, assault, maiming and stalking in the detention and interrogation of enemy combatants.

What does the federal maiming statute prohibit? It makes it a crime for someone "with the intent to torture, maim, or disfigure" to "cut, bite, or slit the nose, ear or lip, or cut out or disable the tongue, or put out or destroy an eye, or cut off or disable a limb or any member of another person." It further prohibits individuals from "throwing or pouring upon another person any scalding water, corrosive acid, or caustic substance" with like intent.

The two torture memos were later withdrawn after they became public because their legal reasoning was clearly defective. But they remained in effect long enough to authorize the torture and abuse of many prisoners in US custody.

The seven memos just made public were also eventually disavowed, several years after they were written. Steven Bradbury, the principal deputy assistant attorney general in Bush's Department of Justice, issued two disclaimer memos - on October 6, 2008 and January 15, 2009 - that said the assertions in those seven memos did "not reflect the current views of this Office." Why Bradbury waited until Bush was almost out of office to issue the disclaimers remains a mystery. Some speculate that Bradbury, knowing the new administration would likely release the memos, was trying to cover his backside.

Indeed, Yoo, Bybee and Bradbury are the three former Justice Department lawyers that the Office of Professional Responsibility (OPR) singled out for criticism in its still unreleased report. The OPR could refer these lawyers for state bar discipline or even recommend criminal charges against them.

In his memos, Yoo justified giving unchecked authority to the president because the United States was in a "state of armed conflict." Yoo wrote, "First Amendment speech and press rights may also be subordinated to the overriding need to wage war successfully." Yoo made the preposterous argument that since deadly force could legitimately be used in self-defense in criminal cases, the president could suspend the Fourth Amendment because privacy rights are less serious than protection from the use of deadly force.

Bybee wrote in one of the memos that nothing can stop the president from sending al-Qaeda and Taliban prisoners captured overseas to third countries, as long as he doesn't intend for them to be tortured. But the Convention Against Torture, to which the United States is a party, says that no country can expel, return or extradite a person to another country "where there are substantial grounds for believing that he would be in danger of being subjected to torture." Bybee claimed the Torture Convention didn't apply extraterritorially, a proposition roundly debunked by reputable scholars. The Bush administration reportedly engaged in this practice of extraordinary rendition 100 to 150 times as of March 2005.

The same day that Attorney General Eric Holder released the memos, the government revealed that the CIA had destroyed 92 videotapes of harsh interrogations of Abu Zubaida and Abd al Rahim al Nashiri, both of whom were subjected to waterboarding. The memo that authorized the CIA to waterboard, written the same day as one of Yoo/Bybee's torture memos, has not yet been released.

Bush insisted that Zubaida was a dangerous terrorist, in spite of the contention of one of the FBI's leading al-Qaeda experts that Zubaida was schizophrenic, a bit player in the organization. Under torture, Zubaida admitted to everything under the sun - his information was virtually worthless.

There are more memos yet to be released. They will invariably implicate Bush officials and lawyers in the commission of torture, illegal surveillance, extraordinary rendition, and other violations of the law.

Meanwhile, John Yoo remains on the faculty of Berkeley Law School and Jay Bybee is a federal judge on the Ninth Circuit Court of Appeals. These men, who advised Bush on how to create a police state, should be investigated, prosecuted and disbarred. Yoo should be fired and Bybee impeached.

How Close the Bush Bullet

How Close the Bush Bullet

By Robert Parry

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Earlier this decade when some of us warned that George W. Bush was behaving more like an incipient dictator than the leader of a constitutional republic, we were dismissed as alarmists, left-wingers, traitors and a host of less printable epithets.

But it is now increasingly clear that President Bush and his top advisers viewed the 9/11 attacks as an opportunity to implement a series of right-wing legal theories that secretly granted Bush unlimited power to act lawlessly and outside the traditional parameters of the U.S. Constitution.

These theories held that at a time of war – even one as vaguely defined as the “war on terror” – Bush’s powers as Commander in Chief were “plenary,” or total. And since the conflict against terrorism had no boundaries in time or space, his unfettered powers would exist everywhere and essentially forever.

According to his administration's secret legal memos released Monday, Bush could waive all meaningful constitutional rights of citizens, including the First Amendment’s protections on free speech and a free press.

John Yoo, a deputy assistant attorney general at the Justice Department's powerful Office of Legal Counsel – which advises a President on the limits of his constitutional powers – declared that Bush could void the First Amendment if he deemed it necessary to fight terrorism.

"First Amendment speech and press rights may also be subordinated to the overriding need to wage war successfully," Yoo wrote in an Oct. 23, 2001, memo entitled “Authority for Use of Military Force to Combat Terrorist Activities Within the United States.”

Yoo then added ominously, "The current campaign against terrorism may require even broader exercises of federal power domestically."

What was particularly stunning about Yoo’s reference to waiving the First Amendment – a pillar of American democracy – was his cavalier attitude. He tossed the paragraph into a memo focused on stripping Americans of their Fourth Amendment “right of the people to be secure in their persons, houses, papers and effects, against unreasonable searches and seizures.”

While saying that Bush could order spying on and military attacks against U.S. domestic targets at his own discretion as Commander in Chief, Yoo added, almost in passing, that the President also could abrogate the rights of free speech and a free press.

Wiping Out Public Trials

Another Yoo memo, dated June 27, 2002, essentially voided the Sixth Amendment and a federal law guaranteeing Americans the right to public trials. In the memo, Yoo asserted that Bush had the power to declare American citizens “enemy combatants” and detain them indefinitely.

“The President’s power to detain enemy combatants, including U.S. citizens, is based on his constitutional authority as Commander in Chief,” Yoo wrote, adding that “Congress may no more regulate the President’s ability to detain enemy combatants than it may regulate his ability to direct troop movements on the battlefield.”

Yoo acknowledged that in “war on terror” cases, an “enemy combatant” may have no formal connection to an enemy group, may have no weapon, and may have no discernable plan for carrying out a terrorist attack. In other words, an “enemy combatant” could be anyone that Bush so designated.

Under Yoo’s analysis, an alleged “enemy combatant” would have no legal recourse, since Bush’s Commander in Chief powers trumped even habeas corpus requirements that the government must show cause for imprisoning someone. Further, this opinion wasn’t just hypothesizing; it provided the legal basis for indefinitely detaining U.S. citizen Jose Padilla.

Though the U.S. Supreme Court ultimately issued a narrow 5-4 decision overturning Bush’s supposed right to deny habeas corpus and punish “enemy combatants” through his own military court system, many of Yoo’s concepts survived in the Military Commissions Act, which was passed by the Republican-controlled Congress in 2006.

While the law appears on the surface to target only non-citizens, fine print deep in the legislation makes clear that the Bush administration still was asserting its power to detain U.S. citizens who were viewed as aiding and abetting foreign enemies and to punish those citizens through military commissions that denied normal due-process rights to defendants.

“Any person is punishable as a principal under this chapter who commits an offense punishable by this chapter, or aids, abets, counsels, commands, or procures its commission,” the law states, adding that “any person subject to this chapter who, in breach of an allegiance or duty to the United States, knowingly and intentionally aids an enemy of the United States ... shall be punished as a military commission … may direct.”

The reference to people acting “in breach of an allegiance or duty to the United States” would not apply to Osama bin Laden or al-Qaeda but would cover American citizens.

The Military Commissions Act remains in effect to this day, although President Barack Obama has vowed not to apply it, favoring use of regular civilian or military courts.

Loss of First Amendment

Though some of us have cited Bush’s determination to override key constitutional protections for years (see, for instance, our book Neck Deep), few critics – including me – thought to include the notion that Bush was interested in suspending the First Amendment.

The significance of Yoo’s throwaway paragraph about throwing away the First Amendment is that it suggests that the Bush administration intended as early as October 2001 to act against journalists and citizens who were viewed as undermining Bush’s “war on terror” through public comments or disclosures.

As a right-wing legal scholar, Yoo surely shared the Right’s knee-jerk animosity toward past reporting on the Watergate scandal and the Vietnam War’s Pentagon Papers, as well as contempt for Americans who demonstrated against the Vietnam War.

But his First Amendment reference also may have reflected the thinking of senior Bush aides in those early days of the "war on terror" as they collaborated with Yoo in formulating his legal opinions.

In his 2006 book War by Other Means, Yoo describes his participation in frequent White House meetings regarding what “other means” should receive a legal stamp of approval. Yoo said the “meetings were usually chaired by Alberto Gonzales,” then White House counsel, and involved Vice President Dick Cheney’s legal counsel, David Addington.

So, a seemingly incongruous reference to overriding the First Amendment – in a memo centered on overriding the Fourth Amendment – could be explained by the desire of White House officials to have some legal cover for actions aimed at journalists who were exposing secrets or whose reporting might weaken the national resolve behind Bush’s actions.

It also suggests that Bush’s critics who exercised their free speech rights in challenging his “war on terror” could have become targets of special government operations justified under Bush’s Commander in Chief powers.

In other words, Bush’s assault on America’s constitutional Republic may have been more aggressive than many of us imagined. It was a bullet that came close to the heart of a dream dating back to 1776.

Auto sales plunge 42 percent

Auto sales plunge 42 percent

US slump, Wall Street slide deepen

By Patrick Martin

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The US economic slump is deepening, with a record plunge in auto sales and a series of other negative economic indicators contributing to an ongoing selloff on the stock exchange. There were predictions that the unemployment figures for February, to be announced Friday, would show a jump in the jobless toll of more than 700,000 in a single month, bringing the unemployment rate to more than 8 percent.

New car sales for February were down 42 percent compared to the same month in 2008, with drops of 53 percent for General Motors, 48 percent for Ford, 44 percent for Chrysler, 40 percent for Toyota, 38 percent for Honda and 37 percent for Nissan. Monthly sales for the three US-owned companies were the lowest in 28 years.

The auto sales report was only the gloomiest of a whole series of reports and forecasts over the last few days. The Commerce Department reported that construction spending fell 3.3 percent in January, nearly double the expected figure, including a 2.9 percent drop in residential construction, and a 4.3 percent drop in nonresidential construction, the largest in 15 years.

The National Association of Realtors reported that its index of sales of existing homes fell 7.7 percent in January to its lowest level ever, breaking the previous record low set last November. The biggest regional declines were 13 percent in the Northeast and 12 percent in the South, with Midwest sales down 9 percent. Sales in the West rose 2 percent because of rising purchases of foreclosed homes.

The huge mortgage lender Freddie Mac, propped up by a federal bailout since last summer, announced last week that it had lost $25.2 billion in the fourth quarter and would need another $15.2 billion in government aid. The company's CEO, David Moffett, appointed only last September, resigned Monday, effective March 12.

The Institute for Supply Management reported that its manufacturing index was 35.8 in February, compared to 35.6 in January. Any reading below 50 indicates a shrinking manufacturing sector.

The richest American capitalist, Warren Buffett, chairman of Berkshire Hathaway, wrote in his company's annual report, released Saturday, that "the economy will be in shambles, throughout 2009, and, for that matter, probably well beyond."

New mass layoffs have been announced, including 6,100 jobs in the closure of HFC and Beneficial, the largest subprime mortgage lender, which is being shut down by its owner, the London-based bank HSBC Holdings. Pilgrim's Pride said it would cut 3,000 jobs and close 3 of its 32 chicken-processing plants. The company filed Chapter 11 bankruptcy in December.

The Organization for Economic Cooperation and Development (OECD) warned that the global slump will be worse than that forecast by the International Monetary Fund in January. The fourth quarter of 2008, when US Gross Domestic Product fell 6.2 percent, was not the bottom, the OECD said. "The recession will deepen," chief economist Klaus Schmidt-Hebbel told the press. "There's no doubt. I think this quarter will be the worst quarter of all."

The crisis in financial markets continues to worsen as well. Trading on the New York Stock Exchange was erratic on Tuesday, rising and falling as a series of US government officials made statements about the state of the economy. The Dow-Jones Industrial Average ended the day down 37.27 points, setting another 12-year low.

The decline in stock prices is both a manifestation of the loss of confidence among investors and a powerful aggravating factor in the crisis itself. Colossal sums have been wiped out in the nearly six months since the crash was triggered by the bankruptcy of Lehman Brothers on September 15, 2008. US stocks overall are down 22 percent since January 1, 2009, and 55 percent from their peak in October 2007.

During the six months that ended February 27, the Standard & Poor's 500, a broader selection of stocks than the Dow-Jones average, lost 43 percent of its value, the worst such period since the 1930s. The S&P 500 fell 18.6 percent in the first two months of 2009, the worst such showing ever, surpassing an 18.2 percent fall in the first two months of 1933, in the throes of the Great Depression.

If anything, the stock market plunge is accelerating. Of the 16 trading days since February 6, 13 have registered a decline in the Dow-Jones average, and one a rise of a minuscule 3.03 points. The total decline in this period of just over three weeks is more than 1,500 points, a drop of 18.7 percent.

Federal Reserve Board Chairman Ben Bernanke and two of the top officials of the Obama administration, Treasury Secretary Timothy Geithner and Budget Director Peter Orszag, testified before congressional committees on Tuesday, and their efforts to reassure the financial markets, in the wake of Monday's heavy selloff, had little impact.

Bernanke spoke after the Federal Reserve officially began its $200 billion program to bail out investors in the consumer-lending sector. The program, named the Term Asset-Backed Securities Loan Facility or TALF, offers loans to holders of securities backed by auto loans, education loans, credit card debts and other consumer debt instruments. The investors must submit requests by March 17, and those approved will receive the cash March 25, repayable in three years.

The Fed Chairman, in an unusual display of public support for White House policy, urged the Senate Budget Committee to move rapidly on the Obama administration's budget, and warned that the United States could face "a prolonged episode of economic stagnation" if they did not. Delaying the budget could trigger "further deterioration in the fiscal situation" and cause "lower output, employment and incomes for an extended period."

In the early afternoon, with the stock market demonstrating continued investor nervousness, Obama himself took the occasion to deliver a pep talk, in remarks to reporters during a brief appearance with visiting British Prime Minister Gordon Brown.

In response to a question about the stock market slump, Obama initially gave a boilerplate response about not focusing on "day-to-day gyrations" but then went on to deliver what amounted to a "buy" recommendation. "What you're now seeing is profit and earning ratios are starting to get to the point where buying stocks is a potentially good deal if you've got a long-term perspective on it," he claimed.

A more sober view would be that when the president of the United States must go out of his way to shill for the stock exchange, the financial calamity must be of truly monumental proportions.

World capitalism is plunging into a crisis as severe as the Great Depression, with political implications no less ominous. The jobs, living standards and well-being of billions of working people around the world are being held hostage to the anarchy of the financial markets and the profit drive of a capitalist aristocracy that will stop at nothing to defend its wealth and privileges.

US Justice Department memos: the specter of military dictatorship

US Justice Department memos: the specter of military dictatorship

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A set of nine secret memos released by the US Justice Department Monday reveal that in the weeks and months after the September 11, 2001, terrorist attacks the US government began erecting the legal scaffolding for a full-blown military dictatorship.

Attorney General Eric Holder declared that the release of the documents, which were posted on the Justice Department's web site, signaled a new era of "transparency and openness." The actions of the Obama administration in recent weeks, however, including the invocation of national security and state secrets to quell lawsuits challenging the worst abuses of the Bush era, make it clear that the threat revealed in these memos is far from over.

The thrust of the memos, written by former Deputy Assistant Attorney General John Yoo, then-Assistant Attorney General Jay Bybee and others in the Justice Department's Office of Legal Counsel, was that the president, as commander-in-chief in the "global war on terrorism," had the right to suspend the Constitution and treat American citizens on US soil as if they were soldiers in an invading foreign army.

In a September 25, 2001, memo, Yoo argued for the unfettered right of the White House to carry out warrantless domestic wiretapping. He insisted that the Fourth Amendment's protection against unreasonable searches and seizures was inoperative in the context of the war on terror, which had "changed the calculus of a reasonable search."

In response to an inquiry from the White House concerning its authority to deploy US troops within the United States itself, Yoo and then-Special Counsel Robert Delahunty issued an October 23, 2001, memo insisting that nothing in the Constitution or the law could stop him.

In the document, Yoo and Delahunty acknowledged that what was under consideration included "deploying troops and military equipment to monitor and control the flow of traffic into a city; attacking civilian targets, such as apartment buildings, offices, or ships where suspected terrorists were thought to be."

The Justice Department officials admitted that the use of military forces against US citizens on American soil raised "novel and difficult questions of constitutional law," but argued that such forces would not be bound to respect constitutional rights, allowing them to search houses and seize suspects, without the need for court approval or a search warrant.

In the same memo, they made the case that calling out the military on US soil could be joined with a sweeping suppression of freedom of speech. "First Amendment speech and press rights may also be subordinated to the overriding need to wage war successfully," they wrote.

Other memos explicitly rejected any power of the courts or Congress to limit the president's actions. This included a finding that Congress had no right to restrict the president's treatment of detainees or their transfer to other countries, a practice known as rendition that was used to subject them to interrogation under torture. They also asserted that the president was not bound to obey laws requiring court approval for wiretapping.

Included in the released documents was a January 15, 2009, memo—issued just five days before Bush left office—signed by the outgoing head of the Office of Legal Counsel, Steven Bradbury. In it, Bradbury claimed that a number of the legal opinions expressed in the earlier memos were no longer operative and had been secretly "withdrawn or superseded."

This document had the character of a legal cover for the government attorneys who are clearly complicit in the criminal activities of the Bush administration, including domestic spying, torture and extra-legal detentions.

This cover-up is essentially taken as good coin by the Obama administration and the Democrats in Congress. The administration treats the earlier memos as "mistakes," while Senator Patrick Leahy, chairman of the Senate Judiciary Committee, said that the memos exposed "the Bush administration's misguided national security policies."

Involved here were not "misguided" policies in an otherwise legitimate "war on terror," but rather a deliberate and frontal assault on the Constitution and democratic rights. No one, either in the Obama administration or in the Democratic congressional leadership, suggests that those responsible for these illegal policies should be held accountable, including by means of criminal prosecutions.

The American Civil Liberties Union, whose lawsuits were at least partially responsible for the release of the memos, welcomed their publication, but noted pointedly that "dozens of other OLC memos, including memos that provided the basis for the Bush administration's torture and warrantless wiretapping policies, are still being withheld."

Indeed, far from "turning the page" on the government criminality and dictatorial actions of the Bush administration, the Obama Justice Department is defending them. In two cases before the Ninth Circuit Court of Appeals in California—one involving the rendition of suspects to torture centers overseas, and the second, the illegal wiretapping of US citizens—Obama's attorneys have invoked the "state secrets privilege," arguing that even to allow the cases to be heard would pose a threat to national security.

In the wiretapping case, a judge last Friday ruled against the government, ordering that a classified document proving that the National Security Agency illegally spied on an Islamic charity and its lawyers be released to the plaintiffs. The Obama Justice Department responded with the extraordinary argument that the court had no right to release the document, and that the decision of the Director of National Intelligence to keep it secret could not be questioned.

In making this argument, the Obama administration is defending both illegal domestic spying—which continues to this day—and the principle of unchallengeable executive power, which was at the heart of the dictatorial conceptions laid out in the Bush Justice Department memos.

Continuity rather than change is what characterizes the Obama administration's actions. The Democratic Party and its congressional leaders were, after all, direct accomplices in the criminal actions of the Bush administration, from illegal wars of aggression, to domestic spying, rendition and torture.

More fundamentally, the turn towards police state methods of rule is driven not by an overarching fear of terrorism, but by the explosive tensions building up within American society itself, which is characterized above all by the highest levels of social inequality since before the last Great Depression.

Democratic forms are increasingly irreconcilable with the immense gulf dividing the masses of working people from the narrow financial elite that controls both major parties and all the institutions of government. Under conditions of the unfolding meltdown of the capitalist economy, the tendencies toward dictatorial methods of rule will only accelerate, under Obama just as surely as they would have under Bush.

US vehicle sales plummet

US vehicle sales plummet

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The 'big-three' US vehicle manufacturing firms have reported huge drops in sales during February, dealing a new blow to the ailing US economy.

General Motors reported a sales drop of more than 53 per cent compared to 2008 on Tuesday, Ford said its sales were down by 48 per cent, while Chrysler posted a 44 per cent fall in sales for the same period.

General Motors said the industry-wide sales plunge brought its February sales to the lowest level for the month since 1967.

The poor figures come despite car-makers spending more on rebates, low-interest financing and other incentives in an effort to increase sales.

General Motors and Chrysler have asked the US Treasury for another $21.6bn in loans on top of the $17.4bn approved in December.

Ford last week reiterated assurances that it can survive the current economic downturn without resorting to government aid.

Earlier on Tuesday Toyota, Japan's crisis-hit car maker, said it had approached a government-backed bank for a $2bn loan to help its financial unit ride out the global credit crunch.

It also reported a 40 per cent sales drop in the US for February.

Economy fears

The US economy is struggling amid a global downturn and continuing turmoil in financial markets.

On Tuesday, Barack Obama, the US president, said that he saw little hope of improvement in the near future.

"The economy's performance in the last quarter of 2008 was the worst in over 25 years. And frankly the first quarter of this year holds out little promise for better returns," he said.

The Dow Jones Industrial Average share index fell 39.34 points (0.58 per cent) to end the day 6,723.95 in response to poor economic data.

But Obama, during a meeting with Gordon Brown, the British prime minister, said it was important not to focus on share prices.

"What I'm looking at is not the day-to-day gyrations of the stock market, but the long-term ability for the US and the entire world economy to regain its footing."

Officials testify

On Monday, US stocks fell to their lowest levels in more than 11 years after US insurance giant AIG reported a $61.7bn loss, the worst ever for a US firm.

Ben Bernanke, the chairman of the Federal Reserve, told the Senate Budget Committee on Tuesday that he was not happy that the firm had been given a further $30bn in government loans, its fourth bailout by the taxpayer.

"I share your anger," Bernanke said.

But he added that the government didn't really have a choice but to take the action because the collapse of AIG would have grave implications for the ailing US economy.

Bernanke and Tim Geithner, the US treasury secretary, and Peter Orszag, the Director of Office of Management and Budget, are testifying to US congressional committees on the state of the economy this week.

Let AIG Go Bankrupt, Not America

Jim Rogers: Let AIG Go Bankrupt, Not America

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American International Group should be allowed to go bankrupt because keeping it and other sick financials alive on government support risks ruining the US economy, legendary investor Jim Rogers told CNBC Tuesday.

AIG , whose $61.66 billion fourth-quarter loss was the largest ever for a US company, received $30 billion more in government funds Monday. The insurer's financial health hasn't improved despite getting as much as $150 billion from the government last year.

"Suppose AIG goes bankrupt, it is better that AIG goes bankrupt and we have a horrible two or three years than that the whole US goes bankrupt," Rogers said. "AIG has trillions of dollars of obligations, let them fail, let the courts sort it out and start over. Otherwise we'll never start over."

On Monday, CEO Edward Liddy told CNBC that the insurer is far more stable and secure than it was last fall but acknowledged that it was "difficult to say" if AIG will need even more money from the government in the future.

Bailing out the banks is going to increase the debt spiral and finally cause the destruction of the world's biggest economy, Rogers said.

"I think it's astonishing, they're ruining the US economy, they're ruining the US government, they're ruining the US central bank and they're ruining the US dollar," he said.

"You are watching something in front of our eyes, very historically, which is basically the destruction of New York as a financial center and the destruction of America as the world's most powerful country."

Japan's economic "lost decade" was caused by trying to bail out the banks, and the West risks running out of money if it doesn't let the bad banks fail now, Rogers warned.

Systemic risk is going to be the same in 10 months, 5 years of 10 years if the fundamental problem is not solved, he added.

"The idea that you have too much debt, too much borrowing and too much consumption and you're going to solve that problem with more debt, more consumption and more borrowing? These people are nuts."

Wall Street and the City of London are going to be "disastrous" for years, like in the 1950s and 1960s, and in 30 years, finance will "dry up and wither away" as we are entering a "long period of hard times," he said.

"Power is shifting now from the money shifters, the guys who trade paper and money, to people who produce real goods. What you should do is become a farmer, or start a farming network," Rogers said.

Bernanke Says U.S. May Need to Expand Bank Rescue

Bernanke Says U.S. May

By Craig Torres and Scott Lanman

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Federal Reserve Chairman Ben S. Bernanke said policy makers may need to expand aid to the banking system beyond the $700 billion already approved and take other aggressive measures even at the cost of soaring fiscal deficits.

“Without a reasonable degree of financial stability, a sustainable recovery will not occur,” the Fed chairman said today in testimony prepared for the Senate Budget Committee. “Although progress has been made on the financial front since last fall, more needs to be done.”

Bernanke’s comments suggest he sees a role for bigger federal outlays as the Obama administration seeks congressional approval for a budget of $3.55 trillion for the fiscal year beginning in October. President Barack Obama has already signed into a law a $787 billion economic stimulus package of tax cuts and government spending.

Obama’s first budget seeks standby authority for as much as $750 billion in new aid to the financial industry. Whether those funds will be needed “depends on the results of the current supervisory assessment of banks” and the evolution of the economy, Bernanke said.

Bernanke said policy makers would have “preferred to avoid” what is likely to be the largest ratio of federal debt compared with gross domestic product since the end of World War II, and he urged lawmakers not to lose sight of fiscal discipline.

Cost to Budget

“But our economy and financial markets face extraordinary challenges,” and doing less now would eventually prove to be more costly, he said. “We are better off moving aggressively today to solve our economic problems; the alternative could be a prolonged episode of stagnation” that would cause budget deficits to swell further, increase unemployment and undermine incomes “for an extended period.”

The Fed has more than doubled its assets to $1.9 trillion during the past year by expanding loans to banks, launching programs to revive commercial paper and other markets and backing the merger of Bear Stearns Cos. with JPMorgan Chase & Co.

The 55-year-old Fed chairman told the Senate Banking Committee last week there’s a “reasonable prospect” the recession will end in 2009 “if the actions taken by the administration, the Congress and the Federal Reserve are successful in restoring some measures of financial stability.”

Stock Slump

Fed policy makers face headwinds from equity markets, with the Standard and Poor’s 500 Index falling this year by 22.5 percent and the S&P Financials Index tumbling 44.2 percent.

The government is still trying to stabilize large financial institutions such as Citigroup Inc. and insurer American International Group Inc. Shares of Citigroup traded at $1.33 this morning at 9:33 a.m., and the government expanded its aid to AIG yesterday after the company reported a fourth-quarter loss of $61.7 billion, the worst loss by any U.S. corporation.

The spending blueprint delivered to Congress last month forecasts government spending this year of $3.94 trillion, up 32 percent from a year ago. That would yield a record deficit of $1.75 trillion in the year ending Sept. 30, equal to about 12 percent of the nation’s gross domestic product, the highest since World War II. Government spending of $3.55 trillion next year will include about $350 billion approved as part of the stimulus package.

Stimulus Impact

“By supporting public and private spending, the fiscal package should provide a boost to demand and production over the next two years as well as mitigate the overall loss of employment and income that would otherwise occur,” Bernanke said.

Still, the size of the impact on the economy from government spending is “subject to considerable uncertainty,” Bernanke said. Consumers may decide to pay down debt or save their cash rather than spend it, he noted.

January forecasts by Fed officials suggest “a full recovery of the economy from the current recession is likely to take more than two or three years,” Bernanke told lawmakers last week.

The U.S. unemployment rate rose to 7.6 percent in January, the highest level since 1992. Job losses spanned almost all industries from trucking and construction to retailing and finance.

Fed officials expect unemployment in the fourth quarter to average 8.5 percent to 8.8 percent, which would be the highest since 1983, according to their January forecasts. Gross domestic product will contract 1.3 percent to 0.5 percent, and inflation will run at just 0.3 percent to 1 percent this year, their projections indicate.

Fed Forecasts

Fed officials don’t see labor markets improving until 2011, when growth forecast at 3.8 percent to 5 percent reduces the unemployment rate to a range of 6.7 percent to 7.5 percent.

Economic models used by Macroeconomic Advisers LLC show the Obama stimulus package could keep the jobless rate at about 8.8 percent instead of the 9.5 percent rate that would result without the package.

The Fed is stepping up efforts to stem the worst credit crisis in seven decades by expanding a program aimed at supporting consumer and business loans to $1 trillion from $200 billion and adding commercial real estate. It is also buying $600 billion of debt sold by government-backed housing finance companies and mortgage-backed securities they guarantee.

Radio chip coming soon to your driver's license?

Radio chip coming soon to your driver's license?

Homeland Security seeks next-generation REAL ID

By Bob Unruh

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Privacy advocates are issuing warnings about a new radio chip plan that ultimately could provide electronic identification for every adult in the U.S. and allow agents to compile attendance lists at anti-government rallies simply by walking through the assembly.

The proposal, which has earned the support of Janet Napolitano, the newly chosen chief of the Department of Homeland Security, would embed radio chips in driver's licenses, or "enhanced driver's licenses."

"Enhanced driver's licenses give confidence that the person holding the card is the person who is supposed to be holding the card, and it's less elaborate than REAL ID," Napolitano said in a Washington Times report.

REAL ID is a plan for a federal identification system standardized across the nation that so alarmed governors many states have adopted formal plans to oppose it. However, a privacy advocate today told WND that the EDLs are many times worse.

Radio talk show host and identity chip expert Katherine Albrecht said REAL ID earned the opposition of Christians because of its resemblance to the biblical "mark of the beast," civil libertarians opposed it for its "big brother" connotations and others worried about identity theft issues with the proposed databases.

"We got rid of the REAL ID program, but [this one] is way more insidious," she said.

Yes, Big Brother is watching! Find out more in "Spychips: How Major Corporations and Government plan to Track your every Move"

Enhanced driver's licenses have built-in radio chips providing an identifying number or information that can be accessed by a remote reading unit while the license is inside a wallet or purse.

The technology already had been implemented in Washington state, where it is promoted as an alternative to a passport for traveling to Canada. So far, the program is optional.

But there are other agreements already approved with Michigan, Vermont, New York and Arizona, and plans are under way in other states, including Texas, she said.

Napolitano, as Arizona's governor, was against the REAL ID, Albrecht said. Now, as chief of Homeland Security, she is suggesting the more aggressive electronic ID of Americans.

"She's coming out and saying, 'OK, OK, OK, you win. We won't do REAL ID. But what we probably ought to do is nationwide enhanced driver's licenses,'" Albrecht told WND.

"They're actually talking about issuing every person a spychip driver's license," she said. "That is the potential problem."

Imagine, she said, going to a First Amendment-protected event, a church or a mosque, or even a gun show or a peace rally.

"What happens to all those people when a government operator carrying a reading device makes a circuit of the event?" she asked. "They could download all those unique ID numbers and link them."

Participants could find themselves on "watch" lists or their attendance at protests or rallies added to their government "dossier."

She said even if such license programs are run by states, there's virtually no way that the databases would not be linked and accessible to the federal government.

Albrecht said a hint of what is on the agenda was provided recently by California Gov. Arnold Schwarzenegger. The state's legislature approved a plan banning the government from using any radio chips in any ID documentation.

Schwarzenegger's veto noted he did not want to interfere with any coming or future federal programs for identifying people.

Albrecht's recent guest on her radio program was Michigan State Rep. Paul Opsommer, who said the government appears to be using a national anti-terrorism plan requiring people to document their identities as they enter the United States to promote the technology.

"The Western Hemisphere Travel Initiative was … just about proving you were a citizen, not that you had to do it by any specific kind of technology," Opsommer said.

But he said, "We are close to the point now that if you don't want RFID in any of your documents that you can't leave the country or get back into it."

Opsommer said his own state sought an exception to the growing federal move toward driver's licenses with an electronic ID chip, and he was told that was "unlikely."

He was told, "They were trying to harmonize these standards with Canada and Mexico [so] it had to apply to everybody. I was absolutely dumbfounded."

WND previously has reported on such chips when hospitals used them to identify newborns, a company desired to embed immigrants with the electronic devices, a government health event showcased them and when Wal-Mart used microchips to track customers.

Albrecht, who has worked on issues involving radio chip implants, REAL-ID, "Spychips" and other devices, provided a platform for Opsommer to talk about drivers licenses that include radio transmitters that provide identity information about the carrier. She is active with the and websites.

Opsommer said he's been trying for several years to gain permission for his state to develop its own secure license without a radio chip.

"They have flat out refused, and their reasoning is all about the need for what they call 'facilitative technology,' which they then determined was RFID," he said during the recent interview.

According to the U.S. State Department, which regulates international travel requirements, U.S. citizens now "must show proof of identity and proof of U.S. citizenship when entering the United States from Canada, Mexico, Bermuda and the countries of the Caribbean by land or seas."

Documentation could be a U.S. passport or other paperwork such as birth certificates or drivers' licenses. But as of this summer, one of the options for returning residents will be an "Enhanced Driver's License."

The rules are being promulgated under the outline of the WHTI, a result of the Intelligence Reform and Terrorism Prevention Act of 2004, which requires travelers to present a passport or other identity documents on entry into the U.S.

While the government has expressed confidence that no personal or critical information will be revealed through the system, it also says drivers will need special information on how to use, carry and protect the radio-embedded licenses as well as "a shielded container that will prevent anyone from reading your license."

But Albrecht, the author or co-author of six books and videos, including the award-winning "Spychips: How major corporations and government plan to track your every move with RFID," warns it goes much further.

"This must be nipped in the bud. Enhanced DL's make REAL ID look like a walk in the park," Albrecht said.

"Look, I am all in favor of only giving drivers licenses to U.S. citizens or people that are otherwise here in this country legally," Opsommer said, "But we are already doing that in Michigan. We accomplished that without an EDL, as has virtually every other state via their own state laws.

"But just because we choose to only issue our license to U.S. citizens does not mean that our licenses should somehow then fall under federal control. It's still a state document, we are just controlling who we issue them to. But under the EDL program, the Department of Homeland Security is saying that making sure illegals don't get these is not enough. Now you need the chip to prove your citizenship," he continued.

Opsommer further warned the electronic chips embedded in licenses to confirm identity are just the first step.

"Canadians are also more connected to what is going on in Britain with the expansion of the national ID program there, and have seen the mission creep that occurs with things like gun control first hand … Whatever the reason, as an example, just last week the Canadian government repatriated a database from the U.S. that contained the driver's license data of their citizens," he said.

"Someone finally woke up and realized it would not be a good idea for that to be on American soil … I think it is only logical that we as state legislators really understand how the governments of Mexico and Canada will have access to our own citizen's data. Right now it is very ambiguous and even difficult for me to get answers on as a state representative."

But Opsommer said Big Brother concerns certainly have some foundation. "So if EDLs are the new direction for secure licenses in all states, it just reinforces what many have been telling me that DHS wants to expand this program and turn it into a wireless national ID with a different name," he said. "We'll wake up one day and without a vote in Congress DHS will just pass a rule and say something like 'starting next month you will need an EDL to fly on a plane, or to buy a gun, or whatever.'"

America's Fiscal Collapse

America's Fiscal Collapse

by Michel Chossudovsky

Go To Original

“We will rebuild, we will recover, and the United States of America will emerge stronger" ( President Barack Obama, State of the Union Address 24 Feb 2009)

"Those of us who manage the public's dollars will be held to account—to spend wisely, reform bad habits, and do our business in the light of day—because only then can we restore the vital trust between a people and their government." President Barack Obama, A New Era of Responsibility, the 2010 Budget)

"Strong economic medicine" with a "human face"

“Promise amid peril.” The stated priorities of the Obama economic package are health, education, renewable energy, investment in infrastructure and transportation. "Quality education" is at the forefront. Obama has also promised to "make health care more affordable and accessible", for every American.

At first sight, the budget proposal has all the appearances of an expansionary program, a demand oriented "Second New Deal" geared towards creating employment, rebuilding shattered social programs and reviving the real economy.

Obama's promise is based on a mammoth austerity program. The entire fiscal structure is shattered, turned upside down.

To reach these stated objectives, a significant hike in public spending on social programs (health, education, housing, social security) would be required as well as the implementation of a large scale public investment program. Major shifts in the composition of public expenditure would also be required: i.e. a move out of a war economy, requiring a movement out of military related spending in favour of civilian programs.

In actuality, what we are dealing with is the most drastic curtailment in public spending in American history, leading to social havoc and the potential impoverishment of millions of people.

The Obama promise largely serves the interests of Wall Street, the defence contractors and the oil conglomerates. In turn, the Bush-Obama bank "bailouts" are leading America into a spiralling public debt crisis. The economic and social dislocations are potentially devastating.

Obama's budget submitted to Congress on February 26, 2009 envisages outlays for the 2010 fiscal year (commencing October 1st 2009) of $3.94 trillion, an increase of 32 percent. Total government revenues for the 2010 fiscal year, according to preliminary estimates by the Bureau of Budget, are of the order of $2.381 trillion.

The predicted budget deficit (according to the president's speech) is of the order of $1.75 trillion, almost 12 percent of the U.S. Gross Domestic Product.

War and Wall Street

This is a "War Budget". The austerity measures hit all major federal spending programs with the exception of: 1. Defence and the Middle East War: 2. the Wall Street bank bailout, 3. Interest payments on a staggering public debt.

The budget diverts tax revenues into financing the war. It legitimizes the fraudulent transfers of tax dollars to the financial elites under the "bank bailouts".

The pattern of deficit spending is not expansionary. We are not dealing with a Keynesian style deficit, which stimulates investment and consumer demand, leading to an expansion of production and employment.

The "bank bailouts" (involving several initiatives financed by tax dollars) constitute a component of government expenditure. Both the Bush and Obama bank bailouts are hand outs to major financial institutions. They do not not constitute a positive spending injection into the real economy. Quite the opposite. The bailouts contribute to financing the restructuring of the banking system leading to a massive concentration of wealth and centralization of banking power.

A large part of the bailout money granted by the Us government will be transferred electronically to various affiliated accounts including the hedge funds. The largest banks in the US will also use this windfall cash to buy out their weaker competitors, thereby consolidating their position. The tendency, therefore, is towards a new wave of corporate buyouts, mergers and acquisitions in the financial services industry.

In turn, the financial elites will use these large amounts of liquid assets (paper wealth), together with the hundreds of billions acquired through speculative trade, to buy out real economy corporations (airlines, the automobile industry, Telecoms, media, etc ), whose quoted value on the stock markets has tumbled.

In essence, a budget deficit ( combined with massive cuts in social programs) is required to fund the handouts to the banks as well as finance defence spending and the military surge in the Middle East war. Obama's budget envisages:

1. defense spending of $534 billion for 2010, a supplemental 130 billion dollar appropriation for fiscal 2010 for the wars in Afghanistan and Iraq, and a supplemental $75.5 billion emergency war funding for the rest of the 2009 fiscal year. Defence spending and the Middle East war, with various supplemental budgets, is (officially) of the order of 739.5 billion. Some estimates place aggregate defence and military related spending at $ 1 trillion+.

2. A bank bailout of the order of $750 billion announced by Obama, which is added on to the 700 billion dollar bailout money already allocated by the outgoing Bush administration under the Troubled Assets Relief Program (TARP). The total of both programs is a staggering 1.45 trillion dollars to be financed by the Treasury. It should be understood that the actual amount of cash financial "aid" to the banks is significantly larger than $1.45 trillion. (See Table 2 below).

3. Net Interest on the outstanding public debt is estimated by the Bureau of the Budget) at $164 billion in 2010.

The order of magnitude of these allocations is staggering. Under a "balanced budget" criterion --which has been a priority of government economic policy since the Reagan era--, almost all the revenues of the federal government amounting to $2.381 trillion would be used to finance the bank bailout (1.45 trillion), the war ($739 billion) and interest payments on the public debt ($164 billion). In other words, no money would be left over for other categories of public expenditure.

TABLE 1 Budgetary allocations to Defence (FY 2009 and 2010), the Bank Bailout and Net Interests on the Public Debt (FY 2010)

$ Billions

Defence including Supplementary allocations; $534 billion (FY 2010), $130 billion supplemental (FY 2010), $75.5 billion emergency funding (FY2009)

*Bank bailout (TARP plus Obama) 1450.0
Net Interest 164.0
TOTAL 2353.5
Total Individual (Federal) Income Tax Revenues (FY 2010) 1061.0
Total Federal Government Revenue (FY 2010) 2381.0

Source: Bureau of the Budget and official statements. See A New Era of Responsibility: The 2010 Budget
See also Office of Management and Budget

* The officially announced bank bailouts to be financed from Treasury Funds. The timing of disbursements could take place over more than one fiscal years fiscal years. The actual value of bank bailout cash injections is substantially higher.

The Budget Deficit

These three categories of expenditure (Defence, Bank Bailout and Interest on the Public Debt) would virtually swallow up the entire 2010 federal government revenue of 2381.0. billion dollars

Moreover, as a basis of comparison, all the revenue accruing from individual federal income taxes ($1.061 trillion), (FY 2010) namely all the money households across America pay in the form of federal taxes, will not suffice to finance the handouts to the banks, which officially are of the order of 1.45 trillion. This amount includes the $ 700 billion (granted during FY 2009) under the TARP program plus the proposed $ 750 billion granted by the Obama administration.

While TARP and Obama's proposed bailout are to be disbursed over Fy 2009 and 2010, they nonetheless represent almost half of total government expenditure (half of Obama's $3.94 trillion budget for fiscal 2010), which is financed by regular sources of revenue ($2381 billion) plus a staggering $1.75 trillion budget deficit, which ultimately requires the issuing of Treasury Bills and government bonds.

The feasibility of a large short-term expansion of the public debt at a time of crisis is yet another matter, particularly with interest rates at abysmally low levels.

The budget deficit is of the order of 1.75 trillion. Obama acknowledges a 1.3 trillion-dollar budget deficit, inherited from the Bush administration. In actuality, the budget deficit is much larger .

The official figures tend to underestimate the seriousness of the budgetary predicament. The $1.75 trillion dollar budget deficit figure is questionable because the various amounts disbursed under TARP and other related bank bailouts including Obama's announced $750 billion aid program to financial institutions are not acknowledged in the government's expenditure accounts.

"The aid hasn’t been requested formally, but appears in a line item “for potential additional financial stabilization efforts,” according to the budget overview. The budget office calculated a $250 billion net cost to taxpayers this year, because it anticipates it would eventually recoup some, though not all, of the money expended to help financial companies.

The funds would come on top of the $700 billion rescue package approved last October by Congress. The White House budgets no money for fiscal 2010 and beyond for such aid." (Bloomberg, February 27, 2010)

Fiscal Collapse

A major crisis of the federal fiscal structure is occurring. The multibillion dollar allocations to the War Budget and to the Wall Street Bank Bailout program backlash on all other categories of public expenditure.

The Bush administration's $ 700 billion bailout under the Troubled Asset Relief Program (TARP) was approved by Congress in October. TARP is but the tip of the iceberg. A panoply of bailout allocations in addition to the $ 700 billion were decided upon prior to Obama assuming office. In November, the federal government's bank rescue program was estimated at a staggering 8.5 trillion dollars, an amount equivalent to more than 60% of the US public debt estimated at 14 trillion (2007). (See table 2 below)

Meanwhile, under the Obama budget proposal, 634 billion dollars are allocated to a reserve fund to finance universal health care. At first sight, it appears to be a large amount. But it is to be spent over a ten year period, -- i.e. a modest annual commitment of 63.4 billion.

Public spending will be slashed with a view to curtailing a spiralling budget deficit. Health and education programs will not only remain heavily underfunded, they will be slashed, revamped and privatized. The likely outcome is the outright privatization of public services and the sale of State assets including public infrastructure, urban services, highways, national parks, etc. Fiscal collapse leads to the privatization of the State.

The fiscal crisis is further exacerbated by the compression of tax revenues resulting from decline of the real economy. Unemployed workers do not pay taxes nor do bankrupt firms. The process is cumulative. The solution to the fiscal crisis becomes the cause of further collapse.

Structure of The Public Debt

This large scale appropriation of liquid money assets under the bank bailouts by a handful of financial institutions serves to increase the public debt overnight.

When the US Treasury allocates 700 billion dollars to the Troubled Assets Relief Program, this amount constitutes a budgetary outlay which inevitably must be financed from within the structure of government revenues and expenditures.

Unless all other categories of public expenditure including health, education and social services are slashed, the various outlays under the bank bailout will require running a massive budget deficit which in turn will increase the US public debt.

America is the most indebted country on earth. The US (federal government) public debt is currently of the order of $14 trillion. This does not include mounting public debts at the state and municipal levels.

This US dollar denominated (federal) debt is composed of outstanding treasury bills and government bonds. The public debt, also called "the national debt" is the amount of money owed by the federal government to holders of U.S. debt instruments.

US debt instruments are held by American residents as part of their savings portfolio, companies and financial institutions, US government agencies, foreign governments, individuals in foreign countries. but does not include intergovernmental debt obligations or debt held in the Social Security Trust Fund. Types of securities held by the public include, but are not limited to, Treasury Bills, Notes, Bonds, TIPS, United States Savings Bonds, and State and Local Government Series securities.

The proposed solution becomes the cause of the crisis. The 700 billion bailout under the Troubled Asset Relief Program (TARP) combined with the proposed Obama $750 billion aid to financial services industry is but the tip of the iceberg. A panoply of bailout allocations in addition to the 700 billion have been decided upon.

Table 2

The Bush Administration's " Bank Bailout"

The government's bank rescue program under the Bush administration was estimated at a staggering 8.5 trillion dollars, an amount equivalent to 60% of the Total Gross Federal debt of 14.078 trillion (2010) (See Table 2 above). This amount does not include the "aid" to financial institutions proposed by the Obama administration, including an additional 750 billion dollars in Obama's February 2009 budget proposal. The size of these allocations of liquid assets endangers the very structures of the fiscal and monetary system.

The total of Bush bank bailouts (8.5 trillion) can be broken down into funds granted by the Federal Reserve, the Treasury, the Federal Deposit Insurance Corporation and the Federal Housing Authority.

The handouts to the financial institutions financed out of Treasury are government expenditures, to be met either through tax revenues or through the emission of public debt instruments.

The disbursements under TARP are categorized by the Bureau of the Budget as part of "a mandatory program" under an Act of the US Congress.. The Treasury's liability, which includes the controversial Troubled Assets Relief Program, was estimated in November 2008 at 1.1 trillion dollars. (See Table 2) Further Treasury allocations, which serve to heighten the burden of the public debt have been envisaged by the Obama administration

Spiralling Public Debt Crisis

Is the Treasury in a position to finance this mounting budget deficit officially tagged at 1.75 billion through the emission of Treasury bills and government bonds?

The largest budget deficit in US history coupled with the lowest interest rates in US history: With the Fed's " near zero" percent discount rate, the markets for US dollar denominated government bonds and Treasury bills are in straightjacket. Moreover, the essential functions of savings (which is central to the functioning of a national economy) is in crisis. .

Who wants to invest in US government debt? What is the demand for Treasury bills at exceedingly low interest rates?

Table 3 Interest Rates in Percent

Treasury securities Updated 2/25/2009

This week Month ago Year ago
One-Year Treasury Constant Maturity 0.64 0.43 2.10
91-day T-bill auction avg disc rate 0.300 0.150 2.160
182-day T-bill auction avg disc rate 0.495 0.350 2.070
Two-Year Treasury Constant Maturity 0.95 0.77 2.04
Five-Year Treasury Constant Maturity 1.79 1.58 2.89
Ten-Year Treasury Constant Maturity 2.75 2.56 3.85
One-Year MTA 1.633 1.823 4.326
One-Year CMT (Monthly) 0.44 0.49 2.71


The market for US dollar denominated debt instruments is potentially at a standstill, which means that the Treasury lacks the ability to finance its mammoth budget deficit through public debt operations, leading the entire budgetary process into a quandary.

The question is whether China and Japan will continue to purchase US dollar denominated debt instruments. Washington is running a public relations campaign to lure Asian investors into buying T-bills and US government bonds. .

With the markets for US dollar denominated debt (both domestically and internationally) in crisis, further pressure will be exerted on the Treasury to slash (civilian) public expenditure to the bone, exact user fees for public services and sell off public assets, including State infrastructure and institutions. In all likelihood, this crisis is leading us to the privatization of the State, where activities hitherto under government jurisdiction will be transferred into private hands.

Who will be buying State assets at rock bottom prices? The financial elites, which are also the recipients of the bank bailout.

Consolidation of the Banks

A massive amount of liquidity has been injected into the financial system, from the bailouts but also from pension funds, individual savings, etc.

The stated objective of the bank bailout programs is to alleviate the banks' burden of bad debts and non-performing loans. In actuality what is happening is that these massive amounts of money are being used by a handful of institutions to consolidate their position in global banking.

The exposure of the banks, largely the result of derivative trade, is estimated in the tens of trillions of dollars, to the extent that the amounts and guarantees granted by the Treasury and the Fed will not resolve the crisis. Nor are they intended to resolve the crisis.

The mainstream media suggests that the banks are being nationalized as a result of TARP, In fact, it is exactly the opposite: the State is being taken over by the banks, the State is being privatized. The establishment of a Worldwide unipolar financial system is part of the broader project of the Wall Street financial elites to establish the contours of a world government.

In a bitter irony, the recipients of the bailout under TARP and Obama's proposed $750 billion aid to financial institutions are the creditors of the federal government. The Wall Street banks are the brokers and underwriters of the US public debt, although they hold only a portion of the debt, they transact and trade in US dollar denominated public debt instruments Worldwide.

They act as creditors of the US State. They evaluate the creditworthiness of the US government, they rank the public debt through Moody's and Standard and Poor. They control the US Treasury, the Federal Reserve Board and the US Congress. They oversee and dictate fiscal and monetary policy, ensuring that the State acts in their interest.

Since the Reagan era, Wall Street dominates most areas of economic and social policy. It sets the budgetary agenda, ensuring the curtailment of social expenditures. Wall Street preaches balanced budgets but the practice has been lobbying for the elimination of corporate taxes, the granting of handouts to corporations, tax write-offs in mergers and acquisitions etc, all of which lead to a spiralling public debt.

Circular and Contradictory Relationship

The Federal Reserve system is a privately owned central bank. While the Federal Reserve Board is a government body, the process of money creation is controlled by the 12 Federal Reserve Banks, which are privately owned.

The shareholders of the Federal Reserve banks (with the New York Federal Reserve Bank playing a dominant role) are among America's most powerful financial institutions.

While the Federal Reserve can create money "out of thin air", the multibillion outlays of the Treasury (including the TARP program) will require the emission of public debt in the form of Treasury Bills and government bonds.

US financial institutions oversee the US public debt. They are involved in the sale of treasury bills and government bonds on financial markets in the US and around the World. But they also hold part of the public debt. In this regard, they are the creditors of the US government. Part of this increased public debt required to rescue the banks will be financed or brokered by the same financial institutions which are the object of the bank rescue plan.

We are dealing with a pernicious circular relationship. When the banks pressured the Treasury to assist them in the form of a major bank rescue operation, it was understood from the outset that the banks would in turn assist the Treasury in financing the handouts of which they are the recipients.

To finance the bank bailout, the Treasury needs to run a massive budget deficit, which in turn requires a staggering increase of the US public debt.

Public opinion has been misled. The US government is in a sense financing its own indebtedness: the money granted to the banks is in part financed by borrowing from the banks.

The banks lend money to the government and with the money they lend the government, the Treasury finances the bailout. In turn, the banks impose conditionalities on the management of the US public debt. They dictate how the money should be spent. They impose fiscal responsibility, they dictate massive cuts in social expenditures which result in the collapse and/or privatization of public services. They impose the privatization of urban infrastructure, roads, sewer and water systems, public recreational areas, everything is up for privatization.

The recipient banks are the beneficiaries as well as the creditors. As creditors, they will oblige the government a) to slash expenditures b) to run up the public debt through the issuing of treasury bills and government bonds.

This public debt crisis is all the more serious because the US federal government does not control monetary policy. All public debt operations go through the Federal reserve, which is in charge of monetary policy, acting on behalf of private financial interests. The government as such has no authority over money creation. This means that public debt operations essentially serve the interests of the banks.

Continuity from Bush to Obama

The Obama stimulus program constitutes a continuation of the Bush administration's bank bailout packages. The proposed policy solution to the crisis becomes the cause, ultimately resulting in further real economy bankruptcies and a corresponding collapse of the standard of living of Americans.

Both the Bush and Obama bank bailouts are intended to come to the rescue of troubled financial institutions, to ensure the payment of "inter-bank" debt operations. In practice, large amounts of money transit through the banking system, from the banks to the hedge funds, to offshore banking havens and back to the banks.

The government and the media tend to focus on the ambiguous notion of " inter-bank debts". The identity of the creditors is rarely mentioned.

Multi-billion dollar transfers are conducted electronically from one financial entity to another. Where is the money going? Who is collecting these multibillion debts, which are in large part the consequence of financial manipulation and derivative trade?

There are indications that the financial institutions are transferring billions of dollars into their affiliated hedge funds. From these hedge funds they can then channel money capital towards the acquisition of real assets.

Through what circuitous financial mechanisms were these debts created? Where is the bailout money going? Who is cashing in on the multibillion dollar government bailout money? This process is contributing to an unprecedented concentration of private wealth.

Concluding Remarks

Financial manipulation is an integral part of the New World Order. It constitutes a powerful means to accumulate wealth.

Under the present political arrangement, those responsible for monetary policy are quite deliberately serving the interests of the financiers, to the detriment of working people, leading to economic dislocation, unemployment and mass poverty.

This article has focussed on how financial manipulation has served to shatter the structure of US public expenditure.

More generally, this restructuring of global financial markets and institutions (alongside the pillage of national economies) has enabled the accumulation of vast amounts of private wealth – a large portion of which has been amassed as a result of strictly speculative transactions.

This critical drain of billions of dollars of household savings and state tax revenues paralyses the functions of government spending and spurs the accumulation of a public debt, which can no longer be be financed through the emission of US dollar denominated debt.

What we are dealing with is the fraudulent transfer and confiscation of lifelong savings and pension funds, the fraudulent appropriation of tax revenues to finance the bank bailouts, etc. To understand what has happened: follow the money trail of electronic transfers with a view to establishing where the money has gone.

The monetary system, which is integrated into the State budgetary process has been destabilized. The fundamental relationship between the monetary system and the real economy is in crisis.

The creation of money "out of thin air" threatens the value of the US dollar as an international currency. Similarly, the financing of a mammoth US budget deficit through dollar denominated debt instruments is impaired as a result of exceedingly low interest rates. Moreover, the process of household savings is undermined with interest rates close to zero.

What we have dealt with in this article is one central aspect of an evolving process of global financial collapse.

The international payments system is in crisis. The economic prospects are terrifying. Bankruptcies in the US, Canada, the European Union are occurring at an alarming rate. Country level exports have collapsed, leading to a contraction of international trade Reports from the Asian economies indicate a massive increase in unemployment. In China's Pearl River basin in Southern Guangdong province's industrial export processing economy, some 700,000 workers were laid off in January. (China Morning Post, Feb 6, 2009). In Japan, industrial output has collapsed by more than 20 percent since December. In the Philippines, a country of 90 million people, exports collapsed by more than 40 percent in December.

Financial Disarmament

There are no solutions under the prevailing global financial architecture. Meaningful policies cannot be achieved without radically reforming the workings of the international banking system.

What is required is an overhaul of the monetary system including the functions and ownership of the central bank, the arrest and prosecution of those involved in financial fraud both in the financial system and in governmental agencies, the freeze of all accounts where fraudulent transfers have been deposited, the cancellation of debts resulting from fraudulent trade and/or market manipulation.

People across the land, nationally and internationally, must mobilize. This struggle to democratise the financial and fiscal apparatus must be broad-based and democratic encompassing all sectors of society at all levels, in all countries. What is ultimately required is to disarm the financial establishment:

-confiscate those assets which were obtained through fraud and financial manipulation.

-restore the savings of households through reverse transfers

-return the bailout money to the Treasury, freeze the activities of the hedge funds. .

- freeze the gamut of speculative transactions including short-selling and derivative trade.



Budget of the United States Government

Fiscal Year 2010 The Budget Documents

A New Era of Responsibility: The 2010 Budget

The tables contained in Annex can also be consulted by clicking:

Summary Tables

See also:

The Economic Depression was predicted in this 2002 best-seller

The Globalization of Poverty and the New World Order

by Michel Chossudovsky

In this new and expanded edition of Chossudovsky’s international best-seller, the author outlines the contours of a New World Order which feeds on human poverty and the destruction of the environment, generates social apartheid, encourages racism and ethnic strife and undermines the rights of women. The result as his detailed examples from all parts of the world show so convincingly, is a globalization of poverty.

This book is a skillful combination of lucid explanation and cogently argued critique of the fundamental directions in which our world is moving financially and economically.

In this new enlarged edition –which includes ten new chapters and a new introduction-- the author reviews the causes and consequences of famine in Sub-Saharan Africa, the dramatic meltdown of financial markets, the demise of State social programs and the devastation resulting from corporate downsizing and trade liberalisation.

Michel Chossudovsky is Professor of Economics at the University of Ottawa and Director of the Centre for Research on Globalization (CRG), which hosts the critically acclaimed website . He is a contributor to the Encyclopedia Britannica. His writings have been translated into more than 20 languages.

Published in 13 languages. More than 150,000 copies sold Worldwide.