And So It’s War!

And So It’s War!
By David Glenn Cox


"A banker is a fellow who lends you his umbrella when the sun is shining, but wants it back the minute it begins to rain." Mark Twain


As we look to the economic crisis in Greece, we must first look to the economic crisis in the United States. They are one and the same and the answers and corrective actions recommended are one and the same, as well. Raise taxes, cut services, pay bankers.

Strange, isn’t it, that economic troubles on opposite sides of the Earth would have identical cures. Or perhaps all economic crises have the same cure. In September of 2008 the Icelandic government took a 75% ownership stake in Landsbanki bank after the bank faced liquidity problems. Landsbanki had been on the cutting edge of the “new banking” industry, offering high interest, online savings accounts called “Icesave.” The lure was irresistable and 300,000 British citizens deposited their savings worth almost five billion dollars.

Many -- most, if not all -- forgot to read the fine print where it said that the deposits were not insured, as regular accounts would be. So, when Landsbanki went in the tank, the British government looked to the Icelandic government and said, “We want our money back!”

The Icelanders answered, "We don’t have your money, and besides, the accounts were uninsured." They were covered under a little known provision called “top-up” rules and would have to depend on Icelandic Compensation Scheme. Landsbanki was the second of three Icelandic banks to fail so the ICS was done.


What happened next was a page out of European history from 1914. The British government and the Bank of England began seeking alliances to prevent Iceland from receiving any further international loans until they agreed to pay back the British for their uninsured bank accounts. Iceland’s economy was on its back and the British organized an economic blockade that wasn’t much different than the German U-boat blockade of 1940.

In October, British officials tried to use anti-terrorism statutes to freeze Icelandic assets in the United Kingdom. Iceland filed a complaint with NATO, and Iceland’s Prime Minister answered by hiring a high-profile British law firm to represent Iceland in legal matters. What was going on there was a proxy war; rather than governments mobilizing troops and navies, banking interests were mobilizing governments and lawyers.

The bankers and the UK government came up with a repayment plan for Iceland. Under its terms Iceland would repay with up to 40% of the island's gross domestic product, costing every household in Iceland $61,000. Iceland’s President Olafur Grimsson refused to sign the plan, putting it instead to a public referendum. Not since the treaty of Versailles has there been a more punitive treaty to punish the many for the deeds of a few.

When the financial crisis came to the United States, the banking interests simply went to Hank Paulson and said, “If we don’t get new money, and quick, the economy will fall down.” Paulson relayed that message to President Bush and the banks were bailed out. Iceland is the same scenario in reverse. Due to the blockade Iceland was forced to borrow money from the world’s loan shark, the International Monetary Fund.

The IMF will lend money but always attaches conditions and stipulations that hamper and hamstring the borrowing nation. They become, in effect, a co-equal, unelected government. So Iceland is being financially conquered by an economic war, run not by generals but by bankers.

The problems in Greece have been a long time in coming. In November of 2009 the new Greek government revealed that its debt level was 12.7% of GDP, twice what had been previously announced. The new government's budget was designed to address the budget shortfall, bringing its deficit down to 8.7% of GDP. The new budget promised a 10% cut in Social Security spending, abolished bonuses at state-owned banks and added a 90% tax on all private bank employee bonuses. Greek Prime Minister Papandreou also promised to strenuously fight corruption and tax evasion

In December, Standard & Poors put the country's A- sovereign rating on negative watch, and the Fitch rating agency, which had cut the Greek credit rating to A- on the higher deficit announcement, cut the sovereign rating again to BBB+ on the government's austerity promises. On December 16, S& P cut the Greek credit rating again to BBB- saying, “Austerity steps announced by Prime Minister Papandreou are unlikely to produce a sustainable reduction in the public debt burden.”

The yield spreads between Greek and benchmark German 10-year bunds widened to an average 272 basis points in mid-December, their the widest margin in over eight months. The bankers were skeptical and continued to sell off Greek government bonds and stocks.

In January Prime Minister Papandreou said the following, "There is only one dilemma: Will we let the country go bankrupt or will we react? Will we let the speculators strangle us, or will we take our fate in our own hands?"

The world of hedge funds is like betting on the line at a crap table. You can bet that the shooter will make their point or you can bet against them making their point. Yet, in this world, the banks control the dice. As the large financial institutions sell off Greek debt it creates pressures to raise interest rates on future Greek loans, meaning more profits for the banks. This situation, however, is like Iceland's in that more profits are nice but not nearly as nice as control.

They are leveraging the elected government to do what the bankers want rather than what the people want. The austerity plan proposed was not good enough, so the banks want to dictate the terms of the bailout to the Greek people. Does all this begin to have a familiar ring to it?

In the meantime each downgrade pushes the Greek people and government into a deeper financial hole and exacerbates the financial crisis. This is no less than blitzkrieg by bankers. Rather than destroying democracy with panzers and Stuka dive-bombers, the bankers are using interest rates, lawyers and credit rating agencies.

Papandreou has argued correctly that California is a greater threat to default than Greece. But California is not the takeover target, not yet anyway. On January 14, the Greek government unveiled another austerity plan. This one is promising to bring down the Greek debt to 2.8% of GDP by 2012 from 12.7% in 2009. Do you know how you manage to do that? Think Iceland, you raise taxes and you cut services. You cut services for the elderly and for students and then you take those savings and you pay the bankers.

You cut wages for public sector workers and add 2% to the national sales tax that is already at 19%. You raise taxes on fuel, alcohol and cigarettes, then you freeze pensions. The European Union Commission says that it backs the new Greek plan to reduce its budget deficit below 3% of GDP by 2012. But wait, something is missing from the new plan: abolishing bonuses at state-owned banks and the added 90% tax on all private bank employee bonuses.

The European Union mission to Athens, along with the IMF experts, sing the now-common refrain. A deeper than expected recession along with higher borrowing costs will make it difficult for the government to meet these targets. If the Greeks fail to meet their targets I’m certain the bankers will recommend even more draconian budget cuts.

Papandreou was absolutely correct in pointing out that California is in far worse shape than Greece. In the United States, however, the bankers already call the tune, so why would they want to rock the good ship lollypop? They don’t need to pressure the government; the banks can borrow money for a quarter of a percent from the Federal Reserve and lend it back out on credit cards at 28% interest. The banks can write off all of their bad real estate loans and take it off their tax debt. The banks control Obama’s home mortgage rescue plan and the banks killed Obama’s consumer protection agency.

Last week the kindly old IRS ruled that it would extend the moratorium on penalties until June 1 for failing to report transactions considered tax shelters. “The rule applies to individuals or other taxpayers that fail to disclose transactions the IRS deems as potentially tax evading, such as employer contributions to post-retirement benefit funds. The levy is as high as $100,000 a year for individuals and $200,000 for all other taxpayers," according to the IRS.

It is assessed for each year a transaction is not reported, and may be charged to both a business and its owner. The department will also “hold off” filing new lien notices on amounts owed, IRS Commissioner Doug Shulman told Congress yesterday. “The penalty has ended up snagging small businesses that weren’t advised of their responsibility to disclose,” Senator Ben Nelson, a Nebraska Democrat, said in a statement last month.

"The provision was designed to crack down on tax shelters for big corporations and wealthy individuals, and has been applied to small-business owners who’ve paid into retirement accounts for themselves and their employees without following IRS disclosure requirements," said Kathleen Pakenham, a New York- based partner at White & Case LLP, who represents 30 such clients.”

Now what was Papandreou saying about fighting corruption and tax evasion? So, you see, the banks have it all going their way and have no need to rock the boat.

Last month Barack Obama signed an executive order to establish a bipartisan panel to seek ways of cutting the US budget deficit. The goal of the President’s budget cutting panel is to make recommendations that may require a mix of tax increases and spending cuts of hundreds of billions of dollars to bring the budget deficit down to 3 % of the economy by 2015. That would put the budget in balance except for payments on debt.

“Everything’s on the table, that’s how this thing’s going to work,” Obama said in response to a question after his remarks.

Three percent, now where have I heard that number before? Everything's on the table; Social Security, Medicare, tax increases for the middle class, freezing wages, even a national sales tax has been suggested. You don’t need panzers and Stukas when you have a Quisling. A government by the banks and for the banks, it gives a whole new meaning to the phrase “It’s Greek to me.”

These things are not mere coincidence or accidents. This is war, a war on democracy and free society being waged by banking interests, and only one will survive.

It keeps too many people who really have every right to expect equality and freedom withing their lives. What a wonderful world it could be without the elite top % fearing us into submission.. taking their power via money.

The deals with Wall Street that hid the Greek debt, not only from investors but from the Greek people, were carried out under the conservative government. The reality was discovered only when they were voted out last year.

A large segment of the Greek political class was already mired in endless bribery scandals involving sweetheart contracts for primarily German corporations, such as Siemens. Their corruption and self-service patronage behavior is a major cause of the overspending.

There is also the matter that wealth inequality in Greece is as bad or even worse than in the United States, but the wealthy long ago offshored their assets or took up residence in tax havens.

The Wall Street banks who made the swap deals to hide Greek debt, such as Goldman Sachs, are now simultaneously betting on Greece to default! There's a line of third-party bettors basically buying fire insurance on a house they own no share in. As they smell the blood, it turns into a coordinated attack strategy on the model best perfected in recent decades by George Soros.

Keep in mind that the ratings agencies who are allowed to judge the Greek situation are the same ones who were being paid by Wall Street to slap AAA on the junk subprime housing securities that they didn't even examine. They were at the center of the great financial frauds since 2002 and the inevitable meltdown in 2008. They were indispensable to the fraud, because they provided the false confidence to investors - as in, confidence game. No Triple-A, no suckers. During the 2008 crash they should have met the same fate as Arthur Andersen; the Enron fraud was peanuts by comparison, thought it has a great deal to do with California's problems to this day. They should have been seized pending criminal investigations for fraud.

Instead they get to survive, prosper, and make pronouncements on Greece and California, which for all their "profligate spending" cannot be said to have been complete paper scams, like the housing bubble and other asset inflation pump and dump schemes Wall Street uses to impoverish the world and then buy it on the cheap.

That's the idea: to drive Greece down to the bargain basement. The proposal to sell off Greek islands was floated at the crisis pow-wow last week in Germany. You will see worse.

The difference so far in Greece, unlike in the US during the crash, is that you don't merely have millions of people calling Congress to stop the bailout, in vain. They're on the streets. You have an organized, self-aware, class-conscious people with living unions and a sense of solidarity across the board.

Can they be broken? They have been in the past, by means of military coups backed by the United States (the 1967-1974 juntas, and the states of emergency that had already preceded them). Those days are done, but any government has enormous resources for propaganda, repression and the sowing of division against its people, if not against the "international community."

Greece should absolutely stay in the EU and participate in its institutions with the goal of democratization. That is the way forward for Europe.

But Greece should leave the euro and regain sovereignty over its currency. Devaluation will become possible and improve the export situation, especially tourism. They will also have the ability to control outflows of capital, a heresy that some country has to finally engage in so that the rest can start doing the same.

It's time to put an end to the lie of capitalist "globalization" which means only that sovereign states turn into mere investment sites competing like whores for the favor of predatory hedge funds and corporations. The chain reaction of nations overthrowing the neoliberal economic regime can start anywhere, and Greece is a fine candidate.

Progressives should be wishing the Greek people luck and supporting them in word and deed, not, like some DUers, reproducing the vile propaganda about the irresponsible, spendthrift, bouzouki-playing, backwards Greeks.

As the OP article points out, it's funny how those immature spendthrifts are suddenly turning up everywhere, how the propaganda against the people is always the same ('Populism'! Oh heavens!), and how the prescription is always the same: cut benefits to the people, raise taxes on the people, pay off the banks at high interest, do not tax the bankers' bonuses or the richest class, do all to please the multinational corporations, beg for their favor.

http://www.nytimes.com/2010/02/25/business/global/25swaps.html?bl



Those countries may be most exposed, but not necessarily those institutions. But if we see Societe Generale (a.k.a. the bank of the Congo genocide) and "France" as one (it's also Belgium), then the very same ones who exacerbate the crisis are the ones scolding Greece and the "profligate" "unrealistic" "freeloading" Greeks.

Come on, let's have some posts in this thread!

Here's another piece that tells it like it is on Greece:

Yes, It Really is a Capitalist Plot
The Fall of Greece

By DIANA JOHNSTONE

http://counterpunch.org/johnstone03012010.html

The crisis broke last autumn after George Papandreou’s PASOK party won elections, took office and discovered that the cupboard was bare. The Greek government had cheated to get into the EU’s euro zone in 2001 by cooking the books to cover deficits that would have disqualified it from membership in the common currency. The European Treaties capped the acceptable budget deficit at 3 per cent and public debt at 60 per cent of GDP respectively. In fact, this limit is being widely transgressed, quite openly by France. But major scandal arrived with revelations that Greece’s budget deficit reached 12.7 per cent in 2009, with a gross debt forecast for 2010 amounting to 125 per cent of GDP.

Of course, European leaders got together to declare solidarity. But their speeches were designed not so much to reassure the increasingly angry and desperate Greek people as to soothe “the markets” – the real hidden almighty gods of the European Union. The markets, like the ancient gods, have a great old time tormenting mere mortals in trouble, so their response to the Greek problem was naturally to rush to profit from it. For instance, when Greece is obliged to issue new bonds this year, the markets can blithely demand that Greece double its interest rates, on grounds of increased “risk” that Greece won’t pay, thus making it that much harder for Greece to pay. Such is the logic of the free market.

What the EU leaders meant by “solidarity” in their appeal to the gods was not that they were going to pour public money into Greece, as they poured it into their troubled banks, but that they intended to squeeze the money owed the banks out of the Greek people.

The squeezing is to take the forms made familiar over the past disastrous decades by the International Monetary Fund: the Greek state is enjoined to cut public expenses, which means firing public employees, cutting their overall earnings, delaying retirement, economizing on health care, raising taxes, and incidentally probably raising the jobless rate from 9.6 per cent to around 16 per cent, all with the glorious aim of bringing the deficit down to 8.7 per cent this year and thus appeasing the invisible gods of the market.

This just might propitiate both the gods and German leaders, who above all want to maintain the value of the euro. The financial markets will no doubt grab their pound of flesh in the form of increased interest rates, while the Greeks are bled by IMF-style “shock treatment”.

I'm stunned. Just stunned. What a fracked world we live in.

Just wait, the Bankers will be buying up the National Parks and Federal Lands in the US if they have their way.


...and they won't pay retail.

My bad....fergut they already own it.

bring on the FRSP

March 7 (Bloomberg) -- French President Nicolas Sarkozy said the euro region is ready to rescue Greece should the government struggle to fund its budget deficit, arguing that the country is “under attack” from so-called speculators.

“I want to be very clear: if it were necessary, the states of the euro zone would fulfill their commitments,” he said in Paris after a meeting with Greek Prime Minister George Papandreou. “There can be no doubt in this regard.” While Greece doesn’t need assistance right now, “we have measures, we are ready, we are determined,” he said.

Sarkozy’s comments are among the strongest by an EU leader to signal the bloc would bail out Greece if necessary as leaders try to warn investors off making further bets against the euro and Greek bonds. Papandreou’s government last week passed a further round of austerity measures and sold 5 billion euros ($6.8 billion) in government debt.

“Speculators and the markets should know that solidarity means something and that, if there’s a problem, we are there,” said Sarkozy today. “The sooner we say that and the more firmly we say that, the more rapidly we settle the problem.”

It merits more than a few responses.