Since 2008, we have lived in a western world shaped by the ‘permanent state’ or by our managerial technocrats – label to choice.

Since 2008, we have lived in a western world shaped by the ‘permanent state’ or by our managerial technocrats – label to choice.

This ‘creative class’ (as they like to see themselves) is particularly defined by its intermediary position in relation to the wealth-controlling oligarchic cabal as ultimate big money overlords on one hand, and the dullard ‘Middle Class’ below them – at whom they sneer and deride.

This intermediary class didn’t set out to dominate politics (they say); It just happened. Initially, the aim was to foster progressive values. But instead, these professional technocrats, who both had accreted considerable wealth and were tightly congregated into cliques in America’s large metro areas, came to dominate left-wing parties around the world that formerly were vehicles for the working class.

Those who coveted membership in this new ‘aristocracy’ cultivated their image as one of cosmopolitan, fast-moving money, glamour, fashion, and popular culture – multiculturalism suited them to perfection. Painting themselves as the political conscience of the whole of society (if not the world), the reality was that their Zeitgeist reflected primarily the whims, prejudices and increasingly psychopathies of one segment of liberal society.

Into this milieu arrived two defining events: In 2008, Ben Bernanke, Chair of the Federal Reserve, gathered together in the aftermath of the Global Financial Crisis, a room-full of the wealthiest oligarchs, ‘locking them in’ until they found the solution to the unfolding systemic bank failure.

The oligarchs did not find a solution but were released from their lock-up anyway. They opted instead, to throw money at structural problems, compounded by egregious errors of judgement about risk.

And to finance the resulting massive losses – which were over $10 trillion in the U.S. alone – the world’s central banks began printing money – since when they have never stopped!

Thus begun the era in the West where deep problems are not solved, but simply have freshly-printed money thrown at them. This methodology was whole-heartedly adopted by the EU also, where it was called Merkelism (after the former German Chancellor). Underlying structural contradictions were simply left to accumulate; kicked down the road.

A second defining characteristic of this era was that as the great oligarchs retreated from industrial production and threw themselves into hyper-financialisation, they saw advantage in adopting the burgeoning Metro-Élite agenda centred around utopian ideals of diversity, identity and racial justice – ideals pursued with the fervour of an abstract, millenarian ideology. (Their leaders had almost nothing to say about poverty or unemployment, which suited the oligarchs perfectly).

So, espying advantage, the Oligarchs too, turned radical. Led by such as the Rockefeller and Ford Foundations, Big Philanthropy and Business, they adopted woke speech and thought codes. And endorsed putting wealth directly into the hands of those who have been systematically victimized, through history. But again, deep structural change in society was addressed superficially – as simply moving money from ‘one pocket to another’.

The real problem flowing from the 2008 crisis however, wasn’t essentially financial. Yes, the losses were shifted from failing institutions balance sheets to the Fed’s, but the real structural problems were never addressed. So, people soon believed that almost every problem could be solved by speech and thought codes – married to the printing press.

Political trade-offs were no longer to be considered a requisite. Costs no longer relevant. In this environment, no problem was too big to solve through behavioural management techniques and the central bank. And if there wasn’t a crisis to mandate and ‘liquify’ agenda change, then one could be invented. And, sure enough, as soon as the U.S. Fed began to return to ‘normal’ policies in 2018 and 2019, a new, even bigger crisis was found.

Not surprisingly, in the context of what was seen as failed Civil Rights and New Deal reforms, the activist movements being funded by the Oligarchic ‘wealth funds’ turned more radical. They adopted a revolutionary cultural activism deployed to “solve problems once and for all” – aimed at bringing about deep structural change within society.

This meant shifting power once again away from the liberal Middle Class ‘who were so often white and male’ – and were therefore part to society’s structural injustice. Put simply, the western Middle Class became seen by the technocrats as a pain in the backside.

The point here is what was missed in all the talk of ‘positive discrimination’ paths in favour of ‘victims’ was the other side to the coin: Negative harmful discrimination practiced against those ‘blocking the path’ – those failing to get out of the way.

Scott McKay’s Revivalist Manifesto calls this hostile discriminatory process, ‘weaponised Government Failure’ – such as the induced government dysfunctionality in U.S. cities to drive the Middle Class away. “‘White flight’ is a feature. It’s not a bug”, its advocates preached. The urban socialist Left wants a manageably small core of rich residents, and a teeming mass of pliable poor ones, and nothing in between. That’s what weaponized governmental failure produces, and it’s been a wide-scale success.

New Orleans votes 90 percent Democrat; Philadelphia is 80 percent Democrat; Chicago is 85 percent. Los Angeles? Seventy-one percent. None of those cities will have a Republican mayor or city council again, or at least not in the foreseeable future. The Democrat Party barely exists outside of the ruins that those urban machines produce.

The bigger message is that ‘induced dysfunctionality’ can produce a society that can be ruled over (made compliant through unpleasantness and hurt) – without having to govern it (i.e. make things work!).

This process is evident too, in the EU today. The EU is in crisis because it has made a hash of its governance in respect to sanctions on Russian energy. The leadership class thought the effects of EU sanctions on Russia to be ‘slam dunk’: Russia would fold in weeks, and all would return as it was before. Things would go back to ‘normal’. Instead, Europe faces melt-down.

Yet, some leaders in Europe – zealots for the Green Agenda – nonetheless pursue an approach parallel to that in the U.S. – of ‘weaponised failure’, conceived as a strategic asset to achieve Green Net Zero ends.

Because … it forces their societies to embrace de-industrialisation; accept carbon footprint monitoring and the Green Transition – and to bear its costs. Yellen and certain EU leaders have celebrated the financial pain as accelerating Transition, like it or not, even if it pushes you out of employment, to the edge of society. Dysfunctional European airports are one example to discourage Europeans from travel and adding to the carbon load!

Put simply, this is another noxious trait that has emerged with the 2008 ‘turn’. Sociopathy refers to a pattern of antisocial behaviours and attitudes, including manipulation, deceit, aggression, and a lack of empathy for others that amounts to mental disorder. The defining characteristic of the sociopath is a profound lack of conscience – an amorality however, which may be hidden by an outwardly charming demeanour.

‘Nudging’ us to compliance through cost, or making life intolerable, is the new way to rule. But our world is rapidly fracturing into potted zones of ‘old normal’ and surrounding pools of disintegration.

Which brings us to the big question: As the West skirts economic systemic failure again, why not then call together the billionaire Oligarchs, as in 2008, and lock them in a room, until they find a solution?

Yes, the Oligarchs may hold themselves in high regard (being so rich), but their last effort gave no solution, but rather was an exercise in self-preservation, achieved through throwing freshly printed money at broad structural problems, thus easing the transition of their empires into their new financialised identity.

However, something does seem to have changed around 2015-2016 – a reaction began. The latter originates not from Oligarchs but from certain quarters in the U.S. system who fear the consequences, were the mass psychological dependency on the printing of ever more money not to be addressed. Their fear is that the slide to societal conflict as wealth and wellbeing distortions explode apart, will become unstoppable.

The Fed however, may be attempting to implement a contrarian, controlled demolition of the U.S. bubble-economy through interest rate increases. The rate rises will not slay the inflation ‘dragon’ (they would need to be much higher to do that). The purpose is to break a generalised ‘dependency habit’ on free money.

The only question from market participants everywhere is when does the Fed pivot (back to ‘printing’) … when? They want their ‘fix’ and want it quickly.

So many are ‘dependent’: The Biden Admin needs it; the EU is dependent on it; the Re-set requires printing. Green requires printing; support for the Ukrainian ‘Camelot’ requires printing. The Military Industrial Complex needs it, too. All need a free cash ‘fix’.

Perhaps the Fed can break the psychological dependency over time, but the task should not be underestimated. As one market strategist put it: “The new operating environment is entirely foreign to any investor alive today. So, we must un-anchor ourselves from a past that is ‘no longer’ – and proceed with open minds”.

This period of zero rates, zero inflation and QE was an historical anomaly – utterly extraordinary. And it is ending (for better or worse).

A small Fed ‘inner circle’ may have a good grasp of what the new operating environment will mean, but any detailed implementation simply can’t extend faithfully down a long trickle-down chain of command oriented to the obverse ‘Growth’ paradigm pleading for ‘pivot’. How many of the people currently involved with this transition understand its full complexity? How many concur with it?

What can possibly go wrong? Starting the shift at the top is one thing. However, the cure for ‘induced governance dysfunctionality’ as an operating strategy in a ‘permanent state’ staffed by sociopath Cold Warriors and technocrats selected for compliance is not obvious. The more sociopathic may tell the American public F*** you! They intend ‘to rule’ – ruin or not.

Betty and Andrew Windsor with the King of Bahrain at the 2019 Windsor Horse Show

Originally published in Counterpunch magazine, 2021

The first article in this series looked at the ‘domestic’ role of the British monarchy, suggesting that they served as a ‘counter-revolutionary backstop’, a feudal remnant kept artificially alive in order to prop up bourgeois rule through the bypassing of parliament and the establishment of rule by decree in the event of serious popular unrest and revolt. In a nation as deeply saturated with colonial wealth and outlook as Britain, however, this is more of an ‘insurance policy’ than an active and ongoing role. In the realm of foreign policy, however – where the revolutionary overthrow of Britain’s colonial proxies is a real and ever-present danger – their role is much more active and visible. Nowhere is this clearer than in the Arab world. 

Following the taxonomy deployed by the legendary Ghanaian revolutionary, Kwame Nkrumah, the Arab states can be divided into two main camps: those which are under the effective control of the former colonial powers and their allies (which he termed ‘neocolonial’ states), and those which are not. In the former camp are states such as Saudi Arabia, Bahrain, Qatar, Kuwait, and the UAE, all of them creations of the British empire and to this day still controlled by the ruling families handpicked by Britain at the height of empire. The consolidation and reinforcement of the relationships between Britain and these families, and the shoring up of their power, is a core part of the role of the British royal family, and much of their time is taken up with hosting and visiting these families. This is especially important at times when their rule is under threat, providing an expression of solidarity at the highest level, an assurance that the British state will stand shoulder-to-shoulder with whatever repression is deemed necessary to hold onto power. 

Whilst this symbolic royal solidarity is offered to leaders of Britain’s neocolonial proxy states the world over, it is the relationships with the ruling families of the Arab world specifically that are considered to be paramount. To understand why this is so, it is essential to appreciate the fundamental importance of Arabia both to the neocolonial system – the channelling of wealth generated in the global South to the western states – in general, and to British economic and political power in particular. 

The Gulf region’s importance to the neocolonial world system derives primarily from its strategic location and its energy resources. Even before the discovery of oil, the region was particularly coveted by the British state due to its proximity to India. Napoleon’s invasion of Egypt in 1798 sent British officials scurrying for control of the Arabian peninsula in order to close the Gulf to the French navy; to this end, the first Anglo-Arabian treaty was signed that year, with the Sultan of Muscat. Others followed soon after, such that the British were virtual hegemons in the region by the middle of the nineteenth century. The thrust of these treaties was always the same – British security guarantees for the ruling families in exchange for British control of their foreign policy, with securing the trade and military route to India the fundamental objective. Urgency was added to this aim in 1911, when Winston Churchill decreed that the navy would switch from coal to oil, meaning that not only British economic strength, but British naval power too, was now dependent on imports from the East (which, since the opening of the Suez canal in 1882, could now make their journey to Europe purely by way of cargo ship through the Red Sea). 

This geostrategic imperative for British control of the Gulf region remains operational today. Three of the world’s eight ‘transit chokepoints’ – narrow waterways through which a large proportion of global trade passes daily – surround the Arabian peninsula – the Suez canal to the Northwest, the Strait of Hormuz to the east, between Arabia and Iran, and the Bab el-Mandab Strait to the west, linking Yemen, Eritrea and Djibouti. Control of these chokepoints is considered crucial, therefore, not so much to British energy security (as the Gulf region supplies less than 4% of Britain’s oil and only 13% of its gas), but to Anglo-America’s ability to control the flow of energy to other countries – in other words, to the leverage provided by such control. The ability to cut off energy supply to whoever it chooses is a key element of western global power. As Bush advisor Zalmay Khalilzad put it back in 1995, “the US position in the Gulf…helps the United States to prevent the rise of another global rival. And should one arise, Washington’s position in the Gulf would be a great advantage.” With East Asia, in particular, increasingly dependent on energy imports from the Middle East, it is easy to see how control of these chokepoints could be used as another weapon in the West’s escalating economic war against China.  

Yet the strategic location of the Arab world is only part of the story. The other key element is oil, and in particular, the link between oil, currency and global power. In his book The City, Tony Norfield identifies the international status of a country’s currency as one of four factors essential to global power, with the status of sterling thus crucial to Britain’s continued imperial role. And the value of sterling fundamentally depends on Gulf oil wealth. 

This was already true in the immediate postwar era when “maintaining the strength of the pound sterling was an absolute strategic priority for British policymakers… and Britain’s interests in Gulf oil were crucial to London’s success in this regard.” (David Wearing, paraphrasing Steven Galpern.) Back then, taxes paid by British-owned oil companies like BP and Shell in Iran and Kuwait helped finance the government’s domestic spending, whilst the foreign currency they earnt allowed Britain to finance imports without building up a trade deficit, as well as building up reserves which could be used to defend the pound when necessary. They also, of course, allowed Britain to import oil without using up precious foreign reserves; all of which helped keep sterling’s value from collapse. 

Following the oil crisis of 1973, when oil producing states turned to western banks to house their newly acquired petrodollars, however, a new role began to emerge for Gulf wealth. Says Wearing, “As well as direct investment in the British economy and investment opportunities for British industry in the Gulf, Whitehall sought a wider influx of surplus oil revenues into the financial system, whereby recycled petrodollars would play a similar stabilising function to the recently expired Bretton Woods system of managed exchange rates.” By the end of the decade, those banks were the repositories for $154billion of petrodollars. This new source of capital allowed for a fundamental transformation in the structure of the British economy, and a new type of imperialism – neoliberalism. Whereas the imperialism of Lenin’s day had been predicated on the export of capital by imperial states based on a manufacturing economy, this new type came to rely on the import of capital, in turn facilitating the ‘offshoring’ of production to the global South. 

In an excellent article on the blog paradigmchange.net, neoliberalism is described as an economic model that is predicated on a shift “from production to finance” and “based on consumption not accompanied by an adequate level of production…The resulting shortfall in income needed to sustain consumption is then replaced with debt, and the trade deficits are paid for by attracting capital into the City.” Imperialism has always been parasitic, but neoliberalism, based on the influx of consumer goods without any corresponding production of exports, is openly and brazenly so – and Arab wealth is essential to the financing of this parasitism. Whilst the capital imports which finance the debt on which neoliberal consumerism is based comes from all over the world, a significant amount comes from the Gulf. In 2012, UK Foreign Office minister Lord Howell claimed that the (Qatari owned) Shard was “the tip…of a very large iceberg” with “ a significant proportion” of GCC capital inflows “channeled into financial assets.” Kuwait and Saudi Arabia each have around £100billion invested through the City of London, with another £30billion from Qatar. It recently emerged that Gulf wealth is considered so important for Britain’s financial health that the UK government had established a secret Whitehall unit – Project Falcon – to attract investment from the UAE alone. Tony Blair was a lobbyist for the group. Says David Wearing, “on the status of the pound sterling, it is clear that Gulf capital inflows make an important indirect contribution by helping to maintain the strength of the pound, and thus its attractiveness as an international currency. This is because, on the balance of payments, the GCC region plays a very significant role indeed… on these key measures, the Gulf region is not merely important to the UK compared to other leading economies (such as the BRICS) but important even compared to major economies in the global North.” Put simply, Gulf capital shores up the pound enough to offset the potentially destabilising impact of ever growing mountains of household debt. Keeping Gulf wealth flowing into the counting houses of the City of London, then, is an essential prop for Britain’s ailing imperial economy. It is also a key mechanism by which the wealth and labour of the global South continues to be extorted by the West, both through the horrifically exploited and abused South Asian migrant workforce on which all the Gulf economies depend, and through the money paid for Gulf oil from the world’s – and particularly Asia’s – heavily import-dependent energy infrastructure. In other words, the US and Britain’s ability to consume more than they produce is dependent on the threefold process of, firstly, the super-exploitation of Asian migrant labour in the Gulf economies; secondly, the channelling of global South wealth into the Gulf states through oil sales in western denominated currencies; and thirdly, the investment of the income thus gathered into US and British banks. 

Ensuring this wealth continues to flow depends on two things: firstly, ensuring that the ruling families of the Gulf states continue to direct their Sovereign Wealth Funds to invest in the US and Britain, and, secondly, and more fundamentally, ensuring that those families are not overthrown. These two tasks are linked, for, alongside the economic incentives for Gulf investment in London (the Treasury and Bank of England’s commitment to guaranteeing ever rising asset prices through QE and house price manipulation) are the political incentives: bolstering the political and military alliance with the UK to ensure regime survival. And when the economic incentives are waning, as they seem to be daily, it becomes ever more imperative for the UK to ensure that those political incentives – securing the family dictatorships – are made very clear. This is where the Windsors come in. 

One of the problems of the neocolonial era is that those charged with securing British interests abroad – the rulers of comprador global South states – must become masters at decoding the contradictory diktats of the western powers. One day, these gentlemen will proclaim themselves champions of liberal freedoms, willing to slaughter millions of people and burn trillions of dollars at its altar; the next, they will declare themselves as standing shoulder-to-shoulder against terrorism with the most illiberal states the mind can concievably imagine. How is an Arab ruler to know, the next time he feels the need to crush an emerging dissident movement, whether to expect a shower of hellfire missiles for his troubles, or a hearty slap on the back? 

This is when a red carpet at Windsor Palace can be very reassuring, and it is no coincidence that the most frenetic hosting of high level state visits seems to occur at precisely those moments when Gulf autocracies are facing the most resistance from their own people. Over the past ten years, for example, when the Arab monarchies have confronted perhaps the biggest popular threat to their rule since the height of Arab nationalism in the 1950s and 60s (when British-created monarchs were overthrown in Egypt, Iraq, Iran, and Libya), they have met with leading members of the British royal family over two hundred times, with Charles alone undertaking ninety-five such visits. Bahrain, home to the most important British and US naval bases in the region, is a case in point. 

The al-Khalifas, the ruling clan in Bahrain for the past 200 years, originally hailed from Iraq, but were expelled by the Ottomans due to the disruption to trade caused by their frequent banditry. They briefly seized control of Bahrain in 1783 as Persian control began to crumble, but their falling out with the Wahhabi sect, on whom their power had relied, ended their rule twenty years later. It was only the treaty they signed with the British in 1820 – in which Britain guaranteed the family’s reign in return for their obedience to imperial designs – which restored them to power, and has kept them there – latterly with the addition of US support – until this day. Only gaining formal independence from Britain in 1971, the director-general of its state security directorate was a Brit – Ian Henderson, a former colonial official in Kenya – right up until 1998. Like the other Gulf states, their military and security apparatuses remain utterly dependent on US and British support. 

Yet the al-Khalifas’ position has been permanently unstable, due to both their obvious role as a facilitator of subordination to foreign domination and their persecution of the majority Shia population. A major workers’ revolt was crushed by the British in 1965, whilst the newly-elected national assembly was closed down by the Emir after just two years in operation in 1975 due to its demands for women’s votes, the nationalisation of oil resources, and the expulsion of foreign bases. “Since then”, says the author of a recent academic piece on the country, “the rule of the Khalifa family has become increasingly authoritarian.” This growing anti-democratic trend has coincided with an increase in the visible support of the British royal family. In 1979, there was particular anxiety in Britain that the revolutionary wave sweeping Iran would extend to the Gulf Arab states. Thus, within weeks of the Shah’s departure, the Queen was duly dispatched on her first official tour of the region in a clear expression of British solidarity with the Gulf rulers against their people. Bahrain was a particular concern, but the schedule of cosy engagements with the Emir, including horse racing, a banquet at the palace, and a return dinner on the royal Yacht Britannia, would have done much to reassure the Emir that British support for his “increasingly authoritarian” regime was unwavering. In 1984, a “glittering banquet” was organised by the Lord Mayor of the City of London in honour of the Emir of Bahrain, attended by the Duke and Duchess of Kent on the Queen’s behalf; whilst Prince Charles and his wife visited Bahrain two years later to attend a banquet in the Emir’s royal palace in Manama. Here they presented the Emir with the Order of St Michael and St George, the highest honour that can be bestowed for services to British imperialism, neatly symbolised by its insignia of a white child standing on the head of a prostrate Black man. 

But it was in 2011, when mass protests against the Khalifa dictatorship threatened to overwhelm the regime, that British royal support really went into overdrive. The mass movement that had been bubbling away since the mid-eighties broke out onto the streets in an unprecedented show of strength, involving at its height an estimated one third of the population, demanding the most basic political freedoms. The Khalifas brutally crushed the demonstrations, their weakness demonstrated by their dependence on Saudi armed forces to do so. The British government’s response was not only to step up the arms exports needed to shore up the regime, and to invite the country’s interior minister to the British foreign office to gather “lessons learnt from our experience in Northern Ireland,” but also to use the royal family to consolidate the Anglo-Bahraini alliance. In May 2012, King Hamad was a guest of honour at the Queen’s jubilee dinner at Windsor castle, and institutional links between the two families have been cemented by the Windsor and Khalifas’ joint sponsorship of the Windsor Horse Show. This event has become an occasion for an annual hobnobbing between the two heads of state, sharing the royal box and jointly hosting the awards ceremony. Commented the human rights group Reprieve during the 2017 event, shortly after the Khalifas began executing dissidents following a six-month hiatus, “Make no mistake, visits like [the Windsor Horse Show] gift the Bahraini government a royal cloak of acceptability, while the Kingdom mercilessly executes political prisoners and uses torture to extract ‘confessions.” It is a gift which is intentional, and clearly appreciated by the Khalifas; indeed, Hamad skipped a meeting with US President Obama in order to attend the show in 2015. In 2016, Hamad was given the most prestigious seat possible at the Queen’s ninetieth birthday dinner, right by her side. Yet even with the full might of British and US imperialism behind them, the Khalifas have still not been able to stop the Bahrainis’ courageous struggle.   

Bahrain is not an exception; the wheeling out of the royals to bolster British-sponsored regimes threatened by popular movements has a long history. In 1952, as the ousting of the British-imposed King Farouk by Colonel Nasser in Egypt ignited republican sentiment across the region, King Faisal of Iraq was invited to Balmoral, the Queen’s private estate in Scotland, in a demonstration that Britain would stand shoulder to shoulder against these anti-monarchical currents wherever they emerged. It wasn’t enough to shore up Faisal’s rule, however; he too was ousted six years later. 1987 saw the outbreak of the Palestinian intifada, the biggest uprising in the West Bank and Gaza since they were first occupied thirty years earlier, lasting until 1993. The Israelis responded with massive violence, including a policy of breaking the bones of child protesters; the royals showed their support for the repression with an official state visit for the Israeli President Chaim Herzog that same year. In 2007, when the Saudi criminal justice system was under unprecedented international scrutiny following the sentencing of two gang rape victims to imprisonment and 90 lashes the previous year, British approval for the regime was signalled by the King Abdullah’s invitation to a state banquet with the queen. “Contacts between our two families have been regular and close,” noted Elizabeth Windsor in her speech welcoming the king, adding that “Many British people have benefited from Saudi hospitality over the years as traders, experts and advisors,” a reference to the British military officers, arms traders, oil men and bureaucrats with whom the Saudi state is riddled. As the Arab Spring began to get under way in late 2010 – and with it, Britain’s twofold policy of using the protests as cover to launch wars against the region’s republican socialist states (Libya and Syria) whilst drowning in blood the peninsula’s anti-monarchical movements, all the region’s Arab collaborators were treated to the royal red carpet treatment: the Al Thanis of Qatar at Windsor castle in October 2010; the Queen in Abu Dhabi the following month; the Emir of Kuwait at Windsor castle in November 2012 and of the Emirates the following year, to name just the visits made by the Queen herself. The relationship with the al-Sauds was and is especially important given the Saudis leading role in facilitating Britain’s genocidal war against the Yemeni revolution.

What I am not saying here, it should be made clear, is that the British royals are somehow sullying themselves by association with these Arab ‘dictators.’ This is all-too-often the implicit line of the British colonial left when, for example, it protests such visits as those outlined above. If anything, the criticism is the other way round – that the real crime of the al-Khalifas, the al-Thanis and the Al-Sauds is their willingness to prostitute themselves and their countrymen to the diktat of the genocidal British state, to do the dirty work of empire.  As for the British royal family, they are no different from their counterparts in the Gulf: an artificial creation of the imperialist bourgeoisie, made up of reactionary feudal remnants on life support whose role is the suppression of democratic freedoms wherever the masses threaten property relations. And yet, as the Yemenis, Bahrainis and Palestinians are proving daily, and as the Iraqis, Egyptians, Libyans and Iranians have long since shown, their days are numbered, all of them, and these childish institutional fantasies will soon reveal themselves as but castles in the sand. Godspeed the day.

It may seem strange to invite an economist to give a keynote speech to a conference of the social sciences. Economists have been characterized as autistic and anti-social in the popular press for good reason. They are trained to think abstractly and use a priori deduction – based on how they think societies should develop. Today’s mainstream economists look at neoliberal privatization and free-market ideals as leading society’s income and wealth to settle at an optimum equilibrium without any need for government regulation – especially not of credit and debt.

The only role acknowledged for government is to enforce the “sanctity of contracts” and “security of property.” By this they mean the enforcement of debt contracts, even when their enforcement expropriates large numbers of indebted homeowners and other property owners. That is the history of Rome. We are seeing the same debt dynamic at work today. Yet this basic approach has led mainstream economists to insist that civilization could and should have followed this pro-creditor policy from the very beginning.

The reality is that civilization could never have taken off if some free-market economist had got into a time machine and travelled back in time five thousand years to the Neolithic and Bronze Age. Suppose that he would have convinced ancient chieftains or rulers how to organize their trade, money and land tenure on the basis of “greed is good” and any public regulation is bad.
If some Milton Friedman or Margaret Thatcher had persuaded Sumerian, Babylonian or other ancient rulers to follow today’s neoliberal philosophy, civilization could not have developed. Economies would have polarized – as Rome did, and as today’s Western economies are doing. The citizens would have run away, or else backed a local reformer or revolutionist to overthrow the ruler who listened to such economic advice. Or, they would have defected to rival attackers who promised to cancel their debts, liberate the bondservants and redistribute the land.

Yet many generations of linguists, historians and even anthropologists have absorbed the economic discipline’s anti-social individualistic world view and imagine that the world must always have been this way. Many of these non-economists have unwittingly adopt their prejudices and approach ancient as well as modern history with a bias. Our daily discourse is so bombarded with the insistence by recent American politicians that the world is dividing between “democracy” with “free markets” and “autocracy” with public regulation that there is much fantasy at work about early civilization.

David Graeber and I have sought to expand the consciousness of how different the world was before Western Civilization took the Roman track of pro-creditor oligarchies instead of palatial economies protecting the interests of the indebted population at large. At the time he published his Debt: The First Five Thousand Years in 2011, my Harvard group of assyriologists, Egyptologists and archaeologists was still in the process of writing the economic history of the ancient Near East in a way that was radically different from how most of the public imagined it to have occurred. David’s and my emphasis on how royal Clean Slate proclamations cancelling debts, liberating bond-servants and redistributing the land were a normal and expected role of Mesopotamian rulers and Egyptian pharaohs was still not believed at that time. It seemed impossible that such Clean Slates were what preserved liberty for the citizenry.

David Graeber’s book summarized my survey of royal debt cancellation in the ancient Near East to show that interest-bearing debt originally was adopted with checks and balances to prevent it from polarizing society between creditors and debtors. In fact, he pointed out that the strains created by the emergence of monetary wealth in personal hands led to an economic and social crisis that shaped the emergence of the great religious and social reformers.

As he summarized “the core period of Jasper’s Axial age … corresponds almost exactly to the period in which coinage was invented. What’s more, the three parts of the world where coins were first invented were also the very parts of the world where those sages lived; in fact, they became the epicenters of Axial Age religious and philosophical creativity.” Buddha, Lao-Tzu and Confucius all sought to create a social context in which to embed the economy. There was no concept of letting “markets work” to allocate wealth and income without any idea of how wealth and income would be spent.

All ancient societies had a mistrust of wealth, above all monetary and financial wealth in creditor hands, because it generally tended to be accumulated at the expense of society at large. Anthropologists have found this to be a characteristic of low-income societies in general.

Toynbee characterized history as a long unfolding dynamic of challenges and responses to the central concerns that shape civilizations. The major challenge has been economic in character: who would benefit from the surpluses gained as trade and production increase in scale and become increasingly specialized and monetized. Above all, how would society organize the credit and debt that was necessary for specialization of economic activities to occur – and between “public” and “private” functions?

Nearly all early societies had a central authority in charge of distributing how the surplus was invested in a way that promoted overall economic welfare. The great challenge was to prevent credit leading to debts being paid in a way that impoverished the citizenry, e.g., through personal debt and usury – and more than temporary loss of freedom (from bondage or exile) or land tenure rights.

The great problem that the Bronze Age Near East solved – but classical antiquity and Western civilization have not solved – was how to cope with debts being paid – especially at interest without polarizing economies between creditors and debtors, and ultimately impoverishing the economy by reducing most of the population to debt dependency. Merchants engaged in trade, both for themselves and as agents for palace rulers. Who would get the profits? And how would credit be provided but kept in line with the ability to be paid?

Public vs. private theories of how land tenure originated

Ancient societies rested on an agricultural base. The first and most basic problem for society to solve was how to assign land tenure. Even families who lived in towns that were being built up around temples and civic ceremonial and administrative centers were allocated self-support land – much like Russians have dachas, where most of their food was grown in Soviet times.

In analyzing the origins of land tenure, like every economic phenomenon, we find two approaches. On the one hand is a scenario where land is allocated by the community in exchange for corvée labor obligations and service in the military. On the other hand is an individualistic scenario in which land tenure originated by individuals acting spontaneously by themselves clearing land, make it their own property and producing handicrafts or other products (even metal to use as money!) to exchange with each other.

This latter individualistic view of land tenure has been popularized ever since John Locke imagined individuals setting out to clear the land – apparently vacant wooded land – with their own labor (and presumably that of their wives). That effort established their ownership to it and its crop yield. Some families would have more land than others, either because they were stronger at clearing it or had a larger family to help them. And there was enough land for everyone to clear ground for planting crops.

In this view there is no need for any community to be involved, not even to protect themselves from miliary attack – or for mutual aid in times of flood or other problems. And there is no need for credit to be involved – although in antiquity that was the main lever distorting the distribution of land by transferring its ownership to wealthy creditors

At some point in history, to be sure, this theory sees governments enter the picture. Perhaps they took the form of invading armies, which is how the Norman ancestors of landlords in John Locke’s day acquired English land. And as in England, the rulers would have forced landholders to pay part of their crops in taxes and provide military service. In any case, the role of government was recognized only as “interfering” with the cultivator’s right to use the crop as he saw fit – presumably to trade for things that he needed, made by families in their own workshops.

My Harvard-sponsored group of assyriologists, Egyptologists and archaeologists have found an entirely different genesis of land tenure. Land rights seem to have been assigned in standardized plots in terms of their crop yield. To provide food for these community members, late Neolithic and early Bronze Age communities from Mesopotamia to Egypt allocated land to families in proportion to what they needed to live on and how much they could turn over to the palace authorities.

This tax yield turned over to palace collectors was the original economic rent. Land tenure came as part of a quid pro quo – with a fiscal obligation to provide labor services at designated times of the year, and to serve in the military. It thus was taxation that created land-tenure rights, not the other way around. Land was social in character, not individualistic. And government’s role was that of coordinator, organizer and forward planner, not merely predatory and extractive.

Public vs. private origins of money

How did early societies organize the exchange of crops for products – and most important, to pay taxes and debts? Was it simply a spontaneous world of individuals “trucking and bartering,” as Adam Smith put it? Prices no doubt would have varied radically as individuals had no basic reference to cost of production or degrees of need. What happened as some individuals became traders, taking what they produced (or other peoples’ products on consignment) to make a profit. If they traveled large distances, were caravans or ships needed – and the protection of large groups? Would such groups have been protected by their communities? Did supply and demand play a role? And most important, how did money emerge as a common denominator to set prices for what was traded – or paid in taxes and to settle debts?

A century after Adam Smith, the Austrian economist Anton Menger developed a fantasy about how and why ancient individuals may have preferred to hold their savings in the form of metals – mainly silver but also copper, bronze or gold. The advantage of metal was said to be that it did not spoil (in contrast to grain carried around in one’s pocket, for instance). It also was assumed to be of uniform quality. So pieces of metal money gradually became the medium by which other products came to be measured as they were bartered in exchange – in markets in which governments played no role at all!

The fact that this Austrian theory has been taught now for nearly a century and a half is an indication of how gullible economists are willing to accept a fantasy at odds with all historical records from everywhere in recorded world history. To start with, silver and other metals are not at all of uniform quality. Counterfeiting is age-old, but individualist theories ignore the role of fraud – and hence, the need for public authority to prevent it. That blind spot is why U.S. Federal Reserve Chairman Alan Greenspan was so unprepared to cope with the massive junk-mortgage bank crisis peaking in 2008. Wherever money is involved, fraud is omnipresent.

That’s what happens in unregulated markets – as we can see from today’s bank frauds, tax evasion and crime that pays very, very well. Without a strong government to protect society against fraud, lawbreaking, the use of force and exploitation, societies will polarize and become poorer. For obvious reasons the beneficiaries of these grabs seek to weaken regulatory power and the ability to prevent such grabitization.

To avoid monetary fraud, silver and subsequently gold coinage from Bronze Age Mesopotamia down through classical Greece and Rome was minted in temples to sanctify their standardized quality. That is why our word for money comes from Rome’s temple of Juno Moneta, where Rome’s coinage was struck. Thousands of years before bullion was coined, it was provided in metal strips, bracelets and other forms minted in temples, at standardized alloy proportions.

Purity of metals is not the only problem with using bullion money. The immediate problem that would have confronted anyone exchanging products for silver is how to weigh and measure what was being bought and sold – and also to pay taxes and debts. From Babylonia to the Bible we find denunciations against merchants using false weights and measures. Taxes involve a role of government, and in all archaic societies it was the temples that oversaw weights and measures as well as the purity of metallic metals. And the denomination of weights and measures indicate their origin in the public sector: fractions divided into 60ths in Mesopotamia, and 12ths in Rome.

Trade in basic essentials had standardized customary prices or payments to the palaces or temples. Taxes and debts were the most important used for money. That reflects the fact that “money” in the form of designated commodities was needed mainly to pay taxes or buy products from the palaces or temples and, at the end of the harvesting season, to pay debts to settle such purchases.

Today’s neoliberal economic mainstream has created a fairy tale about civilization existing without any regulatory oversight or productive role for government, and without any need to levy taxes to provide basic social services such as public construction or even service in the military. There is no need to prevent fraud, or violent seizure of property – or the forfeiture of land tenure rights to creditors as a result of debts. But as Balzac noted, most great family fortunes have been the result of some great theft, lost in the mists of time and legitimized over the centuries, as if it were all natural.

These blind spots are necessary to defend the idea of “free markets” controlled by the wealthy, above all by creditors. This is claimed to be for the best, and how society should be run. That is why today’s New Cold War is being fought by neoliberals against socialism – fought with violence, and by excluding the study of history from the academic economics curriculum and hence from the consciousness of the public at large. As Rosa Luxemburg put it, the fight is between socialism and barbarism.

Public vs. private origins of interest-bearing debt

Interest rates were regulated and stable for many centuries on end. The key was ease of calculation: 10th, 12th or 60th.

Babylonian scribes were trained to calculate any rate of interest as a doubling time. Debts grew exponentially; but scribal students also were taught that herds of cattle and other material economic output tapered off in an S-curve. That is why compound interest was prohibited. It also was why it was necessary to cancel debts periodically.

If rulers had not cancelled debts, the ancient world’s takeoff would have prematurely suffered the kind of decline and fall that impoverished Rome’s citizenry and led to the decline and fall of its Republic – leaving a legal system of pro-creditor laws to shape subsequent Western civilization.

What makes Western civilization distinctly Western? Has it all been a detour?

Civilization could not have developed if a modern Milton Friedman or kindred Economics Nobel Prize winner had gone back in time and convinced Hammurabi or the Egyptian pharaoh to just let individuals act by themselves and let wealthy creditors reduce debtors to bondage – and then to use their labor as an army to overthrow the kings and take over government for themselves, creating a Roman-style oligarchy. That is what Byzantine families tried to do in the 9th and 10th centuries.

If the “free enterprise” boys had their way there would have been no temple coinage or oversight of weights and measures. Land would belong to whomever could grab, foreclose on or conquer it. Interest would have reflected whatever a wealthy merchant could force a needy cultivator to pay. But to economists, everything that occurs is a matter of “choice.” As if there is no outright need – to eat or to pay.

An economic Nobel Prize was awarded to Douglass North for claiming that economic progress today and indeed throughout all history has been based on the “security of contracts” and property rights. By this he means the priority of creditor claims to foreclose on the property of debtors. These are the property rights to create latifundia and reduce populations to debt peonage.

No archaic civilization could have survived for long by following this path. And Rome did not survive by instituting what has become the distinguishing feature of Western Civilization: giving control of government and its lawmaking to a wealthy creditor class monopolizing the land and property.

If an ancient society had done this, economic life would have been impoverished. Most of the population would have run away. Or else, the Thatcherite/Chicago School elite would have been overthrown. The wealthy families that sponsored this grabitization would have been exiled, as occurred in many Greek cities in the 7th and 6th centuries BC. Or, discontented populations would have walked out and/or threatened to defect to foreign troops promising to free the bondservants, cancel their debts and redistribute the land, as occurred with Rome’s Secessions of the Plebs in the 5th and 4th centuries BC.

So we are brought back to David Graeber’s point that the great reformers of Eurasia rose at the same time that economies were becoming monetized and increasingly privatized – an epoch in which wealthy families were increasing their influence over how city-states were run. Not only the great religious reformers but the leading Greek philosophers, poets and dramatists explained how wealth is addictive, and leads to hubris that leads them to seek wealth in ways that injure others.

Looking over the sweep of ancient history, we can see that the main objective of rulers from Babylonia to South Asia and East Asia was to prevent a mercantile and creditor oligarchy from emerging and concentrating ownership of land in their own hands. Their implicit business plan was to reduce the population at large to clientage, debt bondage and serfdom.

That is what occurred in the West, in Rome. And we are still living in the aftermath. Throughout the West today, our legal system remains pro-creditor, not in favor of the indebted population at large. That is why personal debts, corporate debts, public debts and the international debts of Global South countries have mounted up to crisis conditions threatening to lock economies into a prolonged debt deflation and depression.

It was to protest this that David helped organize Occupy Wall Street. It is obvious that we are dealing not only with an increasingly aggressive financial sector, but that it has created a false history, a false consciousness designed to deter revolt by claiming that There Is No Alternative (TINA).

Where Western civilization went wrong

We have two diametrically opposed scenarios depicting how the most basic economic relationships came into being. On the one hand, we see Near Eastern and Asian societies organized to maintaining social balance by keeping debt relations and mercantile wealth subordinate to the public welfare. That aim characterized archaic society and non-Western societies.

But the Western periphery, in the Aegean and Mediterranean, lacked the Near Eastern tradition of “divine kingship” and Asian religious traditions. This vacuum enabled a wealthy creditor oligarchy to take power and concentrate land and property ownership in its own hands. For public relations purposes, it claimed to be a “democracy” – and denounced any protective government regulation as being, by definition, “autocracy.”

Western tradition indeed lacks a policy subordinating wealth to overall economic growth. The West has no strong government checks to prevent a wealth-addicted oligarchy from emerging to make itself into a hereditary aristocracy. Making debtors and clients into a hereditary class, dependent on wealthy creditors, is what todays economists call a “free market.” It is one without public checks and balances against inequality, fraud or privatization of the public domain.

It may seem amazing to some future historian that the political and intellectual leaders of today’s world hold such individualistic neoliberal fantasies that archaic society “should” have developed in this way – without recognizing that this is how Rome’s oligarchic Republic did indeed develop, leading to its inevitable decline and fall.

Bronze Age debt cancellations and modern cognitive dissonance

So we are led back to why I was invited to speak here today. David Graeber wrote in his Debt book that he was seeking to popularize my Harvard group’s documentation that debt cancellations did indeed exist and were not simply literary utopian exercises. His book helped make debt a public issue, as did his efforts in the Occupy Wall Street movement.

The Obama administration backed police breaking up the OWS encampments and did everything possible to destroy awareness of the debt problems plaguing the U.S. and foreign economies. And not only the mainstream media but also academic orthodoxy circled their wagons against even the thought that debts could be written down and indeed needed to be written down to prevent economies from falling into depression.

That neoliberal pro-creditor ethic is the root of today’s New Cold War. When President Biden describes this great world conflict aimed at isolating China, Russia, India, Iran and their Eurasian trading partners, he characterizes this as an existential struggle between “democracy” and “autocracy.”

By “democracy” he means oligarchy. And by “autocracy” he means any government strong enough to prevent a financial oligarchy from taking over government and society and imposing neoliberal rules – by force. The ideal is to make the rest of the world look like Boris Yeltsin’s Russia, where American neoliberals had a free hand in stripping away all public ownership of land, mineral rights and basic public utilities.

You’ve probably heard some of the fuss around central bank digital currencies (CBDCs). This article is neither a fiery condemnation (that would be too easy) nor a technical explanation, nor anything in between. I will briefly explain what they are, describe their attractions and dangers, and then explore some seldom-discussed foundational questions.

What is a central bank currency—digital or otherwise? It is money issued by a central bank such as the Federal Reserve that either circulates as cash or is held in accounts at the central bank. Today, the only entities that have accounts at the Fed are banks and other financial institutions. Private citizens and businesses can’t open an account at the Fed. I tried, but they put me on hold.

Here is a simplified version of how it works, accurate enough for the present purpose. Acme Bank has reserves of $100 million at the Fed. During the course of the day, it makes loans and takes deposits. The loans end up as deposits in other banks. At the end of the day, all these transfers are “cleared,” meaning that if Acme lent a total of $20 million and received a total of $15 million, its account balance at the Fed would fall by $5 million, and other banks in the system would see their balance rise by a total of $5 million also.

I hope you didn’t tune out as soon as you saw numbers. Basically what is happening is that central bank money moves from one bank’s account to another to settle accounts with other banks.

Obviously, these bank reserves at the Fed do not take the form of piles of hundred-dollar bills. They are digital already. So what is new about CBDCs?

The novelty stems from the fact that the money you and I spend (with the exception of cash) is not central bank money at all. It exists only in the ledger of your commercial bank or other institution. If I Paypal you $1000, my Paypal balance and your Paypal balance change, but nothing happens in the central bank. Same is true if Alice, who banks at Acme, writes a $1000 check to Bob, who deposits it in XYZ Bank, and then Carol, who also banks at XYZ, writes a $1000 check to Dave who deposits it in Acme. These individuals’ account balances go up and down, but their banks are even with each other and the Fed is not involved at all.

A central bank digital currency essentially allows private individuals and businesses to have accounts at the central bank. It would function just like (and ultimately replace) cash, requiring no intermediary, no bank, no credit card company, and no transaction fee. If I buy a coffee at your cafe, an app or card reader sends a message to automatically credit your account and debit mine. The user experience would be the same as today, but there would be no fee and no lag time. Normally, paying by debit or credit card involves a 3% fee and a day or two for the funds to become available to the seller.

Attractions and Dangers of CBDCs

Now I’ll list some other benefits and advantages of CBDCs. You might notice that with a mere twist of the lens, many of these advantages take on an ominous hue. But let’s start with the positive:

• As mentioned, CBDCs can remove what is essentially a 3% tax on most consumer-level transactions, allowing swift, frictionless transactions and transfers of money.

• Unlike with physical cash, all CBDC transactions would have an electronic record, offering law enforcement a powerful weapon against money laundering, tax evasion, funding of terrorism, and other criminal activity.

• The funds of criminals and terrorists could be instantly frozen, rendering them incapable of doing anything requiring money such as buying an airplane ticket, filling up at a gas station, paying their phone or utility bills, or hiring an attorney.

• CBDCs are programmable, allowing authorities to limit purchases, payments, and income in whatever ways are socially beneficial. For example, all products could have a carbon score, and consumers could be limited in how much they are allowed to buy. Or, if rationing becomes necessary, authorities could impose a weekly limit on food purchases, gas purchases, and so on.

• With programmable currency, citizens could be rewarded for good behavior: for eating right and exercising, for doing good deeds that are reported by others, for staying away from drugs, for staying indoors during a pandemic, and for taking the medications that health authorities recommend. Or they could be penalized for bad behavior.

• Taxation and wealth redistribution could be automated. Universal basic income, welfare payments, stimulus payments, or racial reparations could be implemented algorithmically as long as CBDC accounts were firmly connected with individual’s identities, medical records, racial status, criminal histories, and so forth.

Basically, beyond facilitating transactions, CBDCs offer an unprecedented opportunity for social engineering. Assuming that those in control are beneficent and wise, this is surely a good thing. But if, as many of us now believe, our authorities are foolish, incompetent, corrupt, or are merely fallible human beings incapable of handling too much power, then CBDCs can easily become instruments of totalitarian oppression. They allow authorities:

• To freeze the funds not only of terrorists and evil-doers, but dissidents, thought criminals, and scapegoated classes of people.

• To program money so it can only go to approved vendors, corporations, information platforms, and so forth. Those that fail to toe the party line can be “demonetized,” with consequences far beyond what befalls the hapless YouTuber who utters heresies about Covid, Ukraine, climate change, etc.

• Under the guise of rewarding good behavior and penalizing bad, to control every aspect of life so that it conforms to the interests of elite corporate and political institutions.

• To nip in the bud any opposition political movement by demonetizing its leaders and activists, either with no explanation at all, or under flimsy pretexts that their victims would have no way to contest.

It boggles my mind that the public could accept such a momentous transfer of power to central authorities, with nary a whisper of democratic process. Something this significant should require explicit public approval in the form of a referendum, constitutional amendment, or the like, after long and considered public debate. Instead, elites discuss it as if it were an inevitability.

Art credit: Rachel Herbert

The Ideology of Progress

The elites who are preparing CBDCs are well aware of their totalitarian potential. I know this from reading their speeches and documents. Moreover, this awareness is not in the sense of a fiendish secret plot to gain totalitarian control and oppress the masses. Their internal narrative (among themselves and in their own minds) is more like the following:

Sure, this technology could be abused if it falls into the wrong hands. Thankfully though, it will remain in our hands: the hands of smart, rational, sophisticated people, well-educated in the best schools, who have advanced to the top of a meritocratic system. In fact, the Fourth Industrial Revolution that includes digital currencies and high-tech biometrics and surveillance will ensure that the good, smart, rational people will remain in power. These technologies will allow us to safeguard the world from irrational, anti-science, undereducated, psychopathic charlatans and demagogues who would mislead the masses and usurp the rule of science, reason, and technological progress. CBDCs will vastly expand our ability to rationally administer society for the net benefit of all.

As long as this way of thinking is firmly in place, then it matters little if Klaus Schwab and the elites are fiendish totalitarian plotters, or merely bland bureaucrats. The results will be the same. This ideology, whether they wield it as a cynical pretext or serve it with whole-hearted sincerity, will drive them to bring the whole world under their control.

We must understand CBDCs as part of a more sweeping ideology of progress, which celebrates any new extension of material and informational control. In that ideology, progress means improvements in our ability to capture the world through data, and to then manipulate the world accordingly. The more accurate and complete the data set, the better able we will be to improve human life. The old policy-making standard of the cost-benefit analysis can be automated through AI algorithms that maximize whatever the smart people in charge choose as the appropriate metric of well-being.

“The more accurate and complete the data set, the better able we will be to improve human life.” Thus it is that CBDC scenarios normally include the ideal of a cash-free society. Cash transactions are outside the data set. They are hard to monitor or control. For CBDCs to fit into social engineers’ paradise of total control, they must accompany the elimination of cash.

This whole program depends on unconscious assumptions: that everything important can be measured, that everything real can be quantified, that every causal principle can be known. The program’s operators seldom consider what—and who—gets left out of the metrics.

Beyond the Binaries

Returning now to matters of currency, I’d like to add some complexity to the dystopian possibility I’ve described. Under apparently binary distinctions like centralization/decentralization, freedom/control, and politics/economy, other principles lurk unnoticed.

Art credit: Natasza Zurek, Dualistic Nature

It may look like CBDCs are qualitatively different from money today; that they are more like rations stamps. Real money, one supposes, can be spent on whatever one likes. Real money, one supposes, is fully alienable from its owner. My dollar is the same as your dollar, and it bears no trace of its origin. All that is true of cash, but is not necessarily of programmable currency. Is it money at all?

The notion of money being free from political interference brings up a more general issue: the relationship between the economic and political realm. Communism obliterates the distinction and unifies the two. Libertarianism seeks the reverse, to banish politics from economics. In practice, the two have never been fully united nor fully separate. Both money and government are modes of human agreement.

The libertarian ideal of money that is outside political interference is based on a misunderstanding of money’s historical origins. Long before the first coins were minted in Lydia and Greece, complex societies kept tallies of contributions to granaries and temples, tallies which could then be used as the basis of lending or exchange. In other words, money originated as credit, not cash. It originated as a social recognition of contribution, not as fungible commodities replacing barter.

Even after the advent of coinage, many or most transactions were settled via credit. In the Middle Ages, records of who owed what to whom were kept on ledgers and tally sticks, and settled only occasionally with coinage. In that context, one person’s thaler or shilling was not equal to another’s. Merchants were much more likely to accept the IOUs of people of “good account” than they were of the town drunkard. One might have good credit in some quarters and poor credit in others. In that sense, money was similar to certain CBDC proposals: It could not always be spent equally everywhere, and was not fully alienable from its source.

Do not interpret the above as an endorsement of CBDCs. There is nothing wrong with social accountability in money, but it needn’t come from central banks and governments. Two issues are at stake here: the degree of political influence over the economy, and the agent of that influence. The degree ranges from an individualistic free-for-all at one extreme, and minute control over all earning, investing, and spending on the other. The agent of the influence could be a centralized state, or it could be some other social structure(s).

Money bearing the characteristics of cash (anonymity, alienability) inherently curtails the power of government, and indeed any form of social control. Not all societies hold limited government to be a good thing, but the United States was founded on it as an ideal. One way to limit government’s power is through a system of checks and balances. Another, complementary, way is to keep realms of human life outside government purview—to maintain a realm that is unregulated, non-juridical, undefined. This does not leave it as an individualistic free-for-all. It allows the operation of other modes of human social regulation. These include community, morality, consensus, extended family, custom, tradition, and cultural normativity.

In classical leftist thinking, the state is distinguished by its monopoly on violence. In a court of law, the losing side must abide by the court’s decision, or ultimately armed officers will enforce it. The colonization of community and informal culture by law is in that sense a colonization of life by violence. It shifts more and more of the edifice of culture onto the foundational bedrock of violence.

How Healthy Societies Constrain Money

The modern decline of non-monetized modes of social organization (community, morality, tradition, extended family, etc.) leaves only the legal system to check the wanton abuse of money power. From ancient times until quite recently there were extra-legal social limits on the free spending of money. The wealthy would suffer social pressure if they were too ostentatious or failed to uphold civic responsibilities. As communities weakened, so did these social pressures.

I remember a story I read as a child from one of the Laura Ingalls Wilder books. Deep snow had cut off the frontier town from the outside, and its grain supplies were running low. Finally, someone managed to make a run through a blizzard to bring in a cartload of wheat on behalf of a local merchant, who for a few weeks became the town’s only supplier. At first, he tried selling the grain at a huge markup, but when the citizens indignantly explained to him that he would be shunned forever more, he relented and sold it at cost.

In those days, people depended on each other in a network of gifts, favors, and obligations. An intangible civic currency circulated along with the financial currency. It enabled people to hold each other accountable. Money would not have done the merchant much good if the town’s doctor, laborers, carpenters, teamsters, and so on bore him ill will and refused him service. That is what might happen to those who offended local mores.

Not to idealize those times, one must also point out that these mores also encoded all manner of racist and sexist attitudes. Even people who bore no racism themselves might still participate in redlining, segregation, and other forms of discrimination, because the social consequences of flouting these conventions were severe. Racist laws were but one layer of the edifice of Jim Crow. But I digress. My point here is that state power was not the only limit to financial power.

Just as checks on government power are essential to a wholesome society, so also are checks on economic power. In the modern age, little remains to check it outside the state (or more precisely, centralized authority). State and money together have usurped nearly every other mode of social organization. When centralized authority subjugates money and property, we have communism. When money and property subjugate the state, we have oligarchy or fascism. Both lead to the same end: the fusion of economic and political power, and the totalitarian domination of all aspects of life.

Those who quite rightly criticize CBDCs for their totalitarian potential must understand that anonymous, trustless money (cash, and today, certain cryptocurrencies) is also antagonistic to a healthy society. I personally would prefer it to total state control, but there is a reason why drug dealers, child pornographers, extortionists, and other criminals use it. It allows them to violate social norms. Historically, cash prevails during times of war and social turmoil, when social structures have ruptured, strangers show up, and people don’t trust each other. (See David Graeber’s book Debt: The First 5000 Years for a compelling argument.) When things settle down and durable social structures emerge, then cash gives way by degrees to credit.

The problem today is not, as the central authorities see it, that too much economic activity lies outside their ability to track and control it. Nor is it as libertarians see it: that individual freedom is eroding away. As in most polarized debates, both sides tacitly accept the very circumstance that generates the conflict to begin with: the erosion of civil society structures that hold people accountable for their actions.

In fact, most people do not want the kind of freedom that is oblivious to the effect of their choices on other people. How do we know whether our economic choices do good or ill? In a healthy society, a myriad of feedback loops inform us how our choices land on others, and so help us navigate life. The CBDC vision relies instead on central authorities to tell us, and to program that information into money so that, for example, products with high embodied carbon become more expensive.

If this were the only conceivable source of social and ecological accountability, then maybe we ought accept the central control and do our best to improve its character. But there is an alternative to subjecting ourselves to the dubious wisdom of an (at best) paternalistic or (at worst) predatory state. We can build and rebuild other systems of social accountability.

In other words, the answer to the threat of centralized totalitarianism is to build community: traditional place-based community as well as online community.

Here we come to the issue of decentralized digital currencies. But before commenting on them, I want to clarify that an economy is not the same as a community, and a community is more than a network of people. A community is a group of people who need each other. Obligation and gratitude, giving and receiving bind them together. Community wanes as financial affluence waxes. If you can pay for everything, you don’t need anyone. The more we meet needs through money, the more vulnerable we are to financial collapse and to control though CBDCs. If the government cuts off my access to money (for example, because I post “disinformation” on my Substack channel), I will be incapacitated if I’m completely dependent on that money to meet my needs. But if I am well embedded in networks of gift and trade, if I grow some of my own food, if I have shared generously over the years, if I have people around me whom I needn’t pay to meet my needs for food, child education, music-making, home repairs, medicine, and care when I grow old, then I will be at least partially insulated from state power. This is a kind of autonomy that alarms fascists and communists both (both flavors of totalitarian are deeply suspicious of any form of social organization outside their purview). Yet it seldom occurs to libertarians either, who normally think in terms of autonomous individuals.

Well, there is no such thing as an autonomous individual. The true nature of the human being—indeed, of being itself—is relationship. Only a system built upon that metaphysical understanding can hope to durably fulfill the hopes that we invest in it.

There is no such thing as an autonomous individual. We are creatures of dependency to the core. Let us not speak, then, of freedom from social constraint. Let us ask instead how we should be constrained, and by whom. To whom should we be accountable, to whom should we be in debt, on whom should we depend in our neediness?

Society as Organism

In addition to non-monetary structures of mutual support, other forms of money also grant a degree of insulation from CBDC control. CBDCs are not so scary if they are not the exclusive permitted form of money. If only a portion of economic activity is transacted in CBDCs, the situation is little different than it is today. Already banks and other financial institutions do the government’s bidding in terms of providing transaction records or freezing bank accounts, as the demonetization of Wikileaks demonstrated already in 2014. In the dreams of totalitarian idealists, no financial activity exists outside their surveillance and control. That is why governments around the world are pushing to eliminate cash and outlaw, or at least regulate, cryptocurrencies.

In fact, cryptocurrencies already provide some of the advantages of CBDCs. For example, second- and third-generation cryptos allow instantaneous transfer of funds at nearly zero cost (and low energy consumption). The technical challenges of transaction time, scaling, and energy use have largely been solved. The socio-political questions have not, and here is fertile soil for the cultivation of new forms of social accountability and new ways to infuse values into money.

Bitcoin maximalists criticize other cryptocurrencies for not being truly decentralized. In most cases, the currency’s founders or a small group of nodes and developers wield strong influence over policy decisions, such as whether to modify the protocol. Theoretically, this leaves them vulnerable to government pressure. A fully decentralized crypto is like cash in the age of precious metal coinage. No one is in charge of it. No organization or group has a determining influence on it. Its value is (supposedly) independent of human politics.

Is that a good thing, though? If the only consideration is government interference, then yes. If we would like to encode money with social, moral, or ecological values, then no. Many newer currencies make a virtue out of their semi-centralization by building some form of community governance into the protocol. Yes, this might make them vulnerable to manipulation by central government authorities; on the other hand, they can nucleate the formation of new centers, parallel structures outside the state.

In a corrupt age, it is tempting to cede control over money to an impartial, impersonal algorithm to insulate it from the messiness of human politics. Ultimately though, politics (in the broad sense of agreements among the human collective) must subordinate money, and values must subordinate value. Do we really want to create money that we cannot change, and risk loosing a Frankensteinian monster upon the world?

It is much better to build governance of money into money itself. Instead of pure decentralization, in which there are no power centers at all, we might think more fruitfully in terms of multiple centers in an organic structure. An organism does not a have a single command-and-control center. Yet, neither is it a mass of undifferentiated co-equal cells. The brain, the heart, the endocrine organs each have systemic influence, but none supersedes the others. They are mutually influencing and mutually dependent. There is a reason that bodies (and ecosystems) grow that way: It makes them adaptable and resilient.

The main threat of CBDCs does not lie in those currencies per se. There is nothing fundamentally wrong with socio-political influence over money. The danger is that they will become the only money, as power-hungry central institutions ban cash and cryptocurrencies to fulfill their dreams of total control. We need other centers of power, other centers of social influence, accountability, and agreement, and other financial organs. Without them, tyranny is inevitable, CBDCs or no, and ideals of individual freedom will not stop it.

We cannot rely on the state to create other centers for us; we must create them ourselves, and protect them from central institutions.

These new structures can embody positive values. In the last few years lots of crypto projects have come across my desk that attempt to integrate social and ecological values into their design. Some are already doing some of the things that CBDC planners envision, such as incentivizing certain behavior. It could be participation in a community, engaging in climate action, or removing plastic from the ocean. At least one cryptocurrency, Celo, is carbon-negative by design (through investing its funds in ecological protection and restoration). It is also part of a growing ecosystem of protocols that support community-building and the development of decentralized autonomous organizations (DAOs). Many of these also incorporate various kinds of democratic decision-making and self-governance into their protocols.

Crypto is still an immature technology, a technological experiment, used by perhaps one percent of the population. It is rife with greed, deception, and get-rich-quick schemes, often disguised in lofty ideals. Some of the issuers who claim ecological values are merely engaging in ecological virtue signaling. Nonetheless, for all their problems, cryptocurrencies and their surrounding technologies illustrate the possibility of incorporating social values into money and developing participatory social structures that are independent of the state.

To fight the system is futile if one cannot offer an inspiring alternative. What is the alternative to a machine-like society centered around an all-seeing, all-powerful CPU? It is society as organism, society as ecosystem.

For that, we need to grow new organs and revitalize those that have withered. The withered ones include place-based communities, local economic structures and civic organizations, a culture of reciprocity and mutual aid, local earth-based skills held collectively and generationally, and extra-legal practices of conflict resolution. By revitalizing the in-person and the place-based, we become resilient to the encroachment of technology and all things digital. Secondly (and, I would say, secondarily) we can grow new organs in the digital realm.

The stronger these new and revitalized organ systems are, the less CBDCs will matter, as money and power devolve away from the center. The ultimate goal cannot be to eliminate national and global scale governance entirely. After all, some of our problems and creative possibilities are national or global in scope. However, because economic and political power is presently far too centralized, we should halt the rush toward CBDCs and focus our attention on other organs: the local, the bottom-up, the informal, the peer-to-peer.

What is really at stake here is the reclamation of something we could actually call a society. Indulge me while I exercise a special sense of the word. A true society is not a collection of atomic individuals ordered and directed by a central power. Originally, the word connoted fellowship, companionship, alliance, and friendship. Central authorities, however beneficent, cannot grant that to us. Their intervention may, arguably, be necessary if life devolves into a war of each against all. CBDCs and the rest of the surveillance state are symptoms of devolution as much as they are causes. It is up to us to reverse it. It is up to us to begin walking the long road back to fellowship.

Unlimited Hangout — On Wednesday, an “industry-led and UN-convened” alliance of private banking and financial institutions announced plans at the COP26 conference to overhaul the role of global and regional financial institutions, including the World Bank and IMF, as part of a broader plan to “transform” the global financial system. The officially stated purpose of this proposed overhaul, per alliance members, is to promote the transition to a “net zero” economy. However, the group’s proposed “reimagining” of international financial institutions, according to their recently published “progress report,” would also move to merge these institutions with the private-banking interests that compose the alliance; create a new system of “global financial governance”; and erode national sovereignty among developing countries by forcing them to establish business environments deemed “friendly” to the interests of alliance members. In other words, the powerful banking interests that compose this group are pushing to recreate the entire global financial system for their benefit under the guise of promoting sustainability.

This alliance, called the Glasgow Financial Alliance for Net Zero (GFANZ), was launched in April by John Kerry, US Special Presidential Envoy for Climate Change; Janet Yellen, US Secretary of the Treasury and former chair of the Federal Reserve; and Mark Carney, UN Special Envoy for Climate Action and Finance and former chair of the Bank of England and Bank of Canada. Carney, who is also the UK prime minister’s Finance Advisor for the COP26 conference, currently cochairs the alliance with US billionaire and former mayor of New York City, Michael Bloomberg.

GFANZ Leadership; Source: GFANZ

On its creation, GFANZ stated that it would “provide a forum for strategic coordination among the leadership of finance institutions from across the finance sector to accelerate the transition to a net zero economy” and “mobilize the trillions of dollars necessary” to accomplish the group’s zero emissions goals. At the time of the alliance’s launch, UK prime minister Boris Johnson described GFANZ as “uniting the world’s banks and financial institutions behind the global transition to net zero,” while John Kerry noted that “the largest financial players in the world recognize energy transition represents a vast commercial opportunity.” In analyzing those two statements together, it seems clear that GFANZ has united the world’s most powerful private banks and financial institutions behind what it sees, first and foremost, as “a vast commercial opportunity,” the exploitation of which it is marketing as a “planetary imperative.”

John Kerry in conversation with CNN’s Christine Amanpour at COP 26. Source: CNN

GFANZ is composed of several “subsector alliances,” including the Net Zero Asset Managers Initiative (NZAM), the Net Zero Asset Owner Alliance (NZAOA), and the Net Zero Banking Alliance (NZBA). Together, they command a formidable part of global private banking and finance interests, with the NZBA alone currently representing 43 percent of all global banking assets. However, the “largest financial players” who dominate GFANZ include the CEOs of BlackRock, Citi, Bank of America, Banco Santander, and HSBC, as well as David Schwimmer, CEO of the London Stock Exchange Group and Nili Gilbert, chair of the Investment Committee of the David Rockefeller Fund.

Notably, another Rockefeller-connected entity, the Rockefeller Foundation, recently played a pivotal role in the creation of Natural Asset Corporations (NACs) in September. These NACs seek to create a new asset class that would put the natural world, as well as the ecological processes that underpin all life, up for sale under the guise of “protecting” them. Principals of GFANZ, including BlackRock’s Larry Fink, have long been enthusiastic about the prospects of NACs and other related efforts to financialize the natural world and he has also played a key role in marketing such financialization as necessary to combat climate change.

As part of COP26, GFANZ— a key group at that conference—is publishing a plan aimed at scaling “private capital flows to emerging and developing economies.” Per the alliance’s press release, this plan focuses on “the development of country platforms to connect the now enormous private capital committed to net zero with country projects, scaling blended finance through MDBs [multilateral development banks] and developing high integrity, credible global carbon markets.” The press release notes that this “enormous private capital” is money that alliance members seek to invest in emerging and developing countries, estimated at over $130 trillion, and that—in order to deploy these trillions in investment—“the global financial system is being transformed” by this very alliance in coordination with the group that convened them, the United Nations.

Proposing a Takeover

Details of GFANZ’s plan to deploy trillions of member investments into emerging markets and developing countries was published in the alliance’s inaugural “Progress Report,” the release of which was timed to coincide with the COP26 conference. The report details the alliance’s “near-term work plan and ambitions,” which the alliance succinctly summarizes as a “program of work to transform the financial system.”

The report notes that the alliance has moved from the “commitment” stage to the “engagement” stage, with the main focus of the engagement stage being the “mobilization of private capital into emerging markets and developing countries through private-sector leadership and public-private collaboration.” In doing so, per the report, GFANZ seeks to create “an international financial architecture” that will increase levels of private investment from alliance members in those economies. Their main objectives in this regard revolve around the creation of “ambitious country platforms” and increased collaboration between MDBs and the private financial sector.

Per GFANZ, a “country platform” is defined as a mechanism that convenes and aligns “stakeholders,” that is, a mechanism for public-private partnership/stakeholder capitalism, “around a specific issue or geography.” Examples offered include Mike Bloomberg’s Climate Finance Leadership Initiative (CFLI), which is partnered with Goldman Sachs and HSBC among other private-sector institutions. While framed as being driven by “stakeholders,” existing examples of “country platforms” offered by the GFANZ are either private sector-led initiatives, like the CFLI, or public-private partnerships that are dominated by powerful multinational corporations and billionaires. As recently explained by journalist and researcher Iain Davis, these “stakeholder capitalism” mechanism models, despite being presented as offering a “more responsible” form of capitalism, allow corporations and private entities to participate in forming the regulations that govern their own markets and giving them a greatly increased role in political decision making by placing them on an equal footing with national governments. It is essentially a creative way of marketing “corporatism,” the definition of fascism infamously supplied by Italian dictator Benito Mussolini.

In addition to the creation of “corporatist” “country platforms” that focus on specific areas and/or issues in the developing world, GFANZ aims to also further “corporatize” multilateral development banks (MDBs) and development finance institutions (DFIs) in order to better fulfill the investment goals of alliance members. Per the alliance, this is described as increasing “MDB-private sector collaboration.” The GFANZ report notes that “MDBs play a critical role in helping to grow investment flows” in the developing world. MDBs, like the World Bank, have long been criticized for accomplishing this task by trapping developing nations in debt and then using that debt to force those nations to deregulate markets (specifically financial markets), privatize state assets and implement unpopular austerity policies. The GFANZ report makes it clear that the alliance now seeks to use these same, controversial tactics of MDBs by forcing even greater deregulation on developing countries to facilitate “green” investments from alliance members.

The report explicitly states that MDBs should be used to prompt developing nations “to create the right high-level, cross-cutting enabling environments” for alliance members’ investments in those nations. The significantly greater levels of private-capital investment, which are needed to reach net zero per GFANZ, require that MDBs are used to prompt developing nations to “establish investment-friendly business environments; a replicable framework for deploying private capital investments; and pipelines of bankable investment opportunities.” GFANZ then notes that “private capital and investment will flow to these projects if governments and policymakers create the appropriate conditions,” that is, enable environments for private-sector investments.

In other words, through the proposed increase in private-sector involvement in MDBs, such as the World Bank and regional development banks, alliance members seek to use MDBs to globally impose massive and extensive deregulation on developing countries by using the decarbonization push as justification. No longer must MDBs entrap developing nations in debt to force policies that benefit foreign and multinational private-sector entities, as climate change-related justifications can now be used for the same ends.

BlackRock CEO and GFANZ principal Larry Fink talks to CNBC during COP26. Source: CNBC

This new modality for MDBs, along with their fusion with the private sector, is ultimately what GFANZ proposes in terms of “reimagining” these institutions. GFANZ principal and BlackRock CEO Larry Fink, during a COP26 panel that took place on November 2, explicitly referred to the plan to overhaul these institutions when he said: “If we’re going to be serious about climate change in the emerging world, we’re going to have to really focus on the reimagination of the World Bank and the IMF.”

Fink continued:

They are the senior lender, and not enough private capital’s coming into the emerging world today because of the risks associated with the political risk, investing in brownfield investments — if we are serious about elevating investment capital in the emerging world. . . . I’m urging the owners of those institutions, the equity owners, to focus on how we reimagine these institutions and rethink their charter.

GFANZ’s proposed plans to reimagine MDBs are particularly alarming given how leaked US military documents show that such banks are considered to be essentially “financial weapons” that have been used as “financial instruments and diplomatic instruments of US national power” as well as instruments of what those same documents refer to as the “current global governance system” that are used to force developing countries to adopt policies they otherwise would not.

In addition, given Fink’s statements, it should not be surprising that the GFANZ report notes that their effort to establish “country platforms” and alter the functioning and charters of MDBs is a key component of implementing preplanned recommendations aimed at “seizing the New Bretton Woods moment” and remaking the “global financial governance” system so that it “promote[s] economic stability and sustainable growth.”

As noted in other GFANZ documents and on their website, the goal of the alliance is the transformation of the global financial system, and it is obvious from member statements and alliance documents that the goal of that transformation is to facilitate the investment goals of alliance members beyond what is currently possible by using climate change-related dictates, rather than debt, as the means to that end.

The UN and the “Quiet Revolution”

In light of GFANZ’s membership and members’ ambitions, some may wonder why the United Nations would back such a predatory initiative. Doesn’t the United Nations, after all, chiefly work with national governments as opposed to private-sector interests?

Though that is certainly the prevailing public perception of the UN, the organization has for decades been following a “stakeholder capitalist” model that privileges the private sector and billionaire “philanthropists” over national governments, with the latter merely being tasked with creating “enabling environments” for the policies created by and for the benefit of the former.

Speaking to the World Economic Forum in 1998, Secretary General Kofi Annan made this shift explicit:

The United Nations has been transformed since we last met here in Davos. The Organization has undergone a complete overhaul that I have described as a ‘quiet revolution.” . . . A fundamental shift has occurred. The United Nations once dealt only with governments. By now we know that peace and prosperity cannot be achieved without partnerships involving governments, international organizations, the business community and civil society. . . . The business of the United Nations involves the businesses of the world.

With the UN now essentially a vehicle for the promotion of stakeholder capitalism, it is only fitting that it would “convene” and support the efforts of a group like GFANZ to extend that stakeholder capitalist model to other institutions involved in global governance, specifically global financial governance. Allowing GFANZ members, that is, many of the largest private banks and financial institutions in the world, to fuse with MDBs, remake the “global financial governance system,” and gain increased control over political decisions in the emerging world is a banker’s dream come true. To get this far, all they have needed to do was to convince enough of the world’s population that such shifts are necessary due to the perceived urgency of climate change and the need to rapidly decarbonize the economy. Yet, if put into practice, what will result is hardly a “greener” world but a world dominated by a small financial and technocratic elite who are free to profit and pillage from both “natural capital” and “human capital.”

Today, MDBs are used as “instruments of power” that utilize debt to force developing nations to implement policies that benefit foreign interests rather than their own national interests. If GFANZ gets its way, the MDBs of tomorrow will be used to essentially eliminate national sovereignty, privatize the “natural assets” (e.g., ecosystems, ecological processes) of the developing world, and force increasingly technocratic policies designed by global governance institutions and think tanks on ever more disenfranchised populations.

Though GFANZ has cloaked itself in lofty rhetoric of “saving the planet,” its plans ultimately amount to a corporate-led coup that will make the global financial system even more corrupt and predatory and further reduce the sovereignty of national governments in the developing world.

Feature photo | Former governor of the Bank of England Mark Carney, who is the U.N.’s special envoy for climate change, speaks at a Bank of England Financial Stability Report Press Conference, in London, Dec. 16, 2019. Kirsty Wigglesworth | AP

Whitney Webb has been a professional writer, researcher and journalist since 2016. She has written for several websites and, from 2017 to 2020, was a staff writer and senior investigative reporter for MintPress News. She currently writes for her own outlet Unlimited Hangout and contributes to The Last American Vagabond and MintPress News.

On Wednesday, the World Economic Forum (WEF), along with Russia’s Sberbank and its cybersecurity subsidiary BI.ZONE announced that a new global cyberattack simulation would take place this coming July to instruct participants in “developing secure ecosystems” by simulating a supply-chain cyberattack similar to the recent SolarWinds hack that would “assess the cyber resilience” of the exercise’s participants. On the newly updated event website, the simulation, called Cyber Polygon 2021, ominously warns that, given the digitalization trends largely spurred by the COVID-19 crisis, “a single vulnerable link is enough to bring down the entire system, just like the domino effect,” adding that “a secure approach to digital development today will determine the future of humanity for decades to come.”

The exercise comes several months after the WEF, the “international organization for public-private cooperation” that counts the world’s richest elite among its members, formally announced its movement for a Great Reset, which would involve the coordinated transition to a Fourth Industrial Revolution global economy in which human workers become increasingly irrelevant. This revolution, including its biggest proponent, WEF founder Klaus Schwab, has previously presented a major problem for WEF members and member organizations in terms of what will happen to the masses of people left unemployed by the increasing automation and digitalization in the workplace.

New economic systems that are digitally based and either partnered with or run by central banks are a key part of the WEF’s Great Reset, and such systems would be part of the answer to controlling the masses of the recently unemployed. As others have noted, these digital monopolies, not just financial services, would allow those who control them to “turn off” a person’s money and access to services if that individual does not comply with certain laws, mandates and regulations.

The WEF has been actively promoting and creating such systems and has most recently taken to calling its preferred model “stakeholder capitalism.” Though advertised as a more “inclusive” form of capitalism, stakeholder capitalism would essentially fuse the public and private sectors, creating a system much more like Mussolini’s corporatist style of fascism than anything else.

Yet, to usher in this new and radically different system, the current corrupt system must somehow collapse in its entirety, and its replacement must be successfully marketed to the masses as somehow better than its predecessor. When the world’s most powerful people, such as members of the WEF, desire to make radical changes, crises conveniently emerge—whether a war, a plague, or economic collapse—that enable a “reset” of the system, which is frequently accompanied by a massive upward transfer of wealth.

In recent decades, such events have often been preceded by simulations that come thick and fast before the very event they were meant to “prevent” takes place. Recent examples include the 2020 US election and COVID-19. One of these, Event 201, was cohosted by the World Economic Forum in October 2019 and simulated a novel coronavirus pandemic that spreads around the world and causes major disruptions to the global economy—just a few weeks before the first case of COVID-19 appeared. Cyber Polygon 2021 is merely the latest such simulation, cosponsored by the World Economic Forum. The forum’s current agenda and its past track record of hosting prophetic simulations demands that the exercise be scrutinized.

Though Cyber Polygon 2021 is months off, it was preceded by Cyber Polygon 2020, a similar WEF-sponsored simulation that took place last July in which speakers warned of a coming deadly “pandemic” of cyberattacks that would largely target two economic sectors, healthcare and finance. Cyber Polygon 2020 was officially described as “international online training for raising global cyber resilience” and involved many of the world’s biggest tech companies and international authorities, from IBM to INTERPOL. There were also many surprising participants at the event, some of whom have been traditionally seen as opposed to Western imperial interests. For example, the person chosen to open the Cyber Polygon event was the prime minister of the Russian Federation, Mikhail Mishustin, and its main host, BI.ZONE, was a subsidiary of the Russian-government-controlled Sberbank. This suggests that the overused “Russian hacker” narrative may be coming to an end or will soon be switched out for another boogeyman more suitable in light of current political realities.

Aside from Mishustin, WEF executive director Klaus Schwab and former UK prime minister Tony Blair participated in the Cyber Polygon 2020 event, which is due to be repeated annually and bears many similarities to 2019’s Event 201. Rather than preparing for a potential medical pandemic, Cyber Polygon 2020 focused on preparing for a “cyberpandemic,” one that mainstream media outlets like the New Yorker claim is “already underway.” Given the WEF’s recent simulations, powerful billionaire business owners and bankers appear to be poised to use both physical and digital pandemics to reform our societies according to their own design and for their own benefit.

The Architects of Cyber Polygon

According to Russian cybersecurity firm BI.ZONE, 120 organizations spread over twenty-nine countries took part in the two scenarios that were simulated at Cyber Polygon 2020, with as many as five million people allegedly having watched the livestream in over fifty-seven countries. Like many events that took place in 2020, the Cyber Polygon simulations were conducted online due to COVID-19 restrictions. Together with the World Economic Forum, BI.ZONE, a subsidiary of Sberbank, manages the Cyber Polygon project. Sberbank’s largest shareholder, as of last year, is the Russian government, and it is thus often described by English-language media outlets as a state-controlled bank.

The 2020 event was launched with an address from the prime minister of the Russian Federation Mishustin, who has a history of courting Western tech companies prior to entering politics. In 1989, Mishustin graduated from Moscow State Technological University (generally known as Stankin) with a qualification in systems engineering. During the 1990s, he worked at the International Computer Club, a nonprofit organization with the goal of “attracting Western advanced information technologies” to Russia. Between 1996 and 1998, Mishustin was the chairman of the board of the ICC, but the company was liquidated in 2016. Between 2010 and 2020, he served as head of the Federal Taxation Service of the Russian Federation. Even though he had never shown any previous political ambitions, on January 16, 2020, he was appointed prime minister of the Russian Federation by an executive order issued by President Putin.

During Mishustin’s welcoming remarks at the WEF’s Cyber Polygon 2020, the Russian PM warned of the need to create public policy to “strengthen the digital security of critical activities without undermining the benefits from digital transformation in critical sectors that would unnecessarily restrict the use and openness of digital technology.” The statement suggests that “unnecessary restrictions” could become seen as necessary in time.

Mishustin goes on to explain that Russia’s post-COVID economic recovery will be based on the “increasing digitalization of that economy and government,” adding that “we will drastically increase the number of available digital public services and introduce fundamentally new support measures for digital businesses.” He also stated that “Russia has developed a common national system for identification and the prevention of cyberattacks with the government agency’s information systems linked in the system.” He also addressed the Cyber Polygon audience about the international community needing to come together to prevent a “global cyberfraud pandemic.”

Sberbank, the largest Russian banking institution and former Soviet savings monopoly, which was originally founded by Nicholas I, was an official host of the Cyber Polygon 2020 event alongside the World Economic Forum. As reported in the Economist in January 2021, the Russian banking giant has begun to reimagine its business in an effort to become a consumer-technology giant. Sberbank has spent around $2 billion on technology and acquisitions, including the acquisition of internet media group Rambler, which it fully acquired in 2020. As late as December 30, 2020, Sberbank acquired Doma.ai, which describes itself as “a convenient real estate management platform.” On June 15, 2020, Sberbank bought 2GIS, a map, navigator, and business directory with over 42 million monthly active users. Sberbank’s twenty-two investments, eleven as the lead investor, include some of the most used services in Russia, and its clear intention is to become a one-stop digital shop for all services. The bank also became the owner of one of the largest data-processing centers in Europe when the South Port data-processing center opened in November 2011, replacing the existing thirty-six regional data centers. Sberbank is set to be the world’s first bank to launch its own cryptocurrency, Sbercoin, and digital finance “ecosystem” this March. It notably announced the coming Sbercoin, a “stablecoin” tied to the Russian ruble, just a few weeks after the Cyber Polygon 2020 exercise.

Sberbank’s alliance with the WEF and prominence at Cyber Polygon 2020 was underscored at the event during the welcoming remarks delivered by Klaus Schwab. Schwab gave special thanks to Herman Gref, a member of the board of trustees of the World Economic Forum and Sberbank’s CEO and also issued the following dire warning:

We all know, but still pay insufficient attention to, the frightening scenario of a comprehensive cyberattack which would bring to a complete halt to the power supply, transportation, hospital services, our society as a whole. The COVID-19 crisis would be seen in this respect as a small disturbance in comparison to a major cyberattack. We have to ask ourselves, in such a situation, how could we let this happen despite the fact we had all the information about the possibility and seriousness of a risk attack. Cybercrime and global cooperation should be on the forefront of the global agenda.

Similar warnings were heard at a 2019 simulation that was also cosponsored by the World Economic Forum, Event 201. Event 201, which simulated a global pandemic just months before the COVID-19 crisis, presciently warned in its official documentation: “The next severe pandemic will not only cause great illness and loss of life but could also trigger major cascading economic and societal consequences that could contribute greatly to global impact and suffering.” In contrast to similar simulations conducted in the past, Event 201 championed a “public-private partnership” approach to combatting pandemics, with a focus on engaging “the private sector in epidemic and outbreak preparedness at the national or regional level.” The WEF is, among other things, a major evangelist for the merging of the public and private sectors globally, describing itself as the “international organization for private-public cooperation.” It is thus unsurprising that their latest disaster simulation, which focuses on cyberattacks, would promote this same agenda.

The Speakers at Cyber Polygon 2020

Aside from Schwab and Mishustin, twenty others took part in Cyber Polygon 2020, including some big names from the top echelons of the political elite. First off, Herman Gref engaged in discussion with former UK prime minister Tony Blair, who has been pushing for digital identity systems for decades. Blair straightforwardly told the CEO of Sberbank that biometric digital identity systems will “inevitably” be the tools that most governments will use to deal with future pandemics. Blair, discussing the coronavirus pandemic with Gref, advocated the harshest of lockdown measures, saying the only alternative to biometric digital identities is to “lockdown the economy.”

Next, Sebastian Tolstoy, Ericsson’s general director for Eastern Europe, Central Asia, and Russia and current chairman of the Tolstoy Family Foundation in Sweden, dialogued with Alexey Kornya. Kornya is president, CEO, and chairman of the management board of Mobile TeleSystems. He previously worked for PricewaterhouseCoopers and AIG-Brunswick Capital Management at North-West Telecom. Tolstoy and Kornya presented a segment at Cyber Polygon 2020 entitled “Building a Secure Interconnected World: What Is the Role of the Telecom Sector?” in which they discussed the importance of digital communication and connectivity to our modern way of living.

In the next segment, Nik Gowing, BBC World News presenter between 1996 and 2014 and founder and director of Thinking the Unthinkable, spoke with Vladimir Pozner, journalist and broadcaster, on the subject of “fake news” in a conversation that was actually somewhat refreshing in its arguments and approach.

Stéphane Duguin, the CEO of the CyberPeace Institute, a Geneva-based company that describes itself as “citizens who seek peace and justice in cyberspace,” then gave a talk to the millions of viewers watching the simulation. The CyberPeace Institute, funded by Microsoft, Facebook, Mastercard, and the Hewlett Foundation, among others, claims to help their customers “increase digital resilience and the capacity to respond to and recover from cyberattacks.” The core backers of the CyberPeace Institute are also among the top backers of the Global Cyber Alliance, which unites the public sectors of the US, UK, and France with multinational corporations and intelligence-linked cybersecurity firms, employing “a coordinated approach and nontraditional collaboration” to “reduce cyber risk.”

Duguin, who is also on the advisory board of the Global Forum on Cyber Expertise, recently launched the Cyber4Healthcare initiative, a “free” cybersecurity service to healthcare providers fighting the COVID-19 pandemic. The Cyber4Healthcare initiative includes as its main partners BI.ZONE as well as Microsoft and the Global Cyber Alliance. This is yet another suspicious Microsoft-linked free cybersecurity service currently being pitched to and adopted by healthcare providers around the world at a time when warnings of a coming cyberattack on healthcare systems globally are becoming more public.

Dhanya Thakkar, senior vice president of AMEA at Trend Micro, who advertises himself online as a top ASEAN LinkedIn “cybersecurity influencer,” and Wendi Whitmore, vice president of IBM X-Force Threat Intelligence, next discussed the topic “Know Your Enemy: How Is the Crisis Changing the Cyberthreat Landscape?” IBM’s presence is notable due to the company’s longstanding relationship with the CIA, dating back to the early Cold War. The company has become so entrenched that the CIA recently recruited their chief information officer directly from IBM Federal. Before joining IBM, Whitmore held executive positions at California-based cybersecurity technology companies CrowdStrike and Mandiant, the latter acquired by FireEye in a stock and cash deal worth in excess of $1 billion. Whitmore was responsible for “professional services.” Notably, both CrowdStrike and Mandiant/FireEye are the key organizations leading the investigation into the recent SolarWinds hack, which US intelligence has blamed on a “Russian hacker” without providing any evidence. Whitmore began her career as a special agent conducting computer crime investigations with the Air Force Office of Special Investigations.

Jacqueline Kernot, the Australian “partner in cybersecurity” for Ernst and Young, and Hector Rodriguez, senior vice president and regional risk officer for Visa, next discussed how to prepare for cyberattacks. Kernot worked for over twenty-five years as a military officer for the Australian Intelligence Corps and spent two years working at IBM’s Defence|Space|Intelligence for Tivoli Software in the UK with “international responsibilities within the UK Ministry of Defence, Defence Primes, and NATO.” Ernst and Young and Visa, alongside other WEF-linked corporations such as Salesforce, are well represented on the Vatican’s exclusive Council for Inclusive Capitalism. The Council, like the WEF, calls for the reconstruction of the economic system to be more “sustainable,” “inclusive,” and “dynamic” by “harnessing the power of the private sector.”

Troels Ørting Jørgensen , chairman of the advisory board of the World Economic Forum’s Centre for Cybersecurity, and Jürgen Stock, the Danish secretary general of INTERPOL, also spoke together at Cyber Polygon regarding the changes in global cybercrime over the course of the previous year. A few months after appearing at Cyber Polygon, the Danish Financial Supervisory Authority announced in an official statement that “Troels Ørting has notified the Ministry of Business Affairs that he is resigning from the Danish Financial Supervisory Authority’s board.” Citing unnamed sources, Danish financial news service FinansWatch reported that during the time between 2015 and 2018, when he was employed as head of security at Barclays bank, Ørting had been a key figure in the hunt for a whistleblower who had exposed the same criminal activity Ørting railed against at Cyber Polygon.

The man speaking alongside Ørting, Jürgen Stock, is a former German police officer, criminologist, and lawyer. He was elected for a second term as secretary general of INTERPOL in 2019, a term that generally lasts for five years. Craig Jones, the cybercrime director at INTERPOL, also joined the discussion at Cyber Polygon 2020. The New Zealander spent twenty-seven years in law enforcement and is considered an expert in cybercrime investigations. He previously held several senior-management positions in UK law enforcement, most recently at the National Crime Agency.

Petr Gorodov and John Crain were briefly interviewed at the Cyber Polygon 2020 event. Gorodov is head of the General Directorate for International Relations and Legal Assistance of the Prosecutor General’s Office of the Russian Federation and also sits on the Commission for the Control of INTERPOL’s files. He is on the Requests Chamber of INTERPOL, which examines and decides on requests for access to data as well as requests for correction and/or deletion of data processed in the INTERPOL information system. John Crain is chief security, stability, and resiliency officer at ICANN, the nonprofit internet security corporation. He is currently responsible for the management of the L-Root server, one of the internet’s thirteen root servers, making his inclusion at the simulation particularly notable. At Cyber Polygon 2020 he promoted a “long-term solution of working together in the cybersecurity community.”

The final word at Cyber Polygon 2020 was delivered by Stanislav Kuznetsov, deputy chairman of the executive board at Sberbank. He is also a board member for the Sberbank charity foundation Contribution to the Future, a project that seeks to get Russian schoolchildren from grades seven through eleven interested in AI (artificial intelligence), machine learning, and data analysis and to help them develop math and programming skills. Kuznetsov studied at the Law Institute of the Ministry of Internal Affairs of the Russian Federation.

The Main Event: Enter the Polygon

Participants in the Cyber Polygon 2020 event, Source: https://cyberpolygon.com/

The simulation component of Cyber Polygon 2020 saw 120 teams from twenty-nine countries take part in the cybersecurity technical simulation. During the online event, participants “exercise[d] the actions of the response team in a targeted attack aimed at stealing confidential data and thus resulting in damage to the company reputation.” Two teams, the Red and the Blue, went head-to-head in the simulations where the Red Team, made up of the training organizers from BI.ZONE, simulated cyberattacks and the Blue Team members attempted to protect their segments of the training infrastructure. The actual simulation was made up of two scenarios in which the various subgroups making up the teams could gain points.

The first scenario, called Defence, made the Cyber Polygon participants practice repelling an active APT (advanced persistent threat) cyberattack. The scenario’s objective was stated as being to “develop skills for repelling targeted cyberattacks on a business-critical system.” The simulation’s fictional organization’s virtual infrastructure included a service that processes confidential client information. This service became the subject of interest to an APT group that planned to steal confidential user data and resell it on the “darknet” to financially benefit and damage the company’s reputation. The APT group studied the target system in advance and discovered several critical vulnerabilities. In the scenario, the cyber “gang” plans to attack on the day of the exercise. The participants involved were judged on their ability to cope with the attack as fast as possible, to minimize the amount of information stolen, and to maintain service availability. Blue Team participants could apply any applications and tools to protect the infrastructure and were also allowed to fix system vulnerabilities by improving the service code.

In the second scenario, called Response, the teams had to investigate the incident using “classic forensics and threat hunting techniques.” Based on the information gathered, participants had to compose a dossier that would help law enforcement agencies locate the criminals. The second scenario’s objective was to develop skills in incident investigation using the scenario in which cybercriminals gained access to a privileged account through a successful phishing attack.

When the BI.ZONE team released the results of the simulation they intentionally avoided using the real names of the organizations so as not to “set off a competition between the participants and keep their results confidential.” However, the teams could later compare their results with the others by using a basic scoreboard, and the hosts could analyse the crucial data showing various organizational weaknesses of each of the participating teams/institutions.

The final report states that the results showed that “banks and companies from the IT industry demonstrated the highest resilience. Security assessment expertise in these sectors is quite well developed, with classic forensics and threat hunting widely applied.” In lay terms, the teams from banks and the IT industry seemed to be better prepared than most other sectors for investigating and hunting down threats. However, all the teams involved proved to be less than able when it came to the initial defense from a cyberattack, with the BI.ZONE report stating that “27% of the teams had difficulties earning points for the first scenario, which allows us to conclude that some of the team members lack or have insufficient expertise in security assessment and protection of web applications.” On the subject of threat hunting, the report goes on to say that “21% of the teams could not earn a single point for the second round of the second scenario. This was attributed to ‘Threat Hunting’ being a relatively novel approach and the majority of organisations lacking experience of applying its techniques in practice.”

The Cyber Polygon 2020 event revealed the weakness in human-led defensive response and resilience as it relates cyberdefense. This outcome is convenient for hi-tech cybersecurity companies like BI.ZONE that wish to highlight the superiority of AI-driven cybersecurity products in comparison to “inefficient” human workers. Also, it should be noted that BI.ZONE’s gaining knowledge of global institutional weaknesses through cyberdefense training could be useful intelligence for their parent company, Sberbank, and in turn the largest shareholder of Sberbank, the Russian government.

Bringing Russia in from the Cold?

Although Russian Federation authorities are quite used to being out in the cold both politically and physically, there appears to be a change in the usual order of nations. Russia’s inclusion as the leader in such an important global cybersecurity initiative is a bit surprising, especially after Russia has been the scapegoat of choice for any cyberattack committed against any Western power for several years, most recently with the SolarWinds hack in the US. Yet, there was no outcry in the West over Cyber Polygon 2020, in which a company that is majority owned by the Russian government was able to gain direct knowledge of the cyberdefense weaknesses of major global institutions, banks, and corporations through their hosting of the exercise.

The complete absence of the “Russian hacker” narrative at Cyber Polygon as well as Russia’s leadership role at the event suggests either that a geopolitical shift has taken place or that the Russian hacker narrative commonly deployed by intelligence agencies in the US and Europe is mainly meant for the general public and not for the elite figures and policymakers in attendance at Cyber Polygon.

Another possibility for Russia no longer being treated as the perpetual enemy of cyberspace is that it is entirely on board with both the official coronavirus narrative and the allegedly imminent cyberpandemic. Cyber Polygon 2020 appeared, in part, to be a Russian charm offensive that was welcomed by the powerful elite. Tony Blair, who once held out the hand of false reconciliation on behalf of the international community to Colonel Gaddafi, has often been involved in these exercises of international diplomacy on behalf of the elites in the years since he left public office. His involvement in the exercise may have been meant to facilitate support among Western WEF-aligned governments for even greater Russian inclusion in the Great Reset. Part of this is due to the WEF-led effort to bring BRICS nations like China and Russia into the Great Reset fold because it is essential for their agenda’s success on a global scale. Now, Russia is pioneering this new model of supposedly national finance systems that the WEF supports through Sberbank’s creation of a digital monopoly not only of financial services but all services within the Russian Federation.

Cyber Polygon 2020 was both an ad for pro-Russian relations and a promotional exercise for Klaus Schwab and the World Economic Forum’s Great Reset. Some of the people who took part and supported the Cyber Polygon event are involved at the highest levels of cyber intelligence; some may have even been unofficial representatives of their national state intelligence apparatus. The decisions of several national governments to participate directly in the WEF-led Great Reset is no “conspiracy theory.” For instance, the incoming Biden administration sent its climate envoy, John Kerry, to the WEF annual meeting last month, where Kerry underscored the US commitment to the Great Reset agenda and the associated Fourth Industrial Revolution that seeks to automate most jobs being currently performed by humans. With the governments of Russia, China, the US, the UK, Israel, Canada, and India, among others, on board with this transnational agenda, it becomes deeply unsettling that high-ranking operatives in both the public and private sectors joined the WEF to conduct a simulation of a crisis that would clearly benefit the Great Reset agenda.

As previously mentioned, the WEF cosponsored a simulation of a coronavirus pandemic just months before the actual event. Soon after the COVID-19 crisis began in earnest last March, Schwab noted that the pandemic crisis was just what was needed to launch the Great Reset as it served as a convenient catalyst to begin overhauling economies, governance, and social society on a global scale. If the destabilizing events simulated at Cyber Polygon do come to pass, it will likely be similarly welcomed by the WEF, given that a critical failure in the current global financial system would allow the introduction of new public-private “digital ecosystem” monopolies such as those being built in Russia by Sberbank.

This effort by Sberbank to both digitize and monopolize access to all services, both private and public, may be appealing to some because of its apparent convenience. However, it will also be emblematic of what we can expect from Schwab’s Great Reset—monopolies of fused public- and private-sector entities disguised by the term “stakeholder capitalism.” What the general public does not realize yet is that they themselves will not be included among these “stakeholders,” as the Great Reset has been designed by the bankers and wealthy elite for the bankers and the wealthy elite.

As for the Cyber Polygon 2020 event, the coming cyberpandemic is being prophetically thrown in our faces just as the pandemic exercise was prior to the actual disease’s appearance. Such prophetic warnings are coming not only from the WEF, however. For instance, the head of Israel’s National Cyber Directorate, Yigal Unna, warned last year that a “cyber winter” of cyberattacks “is coming and coming faster than even I suspected.” In the cyber directorate, Unna works closely with Israeli intelligence agencies, including the infamous Unit 8200, which has a long history of electronic espionage targeting the US and other countries and which has been responsible for several devastating hacks, including the Stuxnet virus that damaged Iran’s nuclear program. Israeli intelligence is also poised to be among the greatest beneficiaries of the Great Reset due to the strength of the nation’s hi-tech sector. In addition, last month saw the UAE’s central bank following Cyber Polygon’s lead by conducting its first-ever cyberattack simulation in coordination with the Emirati private-finance sector. Corporate media outlets, for their part, began this year by claiming that “cyberattacks may trigger the next crisis for banks” and, as of February 1, that “the next cyberattack is already underway.”

Some will say that a “cyberpandemic” is an inevitable consequence of the quickly developing hi-tech world in which we live, but it still fair to point out that 2021 is the year that many have been predicting for the financial destruction of big institutions that will lead to new economic systems that align with the Great Reset. The inevitable collapse of the global banking system, resulting from the off-the-charts corruption and fraud that has run rampant for decades, is likely to be conducted through a controlled collapse, one that would allow wealthy bankers and elites, such as those that participated in Cyber Polygon, to avoid responsibility for their economic pillaging and criminal activity.

This is especially true for Cyber Polygon participant Deutsche Bank, whose inevitable collapse has been openly discussed for years due to the bank’s extreme corruption, fraud, and massive exposure to derivatives. In late 2019, months before the COVID-19 crisis began, the CEO of Deutsche Bank warned that central banks no longer had tools that could adequately respond to the next “economic crisis.” It is certainly telling that entirely new banking systems, such as Sberbank’s soon-to-be-launched digital monetary monopoly, began to be developed just as it began to be publicly acknowledged that central banks’ traditional means of responding to economic calamities were no longer viable.

A massive cyberattack, such as that simulated at Cyber Polygon 2020, would allow faceless hackers to be blamed for economic collapse, thus absolving the real financial criminals of responsibility. Furthermore, due to the difficult nature of investigating hacks and the ability of intelligence agencies to frame other nation states for hacks they in fact committed themselves, any boogeyman of choice can be blamed, whether a “domestic terror” group or a country unaligned with the WEF (for now, at least) like Iran or North Korea. Between the well-placed warnings, simulations, and the clear benefit for the global elite intent on a Great Reset, Cyber Polygon 2020 appears to have served not only its publicly stated purpose but its own ulterior motives.

• Cyber Polygon
• Cyberattack
• Cyberpandemic
• event 201
• Great Reset
• Solarwinds
• World Economic Forum

Author

Johnny Vedmore

Johnny Vedmore is a completely independent investigative journalist and musician from Cardiff, Wales. His work aims to expose the powerful people who are overlooked by other journalists and bring new information to his readers. If you require help, or have a tip for Johnny, then get in touch via johnnyvedmore.com or by reaching out to johnnyvedmore@gmail.com

Author

Whitney Webb

Whitney Webb has been a professional writer, researcher and journalist since 2016. She has written for several websites and, from 2017 to 2020, was a staff writer and senior investigative reporter for Mint Press News. She currently writes for The Last American Vagabond.

MGPE Seminar titled "De-Dollarization – Toward the End of U.S. Monetary Hegemony?" on 20 November 2019. (https://mgpe.ssc.cuhk.edu.hk/en/news/...​)

Since the end of World War II, the United States has been the world’s hegemonic power. In economic, military, and cultural spheres, the U.S. has enjoyed nearly unrivalled supremacy. However, unlike past hegemons, which have been net creditors to the rest of the world, the United States is a net debitor; but this is a strength, not a weakness. U.S. debt is an integral feature of its economic dominance, through which the United States receives goods and services from the rest of the world in exchange for dollars it can print and keystroke into existence. Yet cracks are showing in the foundations of dollar hegemony, as countries look to find ways to escape from U.S. economic dominance. In this talk, Prof. HUDSON will discuss the prospects and challenges of global de-dollarization, and how countries like China may forge a way toward a different monetary system free of U.S. control.

Speaker: Prof. Michael HUDSON
Prof. Michael HUDSON is President of the Institute for the Study of Long-Term Economic Trends (ISLET), Distinguished Research Professor of Economics at the University of Missouri, Kansas City, and author of …And Forgive Them Their Debts (2018), J is for Junk Economics (2017), Killing the Host (2015), The Bubble and Beyond (2012), America’s Protectionist Takeoff, 1815-1914 (2010), Super-Imperialism: The Economic Strategy of American Empire (1968 & 2003), and Trade, Development and Foreign Debt (1992 & 2009), amongst many others. Michael acts as an economic advisor to governments worldwide, including Iceland, Latvia, and China on finance and tax law.

Moderator: Prof Peter BEATTIE 裴弼革教授
(https://mgpe.ssc.cuhk.edu.hk/en/facul...​)
Prof. Peter BEATTIE is Assistant Professor and Assistant Programme Director of the MSSc in Global Political Economy at The Chinese University of Hong Kong, where he teaches political economy and political psychology. His published work has focused on the role of ideas in politics, and his research has been presented at conferences in Asia, Europe, South America, and the United States.

Nearly 50 years after the original publication of "Superimperialism", Michael Hudson revisits how the lucrative dollar-based economic system that the US set up after WWII has evolved with the rise of China and the Covid-19 pandemic. What financial weapons is the US likely to use, and does China's de-dollarisation protect it from such attacks?

The book provides a detailed analysis of how the US has used its economic might to control international relations. The book is complicated, but essentially documents how after WWII the US held an unprecedented amount of the world's gold reserves (50%). These reserves were depleted with the incursion into Korea, and subsequent involvement in Viet Nam, requiring the US to abandon the "gold standard" for valuing world currencies. A failure that proved itself valuable, pushing the US to develop multiple strategies that today allow it to make other countries pay for its military dominance.

Changes in Superimperialism

Oscar Brisset:
Welcome to the first event of the Oxford Economics Society for this academic year. I’m Oscar, the Co-President of our society, and I’m glad to welcome you back for another term of exciting discussions. Although we were hoping last term to be back in-person by January, due to the worsening Covid-19 situation in the UK our events this term are going to remain online, so that everyone at home can still participate.

A new year calls for new resolutions, and our society’s resolution for 2021 is to increase the diversity of economic topics discussed. To give you an idea, we’ll be hosting a presentation on Decolonising Economics and its role in Emerging Markets by Dr. Ingrid Kvangraven, the executive board member of Diversifying and Decolonising Economics. We’ll be hosting Prof. Randall Wray, a strong proponent of the much-discussed modern monetary theory, who was also as I just discovered, professor at the University of Missouri-Kansas City, like our guest today. We’ll also be hosting a presentation on the Young Scholars Initiative run by the Institute of New Economic Thinking at Oxford, a community some of you will definitely be interested in joining that brings together more than 15,000 young economists from around the world. Finally, we’ll be organizing a moderated discussion with the FT’s Chief Economics commentator Martin Wolf, and many other events of course.

To start us off, we are proud to host Michael Hudson, Distinguished Research Professor of Economics at the University of Missouri, Kansas City, former balance-of-payments economist at Chase Manhattan, and an economic advisor to governments worldwide, including Iceland, Latvia and China, on finance and tax law. Now, nearly 50 years after the original publication of “Super Imperialism”, Professor Hudson will be discussing “Changes in Super Imperialism: The position of the USA & China in our Global Economic System”. How has the rise of China and the Covid-19 pandemic affected the USA’s capacity to control financial flows? How will the USA modify its behaviour as a result?

The talk will last 45 minutes, with 15 minutes of questions at the end. Make sure to send in your questions throughout the talk through our Pigeonhole page. The link should be in the description of this event. If you would like to re-watch our events, they’ll be posted to our YouTube channel afterwards.

Thank you for joining us, Professor Hudson…

Prof Hudson:
It’s good to be here. Thank you for inviting me, especially since you mentioned people that I’ve known for a long time. Randall Wray, both of us are now at the Levy Institute and working in other places, and Martin Wolf I’ve been friends with.

The reason that I’m writing a new version of Super Imperialism is that I was asked to by China, and I thought, “As long as they want to bring out a new translation and basically an update of the book, I might as well do it in English too.” I bought the rights back from Pluto and in about two or three months I will be reissuing the English language edition. The context for de-dollarization today by China, Russia and other countries is basically “How do you make an alternative to an international financial order that really was designed from the beginning to benefit the United States in its own self-interest?”

This issue was discussed after WWI when the intergovernmental debt system broke down into Allied debts and German reparations. It was discussed again at the 1930s when the United States sort of scuttled the London Economic Conference of 1933, and it was especially discussed in 1945 in December, in parliament. In the House of Commons, the British parliamentarians were discussing, “Do we want to accept the terms of the British loan?” which ended up being 3.75 billion USD, written down from what Keynes had wanted, or “Do we want to go it alone?”

It was the Conservative pro-empire Members of Parliament that wanted to reject the loan. Churchill wanted at least to abstain, but there was no alternative. In 1945 and again in 1971 when America moved off gold, in every case the alternative seemed to be anarchy. The U.S. strategy was to say, either you accept U.S. rules that favored the United States – in the beginning creditor rules, but debtor rules after 1971, and essentially gave it control of the world economy – or you go it alone and risk anarchy.

Britain was not able to go it alone in 1945. I did not include the parliamentary discussion in the first version of Super Imperialism, but I’ve included that discussion in the new version, because Britain said very clearly: “The United States basically wants to absorb the British Empire and the Sterling area into the Dollar area on its own terms and leave us almost broke. What can we do about it?” Both parties said: “We see that the United States is treating us, its ally in WWII, as a defeated party.” They came right out and said that. “But we don’t have an alternative because we can’t go alone. We have to rely on the United States.”

Let me review what the U.S. strategy is, and what’s led to major changes over time. Dollar supremacy was established after World War I by America’s creditor position. Something very novel happened after. In every previous war, for instance the Napoleonic wars and the earlier wars England had been involved with, the allies had forgiven all of their mutual debts at the end of the war. There was something that the British called “shared sacrifice”, and the idea was “We’re going to have a clean slate after the war.”

This idea goes all the way back to Babylonia in the second millennium BC. Throughout history there was a debt cancellation. There was no carryover of war debts after victory was achieved, because the idea was that if you leave war debts in place, that’s going to bankrupt the allies that you had during the war. It’s also going to bankrupt the defeated countries, and leave them no choice except to fight back.

The laws of Hammurabi showed this. His whole dynasty showed this. My book on Forgive Them Their Debts is a whole history of debt cancellations. But the United States broke this practice after WWI and said: “The debts have to be paid.” The amazing thing is that Europe went along with it. It had a pro-creditor ideology. It believed in the sanctity of debt, and was not going to question that because there was a guiding assumption – which is erroneous – that all debts somehow can be paid if only countries will either devalue or transform their economy, or impose austerity.

Keynes had a long debate with the anti-German Jacques Rueff of France and the American-Swede Bertil Ohlin. Keynes explained that there was no way that debtor countries like the allies or Germany could pay their debts to the creditor unless the creditor is willing to buy their exports, to provide them with the foreign exchange to pay. That debate obviously he won in reality, but that assumption was rejected by the United States, and continues to be rejected by the International Monetary Fund today. The junk economics that was brought in after World War One to consolidate the American position was: “Of course you can pay: simply destroy your economy and let us take you over, and sell out all of your industry and raw materials out to us, and that will enable you to pay.” That’s what the Americans demanded. It’s what the creditor demand has always been. Essentially you have to be willing to destroy your economy in order to pay your debts.

Keynes said this was crazy and he was right, but Europe went along with it and said, “Yes, we are willing to destroy our economies; we are willing to create the resentment for World War II rather than question the assumption that all the debts have to be paid.”

What Keynes pointed out was that there was a distinction between the budget problem – in other words, taxing the economy to raise a domestic fiscal surplus in German Marks or British Sterling – and the transfer problem of paying foreign currency. What happened was that the Allies said, “If America is going to insist that we pay, we’re not going to wreck our economies. We’re going to make Germany pay reparations.”

As you all know, the result was to bankrupt Germany, causing a hyperinflation there that was only solved by Germany essentially borrowing the money from the United States. German municipalities would borrow the money in dollars for local spending, use the dollars to turn over to the Reichsbank to pay the Bank of England and the Bank of France, in turn to pay their dollar debts to the United States. That was a circular flow.

It could only be kept going by the Federal Reserve making interest rates very low here in the United States to promote an outflow of foreign investment to Germany. But those low interest rates also created a stock market boom that crashed in 1939. In the end, the Inter-Ally debts had to be canceled. There had to be a moratorium [on those debts], along with German reparations, as the system broke down in 1931. There was an attempt to reconstruct the economy at the London Economic Conference of 1933 but Roosevelt scuttled that and said, “We’re going to go it alone.”

The basic principle of American foreign policy is that no other country can tell us what to do. We can tell other countries what to do, but they cannot tell us what to do. So we will not join any agreement in which we don’t have a veto power that gives us control of the World Bank and the International Monetary Fund, or the veto power in the United Nations and any international organization that the United States will join. So the question is: how could this supremacy be established all over again as World War II came to a close?

In 1944 and 1945, America made plans for the postwar economy. Its guiding logic was that: “In order to have full employment in the United States we have to have an export-based industry. Now that we’ve destroyed Germany and Japan our major enemy is the United Kingdom.” It became very clear that America’s enemy immediately on the ending of World War II was not Russia or the Soviet Union, but England. It developed a strategy that was designed to essentially bankrupt England with the 1946 British Loan, to force England to accept to end Imperial Preference, to break up its empire, to make it free the about 10 billion pounds Sterling, to be used for spending not in England as blocked currency as the British Board of Trade expected, but in the United States. So England was stripped of all of the blocked currency, stripped of the currency area, stripped of its exclusive Sterling Area, and thereby the empire that became absorbed into the Dollar Area.

The parliamentarians and members of the House of Lords said, “We know that we’re bankrupting Britain, but the alternative is to go it alone, and we can’t really make an alternative.” Keynes said, “Of course you could create your own currency and trading area with India, Canada and other countries, but that would involve a great shrinking.”

At the time they believed still that there had to be some means of settling international payments on creditor terms with gold. The United States had most of the gold in 1945. The British understood very clearly that what seemed to be the gold exchange standard – for countries that settled their balance of payments deficits in gold – was really the Dollar standard, because the dollar was defined in terms of gold. What seemed to be a gold standard was actually the Dollar standard, and in fact the arrangements that America created in 1945 were so one-sided that by 1950 it had drawn another five billion dollars’ worth of monetary gold into the United States out of Europe. There was a refugee flight of gold in the 1930s that was followed by a post-war flight out of Europe. British banks and the wealthiest classes began to move their money to the United States.

By the time of the Korean War in 1950 and 1951, America’s balance-of-payments deficit changed abruptly. From 1951 through the 1960s and 1970s, the entire U.S. balance of payments deficit was military. At first this deficit was welcomed by Europe and by other countries because finally the United States was providing the rest of the world with dollars that it needed to grow. The dollar outflows became the basis of Europe’s central bank reserves along with gold. Some of the dollars were cashed into gold especially by France, and by Germany even more.

The U.S. balance-of-payments deficit was entirely due to America’s military spending. The U.S. private sector was exactly in balance. All of the deficits were on government account, and were entirely military. American foreign aid actually made money in balance-of-payments terms. In the 1960s when I was working at the Chase Manhattan Bank, every Friday the Federal Reserve would publish statistics on the gold cover. All of the paper currency in the United States had to be backed 25 percent by gold. Every Friday we would look at what is the gold cover – how much over the 25 percent does America have in free gold to sell, to settle the military deficit from spending in Southeast Asia, in the Vietnam War and other military operations throughout the world.

It was obvious already in the mid-60s that the United States at some point would run out of gold if it continued its military spending. That led Chase Manhattan’s Chairman of the Board George Champion to oppose the Vietnam War, saying it was fiscally irresponsible. It was the business community and the right-wing in the United States that opposed America’s foreign war, not the labor movement. The labor movement was for the war because it was causing an inflation and helping wages rise. The golden age of American labor was the 1960s and 1970s, resulting from the balance of payments deficit. It was the business community that opposed the war – but not David Rockefeller when he took over from George Champion. Rockefeller wanted to “do the right thing.” He sort of followed what the Treasury asked Chase to do and the other Wall Street leaders followed suit.

Already in the mid-60s the United States faced the problem of how to avoid its balance-of-payments deficit. The solution was to make America the haven for criminal capital in the world. Somebody from the State Department joined Chase Manhattan, and asked Chase to set up enclave affiliates in the Caribbean to essentially attract the criminal capital of the world. As they explained it to me: “We want to be the new Switzerland.” They said the most liquid people in the world are the criminal class, the drug dealers. “We want the drug dealer money; we want the criminal money because it’s liquid. They have nowhere to go. Let’s make America safe for the flight capitalists, for the kleptocrats, for the crooked heads of states of the world for putting their money. Don’t have them put them in Switzerland to push up the Swiss currency. Have them put it in the branches of Wall Street banks that then would take this money in the Caribbean tax evasion and offshore banking center enclaves and then send the money to the head offices.”

The Federal Reserve every three months would publish statistics on head office bank liabilities to their branches in the Caribbean and Panama and Liberia and other countries that were used as tax avoidance centers. We were following that quite closely. Despite trying such stratagems, the United States went off gold in August 1971. At the time it worried about what on earth was going to happen. “Are we going to lose the creditor position that has enabled us to dictate the trade rules and the financial rules and political diplomacy of the world when they went off gold?”

In 1972, a year after the United States went off gold, my Super Imperialism was published. Its theme was that American diplomacy was in an even stronger position now that its deficit was not having to be paid with gold. What were other countries to do? How were foreign central banks going to hold their international reserves? There was only one currency that they could hold, and that was the U.S. dollar. So the fear by Wall Street and the U.S. Government that the dollar would be devalued as a result of its military spending didn’t materialize, because foreign central banks were in a quandary: If they did not recycle the dollars that they received from the America’s balance of payments deficit, their currencies would rise and that would hurt their export interests.

From the American point of view, central banks recycled dollars into Treasury bond holdings, because foreign central banks at that time could only invest in official government securities; they were not creating sovereign wealth funds. America’s balance-of-payments deficits thus financed its domestic budget deficits.

The response to my book on Super Imperialism was not primarily from the Left but from the U.S. Government, especially the Defense Department. I went to work for the Hudson Institute with Herman Kahn, and immediately we got a contract from the Defense Department to explain to them how Super Imperialism was working. I didn’t want to call the book Super Imperialism. I wanted to call it Monetary Imperialism, but the publisher thought differently. Most of the copies were sold in Washington to the Defense Department, the State Department and the CIA, and Herman Khan brought me numerous times down to the White House to discuss this. The Americans made it very clear that – for instance when OPEC quadrupled its oil prices in 1973 and 1974, after America quadrupled its grain prices – Kissinger and the State Department and Treasury told them that they could charge whatever they wanted for the oil, but whatever they charged they had to recycle into U.S. financial markets, mainly into government bonds. They also could buy U.S. stocks and U.S. corporate bonds, but couldn’t buy majority ownership of any big American industry. American had to be in control of its industry. The Arab countries were told “you can buy all the stocks you want through the stock market”. I think one of the Saudi Arabian kings bought a million shares of every company on the Dow Jones Industrial Average.

So you had a recycling. The more dollars Americans spent abroad on its military deficit, the more money flowed into the bond market to finance America’s budget deficit. What the American government had achieved by its creditor status before 1971, it achieved by its debtor status after 1971. Once again, it told the rest of the world: “What’s the alternative? The alternative is anarchy.” Essentially it used that threat. President Johnson insisted that Europe give America special trade favoritism, special advantages, and the rest of the world felt that it had to go along to survive.

At the time there was a discussion concerning the advantages of gold. Herman Khan was a monetary right-winger, and believed that gold should be reintroduced into the international monetary system. He and I went down and gave a presentation to the U.S. Treasury, saying, “Gold is a peaceful metal because it’s a constraint on the balance of payments. If countries had to pay their balance-of-payments deficit in gold, they would not be able to afford the balance-of-payments costs of going to war.” That was pretty much accepted and that was why the United States basically responded, “That’s why we’re not going back to gold. We want to be able to go to war and we want the only alternative to hold central bank reserve to be the United States Dollar.”

The United States also arranged the World Bank and the International Monetary Fund to favor the U.S. economy. In the World Bank it would only make foreign currency loans to other countries. It sent out missions to foreign countries to say “What does the country need?” and almost every mission said “What Latin America, Africa and the Near East need is not foreign currency. They need domestic currency for agricultural development.” You had a latifundia problem in Latin America. The United Nations came out with two wonderful reports on the need for land reform throughout the Third World in order to grow domestic food. But the World Bank was set against other countries becoming food independent. The most important heads of the World Bank were former Secretaries of Defense like McNamara and John McCloy. You can look through who the heads were. The Americans said that any foreign country wanting to grow its own food instead of depending on U.S. grain exports was counted as an Act of War and would be overthrown. That was the explicit reason why the United States established military dictatorships and client oligarchies in Latin America.

The World Bank did promote plantation agriculture but the plantation agriculture was for tropical export crops to compete with other exporting countries, to lower the price of export crops, of tropical crops that could not be grown in the United States. These countries were not supposed to grow their own food supply.

The World Bank became a huge market for American firms to build dams etc. I was told that the World Bank person in charge of designing dams had been a chronic bed-wetter as a child, sort of acting it all out. It also got countries into debt, and once countries were in debt they were forced into the International Monetary Fund, which said basically” “In order to pay your debts, you have to engage in a vicious class war against labor”. You have to lower wages because it’s the only variable in world trade. There’s a common world trade [price] in raw materials: All countries pay the same price for copper, machinery, and other materials. There’s a common world price for oil; there’s a common world price for capital goods. The one variable in foreign trade is the price of labor. So the IMF said, “You’ve got to prevent unionization, you’ve got to prevent any kind of pro-labor reform. Your only way of paying debts is to polarize your economy and impoverish your labor force.”

That is exactly what the opponents of Keynes had urged in the 1920s, and you saw the result in Germany. The same thing was imposed on the Third World countries. That is why, until a few years ago, all the countries of the world tried to get free of the IMF’s “conditionalities,” the terms on which the IMF would lend money. You should essentially think of the IMF as a small office in the basement of the Pentagon, deciding what countries to support, and what countries are following policies that the United States does not want and therefore wants to wreck. That explains why the IMF will give loans to completely non-creditworthy countries such as Argentina under the dictators, or the Ukraine with no visible means of paying off the debt.

The loans to Ukraine, the loans to Greece recently that ended up bankrupting it, the loans yet again to Argentina have demoralized the IMF staff. They complained that every forecast they make shows that the debts can’t be paid, but the IMF continues to make them anyway. The IMF has become a pariah among competent financial analysts throughout the world. The United States is still trying to force countries into the IMF as a means of controlling them, saying “Either you engage in a pro-American war against labor and [engage in] neoliberalism, or the alternative is wreckage.”

Ironically what’s changing all this is the United States’ cold war against Russia and China. The United States has begun to impose sanctions on the Russian and other post-Soviet economies, and on China. This is driving them into a position where their only defense is to do what Britain could not do in 1945: to create an alternative economic order with its own rules. So for the last five years or so China, Russia and other countries are discussing how to de-dollarize their economy.

What do they want to do? They say: “The first thing we have to do is we don’t want to hold our international reserves in loans to the U.S. Government, because that finances the United States military deficit, building its 800 military bases all around us, to try to threaten us militarily. If we withdraw from this international financial system based on the U.S. dollar free-lunch, then dollars can’t be spent ad infinitum without any constraint on military policies that we don’t agree with – right-wing and anti-labor policies that we don’t agree with. So we’re going to take the lead in creating a new grouping – China, Russia, Iran, the Shanghai Cooperation Organization members basically – to do this.”

They’re trying to do what the world began to talk about doing in 1933 at the London Economic Conference: “How do we make a fair system?” When Keynes outlined his plans for Bretton Woods in 1944, his alternative was the Bancor. He said there should be a central bank that can make loans, creating fiat money to enable deficit countries to pay. So that if they ran a balance-of-payments deficit, they wouldn’t have to impose austerity. Austerity and anti-labor policies never enable a country to pay debts. It makes them less able to pay, and even more dependent on creditor countries. So the Chinese and Russians are discussing today “How do we create a currency, a central bank that will help us actually develop? We’ll use international reserves to promote the industrialization and the upgrading of labor and public infrastructure investment, instead of the U.S. demand to privatize infrastructure development and sell it off to foreign rent-seekers.”

What China and Russia found out very quickly is what initially seemed to be an economic rivalry between America and China and other countries was not really an anti-China rivalry as such. It’s a conflict of economic systems. The conflict is between neoliberalism – a financialized world order that wants to privatize all infrastructure and create monopoly rents for transportation, education, healthcare, like what occurs in the United States – and having these basic investments in the public domain, to be subsidized and their services provided at minimum cost. The question at issue is what kind of economy the world is going to have. Will it be a neoliberal economy, a privatized economy – Reaganized, Thatcherized and financialized, organized by central planning in Wall Street – or is the government going to plan?

China and Russia do not want a centrally planned economy anywhere near as centralized as the United States is promoting with Wall Street. In the United States the center of economic planning has been shifted from Washington to Wall Street financial institutions. Banks create credit not to create new means of production, not to build new factories and plant and equipment, but essentially to extend credit against assets already in place. Eighty percent of bank loans in the United States and in England are mortgage loans for real estate, against real estate that’s already in place. I think three percent of mortgage loans are for new construction as long as these loans are already collateralized with promises to buy apartments etc.

So the question is what kind of financial system are you going to have to back up a central banking system and credit creation? Is credit going to be a public infrastructure enterprise as it is in China, where the banks of China are able to decide who is going to get the loans. A public bank is not going to make corporate takeover loans or loans to corporate raiders. It’s going to make loans to actually increase the tangible economy, not to take it over and turn public infrastructure – the education system, healthcare, transportation and communications – into rent extraction.

We’re having today finally a revival of the kind of debate that classical economics was all about in the 19th century – Adam Smith, John Stuart Mill, down through Marx and Alfred Marshall. At issue was how to minimize unearned income as economic rent. At that time, the main form of economic rent they were trying to minimize was land rent. The idea was to get rid of the hereditary landlord class, which was treated as a form of overhead. In today’s economy the main rentiers are financial. There’s not a landlord class anymore, because two-thirds of Americans own their own home (on credit, to be sure). Home ownership rates are higher in continental Europe and England. You don’t have a hereditary landlord class living off land rent. What you do have is a financial class that’s emerged after World War I in a way that they have become the new central planners. It’s a new concentration of wealth, engaging in a new kind of economic war, not only against labor but against government as well, to appropriate the public domain by financializing it. This is done by getting governments into debt and having them sell off the public infrastructure. That’s happening in America at the state and local level, for indebted cities and states like New York.

How do China and Russia avoid their economies becoming financialized? How do they avoid a financialized economy from becoming a high-cost economy and losing their international trade advantage? What’s at stake in de-dollarization is how to create an alternative to a financialized, dollarized economy, one that is going to try to minimize the cost of living and minimize the cost of doing business, instead of a high-cost economy as is occurring in the United States.

The answer they have is that to some extent there’s going to be gold as a means of settlement. But most of all China, Russia, Iran, and other countries are going to mutually hold each other’s trading currencies. They’re replacing dollars with gold and with each other’s currencies. That essentially is the response that the world could have taken after World War One and didn’t, and could have taken after World War II if it had followed Keynes’s policies. Finally, with the help of Donald Trump isolating China and Russia, U.S. diplomacy is creating an independent bloc and helping them do what was unthinkable in the past.

Oscar Brisset:
Great, thank you very much. We’ve got some questions coming in.

To start off, yesterday Joe Biden was inaugurated, making him the 46th President of the United States. What are your expectations regarding his stance on China? We’ve heard him talk a lot about democracy as a guiding foreign-policy principle to distinguish between what is good and what is bad for the U.S. Which measures are likely to be used to advance the USA’s interests: will it be tariffs, sanctions or could we even see a military buildup and embargoes?

Prof Hudson:
The question is, what are the U.S. interests? Again and again in the 1920s, the 1930s and today, the U.S. Government interests were the opposite of U.S. industrial interests, opposite of U.S. economic interests. Just because the Biden administration has an emotional hatred of Russia does not mean that it’s in the U.S. interest. The Biden administration said, “On second thought we’re not going to join the Iran agreements because we’re going to talk to Israel first,” and Blinken, his neocon Secretary of State, said that we won’t do anything without Israel’s approval regarding Iran. Biden also said that the United States will not do anything about solving the world problem of global warming that the oil industry doesn’t like, because basically what’s called the “interest of the United States” is that of his political campaign contributors. So almost his first act was to approve more oil drilling. Here we have the Supreme Court’s Citizens United ruling that lets campaign contributors dominate U.S. policy, not the voters. The American voters were not given a choice in this election. Biden did not do well in the early primaries and Kamala Harris got only one percent of the primary vote.

Polls show that what American voters want is basically a Bernie Sanders type policy. They want what you have in Europe. They want public healthcare, universal healthcare. They don’t want to have to pay 18 percent of America’s GDP for medical insurance and medical expenses, because there’s no way that American industry can compete in markets and American labor be employed in export industries, having health care monopolies protected by successive administrations.

The American public didn’t want the Obama administration to evict 10 million American families, and it looks like the Biden administration is going to outdo Obama. Biden basically says, “We’re going to evict another 10 million American families. What Obama did I can do more.” Many families have not been able to pay the rent or even pay the mortgage if they’ve been unemployed or if their income is reduced because of the Coronavirus. There’s going to be a huge wave of evictions in the United States that will be even larger than the Obama evictions.

The Obama evictions were targeted mainly against Black and Hispanics, who were the victims of the junk mortgage loans. Biden has made a point of appointing many Black women and men to administer positions as a cover story for the fact that his policies are going to be just as viciously anti-Black and anti-minority and anti-Hispanic as the Obama administration’s were. They found that as long as you can have identity politics front and center you can do whatever you want economically to crush the people that you pretend to be representing in identity politics.

Nobody can see really any way in which the American economy can recover. The stock market can recover because the Federal Reserve credit and quantitative easing has been going into supporting stocks and bonds, including junk bonds. Sheila Bair wrote a Wall Street Journal editorial on that. But the underlying economy is shrinking rapidly while the stock market’s going up. That’s what the American economists call a K-shaped recovery – up for the One Percent, down for the 99 Percent.

Oscar Brisset:
I’m going to ask one more question on the China topic and then talk a bit more about historical things you mentioned. China has been building up a network of support and trade deals to drive its expansion. You mentioned some of the policies. It’s also been growing its presence in the U.N. system and even putting together alternative international organizations like the Asian Infrastructure Investment Bank. Is there a line that the U.S. would not tolerate China crossing, after which the U.S. would start devoting much larger resources and spending to contain China, or is the U.S. already at full power?

Prof Hudson:
The United States is muscle-bound. Despite its huge military budget it can’t field an army. It has a foreign legion. ISIS, for instance, is part of its foreign legion. The European NATO is part of its foreign legion. But there’s no way American can ever have a land war again, so you can never invade and conquer a country with a military army. All America has is the Atom bomb, and that’s muscle bound. It cannot go to wage any kind of war except atomic war. There’s nothing in between.

I think Russia and China know that, and Russia at least has taken steps to protect itself and said, “If the United States wants atomic war, we’ll be wiped out but it’ll be wiped out too, and Europe will be wiped out.” I think probably the first exchange would be to wipe out England and Europe, to say “We don’t want to go to war with you and really blow up the world, America. Let’s just show you what we can do. Let’s blow up England and Europe so at least you won’t have your colonies there.” If America persisted, it would be the end of the world. Will America really do that? There was worry that Donald Trump would do that so he could go down in history as the man who destroyed civilization, but I don’t think other people are going to do that.

Oscar Brisset:
Moving now into some of the historical things you mentioned, for example in the 19th century the most powerful European empire was the British Empire. I am trying to see if there’s a parallel between the UK and the American. Did the UK establish such currency dominance similar to the one the U.S. has today? Did it use similar methods to the U.S. to establish its dominance, for example creating international organizations in which it had an institutional advantage, or for example through the control of key energy deposits?

Prof Hudson
England thought that it was establishing currency dominance with the Sterling area. In other words it would spend money abroad and other countries would save their money in Sterling. All during the 1930s the surpluses earned by India and by other members of the Sterling area were basically kept in London, paid to England. But then England ran a deficit with the United States so ultimately the benefit of England’s Sterling area, the financial benefit, was all spent to the United States already in the 1930s. You can look up the balance of payments articles on that.

In 1945, as I mentioned, England thought, “We have 10 billion Pounds of all the savings of Argentina and India, countries that have been providing the raw materials for the World War that we fought, World War II. Now there is going to be a demand for English exports and we can recover by employing our labor to make exports.” But the terms of America’s British Loan said: “No, you have to open up the Sterling area and let these countries cancel their contracts with England.” England had long four-year and five-year capital purchase contracts from India, Argentina. “They can cancel them all and buy from the United States”. England went along with that. So the attempt to create a currency area was smashed by the United States.

Ever since the 19th century America looked at England as the great rival, not the Soviet Union. The Cold War in the 19th century was against England. The fight for protectionism in the United States went so far as to create state colleges and universities that would teach an alternative to Anglo-centered free-trade economics and Anglophile moral philosophy. There was a feeling in the late 19th century of America creating a new civilization and it would not be the religious-based, unscientific civilization of Europe. It would be a new secular civilization. That feeling of a new civilization in America is what led Americans to think, “We will never let other countries tell us what to do because they’re part of the decadent old world and we’re the new world. We’re going to make our own rules.”

Oscar Brisset
You also discussed Bretton Woods. Would it be beneficial to recreate, very hypothetically, a system similar to the Bretton Woods one today? I think a key question that underlies that is, “Does the country that runs such a system reap a benefit from running it or are they just constrained?” Will there be an interest for China to set up such a system?

Prof Hudson
They realize that they cannot set up any system in which the United States is a member because the United States will insist on veto power. If it has veto power, then they can’t do the kind of economic system that I described. Bretton Woods was designed one-sidedly to give all the benefit to the United States, and to make other countries dependent on the U.S. economy, on U.S. exports – largely of agriculture, but also industry – and also on the U.S. dollar. Obviously, that’s not going to be done. The agreement that is being developed on an ad hoc spontaneous basis between China, Russia and neighboring countries is their own system of international payments that will be based on mutual benefit, of holding of each other’s currencies, of preventing any payment surplus country – and it could be China – any payment surplus country ending up with so much credit in a creditor position vis-a-vis debtors. The new system will not impoverish the debtors.

The IMF system was designed to impoverish debtors. The purpose of the IMF was to make other countries so poor and dependent on the United States so they could never be militarily independent. In the discussion of the British loan for instance, in the 1930s the discussion in the London Economic Conference was, “Yes, we’re bankrupting Europe, but if we give Europe enough money to avoid austerity, they’re just going to spend the money on the military.” That was said by the Americans in the State Department and the White House again and again, especially by Raymond Moley who was basically in charge of President Roosevelt’s foreign policy towards Europe.

The question is: how do you create an international financial system designed to promote prosperity, not austerity? The Bretton Woods perspective is for austerity for everybody except the United States, which will have a free ride forever. The question that I’m involved with in the work I’m doing in China and with other countries is how to create a system based on prosperity instead of austerity, with mutual support between creditors and debtors, without the kind of financial antagonism that has been built into the international financial system ever since World War I. Financial reform involves tax reform as well: how do we end up taxing economic rent instead of letting the rentiers take over society. That is what classical economics is all about: how do we revive it?

Oscar Brisset
Final question: these austerity and anti-labor policies which the IMF imposes on countries of the global South seem to be well known practices from before the IMF was created, from what you’ve discussed. Did the IMF invent anything new? In addition, in the 19th century, was predatory lending something common, or was direct invasion always the go-to method for subjugating a territory?

Prof Hudson
The 19th century was really the golden age of industrial capitalism. Countries wanted to invest to make a profit. They didn’t want to invest in dismantling an existing industry, because there wasn’t much industry to dismantle. They wanted to make profit by creating industry. There was a lot of investment in infrastructure, and it almost always lost money. For instance, there was recently a criticism of China saying, “Doesn’t China know that the Panama Canal went bankrupt again and again, and that all the investments in canals and the railroads all went broke again and again?” Of course China knows that. The idea is that you make investment not to make a profit on basic large infrastructure. The 19th century was basically inter-state lending, inter-governmental lending, public sector lending. That’s where the money was made. The late 20th century was one of financialization, dismantling the industry that was already in place, not lending to create industry to make a profit. It’s asset-stripping, not profit-seeking

Oscar Brisset
Thank you very much for joining us today. Our next event will be on February 4th and we look forward to seeing you all then. Thank you very much Prof. Hudson.

Michael Hudson is Professor of Economics at the University of Missouri-Kansas, former balance of payment economist at Chase Manhattan, political consultant, and has written on many topics relating to the history of debt and the international financial system.

By The Ister for the Saker Blog

The origin of modern banking can be found in the early days of the gold trade. In the Middle Ages, goldsmiths accepted deposits of gold in return for paper notes, which could be exchanged for the deposits at a later date. Because these paper notes were more convenient for commercial use than physical metal, they were usually not redeemed for gold right away. The goldsmiths noticed their customers’ deposits could be used in the meantime to generate interest and began surreptitiously lending out the savings of their depositors. Over time fractional reserve banking developed from this tendency of lending out money in excess of the actual reserves being held.

Goldsmith became banker, and from this early monetary system, banking families emerged. Prior to the existence of modern financial institutions, these houses were the entities which could be relied upon for large amounts of credit. A reputable surname gave confidence to depositors that their gold was in good hands, and from the intergenerational accumulation of wealth grew large pools of loanable capital. As nobles required weapons and pay for their armies, the conflicts of medieval Europe were fueled by families such as the Medici, Fuggers, and Welsers. Today, it is the Federal Reserve which finances America’s enormous military and conquests abroad.

To truly understand banking, the concept of free markets must be cast aside. Just as oil is a strategic resource for the real economy capitalist, gold and silver are strategic resources for the financial capitalist. Physical bullion is the basis from which all other lines of credit extend; we know this because the same central banks which publicly proclaim gold to be a barbarous relic still feel the need to maintain enormous hordes in their vaults.

As in oil markets, pricing is not influenced primarily by a large number of producers and buyers but by concentrated cartel dynamics. So while we witness yet another energy battle between OPEC and Russia unfold, it should be understood that similar dynamics are at play in the upper echelons of the monetary world as bankers seek to fix prices and control physical bullion flows in a manner which is beneficial to their interests.

A key difference from oil is that while the pump leads to the refinery and the refinery to the end-user, bankers do not generally like to part with their gold. Accordingly, markets have been designed so that prices are determined not by physical delivery but by the trading of unbacked or fractionally backed “claims” on the underlying metal: certificates, ETFs, and futures. We can be certain that there is not enough physical bullion to cover all these paper metal claims, just like the medieval goldsmith did not hold his deposits in full.

These paper markets set the price, although bars rarely leave the vault

Where is the vault? While Fort Knox claims the largest holdings, the price is set by the London Bullion Market Association and CME Group which together account for around 70% and 20% of global trading volume respectively. The London Bullion Market began in 1850, when N. M. Rothschild and Sons and several other banking families created a cartel to oversee the operations of the global gold market, including the establishment of the “London good delivery” list which created trading standards for size, dimensions, shape and fineness of bullion; today trading on London markets requires a high purity and being between 350-450 ounces.

This domination of the world’s gold market was not achieved through peaceful means: look into the forces behind the conquest of Transvaal’s gold mines, for it bears a direct parallel to America’s invasions of oil-rich nations today. Another similarity with oil markets is that military interventions have a habit of “liberating” the target nation of their gold: just ask Muammar Gaddafi.

The price of such a strategic resource could not be determined by an open market, thus alongside good delivery standards the “gold fix” was established in 1919 and was held in the offices of New Court until 2004, when its operations were passed on to a cartel of bullion banks such JP Morgan and HSBC. Ever since, these banks have been investigated and convicted countless times of manipulating and spoofing the prices.

How do we know that there isn’t enough gold to cover physical deliveries? Back in the 1970s the dollar was under a lot of pressure and Western banks maintained secret gentlemen’s agreements not to request delivery of bullion. In 1971 Dutch central bank chief Jelle Zjilstra ignored these formalities and planned to convert $600 million of the Dutch dollar reserves to gold, prompting Federal Reserve chair Paul Volcker to fly out to the Netherlands and warn him: “you’re rocking the boat.” Shortly after Zijlstra refused Volcker’s pressure and continued with the purchase, the US decoupled from the gold standard.

Abandonment of the gold standard risked a reduction in dollar demand, so Nixon enlisted Wall Street scion Gerry Parsky to negotiate with oil exporting Arab nations. After discussion, the Saudi state agreed to sell oil priced exclusively in dollars and to invest the proceeds of oil sales in America.

To those who say dismissively that the dollar is now backed by “nothing,” I say it is backed by oil and the threat of the US military.

Look at the somber fates of those that tried to ditch the dollar for gold or the Euro: Libya in a state of permanent civil war; starving Syrians picking through landfills in search of food only miles from occupied wheat fields.

So maintaining confidence in our reserve currency requires the undermining of confidence in gold, as its reemergence would unnecessarily democratize the international monetary order. Confidence is undermined first by price suppression, which is accomplished by the manipulation of precious metals futures markets. While it would be hugely wasteful for a private individual or consortium to manipulate such a market with their own money, that is where the unlimited fiat available at central bank trading desks come in: and we know central banks are secretly trading precious metals futures due to leaked documents from CME Group.

Leo Melamed, chairman of CME Group and the putative father of modern commodity futures markets noted in his book Escape to the Futures that CME’s Globex system was inspired by the original London gold fix:

Sandner, Kilcollin and I were in London with the chairman of the Rothschild Bank seeking his advice on how to bring the “gold fix” to Chicago. From the heated debate that followed one would have concluded that Kilcollin knew more about the subject than the legendary Rothschilds, the people who had founded the concept ages before.

What we can see from this is that strategic commodities such as gold and oil are far from a free market: recall my previous article The Empire is Losing the Energy War which described how the Saudi state functions as a price-suppression weapon against Russia’s oil exports. This global commodity suppression schema allows the importation of the planet’s finite resources at a fraction of the true cost in return for theoretically unlimited currency. Recall Fed governor Kevin Warsh’s comments in December of 2011 when gold hit an all time high that banks were:

“finding it tempting to pursue financial repression- suppressing market prices that they don’t like”

There are signs, however, that the thin pool of physical bullion which exists to maintain confidence in paper markets is drying up. In March of 2020, CME Group had to relax its own requirement of 100oz bars to allow 400oz London good delivery bars to be shipped from overseas and used for trade settlement. Some would say: if price suppression exists then why has the gold price gone up over the last few years?

The middle ground between setting the price to very low or very high levels, say, $100 or $10,000, is that the prices are set high enough to minimize outflows from vaults, while at the same time using futures to hammer down the prices at psychologically important levels and initiating margin calls on those who are long gold using leverage. Those who have watched gold for a long time can attest to the sudden and inexplicable drops which originate in the futures market and which occur every time the gold price appears *just* ready to break out.

It’s a very complicated charade for the bullion bank cartel. Allow the price per ounce to go too low and you risk running out of the gold necessary to facilitate markets. At the same time, if the price rises too high it attracts international attention and risks gold reemerging in monetary policy. Notice how as soon as the supply shortages became apparent in March 2020 the bankers were forced to reset gold from $1230 to over $2000 in order to stem the outflows of physical delivery.

Putin is intentionally exacerbating this drought of physical gold in Western banks by expanding the Russian central bank’s purchases of gold. For the past few years Russia has been the number one global purchaser of bullion, having spent over $40 billion to bring Moscow’s reserves to the highest level in history: a sum close to the annual military budget because it is a strategic asset.

Just last week, Russia’s gold reserves passed its dollar reserves for the first time reaching a sum of $583 billion, highlighted by the central bank as part of Putin’s de-dollarization agenda. Given that purchases have grown at roughly 15% per year we can predict that even if the price does not rise, the value of these holdings will be around $1 trillion in three years. Read the anxious commentary about these purchases in Bloomberg and Forbes, and remember the nervousness in the business press when Germany demanded its gold back in 2013, which would only exist if behind-the-scenes physical gold flows were disjointed and there was internal muttering in the financial world as to whether the demand could be fulfilled.

To any who doubt that this is an overt move, in the pre-WW2 monetary system the mass accumulation of gold was well understood among central bankers as an aggressive act intended to starve competitor states of their ability to create credit. For example, French and American hoarding resulted in hyperinflation for Germany and forced Britain’s pound sterling off the gold standard.

Russia’s acquisition of precious metal is a direct threat to the financial system. How funny that the system is so fraudulent that it is an act of aggression to simply demand in physical form what one has paid for in full on an open market; an act which the designers of the system cannot protest lest they reveal their own bankruptcy. Just as it did in the 1920s, the hoarding of gold in the East will eventually limit the West’s ability to extend credit, it is simply unfolding on a longer time frame.

So why is a tiny stock like GameStop causing billionaire Leon Cooperman to cry on CNBC, and why is the SEC threatening small-time investors?

Simply, the financial markets are being revealed as a highly illiquid house of cards. Retail investors from Reddit began trolling short-sellers by rapidly buying small stocks and causing hedge funds to blow up from expensive margin calls. The losses are now estimated at around $70 billion, and as these small-time investors funnel their unemployment and stimulus checks into their aggressive trades they have fought wealthy investors in a more effective way than Occupy Wall Street ever did. They have now turned their eyes to the small and illiquid silver market…

Look at the fate of the Hunt brothers fortune: they were oil billionaires who tried to exercise their legal right to take physical delivery of a large volume of silver futures contracts and had CME pull the rug out from under them before it could be achieved. CME Group defeated the Hunt brothers by instituting Silver Rule 7 which limited the dollar amount of physical silver that an individual investor could buy. But how will that stop the hordes of young low net worth traders who are now telling one another to purchase physical bullion and intentionally strain the rigged silver market?

This arcane financial system is doomed to fail because it is based on ever-higher and more unstable abstractions of underlying wealth: CDOs squared and cubed, dark pool derivatives markets totaling trillions of dollars, and so on: all of which depends on the financial sector sucking as much money as possible out of a shrinking global economy through securitization. Now that people are demanding the underlying assets themselves, change is beginning.

What an interesting timeline: where Russia and unemployed youths have come to the same conclusion for how to defeat the banks.

The Ister is a researcher of financial markets and geopolitics. Author of The Ister: Escape America

Michael Oswald's film The Spider's Web reveals how at the demise of empire, City of London financial interests created a web of secrecy jurisdictions that captured wealth from across the globe and hid it in a web of offshore islands. Today, up to half of global offshore wealth is hidden in British jurisdictions and Britain and its dependencies are the largest global players in the world of international finance.

“The nature of the time, most serene prince, requires this, an observance of an old proverb, which enjoins kissing the hand we are unable to cut off”

Sebastien Guistinian, Venetian Ambassador to England’s Henry VIII

The Russia-China alliance has become an unstoppable powerhouse of visionary infrastructure projects across the Arctic, Eurasia, Africa and Europe exemplified beautifully by the evolving Belt and Road Initiative and BRICS. This cooperative alliance has tapped into a strategic reality of mankind’s genuine common interests which is so powerful that even countries formerly at war with each other and subjects of imperial manipulation have increasingly broken free in order to participate in this new paradigm.

This coalition of nations working with a common sense of both the manipulative hand behind the scenes and common focus for future cooperation may be a new phenomenon in our modern age, but it is certainly not without historical precedent. Not only did such an international coalition form in the wake of the 1865 union victory in the Civil War which saw nations like Germany, France, Argentina, Brazil, Russia and Japan form an anti-British Empire alliance for industrial progress and public works, but it also occurred during a peak of the European Golden Renaissance with an alliance known as the League of Cambrai (1508-1512).

However, just as the 19th century coalition of progress was derailed by a wave of assassinations, revolutions and wars, so too was the earlier League of Cambrai sabotaged before its mission to cleanse the world of oligarchism could be consummated.

With the knowledge that history doesn’t repeat, but rather fools repeat history- a brief analysis of the causes of the formation of the League of Cambrai and its ultimate self-destruction under the sophisticated intrigues of Venice (then the seat of an international financier oligarchy) can be best understood, and potentially foolish decisions can avoid repetition. Among the many authors I am indebted to for this research report, includes Gerald Rose, Robert Ingraham and finally Webster Tarplay whose 1981 studies published in Campaigner magazine continue to stand as some of the most thorough analyses available to modern researchers.

From Whence Sprince Today’s Potential?

The Russia-China alliance has become an unstoppable powerhouse of visionary infrastructure projects across the Arctic, Eurasia, Africa and Europe exemplified beautifully by the evolving Belt and Road Initiative. This cooperative alliance has tapped into a strategic reality of mankind’s genuine common interests which is so powerful that even countries formerly at war with each other and subjects of imperial manipulation have increasingly broken free in order to participate in this new paradigm.

The leadership of both Russia, China and a growing array of allied nations have taken a sober look at the geopolitical landscape which arose in the wake of the disastrous regime change wars-with-no-end in the Arab world and the inevitable nuclear war that would arise from an intended NATO confrontation with Russia or China and the decision to survive by changing the “rules of the game” was a no-brainer.

This coalition of nations working with a common sense of both the manipulative hand behind the scenes and common focus for future cooperation may be a new phenomenon in our modern age, but it is certainly not without historical precedent. Not only did such an international coalition form in the wake of the 1865 union victory in the Civil War which saw nations like Germany, France, Argentina, Brazil, Russia and Japan adopt the “American system” of protectionism and dirigism for industrial progress and public works, but it also occurred during a peak of the European Golden Renaissance with an alliance known as the League of Cambrai (1508-1512).

However, just as the 19th century coalition of progress was derailed by a wave of assassinations, revolutions and wars, so too was the earlier League of Cambrai sabotaged before its mission to cleanse the world of oligarchism could be consummated.

With the knowledge that history doesn’t repeat, but rather fools repeat history- a brief analysis of the causes of the formation of the League of Cambrai and its ultimate self-destruction under the sophisticated intrigues of Venice (then the seat of an international financier oligarchy) can be best understood, and potentially foolish decisions can avoid repetition.

Why did the League Arise?

The Golden Renaissance is an incredible singularity in the human experience.

Coming out of a centuries’ long Dark Age, what we today call “the Renaissance” is characterized on first approximation by a spike of human population, longevity and productive capabilities. Rather than treat this anomaly as “proof” that we are simply a cancer infesting the mother Gaia as modern radical ecologists are wont to do, it is more valuable to see it for what it was: The material EFFECT of a blossoming of creative ideas, and discoveries touching all fields of knowledge: medical, artistic, musical, architectural, scientific, and economic. The underlying cause of this was a deeper profound shift in understanding of Natural Law based upon a notion that mankind’s laws were only legitimate if they cohered with the discoverable laws (moral and physical) of nature. This was expressed by early Renaissance philosopher Cardinal Nicholas of Cusa who stated in 1433:

“There is in the people a divine seed by virtue of their common equal birth and the equal natural rights of all men, so that all authority – which comes from God as does man himself – is recognized as divine when it arises from the common consent of all the subjects… This is that divinely ordained marital state of spiritual union based on a lasting harmony by which a commonwealth is guided in the fullness of peace toward eternal bliss.”

This was a profound insight which rejected the popular notion of “man made in the image of mud” that had governed Europe under the feudal structures of oligarchism since the destruction of the Carolingian Empire of Charlemagne.

It took a bit of time for these concepts to become active organizing principles in the formation of the first nation state system of Louis XI of France in 1461, but when they demonstrated their effectiveness at organizing a nation and actualizing the creative powers of the citizens, it spread like wildfire. Louis XI qualified himself as a serious philosopher king which both Plato and Confucius in their times knew was the key for society’s salvation when he said: “When Justice reigns in a kingdom, the common good is well guarded, and so is the particular: Because Justice is such a virtue that maintains human company and common life, providing that everyone makes a wise use of common things as common; and of particular things as particular.”

After re-organizing his nations’ corrupt banking system and taxation system while re-directing the treasuries towards public works and mass education, France under Louis XI grew in power and managed to avoid military enmeshments that characterized Europe for centuries. His success was soon replicated in England as Henry VII of Tudor left France to overthrow the evil Plantagenet dynasty of Richard II in 1485 and followed Louis XI’s example. This “new statecraft” was simultaneously gaining steam across Italy’s city-states of Florence and Milan manifesting with the rise to prominence of such figures as Cosimo de Medici, Leonardo Da Vinci, and Nicollo Machiavelli. Leading humanist Aeneas Piccolomini, a follower of Cusa, was elected Pope in 1460 becoming Pius II which influenced the Holy Roman Emperor Friedrich III to the humanist cause.

Once Machiavelli became 2nd Chancellor of Florence in 1502, he immediately appointed Da Vinci as Chief Engineer to Cesar Borgia and the two worked closely together reforming military practices in defense of Florence for years.

Machiavelli, Leonardo, Borgia (who became the leader of Milan with Machiavelli’s help) understood well the nature of the evil that was trying to undo the new paradigm that they championed. It is here at this moment that it was realized that for the renaissance process to survive, a source of evil that plagued mankind for centuries had to be destroyed. As we shall later see, it was Venice that had been the primary force actively keeping the world at war and the population in the mud for centuries and those leading humanists knew that this force would not rest until the renaissance was undone and humanity was brought under total subjugation. Together they and leading co-thinkers across Italy, France and Spain organized an alliance which nearly wiped this evil from the face of the earth in 1508 called the League of Cambrai.

What Was Venice?

While Venice esteemed itself a republic (literally calling itself “the Serene republic”) it was in all pretenses a total oligarchy. The City-state was founded by leading families of the Roman oligarchy who sought refuge from Visigoths and Huns as the Empire collapsed in 450. It grew as a junior partner to the Byzantine Empire for centuries and formed a unique form of government. A senate amounting to nearly 1500 members of the nobility was formed which itself was headed by a Council of 10. Atop this pyramid was a council of three which utilized the figure of an elected doge to justify itself. The system was so effective that in its 1000+ years, only one attempt was made by a doge to go renegade- a crime for which he was publicly beheaded in 1355.

From below, the population was one of pure cattle living under a continuity of carnivals, prostitution, plague and poverty.

From 1201-1204, Venice had managed to run a coup on the Byzantine Empire with the pillage of Constantinople during the 4th Crusade. This was a masterstroke of evil genius that utilized fanatical European forces from France and the Holy Roman Empire who foolishly thought they were embarking on a Crusade to fight the Turks in the Holy Land. These fools were convinced to first pay debts they owed to Venice (for use of the latter’s transportation ships) by laying siege and looting the Christian City of Constantinople. This duplicitous scheme allowed Venice to not only destroy their older sister, but also took control of all her sea-based trade routes to boot. Venice also received a huge bribe from the Ottoman Empire for having kept Crusaders out of their way- thus freeing the Turks to destroy the remnants of the renaissance-Humanist culture of Baghdad in 1258.

By 1350, Venice had control over world finance through its monopoly of gold and silver bullion, maritime trade and the most sophisticated intelligence network on earth. Venice’s mastery of manipulating wars among potential allies while financing all sides was not limited to Europe. This “new Rome” had even spread its tentacles through Asia gaining a monopoly of trade in Mongol-controlled territories in exchange of offering political intelligence to the Khans whose success penetrating Russia, Kiev, Bulgaria, Hungary and beyond was made possible through such Venetian agents as Marco Polo and his father (Polo even became the Advisor to Kublai Khan).

Venetian Evil Called Out

Cosimo de Medici (sponsor of Cusa and the 1438 Council of Florence) said of the Venetians: “Association with the Venetians brings two things which have always been rejected by men of wisdom: perdition and disgrace” and Ludovico Sforza, an ally of Machiavelli said: “Venetians are obstinate and hardened, always keeping their mouths open to be able to bite off power and usurp the state of all their neighbors to fulfill the appetite of their souls to conquer Italy and then beyond as did the Romans, thinking to compare themselves to the Romans when their power was at its apex.”

Another ally of the League, Louis XII of France said the venetians “were traders in human blood, traitors to the Christian faith who have tacitly divided up the world with the Turks and who are already planning to throw bridgeheads across the Danube, the Rhine, the Seine, the Tagu and the Ebro, attempting to reduce Europe to a province and to keep it subjugated to their armies”.

Most eviscerating in his attack was Pope Pius II who said “As among brute beasts, aquatic creatures have the least intelligence, so among the human beings the Venetians are the least just and the least capable of humanity… They are hypocrites. They wish to appear as Christians before the world but in reality they never think of God and except for the state, which they regard as a deity, they hold nothing sacred, nothing holy… All law and right may be violated for the sake of power.”

The Success of the League

The League of Cambrai was established on December 10, 1508 uniting the highly corruptible Pope Julius II, the Holy Roman Empire Maximilian, France of Louis XII and Ferdinand I of Spain under the common cause of crushing this “new Rome” out of existence. Machiavelli was the driving force behind the league putting the project into motion in 1507 when he arranged for Maximilian to get on board with the agreement that Florence and Milan would finance the cause and provided strategic intelligence throughout.

Utilizing hired mercenary armies, the Venetians were unable to defend themselves against the onslaught that fell upon them. Venetian-controlled territories like Padua and Pisa were won by Florentine Citizen-soldiers organized by Machiavelli, Da Vinci and Borgia and with the decisive victory of France at Agnadello, the Venetian armies were obliterated on May 14, 1509. The Doge messaged the Pope begging for mercy and Machiavelli celebrated the victory writing that in one day, the Venetians “lost what it had taken them 800 years’ exertion to conquer.”

The Venetians were as good as finished… with no army left to defend themselves and the most powerful coalition of powers united together with all the capabilities to finish them off… so what happened?

The Failure of the League

Utilizing the weakest link in the coalition, Pope Julius II, the Venetians pulled off a secret bribe offering all of Rome’s lost territories and more to the Pope as well as a promise to buy alum from Papal territories at inflated values rather than with the Turks. This bribe turned the pope, and accordingly Maximilian against France and Florence as the League was left to disintegrate and a new Venetian-controlled alliance was created in 1512 called the Holy League which soon included England’s Henry VIII and Ferdinand I of Spain. Louis XII’s armies were decimated at the Battle of Ravenna in 1512 forcing a retreat to France and leaving Florence to be soon defeated. Machiavelli’s citizen army was promptly slaughtered, and the great leader tortured and exiled while Da Vinci evaded death by fleeing to Rome and later France.

The moment of great potential had collapsed an age of turmoil and war was unleashed which wouldn’t see a major respite until the establishment of the 1648 Peace of Westphalia (itself sabotaged by the same Venetian forces who by this time were in the midst of moving their center of power to the more strategic location of England and the Netherlands).

In the 2008 manuscript The Modern Anglo-Dutch Empire: It’s Origins, Evolution and Anti-Human Outlook, historian Bob Ingraham recounts in sordid detail how the leading families of Venice moved their operation out of the lagoons during the 17th century in order to become the Anglo-Dutch Empire. This valuable research recounts the creation of a new system of private central banking innovated by Venice’s Banco della Piazza di Rialto of 1587 which morphed into the Bank of Venice in 1619. This new banking paradigm created the model that was used in the creation of the Bank of Amsterdam in 1609 and later with the Bank of England in 1694 after the Venetian Party of England orchestrated a coup known as the “Glorious Revolution”.

This financial innovation was based on the realization that it is better to control a nation’s issuance of banknotes and bills of credit while masquerading a private corporation as a national institution rather than simply attempting to impose simple usury on a nation as had been previously done for centuries.

How Not to Repeat History

While the 1648 Peace of Westphalia saw a re-activation of the renaissance principle enunciated by Cusa, Europe soon fell back into organized warfare leaving the beautiful principles of the treaty mere words on parchment. While the 1776 American Revolution again saw a re-activation of this principle, its spread throughout Europe and beyond was also crushed with the perversion of the French revolution which turned into an irreparable bloodbath by 1791. While the 19th century alliance of sovereign nations adopting Lincoln’s system also nearly resulted in a new age of progress and win-win cooperation, it too was destroyed by small-minded fools falling prey to short-term games and their own egos.

Today, 135 nations have been brought into solidarity with the Russia-China’s alliance and this new momentum for progress and cooperation has inspired a renewed nationalism across even the Trans-Atlantic Community which had fallen so deeply under Anglo-Dutch financial control throughout the 20th Century that few had believed hope could still exist. Even America’s constitutional traditions once believed lost to its post-JFK conversion into Britain’s dumb giant appears to be experiencing a much-needed revival under President Trump.

With nearly 8 billion souls on the planet and the power of the atom at our fingertips, the stakes have never been higher and the liberty to act the fool in the face of Venetian evil never so intolerable.

HSBC are in the news for attempting to suppress a report into money laundering. This is no surprise as the company’s entire history, right up to the present day, is one of financing drug cartels.

HSBC are not known for their transparency. Britain’s wealthiest company, with a stock market valuation of $215billion, has enough advertising muscle in the British press to ensure that critical investigative pieces have been spiked in both the Sunday Times and the Daily Telegraph – in the latter case, causing that newspaper’s chief political commentator to resign in protest. Then last year, the bank’s friends in the Swiss government sentenced the whistleblower who exposed the bank’s massive facilitation of tax avoidance to five years in prison, the longest sentence ever demanded by the country’s public ministry for a banking data theft case. And back in 2011 HSBC was revealed to be the UK financial sector’s most enthusiastic user of tax havens, with no less than 556 subsidiary companies based in offshore jurisdictions. Tax havens, as leading expert Nicholas Shaxson notes, “are characterised by secrecy…what they are fundamentally about is escape – escape from the rules, laws, regulations of jurisdictions elsewhere. You move your money offshore and you can then escape the laws that you don’t like”. This is clearly an institution with much to hide.

So it should not have surprised anybody when, earlier this month, it was revealed that HSBC are now seeking to block the publication of a report into HSBC’s compliance with anti-money laundering laws. After all, it was only three years ago that HSBC were hit with a massive $1.9 billion fine for laundering around $1 billion on behalf of some of the world’s most vicious gangsters. According to US assistant attorney general Lanny Breuer, “from 2006 to 2010, the Sinaloa cartel in Mexico, the Norte del Valle cartel in Colombia, and other drug traffickers laundered at least $881 million in illegal narcotics trafficking proceeds through HSBC Bank USA. These traffickers didn’t have to try very hard.” This is putting it mildly; in fact HSBC went to great lengths to facilitate the drug cartels. As Matt Taibbi wrote in his definitive piece on the scandal, HSBC “ran a preposterous offshore operation in Mexico that allowed anyone to walk into any HSBC Mexico branch and open a US-dollar account (HSBC Mexico accounts had to be in pesos) via a so-called ‘Cayman Islands branch’ of HSBC Mexico. The evidence suggests customers barely had to submit a real name and address, much less explain the legitimate origins of their deposits.” The bank did have a system in place to identify ‘suspicious activity’; but it routinely flouted it. As Nafeez Ahmed has written, “By 2010, HSBC had racked up a backlog of 17,000 suspicious activity alerts that it had simply ignored. Yet the bank’s standard response when it received its next government cease-and-desist order was simply to ‘clear’ the alerts, and give assurances that everything was fine. According to former HSBC compliance officer and whistleblower Everett Stern, the bank’s executives were deliberately ignoring and violating anti-money laundering regulations.” Taibbi wrote that “In one four-year period between 2006 and 2009, an astonishing $200 trillion in wire transfers (including from high risk countries like Mexico) went through without any monitoring at all. The bank also failed to do due diligence on the purchase of an incredible $9 billion in physical US dollars from Mexico and played a key role in the so-called Black Market Peso Exchange, which allowed drug cartels in both Mexico and Colombia to convert US dollars from drug sales into pesos to be used back home. Drug agents discovered that dealers in Mexico were building special cash boxes to fit the precise dimensions of HSBC teller windows”. HSBC’s customers – cartels like Colombia’s Norte del Valle and Mexico’s Sinaloa – were at the time involved in mass murder and abuse of the most psychopathic variety, including beheadings and torture videos. The official death toll from these groups in Mexico alone is 83,000 over the past decade. That they have the capacity to carry out violence on such a massive scale is the result of the massive financial growth of their industry. And that growth was wilfully facilitated by HSBC.

Given that this has all now been established in court, were the rule of law actually applied, the bank’s Charter would have been revoked, and its directors (including former UK Trade Minister Stephen Green) would now be in jail. The reason this did not happen is that the sheer size of HSBC’s operations make it too strategically important to close down. “Had the US authorities decided to press charges”, explained Assistant Attorney General Lenny Breuer, “HSBC would almost certainly have lost its banking licence in the US, the future of the institution would have been under threat and the entire banking system would have been destabilised.” That is to say, HSBC’s wealth and power put it officially above the law. Even its $1.9 billion fine, massive though it might seem, amounted to a mere five weeks profit for the bank.

But all of this is entirely in keeping for a bank whose roots lie precisely in illegality, drug trading and massive violence.

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Little wonder, then, that wherever you look – from Afghanistan, to Kosovo, to Libya, to Mexico to Colombia, and even ‘at home’ – the policies of the world’s leading financial centres serve to boost the production, distribution and profitability of the drugs trade. And little wonder that HSBC are still keeping their ‘money laundering checks’ to themselves.

Real revolutions are taking place not on squares, but in the quiet of offices, and that’s why nobody noticed the world revolution that took place on March 29th 2019. Only a small wave passed across the periphery of the information field, and the momentum faded away because the situation was described in terms unclear to the masses.

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This revolution is called “Basel III”, and it was made by the Bank for International Settlements (BIS). Its essence is in the following: BIS runs the IMF, and this, in turn, runs the central banks of all countries. The body of such control is called BCBS – the Basel Committee on Banking Supervision. It isn’t just some worthless US State Department or Congress of American senators. It’s not a stupid Pentagon, a little Department of the Treasury, which runs around like the CIA’s servant on standby, or a house of collective farmers with the name “White House”.

This isn’t even the banks of the US Federal Reserve, which govern all of this “wealth”. This is a Government of all of them combined. That real world Government that people in the world try not to speak about aloud. BCBS is the Politburo of the world, whose Secretary General, according to rumours, is comrade Baruch, and the underground structure of the Central Committee is even more secret. It has many euphemisms, the most adequate of which is “Zurich gnomes”. This is what Swiss bankers are called. Not even owners of commercial banks, but namely those ordinary-looking men sitting in the Swiss city of Basel who Hitler – who tried to attach the whole world to the Third Reich, and who preserved neutrality with Switzerland during all the war – didn’t dare to attack. And, as is known, in Switzerland, besides Swiss rifleman, in reality there isn’t even an army. So who was the frenzied Fuhrer afraid of?

Nevertheless, the “recommendations” that were made by BCBS on March 29th 2019 were immediately, at the snap of the fingers, accepted for execution by all the central banks of the world. And our Russian Central Bank is not an exception. There is even the statement of the press service of the Central Bank of the Russian Federation posted on the official website of the Central Bank. It is called “Concerning the terms of implementation of Basel III”. The planned world revolution was in 2017 (magic of dates and digits or just a coincidence [a reference to 1917 – ed]?), but it has started only now.

Its essence is simple. In the world the system of exclusive dollar domination established in 1944 in Bretton Woods and reformed in 1976 in Jamaica, where gold was recognised as an equivalent of world money that became invalid, is being cancelled. The dollar indeed became world money, and gold became an ordinary exchange good, like metal or sugar traded in London on commodity exchanges. However, the weather was determined there by only three firms of the “Pool of London” that belong to an even smaller number of owners, but, nevertheless, it’s not gold, but oil that became the dollar filler.

We have lived in such a world ever since. Gold was considered as a reserve of the third category for all banks, from central to commercial ones, where the reserves were, first of all, in dollars and bonds of the US. The norms of Basel III demand an increase, first of all, in monetary reserves. This impeded the volumes of monetary resources of banks that could be used to carry out expansion, but it was a compulsory measure for saving the stability of a world banking system that showed to be insufficient in a crisis.

In Russia pseudo-patriots were very much indignant at this, demanding to reject Basel III, which they called a sign of “a lack of sovereignty”. In reality, this is a quite normal demand to observe international standards of bank security, which were becoming more rigid, but since we [Russians – ed] were not printing dollars, so of course it had an impact on us. And since the alternative is an exit from world financial communications into full isolation, so our authorities, of course, did not want to accept such nonsense that was even designated by pseudo-patriots as a “lack of sovereignty”. To call sovereignty – freedom, to put your head in the noose is, let’s agree, a strange interpretation of the term.

The Basel III decision meant that gold as a reserve of the third category was earlier estimated at 50% of its value on the balance sheets of world banks. At the same time, all owners of world money traded in gold not physically, but on paper, without the movement of real metal, the volume of which in the world wasn’t enough for real transactions. This was done in order to push down the price of gold, to keep it as low as possible. First of all, for the benefit of the dollar. After all, the dollar is tied to oil, which had to cost no less than the price of one gram of gold per barrel.

And now it was decided to place gold not in the third, but “just” in the first category. And it means that now it is possible to evaluate it not at 50, but at 100% of its value. This leads to the revaluation of the balance sheet total. And concerning Russia, it means that now we can quietly, on all legal grounds, pour nearly 3 trillion rubles into the economy. If to be precise, it is 2.95 trillion rubles or $45 billion at the exchange rate in addition to the current balance sheet total. The Central Bank of the Russian Federation can pour this money into our economy on all legal grounds. How it will happen in reality isn’t yet known. Haste here without calculating all the consequences is very dangerous. Although this emission is considered as noninflationary, actually everything is much more complicated.

During the next few months nothing will change in the world. The U-turn will be very slow. In the US the gold reserves officially total 8133.5 tons, but there is such a thing as a financial multiplier: for every gold dollar, the banks print 20-30 digital paper ones. I.e., the US can only officially receive $170 billion in addition, but taking into account the multiplier – $4.5 trillion. This explains why the Federal Reserve System holds back on increasing interests rates and so far maintains the course towards lowering the balance sheet total – they are cautious of a surge in hyperinflation.

But all the largest states and holders of gold will now revaluate their gold and foreign exchange reserves: Germany, Italy, France, Russia, China, and Switzerland – countries where the gold reserves exceed 1,000 tons. Notice that there is no mumpish Britain in this list. Its reserves are less than 1000 tons. Experts suspect that it is perhaps not a coincidence that the dates of Brexit and the date of Basel III coincide. The increased financial power of the leaders of Europe – Germany and France – is capable of completely concluding the dismantlement of Britain on the European continent. It was necessary to get out as soon as possible.

Thus, it seems that it is possible to congratulate us – the dollar era lasting from 1944 to 2019 has ended. Now gold is restored in its rights and is not an exchange metal, but world money on an equal basis with the dollar, euro, and British pound. Now gold will start to rise in price, and its price will rise from $1200-1400 per troy ounce up to $1800-2000 by this autumn. Now it is clear why Russia and China during all these years so persistently decanted its export income into the growth of gold reserves. There is now such a situation where nobody in the world will sell gold.

Injections of extra money will suffice for the world economy for 5-6 months. In the US this money can be used to pay off the astronomical debt. Perhaps this wasn’t Zurich’s last motive for making such a decision. But after all, the most important thing is an attempt to slip out from under the Tower of Pisa that is the falling dollar.

Since the dollar and oil are connected, the growth of the price of gold will directly affect the growth of the price of oil. Now a barrel costs as much as 1.627 grams of gold. A price growth will cause the world economy – where 85% of the money dollar supply turns into stock surrogates like shares, bonds, and treasuries – to cave in. The stock exchange will not be able to bundle together such an additional mass of money any more.

It will be good for oil industry workers – even, perhaps, best of all, but not for long. The economical crash because of expensive oil will become a crash for all oil industry workers too. It is precisely this that is the main reason why our rights for additional emissions can remain unused in full volume, although a gift in such a form will not be completely ignored. The May Decrees of Putin in the current context are being understood completely differently. Russia runs away from the oil-based economic model in all ways. Including by political reforms and changing the elites.

However, why is the decision of Basel a revolution? Because from the autumn the financial flood in the world economy will begin. It will entail the acceleration of Russia and China’s isolation from the dollar system and the crash of the economies that completely depend on the dollar – the vassal countries of the US. It will be worst of all for them. And this means that the reasons for increased distancing between the EU and the US will increase in number manyfold. A redrawing of the map of global unions awaits the world.

And the redrawing of these unions will be carried out not least by military methods. Or with their partial use, but in one way or another, reasoning involving force in the world will increase almost to the level of guaranteed war. “Almost” is our hope for rescue, because the US loses all main instruments of influence on this world. Except force.

But it’s not for this purpose that the “Zurich gnomes” created this world, so that the US is so simply turned into radioactive ashes. The US will be drenched with cold water like a broken down nuclear reactor, while the world has entered the zone of the most global transformations over the past few centuries. The revolution that so many waited for, were afraid of, and spoke so much about has started. Buckle up and don’t smoke, the captain and crew wish you a pleasant flight.

In recent days Sweden’s largest mortgage bank, Swedbank, fired its CEO amid charges she was involved in a multi-billion dollar money laundering operation. Swedbank now joins Denmark’s largest bank, Danske Bank, and several other European Union banks implicated in laundering what has been claimed amounts to more than $1 trillion in funds of Russian or Ukraine or other origin in recent years. As impressive as the scandal appears, equally interesting is the curious man triggering the scandals.

On March 28 Swedbank AB fired its CEO, Birgitte Bonnesen, amid allegations she was complicit in a conspiracy to launder billions of dollars in money from former Soviet Union states via Swedbank’s Estonia branch. At present Swedish SVT television reports suggest the mortgage bank laundered as much as 20 billion euros ($23 billion) in questionable funds each year, between 2010 and 2016 in Estonia, which, if true, would total some $140 billion. Swedbank allegedly also misled US authorities on its suspicious customer activities. Reportedly the Swedbank Estonia violations are tied to the even more dramatic allegations that Denmark’s largest bank, Danske Bank, laundered an eye-popping $230 billion via its Estonia operation. Bonnesen was in charge of Swedbank’s Baltic banking operations from 2011-2014.

Among those allegedly using the Baltic branch of Swedbank was former Ukraine President Viktor Yanukovytch, ousted in a CIA coup in February 2014 facilitated by Obama State Department official Viktoria Nuland. Another client was reportedly the Russian industrial oligarch, Iskandar Makhmudov, who made his fortune during the Yeltsin years in the “rape of Russia” plunder of Soviet state companies.

The curious whistleblower

The person by all reports responsible for blowing the whistle on what he says is criminal money laundering of funds of Russian and Ukrainian oligarchs by Swedbank, Danske Bank and allegations that Deutsche Bank and other EU banks were also involved, is an American-born British citizen named Bill Browder.

Browder is notorious as a bitter enemy of Russia’s Putin. He has charged Putin’s police of murdering a business associate of Browder, Sergei Magnitsky, Browder’s accountant, in a Russian jail, charges never proven. It was enough however, for the well-connected Browder to get the influential backing of US Senator John McCain to pass the Magnitsky Act of 2012. Today the act has been broadened to apply globally, authorizing the US government to sanction those who it sees as human rights offenders, freezing their assets, and banning them from entering the US.

Putin’s government had charged Browder with theft of $230 million in tax money, after Russian authorities banned Browder and seized his Hermitage Capital hedge fund in Russia. As investigators have pointed out, far from wanting him dead, Magnitsky, as accountant for Browder, was the key state witness for Russia against Browder. The McCain-backed Magnitsky Act gave the US Government unprecedented powers to sanction individuals and companies in the name of “punishing rogue, evil regimes who torture innocents.” The Magnitsky Act paved the way to the Cyprus confiscation of Russian deposits, to post-Crimean US sanctions and beyond. Browder’s Magnitsky games are still very active today.

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The context is one of the CFPB’s most important and useful anti-predatory lending rules by payday lenders. Payday lenders often charge working class Americans interest rates well above 100 percent. (In Missouri, a hotbed of predation, they can charge more than 500 percent.) The ‘sweet spot’ for payday lenders is borrowers who will be unable to repay promptly the initial loan (with an obscene, but vastly lower initial interest rate). This sets off a cycle of additional borrowing and extending of payday loans that places the borrower into a debt spiral that frequently results in bankruptcy. Payday lenders, who exist to predate on customers, make their extraordinary profits largely from borrowers who cannot repay the initial payday loan when it comes due, but have some income and will continue to reborrow and attempt to repay for months. Predatory payday lenders optimize by finding this ‘sweet spot’ of those who have enough income and a compelling intent to repay – but not enough income to pay off the entire series of loans.

Kate Berry’s article reports that Kathy Kraninger, Trump’s new CFPB head (with no experience in consumer financial protection), intends to junk the CFPB rule provisions requiring that payday lenders underwrite their loans by documenting the borrower’s ability to repay the loan when due. She also intends to act to protect the predators’ ‘sweet spot.’ Berry reports that Kraninger also intends to optimize the predators’ ‘sweet spot.’

The latest proposal also is expected to rescind limits that the rule placed on repeat reborrowings by a single consumer; the CFPB’s data shows that payday lenders rely on reborrowings as a major source of revenue.

The two points, capacity and reborrowing, are predatory kissing-cousins. Predatory lenders’ targets reborrow because they lack the capacity to repay the initial loan when it comes due.

Predation and Fraud in the GFC Based on Not Documenting Capacity to Repay

This ‘sweet spot’ strategy is a signature of predatory lending because it optimizes the CEO’s ‘take’ from ‘control fraud’ and predation. “Exploding rate ARMs” were a common late-game strategy in the run-up to the Great Financial Crisis (GFC). An exploding rate ARM was an adjustable rate mortgage with a monthly payment so low that it did not even pay the interest currently due on the mortgage. (In jargon, it was “negatively amortizing.”) This meant that the principal amount of the mortgage debt increased every month. The mortgage contract provided that after three-to-five years (sooner had there been high inflation) the monthly mortgage payment would ‘reset’ (adjust upward) – often doubling the monthly payment. The lenders’ CEOs understood, of course, that this would cause loan defaults and foreclosures to reach tsunami levels.

The defaults were particularly high because the predatory lenders consistently ‘qualified’ the borrower as (purportedly) having sufficient income to repay the loan based on the initial monthly payment – not the 2X reset payment. Indeed, many of them purported to ‘qualify’ the borrower based on a ‘teaser’ interest rate (that last only for one month or three months). The teaser rate produced an initial monthly payment that was exceptionally low. The lenders’ CEOs gamed the ‘qualifying’ standard for the sole purpose of making it appear that borrowers who typically lacked the income to repay the ‘fully indexed’ interest rate had the ability to do so.

Why did the predatory CEOs make exploding rate ARMs their most common mortgage product as the housing bubble was fast approaching its peak? First, it let them loan to millions more people who could not afford to repay their loans – and disguised that fact. Extremely fast growth is the first ‘ingredient’ in the ‘recipe’ for ‘accounting control fraud.’ (See my many columns if this point is new to you).

Second, it slowed down defaults, which is critical to lengthening the ‘sweet spot’ strategy’s period of success. Paying one-half the ‘fully indexed’ monthly payment is obviously far easier, particularly for borrowers with modest incomes. As long as the loan does not default, the accounting alchemy I describe next continues.

Third, accounting is nearly always the ‘secret sauce’ in financial fraud and predation ‘recipes.’ The predatory exploding rate ARM lending CEOs’ were invariably able to suborn top tier audit partners to allow the lender to book currently as income payable the fully indexed (i.e., 2X) interest rate the borrower was contractually committed to paying (eventually). Of course, given the immense defaults certain on exploding rate ARMs as soon as the bubble stalled, the borrowers would frequently have no ability to pay the monthly payment when the interest rate doubled. Lenders called this ‘phantom interest’ because they got to treat it for GAAP accounting purposes as current income even though they frequently would never receive the additional cash from the borrowers when they defaulted in droves when their monthly payments doubled. Phantom interest became massive – producing tens of billions of dollars in largely phony income to predatory lenders – and billions of dollars in real bonuses to bank officers.

Fourth, the predatory exploding rate ARM loans typically had a substantial ‘prepayment penalty’ (very unusual for U.S. home mortgages) that the CEOs designed to lock in victims of their predation. Americans can usually get out of mortgage agreements in which they have agreed to pay too high a rate of interest by refinancing their mortgage without any prepayment penalty. The CEOs of the predatory lenders foreclosed that option (pun intended) so that they could maintain their accounting magic.

Similarly, the CEOs of fraudulent lenders used ‘liar’s’ loans as one of their two primary loan origination fraud strategies. (The other was fraudulently inflated appraisals. The Trump administration is aggressively making finance more criminogenic by reducing appraisal requirements.) Fraudulent CEOs designed liar’s loans to make loans to people who lack the actual capacity (income) to repay the loan while providing a fig leaf of fictional capacity through false ‘stated income.’ Recall that investigators concur that it was the lenders’ officials and their agents that put the lies in liar’s loans.

There is nothing new about “mis-defining” global events, global conflicts and sociological trends. If there is one gift from Donald Trump, it’s his tendency to debunk everything, everything but himself. It’s one thing lying about pretty much everything, it’s quite something else to structure world events to fit the lies and that’s exactly what we are doing. Let me explain.

We have created artificial categories, created to fit analytical patterns created to serve a massive disinformation culture, and built fictional narratives around them to define what we all agree is a senseless spiral into chaos and anarchy.

Let’s look at world economics. Value is established through esoteric creations called “currencies,” a term few can define. Typically, the world trades on the US dollar, a currency backed by debt, but no one knows who holds that debt nor can anyone explain how the debt was created, where the money went, where it is now and where the cash that services the interest on the debt goes.

You see, America operates with an illegal central bank, one banned by American laws written into the constitution in 1787 and yet a secret bank was created that now holds well over $20 trillion in government securities. No one knows who owns the bank, where it is actually located, where the debt is held nor, can anyone define how the system works. The whole thing is smoke and mirrors.

Nearly every nation has one of these banks and owes money to this same group that runs every bank, that prints all currency, a group that, were one to actually investigate, has never had any real holdings, never lent any significant amount of money at all and, in actuality has, through bribery, created a racket where nations create fake money themselves and pay interest to a series of ancient crime families that really don’t do anything at all.
https://journal-neo.org/2018/11/22/the-unfixable-the-price-of-rule-by-ignorance/

The political and media coverup of the genocide of the Greek Nation began yesterday (August 20) with European Union and other political statements announcing that the Greek Crisis is over. What they mean is that Greece is over, dead, and done with. It has been exploited to the limit, and the carcas has been thrown to the dogs.

350,000 Greeks, mainly the young and professionals, have fled dead Greece. The birth rate is far below the rate necessary to sustain the remaining population. The austerity imposed on the Greek people by the EU, the IMF, and the Greek government has resulted in the contraction of the Greek economy by 25%. The decline is the equivalent of America’s Great Depression, but in Greece the effects were worst. President Franklin D. Roosevelt softened the impact of massive unemployment with the Social Security Act other elements of a social safety net such as deposit insurance, and public works programs, whereas the Greek government following the orders from the IMF and EU worsened the impact of massive unemployment by stripping away the social safety net.

Traditionally, when a sovereign country, whether by corruption, mismanagement, bad luck, or unexpected events, found itself unable to repay its debts, the country’s creditors wrote down the debts to the level that the indebted country could service.

With Greece there was a game change. The European Central Bank, led by Jean-Claude Trichet, and the International Monetary Fund ruled that Greece had to pay the full amount of interest and principal on its government bonds held by German, Dutch, French, and Italian banks.

How was this to be achieved?

In two ways, both of which greatly worsened the crisis, leaving Greece today in a far worst position that it was in at the beginning of the crisis almost a decade ago.

The cliche of opulence and laziness disguises real Greek misfortune at the hands of the European community – and America – resulting in one of the most offensive punchlines of all time: Somehow Greece deserves the economic disaster wrought upon it, a severity not seen since The Great Depression.

In reality, the country’s long financial crisis is one big deliberate illusion created by some of the world’s largest banks and multinational conglomerates that have sidelined governments and made the rule of law and the will of the people all but irrelevant.

It has prioritised multinational profits over the economic needs of Eurozone countries, and even those outside of the union. With no sovereign currency with which to balance the score, Greece has become utterly subject to France, Germany, the International Monetary Fund (IMF) and the European Central Bank, (ECB).

The money from the three bailouts did not go to Greece at all and did not restore prosperity – it was never designed to in the first place – but flowed straight back into the coffers of French and German banks whose bad decisions over the last half century became the burden of the Greek people.

If there’s one myth -and there are many- that we should invalidate in the cross-over world of politics and economics, it‘s that central banks have saved us from a financial crisis. It’s a carefully construed myth, but it’s as false as can be. Our central banks have caused our financial crises, not saved us from them. That another crisis is waiting to happen, and that politics and media have made sure that just about no-one at all is aware of it, is one thing. We already knew this, a few of us. That the world’s main central bankers have an active incentive to bring about the crisis, if only by sitting on their hands long enough, is new. But they do.

Yellen, Draghi and Kuroda may opt to leave before pulling the trigger, or be fired soon enough. But whoever is in the governor seats will realize that unleashing a crisis sooner rather than later is the only option left not to be blamed for it. Let the house of dominoes crumble now, and they can say “nobody could have seen this coming”, while at the same time saving what they can for the banks and bankers they serve. That option will not be on the table for much longer.

We should have never given them, let alone their member/master banks, the power to conjure up trillions out of nothing, and use that power as a political tool. But it is too late now.

In June 2011 four civil society organisations from across the globe -- CEE Bankwatch Network in eastern Europe, urgewald from Germany, Bank Information Center in the US and Oyu Tolgoi Watch from Mongolia -- traveled to Mongolia's south Gobi desert. The purpose of the visit was to better understand the environmental and social impacts of the development of the Tavan Tolgoi and Oyu Tolgoi mining projects in the Gobi. What they discovered was that the pressures from mining placed on the desert's scarce natural resources was driving the Gobi's traditional herder's to the edge of survival.