Wednesday, September 22, 2010

The Emerging Global Fed

New American
Written by Alex Newman
Sept 16, 2010
http://www.thenewamerican.com/index.php/economy/economics-mainmenu-44/4602-the-emerging-global-fed

The Federal Reserve has been a nightmare for the American people. It inflates the money supply, thereby devaluing already-existing money and placing a massive hidden tax on the people via rising prices. It also uses its monopoly power to cause interest rates to go up or down, usurping the rightful place of the market and causing massive malinvestment and generally an improper and unproductive allocation of resources.

The Fed also causes the boom-and-bust cycle through its manipulations of the currency and credit supply. It serves as the government’s partner in perpetually expanding the “welfare-warfare state,” allowing the state to spend far more than it could ever hope to reasonably raise through direct taxation. And of course, the fact that all Federal Reserve notes enter the economy as debt with interest attached (but never created) has led to a situation where it is literally mathematically impossible to pay off the debt. In sum, the consequences of such a system have been disastrous for average Americans — hence the growing calls to audit and even end the Fed.

But now, imagine such a system at the global level. And it isn’t just a mental exercise; the global central bank is already emerging. As bad as the Fed has been for America — and indeed the world — a similar system at the international level would be far worse. Disaster might even be an understatement.

International Liquidity and Inflation
One of the most serious threats posed by a global central bank and world fiat currency is the fact that it would allow the emerging planetary regime to print its own money and finance its activities independently. That means wealth could be secretly siphoned away from all of humanity to pay for armies, tax collectors, courts, bureaucracies, law enforcement, wealth redistribution, propaganda, and much more. With no limits. But to advocates of such a system, that is one of its primary benefits.

“A super-sovereign reserve currency not only eliminates the inherent risks of credit-based sovereign currency, but also makes it possible to manage global liquidity. A super-sovereign reserve currency managed by a global institution could be used to both create and control the global liquidity,” wrote Chinese central-bank boss Zhou Xiaochuan in his public paper calling for a world currency. “The centralized management of its member countries’ reserves by the Fund will be an effective measure to promote a greater role of the SDR [Special Drawing Rights, the International Monetary Fund’s first effort at a world currency] as a reserve currency.” Of course, communists have always supported control of “liquidity” (Karl Marx was a strong advocate of central banks with a monopoly on currency and credit). But to people who care about freedom and prosperity, the communists’ support should be a huge red flag.

The United Nations has also backed global currency proposals for the same reason. In a report earlier this year calling for the end of the dollar’s status as a reserve currency and a new monetary regime controlled by the International Monetary Fund, the UN’s World Economic and Social Survey for 2010 points out that, “Such emissions of international liquidity could also underpin the financing of investment in long-term sustainable development.” The term “sustainable development” — especially when used by the UN — is often used to refer to stronger central planning, population reduction, more land in government hands, and other ideas repugnant to average Americans and the U.S. Constitution. Other schemes for “international liquidity” could be even worse.

Hiding behind the passive voice, a separate report by the UN Conference on Trade and Development adds in the concept of wealth redistribution: “It has been suggested that in order for the SDR to become the main form of international liquidity and means of reserve holding, new SDR allocations should be made according to the needs of countries.” It then promotes worldwide central planning to “stabilize global output growth” by issuing more SDRs or retiring them as the emerging global government deems necessary. As it stands, wealth redistribution around the world is bad enough. Surrendering that power to a global institution would be a nightmare.

In its report published earlier this year, the IMF also recently came out in favor of allowing it to print its own money to provide “international liquidity.” “A global currency, bancor, issued by a global central bank would be designed as a stable store of value that is not tied exclusively to the conditions of any particular economy,” the paper says. “The global central bank could serve as a lender of last resort, providing needed systemic liquidity in the event of adverse shocks and more automatically than at present.” In laymen’s terms, the IMF, with its power to “emit liquidity” out of thin air, would be empowered to “bail out” companies, governments, and whomever it wished. If you thought the Fed handing out trillions of dollars to the big banks and other insiders was bad, just wait until a global central bank exercises that power.

Allowing the emerging global government to supply its own money would free it from the constraints of having to raise money through national contributions or direct international taxation. But of course, printing all of this new “liquidity” and financing all of its ambitious projects would be inflationary by definition. And this inevitably would represent a massive problem.

Even John Maynard Keynes, the original proponent of the world currency called “bancor,” understood the concept well. In 1919, he wrote in his book The Economic Consequences of the Peace, “By a continuous process of inflation, governments can confiscate, secretly and unobserved, an important part of the wealth of their citizens.”

To understand the effects, one can look to history and examine examples such as what occurred in the Weimar Republic of Germany, where the money supply was inflated to such an extent, to finance government spending and war debt, that Germans actually found their money more valuable to burn as fuel than to use to purchase items. Or, in more recent years, the tragedy of hyperinflation in Zimbabwe, where inflation exceeded millions of percent per year and it could cost a person billions of dollars for a loaf of bread, provides a more current warning. Even in America — with a comparably stable currency up until now — inflation has wreaked havoc on the economy and the lives of citizens, as we have become a country where husbands and wives must both work to make ends meet. And these all happened in a world where there was still a check on unlimited inflation of fiat money — the fact that citizens could quit using it and purchase other currencies that were not losing their value as quickly. But under a global fiat monetary regime, there would be no such option.

Economists who have been proven correct over the decades about the economic consequences of creating money out of thin air are already sounding the alarm. “A world paper currency and world central bank would heighten the moral hazard and lead to a global inflationary regime such as we’ve never seen,” noted Lew Rockwell, the chairman of the Ludwig von Mises Institute. That is, the “easy” money and credit would cause people to borrow and spend way beyond their means, creating an unprecedented global bubble that would at some point inevitably burst. “There would be no escape from political control at that point.”

And the consequences would be dire. “Inflation tears apart the whole fabric of stable economic relationships,” explained the legendary free-market economist Henry Hazlitt. “It leads men to demand totalitarian controls. It ends invariably in bitter disillusion and collapse.”

Closer Integration and Total Control
Existing monetary unions are often seen as the model for a global currency by advocates of such a system. But surrendering control over money to supranational institutions has consequences, as the people of the Eurozone are discovering. For one, according to data compiled by the European Central Bank, economic growth has slowed dramatically in countries using the euro since the introduction of that single currency — a phenomenon not observed in other areas of the world.

But more importantly, the goal of keeping the monetary union intact is leading to ever greater fiscal and political integration as rules are harmonized and authority continues shifting from nations toward European institutions. During the height of the crisis in Greece, other European governments were forced to bail out the Greek regime over fears that it could bring down the euro. But on top of that, Eurozone heads of state and government got together and used the crisis as an excuse for pushing deeper integration and the imposition of “economic governance” at the European level.

“We commit to promote a strong coordination of economic policies in Europe. We consider that the European Council must improve the economic governance of the European Union and we propose to increase its role in economic coordination and the definition of the European Union growth strategy,” announced the euro-area heads of state and government in a statement. “The current situation demonstrates the need to strengthen and complement the existing framework to ensure fiscal sustainability in the euro zone and enhance its capacity to act in times of crises.”

Around the same time, IMF boss Dominique Strauss-Kahn joined the calls for deeper integration in Europe, offering IMF funds with strings attached. “The launching of the euro was only a first step,” he explained. “You can’t have a single currency without having a more coordinated economic policy.” And indeed, such economic control will also lead to more political control — just as we have seen with the transformation of the European Common Market into the European Union.

Obviously, if the euro is the model for a world currency, the same phenomenon would occur at the world level. That would mean closer integration among the nations of the world, the vast majority of which are ruled by totalitarian regimes of various varieties. A world fiat currency, then, would be the surest way to accelerate the development of a true global government and the accompanying destruction of national sovereignty. But to planetary currency enthusiasts, that is a non-issue.

Noting that there would be critics of the development of a world central bank, especially in America, Council on Foreign Relations insider and global fiat currency promoter Jeffrey Garten points out in an article for Newsweek, “Among their many charges, critics will protest the establishment of ‘world government.’ But we have a World Trade Organization with legally binding powers over trade disputes. We have a World Health Organization for communicable disease with the ability to quarantine entire countries. And a World Court functions today that has considerable legal and moral clout.” Dismissing critics protesting the establishment of a world government by pointing out that it already exists in rudimentary form is hardly likely to pacify those critics.

But what would a global currency really mean aside from the destruction of the dollar and the U.S. economy? “A global central bank would be a disaster,” financial guru Bob Chapman, editor of the International Forecaster, told The New American. “It means the acceptance of world slavery.” Chapman also pointed out that the present international monetary system was being deliberately destroyed precisely to bring about a global currency like the bancor. “It’s just not fiscal and monetary policy. It is every facet of your life that these elitists want to control.” And they’re moving rapidly toward that goal.

In addition to printing money, the emerging global central bank and its affiliates are already usurping other powers traditionally exercised at the national level. In his Newsweek article, Garten calls for the new planetary central bank to be the “lead regulator” of all sorts of financial institutions, monitor risks, push national authorities to “modify their policies,” coordinate national “stimulus programs,” orchestrate a “global-stimulus plan,” force taxpayers around the world to bail out companies, and even act as a bankruptcy court. The IMF, in its own report, called for global “imbalance” taxes, capital controls, and a true world financial regulatory regime. A lot of that is already coming into being, but as the new monetary order develops, the agenda will only accelerate.

And as if all that wasn’t bad enough, there is no accountability for this newly empowered IMF. Jim Rickards, the director of market intelligence for Omnis, explained that, while the IMF has articles of association and some governance rules, the true power structure behind it is the G20, which is “completely unaccountable.”

Options, Solutions
As the international monetary crisis unfolds with a collapsing dollar, there will need to be some sort of reforms. The question is which ones. Instead of “currency reform” coming “from the marble palaces of the monetary elites,” economist Lew Rockwell of the Mises Institute points out, “private currencies traders the world over could, on their own, give rise to a new currency rooted in gold and traded by means of digital media.” This would be far superior for numerous reasons, he argues. “Under a gold standard, the physical metal is the limit and the market is the master. Under a global paper system, the paper provides no limit whatsoever and the politicians are the masters.”

And indeed, while the elites push their fiat world currency, entrepreneurs have already been working on making gold a sort of currency without the need for government dictates. “Money was invented in pre-history by people interacting peacefully with one another to help improve their situation by trading. Money is not an invention of government,” explained James Turk, founder of GoldMoney, a company holding over a billion dollars in assets that allows customers to purchase, store, and trade precious metals. “There is a better solution. It was the one created by Sir Isaac Newton and given to King William III. We now call it the classical gold standard, which lasted from circa 1700 to 1914. If governments are to issue currency, it must be tied to gold. It is this link that provides essential discipline needed to rein in the aspirations of politicians to spend money, even money the government doesn’t have,” he told The New American, adding that the bankers pushing for a world fiat currency “will do everything they can to continue this special privilege that they have assumed for themselves.”

Omnis’ Rickards also has some ideas about how America can put a freeze on the emergence of the global paper currency: cuts in taxes and spending; higher interest rates to strengthen the dollar; and, eventually, getting back on the gold standard. “The U.S. is in the best position to go back to the gold standard,” he explained, pointing out that, with an estimated 8,000 tons, America has more gold than any other country. “The first country that goes to the gold standard will — in effect — dominate the world of finance because they will have the currency that everybody wants. ... Would you rather have a gold-backed dollar or a paper SDR?” What’s missing right now, he said, is just the political will to do it.

“What you’re going to see over the next few years is a global struggle between the forces who want to create new forms of paper and just give it a different name and a different issuer and continue to flood the world with paper liquidity and keep the game going on the one hand, versus people who will recognize that the only true form of money is gold and will start bidding up the price of gold against the dollar,” Rickards predicted.

John McManus, president of The John Birch Society, has a similar view of how to rectify the current situation without moving toward an international central bank to manage a global fiat currency. “If the currency is a commodity like gold or silver, it does not have to be managed. The free market place will manage it,” he explains in Dollars and Sense, a short video presentation on the monetary system. “Money should be a commodity valuable to all people; and there’s no management needed.”

It is ironic that the likely imminent collapse of the world’s current fiat “reserve currency” is being used as an excuse to implement a global fiat currency. But it is extremely serious. Escaping the elites’ clutches would become almost impossible as wealth is steadily transferred from humanity to the banking oligarchy and its ever-expanding global government. And so the scheme must be prevented.

Monday, September 20, 2010

Government Prepares To Seize Paychecks As Statist Cancer Explodes

Fresh round of economic fascism is about forcing us to beg big government for handouts in return for our own enslavement

Paul Joseph Watson & Alex Jones
Prison Planet.com
http://www.prisonplanet.com/government-prepares-to-seize-paychecks-as-statist-cancer-explodes.html
Monday, September 20, 2010

Forget big government – the same elite whose policies caused the financial collapse are now ready to launch the next phase of their fascist takeover of the economy – by forcing businesses to send employee paychecks straight to the government, who would then deduct the “appropriate tax” before the employee receives their wage, as the statist cancer of collectivism grows.

The proposal represents another hammer blow to financial privacy, as the establishment moves towards a total cashless society where every transaction is tracked, traced and controlled by the authorities.

“The UK’s tax collection agency is putting forth a proposal that all employers send employee paychecks to the government, after which the government would deduct what it deems as the appropriate tax and the pay the employee’s by bank transfer,” reports CNBC.

The system would be run by the same organization, Her Majesty’s Revenue and Customs (HMRC), that has become notorious for its botched handling of data and incorrect tax calculations which have forced people to spend months and even years trying to claim back unfairly claimed money seized by the taxman.

But this story is about far more than the threat of mere bureaucracy or bumbling incompetence – this is about the system exploiting the economic crisis it caused as a pretext to completely dominate and control our lives.

This is about the state handing itself the power to arbitrarily raise taxes to any level it desires and then automatically seizing the money with no chance of redress or petition on behalf of the taxpayer.

Allied to the proposal will be a new program that will force middle-class families to take government “lie detector tests,” which are notoriously unreliable and inadmissible in court, as part of intrusive tax investigations into their financial affairs.

Prime Minister David Cameron and his side-kick Nick Clegg’s promise to deconstruct the Big Brother state in Britain has proven to be completely fraudulent. This is Big Brother on steroids, and it mimics a myriad of other programs on both sides of the pond that are being enforced as part of the same move towards total regulation and control over every aspect of our existence.

- Local tax authorities such as Pennsylvania telling residents “we know where you live” and threatening to use satellite imaging technology to track them down for claimed back taxes.

- So-called “smart-meters” being introduced by law to allow utility companies and the government to regulate energy consumption remotely.

- Government plans to dictate what kind of household appliances people are allowed to own and what kind of light bulbs we can use.

- Fees and restrictions on garage sales and any kind of independent, local community-driven economic activity.

- Legislation aimed at preventing people from sharing, trading, or selling homegrown food, as part of a total Homeland Security takeover of all U.S. food and U.S. farms.

Every new assault the state launches against us is focused around increasing our dependence on Big Brother and making us destitute and unable to survive without welfare.

People in the United Kingdom and the United States need to understand that their governments are malevolent and that their primary purpose is to obliterate the middle class by forcing them to become dependent on the state. As the cost of living soars, as tax hikes go through the roof, and as austerity fascism starts to bite, governments are now moving to prevent people from becoming self-sufficient, dashing the only hope of avoiding poverty for many.

Allied with the march of green fascism, the economic crisis has been ruthlessly exploited by the elite to empower the state to wholly subjugate the people under the thumb of big government. Every step they take is about enriching themselves politically and financially, while ensuring our only recourse is to beg for handouts in return for allowing ourselves to become slaves whose every action is controlled, catalogued, judged and punished by our new masters on the global plantation.

*********************

Paul Joseph Watson is the editor and writer for Prison Planet.com. He is the author of Order Out Of Chaos. Watson is also a fill-in host for The Alex Jones Show. Watson has been interviewed by many publications and radio shows, including Vanity Fair and Coast to Coast AM, America’s most listened to late night talk show.

Friday, September 3, 2010

Death By Globalism

Paul Craig Roberts
GCN Live.com
http://www.gcnlive.com/wp/2010/09/02/death-by-globalism/
September 2, 2010

Have economists made themselves irrelevant? If you have any doubts, have a look at the current issue of the magazine, International Economy, a slick endorsed by former Federal Reserve chairmen Paul Volcker and Alan Greenspan, by Jean-Claude Trichet, president of the European Central Bank, by former Secretary of State George Shultz, and by the New York Times and Washington Post, both of which declare the magazine to be “ahead of the curve.”

The main feature of the current issue is “The Great Stimulus Debate.” Is the Obama fiscal stimulus helping the economy or hindering it?

Princeton economics professor and New York Times columnist Paul Krugman and Moody’s Analytics chief economist Mark Zandi represent the Keynesian view that government deficit spending is needed to lift the economy out of recession. Zandi declares that thanks to the fiscal stimulus, “The economy has made enormous progress since early 2009,” an opinion shared by the President’s Council of Economic Advisors and the Congressional Budget Office.

The opposite view, associated with Harvard economics professor Robert Barro and with European economists, such as Francesco Giavazzi and Marco Pagano and the European Central Bank, is that government budget surpluses achieved by cutting government spending spur the economy by reducing the ratio of debt to Gross Domestic Product. This is the “let them eat cake school of economics.”

Barro says that fiscal stimulus has no effect, because people anticipate the future tax increases implied by government deficits and increase their personal savings to offset the added government debt. Giavazzi and Pagano reason that since fiscal stimulus does not expand the economy, fiscal austerity consisting of higher taxes and reduced government spending could be the cure for unemployment.

If one overlooks the real world and the need of life for sustenance, one can become engrossed in this debate. However, the minute one looks out the window upon the world, one realizes that cutting Social Security, Medicare, Medicaid, food stamps, and housing subsidies when 15 million Americans have lost jobs, medical coverage, and homes is a certain path to death by starvation, curable diseases, and exposure, and the loss of the productive labor inputs from 15 million people. Although some proponents of this anti-Keynesian policy deny that it results in social upheaval, Gerald Celente’s observation is closer to the mark: “When people have nothing left to lose, they lose it.”

The Krugman Keynesian school is just as deluded. Neither side in “The Great Stimulus Debate” has a clue that the problem for the U.S. is that a large chunk of U.S. GDP and the jobs, incomes, and careers associated with it, have been moved offshore and given to Chinese, Indians, and others with low wage rates. Profits have soared on Wall Street, while job prospects for the middle class have been eliminated.

The offshoring of American jobs resulted from (1) Wall Street pressures for “higher shareholder returns,” that is, for more profits, and from (2) no-think economists, such as the ones engaged in the debate over fiscal stimulus, who mistakenly associated globalism with free trade instead of with its antithesis–the pursuit of lowest factor cost abroad or absolute advantage, the opposite of comparative advantage, which is the basis for free trade theory. Even Krugman, who has some credentials as a trade theorist has fallen for the equation of globalism with free trade.

As economists assume, incorrectly according to the latest trade theory by Ralph Gomory and William Baumol, that free trade is always mutually beneficial, economists have failed to examine the devastatingly harmful effects of offshoring. The more intelligent among them who point it out are dismissed as “protectionists.”

The reason fiscal stimulus cannot rescue the U.S. economy has nothing to do with the difference between Barro and Krugman. It has to do with the fact that a large percentage of high-productivity, high-value-added jobs and the middle class incomes and careers associated with them have been given to foreigners. What used to be U.S. GDP is now Chinese, Indian, and other country GDP.

When the jobs have been shipped overseas, fiscal stimulus does not call workers back to work in order to meet the rising consumer demand. If fiscal stimulus has any effect, it

stimulates employment in China and India.

The “let them eat cake school” is equally off the mark. As investment, research, development, etc., have been moved offshore, cutting entitlements simply drives the domestic population deeper in the ground. Americans cannot pay their mortgages, car payments, tuition, utility bills, or for that matter, any bill, based on Chinese and Indian pay scales. Therefore, Americans are priced out of the labor market and become dependencies of the federal budget. “Fiscal consolidation” means writing off large numbers of humans.

During the Great Depression, many wage and salary earners were new members of the labor force arriving from family farms, where many parents and grandparents still supported themselves. When their city jobs disappeared, many could return to the farm.

Today farming is in the hands of agri-business. There are no farms to which the unemployed can return.

The “let them eat cake school” never mentions the one point in its favor. The U.S., with all its huffed up power and importance, depends on the U.S. dollar as reserve currency. It is this role of the dollar that allows America to pay for its imports in its own currency.

For a country whose trade is as unbalanced as America’s, this privilege is what keeps the country afloat.

The threats to the dollar’s role are the budget and trade deficits. Both are so large and have accumulated for so long that the prospect of making good on them has evaporated. As I have written for a number of years, the U.S. is so dependent on the dollar as reserve currency that it must have as its main policy goal to preserve that role.

Otherwise, the U.S., an import-dependent country, will be unable to pay for its excess of imports over its exports.

“Fiscal consolidation,” the new term for austerity, could save the dollar. However, unless starvation, homelessness and social upheaval are the goals, the austerity must fall on the military budget. America cannot afford its multi-trillion dollar wars that serve only to enrich those invested in the armaments industries. The U.S. cannot afford the neoconservative dream of world hegemony and a conquered Middle East open to Israeli colonization.

Is anyone surprised that not a single proponent of the “let them eat cake school” mentions cutting military spending? Entitlements, despite the fact that they are paid for by earmarked taxes and have been in surplus since the Reagan administration, are always what economists put on the chopping bloc.

Where do the two schools stand on inflation vs. deflation? We don’t have to worry. Martin Feldstein, one of America’s pre-eminent economist says: “The good news is that investors should worry about neither.” His explanation epitomizes the insouciance of American economists.

Feldstein says that there cannot be inflation because of the high rate of unemployment and the low rate of capacity utilization. Thus, “there is little upward pressure on wages and prices in the United States.” Moreover, “the recent rise in the value of the dollar relative to the euro and British pound helps by reducing import costs.”

As for deflation, no risk there either. The huge deficits prevent deflation, “so the good news is that the possibility of significant inflation or deflation during the next few years is low on the list of economic risks faced by the U.S. economy and by financial investors.”

What we have in front of us is an unaware economics profession. There may be some initial period of deflation as stock and housing prices decline with the economy, which is headed down and not up. The deflation will be short lived, because as the government’s deficit rises with the declining economy, the prospect of financing a $2 trillion annual deficit evaporates once individual investors have completed their flight from the stock market into “safe” government bonds, once the hyped Greek, Spanish, and Irish crises have driven investors out of euros into dollars, and once the banks’ excess reserves created by the bailout have been used up in the purchase of Treasuries.

Then what finances the deficit? Don’t look for an answer from either side of The Great Stimulus Debate. They haven’t a clue despite the fact that the answer is obvious.

The Federal Reserve will monetize the federal government deficit. The result will be high inflation, possibly hyper-inflation and high unemployment simultaneously.

The no-think economics establishment has no policy response for economic armageddon, assuming they are even capable of recognizing it.

Economists who have spent their professional lives rationalizing “globalism” as good for America have no idea of the disaster that they have wrought.

Dr. Paul Craig Roberts is the father of Reaganomics and the former head of policy at the Department of Treasury. He is a columnist and was previously an editor for the Wall Street Journal. His latest book, “How the Economy Was Lost: The War of the Worlds,” details why America is disintegrating.

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