Peace and Justice Post

By Michael Schwartz | Asia Times, Oct 25, 2008

Even before the spectacular presidential election campaign became a national obsession, and the worst economic crisis since the Great Depression crowded out other news, coverage of the Iraq War had dwindled to next to nothing. National newspapers had long since discontinued their daily feasts of multiple – usually front page – reports on the country, replacing them with meager meals of mostly summary stories buried inside the paper. On broadcast and cable TV channels, where violence in Iraq had once been the nightly lead, whole news cycles went by without a mention of the war.

The tone of the coverage also changed. The powerful reports of desperate battles and miserable Iraqis disappeared. There are still occasional stories about high-profile bombings or military campaigns in obscure places, but the bulk of the news is about quiescence in old hot spots, political maneuvering by Iraqi factions, and the newly emerging routines of ordinary life.

A typical “return to normal life” piece appeared October 11 in the New York Times under the headline, “Schools Open, and the First Test is Iraqi Safety.” Featured was a Baghdad schoolteacher welcoming her students by assuring them that “security has returned to Baghdad, city of peace”.

Even as his report began, though, Times reporter Sam Dagher hedged the “return to normal” theme. Here was his first paragraph in full:

On the first day of school, 10-year-old Basma Osama looked uneasy standing in formation under an already stifling morning sun. She and dozens of schoolmates listened to a teacher’s pep talk – probably a necessary one, given the barren and garbage-strewn playground.

This glimpse of the degraded conditions at one Baghdad public school, amplified in the body of Dagher’s article by other examples, is symptomatic of the larger reality in Iraq. In a sense, the (often exaggerated) decline in violence in that country has allowed foreign reporters to move around enough to report on the real conditions facing Iraqis, and so should have provided US readers with a far fuller picture of the devastation George Bush’s war wrought.

In reality, though, since there are far fewer foreign reporters moving around a quieter Iraq, far less news is coming out of that wrecked land. The major newspapers and networks have drastically reduced their staffs there and – with a relative trickle of exceptions like Dagher’s fine report – what’s left is often little more than a collection of pronouncements from the US military, or Iraqi and American political leaders in Baghdad and Washington, framing the American public’s image of the situation there.

In addition, the devastation that is now Iraq is not of a kind that can always be easily explained in a short report, nor for that matter is it any longer easily repaired. In many cities, an American reliance on artillery and air power during the worst days of fighting helped devastate the Iraqi infrastructure. Political and economic changes imposed by the American occupation did damage of another kind, often depriving Iraqis not just of their livelihoods but of the very tools they would now need to launch a major reconstruction effort in their own country.

As a consequence, what was once the most advanced Middle Eastern society – economically, socially, and technologically – has become an economic basket case, rivaling the most desperate countries in the world. Only the (as yet unfulfilled) promise of oil riches, which probably cannot be effectively accessed or used until US forces withdraw from the country, provides a glimmer of hope that Iraq will someday lift itself out of the abyss into which the US invasion pushed it.

Consider only a small sampling of the devastation.

The Economy: Fundamental to the American occupation was the desire to annihilate Saddam Hussein’s Ba’athists state apparatus and the economic system it commanded. A key aspect of this was the closing down of the vast majority of state-owned economic enterprises (with the exception of those involved in oil extraction and electrical generation).

In all, 192 establishments, adding up to 35% of the Iraqi economy, were shuttered in the summer and fall of 2003. These included basic manufacturing processes like leather tanning and tractor assembly that supplied other sectors, transportation firms that dominated national commerce, and maintenance enterprises that housed virtually all the technicians and engineers qualified to service the electrical, water, oil, and other infrastructure systems in the country.

Justified as the way to bring a modern free-enterprise system to backward Iraq, this draconian program was put in place by the president’s proconsul in Baghdad, L Paul Bremer III. The result? An immediate depression that only deepened in the years to follow.

One measure of this policy’s impact can be found in the demise of the leather goods industry, a key pre-invasion sector of Iraq’s non-petroleum economy. When a government-owned tanning operation, which all by itself employed 30,000 workers and supplied leather to an entire industry, was shuttered in late 2003, it deprived shoe-makers and other leather goods establishments of their key resource. Within a year, employment in the industry had dropped from 200,000 workers to a mere 20,000.

By the time Bremer left Iraq in the spring of 2004, the inhabitants of many cities faced 60% unemployment. Meanwhile, the country’s agriculture, a key component of its economy, was also victimized by the dismantling of government establishments and services. The lush farming areas between the Tigris and Euphrates rivers suffered badly. The once-thriving date palm industry was a typical casualty. It suffered deadly infestations of pests when the occupation eliminated a government-run insecticide spraying program. Even oil refinery-based industrial towns like Baiji became cities of slums when plants devoted to non-petroleum activities were shuttered.

This economic devastation fueled the insurgency by generating desperation, anger, and willing recruits. The explosion of resistance, in turn, tended to obscure – at least for Western news services – the desperate circumstances under which ordinary Iraqis labored.

As violence has subsided in Baghdad and elsewhere, demands for relief have come to the fore. These are not easily answered by a still largely non-functional central government in Baghdad whose administrative and economic apparatus was long ago dismantled, and many of whose key technical personnel had fled into exile. Meanwhile, in early 2006, the American occupation declared that further reconstruction work would be the responsibility of Iraqis. It is not clear into what channels the growing discontent over an economy that remains largely in the tank and a government that still cannot deliver ordinary services will flow.

Electricity: A critical factor in Iraq’s collapse has been its decaying electrical grid. In areas where the insurgency raged, facilities involved in producing and transmitting electricity were targeted, both by the insurgents and US forces, each trying to deprive the other of needed resources. In addition, Bremer eliminated the government-owned maintenance and engineering enterprises that had been holding the electrical system together ever since the UN sanctions regime after the 1991Gulf War deprived Iraq of material needed to repair and upgrade its facilities. Maintenance and replacement contracts were given instead to multinational companies with little knowledge of the existing system and – due to cost-plus contracting – every incentive to replace facilities with their own proprietary technology. In the meantime, many Iraqi technicians left the country.

The successor Iraqi governments, deprived of the capacity to manage the system’s reconstruction, continued the US occupation policy of contracting with foreign companies. Even in areas of the country relatively unaffected by the fighting, those companies did the lucrative thing, replacing entire sections of the electric grid, often with inappropriate but exquisitely expensive equipment and technology.

A combination of factors – including pressure from the insurgency, the soaring costs of security, and an almost unparalleled record of endemic waste and corruption – led to costs well beyond those originally offered for the already overpriced projects. Many were then abandoned before completion as funding ran out. Completed projects were often shabbily done and just as often proved incompatible with existing facilities, introducing new inefficiencies.
In one altogether-too-typical case, Bechtel installed 26 natural gas turbines in areas where no natural gas was available. The turbines were then converted to oil, which reduced their capacity by 50% and led to a rapid sludge build-up in the equipment requiring expensive maintenance no Iraqi technicians had been trained to perform. In location after location, the turbines became inoperative.

Even before the invasion, the decrepit electrical system could not meet national demand. No province had uninterrupted service and certain areas had far less than 12 hours of service per day. The vast investments by the occupation and its successor regimes have increased electrical capacity since the invasion of 2003, but these gains have not come close to keeping up with skyrocketing demand created by the presence of hundreds of thousands of troops, private security personnel, and occupation officials, as well as by the introduction of all manner of electronic devices and products in the post-invasion period.

Continued . . .

Nobel Peace Prize winner Martti Ahtisaari said Saturday it is a disgrace that the international community has not managed to resolve the conflict in the Middle East, blaming the failure on a lack of political will. “How can we, year after year, seriously say that we are trying to reach a solution when we aren’t?” he asked. “I’m ashamed, I have to admit that.”

In the interview, Ahtisaari criticized the Western boycott of the Palestinian militant group Hamas, and said it may soon be time to admit that, “we have to speak with the Taliban” in Afghanistan instead of just sending troops to the country. (AP)

Tariq Al-Maeena |Arab News, Oct 25, 2008

At an international conference in London dubbed “Terrorism: Alternative global perspectives”, Alan Hart, the author of “Zionism: the Real Enemy of the Jews”, stated, “The United States is supporting Israeli-sponsored terrorism in the Middle East.”

Speaking at the conference organized by the Center for the Study of Terrorism (CFSOT) in London to explore the comprehensive effects of the US “global war on terror”, he added that the Israeli regime, with blanket approval of Washington “simply ignores the United Nations resolutions concerning the violation of Palestinians’ rights”.

Hart, a noted British expert on Middle East affairs and a former television executive who once held the post of controller of BBC One, expressed alarm at the pro-Israeli bias in the Western media when it comes to reporting on the developments in the Middle East.

“The world is falling apart. There is only one way to confront with the double standards of the West and that is informing people about the realities of the history,” he said.

He noted that for the past six decades after the creation of the State of Israel, the United States had blocked most anti-Israel resolutions at the Security Council, in spite of the Jewish state’s gross and often barbaric violations against the Palestinians. The injustice against Palestinians had no parallels in history.

Referring to the Palestinian-Israeli conflict, he described it as analogous to the long drawn-out British-Irish conflict whereby the British government moved the Scottish people in Northern Ireland to occupy it gradually. “A similar situation exists in Palestine where the Jews are occupying Muslim lands,” he said, placing the blame squarely on the shoulders of then British Premier Tony Blair’s foreign policy and his close alliance with the US President George W. Bush for spreading terrorism and extremism across the world.

Urging Muslims to stand against Islamophobia “which is currently spreading across the world”, Hart expressed his concern that Iran was becoming a victim of collusion among the policymakers in Washington, London and Tel Aviv. “It is constantly targeted by the propaganda war of the US media,” he said.

In his latest book, “Zionism: The Real Enemy of the Jews”, Hart expands on how such a collusion is leading to a clash between civilizations and how it could be prevented. He is a firm believer of the notion that what peacemaking needs above all else is some truth, “about many things but, especially, the difference between Zionist mythology and real history, and, the difference between Judaism and Zionism and thus why it is perfectly possible to be passionately anti-Zionist without being in any way, shape or form anti-Semitic.”

Hart’s words should be seriously studied by those who would like to get to the truth behind Middle East politics and understand how the US has gradually fallen from grace among the Arab masses. Of course what he says comes as no surprise to most of us in the region.

A fiercely independent thinker, Hart has held many private conversations with key players on both sides of the Arab-Israeli conflict including Golda Meir, Shimon Peres and Yasser Arafat. During Carter’s presidency, Alan Hart established covert diplomatic channels to initiate an exploratory dialogue between Arafat and Peres as the US administration found it difficult to advance the peace process by institutional diplomacy because of the Zionist lobby’s awesome influence on American politics and politicians.

When asked if the Israeli lobby would not seek to discredit him as they had done with many scholars before him, Hart’s answer was: “I have three children and, when the world falls apart, I want to be able to look them in the eye and say, ‘Don’t blame me. I tried.’”

Hell, he says, “is when you know that the end of your life is approaching and that you have not used your talents and resources as well as you could have done to make a difference — i.e. when you realize upon reflection that you have wasted your life. Heaven is contemplation of the approach of death without fear because you know that, on balance, you’ve done your best to make a difference.”

It is statement that admits of no equivocation, one that should be carefully considered by the two politicians currently vying for the US presidency.

By Roy Gutman | McClatchy Newspapers, Oct 24, 2008

♦Part 34

Kashmir Watch, October 24

By Dr. Abdul Ruff Colachal

Indian mindset of annexation is too great and nasty that its neighbors should be really worried about the long term implications, Manmohan has done enough damage, i.e., ground work for the growth of capitalism and imperialism in the country and his successors would pursue the same further, but the communal forces operating under the garb of political outfits would destroy the country. The communal elements would be let come to power by Congress party that has anti-Muslim agenda.  India’s continued occupation of Jammu Kashmir Is not in the interest of the neither the region nor SAARC welfare and its heavy armament programs under US shield is a sign of Indian hidden destructive intents.

Indian Polls for Terror Legitimacy

The poll preparations in JK by the terrorist illegal Indian occupants have begun in the state, disregarding opposition by the people. Only Reserve Bank money bags are yet to arrive from different political parties from India and Indian government.

India is still looking for avenues to invade and annex some more alien lands and credited to Indian Union account. South Asia should be beware of Indian Weaponization programs with the help of the global terrorist sate USA. Historically speaking, fascism, like capitalism and imperialism both classic and neo-, does not admit any scope for counseling or advise and it needs to routed completely, as Soviet Russia did to German fascism  thereby closing the disastrous WWII.

Terrorist colonizer India has been trying all tricks learnt from the former colonizer UK to silence the unwilling Kashmiris who demand freedom form Indian genocide and military rule through a band of pro-Indian elements controlled by India brute forces. Knowing fully well the present critical situation in JK, and overlooking the recent pro-freedom protests in Kashmir valley, the Election Commission has decided to hold elections in the state in seven phases so that Indian terror forces could effectively control and terrorize the defenseless Kashmiris. The last phase elections would be held on December 24.

In fact, most of the mainstream parties too had called for the postponement of the assembly elections in state saying time is not ripe for the poll process. Even as People’s Democratic Party (PDP) openly said it would not favor elections in the state, its rival National Conference, unsure of winning the polls, was in dilemma over the poll issue and wanted Election Commission to immediately decide in favor of or against holding the elections. The Indian communal national political party, BJP, however, was strongly advocating for timely polls in the state so as to make most of the communal sentiment it succeeded in whipping up in the winter capital of the state.

The announcement of the polls in J and K has come as a surprise to the people of valley, who feel that it is not the opportune time for elections as the valley has witnessed the biggest pro-independence demonstration of the last two decades. Now that the poll dates have been announced, regional political parties have come out with their response. As expected the pro-India politicians have welcomed the Indian move.  Welcoming the announcement of elections in the state National Conference (NC) president Omar Abdullah said he was glad that the suspense over the announcement of polls ended. “How good or bad the decision is, time will tell. Now we can think to get down to the process of electioneering”.

As expected, the freedom movement leaders whom the Indian as well as Kashmir media shameless call, without knowing the history of Jammu Kashmir, as so-called “separatists” although it India which plays the separatist and destructive role in Jammu Kashmir,  have shown strong resentment towards the decision. All Parties Hurriat Conference has rightly described the announcement as another election drama in Jammu & Kashmir. Chairman Side Ali Gianni, who is currently undergoing treatment at New Delhi, has said elections are meaningless for the people of Kashmir till they achieved freedom. While the Chairman of Jammu and Kashmir Liberation Front, Mohammad Basin Mali said that the struggle of Kashmiri people was aimed at resolving the Kashmir dispute and not for holding elections.  Another leader Midways Omar Faros said the periodical elections for the Jammu & Kashmir Assembly and Indian Parliament could not provide any solution to the Kashmir imbroglio.

No doubt, Senior most Hurriat leader Syed Ali Geelani has become symbol of freedom movement for his principled stand and assured all out support to him on behalf of the British Kashmiri community. In Kashmir October 27 will be observed as Black Day to convey to the international community that Kashmiris reject India’s illegal occupation of Jammu and Kashmir. Similarly the Kashmiri Diaspora has decided to mark the day as protest day to force occupying “democratic” India to vacate Jammu Kashmir voluntarily. Three-e-Kashmir UK has appealed to Pakistani and Kashmiri community to join the organization at an anti- India rally to be held in front of Indian High Commission in London on the occasion of 61st anniversary of Kashmir’s military occupation. People of Kashmir have brought the freedom movement to present stage by offering 100,000 precious lives and they will continue to offer more sacrifices till the desired goal is achieved. They paid great tribute to Geelani for leading the Kashmiri peoples’ struggle with courage and determination.

Continued . . .

REUTERS
Reuters North American News Service

Oct 24, 2008 02:41 EST

SRINAGAR, India, Oct 24 (Reuters) – Shops, businesses and schools closed in Kashmir’s main city on Friday after a strike by separatists to press for the implementation of a U. N. resolution requesting a referendum over the disputed Himalayan region.

The strike coincided with United Nations Day on Friday.

The United Nations adopted a resolution in 1948 calling for a referendum for Kashmir to determine whether the area should be part of India and Pakistan.

“I appeal to people to observe a complete strike on United Nations day to press for implementation of U. N. resolutions over Kashmir,” hardline separatist leader, Syed Ali Shah Geelani, said in a statement.

The past two months have witnessed some of the biggest anti-India protests in Kashmir since a separatist revolt against New Delhi’s rule broke out nearly twenty years ago.

The strike also closed banks and most of the government offices in Srinagar, Kashmir’s summer capital, where roads were deserted except for security patrols.

Life in Srinagar, a city of 1.1 million people, is frequently disrupted by strikes and protests over separatist causes.

“We will never bow to the suppression and occupation of Indian rule, and I think today we should protest and remind the United Nations of its promise,” said Abdul Hamid, a shopkeeper in Srinagar.

Tens of thousands of people have been killed since simmering discontent against Indian rule turned into a full-blown rebellion in 1989.

Violence involving Indian troops and separatist guerrillas has declined significantly since India and Pakistan, which both claim the region, began a slow-moving peace process in 2004.

But people are still killed in almost daily fighting between militants and soldiers.

Three militants were killed in separate gun battles with soldiers in the past 24 hours, police said. (Reporting by Sheikh Mushtaq; Editing by Alistair Scrutton and Paul Tait)

Source: Reuters North American News Service

How to Reverse the Tide and Democratize the US Monetary System

by Ellen Brown | Global Research, Oct 17, 2008

“Admit it, mes amis, the rugged individualism and cutthroat capitalism that made America the land of unlimited opportunity has been shrink-wrapped by half a dozen short sellers in Greenwich, Conn., and FedExed to Washington, D.C., to be spoon-fed back to life by Fed Chairman Ben Bernanke and Treasury Secretary Hank Paulson. We’re now no different from any of those Western European semi-socialist welfare states that we love to deride.”– Bill Saporito, “How We Became the United States of France,” Time (September 21, 2008)

On October 15, the Presidential candidates had their last debate before the election. They talked of the baleful state of the economy and the stock market; but omitted from the discussion was what actually caused the credit freeze, and whether the banks should be nationalized as Treasury Secretary Hank Paulson is now proceeding to do. The omission was probably excusable, since the financial landscape has been changing so fast that it is hard to keep up. A year ago, the Dow Jones Industrial Average broke through 14,000 to make a new all-time high. Anyone predicting then that a year later the Dow would drop nearly by half and the Treasury would move to nationalize the banks would have been regarded with amused disbelief. But that is where we are today.¹

Congress hastily voted to approve Treasury Secretary Hank Paulson’s $700 billion bank bailout plan on October 3, 2008, after a tumultuous week in which the Dow fell dangerously near the critical 10,000 level. The market, however, was not assuaged. The Dow proceeded to break through not only 10,000 but then 9,000 and 8,000, closing at 8,451 on Friday, October 10. The week was called the worst in U.S. stock market history.

On Monday, October 13, the market staged a comeback the likes of which had not been seen since 1933, rising a full 11% in one day. This happened after the government announced a plan to buy equity interests in key banks, partially nationalizing them; and the Federal Reserve led a push to flood the global financial system with dollars.

The reversal was dramatic but short-lived. On October 15, the day of the Presidential debate, the Dow dropped 733 points, crash landing at 8,578. The reversal is looking more like a massive pump and dump scheme – artificially inflating the market so insiders can get out – than a true economic rescue. The real problem is not in the much-discussed subprime market but is in the credit market, which has dried up. The banking scheme itself has failed. As was learned by painful experience during the Great Depression, the economy cannot be rescued by simply propping up failed banks. The banking system itself needs to be overhauled.

A Litany of Failed Rescue Plans

Credit has dried up because many banks cannot meet the 8% capital requirement that limits their ability to lend. A bank’s capital – the money it gets from the sale of stock or from profits – can be fanned into more than 10 times its value in loans; but this leverage also works the other way. While $80 in capital can produce $1,000 in loans, an $80 loss from default wipes out $80 in capital, reducing the sum that can be lent by $1,000. Since the banks have been experiencing widespread loan defaults, their capital base has shrunk proportionately.

The bank bailout plan announced on October 3 involved using taxpayer money to buy up mortgage-related securities from troubled banks. This was supposed to reduce the need for new capital by reducing the amount of risky assets on the banks’ books. But the banks’ risky assets include derivatives – speculative bets on market changes – and derivative exposure for U.S. banks is now estimated at a breathtaking $180 trillion.² The sum represents an impossible-to-fill black hole that is three times the gross domestic product of all the countries in the world combined. As one critic said of Paulson’s roundabout bailout plan, “this seems designed to help Hank’s friends offload trash, more than to clear a market blockage.”³

By Thursday, October 9, Paulson himself evidently had doubts about his ability to sell the plan. He wasn’t abandoning his old cronies, but he soft-pedaled that plan in favor of another option buried in the voluminous rescue package – using a portion of the $700 billion to buy stock in the banks directly. Plan B represented a controversial move toward nationalization, but it was an improvement over Plan A, which would have reduced capital requirements only by the value of the bad debts shifted onto the government’s books. In Plan B, the money would be spent on bank stock, increasing the banks’ capital base, which could then be leveraged into ten times that sum in loans. The plan was an improvement but the market was evidently not convinced, since the Dow proceeded to drop another thousand points from Thursday’s opening to Friday’s close.

One problem with Plan B was that it did not really mean nationalization (public ownership and control of the participating banks). Rather, it came closer to what has been called “crony capitalism” or “corporate welfare.” The bank stock being bought would be non-voting preferred stock, meaning the government would have no say in how the bank was run. The Treasury would just be feeding the bank money to do with as it would. Management could continue to collect enormous salaries while investing in wildly speculative ventures with the taxpayers’ money. The banks could not be forced to use the money to make much-needed loans but could just use it to clean up their derivative-infested balance sheets. In the end, the banks were still liable to go bankrupt, wiping out the taxpayers’ investment altogether. Even if $700 billion were fanned into $7 trillion, the sum would not come close to removing the $180 trillion in derivative liabilities from the banks’ books. Shifting those liabilities onto the public purse would just empty the purse without filling the derivative black hole.

Plan C, the plan du jour, does impose some limits on management compensation. But the more significant feature of this week’s plan is the Fed’s new “Commercial Paper Funding Facility,” which is slated to be operational on October 27, 2008. The facility would open the Fed’s lending window for short-term commercial paper, the money corporations need to fund their day-to-day business operations. On October 14, the Federal Reserve Bank of New York justified this extraordinary expansion of its lending powers by stating:

“The CPFF is authorized under Section 13(3) of the Federal Reserve Act, which permits the Board, in unusual and exigent circumstances, to authorize Reserve Banks to extend credit to individuals, partnerships, and corporations that are unable to obtain adequate credit accommodations. . . .

“The U.S. Treasury believes this facility is necessary to prevent substantial disruptions to the financial markets and the economy and will make a special deposit at the New York Fed in support of this facility.”⁴

That means the government and the Fed are now committing even more public money and taking on even more public risk. The taxpayers are already tapped out, so the Treasury’s “special deposit” will no doubt come from U.S. bonds, meaning more debt on which the taxpayers have to pay interest. The federal debt could wind up running so high that the government loses its own triple-A rating. The U.S. could be reduced to Third World status, with “austerity measures” being imposed as a condition for further loans, and hyperinflation running the dollar into oblivion. Rather than solving the problem, these “rescue” plans seem destined to make it worse.

The Collapse of a 300 Year Ponzi Scheme

All the king’s men cannot put the private banking system together again, for the simple reason that it is a Ponzi scheme that has reached its mathematical limits. A Ponzi scheme is a form of pyramid scheme in which new investors must continually be sucked in at the bottom to support the investors at the top. In this case, new borrowers must continually be sucked in to support the creditors at the top. The Wall Street Ponzi scheme is built on “fractional reserve” lending, which allows banks to create “credit” (or “debt”) with accounting entries. Banks are now allowed to lend from 10 to 30 times their “reserves,” essentially counterfeiting the money they lend. Over 97 percent of the U.S. money supply (M3) has been created by banks in this way.⁵ The problem is that banks create only the principal and not the interest necessary to pay back their loans. Since bank lending is essentially the only source of new money in the system, someone somewhere must continually be taking out new loans just to create enough “money” (or “credit”) to service the old loans composing the money supply. This spiraling interest problem and the need to find new debtors has gone on for over 300 years — ever since the founding of the Bank of England in 1694 – until the whole world has now become mired in debt to the bankers’ private money monopoly. As British financial analyst Chris Cook observes:

“Exponential economic growth required by the mathematics of compound interest on a money supply based on money as debt must always run up eventually against the finite nature of Earth’s resources.”⁶

The parasite has finally run out of its food source. But the crisis is not in the economy itself, which is fundamentally sound – or would be with a proper credit system to oil the wheels of production. The crisis is in the banking system, which can no longer cover up the shell game it has played for three centuries with other people’s money. Fortunately, we don’t need the credit of private banks. A sovereign government can create its own.

The New Deal Revisited

Today’s credit crisis is very similar to that facing Franklin Roosevelt in the 1930s. In 1932, President Hoover set up the Reconstruction Finance Corporation (RFC) as a federally-owned bank that would bail out commercial banks by extending loans to them, much as the privately-owned Federal Reserve is doing today. But like today, Hoover’s plan failed. The banks did not need more loans; they were already drowning in debt. They needed customers with money to spend and to invest. President Roosevelt used Hoover’s new government-owned lending facility to extend loans where they were needed most – for housing, agriculture and industry. Many new federal agencies were set up and funded by the RFC, including the HOLC (Home Owners Loan Corporation) and Fannie Mae (the Federal National Mortgage Association, which was then a government-owned agency). In the 1940s, the RFC went into overdrive funding the infrastructure necessary for the U.S. to participate in World War II, setting the country up with the infrastructure it needed to become the world’s industrial leader after the war.

The RFC was a government-owned bank that sidestepped the privately-owned Federal Reserve; but unlike the private banks with which it was competing, the RFC had to have the money in hand before lending it. The RFC was funded by issuing government bonds (I.O.U.s or debt) and relending the proceeds. The result was to put the taxpayers further into debt. This problem could be avoided, however, by updating the RFC model. A system of public banks might be set up that had the power to create credit themselves, just as private banks do now. A public bank operating on the private bank model could fan $700 billion in capital reserves into $7 trillion in public credit that was derivative-free, liability-free, and readily available to fund all those things we think we don’t have the money for now, including the loans necessary to meet payrolls, fund mortgages, and underwrite public infrastructure.

Credit as a Public Utility

“Credit” can and should be a national utility, a public service provided by the government to the people it serves. Many people are opposed to getting the government involved in the banking system, but the fact is that the government is already involved. A modern-day RFC would actually mean less government involvement and a more efficient use of the already-earmarked $700 billion than policymakers are talking about now. The government would not need to interfere with the private banking system, which could carry on as before. The Treasury would not need to bail out the banks, which could be left to those same free market forces that have served them so well up to now. If banks went bankrupt, they could be put into FDIC receivership and nationalized. The government would then own a string of banks, which could be used to service the depository and credit needs of the community. There would be no need to change the personnel or procedures of these newly-nationalized banks. They could engage in “fractional reserve” lending just as they do now. The only difference would be that the interest on loans would return to the government, helping to defray the tax burden on the populace; and the banks would start out with a clean set of books, so their $700 billion in startup capital could be fanned into $7 trillion in new loans. This was the sort of banking scheme used in Benjamin Franklin’s colony of Pennsylvania, where it worked brilliantly well. The spiraling-interest problem was avoided by printing some extra money and spending it into the economy for public purposes. During the decades the provincial bank operated, the Pennsylvania colonists paid no taxes, there was no government debt, and inflation did not result.⁷

Like the Pennsylvania bank, a modern-day federal banking system would not actually need “reserves” at all. It is the sovereign right of a government to issue the currency of the realm. What backs our money today is simply “the full faith and credit of the United States,” something the United States should be able to issue directly without having to draw on “reserves” of its own credit. But if Congress is not prepared to go that far, a more efficient use of the earmarked $700 billion than bailing out failing banks would be to designate the funds as the “reserves” for a newly-reconstituted RFC.

Rather than creating a separate public banking corporation called the RFC, the nation’s financial apparatus could be streamlined by simply nationalizing the privately-owned Federal Reserve; but again, Congress may not be prepared to go that far. Since there is already successful precedent for establishing an RFC in times like these, that model could serve as a non-controversial starting point for a new public credit facility. The G-7 nations’ financial planners, who met in Washington D.C. this past weekend, appear intent on supporting the banking system with enough government-debt-backed “liquidity” to produce what Jim Rogers calls “an inflationary holocaust.” As the U.S. private banking system self-destructs, we need to ensure that a public credit system is in place and ready to serve the people’s needs in its stead.

Ellen Brown, J.D., developed her research skills as an attorney practicing civil litigation in Los Angeles. In Web of Debt, her latest book, she turns those skills to an analysis of the Federal Reserve and “the money trust.” She shows how this private cartel has usurped the power to create money from the people themselves, and how we the people can get it back. Her eleven books include the bestselling Nature’s Pharmacy, co-authored with Dr. Lynne Walker, and Forbidden Medicine. Her websites are www.webofdebt.com and www.ellenbrown.com.

How Can I Miss You When You Won’t Go Away?

By RON JACOBS | Counterpunch, Oct 24 / 26, 2008

I should be used to it by now, but I’m not.  When I read statements from US policymakers telling the world that Iraq is still not capable of defending itself without US help, I am still angered and amazed at the bold-faced arrogance.  Most recently, several US political leaders and generals have told the Iraqi and American people that only they know when it is time for US troops to leave Iraq.  Furthermore, while Iraqis from virtually every segment of that nation’s political sphere demand changes in the US-imposed agreement to keep US forces there, Secretary of State Condoleeza Rice vocalizes Washington’s response: we decide what we want to do in Iraq and we decide how long we will stay, so take it or leave it.  If you leave it, then we will find another way to stay, and if we do, we will make your lives more miserable than we already have.

What’s different about this communication from Washington is that it is not only directed at the everyday people of Iraq.  It is also directed at the client government Washington has installed there.    Of course, the demands being made by the Green Zone parliament are only being made because the Iraqi people are pressuring this group of Iraqi politicians to make those demands.  Naturally, there are those in Washington and in the US media who see the Green Zone government’s demands as ungrateful and bordering on insubordination.  One can almost hear them asking:  How could those ungrateful people have the brashness to demand the right to prosecute those who would kill Iraqi civilians without recourse?  How dare these Iraqi officials who rule only because we gave them the wherewithal to do so tell us that all US troops must leave their country by a certain date?  Even more to the point, how dare the government in Baghdad that Washington created and maintains tell us what Iraqi sovereignty is?  After all, it is the occupier who determines what the natives will rule and what the occupier will rule.  Haven’t they read their Kipling?

As Michael Schwartz makes very clear in his recently released book War Without End: The Iraq War in Context, Washington went into Iraq with the intention of controlling the resources and destiny of that country and using it as a base for controlling the Middle East and South Asia.  As Schwartz also makes very clear, Washington will not leave until it is certain of that control.  Of course, there is a part of this equation that is the unpredictable variable.  What if the Iraqis refuse to go along with this plan of Washington’s?  Or, even more important to those of us whose tax dollars are funding this war, what if we refuse to go along with this plan?

Schwartz’s book, which is, if not the best book written on the US war and occupation of Iraq,  certainly one of the best, is more than a litany of the death and destruction undertaken by occupying troops.  It is also a sharp analysis of the twists and turns of the war and occupation that is based on the underlying assumption that this war and occupation has always been about dominance of the Middle East and control of its resources and destiny.  After reading this book, it becomes clear that this motivation is the only one that makes consistent sense.

As the debate continues to unfold around the Status of Forces Agreement (SOFA) between Washington and the Iraqis in the Green Zone, one can expect threats of a US withdrawal to be made.  In fact, certain news reports in some US newspapers reported as much on October 22, 2008.  According to these reports, Washington has told members of the Green Zone government that Washington will pull its troops if the SOFA is not signed.  Apparently, Washington considers this to be a threat and hopes that the green Zone politicians will fall in line out of fear that they will not survive without US troops to protect them.  At this juncture in Iraq’s history, one wonders if this threat from Washington might be a miscalculation.   As noted above, Ms. Rice is on record saying that she doesn’t believe the Green Zone government can defend itself as it is currently constituted.  However, is it possible that Iraqis (even those in the Green Zone government) are not interested in that government as it is currently constituted?  If so, then Washington’s threat of withdrawal is not only an empty threat, it is potentially a shrewd move on the part of the Iraqis and a potential victory for the Iraqi people, who have made it clear with IEDs, votes, public opinion polls and a myriad other means that they want the US military and its support mechanisms (including contractors, intelligence services and others) out of their country the sooner, the better.

Unfortunately, a US departure is not likely to come so easily, no matter how much the Iraqis and Americans may want it.  The more likely scenario is that the debate over the SOFA will continue and if an agreement is not reached by the deadline of December 31, 2008, some kind of temporary mandate will be established by Washington to keep its troops in place throughout Iraq.  If Washington is unable to keep its troops in Iraq legally after that date, then don’t look for a withdrawal.  After all, if I recall, the fact that the invasion that brought US troops into Iraq in 2003 was of questionable legality.  That certainly  didn’t seem to matter very much then. Continuing the occupation of Iraq illegally is unlikely to make much difference in 2009, either.

Ron Jacobs is author of The Way the Wind Blew: a history of the Weather Underground, which is just republished by Verso. Jacobs’ essay on Big Bill Broonzy is featured in CounterPunch’s collection on music, art and sex, Serpents in the Garden. His first novel, Short Order Frame Up, is published by Mainstay Press. He can be reached at: rjacobs3625@charter.net