Saturday, 8 November 2008
The OSCE concluded that the conflict began on August 7 when US-trained Georgian troops shelled Russian peacekeepers and civilians in the capital of Georgia's breakaway province of South Ossetia, Tskhinvali.
According to Friday’s New York Times, “the accounts suggest that Georgia's inexperienced military attacked the isolated separatist capital of Tskhinvali on August 7 with indiscriminate artillery and rocket fire, exposing civilians, Russian peacekeepers and unarmed monitors to harm.” The newspaper added, “Georgian artillery rounds and rockets were falling throughout the city at intervals of 15 to 20 seconds between explosions, and within the first hour of the bombardment at least 48 rounds landed in a civilian area.”
After an initial bombardment around 6 PM on August 7, Georgian troops declared a unilateral ceasefire, during which they apparently moved rockets and artillery into better positions. At 11 PM, Georgia announced that Russian troops were shelling Georgian villages in South Ossetia and declared an operation to “restore constitutional order” there.
OSCE monitors refuted Georgian claims that Georgian forces were responding to a Russian attack. The Times wrote, “monitors have also said they were unable to verify that ethnic Georgian villages were under heavy bombardment that evening, calling to question one of [Georgian President] Mr. Saakashvili's main justifications for the attacks.”
The newspaper quoted ex-British army officer Ryan Grist, who was the senior OSCE representative in Georgia when the war broke out, as saying, “It was clear to me that the [Georgian] attack was completely indiscriminate and disproportionate to any, if indeed there had been any, provocation.”
As was explained later, particularly in the European press, Georgia hoped to rapidly overrun South Ossetia and seize the Roki Tunnel, the main transport corridor through the mountains separating Russia and South Ossetia. In the case of a weak Russian response—the attack took place with top Russian officials away at the Beijing Olympics—Georgia could hope to present Russia with a fait accompli. In the event, the Georgian offensive bogged down in Tskhinvali and Russia sent in reinforcements, rapidly chasing Georgian troops out of South Ossetia.
US government and media reporting at the time turned reality on its head, denouncing Russia in chorus for its “aggression.” As Russia sent reinforcements to South Ossetia and expelled Georgian forces, President Bush denounced Russia's response as “disproportionate.” Vice President Dick Cheney said, “Russian aggression must not go unanswered,” adding that its continuation would have “serious consequences” for Russia’s relations with the United States.
In its August 12 editorial, the Times wrote, “Moscow claims it is merely defending the rights of ethnic minorities in South Ossetia and Abkhazia, which have been trying to break from Georgia since the early 1990s. But its ambitions go far beyond that. Prime Minister Vladimir Putin [...] appears determined to reimpose by force and intimidation as much of the old Soviet sphere of influence as he can get away with.”
In its Friday article, the Times implied that the findings of the OSCE was new information about which the newspaper was previously unaware. However, its own account contradicts this self-serving depiction of its role in spreading disinformation about the Georgian-Russian conflict. The article notes that OSCE representative Grist last August “gave a briefing to diplomats from the European Union that drew from the monitors’ observations and included his assessments. He then soon resigned under unclear circumstances.” There can be no doubt that the Times (as well as the US government) was aware of Grist’s report soon after it was given to EU officials.
The Times article concluded that the discrepancy between OSCE testimony and the official position of the US government and media put “the United States in a potentially difficult position. The United States, Saakashvili's principal source of international support, has for years accepted the organization's conclusions and praised its professionalism.”
In fact, the OSCE report completely refutes the US line, which was shot through with inconsistencies. While seeking to place the blame on Russia, the US media also spread claims that Georgian forces had acted without US knowledge—even though the US kept over 100 military advisors in Georgia in the run-up to the invasion, which followed soon after a major exercise with US forces entitled “Immediate Response 2008.”
Washington seized on the Russian-Georgian conflict to place missile defenses and troops in Poland and the Czech Republic, raising the specter of a direct military clash with Russia. It dismissed Russian claims of Georgian aggression out of hand.
Republican presidential candidate John McCain telephoned Saakashvili and told him, “Today we're all Georgians.” Then-Democratic candidate Barack Obama issued a statement from Hawaii, where he was on vacation, denouncing Russian “aggression.” Later, in ceremonies for the seventh anniversary of the September 11, 2001 attacks, the candidates joined forces to issue calls for “national service,” with Obama saying, “If we are going to war, then all of us go, not just some.”
Definite political conclusions must be drawn from a situation that created the potential for global war. First and foremost is the utter unreliability of the US political establishment and media, which expressed hardly any dissenting views, even as more critical accounts emerged in the European press in sharp contradiction to their accounts.
The prominence the New York Times gave to its account of the OSCE report—the article was the front-page lead and continued to a full-page article in the inside pages—suggests a deliberate operation to prepare public opinion for a shift in US policy in the region. With President-elect Obama committed to increasing the US military presence in Afghanistan and the US facing a major economic recession, an attempt seems to be underway to repair relations with Russia, possibly at Saakashvili's expense.
In Tbilisi 10,000 protestors marched against Saakashvili yesterday, marking the one-year anniversary of his violent repression of demonstrations supporting rival nationalist Irakli Okruashvili.
The US also announced plans yesterday to open negotiations with Russia over nuclear weapons and the controversial US nuclear missile defense shield aimed at Russia. The talks would aim to revise the Strategic Arms Reduction Treaty (START) and assuage “Moscow's growing opposition to a US missile-defense system for Europe,” according to the Wall Street Journal.
A State Department official told the Journal such negotiations would not conclude under the Bush administration, but would rather “help get the ball rolling” for President-elect Obama.
Friday, 7 November 2008
"Thanks to the crisis of neo-liberalism, Karl Marx is en vogue again," says Joern Schuetrumpf, managing director of the Berlin-based publishing house Karl-Diez Verlag. Schuetrumpf publishes the original German edition of Marx's collected works, including Das Kapital (The Capital).
"When Marx's books become bestsellers, it means that society is badly off," Schuetrumpf tells IPS. "The financial turmoil and the ensuing economic recession are the motors of a Marx revival."
Schuetrumpf is profiting from the crisis. In October Karl-Diez Verlag sold more than 500 copies of Das Kapital, confirming a trend that began early in 2008.
"Until 2004, we sold less than 100 copies of Das Kapital per year," Schuetrumpf said. "In the 10 months of 2008, we have sold more than 2,500 copies. It is clear that people are interested in learning what Marx has to say about why capitalism does not work."
Marx's popularity in Germany is being renewed mostly among left-wing intellectuals. At least 30 universities around the country are now offering new courses on Marxist theory, and lectures on Das Kapital.
Most courses have been organised by the Socialist Student Federation and the Rosa-Luxembourg-Foundation linked to The Left party formed by former communist and Social-Democrat militants.
"I think that Marx's popularity will spread beyond these groups," Schuetrumpf said. "In this crisis, I see many people going back to the church. Others, the more rational people, are looking for an answer to social problems beyond religion, and Marx is a good place to start."
Some are even trying to bring about a synthesis of religion and Marxist theory. Reinhard Marx, for instance. Marx, no relation of Marx the philosopher, is Archbishop of Munich and author of a new book – titled Das Kapital. The first edition appeared in September with a print run of 15,000, and is sold out.
"I have never given in to the temptation of becoming a Marxist," Marx the bishop told IPS. "I am faithful to the spirit of the encyclical Rerum Novarum." This document, issued by Pope Leo XIII in 1891 as an open letter addressed to all Catholic bishops, discussed the relationship between capital and labour, and between government and citizens.
The paper expressed the need for alleviation of "the misery and wretchedness pressing so unjustly on the majority of the working class." While supporting the rights of workers to form unions, it rejected both communism and unrestricted capitalism, and affirmed the right to private property.
And yet, time and again, whenever Archbishop Marx confronted "misery and wretchedness", he always went back to reading the original Kapital.
In the foreword to his own Kapital, Marx the bishop writes to Marx the revolutionary theorist expressing admiration for his foresight. "Is capitalism really going to be only a chapter in economic history...and will disappear, victim of its own contradictions, as you foresaw?"
A hundred and fifty years ago, the bishop tells IPS, "Marx predicted globalisation, and saw already the failures of capitalism."
Marxist theorists recall that the financial crisis of 1857 in the U.S. inspired Marx to intensify his studies on finance capital and its cycles of boom and bust. Ten years later, he published Das Kapital, in which he described capitalism as anarchic, irrational and blind competition led by the frantic pursuit of profit and accumulation.
In place of this doomed system, Marx argued, state-managed economy would be needed, based on a rational system of rules to eliminate poverty and social inequality. Twenty years before publishing Das Kapital, Marx had argued in The Communist Manifesto in 1848 that "history of all hitherto existing society is the history of class struggles."
Marx's new popularity is not restricted to Germany. In France, the University Press (PUF, after its French name), publisher of Das Kapital in Paris, confirmed that the book has recently begun to sell. "Normally, we sell less than 50 copies of the book per month," a PUF spokesperson told IPS. "Since mid 2008, we are selling more than 150 copies a month."
Many of the new readers are searching for economic wisdom beyond Marxist theory. Other classic analyses of the failures of capitalism, by John Maynard Keynes and John Kenneth Galbraith, are also finding big new sales.
Keynes, and later Galbraith, argued that freewheeling capitalism, especially the globalisation of finance, would necessarily bring economic and social catastrophe. Like Marx, Keynes argued that intervention by the state was essential to avoid the cycles of boom and boost. But unlike Marx, Keynes wanted capitalism reformed and managed, not eradicated.
"Last April, we decided to reprint the French edition of Galbraith's The Great Crash of 1929'," Benoîte Mourot, managing director of Editions Payot & Rivages told IPS. "This new edition had 3,000 copies, and we sold out in October, without any marketing campaign." A reprint has been ordered.
Payot & Rivages is also publisher of Keynes in French. "Of Keynes's main work, 'The General Theory of Employment, Interest, and Money', we sell normally some 500 copies per year," Mourot said. "In September alone, we sold 400 copies."
The new recognition for both Keynes and Galbraith is based also on the worldwide appeals for "a new Bretton Woods" system; that is, a new set of regulations to manage financial and trade relations. A conference in 1944 in Bretton Woods in New Hampshire in the U.S. had produced the International Monetary Fund (IMF) and the World Bank.
Keynes, as leader of the British delegation to the Bretton Woods conference of 1944, and chairman of the World Bank commission at the time, was a key actor in the negotiations that established the Bretton Woods institutions.
But now, Joerg Huffschmid, professor of economics at the University of Bremen in Germany says, "a re-edition of Bretton Woods would not suffice to lead the world to a new welfare status for all citizens of the world. The original Bretton Woods system did not consider the welfare of the countries of the south, which were colonies or neo-colonies at the time."
This time around, Huffschmid said, "the set of rules to manage the world economy to avoid a new crisis like the present one cannot aim simply to reform capitalism." Marx the philosopher, if not the bishop, would certainly agree.
Wednesday, 5 November 2008
Texas Congressman and 2008 presidential candidate Ron Paul has warned that the euphoria surrounding the election of Barack Obama combined with the overwhelming fear of major international crises could facilitate a cataclysmic shift toward a new world order.
Appearing live on the Alex Jones show earlier today, the Congressman spoke of a feeling of dread surrounding the change of guard both in the White House and on Capitol Hill:
"I do feel it but I don't think it's brand new, I didn't wake up with it, I've had it for a while, I don't think the election was a surprise, but the rhetoric is getting pretty strong and they are getting very bold." he commented.
Speaking on the stage management of the election, and calling it a "huge distraction" from real issues, the Congressman outlined how both candidates were pre-positioned by the elite interests with the knowledge that either would satisfactorily serve their agenda:
"I think McCain was obviously a back up candidate in case something happened where Obama didn't win, they'd have been satisfied with McCain, but they have been positioning Obama for a long long time."
"This started even before he announced he was running. Anybody who would have gotten that much favorable coverage for so long, you know that the plans are laid for him to be the individual that's going to be taking care of the corporate elite." the Congressman continued.
Paul also warned that Democrats gains within the House and the Senate make for a particularly worrying situation of absolute power, similar to that held by the Republican party eight years ago.
"Just as a Republican Congress wouldn't say boo to a Republican Congress, you know that the Democratic Congress is NEVER going to stand up."
"I think it is very dangerous and the first year is going to be the most dangerous year." Paul stated. "Just think of Bush's first year, he also had the 9/11 thing that he could use to scare everybody to death. And Obama will use the financial crisis, which will get worse, and there will be more military skirmishes around the world." Paul asserted.
The Congressman also warned that many Republican representatives may go along with Obama just to win favor with the electorate and be seen to follow popular opinion.
Commenting on the much touted "International crisis" that luminaries such as Colin Powell, Joe Biden and Zbigniew Brzezinski have all guaranteed will occur within weeks of Obama entering the White House, the Congressman stated that he believes it may be a catalyst for a shift toward world government:
"I think it's going to be an announcement of a new monetary order, and they'll probably make it sound very limited, they're not going to say this is world government, even though it is if you control the world's money and you control the military, which they do indirectly."
"A world central bank, worldwide regulation and world control of the whole system, of all the commodities and all the natural resources, what else can you call it other than world government?"
"Obama wouldn't be there if he didn't toe the line, and when the meeting starts on November 15th for the new monetary system, this could be the beginning of the end of what's left of our national sovereignty." Paul said, also warning that the global media are already hailing Obama as the world's leader.
With Obama having previously announced that he will shift military attention to Pakistan, the Congressman also warned that the president elect will, thanks to the previous administration, have the necessary precedent to escalate the war on terror:
"It's the philosophy of the Bush doctrine, which was that we have the right to preemptively strike anybody and then he even expanded that recently by saying we don't have to invade and conquer, but we have the right to go in and bomb anybody without their permission, and that's why we go into Pakistan and Syria, which are acts of war. So they have the tools to do it and the sentiment and most Americans are oblivious to what is happening."
Paul also suggested that any escalation could be facilitated by false flag events such as Gulf of Tonkin style incidents.
Urging listeners not to lose faith in the campaign for liberty and the quest to restore and the Republic, Ron Paul spoke of reason to look ahead:
"We have to look for sources of optimism... ultimately though all that happens to us is a result of philosophy and beliefs and convictions and that is where I think we have made some inroads. We have drawn attention to the importance of monetary policy, the importance of the central bank, the importance of how government causes so much problems, it's just that we're in the minority." Paul said.
"We have to continue to do what we are doing, you are in the business of passing on and spreading information, that, to me, is most crucial, getting more people engaged, more people understanding what the issues are, nothing else is more important than that. Then when you see an opportunity we have to turn this into political action." the Congressman concluded.
To listen to the full interview click here.
It’s the answer told by lines that stretched around schools and churches in numbers this nation has never seen; by people who waited three hours and four hours, many for the very first time in their lives, because they believed that this time must be different; that their voice could be that difference.
It’s the answer spoken by young and old, rich and poor, Democrat and Republican, black, white, Latino, Asian, Native American, gay, straight, disabled and not disabled – Americans who sent a message to the world that we have never been a collection of Red States and Blue States: we are, and always will be, the United States of America.
It’s the answer that led those who have been told for so long by so many to be cynical, and fearful, and doubtful of what we can achieve to put their hands on the arc of history and bend it once more toward the hope of a better day.
It’s been a long time coming, but tonight, because of what we did on this day, in this election, at this defining moment, change has come to America.
I just received a very gracious call from Senator McCain. He fought long and hard in this campaign, and he’s fought even longer and harder for the country he loves. He has endured sacrifices for America that most of us cannot begin to imagine, and we are better off for the service rendered by this brave and selfless leader. I congratulate him and Governor Palin for all they have achieved, and I look forward to working with them to renew this nation’s promise in the months ahead.
I want to thank my partner in this journey, a man who campaigned from his heart and spoke for the men and women he grew up with on the streets of Scranton and rode with on that train home to Delaware, the Vice President-elect of the United States, Joe Biden.
I would not be standing here tonight without the unyielding support of my best friend for the last sixteen years, the rock of our family and the love of my life, our nation’s next First Lady, Michelle Obama. Sasha and Malia, I love you both so much, and you have earned the new puppy that’s coming with us to the White House. And while she’s no longer with us, I know my grandmother is watching, along with the family that made me who I am. I miss them tonight, and know that my debt to them is beyond measure.
To my campaign manager David Plouffe, my chief strategist David Axelrod, and the best campaign team ever assembled in the history of politics – you made this happen, and I am forever grateful for what you’ve sacrificed to get it done.
But above all, I will never forget who this victory truly belongs to – it belongs to you.
I was never the likeliest candidate for this office. We didn’t start with much money or many endorsements. Our campaign was not hatched in the halls of Washington – it began in the backyards of Des Moines and the living rooms of Concord and the front porches of Charleston.
It was built by working men and women who dug into what little savings they had to give five dollars and ten dollars and twenty dollars to this cause. It grew strength from the young people who rejected the myth of their generation’s apathy; who left their homes and their families for jobs that offered little pay and less sleep; from the not-so-young people who braved the bitter cold and scorching heat to knock on the doors of perfect strangers; from the millions of Americans who volunteered, and organized, and proved that more than two centuries later, a government of the people, by the people and for the people has not perished from this Earth. This is your victory.
I know you didn’t do this just to win an election and I know you didn’t do it for me. You did it because you understand the enormity of the task that lies ahead. For even as we celebrate tonight, we know the challenges that tomorrow will bring are the greatest of our lifetime – two wars, a planet in peril, the worst financial crisis in a century. Even as we stand here tonight, we know there are brave Americans waking up in the deserts of Iraq and the mountains of Afghanistan to risk their lives for us. There are mothers and fathers who will lie awake after their children fall asleep and wonder how they’ll make the mortgage, or pay their doctor’s bills, or save enough for college. There is new energy to harness and new jobs to be created; new schools to build and threats to meet and alliances to repair.
The road ahead will be long. Our climb will be steep. We may not get there in one year or even one term, but America – I have never been more hopeful than I am tonight that we will get there. I promise you – we as a people will get there.
There will be setbacks and false starts. There are many who won’t agree with every decision or policy I make as President, and we know that government can’t solve every problem. But I will always be honest with you about the challenges we face. I will listen to you, especially when we disagree. And above all, I will ask you join in the work of remaking this nation the only way it’s been done in America for two-hundred and twenty-one years – block by block, brick by brick, calloused hand by calloused hand.
What began twenty-one months ago in the depths of winter must not end on this autumn night. This victory alone is not the change we seek – it is only the chance for us to make that change. And that cannot happen if we go back to the way things were. It cannot happen without you.
So let us summon a new spirit of patriotism; of service and responsibility where each of us resolves to pitch in and work harder and look after not only ourselves, but each other. Let us remember that if this financial crisis taught us anything, it’s that we cannot have a thriving Wall Street while Main Street suffers – in this country, we rise or fall as one nation; as one people.
Let us resist the temptation to fall back on the same partisanship and pettiness and immaturity that has poisoned our politics for so long. Let us remember that it was a man from this state who first carried the banner of the Republican Party to the White House – a party founded on the values of self-reliance, individual liberty, and national unity. Those are values we all share, and while the Democratic Party has won a great victory tonight, we do so with a measure of humility and determination to heal the divides that have held back our progress. As Lincoln said to a nation far more divided than ours, “We are not enemies, but friends…though passion may have strained it must not break our bonds of affection.” And to those Americans whose support I have yet to earn – I may not have won your vote, but I hear your voices, I need your help, and I will be your President too.
And to all those watching tonight from beyond our shores, from parliaments and palaces to those who are huddled around radios in the forgotten corners of our world – our stories are singular, but our destiny is shared, and a new dawn of American leadership is at hand. To those who would tear this world down – we will defeat you. To those who seek peace and security – we support you. And to all those who have wondered if America’s beacon still burns as bright – tonight we proved once more that the true strength of our nation comes not from our the might of our arms or the scale of our wealth, but from the enduring power of our ideals: democracy, liberty, opportunity, and unyielding hope.
For that is the true genius of America – that America can change. Our union can be perfected. And what we have already achieved gives us hope for what we can and must achieve tomorrow.
This election had many firsts and many stories that will be told for generations. But one that’s on my mind tonight is about a woman who cast her ballot in Atlanta. She’s a lot like the millions of others who stood in line to make their voice heard in this election except for one thing – Ann Nixon Cooper is 106 years old.
She was born just a generation past slavery; a time when there were no cars on the road or planes in the sky; when someone like her couldn’t vote for two reasons – because she was a woman and because of the colour of her skin.
And tonight, I think about all that she’s seen throughout her century in America – the heartache and the hope; the struggle and the progress; the times we were told that we can’t, and the people who pressed on with that American creed: Yes we can.
At a time when women’s voices were silenced and their hopes dismissed, she lived to see them stand up and speak out and reach for the ballot. Yes we can.
When there was despair in the dust bowl and depression across the land, she saw a nation conquer fear itself with a New Deal, new jobs and a new sense of common purpose. Yes we can.
When the bombs fell on our harbour and tyranny threatened the world, she was there to witness a generation rise to greatness and a democracy was saved. Yes we can.
She was there for the buses in Montgomery, the hoses in Birmingham, a bridge in Selma, and a preacher from Atlanta who told a people that “We Shall Overcome.” Yes we can.
A man touched down on the moon, a wall came down in Berlin, a world was connected by our own science and imagination. And this year, in this election, she touched her finger to a screen, and cast her vote, because after 106 years in America, through the best of times and the darkest of hours, she knows how America can change. Yes we can.
America, we have come so far. We have seen so much. But there is so much more to do. So tonight, let us ask ourselves – if our children should live to see the next century; if my daughters should be so lucky to live as long as Ann Nixon Cooper, what change will they see? What progress will we have made?
This is our chance to answer that call. This is our moment. This is our time – to put our people back to work and open doors of opportunity for our kids; to restore prosperity and promote the cause of peace; to reclaim the American Dream and reaffirm that fundamental truth – that out of many, we are one; that while we breathe, we hope, and where we are met with cynicism, and doubt, and those who tell us that we can’t, we will respond with that timeless creed that sums up the spirit of a people:
Yes We Can. Thank you, God bless you, and may God Bless the United States of America.
Tuesday, 4 November 2008
In reality, home prices don't stop going down at some particular level that appears to be “cheap.” Nor do they stop falling because they match some historical price that was previously a low.
The end of the decline in home prices will come only when there are no new economic forces driving them down.
When will that be? I'd love to say it's just around the corner. But everything I see tells me that, despite the sharp declines already recorded, a steeper plunge in home values is dead ahead.
The reason: So far, most of the troubles in the housing market have been caused by bad mortgages going sour. Meanwhile,
* the more common causes of housing slumps — high interest rates, rising unemployment, and recession — are just starting to kick in. And …
* the most powerful causes — depression and deflation — are still on the horizon.
In the boom leading up to the Great Depression of the 1930s, most Americans did not borrow money to buy a home. Variable rate mortgages didn't exist. And Wall Street investors rarely got involved in the business of financing homes. Home prices did fall dramatically. But those price declines came mostly after the stock market crashed, after the economy shrunk and after millions of workers had lost their jobs.
The crux of the problem today: That phase of the housing crisis still lies ahead. Moreover, this time, because of massive debts, the pressure to abandon or sell homes is far greater.
Conclusion: If the U.S. sinks into a depression, home price declines could be as deep as, or deeper than, those of the Great Depression, especially in the hardest hit regions of the country.
It is a frightening thought. Yet, on the positive side, a sharply reduced price for the average home is the only fundamental, enduring mechanism for making homes more affordable and restoring demand — especially if the days of easy credit are gone.
Already, in 2008, one in ten American homeowners has defaulted on their mortgage or lost their home in foreclosure. Nearly four in ten owe more than their home is worth.
And all this is before the recession deepens and before we experience the next phase of the Great American Housing Nightmare.
Why This Was One of the Biggest Speculative Manias of All Time
The Great American Housing Nightmare has no precedent; no historical roadmap to guide you, no proven pathway to follow.
No one can tell you with precision how far U.S. home prices will decline, when they will hit bottom, how many homeowners will lose their homes, or how soon a real recovery will begin. Getting to a recovery could take many years.
In fact, to throw some light on the speculative frenzy and panic that have swept through the U.S. housing market, the most relevant precedents I could find have nothing to do with homes at all. They are the Dutch speculative mania of the 1630s, the South Sea Bubble of the 1700s and the stock market panics of the early 1900s.
In those boom-and-bust episodes, the objects of speculation were tulips, slaves and stocks. This time, it was the American home. But despite that key difference, the critical boom-bust elements that helped create the speculation — and the depth of the losses which ensued — were roughly similar.
Boom-Bust Element #1: Debt
Debt is the fuel of speculation. Without it, speculative bubbles cannot emerge. With it, prices can be inflated beyond the wildest imagination.
In seventeenth century Holland, investors speculated wildly on tulips, putting up as little as 2.5% of their own cash. Similarly, in early 20th century stock market booms, investors put up as little as 10% of their own money, using borrowed funds for up to 90% of their purchases.
But in many respects, the borrowing mania that created the Great American Housing Nightmare makes all previous debt manias pale by comparison.
By mid-year 2008, the Federal Reserve reported a grand total of $14.8 trillion in U.S. mortgages outstanding — 40% more than the entire national debt and triple the total of all the mortgages in America just a dozen years earlier.
Sadly, it was not just the supersized quantity of debt that was so dangerous. Even more dangerous was the substandard quality of the debt. Consider the facts:
Bullet In all prior speculative bubbles in history, investors were required to put up at least some of their own money to buy into the boom. Even in the tech stock mania of the early 2000s, investors had to put up a minimum of 50% cash for their stock purchases.
But in the frenzy that preceded the Great American Housing Nightmare, millions of Americans bought homes with zero money down!
Lenders didn't merely look the other way while home owners borrowed the down payment; they actively encouraged it. Homebuyers without enough cash to buy a $500 TV set were declared the proud new owners of $500,000 luxury homes. Many took it one step further with serial purchases of homes, leapfrogging with glee from one free ride to the next.
Bullet In all prior speculative bubbles, borrowers were invariably required to make payments of interest and principal in full and without fail, with zero tolerance for any other arrangement.
In contrast, during the Great American Housing Nightmare, millions of homeowners were allowed to pay interest only or even less than full interest.
So it should come as no surprise that the majority opted to make the smallest payments allowed, while the lender added the unpaid amounts to the loan balance. As with credit cards, the more that time went by, the deeper into debt the borrowers fell.
Bullet In prior historical episodes of rampant speculation, loans were almost invariably held by the lenders, who, in turn, had a vested interest in making sure the borrower's finances were sound and their payments were kept current.
But in the Great American Housing Nightmare, the mortgages were mostly held by non-lenders — institutions and investors that were far removed from the borrowers.
Bullet In earlier manias, investors speculating with borrowed funds were required to document that they were worthy of the loans. They invariably had to present hard evidence of income, proof of assets, or both.
But in the Great American Housing Nightmare, even that was not the case. Millions were allowed to borrow huge sums without a scintilla of proof that they had the wherewithal to make the payments.
Bullet In earlier manias, the bubble was generally confined primarily to one debt sector.
Not this time around! Beyond the $14.8 trillion in residential and commercial mortgages in America, there are another $20.4 trillion in consumer and corporate debts. This meant that mortgages represent only 42% of the private-sector debt problem in the country.
Result: Americans are not only under tremendous pressure to sell their homes due to burdensome mortgages, they are also squeezed by huge credit card balances and by layoffs from employers equally addicted to debt.
By virtually every measure, the debts piled up prior to the Great American Housing Nightmare are far bigger and worse than any debt pile-up ever witnessed in history.
Boom-Bust Element #2: Investor Frenzy
Gouda Tulip Bulbs
South Sea Co. Shares
In 1637, at the height of the tulip mania, just one Semper Augustus bulb changed hands for 12 acres of land. Another bulb was sold for a massive collection of goods, including 160 bushels of wheat, 160 bushels of rye, four oxen, twelve swine, two hogsheds of wine, four casks of beer, two tons of butter, 1,000 pounds of cheese and more. But just a few months later, similar bulbs were practically worthless.
In 1720, investors drove up shares in the South Sea Company from 125 to 960 in six months and back down again to 180 in less than three months.
In 1929, the Dow Jones Industrials surged from 213 in 1928 to 381 in 1929, only fall to 41 in 1932.
In each case, investors and speculators — most with little experience in the market — were caught up in a wild buying frenzy, only to dump nearly everything in an even wilder selling panic.
Unfortunately, we witnessed a similar pattern prior to the Great American Housing Nightmare. As the buying frenzy heated up, homes and condos were flipped faster than hotcakes. Prices were driven through the roof. And even mortgages themselves were transformed into securities that were riskier than some of the riskiest stocks in the world.
At the peak of the housing bubble, the average price of existing home reached nearly five times the total yearly income of its owners, the highest in history. At the same time, the affordability of each home plunged to its lowest level in history.
Once set in motion, the speculative fever spread quickly. From Miami to Phoenix to San Diego to Las Vegas, investors camped outside housing developments to snap up three, four, five, or more units at a time. Condominium developers built gleaming towers in major cities, based almost exclusively on anticipated bids from investors and speculators and with no evidence of real underlying demand. From coast to coast, investors signed on to millions of pre-construction contracts, only to flip them before the first shovels touched the ground.
This kind of speculation was traditionally just a small niche in the giant U.S. housing market. But at the peak of the housing boom, it nearly took over: An astounding 40% of houses and condos were bought as second homes or investments. The yearly rate of appreciation on existing homes catapulted from 3.6% in January 2001 to 16.6% in November 2005. On new homes, meanwhile, it surged from 4.8% in to 18.1%.
Fueling the bubble, government agencies like Ginnie Mae, government-sponsored enterprises like Fannie Mae and Freddie Mac, and private investment banks bundled up mortgages and resold them as securities that could be traded much like stocks and bonds. These securities, in turn, were bought by banks and investors in the U.S., Europe and Asia. The total amount of mortgages transformed into these securities: $4.8 trillion, 60% more than the total value of all the stocks in the Dow Jones Industrial Average.
In just one year — 2006 — $2.4 trillion in new mortgage-backed securities were created, more than triple the amount of just six years prior. Even in past investment manias, there was no such structure. Even the wild and wooly speculators of the 1600s, 1700s and the early 1900s did not take the madness to that extreme.
Boom-Bust Element #3: Government-Created Monopolies, Corruption, Fraud and Cover-Ups
Some of the largest speculative bubbles of all time were born out of government-sponsored monopolies, nurtured by government-bred bureaucrats and kept alive beyond their time by government-inspired corruption, fraud and cover-ups.
In the South Sea Bubble of 1711, the English government needed to find a way to fund the huge debts it had incurred in the War of Spanish Succession. So the Lord Treasurer, Robert Harley, created the South Sea Trading company to help finance the government's debts. The company got exclusive trading rights in the South Atlantic plus a perpetual government annuity of over a half million pounds per year. In exchange, its investors agreed to assume responsibility for about £10 million of the government's debt.
It seemed like a win-win. But the government's sponsorship and the company's monopoly led to big trouble. The company's managers, thinking they had the government's largesse to fall back on, were complacent and ignored signs of economic troubles. They took excessive risk. And ultimately, investigations turned up massive fraud at the company and pervasive corruption in the government.
When the entire structure collapsed, there was nothing the government could do except to pass what later become known as the “Bubble Act” aimed to prevent a future recurrence.
Similarly, in the early 1900s, the Panic of 1901 occurred in the wake of a failed attempt to create a massive railroad monopoly; the Panic of 1907 followed a failed attempt to corner the copper market; and the Crash of 1929 resulted, to a large degree, from collusion among brokers, bankers and tycoons.
In nearly every case, the government gave select companies or individuals special privileges, waived critical regulations and encouraged great concentration of power. And in nearly every case, the government made desperate attempts to salvage the boom long after the bust began. But it was ultimately powerless to avert a collapse in the very structures it had helped to create.
Unfortunately, the same, or worse, could happen in the Great American Housing Bubble: The U.S. government created two monopolies that made England's eighteenth century South Sea Company and America's twentieth century industrial monopolies look small by comparison. Their names: Fannie Mae and Freddie Mac.
The U.S. Government gave these companies monopolistic control over America's largest debt market — mortgages. And then, beginning in the early 2000s, the government spurred these monopolies to compete aggressively with private subprime lenders.
Not surprisingly, the results were similar to those of earlier bubbles: Extreme complacency, excessive risk-taking, and, ultimately, fraud.
In September 2004, the Office of Federal Housing Enterprise (OFHE), Fannie's and Freddie's primary regulator, issued a special report revealing massive accounting irregularities. And four years later, in September 2008, the companies had still not cleaned up their act, prompting the Securities and Exchange Commission to launch new investigations into accounting deceptions.
The biggest deception of all: In their official filings and public pronouncements this year, Fannie and Freddie consistently and wildly overstated their capital, while understating their risk. Supposedly built with mortar and steel, Fannie and Freddie were actually houses of cards in disguise.
Repeatedly, the company executives swore on oath that they had more than enough capital. And even on the eve of their demise, their regulators testified before Congress that the companies were solvent.
Based on their smoke-and-mirrors accounting, perhaps. But based on the basic rules that you and I must abide by, not even close. For longer than anyone cared to admit, Fannie and Freddie had been insolvent. Meanwhile, their chief executives hid behind carefully camouflaged facade, marched into riskier corners of the mortgage market, and trashed the trust of millions of Americans with no sign of restraint and little expression of regret.
Between 2005 and 2008, for example, Fannie Mae purchased or guaranteed at least $270 billion in subprime mortgages — high-fee loans to high-risk borrowers. That was more than three times as much as it had bought in all its earlier years combined.
Yet no one seemed to bat an eyelash.
Quite the contrary, Wall Street and Washington cheered loudly, encouraging them to take on even more risk.
Why such enthusiasm? Because the rapid growth in fees supercharged Fannie's stock price. Because big revenues meant huge bonuses for executives — $90 million for one, $30.8 million for another, and $10 million for a third. And because the easy money flowing to unqualified borrowers indirectly helped politicians buy millions of votes.
Suddenly, however, in September 2008, it was finally recognized that all the financial statements and all the sworn testimony about solvency were unabashed lies. Suddenly, the two largest mortgage lenders on earth, supposedly rich and prosperous, were thoroughly bankrupt. And suddenly, underscoring the depth of their demise, each company needed an unprecedented $100 billion injection of government funds just to keep it alive.
The potential bill to taxpayers: $200 billion. But that figure assumes an end to the credit crunch, no more debt collapses, no recession, and certainly no depression. If any of these assumptions should prove wrong, $200 billion will barely cover what is fast becoming history's largest cesspool of sinking debts and commitments — $5.2 trillion in mortgages guaranteed or owned by the two companies, their $1.5 trillion in debts, and their $2 trillion in derivatives.
Boom-Bust Element #4: Collapse!
How much could home prices ultimately decline in the Great American Housing Nightmare? We have no way of knowing with certainty. But we can draw some lessons from similar bubbles and crashes throughout history:
* In the Dutch Tulip Mania, investors lost nearly all of their money if they bought for cash; more than all of their money if they bought on the slim margin of just 2.5%.
* In the South Sea Bubble, the cost of the shares investors bought fell from a peak of 1,000 to less than 100, a loss of 90% or more.
* In the Crash of 1929 and the ensuing 3-year bear market, investors lost 89% of their money even in America's largest industrial stocks.
* In the tech wreck of 2000-2002, when a myriad of Internet and technology companies collapsed, investors lost 78% of their money invested in the average Nasdaq stock; and 100% in companies that went under.
* In Japan's long bear market, which stretches from 1990 to the present, investors have lost 82% of their money from peak to trough in companies that make up the Nikkei average, and much more in smaller companies.
* And in the financial crisis of 2008, investors lost 99% or more of their money in some of America's most respected financial institutions.
My argument: The speculative bubble in U.S. homes is as extreme as each of these historic examples; and in the most hard-hit regions, the resulting price collapse could be equally extreme. Indeed, the Great American Housing Nightmare is progressing in three phases:
Phase 1. The bust in the subprime mortgage market. This is now history.
Phase 2. A severe U.S. recession. As of this writing, this phase is just beginning.
Phase 3. Depression and deflation. Still ahead.
Therefore, no matter how far home prices in your area have already fallen and no matter how cheap they may appear, they could still fall a lot further.
In the hardest hit regions, an individual home that was once priced for $400,000 at its peak could fall to as low as $200,000 by the end of Phase 1. But don't blindly assume that's the bottom. In Phase 2, it could fall in half again, to $100,000. And in Phase 3, it could fall by at least half for a third time, to as low as $50,000 or $40,000.
Homes with peak prices of $1 million could sell for as little as $100,000; some, originally priced for $10 million may have no buyers at all — even with asking prices as low as $1 million.
Nationwide, the median home price will not fall nearly that far. But that factoid alone will do nothing for homeowners in bubble areas like Florida, Nevada or California. Nor will it help those in blighted regions where factories are closed and unemployment rises far above the national average.
Never before in history have we witnessed home price declines of this magnitude! But that fact alone does not make them implausible, let alone impossible.
Remember: Never before in history has so much debt, speculation, government manipulation, fraud, corruption and consumer abuse been heaped onto any housing market! And if there's one thing that history teaches us, it's that unprecedented causes lead to unprecedented consequences.
Lessons To Learn Now Before It's Too Late
Lesson #1. Don't blame yourself. Virtually every realtor and expert in America told you that investing in homes was a “sure bet”; and any lender in the country that accepted your loan application was, in effect, telling you that you had the means to make the payments.
Lesson #2. Don't look back. Forget what your property was worth at its peak. And try to forget what you paid for it as well. That's water under the bridge. Instead, look at what's happening today — in the headlines, in your neighborhood, at companies in your area.
Lesson #3. Don't count on the government to save the day. There are bound to be a series of public programs to help some people some of the time. But they will be spotty; they won't turn the housing market around; and you may not qualify. For example, the FHASecure program rolled out in late 2007 essentially created three classes of homeowners with mortgages:
* Homeowners current on their mortgages and not at risk of foreclosure were mostly not eligible for federal assistance;
* Those already in foreclosure were also not eligible; and …
* Ironically, only home owners falling behind in their mortgage payments could get government help.
Not only did that make it very difficult for most people to qualify, but it also gave a strong incentive to households to deliberately fall behind on their mortgages. People asked: “ Why should I cut my food budget or give up on my nights out when my neighbor is having all the fun, skipping his mortgage payments and getting rewarded by the government for his imprudent behavior?”
Ultimately, these kinds of government programs are fundamentally flawed and doomed to fail.
The most important lesson of all: Don't underestimate the potential depth, speed and duration of the decline. As the debts are unraveled, the economy comes unglued and the deceptions are uncovered, home prices could continue to plunge much further.
If you are able and willing to sell your properties, do so now. Don't wait.
The reason for establishing an equal transatlantic partnership is that "the world has changed", as French Foreign Minister Bernard Kouchner put it at the last meeting and Monday's meeting.
"The world has changed, because we have realized that a great country, which will remain a great country, is not the only one concerned by the world's problems," he said. "The European Union has become more resolute."
Kouchner cited the leading role the EU played in brokering a cease-fire between Russia and Georgia in August and in coping with the global financial turmoil.
"We will play our full role for partnership," Kouchner said more frankly at a press conference after the three-hour informal meeting. "We don't want to play a secondary role any more."
Benita Ferrero-Waldner, EU commissioner for external relations, echoed him by saying on the same occasion that the EU would try to "take the advantage of the period of transition" to simply try to define priorities with the United States.
She insisted that relations with Washington should reflect Europe's new "leadership" in world affairs.
"We want to have an even stronger relationship with the United States, and for that reason I think it's important that we say what we think is important for us. I think it should be a more balanced relationship," she said.
Britain, the die-hard supporter and follower of U.S. policies, also voices its determination to stand up to challenge the elder brotherhood of the United States.
Foreign Secretary David Miliband said the EU could work with Washington to set "an inclusive global agenda that responds to the changing economic and social and political times", adding "This isn't just about asking America to do things. It's about Europe stepping up as well," he told reporters upon his arrival for the meeting.
Miliband said "make sure that our contribution in the Middle East, in Afghanistan and Pakistan, in responding to the global financial crisis, is strong and clear and in close alliance both with this American administration but also with the new one."
Javier Solana, EU foreign and security policy chief, also thought the U.S. general elections, which will take place on Tuesday, was an opportunity to start a new transatlantic relationship.
"Concerning the United States, we are on the eve of crucial elections. Europeans and Americans alike, seem keen to begin a new chapter," he said on Oct. 30 at the annual conference of the Institute for Security Studies of the European Union in Paris.
"I have been and remain a firm believer in the power of the U.S. and Europe to act as a force for good around the world," he said.
Analyst here say the Europeans have good reasons for taking the opportunity of the transition of the U.S. administration for a change of partnership.
They did not have the chance or gut to call for standing on the same footing with the George W. Bush administration, as the outgoing U.S. president never took seriously the Europeans during his first term. He practiced unilateralism.
Neglecting strong opposition from most EU nations, especially France and Germany, the Bush administration lodged the Iraqi war in 2003, throwing transatlantic ties into a nadir.
The thaw began as Germany and France changed governments respectively in 2005 and 2007.
Pro-American Angela Merkel and Nicolas Sarkozy offered to improve relations with Washington, not the other way around.
Bush demonstrated friendliness and regret over his foreign policy towards Europe only during his farewell visit to the continent this year because he needed the help of the Europeans in Afghanistan.
On the EU side, the EU had never before played more leading roles than under the French presidency this year.
The French leaders repeatedly boasted the EU role in stopping the Georgia-Russia conflict and in tackling the financial storm.
The EU is eager to show its leadership by set an agenda with the United States in stopping conflict in the Middle East, in helping Afghanistan and Pakistan, to name a few.
Ambitious as it is, analysts say the EU presidency is going to a weak and inexperienced hand at the beginning of next year, the Czech Republic.
Also, with its own problems such as the stalled Lisbon Treaty, whether the EU can really stand as equals with its U.S. partner will be a big question mark.
Monday, 3 November 2008
Under the title ``Today`s Brutish Imperialism,`` LaRouche directly attacks the major conceptual stumbling blocks to effective action against today`s breakdown of civilization.
Writing in the Oct. 31 edition of Executive Intelligence Review, leading U.S. statesman and economist Lyndon LaRouche issued a major report, one which, he wrote, “may come to be considered by some among the world’s leading circles of today, as the most important political document you have read, or might have read, during your lifetime to date.”
Under the title “Today’s Brutish Imperialism,” LaRouche directly attacks the major conceptual stumbling blocks to effective action against today’s breakdown of civilization, and outlines the four crucial steps which must be taken by the United States, Russia, China, and India in the immediate days and weeks ahead. The question that is raised, is whether the political leaders of these countries find the courage to take responsibility for mastering, and acting, on LaRouche’s prescription.
The full text of LaRouche’s document is available on www.larouchepac.com and www.larouchepub.com, and in hard copy through Executive Intelligence Review. The following excerpts provide a foretaste that should whet your appetite.
BRITISH IMPERIALISM TODAY
At present, the popular, but utterly incompetent notion, among professed socialists and others, that the U.S.A. “is the world’s leading imperialism today,” is not only an utterly wrong idea, but a belief which could be presently suicidal in actual practice for nations such as both the U.S.A. and Russia, and others, today. Nonetheless, that wrong idea is a belief among many leading economists and statesmen, throughout the world, who cling stubbornly to the notion of American imperialism, still today.
Thus, the world is presently menaced by the effects upon the credulous, of that strategic delusion, the delusion that it is the U.S.A., rather than the British Empire’s Anglo-Dutch Liberal system, which is, uniquely, the dominant, actually imperialist strategic force operating throughout the planet today. Indeed, each of the impassioned haters of the U.S.A. among even our citizens, and others abroad, even leading political figures, is a product of the fact that they are virtually, either unwitting, or more or less witting British agents against our United States, whether they are able to grasp that fact, or not. A similar delusion is met among many in Russia, still today.
As I indicate later in this present report, the term imperialism, competently employed, never corresponds to an extension of world-power by some particular nation-state. In reality, as distinct from the childish fairy-tales of the credulous, all empires are dynamically supranational, and the kingdoms or comparable states of that time are merely, in and of themselves, the subjects of some supranational, imperialist power, as that relationship is illustrated by the thrust toward the condition in western and central Europe under which the supra-national authority of supra-national government, such as “globalization” and “free trade” generally, or the World Trade Organization in particular, subordinates, or even replaces actual national sovereignties. Fighting the wrong choice of enemy, especially in the wrong war, especially long wars according to designs tailored for the U.S.A. by London, or British agents-in-fact such as former President George H.W. Bush, the son of the Prescott Bush who moved funds to bail out Adolf Hitler’s Nazi Party, most especially, perpetual wars, is the best way to get one’s own nation destroyed, as we should recognize this factor in the effects of the long U.S. war in Vietnam, under Presidents Johnson and Nixon, then, or, now in Iraq, under Presidents Bush, father and son, since January 1989.
It is the legacy of that chief adversary of the present world’s British imperialism, the constitutional United States, since the crucial historical break of the February 1763 Peace of Paris, and also the legacy of Massachusetts’ Winthrops and Mathers, and their political heir Benjamin Franklin: that United States remains the most effective force so far, even despite the two U.S. Presidents Bush, to secure the true freedom of nations from so-called “British” imperialism of today. The legacy of Benjamin Franklin’s leading role in crafting the constitutional U.S. republic in its essential character, remains, still, the leading, constitutional adversary of the world’s only true empire of today, the Anglo-Dutch Liberal empire sprung from the tradition of Paolo Sarpi. At the least, this is true of our United States to the degree it has, repeatedly, represented, as under President Franklin D. Roosevelt, the rallying-point of peoples of the world against what has been the leading traditional opponent, British imperialism, since February 1763.
Our United States has never been an imperialist nation in its national character, and has seldom acted in a way even resembling an imperialist power, except when the U.S. government was controlled by British influences such as our own American Tory party descended from such as that outright traitor and British Foreign Office agent U.S. Vice-President Aaron Burr, or, as under avowed virtual agent of British influence, President Harry S Truman, or was confronted by a multi-national adversary, such as, most frequently, the allies and agents of our republic’s principal adversary in fact, the British empire itself. Today, the United States alone could not win the battle for its freedom from Anglo-Dutch Liberal imperialism.
Since the death of President Franklin Roosevelt, and the ascendancy of that wretched defender of British colonialism, President Harry Truman, the power and practiced principle of our United States has been spoiled, that to such a degree that long since the accession of Truman, the U.S.A. has been chiefly self-ruined by a rarely interrupted succession of phases marked by the accession of Truman, the assassination of President John Kennedy, the break-up of the Bretton Woods system sought by London (on the initiative of the accomplices of British subversion of the U.S. administration of President Richard Nixon), and by those predatory, treasonous hordes of David Rockefeller’s Trilateral Commission, the which were deployed in service of the same, pro-genocidal green fascism of the pro-genocidal World Wildlife Fund of Britain’s Duke of Edinburgh (Prince Philip) and his leading, recently deceased partner, Nazi-SS veteran Prince Bernhard of the Netherlands....
DISCOVER A NEW WORLD
In the concluding chapter, LaRouche calls for apportioning the outline of the proposed programmatic approach to the immediate launching of a global physical-economic recovery, among the following principal categories.
1. A New, Global, Bretton Woods System. The present financial systems of the world at large are not only hopelessly bankrupt, when considered in the entirety of the nominally outstanding assets and liabilities of each nation, or region of the world. Although we must choose, selectively, to secure the valid elements among the claimed nominal assets, the merely nominal claims, most of which, like financial derivatives, are essentially only gambling debts, must be simply discarded as waste. Any possibility of the present survival of civilization depends upon the imposition of that condition. ... Among things to be protected, now privileged portions represented as legitimate claims under the process of financial reorganization, must now find a place of safe residence, under general financial and credit reorganization, for those claims. That place, should, in typical cases, be provided by the creation of newly formed credit systems, a place where legitimate claims from the former monetary systems, so defined, are now honored, according to lawful terms, consistent with the intent of national constitutions such as our own U.S. Federal Constitution, and thus provided protection under the lawful terms of a new, international credit-system.
2. The Dynamic Role of Infrastructure. We require potable water, per capita and per square kilometer; power, measured in both quantity and energy flux-density; available mass transport of people and freight; medical care and public health provisions; quality of education and Classical modalities in entertainment and general education; density of physical-scientific research, per capita, and rate of advancement in knowledge of physical and related principles. The general point to be emphasized as among included considerations, is education for development of the quality of the human individual mind, rather than emphasis on so-called “practical education” specific choices of assignments.
3. The Creation of International Credit. Call it, in the alternative, “energy/capital flux-density.” This is usefully translated as an orientation toward the increase of the ratio of number of persons employed in developing and improving the capital-intensity of both production and increase of relative physical output per unit of output per-capita and per square kilometer, rather than merely linear increases. In short, the rate of net productivity per capita and per square kilometer must not merely increase, but accelerate, as Gottfried Leibniz would have informed Descartes, if Leibniz had thought talking to Descartes could have any useful outcome.
4. An Eurasia-Africa Global Perspective. Therefore, the commitment to the destiny of the poorest and least protected among the peoples of the world, the commitment to their acquisition of the efficient means of self-government for progress in the human condition, rather than that of some pet animal, demands that the goals of all humanity are being tested, that by the prospects of a truly human life, that in the full meaning of the adducible creative powers unique to the human individual, which must be the goal and standard of a future new order of progress for all mankind today. Let the reign of all oligarchies of the type of Anglo-Dutch Liberalism, or even worse, now be brought to an end.