Enslaved By Debt

excerpted from the book

Web of Debt

The Shocking Truth About Our Money System And How We Can Break Free

by Ellen Hodgson Brown

Third Millennium Press, 2007, paperback


Although the puppeteers behind [John] Kennedy's assassination have never been officially exposed, some investigators have concluded that he was another victim of the invisible hand of the international corporate/ banking/military cartel. President Eisenhower warned in his 1961 Farewell Address of the encroaching powers of the military-industrial - complex. To that mix [Donald] Gibson [in his book - Battling Wall Street: The Kennedy Presidency] would add the oil cartel and the Morgan-Rockefeller banking sector, which were closely aligned. Kennedy took a bold stand against them all.

How he stood up to the CIA and the military was revealed by James Bamford in a book called Body of Secrets, which was featured by ABC News in November 2001, two months after the World Trade Center disaster. The book discussed Kennedy's threat to abolish the CIA's right to conduct covert operations, after he was presented with secret military plans code-named "Operation Northwoods" in 1962. Drafted by America's top military leaders, these bizarre plans included proposals to kill innocent people and commit acts of terrorism in U.S. cities, in order to create public support for a war against Cuba. Actions contemplated included hijacking planes, assassinating Cuban émigrés, sinking boats of Cuban refugees on the high seas, blowing up a U.S. ship, orchestrating violent terrorism in U.S. cities, and causing U.S. military casualties, all for the purpose of tricking the American public and the international community into supporting a war to oust Cuba's then-new Communist leader Fidel Castro. The proposal stated, "We could blowup a U.S. ship in Guantanamo Bay and blame Cuba," and that "casualty lists in U.S. newspapers would cause a helpful wave of national indignation."

Needless to say, Kennedy was shocked and flatly vetoed the plans. The head of the Joint Chiefs of Staff was promptly transferred to another job. The country's youngest President was assassinated the following year. Whether or not Operation Northwoods played a role, it was further evidence of an "invisible government" acting behind the scenes.

The price of oil suddenly quadrupled in 1974. That highly suspicious rise occurred soon after an oil deal was engineered by U.S. interests with the royal family of Saudia Arabia, the largest oil producer in OPEC (the Organization of the Petroleum Exporting Countries). The deal was evidently brokered by U.S. Secretary of State Henry Kissinger. It involved an agreement by OPEC to sell oil only for dollars in return for a secret U.S. agreement to arm Saudi Arabia and keep the House of Saud in power.

... The U.S. dollar, which had formerly been backed by gold, was now "backed" by oil. Every country had to acquire Federal Reserve Notes to purchase this essential commodity. Oil-importing countries around the world suddenly had to export goods to get the dollars to pay their expensive new oil import bills, diverting their productive capacity away from feeding and clothing their own people. Countries that had a "negative trade balance" because they failed to export more goods than they imported were advised by the World Bank and the IMF to unpeg their currencies from the dollar and let them "float" in the currency market.

... If the benefits of letting the currency float were minor, the downsides were major: the currency was now subject to rampant manipulation by speculators. The result was a disastrous roller coaster ride, particularly for Third World economies. Today, most currency trades are done purely for speculative profit.

Bernard Lietaer writes in The Future of Money

Your money's value is determined global casino of unprecedented proportions: $2 trillion are traded per day in foreign exchange markets, 100 times more than the trading volume of all the stock markets of the world combined. Only 2% of these foreign exchange transactions relate to the "real" economy reflecting movements of real goods and services in the world, and 98% are purely speculative.

Professor Henry C. K. Liu, Chinese American economist

The record of the past three decades shows that neo-liberal ideology brought devastation to every economy it invaded.

When the price of oil quadrupled in the 1970s, OPEC countries were suddenly flooded with U.S. currency; and these "petrodollars" were usually deposited in London and New York banks. They were an enormous windfall for the banks, which recycled them as low-interest loans to Third World countries that were desperate to borrow dollars to finance their oil imports. Like other loans made by commercial banks, these loans did not actually consist of money deposited by their clients. The deposits merely served as "reserves" for loans created by the "multiplier effect" out of thin air." Through the magic of fractional-reserve lending, dollars belonging to Arab sheiks were multiplied many times over as accounting-entry loans. The "emerging nations" were discovered as "emerging markets" for this new international financial capital. Hundreds of billions of dollars in loan money were generated in this way.

Before 1973, Third World debt was manageable and contained. It was financed mainly through public agencies including the World Bank, which invested in projects promising solid economic success. But things changed when private commercial banks got into the game. The banks were not in the business of "development." They were in the business of loan brokering. Some called it "loan sharking." The banks preferred stable" governments for clients. Generally, that meant governments controlled by dictators. How these dictators had come to power, and what they did with the money, were not of immediate concern to the banks. The Philippines, Chile, Brazil, Argentina, and Uruguay were all prime loan targets. In many cases, the dictators used the money for their own ends, without significantly bettering the condition of the people; but the people were saddled with the bill.

[The International Monetary Fund (IMF) was] brought in by the London and New York banks to enforce [third world] debt repayment and act as "debt policeman." Public spending for health, education and welfare in debtor countries was slashed, following IMF orders to ensure that the banks got timely debt service on their petrodollars. The banks also brought pressure on the U.S. government to bail them out from the consequences of their imprudent loans, using taxpayer money and U.S. assets to do it. The results were austerity measures for Third World countries and taxation for American workers to provide welfare for the banks.

When new oil reserves were discovered in Mexico in the 1970s, President Jose Lopez Portillo undertook an impressive modernization and industrialization program, and Mexico became the most rapidly growing economy in the developing world. But the prospect of a strong industrial Mexico on the southern border of the United States was intolerable to certain powerful Anglo-American interests, who determined to sabotage Mexico's industrialization by securing rigid repayment of its foreign debt. That was when interest rates were tripled. Third World loans were particularly vulnerable to this manipulation, because they were usually subject to floating or variable interest rates.'

Why did Mexico need to go into debt to foreign lenders? It had its own oil in abundance. It had accepted development loans earlier, but it had largely paid them off. The problem for Mexico was that it was one of those intrepid countries that had declined to let its national currency float. Mexico's dollar reserves were exhausted by speculative raids in the 1980s, forcing it to borrow just to defend the value of the peso. According to Henry Liu, writing in The Asia Times Mexico's mistake was in keeping its currency freely convertible into dollars, requiring it to keep enough dollar reserves to buy back the pesos of anyone wanting to sell. When those reserves ran out, it had to borrow dollars on the international market just to maintain its currency peg.

In 1982, President Portillo warned of "hidden foreign interests" that were trying to destabilize Mexico through panic rumors, causing capital flight out of the country. Speculators were cashing in their pesos for dollars and depleting the government's dollar reserves in anticipation that the peso would have to be devalued. In an attempt to stem the capital flight, the government cracked under the pressure and did devalue the peso; but while the currency immediately lost 30 percent of its value, the devastating wave of speculation continued. Mexico was characterized as a "high-risk country," leading international lenders to decline to roll over their loans. Caught by peso devaluation, capital flight, and lender refusal to roll over its debt, the country faced economic chaos. At the General Assembly of the United Nations, President Portillo called on the nations of the world to prevent a "regression into the Dark Ages" precipitated by the unbearably high interest rates of the global bankers.

In an attempt to stabilize the situation, the President took the bold move of taking charge of the banks. The Bank of Mexico and the country's fm-o" private banks were taken over by the governments with compensation to their private owners. It was the sort of move calculated to set off alarm bells for the international banking cartel. A global movement to nationalize the banks could destroy their whole economic empire. They wanted the banks privatized and under their control. The U.S. Secretary of State was then George Shultz, a major player in the 1971 unpegging of the dollar from gold. He responded with a plan to save the Wall Street banking empire by having the IMF act as debt policeman. Henry Kissinger's consultancy firm was called in to design the program. The result, says Engdahl, was "the most concerted organized looting operation in modern history," carrying "the most onerous debt collection terms since the Versailles reparations process of the early 1920s," the debt repayment plan blamed for propelling Germany into World War II.

Mexico's state-owned banks were returned to private ownership , but they were sold strictly to domestic Mexican purchasers. Not until the North American Free Trade Agreement (NAFTA) was foreign competition even partially allowed. Signed by Canada, Mexico and the United States, NAFTA established a "free-trade" zone in North America to take effect on January 1, 1994. In entering the agreement, Carlos Salinas, the outgoing Mexican President, broke with decades of Mexican policy of high tariffs to protect state-owned industry from competition by U.S. corporations.

By 1994, Mexico had restored its standing with investors. It had balanced budget, a growth rate of over three percent, and a stock market that was up five-fold. In February 1995, Jane Ingraham wrote in The New American that Mexico's fiscal policy was in some respects "superior and saner than our own wildly spendthrift Washington circus." Mexico received enormous amounts of foreign investment, after being singled out as the most promising and safest of Latin American markets. Investors were therefore shocked and surprised when newly-elected President Ernesto Zedillo suddenly announced a 13 percent devaluation of the peso, since there seemed no valid reason for the move. The following day, Zedillo allowed the formerly managed peso to float freely against the dollar. The peso immediately plunged by 39 percent.

What was going on? In 1994, the U.S. Congressional Budget Office Report on NAFTA had diagnosed the peso as "overvalued" by 20 percent. The Mexican government was advised to unpeg the currency and let it float, allowing it to fall naturally to its "true" level. The theory was that it would fall by only 20 percent; but that is not what happened. Speculators pushed the peso down sharply and abruptly, collapsing its value. The collapse was blamed on the lack of "investor confidence" due to Mexico's negative trade balance; but as Ingraham observes, investor confidence was quite high immediately before the collapse. If a negative trade balance is what sends a currency into massive devaluation and hyperinflation, the U.S. dollar itself should have been driven there long ago. By 2001, U.S. public and private debt totaled ten times the debt of all Third World countries combined.

Although the peso's collapse was supposedly unanticipated, over 4 billion U.S. dollars suddenly and mysteriously left Mexico in the 20 days before it occurred. Six months later, this money had twice the Mexican purchasing power it had earlier. Later commentators maintained that lead investors with inside information precipitated the stampede out of the peso. The suspicion was that these investors were the same parties who profited from the Mexican bailout that followed. When Mexico's banks ran out of dollars to pay off its creditors (which were largely U.S. banks), the U.S. government stepped in with U.S. tax dollars. The Mexican bailout was engineered by Robert Rubin, who headed the investment bank Goldman Sachs before he became U.S. Treasury Secretary. Goldman Sachs was then heavily invested in short-term dollar-denominated Mexican bonds. The bailout was arranged the day of Rubin's appointment. The money provided by U.S. taxpayers did not go to Mexico but went straight into the vaults of Goldman Sachs, Morgan Stanley, and other big American lenders whose risky loans were on the line.

The late Jude Wanniski was a conservative economist who was at one time a Wall Street Journal editor and adviser to President Reagan. He cynically observed of this baker coup:

There was a big party at Morgan Stanley after the Mexican peso devaluation, people from all over Wall Street came, they drank champagne and smoked cigars arid congratulated themselves on how they pulled it off and they made a fortune. These people are pirates, international pirates.


The loot was more than just the profits of gamblers who had bet the right way. The pirates actually got control of Mexico's banks. NAFTA rules had already opened the nationalized Mexican banking system to a number of U.S. banks, with Mexican licenses being granted to 18 big foreign banks and 16 brokers including Goldman Sachs. But these banks could bring in no more than 20 percent of the system's total capital, limiting their market share in loans and securities holdings." By 2004, this limitation had been removed. All but one of Mexico's major banks had been sold to foreign banks, which gained total access to the formerly closed Mexican banking market.

The value of Mexican pesos and Mexican stocks collapsed together, supposedly because there was a stampede to sell and no one around to buy; but buyers with ample funds were sitting on the sidelines, waiting to pick over the devalued stock at bargain basement prices. The result was a direct transfer of wealth from the local economy to international money manipulators. The devaluation also precipitated a wave of privatizations (sales of public assets to private corporations), as the Mexican . government tried to meet its spiraling debt crisis In a February if article called "Militant Capitalism," David Peterson blamed the rout on an assault on the peso by short-sellers. He wrote:

The austerity measures that the U.S. government and the IMF forced on Mexicans in the aftermath of last winter's assault on the peso by short-sellers in the foreign exchange markets have been something to behold. Almost overnight, the Mexican people have had to endure dramatic cuts in government spending; a sharp hike in regressive sales taxes; at least one million layoffs (a conservative estimate); a spike in interest rates so pronounced as to render their debts unserviceable ... a collapse in consumer spending on the order of 25 percent by mid-year; and, in brief, a 10.5 percent contraction in overall economic activity during the second quarter, with more of the same sure to follow.

By 1995, Mexico's foreign debt was more than twice the country's total debt payment for the previous century and a half. Per-capita income had fallen by almost a third from a year earlier, and Mexican purchasing power had fallen by well over 50 percent." Mexico was propelled into a crippling national depression that has lasted for over a decade. As in the U.S. depression of the 1930s, the actual value of Mexican businesses and assets did not change during this speculator-induced crisis. What changed was simply that currency had been sucked out of the economy by investors stampeding to get out of the Mexican stock market, leaving insufficient money in circulation to pay workers, buy raw materials, finance loans, and operate the country. It was further evidence that when short-selling is allowed, currencies are driven into hyperinflation not by the market mechanism of "supply and demand" but by the concerted action of currency speculators.

While economists debate the fiscal pros and cons of "floating" exchange rates, from a legal standpoint they represent a blatant fraud on the people who depend on a stable medium of exchange... The very notion that a country has to "defend" its currency shows that there is something wrong with the system... A sovereign government has both the right and the duty to calibrate its medium of exchange so that it is a stable measure of purchasing power for its people.

[Henry Carey and the American nationalists warned in the nineteenth century of the dangers of opening a country's borders to "free trade." Carey said sovereign nations should pay their debts in their own currencies, issued Greenback-style by their own governments. [Professor Henry C. K. Liu, Chinese American economist ] also advocates this approach, which he calls "sovereign credit." Carey called it "national credit," something he defined as "a national system based entirely on the credit of the government with the people, not liable to interference from abroad.

There were actually two Russian revolutions. The first, called the February Revolution, was a largely bloodless transfer of power from the Tsar to a regime of liberals and socialists led by Alexander Kerensky, who intended to instigate political reform along democratic lines. The far bloodier October Revolution was essentially a coup, in which Kerensky was overthrown by Vladimir Lenin with the support of Leon Trotsky and some 300 supporters who came with him from New York. Born Lev Bronstein, Trotsky was a Bolshevik revolutionary who had gone to New York after being expelled from France in 1916. He and his band of supporters returned to Russia in 1917 with substantial funding from a mystery Wall Street donor, widely thought to he Jacob Schiff of Kuhn Loeb. Trotsky's New York recruits later adopted Russian names and made up the bulk of the Communist Party leadership.

Why was a second Russian revolution necessary? The reasons are no doubt complex, but in The Creature from Jekyll Island, Ed Griffin suggests one that is not found in standard history texts. He observes that Trotsky and the Bolsheviks received strong support from the highest financial and political power centers in the United States, men who were supposedly "capitalists" and should have strongly opposed socialism and communism. Griffin maintains that Lenin, Trotsky and their supporters were not sent to Russia to overthrow the Tsar. Rather, "Their assignment from Wall Street was to overthrow the revolution." In support, he quotes Eugene Lyons, a correspondent for United Press who was in Russia during the Revolution. Lyons wrote:

Lenin, Trotsky and their cohorts did not overthrow the monarchy. They overthrew the first democratic society in Russian history, set up through a truly popular revolution in March, 1917.

They represented the smallest of the Russian radical movements .... But theirs was a movement that scoffed at numbers and frankly mistrusted multitudes .... Lenin always sneered at the obsession of competing socialist groups with their "mass base." "Give us an organization of professional revolutionaries," he used to say, "and we will turn Russia upside down."

Within a few months after they attained power, most of the tsarist practices the Leninists had condemned were revived, usually in more ominous forms: political prisoners, convictions without trial and without the formality of charges, savage persecution of dissenting views, death penalties for more varieties of crime than any other modern nation.

Lenin, Trotsky and their supporters kept Russia in the hands of a small group of elite called the Communist Party, who were largely foreign imports. The Party kept Russian commerce open to "free trade," and it kept the banking system open to private manipulation. In 1917, the country's banking system was nationalized as the People's Bank of the Russian Republic; but this system was dissolved in 90 contradicting the Communist idea of a "moneyless economy." Edward Griffin writes:

In 1922, the Soviets formed their first international bank. It was not owned and run by the state as would he dictated by Communist theory hut was put together by a syndicate of private hankers. These included not only former Tsarist bankers, but representatives of German, Swedish, and American banks. Most of the foreign capital came from England, including the British government itself. The man appointed as Director of the Foreign Division of the new bank was Max May, Vice President of Morgan's Guaranty Trust Company in New York.

In the years immediately following the October Revolution, there was a steady stream of large and lucrative (read noncompetitive) contracts issued by the Soviets to British and American businesses... U.S., British, and German wolves soon found a bonanza of profit selling to the new Soviet regime.

Srdja Trifkovic is a journalist who calls himself a "paleoconservative" (the "Old Right" as opposed to the "New Right"). He writes that the Neocons moved "from the paranoid left to the paranoid right" after emerging from the anti-Stalinist far left in the late 1930s and early 1940s. They had discovered that capitalism suited their aims better than socialism but they remained consistent in those aims, which were to prevail over the Russian regime and dominate the world economically and militarily. They succeeded on the Russian front when the Soviet economy finally collapsed in 1989.

Canadian writer Wayne Ellwood

[Structural adjustment is] a code word for economic globalization and privatization - a formula which aims both to shrink the role of the state and soften the market for private investors.

Mark Weisbrot, co-director of the Center for Economic and Policy Research, testified before Congress in 1998

The IMF has presided over one of the worst economic declines in modern history. Russian output has declined by more than 40% since 1992 - a catastrophe worse than our own Great Depression. Millions of workers are denied wages owed to them, a total of more than $12 billion .... These are the results of "shock therapy," a program introduced by the International Monetary Fund in 1992.

Professor Henry C.K. Liu, economist, chair of Department of Economics at UCLA, and countries' investment consultant

The Nazis came to power in Germany in 1933, at a me when its economy was in total collapse, with ruinous war-reparation obligations and zero prospects for foreign investment or credit. Yet through an independent monetary policy of sovereign credit and a full-employment public-works program, the Third Reich was able to turn a bankrupt Germany, stripped of overseas colonies it could exploit, into the strongest economy in Europe within four years, even before armament spending began.'

[John Maynard] Keynes [wrote]: when the resources were available to increase productivity, adding money to the economy did not increase prices; it increased goods and services. Supply and demand increased together, leaving prices unaffected.

The usual explanation for the drastic runaway inflation that afflicted Russia and its former satellites following the fall of the Iron Curtain is that their governments resorted to printing their own money, diluting the money supply and driving up prices. But as William Engdahl shows in A Century of War, this is not what was actually going on. / Rather, hyperinflation was a direct and immediate result of letting their currencies float in foreign exchange markets. He writes:

In 1992 the IMF demanded a free float of the Russian ruble as part--of its "market-oriented" reform. The ruble float led within a year to an increase in consumer prices of 9,900 per cent, and a collapse in real wages of 84 per cent. For the first time since 1917, at least during peacetime, the majority of Russians were plunged into existential poverty .... Instead of the hoped-for American-style prosperity, I two-cars-in-every-garage capitalism, ordinary Russians were driven into economic misery.

After the Berlin Wall came down, the IMF was put in charge of the market reforms that were supposed to bring the former Soviet countries in line with the Western capitalist economies that were dominated by the dollars of the private Federal Reserve and private U.S. banks. The Soviet people acquiesced, lulled by dreams of the sort of prosperity they had seen in the American movies. But [William] Engdahl says it was all a deception:

The aim of Washington's IMF "market reforms" in the former J \ Soviet Union was brutally simple: destroy the economic ties that bound Moscow to each part of the Soviet Union .... IMP shock therapy was intended to create weak, unstable economies on the periphery of Russia, dependent on Western capital and on dollar inflows for their survival -- a form of neocolonialism .... The Russians were to get the standard Third World treatment... IMF conditionalities and a plunge into poverty for the population. A tiny elite were allowed to become fabulously rich in dollar terms, and manipulable by Wall Street bankers and investors.

It was an intentional continuation of the Cold War by other means -- entrapping the economic enemy with loans of accounting-entry money. Interest rates would then be raised to unplayable levels, and the IMP would be put in charge of "reforms" that would open the economy to foreign exploitation in exchange for debt relief. [William] Engdahl writes:

The West, above all the United States, clearly wanted a reindustrialized Russia, to permanently break up the economic structure of the old Soviet Union. A major area of the global economy, which had been largely closed to the dollar domain for more than seven decades, was to be brought under its control... The new oligarchs were "dollar oligarchs."

Things were even worse in Yugoslavia, which suffered what has been called the worst hyperinflation in history in 1993-94. Again, the textbook explanation is that the government was madly printing money. As one college economics professor put it:

After Tito [the Yugoslavian Communist leader until 1980], the Communist Party pursued progressively more irrational economic policies. These policies and the breakup of Yugoslavia ... led to heavier reliance upon printing or otherwise creating money to finance the operation of the government and the socialist economy. This created the hyperinflation.

That was the conventional view, but Engdahl maintains that the reverse was actually true: the Yugoslav collapse occurred because the IMF prevented the government from obtaining the credit it needed from its own central bank. Without the ability to create money and issue credit, the government was unable to finance social programs and hold its provinces together as one nation. The country's real problem was not that its economy was too weak but that it was too strong. Its "mixed model" combining capitalism and socialism was so successful that it threatened the bankers' IMF/ shock therapy model. [William] Engdahl states:

For over 40 years, Washington had quietly supported Yugoslavia, and the Tito model of mixed socialism, as a buffer against the Soviet Union. As Moscow's empire began to fall apart, Washington had no more use for a buffer - especially a nationalist buffer which was economically successful, one that might convince neighboring states in eastern Europe that a middle way other than IMF shock therapy was possible. The Yugoslav model had to be dismantled, for this reason alone, in the eyes of top Washington strategists. The fact that Yugoslavia also lay on a critical path to the potential oil riches of central Asia merely added to the argument.

Yugoslavia was another victim of the Tequila Trap - the lure of wealth and development if it would open its economy to foreign investment and foreign loans. According to a 1984 Radio Free Europe report, Tito had made the mistake of allowing the country the "luxury" of importing more goods than it exported, and of borrowing huge sums of money abroad to construct hundreds of factories that never made a profit. When the dollars were not available to pay back these loans, Yugoslavia had to turn to the IMF for debt relief. The jaws of the whale then opened, and Yugoslavia disappeared within.

As a condition of debt relief, the IMF demanded wholesale privatization of the country's state enterprises. The result was to bankrupt more than 1,100 companies and produce more than 20 percent unemployment. IMF policies caused inflation to rise dramatically, until by 1991 it was over 150 percent. When the government was not able to create the money it needed to hold its provinces together, economic chaos followed, causing each region to fight for its own survival. [William] Engdahl states:

Reacting to this combination of IMF shock therapy and direct Washington destabilization, the Yugoslav president, Serb nationalist Slobodan Milosevic, organized a new Commuriist Party in November 1990, dedicated to preventing the breakup of the federated Yugoslav Republic. The stage was set for a gruesome series of regional ethnic wars which would last a decade and result in the deaths of more than 200,000 people .

... In 1992 Washington imposed a total economic embargo on Yugoslavia, freezing all trade and plunging the economy into chaos, with hyperinflation and 70 percent unemployment as the result. The Western public, above all in the United States, was told by establishment media that the problems were all the result of a corrupt Belgrade dictatorship.

Similar interventions precipitated runaway inflation in the Ukraine, where the IMF "reforms" began with an order to end state foreign exchange controls in 1994. The result was an immediate collapse of the currency. The price of bread shot up 300 percent; electricity shot up 600 percent; public transportation shot up 900 percent. State industries that were unable to get bank credit were forced into bankruptcy. As a result, says [William] Engdahl:

Foreign speculators were free to pick the jewels among the rubble at dirt-cheap prices [1990s] .... The result was that Ukraine, once the breadbasket of Europe, was forced to beg food aid from the U.S., which dumped its grain surpluses on Ukraine, further destroying local food self-sufficiency. Russia and the states of the former Soviet Union were being treated like the Congo or Nigeria, as sources of cheap raw materials, perhaps the largest sources in the world . . . . [T]hose mineral riches were now within the reach of Western multinationals for the first time since 1917.

Zimbabwe, in August 2006 was reported to be suffering from a crushing hyperinflation of around 1,000 percent a year. As usual, the crisis was blamed on the government frantically issuing money; and in this case, the government's printing presses were indeed running. But the currency's radical devaluation was still the fault of speculators, and it might have been avoided if the government had used its printing presses in a more prudent way.

The crisis dates back to 2001, when Zimbabwe defaulted on its loans and the IMF refused to make the usual accommodations, including refinancing and loan forgiveness. Apparently, the IMF intended to punish the country for political policies of which it disapproved, including land reform measures that involved reclaiming the lands of wealthy landowners. Zimbabwe's credit was ruined and it could not get loans elsewhere, so the government resorted to issuing its own national currency and using the money to buy U.S. dollars on the foreign exchange market. These dollars were then used to pay the IMF and regain the country's credit rating." Unlike in Argentina, however, the government had to show its hand before the dollars were in it, leaving the currency vulnerable to speculative manipulation. According to a statement by the Zimbabwe central bank, the hyperinflation was caused by speculators who charged exorbitant rates for U.S. dollars, causing a drastic devaluation of the Zimbabwe currency.

The government's real mistake, however, may have been in playing the IMF's game at all. Rather than using its national currency to buy foreign fiat money to pay foreign lenders, it could have followed the lead of Abraham Lincoln and the Guernsey islanders and issued its own currency to pay for the production of goods and services for its own people. Inflation would have been avoided, because the newly-created "supply" (goods and services) would have kept up with "demand" (the supply of money); and the currency would have served the local economy rather than being siphoned off by speculators.

President Ulysses S. Grant

Some nations like to lend money to poor nations very much. By this means they flaunt their authority, and cajole the poor nation. The purpose of lending money is to get political power for themselves.

William Engdahl, 'The Century of War'

The Tiger economies were a major embarrassment to the IMF free market model. Their very success in blending private enterprise with a strong state economic role was a threat to the IMF free market agenda. So long as the Tigers appeared to succeed with a model based on a strong state role, the former communist states and others could argue against taking the extreme IMF course. In east Asia during the 1980s, economic growth rates of 7-8 per cent per year, rising social security, universal education and a high worker productivity were all backed by state guidance and planning, albeit in a market economy - an Asian form of benevolent paternalism.

High economic growth, rising social security, and universal education in a market economy - it was the sort of "Common Wealth" America's Founding Fathers had endorsed. But the model represented a major threat to the international bankers' system of debt-based money and IMF loans.

Washington began demanding that the Tiger economies open their controlled financial markets to free capital flows, supposedly in the interest of "level playing fields." Like Japan, the East Asian countries went along with the program. The institutional speculators then went on the attack, armed with a secret credit line from a group of international banks including Citigroup.

They first targeted Thailand, gambling that it would be forced to devalue its currency and break from its peg to the dollar. Thailand capitulated, its currency was floated, and it was forced to turn to the IMF for help. The other geese then followed one by one. Chalmers Johnson wrote in The Los Angeles Times in June 1999:

The funds. [institutional speculators and international banks] easily raped Thailand, Indonesia and South Korea, then turned the shivering survivors over to the IMF, not to help victims, but to insure that no Western bank was stuck with non-performing loans in the devastated countries.

Mark Weisbrot testified before Congress, "In this case [Asian Tigers' economic collapse] the IMF not only precipitated the financial crisis, it also prescribed policies that sent the regional economy into a tailspin."

In an article in Monetary Reform in the winter of 1998-99 Professor Michel Chossudovsky wrote:

This manipulation of market forces [Asian Tigers' economies] by powerful actors constitutes a form of financial and economic warfare. No need to re-colonize lost territory or send in invading armies. In the late twentieth century, the outright "conquest of nations," meaning the control over productive assets, labor, natural resources and institutions, can be carried out in an impersonal fashion from the corporate boardroom: commands are dispatched from a computer terminal, or a cell phone.

Malaysian Prime Minister Mahathir Mohamad said the IMF was using the [Asian] financial crisis to enable giant international corporations to take over Third World economies. He contended:

They see our troubles as a means to get us to accept certain regimes, to open our market to foreign companies to do business without any conditions. [The IMF] says it will give you money if you open up your economy, but doing so will cause all our banks, companies and industries to belong to foreigners ....

They call for reform but this may result in millions thrown out of work. I told the top official of IMF that if companies were to close, workers will be retrained, but he said this didn't matter as bad companies must be closed. I told him the companies became bad because of external factors, so you can't bankrupt them as it was not their fault. But the IMF wants the companies to go bankrupt.

Mahathir insisted that his government had not failed. Rather, it had been victimized along with the rest of the region by the international system. He blamed the collapse of Asia's currencies on an orchestrated attack by giant international hedge funds. Because they profited from relatively small differences in asset values, the speculators were prepared to create sudden, massive and uncontrollable outflows of capital that would wreck national economies by causing capital flight. He charged,

"This deliberate devaluation of the currency of a country by currency traders purely for profit is a serious denial of the rights of independent nations." Mahathir said he had appealed to the international agencies to regulate currency trading to no avail, so he had been forced to take matters into his own hands. He had imposed capital and exchange controls, a policy aimed at shifting the focus from catering to foreign capital to encouraging national development. He fixed the exchange rate of the ringgit (the Malaysian national currency) and ordered that it be traded only in Malaysia. These measures did not affect genuine investors, he said, who could bring in foreign funds, convert them into ringgit for local investment, and apply to the Central Bank to convert their ringgit back into foreign currency as needed.

Western economists waited for the economic disaster they assumed would follow; but capital controls actually helped to stabilize the system. Before controls were imposed, Malaysia's economy had contracted by 7.5 percent. The year afterwards, growth projections went as high as 5 percent. Joseph Stiglitz, chief economist for the World Bank, acknowledged in 1999 that the Bank had been "humbled" by Malaysia's performance. It was a tacit admission that the World Bank's position had been wrong.'

China is distinguished by keeping itself free of the debt web of the IMF and the international banking cartel; and by refusing to let its currency float, a policy that has fended off the currency manipulations of international speculators. The value of the renminbi is kept pegged to the dollar; and unlike Mexico in the 1990s, China has such a huge store of dollar reserves that it is pervious to the assaults of speculators.

Greg Grillot, in a May 2005 article 'The Mystery of Mr. Wu'

Like modern American banks, the Chinese banks (read: the Chinese government) freely loan money to fledgling and huge established businesses alike. But unlike modern American banks ... the Chinese banks don't expect businesses to pay back the money lent to them.

Professor Henry C.K. Liu, economist, chair of Department of Economics at UCLA, and countries' investment consultant

Any government that takes on foreign debt is recklessly exposing its economy to unnecessary risk from external forces.

Third World countries .. [have] been caught in the trap of accepting foreign loans and investment, making it vulnerable to sudden capital flows, subjecting it to the whims and wishes of foreign financial powers. Countries that have been lured into this trap have wound up seeking financial assistance from the IMF, which has then imposed "austerity policies" as a condition of debt relief. These austerities include the elimination of food program subsidies, reduction of wages, increases in corporate profits, and privatization of public industry. All sorts of public assets go on the block - power companies, ports, airlines, railways, even social-welfare services. Canadian critic Wayne Eliwood writes of this "privatization trap":

Dozens of countries and scores of public enterprises around the world have been caught up in this frenzy, many with little choice.
Countries forced to the wall by debt have been pushed into the privatization trap by a combination of coercion and blackmail . ... How much latitude do poor nations have to reject or shape adjustment policies? Virtually none. The right of governments to make sovereign decisions on behalf of their citizens - the bottom line of democracy - is simply jettisoned.

In theory, these structural adjustment programs also benefit local populations by enhancing the efficiency of local production, something that supposedly happens as a result of exposure to international competition r investment and trade. But their real effect has been simply to impose enormous hardships on the people. Food and transportation subsidies, public sector layoffs, curbs on government spending, and higher interest and tax rates all hit the poor disproportionately hard. Helen Caldicott, M.D., co-founder of Physicians for Social Responsibility, writes:

Women tend to bear the brunt of these IMF policies, for they spend more and more of their day digging in the fields by hand to increase the production of luxury crops, with no machinery or modern equipment. It becomes their lot to help reduce the foreign debt, even though they never benefited from the loans in the first place .... Most of the profits from commodity sales in the Third World go to retailers, middlemen, and shareholders in the First World .... UNICEF estimates that half a million children die each year because of the debt crisis.

Countries have been declared "economic miracles" even when their poverty levels have increased. The "miracle" is achieved through a change in statistical measures. The old measure, called the gross national product or GNP, attributed profits to the country that received the money. The GNP included the gross domestic product or GDP (the total value of the output, income and expenditure produced within a country's physical borders) plus income earned from investment or work abroad. The new statistical measure looks simply at GDP. Profits are attributed to the country where the factories, mines, or financial institutions are located, even if the profits do not benefit the country but go to wealthy owners abroad.

In 1980, median income in the richest 10 percent of countries was 77 times greater than in the poorest 10 percent. By 1999, that gap had grown to 122 times greater. In December 2006, the United Nations released a report titled "World Distribution of Household Wealth," which concluded that 50 percent of the world's population now owns only 1 percent of its wealth. The richest 1 percent own 40 percent of all global assets, with the 37 million people making up that 1 percent all having a net worth of $500,000 or more. The richest 10 percent of adults own 85 percent of global wealth. Under current conditions, the debts of the poorer nations can never be repaid but will just continue to grow. Today more money is flowing hack to the First World in the form of debt service than is flowing out in the form of loans. By 2001, enough money had flowed back from the Third World to First World banks to pay the principal due on the original loans six times over. But interest consumed so much of those payments that the total debt actually quadrupled during the same period.

Christian Weller and Adam Hersh in a 2002 editorial

[T]o use India and China as poster children for the IMF/ World Bank brand of liberalization is laughable. Both nations have sheltered their currencies from global speculative pressures (a serious sin, according to the IMF). Both have been highly protectionist (India has been a leader of the bloc of developing nations resisting WTO pressures for laissez-faire openness). And both have relied heavily on state-led development and have opened to foreign capital only with negotiated conditions.

[India and China] were largely insulated from the Asian crisis of the 1990s by their governments' refusal to open the national currency to foreign speculation. In India, as in China, private banking has made some inroads; but in 2006, 80 percent of India's banks were still owned by the government" Government ownership has not made these banks inefficient or uncompetitive. A 2001 study of consumer satisfaction found that the State Bank of India ranked highest in all areas scored, beating both domestic and foreign private banks and financing institutions. 2007 study also found that India's public sector banks were faring better than its domestic private sector banks.

In a June 2005 article in the London Observer, Greg Palast noted that in those Indian states where globalist free trade policies have been imposed, workers have been reduced to sweatshop conditions due to murderous competition between workers without union protection. But these are not the states where Microsoft and Oracle are finding their highly-skilled computer talent. In those states, says Palast, the socialist welfare model is alive and thriving:

The computer wizards of Bangalore (in Karnataka state) and Kerala are the products of fully funded state education systems where, unlike the USA, no child is left behind. A huge apparatus of state-owned or state-controlled industries, redistributionist tax systems, subsidies of necessities from electricity to food, tight government regulation and affirmative action programs for the lower castes are what has created these comfortable refuges for Oracle and Microsoft.

... What made this all possible was not capitalist competitive drive (there was no corporate "entrepreneur" in sight), but the state's investment in universal education and the village's commitment to development of opportunity, not for a lucky few, but for the entire community. The village was 100% literate, 100% unionized, and 100% committed to sharing resources through a sophisticated credit union finance system.

Conditions are much different in the state of Andhra Pradesh, where farming has been the target of a "poverty eradication" program of the British government. Andhra Pradesh has the highest number of farmer suicides in India. These tragedies have generally followed the amassing of unrepayable debts for expensive seeds and chemicals for export crops that did not produce the promised returns. An April 2005 article in the British journal Sustainable Economics traced the problem to a project called "Vision 2020":

[T]he UK's Department for International Development (DID) and World Bank were financing a project, Vision 2020 which aimed to transform the state to an export led, corporate controlled, industrial agriculture model that was thought likely to displace up to 20 million people from the land by 2020. There were no ideas or planning for what such displaced millions were to do and despite these fundamental and profound upheavals in the food system, there had been little or no involvement of small farmers and rural people in shaping this policy.

Vision 2020 was backed by a loan from the World Bank and was to receive £100 million of UK aid, 60% of all DFID's aid budget to India .... There were about 3000 farmer suicides in Andhra Pradesh in the 4 years prior to the May 2004 election and since the election there have been 1300 further suicides.

A later report put the number of farmer suicides between 1997 and 2005 at 150,000.' India's farmers, who make up 70 percent of the population, voted out the existing coalition government in May 2004; but the new ruling party, the United Progressive Alliance (UPA), has also had to take its marching orders from the World Bank, the World Trade Organization (WTO) and multinational corporations. The Sustainable Economics article noted that laws and policies have been pushed through the legislature that threaten to rob the poor of their seeds, their food, their health and their livelihoods, including:

* A new patent ordinance that introduces product patents on seeds and medicines, putting them beyond people's reach. Prices increase 10 to 100-fold under patent monopolies. Since India is also the source of low-cost generic medicines for Africa, the introduction of patent monopolies in India is likely to increase debt and poverty globally.

* New policies for water privatization have been introduced, including privatization of Delhi's water supply, pushing water tariffs up by 10 to 15 times. The policies threaten to deprive the poor of their fundamental right to water, diverting scarce incomes to pay water bills that are 10 times higher than needed to cover the cost of operations and maintenance.

* The removal of regulations on prices and volumes, allowing giant corporations to set up private markets, destroying local markets and local production. India produces thousands of crops on millions of farms, while agribusiness trades in only a handful of commodities. Their new central role in much less regulated Indian markets is likely to result in destruction of diversity and displacement of small producers and traders.

The "New World Order" [NWO] that was heralded at the end of the Cold War was supposed to be a harmonious global village without restrictions on trade and with cooperative policing of drug-trafficking, terrorism and arms controls. But to the wary, it is the road to a one-world government headed by transnational corporations, oppressing the public through military means and restricting individual freedoms. Bob Djurdjevic writing in the paleoconservative journal Chronicles in 1998, compared the NWO to the old British empire:

Parallels between the British Empire and the New World Order Empire are striking. It's just that the British crown relied on brute force to achieve its objectives, while the NWO elite mostly use financial terrorism... The British Empire was built by colonizing other countries, seizing their natural resources, and shipping them to England to feed the British industrialists' factories. In the wake of the "red coats" invasions, local cultures were often trampled and replaced by a "more progressive" British way of life.

The Wall Street-dominated NWO Empire is being built by colonizing other countries with foreign loans or investments. "Then he fish is firmly on the hook, the NWO financial terrorists pull the plug, leaving the unsuspecting victim high and dry. And begging 'o be rescued. In comes the International Monetary Fund (IMF). Its bailout recipes - privatization, trade liberalization and other austerity reforms - amount to seizing the target countries' natural and other resources, and turning them over to the NWO elites just as surely as the British Empire did by using cruder methods.

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