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,
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
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
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
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 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
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
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
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
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
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.
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
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]
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
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.
"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
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
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
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
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
[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
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
* 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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