Frederick Douglass

"Power concedes nothing without a demand. It never did, and it never will. Find out just what people will submit to, and you have found out the exact amount of injustice and wrong which will be imposed upon them..." Frederick Douglass

Friday, December 31, 2010

Media and Class Struggle, It's a Joke but it's not That Funny

You just cannot make this shit up!

The struggle in India is quite complex, and is being fought on many fronts. The indigenous people, popularly known as Adivasi ( 'original people' in Sanskrit ), are rebelling against the government's efforts to relocate them and give their ancestral lands over to oil, timber, and mining companies.

The history of the left in India is a study in itself. The original fault line, much like everywhere else in the socialist world, derived from the epic Stalin-Trotsky conflict. Thereafter divergent allegiances resulted in the creation of three different parties all calling themselves communist: the Communist Party of India ( Marxist ), the Communist Party of India ( Leninist ), and the Communist Party of India ( Maoist ), with the latter being commonly referred to as Naxalite after the town, Naxalbari. where they launched their first insurrection.

To make matters worse, these parties experienced further internal fragmentation with some members believing that a legal path to power was possible, with others denouncing them as mere "reformers" and warning against ideological drift. Their differing orientations clashed most irreconcilably on the issue of firearms, with the former believing they are unnecessary and counterproductive, and the latter insisting on their indispensability. As a consequence, these parties split into legal parties working within the system, and illegal parties with armed militias.

The membership of these parties rose and fell with events. When one was experiencing success, people from other parties would overcome their doctrinal reluctance and defect. If that particular party's influence waned, it would then experience a decline in membership with its defectors coalescing around another issue or figure or party.

It should come as no surprise that in largely agrarian India, the Naxalites have the largest following. With their success in the armed conflict with the Indian government over Adivasi land, their numbers have swollen tremendously. They are doing so well, and are enjoying so much popular support from Indians who believe in the Adivasi cause, that Prime Minister Manmohan Singh referred to the Naxalites as "the single biggest internal security challenge ever faced by our country." [1] Currently, they have 42 percent of that nation under their control, an area now being called the Red Corridor.

Recently, there have been a rash of strikes and suicides in Tirupur, state of Tamil Nadu. It is the center of the textile industry in India and workers have not shared in the recent boom. The strikers are calling for wage increases, shorter hours, and decent plumbing and sanitation in company-provided housing, where conditions are deplorable. Yet if one reads the mainstream media in India, one gets a distinctly different impression of the conflict.

From business magazine Tehelka:

"Alcoholism, family disputes, failure in love and extra-marital affairs are cited by experts as the main reasons for the spike in suicides." [2]

Here's The Times of India:

''In a land of migrant labourers, where the workforce is largely drawn from southern TN and north India, suicide figures are bound to be high,'' says Tirupur SP A Arun. [3]

While the Deccan Herald's reporting is considerably better, they provide this howler:

"Many of these suicides are believed to be among the depression-prone migrant workers,” says District Collector Samayamoorthy. [4]

The Hindu:

"K. Sakthivel, psychiatrist at District Headquarters Hospital, said studies indicate that the main reason for suicide in the district was vulnerable personality traits which lead a person to take a spontaneous decision to end his or her life at the slightest of provocations." [5]

You just cannot make this shit up.


Maoist website http://indianmaoist.blogspot.com/



[1] Please note that I offer this link to provide a source for the Singh quote. I do not endorse the article which is full of disinformation. It depicts the Maoists as gangsters, however you may feel about them, they are certainly not profiteers.
http://www.time.com/time/magazine/article/0,9171,1810169-1,00.html

[2] http://www.tehelka.com/story_main47.asp?filename=Cr301010Tirupur.asp

[3] http://timesofindia.indiatimes.com/india/405-deaths-in-8-months-Tirupur-turning-suicide-capital-of-TN/articleshow/6604039.cms

[4] http://www.deccanherald.com/content/99897/sudden-suicides-tear-tirupur-textile.html

[5] http://www.thehindu.com/news/cities/Coimbatore/article553656.ece

Thursday, December 30, 2010

The Struggle in Tunisia







It seems that the long-simmering resentment of their government by the Tunisian people is coming to a head. In much the same way that the death of Alexandros Grigoropoulous triggered the uprising in Greece, the recent self-immolation of a college student [1], Muhammad Bouazizi, after police shut down his unlicensed street kiosk has moved many Tunisians to violent clashes with the police. [2] Unfortunately, fatalities have resulted. [3]

In response, President Zine al-Abidine Ben Ali, apparently trying to prove just how stupid he is, blamed foreign media for stirring up the protests and then mischaracterizing them; [4] fired the communications minister as a result; [5] and, most foolishly, escalated the tempest by threatening demonstrators with severe punishment. [6] He then proceeded to arrest leaders of the major opposition party. [7]





[1] http://www.theatlanticwire.com/opinions/view/opinion/Protesters-and-Police-Clash-in-Tunisia-Following-Self-Immolation-6338

http://top10bookreviews.com/protesters-and-police-clash-in-tunisia-following-self-immolation (Scroll down for video)

[2] http://www.ips-dc.org/blog/will_the_tunisian_president_go_the_way_of_ceausescu_part_2

[3] http://www.msnbc.msn.com/id/40805193/ns/world_news-africa/

[4] http://www.latimes.com/news/nationworld/wire/sns-ap-af-tunisia-unrest,0,3514159.story

[5] http://latimesblogs.latimes.com/babylonbeyond/2010/12/tunisia-president-warns-protesters-shuffles-cabinet-amid-demonstrations.html

[6] http://english.aljazeera.net/news/africa/2010/12/2010122823238574209.html

[7] http://www.wfaa.com/news/world/112602324.html

The War on the Working Class Rolls on.

http://thetbf.wordpress.com/2010/12/30/wage-theft-in-america-two-approaches/

Sunday, December 26, 2010

Editor's Note

New articles for the Grand Deception series are on the way. Recently, I've experienced some health problems and with going back and forth to specialists and therapy, I've been quite busy. Throw in my work schedule and the holidays and I have had no time to write. Fortunately, my medical situation is not too serious and I'll be back in the saddle soon.

The next three articles will be on collateralized debt obligations, naked credit default swaps, and proprietary trading. Once those are done, what will follow will be a chronological replay of the crash; who, what, when, and, most importantly, why.

My thanks to those who inquired, best wishes for the new year to all.

The Struggle Continues in England

Interview with a British university occupier and former AWSM member


Great interview:
http://awsm.org.nz/?p=487

Interview: The Irish Struggle Against Austerity By Mike Harris

Taken from Ideas and Action website: [http://ideasandaction.info/2010/12/interview-with-irish-anarchist/]

















Q: Thank you, Kevin, for doing this interview with the Workers Solidarity Alliance’s on-line journal ideas & action. Before we begin the interview, I must say, it almost seems like yesterday you out-migrated to NYC for a bit, and we were sitting face-to-face discussing anarchist politics and the world around us. All this, of course, before the “Celtic Tiger” started to roar. Must seem a bit odd, having been back in Ireland all these years to now see the growth in the out-migration movement again.

A: It is strange. The crash has happened very quickly and taken many people by surprise; the scale of it has been beyond what anyone expected.

To put things in perspective though. As many of your readers will know, emigration out of Ireland to places like the States has been a feature of Irish life going back generations. I first met you in New York back in the early 80s when Ireland was last in a harsh recession. So I remember that period well and I know that it was hard for many of us – there was a lot of unemployment here and of course with that came poverty and displacement.

The boom here, the so-called Celtic Tiger era, came against that background. Short lived though it was, it was welcomed by many people. Some imagined that as a country we had turned a corner and that we had banished the ills of mass unemployment and emigration for good. That was not the case – as we now know.

Here we are now, in 2010 and we have been plunged into a new and desperate economic period, one where the costs will, in large measure, be borne by the Irish working class – once again I might add. Unemployment has shot up. And employers are using the new climate to attack wages and conditions. It is a period of high insecurity for people once more.

Q: The Irish financial crisis seems to have come to a head recently. But it was a while in the making – is that so?

A: Yes. The roots of the problem go way back. Of course there is a specific Irish context to what is happening here right now. But it is worth noting also that what is happening in Ireland right now is linked to the generalised crash that broke over the world’s economy in 2008. The old cycle of ‘boom and bust’ is at play here – classic capitalism, I suppose.

Q: Can you please tell us how Ireland came crashing down from being the “Celtic Tiger” to its current situation. It seems like all the “right” social and economic ingredients have been in place for a long while (for example, a very low tax rate and a docile trade union movement which long ago bought into the “social partnership” concept)

A: A lot has been written about this. There are a number of aspects to the situation but I will try to be brief and as accurate as possible. I would recommend a particularly good article in the current issue of the Irish Anarchist Review by Gregor Kerr called ‘Bubbles, Booms and Bust’.1 It gives a lot more detail than I can here.

First off the Irish economy is a peculiar entity. Indigenous industry here has been historically weak – the legacy of British imperialism. Ireland’s economic elite in an effort to get around this attempted to reposition Ireland as a tax haven for multinationals in the latter quarter of the last century. Ireland adopted a very low ‘corporate tax’ rate for those who ‘invested’ here. Similarly, other inducements were offered – educated English speaking workforce and so on; lax environmental oversight also.

Ireland became a very ‘competitive’ location for capitalism from the mid 90s onwards and investment flowed in. ‘Competitive’ here of course is neo-liberal speak for a ‘low-tax location with a compliant workforce’. That was what Ireland was offering to the multinationals.

With this foreign investment, unemployment here decreased and with that, for the first time in a generation, the indigenous construction industry revived. Irish property values were low relative to our European neighbours and our hosing stock was also old. In effect a construction boom took hold in this environment. A key aspect of this was land speculation: massive money was made by ‘developers’ linked to Flanna Fáil party and others. It was a heyday for some and the industry swelled out of all proportion to requirements. To give your readers one figure: 750,000 housing units were built between 1995 and 2007.

The banking sector is at the centre of the current crash. In truth it is this sector that has driven the Irish economy to the wall. To understand why we need to appreciate that a few factors were at play. First of all the banking sector grew disproportionately during the boom as a result of the boom in property values and the building spurge. Some of this growth was legitimate, but most wasn’t.

As the building/ property boom took hold wild speculation on land and valuations became the order of the day. It seemed at one point that Ireland would be covered in housing and buildings! I’m exaggerating of course but it is true to say that there was frenzy. Massive money was being made by the greediest of elements in society – many of whom had the ear of the Government and main political parties.

Secondly there had been deregulation in the banking sector – this was government policy and facilitated a lot of shady dealings at the Irish Financial Centre in Dublin. As a result there was no serious oversight and caution was thrown to the wind in terms of the lending criteria. A particular important ‘player’ in all of this was a bank called Anglo-Irish Bank. This bank is credited with over €60 billion in bad debts now – and we still don’t know if that is the full extent of the losses at that one bank.

During the boom the adage (among the bankers) was ‘Where Anglo goes others follow.’ Anglo had close links to Ireland’s economic elite. It lent recklessly – in Ireland and more importantly abroad. Its CEO, Fingleton, is now widely acknowledged to be a crook – and that is being kind to him. He appears to have lent vast sums of money to those who were his friends. As Anglo-Irish began to sink he even lent a fortune to the directors of the bank to buy shares in the bank to shore up the bank’s share price!

All this was big trouble – very big trouble. But the Irish government then got involved and they made it a lot, lot worse. Anarchists have little respect for governments – well here is an example of why we don’t. Clearly a big element of stupidity was involved but, of course, it would be naive to not point out also that the Irish government was also looking after its friends in the Golden Circle.

Q: What is this – the Golden Circle?

A: Here in Ireland we call the moneyed elite, the Golden Circle. This is because the elite in Ireland are confined to a relatively small number of identifiable people. They all know each other personally and have close connections to the key decision makers in government. If a lucrative situation is developing they tell one another about it. They are people who creamed off the big profits in what went on here over the years.

Q: So what was it the Irish Government did that was so stupid?

A: When the crash occurred in the international markets in 2008, the Irish government ‘guaranteed’ all bank debts. The problem was the Government had no idea when it issued the guarantee how large the debts were in the Irish banking sector. Crucially it guaranteed the debts in Anglo Irish Bank.

Now two years on from that time, we are finally getting to the bottom of a very deep hole. It has transpired that the debts in the banking sector were significantly larger than expected. The debts at Anglo Irish Bank were astronomical.

The current Government has nonetheless stood by its ‘word’ and as a result the Irish State has been sucked into the banking disaster.

And there you have it: now we are being asked to pay for all of that!

Q: How would you compare, if possible, the Irish situation to the Greek? Are the EU “bailout” plans the same?

A: I cannot admit to knowing enough to offer you a detailed view but in broad terms they are similar. At the root of the problem is the need for the Irish and Greek government to borrow to meet current needs. These debts have exceeded the budgetary limits set by the European Union.

There are different reasons though for why Ireland and Greece have ended up in this place with this particular problem. In other words we arrived at this place by different routes. And of course as we speak, both Portugal and Spain are also facing trouble. So there is a broader problem as well.

What is most significant and illuminating though is that the medicine that Ireland and Greece are now being asked to swallow is almost identical. Surprise, surprise! In both countries it is the ‘public sector bill’ that has been targeted. What this means is that cuts are targeted at social services – welfare, education and hospitals. Cuts are proposed for workers in those eras and pension entitlements and job numbers are also being reduced. As your readers will know this agenda is the agenda of neo-liberalism.

Q: How is the generalized fight-back coming along against the proposed austerity measures?

A: In the aftermath of the crash in 2008 the Irish government led the pack of wolves when it came to imposing cuts on the population. ‘Tough times require tough medicine’ and all that rubbish was the order of the day.

Ordinary people were in shock though. Unemployment grew rapidly; the scale of the unfolding building bubble fiasco was emerging. Building work, a huge employer, collapsed. Many people found themselves in immediate debt as houses they had paid excessive prices for were down valued overnight. There were mobilisations in the public sector – among teachers and there was one day public sector strike. But overall people were reeling and they accepted what they were told.

In the last year though the true scale of corruption among the elite has come to light. In particular the massive corruption and back-slapping in the banking sector has been exposed. The Anglo-Irish debts have got bigger with each passing week. Many of those responsible for outright thievery are still in their jobs! In the meantime, the Government has had one message: you, the ordinary worker, must bear more pain.

We have just had a march of 100,000 workers in Dublin. It was organised by the ICTU and was a very positive showing. I am not exaggerating to say that there is massive anger. The IMF and the ECB – the EU’s bank – have now signed the ‘bailout deal’ with the disgraced government. A budget outlining exactly what cuts will take place is imminent. The question is what is going to happen.

Q: What is your impression? Is there a “unified” trade union and left mobilization on-going?

A: There are signs of mobilisation and of some grassroots organising. I stress, some. But I think we need to be hopeful here because any sign of organising at a grass roots level is crucial and very healthy. As your readers will appreciate, the Irish trade unions are very top-down structures. Rank and file participation dwindled during the ‘partnership’ era which spanned from the late 80s until today. ‘Partnership’ gave a big role to union full-time officials – the union leadership I suppose you could call them – and in effect led to rank file involvement ending. But to take an example: at the march just mentioned in Dublin, the head of the largest union, Jack O’Connor was booed when he spoke. There is anger among workers that the unions are not doing enough. The old story, the union leaders talk the talk but that is all – they are sheep in wolves clothing.

So officially the trade union movement is opposed to what is happening. But the leadership is scared of any big mobilisation and not being able to control it. Also the leadership has no real plan. All they have called for so far is ‘a longer period’ of payback to the international banks. In other words: ‘we will take the pain if you deliver it over a longer period’. Lunacy!

So the key question is, will the rank and file rise? I do think there are positive signs. We have to remember that workers are taking the brunt of what is being done. And this is a scenario that is not going to go away soon. One group who resisted so far are the pensioners – and they won! So fighting back works and deep down people know that. But against that unemployment is high and people, naturally, are cautious. There are also big debt problems for many. Thirdly the Irish media has played a significant role in saying ‘there is no other way – you must accept the situation’. We’ll see.

Q: What role has your organization, the anarchist WSM, been playing in this fight-back?

A: We wish we were a lot larger and that we had much more influence at a time like this. But that said we are doing as much as we can to make ourselves heard. There are a number of different areas in which the crisis is being fought. Among the workers in their unions, among students and also in the various ways at a community level – where many of the cuts are already being felt first hand.

The main thing we are pushing of course is the idea that we must fight back and that we must resist; the sooner that we do this the better. This may seem like an obvious point to be making but the media and the Government really bang on and on that people should accept the situation that we are now in. So there is a role here for us as anarchists at a very basic level. Fight, resist!

Secondly in all areas, but particularly in the workplace where it is crucial, we argue for ‘taking back the unions’. As mentioned above rank and file involvement is very low now. But it is becoming clear to a minority of union members that the union leadership will do nothing – unless pushed. So at this moment putting ideas out there about self-organisation and about democracy in the unions is very important. In all areas there is a need to push for this.

Q: How does the WSM differ from, say, other leftists and the militant wing of the trade union movement during this crisis?

A: The clear and overwhelming direction of the left and even the militant left at the moment is towards electoralism. I haven’t mentioned this so far but it is a very important aspect of the current crisis. The current Government – a collation of Flanna Fáil and the Greens – will fall soon. It is becoming clear also that in pure electoral terms the voting public are moving left-ward. So the Irish Labour Party is set to do very well.

Political parties to the left of Labour are eyeing up this situation too. What’s new? A new electoral block linking the Trotskyist parties and some independents has just been formed. It is called the United Left Alliance. Their efforts are now directed at getting TDs elected to the next Dáil (parliament). It is the old story – they are playing the electoral card to the detriment of grass roots fight back. They will of course use any grassroots network for their own electoral ends – and damn the consequences.

Look, as anarchists, we know this story and it happens again and again. So we must counter this and we must do what we can to build an independent anti-electoral opposition. This is our aim.

Q: As anarchists, we agree that the final goal is workers and community self-management. In the meanwhile, are there any constructive immediate and medium solutions that the WSM may be posing to address the crisis and suffering?

A: The downside of all this is that there is a long way to go. As we do this interview, the IMF/ECB bailout has been in effect signed into a reality. This means a four to five year period of attacks lies ahead. The upside of this though is that we have time to make inroads and build resistance. I think this can be a period in which the anarchist movement makes a breakthrough. As they say, now or never. But it will not be easy and our numbers are small against the general forces that face us.

Q: In closing, on a personal note, let me hope that you and your family won’t be devastated by the crisis. On behalf of our organization, we wish our Irish sisters and brothers good luck and success in your fight-back.

A: Thank you and I will pass on your good words of solidarity to our comrades. I might add that we appreciate the interest that you take in what is happening here. The reality is we cannot make a real impact without international solidarity. And an important part of that process is that we get the information out that this is just more of the same old business of greed and capitalism. This is the second major recession I have now seen and it is worse than the last time. There is a better way to live and we need to build it for ourselves and our children and our brothers and sisters. Thanks and solidarity to the WSA.





Images of the Protests in Spain



UGT is a Marxist trade union.

Some Images from the Protests in Italy




Violence in Greece over Austerity Measures

Greeks take vengeance on Parliamentarian who betrayed them by voting for latest round of punitive cost-cutting.
[http://www.telegraph.co.uk/news/worldnews/europe/greece/8203980/Former-Greek-minister-attacked-by-mob-as-riots-break-out-in-Greece.html]

Seasons Greetings

Blessed indeed are the peacemakers, but maybe we should overturn the the tables of the money-changers first.

Wednesday, December 22, 2010

Follow-up to War on Public Employees...

Please note that the article below quotes Meredith Whitney who is mentioned in my The Grand Deception series ( and will be again ). It is she who, as an accountant for Citigroup, was the first to state publicly that the sub-prime mortgage bonds were worthless, thus causing the race to the exits which precipitated the collapse. Now here she is sounding the alarm on the municipal bond market. ( "Municipal" is a misnomer in this case as all non-Federal government bonds are traded in this market. )

It's important to keep in mind two things:

1, Making such predictions can hasten, exacerbate, or even cause the market to collapse. If investors believe the city, county, or state cannot pay the debt, they wont buy the bond. As FDR said, fear is the problem.

2, Our Federal government's cutting off of support for local governments is an expression of its subversion by capital as it will spend about thirty trillion dollars bailing out Wall Street, but denies three trillion to the states. Bank of America is too big to fail but California isn't.

Can the argument that the bailout was to avert systemic failure any longer be made when the far greater hazard of large numbers of states and cities going under is ignored? Is this draconian action a matter of a cash-strapped Federal government reluctantly doing what it must to survive, as they would have us believe, or is it simply following the orders of its Wall Street masters? Which would have the worst systemic consequences for the residents of L.A.: BoA going into bankruptcy with all depositors insured up to $100,000, or the inability of their city, county and state governments to function? Which would adversely affect the greater number?

http://inteldaily.com/2010/12/municipal-bond-market-crash-2011-are-dozens-of-state-and-local-governments-about-to-default-on-their-debts/?utm_source=feedburner&utm_medium=email&utm_campaign=Feed%3A+inteldaily%2Ffeeds+%28Inteldaily.com%29&utm_content=Yahoo!+Mail

Sunday, December 19, 2010

Saturday, December 18, 2010

Violence against Austerity Protesters Escalating in England

Paralyzed protester pulled from wheelchair, then harried on television by broadcast goon who tries to discredit him. Has to be seen to be believed:
http://www.gilad.co.uk/writings/jody-mcintyre-it-is-rough-out-there.html

Please note that the "impartial" journogandist tries to get him to say something incriminating to undermine his complaint, potentially a legal case, against the police.

In case you are interested, here's a link to the victim's blog:
http://jodymcintyre.wordpress.com/

Monday, December 13, 2010

Sunday, December 12, 2010

The Grand Deception ( part five ), The Ticking, Ticking, Time Bond

As stated in a previous article in this series, my intention is not only to describe the crisis of '08, but to prove that the collapse was no accident but a carefully calculated act of class war against working people. The unprecedented shift of wealth from the working class to the super affluent was not the unintended result of bad policy, incompetence, regulatory indifference, or the excessive greed of rogue elements on Wall Street, although each of these were essential parts, it was rather the criminal act of those on the very top of the economic pyramid. I believe that a familiarity with the circumstances can lead only to that conclusion. The "financial weapons of mass destruction"[1] which decimated our economy were brilliantly configured to maximize effect, and targeted precisely those institutions where that effect could not go unremedied without dire, systemic consequences, both political and economic.

The sub-prime mortgage bond was the Wall Street construct whose detonation brought the economy down like wounded game. These securities were of a type which made them attractive to pension funds and mutual funds. Often workers who participate in 401Ks will invest money in stock funds until they near retirement and then switch to the usually safer bond funds. The elimination of retirement savings caused by the implosion made it politically impossible for government to let investors suffer their losses as the political party making such a decision would become quite unpopular with voters. It is hard to conceive of a better way to sabotage an economy and compel government thereafter to respond in your favor.

As we saw in the last article, the mortgage bond became quite popular with long-term investors like retirement funds because of their perceived safety. Prime loans were backed by Fannie Mae and other GSE who were in turn backed by the government of the United States. They were as close to a certainty as is possible. However sub-prime loans were not backed by the government, and were anything but a sure thing.

The sub-prime mortgage bond mimicked its prime antecedent in that it was tranched, and that it too adopted the pay-as-you-go method of redemption. Now the danger wasn't that the underlying mortgages would be paid off too soon, but that they wouldn't be paid at all. So the first tranches, like their prime counterparts, would pay a better rate of interest, but contained the riskiest mortgages in the bond.

Despite these new bonds having a reduced credit rating, they sold well, with most non-professional buyers not realizing that a sea change in the quality of the underlying loans had occurred. Alan Greenspan and the Fed had green-lighted these new securities, so they must be okay, or so the argument went.

Given that the ever-dependable Fed chief was keeping interest rates at all time lows,[2] and that big investment banks were buying these sub-prime mortgages as fast as they were written, the market took off. There was no risk to the lender so long as they could pass these mortgages along to Wall Street. Predictably, they adopted an originate-and-sell policy. As they did, their criteria for assessing risk weakened in proportion to Wall Street's demand for product for their MBS business. With the dot.com bubble having not long before burst, Wall street needed new and, putatively at least, less risky investments, MBS, with their reputation for reliability, was just what the banks needed. Soon the sub-prime mortgage bond became a large part of Wall Street's business. Eventually, MBS would constitute ninety percent of the financial industry's bond revenue. In fact, the day came when the housing industry could not keep up with the finance industry's demand for mortgages, and new and even more esoteric MBS were fashioned by Wall Street to offset the decline. Thus was the CDO born.[3]

The housing market went into overdrive. With Wall Street egging them on, mortgage originators found new ways to make loans. The one incentive which mattered most but was insufficiently understood by sub-prime borrowers, was the variable-rate mortgage. This meant that the rate of interest one had to pay on a mortgage was pegged to the prime lending rate. The borrowers debt would increase when rates rose, and decrease as rates declined. This feature was particularly attractive in the low-rate environment created by the Fed. As an added inducement, most sub-prime loans offered a low "teaser" rate for the first three years or so. It was a great deal: You didn't need any money down; you got a really low starter rate; and it appeared that the Fed wasn't going to raise rates any time soon, if ever. It must have seemed too good to be true.

In the 1980s, the big investment banks came up with a new option for bond issuers called the interest rate swap ( never reduced to abbreviation as those letters were already in use, and would not have been helpful for their sales staff ). This enabled bond issuers to exchange a fixed rate for a variable one. The investment banks are making a bet that they will benefit from future rates being favorable to them. If so, the swap will be profitable. If the market turns against them, they can take a loss.

The interest rate swap turns the bank from broker to interested party in the transaction, and thus exposes it to risk. Unfortunately for the banks, government regulation required that they keep sufficient assets in reserve against the possibility of losses. They had an option: They could take out a CDS ( credit default swap, essentially an insurance policy against investment losses ) in which case the insurer would then be obligated to maintain the required reserves. They found an insurance company willing to write such policies in AIG ( American Insurance Group ). The significance role that this company with deep links to the intelligence services would play in the crash will be discussed in later articles in this series.

There were those who recognized that the new sub-prime mortgages, and the bonds upon which they were based, would not be viable in the long term, and resolved to bet against them. The problem was that, unlike stocks, these bonds were impossible to short. One could buy a credit default swap against them but one needed to own the underlying bond in order to do so. One's potential gains from the insurance company's pay-off were offset by the need to buy the bond ( or tranches thereof ). As if by the intervention of Providence, the introduction of the "naked" credit default swap occurred thanks to the good offices of our friends over at J P Morgan Chase, a bank owned in part by the Rothschild banking dynasty, who would be the chief beneficiary of the stock market crash and subsequent bailout.

Naked, at least in the investment sense, means that one didn't own the bond or other financial instrument one was insuring. It's simply a wager one makes with an insurance company. If the bonds tank, you get paid, even though you don't own them. Like any insurance policy, you had to pay the premiums. So the question one had to answer is when you thought the housing market would disintegrate. Since the teaser rates for the variable-rate mortgages lasted three years, the likelihood of default was negligible until then. Thereafter, it depended upon the Fed and what it would do with the prime lending rate. As it happened, a coincidence I'm sure, Fed chief Alan Greenspan began raising rates just about three years after the sub-prime mortgage bonds hit the market.

These naked credit default swaps were approved by Greenspan, although now he expresses regret. Our government doesn't share the former Fed chief's remorse though, the Senate voted against a ban on these Las Vegas style wagers which were the "toxic assets" that brought the global economy to a lurching halt and drove tens of millions into unemployment and despair.[4]

The stage was now set. The Fed allowed these derivatives to enter the market and did nothing to regulate their exchange. Predictably, new mortgage lenders sprang up like weeds--Aames, Loomis, Greentree, The Money Store--and went public just as fast. Wall Street cashed in by buying these mortgages and selling them as bonds to their clients. When the housing market couldn't originate fast enough to slake Wall Street's inextinguishable thirst for loans for its new best-selling product, they replaced these first-generation sub-prime mortgage bonds with new MBS of ever-increasing complexity and vulnerability. The market kept turning because the major players were not exposed to risk. The lenders sold to Wall Street. Wall Street sold to the public or insurers. The people at risk were the mortgage borrowers, bond buyers, and the end-of-the-line insurers who were buying based on the evaluations of ratings agencies which were now owned, thanks to deregulation, by the banks who were making money hand-over-fist from selling these bonds.

Expecting, as Alan Greenspan now claims he did, that the market would police itself by refusing to deal in dubious investments, was expecting Wall Street to put ethics ahead of profit. Nobody is that stupid, not even Greenspan. These bonds were ticking, and thousands involved in their creation and distribution heard them tick. Nobody, or very few at least, were willing to call attention to the turd in the punchbowl when everybody was having such a good time at the party.


[1] Warren Buffet

[2] The subprime rate is linked to the prime lending rate, traditionally it's three points higher.

[3] collateralized debt obligation. This will be discussed in detail in an upcoming article.

[4] http://www.marketwatch.com/story/senate-rejects-ban-of-naked-credit-default-swaps-2010-05-18-211800

Sunday, November 28, 2010

The Grand Deception ( part four ), The Weapon

A mortgage bond is a bundle of mortgages packaged together and sold as a bond. The way it works is simple: A mortgage lender, usually a bank, lends money to an applicant to buy a home. They then sell the debt to an investment bank. The reason a bank sells their loans is that it takes them off their books, which enables them to lend again. The laws which govern banking practices require that the bank keep a sufficient amount of assets in reserve in case their loans go bad. Each loan would make more money for the bank if it went to maturity, but in passing the loan along the bank can now re-lend against the same assets that were held in reserve for the previous loan. Say for instance a bank has nine million dollars in reserve, by law, believe it or not, it can create up to one-hundred million dollars in new money for loans.[1] According to the Federal Reserve Bank, this generous ratio is enough to keep the banking system liquid as it is unlikely that all the banks loans would go bad at the same time. So if the bank has two, fifty- million dollar loans out, it cannot lend again until at least some portion of these loans are repaid. They net a smaller profit from selling the loans off, but it means they can lend again.

More often than not, the loans are purchased by Fannie Mae or Freddy Mac. Fannie was created by FDR as part of his New Deal banking reforms. It was a government agency, whose purpose was to buy debt from banks and allow them to re-lend. The program was extremely successful, so much so that it was privatized under Bush family protege, Richard Nixon. Today it, and Freddy Mac which came later, are Government Sponsored Enterprises ( GSE ), which means they are private corporations which are under a government mandate to serve a particular purpose in the public interest.

In the 1980s, Lew Ranieri of Salomon Brothers Wall Street investment bank came up with the idea of compiling bank debt and selling it as a bond. Hence the mortgage bond was born. The idea was simple: Buy a thousand or so mortgages, put them together, and sell them as a security. The bond-holders would get paid as the mortgages got repaid.

A great idea but there were problems unique to selling mortgage debt as bonds.

1, The bond which contained a thousand or more mortgages was going to be quite expensive, and would price most buyers out of the market.

2, Usually a bond is issued by a single institution, be it public or private, then given a rating by rating companies, then bought by the public at a price commensurate with the rating. The best bonds are rated AAA, these are the safest bonds one can buy, so the rate of interest offered by the issuer doesn't have to be so high. Lower rated bonds are riskier, consequently the rate of interest the bond pays has to be higher in order to induce the public to buy them. In the case of the mortgage bond, the risk incurred by the buyer was dependent on the ability of home-owners to pay off their debts. In some cases, as we shall see, such as when the loans were "prime," determining risk was quite easy. However, when these bonds contained sub-prime loans, the overall risk of buying such a bond was a tricky calculation based on the likelihood of a thousand individual mortgages being collected. The usual metrics the rating agencies used were not applicable to these new mortgage bonds, there was a lot of guesswork involved.

3, Another problem for the investment banks hoping to sell mortgage debt to the bond-buying public was the uncertainty of how long it would take for these bonds to mature. Typically, the term of the bond is known in advance. Their lengths vary greatly, and is taken into consideration by the prospective buyer. You buy what you want. In the case of the mortgage bond, some homeowners might pay off their mortgages early, which, from the point of view of the bond-holder, was undesirable.

If you buy a bond, you want to hold it for awhile. If your bond gets paid off early, you have made less from your investment than if it had gone to term. This is particularly problematic for a bond derived from mortgage debt as the mortgages were more likely to be paid off prematurely when bank interest rates were low. If a home-buyer takes a fixed-rate mortgage at five percent interest and rates subsequently drop to four or three percent, then he or she would do well to take out another loan to pay off the first and save thousands in interest. For the holder of a mortgage bond this means that one of the underlying loans has been paid off and part of your investment is now gone. To make matters worse, one cannot turn around and re-invest one's profits from the paid-off bond into a new one as the drop in interest rates which caused the premature pay-offs makes for a lousy bond market.

Why? If you are a business or government agency, and you want to raise some money, you can go to a bank and borrow, or you can issue a bond. If bank rates are low, borrowing makes more sense. If bank rates are high, and you think you can sell a bond with a lower rate of interest than you would have to pay a bank for a loan, then the bond is a better bet. Low bank rates kill the bond market as under those circumstances there's no reason to issue bonds. Homeowners refinance when rates are low, not a good thing if you are holding mortgage bonds.

Fortunately for Ranieri and Salomon Brothers, the rise of mutual funds provided the solution for the first problem, but created another.

Mutual funds are just that--mutual. Around the same time as Ranieri was contemplating the mortgage bond, investment banks began to offer mutual funds. These are pools of money into which anyone can invest. The funds themselves then buy stocks, bonds etc. This made it possible for people who were not rich to invest in a broad range of securities. It also made the purchase of fairly expensive items more feasible. Mortgage bonds could be bought by anyone who could afford them, but now they could be bought by investors who really couldn't afford them on their own.

Great news for Ranieri but there was still another hurdle: If mortgage bonds were to be collectively owned, how would redemption work? Say a mutual fund with a thousand investors in it buys a mortgage bond which included a thousand mortgages, would each mutual fund participant own a single mortgage within the bond? This wouldn't be feasible because these bonds would be owned by the fund collectively, not by individuals within the fund, otherwise it wouldn't be a mutual fund. If the bond was collectively owned, how would it be determined whose investment would be ended first if and when a mortgage was paid prematurely? The obvious answer would be for all the fund's participants to bear the loss equally but this would make it hard for funds to buy mortgage bonds as investors might not be willing to accept the depreciation of the bond in this manner. Some would want greater protection or would see these bonds as not a good investment vis a vis non-mortgage bonds.

Cleverly, Ranieri came up with a solution: Mortgage bonds would be sold in "tranches" ( French for "slices" ), and each one would be backed by just a handful of mortgages within the bond. Mike Lewis'[2] analogy is that of a sky-scraper in a flood plain. Buying the first tranche of a mortgage bond was like buying a condo on the first floor, you were more likely to be flooded--having your investment end due to prepayment of the underlying mortgages--so the rate of interest paid on the first tranche was a little higher. You were exposed to more risk, but had a greater reward. As the tranches progressed--being higher in the building--your risk of being flooded out declined and so did your potential pay-off.

In addition, it was determined that the flow of money that would result from homeowner prepayment of mortgages would be distributed in a pay-as-you-go manner. The owner(s) of the first tranche would receive payment when all of the mortgages which comprised the tranche were paid by the homeowners. In such cases where only some of these mortgages were prepaid, the the holder(s) would receive payment on that percentage of the loans which were prepaid and the rest of the investment would continue until all of the mortgages were paid. This offered investors the opportunity to be part of the riskier, higher pay-out tranches, or, for those more conservative, they could buy into a safer tranche.

It worked brilliantly, Mortgage bonds became very popular with bond investors. At this initial stage all the loans underlying these bonds were prime. These were the kinds of loans bought from mortgage buyers by Fannie Mae. As such, the loans were guaranteed by the GSE. If somebody actually defaulted, Fannie would take possession of the property and pay off the loan. This being the case, these mortgage bonds were as close to a sure thing as a bond can be. They were better than AAA, and quickly gained the reputation of being the safest investment one could make.

This would change with the advent of sub-prime lending. Which will be the subject of the next article in this series.



[1] For a more detailed explanation, please watch the video entitled Money as Debt linked on the right column of this blog.

[2] From his book The Big Short

Sunday, November 21, 2010

The Grand Deception ( part three ), The Method

The purpose of this series of articles is to explain exactly what caused the collapse; who made it happen; and, if I achieve my goal, why. It is my contention that this depression, like so many others, is a scam. In order for the reader to learn what precisely happened, it's necessary to understand how the financial markets work.

If you don't have any background in economics, or have ever turned on CNBC and wondered just what language they were speaking, not to worry! What will follow will demystify marketspeak for you no matter how inexperienced you are with such things. What happened is really quite simple, you will have no trouble following along. I promise.

Warren Buffet called mortgage-backed securities ( MBS ) "economic weapons of mass destruction." [1] These ballistic missiles fired from the turrets of Wall Street's oldest and largest banking houses ultimately brought the world's economy to a standstill. The MBS were to the financial industry what tortillas are to Mexican cuisine in that they could be molded and cut into many different dishes. As tortillas are used to make tacos and burritos and quesadillas, so MBS came with different ingredients and formed into many different market-pleasing shapes and sizes. The problem was that the tortillas holding these creations together were disintegrating. The mortgages which "backed" these investments were going bankrupt at an alarming rate. And when this became public it caused a massive sell-off. This resulted in the sub-prime housing market collapse and the prospect of bankruptcy for those institutions, many of them respected Wall Street banking and insurance companies, which had invested large sums in these MBS. It was like yelling fire in a crowded theater, it caused a stampede toward the exits. The market was shorted so hard and so fast that it caused panicked selling of both the MBS and of shares in those companies which didn't make it to the exit in time.

That is how the collapse happened. To understand it in detail, it is necessary to understand what "shorting" is. To understand that one needs to know a little about how buying and selling securities or commodities work. If you know what a dividend is, or what going "long" or "short" is, then you don't need to read on. If you don't, please stay with me.

Let's begin with the life cycle of the average company on one of the stock exchanges. Say you have an idea for an business but don't have as much money as you need. You could go to the bank and get a loan, or, if you believe you are on to something big and think others might be willing to buy in, you can "go public."

"Going public" or taking your existing company public means that you will sell shares in your enterprise on the public market. You go to an investment bank[2] and they handle all the details and, for a fee or some shares or both, they put your shares on an exchange. ( Usually the New York Stock Exchange [ NYSE ] or the over-the-counter exchange known as NASDAQ. ) This is the initial public offering of stock ( IPO ), thereafter you can decide to increase the number of shares available on the exchange if you need to raise more money.

The term "share" means just that: It's a share in the company, a share of its ownership. If there are a million shares in a given company and you buy one, then you own one millionth of that company. Typically the people going public wish to retain control so they keep a majority of the shares. If there are a million shares then the original owner would keep 500,001 and make only 499,999 available to the public. Thus he or she would still be the majority owner.

Shares in companies are often called "securities" as the buyer has secured a share of the ownership, you have paid for it outright. If one does buy some shares in a company one is said to have a "position" in that company.

The IPO share price is fixed to what the investment bank thinks the public will pay. If you have an existing company and doing so well that you need capital to expand, then it's likely that investors will pay more. If your company is a start-up then your shares probably wont fetch much. On average, for new companies, the IPO price is about ten bucks.

Now you have a "joint-stock company"[3] The price of your shares will go up when more people want to buy then sell, and vice versa. Let's say you do really well, your company goes global and becomes the biggest player in your industry. While this is going on, your shares are going to be in high demand, but if you are very lucky and begin to dominate your sector, you cease to grow as quickly. Take Microsoft for example. They are so dominant that in order to keep growing they will have to find another planet that needs operating software. Now, just about everybody buys Windows, there just isn't anybody left to sell to. When companies reach this stage, they generally experience a sell-off as investors begin to look to other companies which are still growing. This creates a problem for even big successful companies like Microsoft as the value of their enterprise is determined by their "market capitalization."

Market capitalization is easy to compute: It's the total number of shares in existence multiplied by the share price. If there are a billion shares of a company, and their price is fifty dollars, then the company's market cap', or value, is 50 billion dollars. When there is a sell-off and the share price declines, the overall value of the company declines. That means their credit limit goes down; it means they would have to offer a larger number of their shares in order to buy another company; it means they are more susceptible to being bought out in a hostile take-over. In order to keep their share price up when they can no longer keep growing, many companies issue dividends[4] to share-holders. This is a sum of money per share, usually paid annually. For many, particularly those who dislike risk, these are good investments in that these companies are usually quite stable and fiscally sound, and one gets a better return on investment from these dividends than one would from a bank account. There's not much hope of making a lot of money from these shares, but they are a dependable source of income. Some people live off these dividends.

When investors buy securities, they are doing so in the hope that the share price will go up. If you buy at fifty bucks a share, and sell at 100, then you have doubled your money ( minus broker's fees ). Of course it could backfire on you and the share price could go down, that's the risk you are taking, but the hope is the price will go up after you take a position in a company. This is called being "long" in the market.

There is a way of betting that the share-price of a given company will go down. This is called being "short" in the market. Often this involves companies which issue dividends.

Say you own some securities which pay dividends annually. And let's say that they pay on the first of May. It's now the second of May and you have received your dividend and you are waiting 364 days until you get paid again. Now your broker tells you that somebody is looking to borrow some shares of the company you have a position in. The prospective buyer says lend me a thousand shares and I will return them to you before May of next year. He also offers to pay all broker's fees and, in addition, pay you a fee as well. Your broker says the guy is a good credit risk and You agree because it's a second payday for you, and you will have your thousand shares back in time to receive your dividend as usual.

The borrower is hoping that the share price will go down so he borrows the shares and immediately sells them. He now has until May to buy them back and return them to the lender. If the price drops in that time then he's made some money. Here's how it works: He sells the shares for say sixty dollars. He now has $60,000. If he's lucky and sometime in the next year the price drops to thirty dollars a share, he then buys a thousand shares costing him $30,000. He's made $30,000 in profit ( minus broker's and lender's fees ). He returns the shares to the lender and everyone's happy. If the share-price rises and he has to pay more than he got when he sold, then he loses money. This is shorting the market.

The lender now has shares that are worth half of what they were before the loan but that would have been the case anyway, and if you are holding shares for their dividends then the actual price isn't particularly important. ( That is after the initial purchase. ) If the lender collected the same in the fee from the borrower as he collects from the dividend payment, as is often the case, then the lender has doubled his yearly income from the shares he holds.

We have been talking about securities, there are also ways to short bonds. In the 1980s, Lew Ranieri of Salomon Brothers investment bank created the mortgage bond. It allowed purchasers to buy a piece of the debt owed by homeowners and access the flow of cash that resulted from mortgage payments. Basically, mortgage bond buyers were sharing in some of the risk the bank had assumed when it wrote the mortgage, and sharing in some of the profits when the mortgage payments were made. Bonds, which are loans made by buyers to the issuer at a fixed or variable rate of interest, are usually issued by governments or corporations. In this case these bonds were derivatives [5] issued by investment banks themselves and based on the long-term ability ( or inability, as the case may be ) of mortgage borrowers to repay their debt.

When a bond is issued, it is given a rating by rating agencies. The best rating is AAA and the worst/highest risk bonds are commonly referred to as "junk." This rating is the agency's evaluation of how solvent and able to pay off the bond the issuer is, an assessment of the risk the buyer is taking. Traditionally, there are only two parties, the issuer and the buyer. If a bank is issuing a bond, the rating agency is evaluating the bank itself. In the case of the mortgage bond, the issuer is an entity, usually the investment bank itself, which has bought mortgage loans from a commercial bank or mortgage company, and is offering a piece of it to the bond-buying public. There are now three parties involved: the issuer, the buyer, and the homeowners who are paying off their mortgages. The task of the rating agency is now much more complex, less mathematical and more subjective and interpretive. This alone made these financial investments risky, but the likelihood of getting a good appraisal from the rating agencies was diminished further by political developments.

Since 1980 when Ronald Reagan took office, there has been a steady erosion of regulation and oversight of Wall Street, and it hasn't mattered whether a Republican or Democrat was in the White House. Under Clinton, the Gramm-Leach-Bliley Act was passed in 1999. It repealed the Bank Act of 1933 ( Sometimes called the Glass-Steagall Act ) which had kept investment banks from owning commercial banks and ratings agencies. With the runway now clear, a great consolidation occurred with the result that investment banks now owned the agencies which were now assessing the mortgage bonds offered by the same investment banks. The point of Glass-Steagall was to prevent just this kind of conflict of interest, once it was out of the way, all kinds of shenanigans were possible.

Mortgage bonds were difficult enough to assess, now there was added pressure of pleasing the owner. It was in this murky, deregulated, derivative market that the MBS and other worthless investments that caused the current depression were spawned.

Further complicating matters was the legal question: What was the responsibility of the issuer of these mortgage bonds? As they were new, the law didn't address three-party bonds. If the bonds went bad due to the inability of homeowners to pay their mortgages, did the bond-holders have any legal recourse against the investment bank which sold them the bonds? The law was unclear in this regard.

For the first decade or two of their existence, mortgage bonds were a great success and made Ranieri a very wealthy man. However these bonds in recent years became "securitized." That is to say that they were repackaged and bought and sold like shares of joint-stock companies. The potential of these new derivatives, particularly in the then red hot housing market, combined with new liberal bookkeeping practices like mark-to-market accounting [6] which camouflaged just how dubious these MBS were, made these new instruments extremely popular with investors. They were the clinking-clanking sound that kept Wall Street world going around and around. When at last Meredith Whitney of Citigroup sounded the alarm by announcing that these MBS were worthless, they were shorted as were the companies which were holding large quantities of them. Thus did Lehman Brothers and other titans of high finance left holding the bag fall. Our economy fell with them.

There was one company in particular that guessed just the right time to short the housing market. It's a hedge fund called Paulson and Company. It shorted just before Alan Greenspan, head of the Federal Reserve Bank, raised interest rates. The housing market was hot because the Fed had lowered rates and kept them there thus making home-buying more affordable. Greenspan was also responsible for green-lighting MBS and mark-to-market accounting. His raising of interest rates was sure to slow the housing market down, Paulson anticipated this moment and placed the largest short ever in the history of Wall Street. As it turns out, his ability to read Greenspan's mind netted him personally about fifteen billion dollars. Estimates of how much he made for his fund vary widely but the actual profits must exceed 50 billion. It was later revealed by a Securities Exchange Commission ( SEC ) investigation that Paulson had been crafting some of the bogus derivatives for Goldman Sachs, the same worthless paper which he had been shorting.

Later, when Alan Greenspan retired from the Fed and, after finishing a tour for his autobiography, he was hired by Paulson. The terms of the deal were not released.

Is it possible that Paulson had more than a hunch as to when the Fed would lower rates and kill the housing market? Is it possible that the party who designed some of these MBS and made the largest bet ever against them actually intended them to fail? Is it possible that what happened was what was intended?

There's a lot more, dear reader, a lot more, details to come.



[1] He should know, he launched a few of his own. More on this in later articles in this series.

[2] As opposed to depository or commercial banks that you and I deal with. Investment banks broker stocks and bonds etc.

[3] So called because it is jointly owned.

[4] So called because they are the result of dividing the total number of shares by the amount being paid out by the company.

[5] Derivatives can be any investment which is derived from another. In the case of a mortgage bond, it's derived from the payments of homeowners.

[6] Mark-to-market accounting allowed companies to register the profits from a sale before they had actually received the payment. With mortgage bonds, investment banks' bookkeeping reflected mortgages as being paid when they were written. One had to dig much deeper than normal to find where the books reflected the actual status of the mortgages. This is what Meredith Whitney did.

Thursday, November 18, 2010

The Protest in Great Britain





Near tripling of student fees ( an annual

increase of about $10,000 ) due to austerity measures imposed by the big banks has sparked riots.

Some are claiming that the the protest was "hijacked by anarchists." ( note the black and red anarchist flag being hoisted and the nearby encircled A, the anarchist logo, in one of the photos. )
http://www.suite101.com/content/student-protests-in-london-descend-into-chaos-a310184

Here's a statement from students in Sussex from their blog
http://defendsussex.wordpress.com/2010/11/15/statement-from-the-occupation/:

Statement from the occupation:

This afternoon, over 170 students occupied the lecture theatre in the Fulton building at the University of Sussex in protest of the trebling of tuition fees and the attack on our education system.
In light of Wednesday’s demonstration, which saw 52,000 people come out in opposition to the government’s proposed cuts to education and raising of fees, we feel it is necessary for further action to consolidate the efforts made so far and push on in the opposition to these ideologically motivated cuts to both education specifically and public services as a whole.
We reject the notion that these cuts are necessary or for the benefit of society. There are viable alternatives which are not being explored. While the government has suggested that ‘we are all in this together’, we completely reject this and are insulted that these cuts are being pushed through alongside reductions in corporate tax. We feel these cuts are targeting those who are most vulnerable in our society.
Furthermore, not only are these cuts damaging our current education, but are changing the face of the education system as we know it. The hole in finances left by government cuts will inevitably be filled by private interest. This marketization of education will destroy the prospect of free and critical academic enquiry, on which universities should be based. The trebling of tuition fees will further exclude another swathe of society and make university accessible only to the rich.
We reject the media manipulation of the occupation of Millbank. The cost of the damage to 30 Millbank is less than insignificant when set against the damage of lost livelihoods and destruction of public services for future generations.
This occupation recognises that Aaron Porter’s statements condemning the demonstration are counter-productive and serve only to divide and segregate the movement. We are disappointed that, as a national representative of students, Aaron Porter’s statements have detracted from the real issue at hand by focusing on the events at Millbank Tower.
We believe that this Tory led coalition government has no mandate for lifting the cap on tuition fees. Nick Clegg has openly manipulated student voters in his campaign for election, and following the recent exposure of plans to drop his pledge to reject any rise in tuition fees, this occupation condemns his dishonesty and undemocratic methods.
Education is a right, not a privilege.

- We demand the University of Sussex management makes a statement condemning all cuts to higher education and rise in tuition fees
- We are opposed to all cuts to public services
- We oppose a rise in tuition fees
- We call for solidarity and support for those arrested or victimised on Wednesday’s demonstration
- We stand in solidarity with others taking action, both nationally and internationally, in the fight against austerity measures.
- We call for all other university, college and school students and staff to strike and occupy in defence of the future of our education system, and to participate in the national day of action on the 24th November 2010.





Sunday, November 14, 2010

The Grand Deception ( part two ), The "F" Word

Why is it that people cannot believe their own eyes, particularly when they've seen it all before? Why can't they believe what is happening right under their noses? If one studies the history of the United States, one will learn that there has been a never-ending struggle between the international banking cartel and the duly elected government of this country, between private and public power. The conflict began even before George Washington was sworn in as the first president. According to Ben Franklin, the revolution was not the inevitable consequence of the Stamp Act or taxes on tea or whiskey, but rather the result of Britain's outlawing of the colonial currency ( Colonial Scrip ).[1] Such hardship followed from a lack of cash and credit, Franklin insists, that the colonists had little choice but to rebel.

Alexander Hamilton, the cartel's man, argued for the creation of a privately-owned central bank, modeled on the Bank of England, to set and regulate the new nation's monetary policy. Jefferson and Franklin roared in protest but were defeated by the banker's bottomless pockets. Franklin was so averse to the bank that he even supported deportation of all Jews then in the colonies and a ban on further Jewish immigration.[2] Alas Hamilton and his faction prevailed, the U.S. had defeated the British Army, but lost to its bankers. The bank was born, with the Rothschilds in firm control.

The bank's charter ran twenty years. When it expired, President Madison vetoed the renewal bill. Congress then tried to override Madison, and the scandal that resulted has been the subject of much acrimonious debate since. In the British Parliament, Madison was accused, and not without some justification, of violating his own Constitution to defeat the bank. The upshot was the War of 1812. Britain's bankers were by then so powerful that they were directing Britain's foreign policy, and had been since Walpole assumed control of the British government in the wake of the South Sea Bubble scandal, another banker scam. Once again we had won a war against British soldiers, but lost to their money-lenders.

After the war, Madison inexplicably reversed himself and agreed late in his second term to a new charter for a national bank. Certain reforms were enacted, but it was to no use. Once again the same British bankers as before gained control of the new bank.

When the new bank's charter came up for renewal, President Jackson declined in the most undiplomatic of terms. He referred to the its owners as snakes and vultures and shameless con men and profiteers. All true, of course, but such rhetoric plunged the bank and Jackson into a conflict which divided the nation and paralyzed the government. Much of the correspondence of the bank's head, Nicholas Biddle, survives to this day. In it he threatens that if the government doesn't renew his bank then he would be "forced" to pursue a policy of contraction. By this he meant that the big banks would hoard the nation's money supply, just as they are doing today, and plunge the country into unemployment and recession.

This they did. This time, however, it back-fired on them. As the economy got worse and worse, popular opinion sided with Jackson. Those Congressmen who were on Biddle's payroll began to complain that they would lose their seats if they continue to support the bank. Eventually the Rothschilds called an end to the war as the recession had begun to hurt their other business interests. Jackson, and the people, had finally triumphed over the cartel. Unfortunately, the bank was rechartered as the Federal Reserve Bank in 1913, and the cartel became our masters once again.

Since Jackson, five presidents have taken on the big banks: Lincoln, Garfield, T. Roosevelt, F. Roosevelt, and Kennedy. All were shot at, three were fatally wounded. Coincidences all, I'm quite sure.

There was an attempt to overthrow FDR and install a Fascist dictatorship in his place.[3] According to documentary filmmaker Adam Curtis, this effort was led by Prescott Bush, son of Samuel Bush, grandfather of George W. Bush.[4]

Biddle's creating a depression is by no means unique, there have been many bank-induced financial crises since. Among the more important are 1837, 1857[5], 1873, 1893, 1907, 1929, 1937, 1973, 1993, and 2008. There is an enormous amount of literature on how J. P. Morgan, American representative of the Rothschild banking dynasty, manipulated bond prices and money supply to bring about the economic collapse of 1907. One cannot take an Economics 101 class in an American university without learning about it. The same is true for the other depressions, if to a lesser degree. Even Milton Friedman, maven of the Rockefeller-founded University of Chicago School of Economics and zealous advocate of the banking establishment, admits that the Great Depression was caused by the Federal Reserve Bank's policy of contraction.[6]

Even no less a revered figure than Winston Churchill has written about banker manipulation of the economy. When he visited New York in '29 during the stock market collapse, Bernard Baruch took Churchill onto the floor of the exchange. The Brit looked around at the harrowed faces and the frantic selling and commented to his companion about how horrible it all was. Not to worry, Baruch counseled him, "we made this happen, and we'll make it stop at the appropriate time."[7]

What is astounding to me is that with all the information available about the subterfuges these banks and their servants in government have perpetrated, one is still met with outrage, even contempt, if one dares to use the "f" word--fraud.[8] "yes, well, that might've happened in the past, but it's not possible anymore...with people suffering the way they are, your wacky conspiracy theories are not helping."

Why is it so hard for people to believe that what is happening is what was intended? As we know it has been so many times in the past? Was it really so hard for the Fed to realize that uncollectible mortgages, used as collateral for securing credit, and bundled, tranched, traded, sold, and optioned by private corporations ( hedge funds ) of unknown ownership, in a secret and unregulated derivatives market, might lead to mass bankruptcy? Is Alan Greenspan really as stupid as he now claims? I don't believe it, and in this series of articles I hope to convince you that what we are witnessing is fraud, a criminal conspiracy with you and me as the intended victims.

Yesteryear's wacky conspiracy theories are today's documented facts. Meredith Whitney, bean-counter for Rockefeller-owned Citigroup, shook up Wall Street when she became the first analyst to issue a dire assessment of the sub-prime mortgages and their derivatives. When she did, she fired, no doubt unwittingly, the first shot in the banker's war against working-class people like you and me. Her warning, that Citi' was going to have to cut its dividend [9] or face the possibility of bankruptcy, launched a sequence of predictable events which has led to an enormous transfer of wealth and power, unprecedented in its size and scope, from working people up the food chain to the richest families in the world.

In the next few installments of this series, I will describe the specific events, in roughly chronological order, that precipitated the collapse. I will talk about the specific banks and hedge funds which are involved. I will explain in simple terms just what these derivatives are and how they were used to bring down the economy. And I will talk about who owns these banks and funds, and just how they profited from our misery.



[1] From his autobiography

[2] This is inexcusable of course, but in fairness to Franklin banking and money-lending were still quite controversial in his day, and were dominated then, even more than now, by Jews.

[3] The Plot to Seize the White House, by Jules Archer.

[4] Here's a blog with many relevant links: http://richardbrenneman.wordpress.com/2010/01/11/smedley-butler-and-the-fdr-coup/
And here is a short video in three parts which touches on Prescott Bush's
involvement:http://www.youtube.com/watch?v=UXGUgFXoRu4.
Unfortunately, I cannot find Curtis' documentary on line anymore.

[5] This one bankrupted the Federal government just before the cartel-financed secession by the South.

[6] In his autobiography Friedman insists that this was due to incompetence rather than criminality. Uncle Milty and I don't have much in common, but the one thing we do share is that neither of us believe a word of that.

[7] From his autobiography ( One of them anyway )

[8] http://dailybail.com/home/william-black-with-dylan-ratigan-there-is-bank-fraud-everywh.html [watch top video and the scroll down to conclusion]
http://www.cjr.org/the_audit/propublica_humdinger_on_a_diab.php,
http://www.bloomberg.com/apps/news?pid=newsarchive&sid=atRb5YmXqs0w,
http://www.bloomberg.com/news/2010-11-02/jpmorgan-said-to-be-investigated-over-subprime-cdo-disclosures.html,
http://www.propublica.org/article/sec-investigating-deal-between-jpmorgan-and-hedge-fund-magnetar,
http://finance.yahoo.com/news/JPMorgan-halts-50K-apf-1054548494.html?x=0

[9] Simple explanations for financial terms will be provided in the next article in this series.

Thursday, November 4, 2010

The Protest in Dublin

The struggle moves to Ireland.

As a result of the Depression, the Irish Government has instituted a schedule of fees for college students. The latter have hit the streets in protest.

Estimates vary considerably, but it seems certain that ten to fifty percent
of students will be forced to drop out due to inability to pay the new fees. In protest, students occupied the Department of Finance building.

This link describes the problem:

http://irelandafternama.wordpress.com/2010/11/04/student-protests-and-the-cost-of-education/

These the demonstration:

http://www.independent.ie/national-news/budget/news/peaceful-protest-turned-to-violence-in-an-instant-2406941.html?start=4

http://www.morningstaronline.co.uk/index.php/news/content/view/full/97261
( "Taoiseach" means secular ruler in Gaelic. In contemporary terms it means prime minister. )