Tag Archives: Ponzi Scheme

“austerity” is too good for the bankers: their punishment should fit their crimes

Ever since I began writing this blog and long before that, one thing has been at the forefront of the political agenda:– “Austerity measures”. The quotation marks are ugly but essential. Those annoying little curly tadpoles hopefully raising the question: what does this phrase actually mean and what is it hiding? Perhaps a dictionary might help us:

Austere: grave, sober, or serious; self-disciplined, abstemious, or ascetic; severely simple or plain. Austerity is then, more often than not, considered ennobling; the word even carries implicitly wholesome religious connotations. The life of a monk is austere. The saints too practiced austerity. And Christ himself is said to have led an austere life. The religious justification is that obsessing about material comforts misses the bigger spiritual picture, but I am not intending to argue either for or against that opinion. My contention here being simply that the meaning of “austerity measures” relies heavily although unconsciously on these traditional ideals. In more purely secular terms, tightening the belt being very often regarded as a good thing.

There is, of course, a constantly expanding menagerie of euphemisms and doublespeak. Civilian casualties in war are now simply “collateral damage”; war itself becoming “kinetic action”; “enemy combatant” meaning a prisoner of war denied their rights; “theater” the war zone; whilst kidnap and torture have been reduced to “extraordinary rendition”. All of these are designed to hide the indefensible truth. But “austerity measures” achieves more again. It doesn’t merely hide the truth, but almost reverses it.

First, let me translate “austerity measures” into useful Standard English: “austerity measures” means enforced poverty. There are no ugly tadpoles required here, because this is quite literally the meaning of the phrase. With the proper words in place, the spell is undone and the truth becomes unavoidable and as clear as day. “Austerity” means being pushed down. Being forced to submit. In short, there is nothing edifying nor ennobling about stripping ordinary people of their very basic and essential public services and economic rights.

“Austerity measures” — what are they good for? Absolutely nothing! You cannot rescue any economy during a depression by impoverishing the people of that country. We can understand this through applying basic economics, or we can find the empirical proof in so many cases where the IMF and the World Bank have applied such “measures” in the past. By making people poorer, personal debt increases as does government debt. As people stop spending, others are forced out of work. The economy shrinks and tax revenues are driven down. Eventually the debt repayments become impossible to maintain. It is a downward death spiral, as the latest report from Greece on Democracy Now! shows all too clearly:

Click here to watch the video or read a full transcript of the same report [from Feb 14th] on the Democracy Now! website.

Greece has now been brought to its knees by imposed “austerity”, and so long as its main political parties continue taking the same course, the situation will quickly worsen. Society is already breaking down and sooner or later the whole political system will surely follow. A revolution in Greece of one kind or another is coming. We can only pray that it’s a good one.

Wherever severe “austerity” moves to next, whether it is Portugal, Ireland, Spain, Italy or here in Britain, the same results must be expected. Oh, and if you think that Greece has a more serious debt problem than anywhere else, then it’s time to think again. Japan has a far higher level of public debt than Greece (see here), and if you also include business and bank debts, then the picture looks very different again. This graphic, published on zerohedge.com [from November 2011] shows very clearly which nation is currently leading in the global debt race to the bottom (and it’s not Greece – not by a long chalk):

Owe your banker £1000 and you are at his mercy; owe him £1 million and the position is reversed. The economist John Maynard Keynes called this ‘the old saying’. So old that it seems to have been long since forgotten. These days, as Keynes would no doubt be surprised to learn, there are some banks deemed simply ‘too big to fail’. Which is, of course, precisely how we got into this mess in the first place, as well as the reason we remain stuck in it.

The ‘megabanks’ have failed, trading poorly, making bad investments and decisions, whilst influencing economic policies in ways that are now proven to be destructive and against the interests of most on the planet, and all the time conducting their operations way beyond their actual means. They are all bankrupt, having “invested” in a load of completely worthless paper which they prefer to call “toxic assets”. And here it is important to understand that in the topsy-turvy world of finance, all debts held are considered to be ‘assets’, even if those debts cannot be repaid, in which case they are regarded as ‘toxic’, whilst remaining as ‘assets’ nonetheless!

The question now being asked is will the latest 130 billion euro bailout save the Greek economy, and the answer to that question is a resounding no. It will no more save the Greek economy than the 110 billion euro bailout did less than two years ago, back in May 2010. Greece will default eventually. Meanwhile the Greek people will have received no benefit from any of these huge bailouts, since the money is only ever used to pay off the bankers’ losses. And yet, when we trace back those losses, what we discover is that they were a product of unquestionably criminal practices. William Black, a highly respected former financial regulator, has explained more than once how the whole financial system became a Ponzi Scheme — and Black is far from a lone voice. Click here to read an earlier post on William Black.

Yet the bankers have so far remained immune from any prosecution. Instead of prison they are receiving continued bailouts, whilst also picking up private perks in the form of bonuses. So how do they get away with it? Simple – they run the show. And evidence of this banker occupation is all around. Goldman Sacks, for instance, are everywhere.

They have not only ‘conquered Europe’, as an extraordinary article in the Independent put it, but long since embedded themselves in other positions of power and influence including, perhaps most significantly, the White House. More recently, they have openly installed unelected puppets to run Greece and Italy. Which is how the Ponzi Scheme that Black and others have uncovered remains officially unchallenged, unhampered and unabated. The bailouts keeping the crooked casino afloat a little longer, whilst the debt contagion spreads far and wide, generating renewed opportunity for asset-stripping along the way. The Greeks are the scapegoats, and also the first victims.

Two years ago, speaking on Al Jazeera, Max Keiser pointed out [7:30 minutes in] that Goldman Sacks had illegally colluded with the Greek government in order to hide debts in their bid for entry into the Eurozone:

The same collusion was more recently picked over in this detailed BBC report from Nick Dunbar, author of “The Devil’s Derivatives”. According to Dunbar’s version of events, however, the secret deal that had been fraudulently cooked up to conceal the true level of Greek government debt was “perfectly legal”:

In his latest book Vultures’ Picnic, investigative journalist, Greg Palast, also delves into Goldman Sacks chicanery. Hidden within documents that he took great pains to authenticate, he discovers evidence that the dodgy deal was a deliberate plan to force the Greek nation into bankruptcy and a fire-sale:

Greece’s economy blew apart because a bunch of olive-spitting, ouzo-guzzling, lazy-ass Greeks refuse to put in a full day’s work, retire while they’re still teenagers, pocket pensions fit for a pasha; and they’ve gone on a social-services spending spree using borrowed money. Now that the bill has come due and the Greeks have to pay with higher taxes and cuts in their big fat welfare state, they run riot, screaming in the streets, busting windows and burning banks.

I don’t buy it. I don’t buy it because of the document in my hand marked, “RESTRICTED DISTRIBUTION.”

I’ll cut to the indictment: Greece is a crime scene. The people are victims of a fraud, a scam, a hustle and a flim-flam. And––cover the children’s ears when I say this––a bank named Goldman Sachs is holding the smoking gun.

You can read a little more about Palast’s investigation, and what it reveals about the Greek crisis here and also on page 27 of chapter one.

There has been a loud call (one that I have also joined in) for the bankers to pay their way in the form of Toban Taxes and so forth, but frankly this is not enough. “Austerity” is too good for bankers. Nothing short of a full criminal investigation is actually needed, with a debt moratorium imposed for as long as that investigation takes. A cancellation of all odious debts should then follow.

Until that time, and as the people of Greece and elsewhere continue to suffer, we would be wise to stand shoulder to shoulder with them. They are the unfortunate recent victims in an ever-expanding and increasingly merciless financial war. For “bailouts” read “more debt”, whilst “austerity measures” means nothing other than economic “shock and awe”.

On the positive side, even parts of the mainstream media are finally beginning to awaken to the crisis now taking hold in Greece and elsewhere. Here, for instance, is Paul Mason, the economics editor for BBC‘s Newsnight, taking a break from his usual duties to speak on Democracy Now! (and to plug his book, obviously) last Wednesday [Feb 22nd]:

Paul Mason appears to be under the unfortunate delusion that only he and Glenn Beck (of all people) are making the connection between the deepening financial crisis and the rise of popular movements across Europe, North Africa and America. If only Mason had figured out how to navigate the internet, he’d be so much better informed.

Click here to watch the video or read a full transcript on the Democracy Now! website.

Additional:

As for the truth about just how lazy the Greek’s really are, here’s a BBC news article from Feb 26th:

But the statistics suggest the country has not lost its way due to laziness. If you look at the average annual hours worked by each worker, the Greeks seem very hard-working.

Figures from the Organisation for Economic Co-operation and Development (OECD) show that the average Greek worker toils away for 2,017 hours per year which is more than any other European country.

Out of the 34 members of the OECD, that is just two places behind the board leaders, South Korea.

On the other hand, the average German worker – normally thought of as the very epitome of industriousness – only manages 1,408 hours a year. Germany is 33rd out of 34 on the OECD list (or 24th out of 25 looking at the European countries alone).

Europe’s top 10 and bottom 10

Most hours worked Most productive Least hours worked Least productive
1 Greece Luxembourg Netherlands Poland
2 Hungary Norway Germany Hungary
3 Poland Ireland Norway Turkey
4 Estonia Belgium France Estonia
5 Turkey Netherlands Denmark Czech Rep
6 Czech Rep France Ireland Portugal
7 Italy Germany Belgium Slovakia
8 Slovakia Denmark Austria Greece
9 Portugal Sweden Luxembourg Slovenia
10 Iceland Austria Sweden Iceland

Looking though the table above, you might notice a negative correlation between long working hours and increased productivity. This exposes another pernicious myth, as we can clearly see that it’s far better to work clever than to work hard.

Click here to read the full article which is entitled “Are Greeks the hardest workers in Europe”, written by Charlotte McDonald.

*

Click here to add your signature to the statement of solidarity with the people of Greece backed by trade union leaders, members of Parliament and campaigners published in the Guardian.

The people of Greece face an unprecedented economic and political crisis. They are being driven to poverty and mass unemployment by the demands of the so-called Troika – the European Union, the European Central Bank, and the International Monetary Fund which has imposed Lucas Papademos, formerly of Vice-President of the ECB, as Prime Minister.

Hospitals in Greece are running out of basic medicines, nearly half of all young people are unemployed, workers in some sectors have not been paid for months, and many are forced to resort to soup kitchens or scavenge from rubbish dumps.

Now the Troika demands a cut of 23% to the minimum wage, the sacking of tens of thousands of public sector workers and the decimation of pensions which have already lost nearly 50% of their value. International capital is asset stripping an entire country and ripping apart its social fabric.

Greece is at the cutting edge of the austerity measures that are being introduced across Europe. All the evidence shows that while these measures may protect the interests of the rich, they just make matters worse for the majority of the population. What happens in Greece today we will see in Portugal tomorrow and in Ireland the day after. In Britain, the Coalition government is pursuing similar measures which will see workers earnings cut, working longer for a smaller pension, and the dismantling of the NHS along with other public services.

Mikis Theodorakis, famous Greek composer of Zorba’s Dance, and Manolis Glezos, veteran resistance fighter against the Nazi occupation who took down the swastika from the Acropolis during the 2nd World War and replaced it with the Greek flag, have issued a statement calling for a European Front to defend the people of Greece and all those facing austerity.

The Coalition of Resistance and the People’s Charter have decided to support this call and agreed to work with trades unions, campaigns and parties across Europe to establish a European Solidarity Campaign to defend the people of Greece. The campaign aims to organise solidarity and raise practical support for the people of Greece; they cannot be made to pay for a crisis for which they are not responsible.

 

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Filed under analysis & opinion, austerity measures, financial derivatives, Greece, Greg Palast, Japan, Max Keiser, Uncategorized

lessons from Iceland – the new IMF poster-child

In 2008, Iceland suffered the third largest financial meltdown in history. It was a crisis that had been triggered when some of Iceland’s leading bankers were caught running a Ponzi scheme, and as a consequence, Gordon Brown’s government actually applied anti-terrorist legislation to freeze Icelandic bank assets in Britain:

“We’re still on the list — in the wonderful company of al-Qaeda, the Taliban, Sudan, North Korea, Iran and a number of other entities — where we do not belong,” Iceland’s Prime Minister, Geir Haarde, said in an interview with TIME, referring to the British government’s website listing of regimes subject to financial sanctions. “The application of the antiterrorist legislation has created a lot of ill will here,” said Haarde — particularly in combination with London’s demand that the Icelandic government recompense British depositors in a subsidiary of the failed Icelandic bank Landsbanki to the tune of $5 billion, or “roughly half of Iceland’s GDP,” Haarde added. “Our parliament will never agree to accepting that kind of debt burden. It’s unsustainable.”1

So you might very reasonably suppose that some of these ‘financial terrorists’ would by now have been put away behind bars, but think again. Instead, this same criminal elite is not only at large, but still very much in the business of financial speculation. Meanwhile, and in time-honoured tradition, it’s the people of Iceland who are being punished for these crimes; with the country already in ruins and their government having to run into the arms of the IMF to secure a $2 billion loan, which it may or may not have spent (this apparently remains unclear), but which has certainly not as yet been repaid.

On Wednesday [Nov 2nd], Birgitta Jónsdóttir, who is a member of the Icelandic parliament (Althing), formerly representing the Citizen’s Movement, but now one of three Icelandic MPs representing The Movement (Hreyfingin), spoke with Max Keiser on Russia Today‘s Keiser Report. She told him:

“The interesting thing is that the IMF has now decided to use Iceland as a promotional kick for them being the new cuddly and soft IMF. I had to remind the people from the IMF, at the conference in Iceland last week, about their policy in Greece, and their policy and programme in Lithuania, where they indeed have not changed anything from the previous disasters in Asia. But they’re still trying to market the IMF as if it has changed. And I think it’s dangerous. Many economists who looked at the Icelandic example have proved that the IMF has changed. Now, hear my warning, they have not!”

Of course, ‘help’ from the IMF always comes with strings attached; a set of ‘conditionalities’ that demand the fire sale of national assets and the weakening of welfare systems, which is precisely what’s happening to Iceland right now:

“We had an IMF deputy managing director speaking at this conference in a panel. She said that the IMF had helped strengthen the welfare system. Which is, of course, a ludicrous lie… We are having an exodus out of Iceland. We don’t even have properly staffed hospitals. And all the hospitals have been slashed so badly that we’ve been getting letters from all of them – the parliamentarians in Iceland – just basically saying that they can’t cut any more unless we will have health hazards. The same applies to the educational system.”

Yet in spite of such IMF involvement, Jónsdóttir says that there’s still no transparency in the Icelandic banking system:

“I think that we have to bear in mind that most politicians, or you know, people in power are puppets. They’re puppets for the financial sector. And we just have to face it. And it is really time that we looked beyond the traditional politics, because let’s face it, our democracies, they are dictatorships with many heads. Because we, the people, we do not have access to decision-making, or to making sure that they are doing their jobs in favour of our needs, and the needs of the great many, but only the few.”

But in a way, Iceland have escaped lightly, because at least their banks were allowed to fail, which means no more bail-outs, and so, unlike with the situation in Greece, there has been no descent into such a bottomless debt spiral. And unlike the Greeks, the people of Iceland were granted not one, but two referenda (March 2010 and April 2011) and, on both occasions, very sensibly voted against a bailout. Although, as Jónsdóttir explains, there were also more practical reasons for the Icelandic default and the collapse of their banks:

“It was not because the Icelandic government was so smart that they decided to let the banks fail. They just couldn’t get the money to save them. Everybody thought that was really bad, but that actually has turned out to be a great blessing for us. That the three banks were actually allowed to fail.”

Jónsdóttir says that she doesn’t believe the IMF will ever change because “we all know what the function of the IMF is. And that is not to look after the people but to look after the people that have the power. So they’re looking after the 1%, not the 99%.”

However, during the recent IMF conference in Iceland, a surprise suggestion did apparently come from the chief economist of Citigroup, Willem Buiter, who said that there should be a debt jubilee for Iceland.

Jónsdóttir adds that:

“Maybe that time has come everywhere. Maybe it’s time that we start anew. And I think that what I’ve been hearing everywhere is that people don’t trust in the system – any aspect of the system, because the system is self-serving; it doesn’t matter if it’s the financial system or other systems. So yeah, why don’t we take this good man’s advice and have debt jubilee everywhere.”

1 From an article entitled “Iceland to Britain: ‘We’re no terrorists’”, written by Jonas Moody, published by Time on November 3, 2008. http://www.time.com/time/world/article/0,8599,1855901,00.html

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William Black on how our financial system became a Ponzi scheme

William Black, Associate Professor of Economics and Law at the University of Missouri-Kansas City, is a former financial regulator and a white-collar criminologist, who helped to expose Congressional corruption during the Savings and Loan Crisis in the late 1980s, by accusing then-house speaker Jim Wright and five US Senators, subsequently known as the Keating Five (who included John Glenn and John McCain), of doing favors for the S&L’s in exchange for contributions and other kickbacks. Although the senators only received a slap on the wrist, Charles Keating — after whom the so-called “Keating Five” were named — had sent a memo that read, in part, “get Black — kill him dead.”

Based on his experiences, Black wrote a book entitled: “The Best Way to Rob a Bank is to Own One.

In April 2009, William Black was interviewed by Bill Moyers on PBS. He explained how the banks and the credit ratings agencies were together committing fraud, with the result that the financial system “became a Ponzi scheme”:

BILL MOYERS: So if your assumption is correct, your evidence is sound, the bank, the lending company, created a fraud. And the ratings agency that is supposed to test the value of these assets knowingly entered into the fraud. Both parties are committing fraud by intention.

WILLIAM K. BLACK: Right, and the investment banker that — we call it pooling — puts together these bad mortgages, these liars’ loans, and creates the toxic waste of these derivatives. All of them do that. And then they sell it to the world and the world just thinks because it has a triple-A rating it must actually be safe. Well, instead, there are 60 and 80 percent losses on these things, because of course they, in reality, are toxic waste.

BILL MOYERS: You’re describing what Bernie Madoff did to a limited number of people. But you’re saying it’s systemic, a systemic Ponzi scheme.

WILLIAM K. BLACK: Oh, Bernie was a piker. He doesn’t even get into the front ranks of a Ponzi scheme…

BILL MOYERS: But you’re saying our system became a Ponzi scheme.

WILLIAM K. BLACK: Our system…

BILL MOYERS: Our financial system…

WILLIAM K. BLACK: Became a Ponzi scheme. Everybody was buying a pig in the poke. But they were buying a pig in the poke with a pretty pink ribbon, and the pink ribbon said, “Triple-A.”

He also pointed out that the policies of Obama administration remained in violation of the law:

BILL MOYERS: Yeah. Are you saying that Timothy Geithner, the Secretary of the Treasury, and others in the administration, with the banks, are engaged in a cover up to keep us from knowing what went wrong?

WILLIAM K. BLACK: Absolutely.

BILL MOYERS: You are.

WILLIAM K. BLACK: Absolutely, because they are scared to death. All right? They’re scared to death of a collapse. They’re afraid that if they admit the truth, that many of the large banks are insolvent. They think Americans are a bunch of cowards, and that we’ll run screaming to the exits. And we won’t rely on deposit insurance. And, by the way, you can rely on deposit insurance. And it’s foolishness. All right? Now, it may be worse than that. You can impute more cynical motives. But I think they are sincerely just panicked about, “We just can’t let the big banks fail.” That’s wrong.

Click here to read a complete transcript of the interview.

Two and a half years on, William Black says on Democracy Now! that nothing has changed:

AMY GOODMAN: What do you think has to happen now? And what does this have to do with the Occupy Wall Street protests that have expanded here in Kansas City and across the globe? There are more than a thousand demonstrations that have been held in the last weeks.

WILLIAM BLACK: Well, we have companion problems. We’ve got to stop this dynamic that’s producing recurrent, intensifying crises. I mean, this one has devastated the nation. The next one would probably be equivalent to the Great Depression. And part of that answer—but only part of it—is to hold the folks accountable, especially the most elite, who caused this crisis. And they did it through fraud, and they did it through fraud in what we call the “C-suites” —the CEOs, the COOs — so, the absolute top.

AMY GOODMAN: And how would these powerful financial entities be held accountable? What exactly should happen?

WILLIAM BLACK: It all starts with the regulators, which is why it’s all not started here, because we have, of course, the wrecking crew, Bush’s wrecking crew, what Tom Frank called them, in charge, and they stopped making criminal referrals. So our agency, in the savings and loan crisis, made over 10,000 criminal referrals to the FBI. That same agency, in this crisis, made zero criminal referrals. If you don’t get people pointing the way and pointing to the top of the organization, you don’t get effective prosecutions. So, in the peak of the savings and loan crisis, we had a thousand FBI agents. This crisis has losses 70 times larger than the savings and loan crisis. And the savings and loan crisis, when it happened, was considered the largest financial scandal in U.S. history. So we’re now 70 times worse. And as recently as 2007, we had 120 FBI agents—one-eighth as many FBI agents for a crisis 70 times larger. And they looked not at the big folks, but almost exclusively at the little folks.

AMY GOODMAN: William Black, you mentioned Bush’s wrecking crew, but we live in the time of President Obama.

WILLIAM BLACK: And we’ve been living for some years in the time of President Obama, and he has done absolutely nothing to reestablish the criminal referral process. And as a result, there are virtually no prosecutions of any elites.

He was also asked about what the message from Occupy Wall Street should be:

Well, first, of course, I don’t speak for that movement, and indeed they don’t have official spokespersons with clear plans. So that part is true. They think of that as one of the great strengths of democracy now, right? That things bubble up, and they have different ideas. However, if you look, not just nationwide, but worldwide, you will see some pretty consistent themes developing.

And those themes include: we have to deal with the systemically dangerous institutions, the 20 biggest banks that the administration is saying are ticking time bombs, that as soon as one of them fails, we go back into a global crisis. Well, we should fix that. Right? There’s no reason to have institutions that large. That’s a theme.

That accountability is a theme, that we should keep—put these felons in prison, and there’s no action on that.

That we should get jobs now, and that we should deal with the foreclosure crisis. So those are four very common themes that you can see in virtually any of these protest sites. And they have asked me, for example, to come to New York to talk about some of these things. So, I think, over time, you won’t necessarily have some grand written agenda, but you’ll have, as I say, increasing consensus. And it’s a very broad consensus. It’s not left, it’s not right; it’s not Republican, it’s not Democrat.

Click here to read the full transcript.

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