Where we are headed again, sadly.
Friday, February 5, 2010
Wednesday, January 20, 2010
Friday, December 25, 2009
Saturday, December 12, 2009
Mission Bulletin of Strategic Crisis Center
Mission Bulletin of Strategic Crisis Center
Jeff Nyquist Mission Statement
http://www.strategiccrisis.com/index.php?option=com_content&view=article&id=170:7-december-2009&catid=48:mission-statement&Itemid=18
A grave strategic crisis is coming. The U.S. Congress has decided to allow the nation's nuclear arsenal to sink into disrepair. At the same time, the president is eager to sign a nuclear arms reduction treaty with Russia, while Russia is modernizing its nuclear forces (not to mention what China is doing). It is possible, within a year, that America will have less than 400 strategic nuclear warheads. The strategic posture of the United States has become a makeshift affair; partly based on the dictates of political correctness, partly based on the false market optimism of a business community that wants to trade with Communist China. It does not occur to these businessmen that China is trading with them today in order to hang them tomorrow.
Today's strategic crisis is an intellectual crisis. It occurs because men have not studied the strategic situation with due diligence. They have abandoned common sense, and they have failed to name their enemies. The Islamic threat notwithstanding, the United States faces two powerful opponents: Russia and China. Due to the advance of "politically correct" thinking in Washington, and to the softening of the American psyche, few politicians are willing to admit that Russia and China are working against the security interests of the United States. Other countries, as well, are part of the Russian-Chinese alliance. These include Iran, North Korea, Cuba, Vietnam, Venezuela, and others.
It would seem, indeed, that the old Communist Bloc still exists, and is growing, especially in the Third World. Meanwhile, Communist influence in Europe is spreading through KGB-businesses, Russian organized crime, and agents of influence. Though former Soviet Republics and Warsaw Pact states have gained entry into NATO, the governments and economies of these countries are largely in the hands of Moscow's agents. Even Lech Walesa in Poland has long since been exposed as an agent of the communist secret police. It is no wonder, therefore, that Russia and China are engaged in a military buildup while the strategic attention of the United States is focused on Iran and Afghanistan. A deception has been promulgated, and the United States has been taken for a ride.
It now becomes evident, twenty years after the so-called collapse of communism, that America didn't win the Cold War. The communist bloc merely reorganized itself under new banners and new slogans. The old ideology was outwardly abandoned to facilitate the interpenetration of East and West. It is an indisputable fact that the collapse of Communism in 1989 was part of a longstanding Kremlin plan. We know this from the testimony of defectors and researchers like Jan Sejna, Anatoliy Golitsyn and Vladimir Bukovsky. It was Bukovsky who acquired documents from the Communist Party Soviet Union archive proving the existence of the plan. We also know that this plan did not play out as envisioned. After the unification of Germany, the German people did not abandon NATO as Kremlin strategists had projected. The Kremlin's miscalculation in this regard led to a major upset for the Soviet side, leading to a series of setbacks. To recover lost ground, the Kremlin strategists set to work after 1991. They built what has been called a KGB regime in Moscow. And they have been building an international alliance with which to change the global balance of power.
Some historical background is necessary to understand how we got where we are today: In December 1961 a KGB major named Golitsyn defected to the United States with information about a Soviet long-range strategy. He provided the CIA with a package of documents, including one that described a new KGB directorate of disinformation (Department “D”). The document said that catching American spies was not the KGB’s primary concern. Better to create an elaborate web of disinformation “to negate and discredit authentic information the enemy has obtained.” The KGB’s tactic was to feed the CIA a steady diet of pleasing falsehoods. Eventually, the CIA would only believe stories tailored by the KGB. This, in turn, would allow Soviet agents to penetrate more easily into the heart of U.S. intelligence.
Golitsyn warned the CIA that Soviet disinformation was carefully devised to support a long-range plan in which the balance of power would be inconspicuously shifted in favor of the communist bloc. With the exception of the CIA’s James Angleton, few credited Golitsyn’s warning. Having been disbelieved and cast aside, Golitsyn submitted a top secret manuscript to the CIA in 1982. According to this manuscript, by 1986 the Soviet Union would be led by a man “with a more liberal image.” This man would initiate “changes that would have been beyond the imagination of Marx or the practical reach of Lenin and unthinkable to Stalin.” The Soviet system would be liberalized, and the liberalization “would be spectacular and impressive. Formal pronouncements might be made about a reduction in the Communist Party’s role; its monopoly would be apparently curtailed…. The KGB would be reformed. Dissidents at home would be amnestied; those in exile abroad would be allowed to take up positions in the government…. Political clubs would be opened to nonmembers of the Communist Party. Leading dissidents might form one or more alternative political parties. Censorship would be relaxed; controversial books, plays, films, and art would be published, performed, and exhibited.”
The CIA did not take Golitsyn’s manuscript seriously, and gave Golitsyn permission to publish it as a book, titled New Lies for Old, which appeared in 1984. It included 148 falsifiable predictions. According to researcher Mark Riebling “139 out of 148” of Golitsyn’s predictions “were fulfilled by the end of 1993 – an accuracy rate of nearly 94 percent.” Did anyone agree with Golitsyn’s analysis, or approve his predictions at the time? Leading pundits and CIA analysts mocked Golitsyn’s work. “Unfortunate is the only term for this book,” wrote a CIA analyst in 1985. There were no CIA apologies tendered to Golitsyn when 139 of his predictions came true. By that time Golitsyn’s critics were busy congratulating themselves on winning the Cold War. The success of Soviet disinformation was total. From that point forward the world would only understand what the KGB wanted them to understand.
According to the 1982 memoirs of a high-level Czechoslovakian defector named Jan Sejna,, “One of the basic problems of the West is its frequent failure to recognize the existence of any Soviet ‘grand design’ at all. Those rejecting this concept unwittingly serve Soviet efforts to conceal their objectives and further complicate the process of determining such objectives.” As a leading official, Sejna worked directly for the top level of the Czech communist government. In 1967 Sejna and his colleagues were briefed on Moscow’s strategy. “It had always been made clear that the Plan’s objectives were firm but the means and methods of achieving them were flexible,” wrote Sejna in his memoirs. “This flexibility often serves to confound Western political analysts, who tend to confuse a change in tactics with a profound change in … thinking.” Therefore, Khrushchev’s denunciation of Stalin in 1956 was a tactic and not a change of heart. According to Sejna, even though Khrushchev denounced Stalin’s crimes, the Kremlin had not abandoned Stalin’s objectives.
While addressing Western ambassadors during a reception at the Polish Embassy in Moscow on 18 November 1956, Khrushchev publicly stated: “Whether you like it or not, history is on our side. We will bury you!” ("Мы вас похороним!") On 24 July 1959 Khrushchev told visiting U.S. Vice President Richard Nixon that his grandchildren would live under communism. Two months later Khrushchev visited the United States where he made the exact same boast to U.S. Agriculture Secretary Ezra Taft Benson. When Benson assured him the opposite, Khrushchev reportedly said: “You Americans are so gullible. No, you won’t accept communism outright, but we’ll keep feeding you small doses of socialism until you’ll finally wake up and find you already have communism. We won’t have to fight you. We’ll so weaken your economy until you’ll fall like overripe fruit into our hands.”
Khrushchev’s intention was recently explained by the former deputy chief of Romania’s foreign intelligence service, Ion Pacepa, who made the following observation to the Czech-American researcher Robert Buchar: “The whole foreign policy of the Soviet bloc states, indeed its whole economic and military might, revolved around the larger Soviet objective of destroying America from within through the use of lies. The Soviets saw disinformation as a vital tool in the dialectical advance of world communism. KGB priority number one was to damage American power, judgment, and credibility.”
It is noteworthy that Khrushchev did not say, “You will live under communism.” He also did not say, “Your children will live under communism.” He told his American opposites that their grandchildren would live under communism. Khrushchev was admitting that Moscow’s plan was a long-range plan, involving decades of work. Starting in February 1967 the Warsaw Pact countries received regular directives detailing their part in the overall Plan. “When my friends and I studied the Strategic Plan,” wrote Sejna, “our initial reactions were identical: we considered it quite unrealistic, especially in its timing, which we thought wildly optimistic.” Only after Sejna defected to the West did he change this opinion. “I could find no unity, no consistent objective or strategy among Western countries. It is not possible to fight the Soviet system and strategy with small tactical steps. For the first time I began to believe that the Soviet Union would be able to achieve her goals – something I had not believed in Czechoslovakia.”
The Kremlin strategists envisioned that sometime after 1990 an economic and political sequence would unfold, leading to the collapse of the American economy and “the advent to power in Washington of a transitional liberal and progressive government.” In September 1967 the Secretary of the Soviet Central Committee, Konstantin Katushev, arrived in Prague to orally brief the Czech communist leaders. The Czechs feared that an economic crisis in America would lead to the emergence of a right-wing regime. The United States could move to “either extreme,” Katushev admitted, “as … in the McCarthy period and the Vietnam War. If we can impose on the U.S.A. the external restraints proposed in our Plan, and seriously disrupt the American economy, the working and lower middle classes will suffer the consequences and they will turn on the society that has failed them. They will be ready for revolution.”
The Russian strategists foresaw that the American workforce would be facing a difficult situation in twenty to forty years. America’s enormous progress in technology, said Katushev, was a destabilizing influence because it led to underemployment by unskilled workers. “This phenomenon,” Katushev noted, “is one I consider the United States cannot deal with.” Though American workers could turn to the right, he added, “It’s more likely … that a progressive regime will emerge because, in spite of their power, the governing bureaucratic elite and industrial elite, and the media, are fundamentally liberal in their outlook and ashamed of their failure to solve basic national problems.”
In 1967 Soviet Marshal Matvei Zhakarov visited Prague to encourage the recruitment of “high-level agents of influence” in the rising elite of America’s universities, media and government. Moscow perceived that power was passing from the hands of the “old industrial plutocracy.” If the Soviet bloc could penetrate the U.S. media and academia, it would be easier to manipulate the society as a whole. While the Strategic Plan called for disrupting the U.S. economy and encouraging the election of a progressive presidential candidate, it also aimed at splitting the United States from Europe. According to Sejna, “The Russians planned to play upon the nationalist, bourgeois prejudices of the leading European countries in order to convince them that Europe must strive to become a distinct entity, separate from the United States.”
In order to gain technology and money from the West, Moscow also planned to launch an unprecedented peace offensive, which would involve the liquidation of the communist bloc. About this plan, Sejna wrote: “The erosion of NATO begun in Phase Two [of the Plan] would be completed by the withdrawal of the United States from its commitment to the defense of Europe, and by European hostility to military expenditure, generated by economic recession and fanned by the efforts of the ‘progressive’ movements. To this end we envisaged that it might be necessary to dissolve the Warsaw Pact, in which event we had already prepared a web of bilateral defense arrangements, to be supervised by secret committees of Comecon.”
In terms of operational details, the Plan relied on future sabotage and terrorist operations. These would benefit from the infiltration of organized crime and Soviet-sponsored drug trafficking. The Russian planners believed that the American economy could be sabotaged, that the CIA was effectively blind, and that drug trafficking could open a back door to America’s financial centers and geographical heartland. Sejna’s testimony on this subject was published in 1990 a book titled Red Cocaine, written by Joseph D. Douglass, Jr., with an introduction by Ray S. Cline, former Deputy Director for Intelligence at the CIA.
The role of terrorism was especially important to the thrust of the Strategic Plan. When researcher Robert Buchar asked Russian historian Vladimir Bukovsky whether the Soviets fathered modern terrorism, Bukovsky replied: “Oh definitely. I can show you hundreds of documents proving that. I mean how they supplied, trained, created and … control almost every terrorist organization on earth. I have these documents.”
The former Deputy Director of the Romanian intelligence service, Ion Mihai Pacepa, has written about Russia’s involvement with international terrorism. “Today’s international terrorism,” he wrote in August 2006, “was conceived at the Lubyanka, the headquarters of the KGB…. I witnessed its birth in my other life, as a Communist general.”
In a 1987 book, titled Spetsnaz: The Inside Story of the Soviet Special Forces, a Soviet military intelligence defector writing under the pen name Viktor Suvorov explained the ultimate purpose to which terrorism would be put to use. In Chapter 15 of the book, Suvorov listed various acts of economic sabotage and terrorism to be undertaken in advance of all-out war against the United States. “All these operations,” wrote Suvorov, “are known officially in the GRU as the ‘preparatory period,’ and unofficially as the ‘overture.’ The overture is a series of large and small operations the purpose of which is, before actual military operations begin, to weaken the enemy’s morale, create an atmosphere of general suspicion, fear and uncertainty, and divert the attention of the enemy’s armies and police forces to a huge number of different targets, each which may be the object of the next attack.” According to Suvorov, the overture is carried out by intelligence agents and by “mercenaries recruited by intermediaries.” The strategy they follow is known as “grey terror,” described by Suvorov as “a kind of terror which is not conducted in the name of the Soviet Union.” Instead, the terror is carried out in the name of “already existing extremist groups not connected in any way” with Russia. According to Suvorov, “The terrorist acts carried out in the course of the ‘overture’ require very few people, very few weapons and little equipment.” The example of 19 men with box-cutters comes to mind, though Suvorov lists “a screw driver, a box of matches or a glass ampoule.”
In a July 2005 interview with the Polish Newspaper Rzeczpospolita, FSB/KGB defector Alexander Litvinenko alleged that al Qaeda’s second-in-command, Ayman Al-Zawahri, was “an old agent of the FSB.” Political writer and former KGB officer, Konstantin Preobrazhenskiy, confirmed Litvinenko’s allegation, stating: “[Litvinenko] was responsible for securing the secrecy of Al-Zawahri’s arrival in Russia, who was trained by FSB instructors in Dagestan, Northern Caucasus, in 1996-97.” Preobrazhenskiy further stated: "At that time, Litvinenko was the Head of the Subdivision for Internationally Wanted Terrorists of the First Department of the Operative-Inquiry Directorate of the FSB Anti-Terrorist Department. He was ordered to undertake the delicate mission of securing Al-Zawahri from unintentional disclosure by the Russian police. Though Al-Zawahri had been brought to Russia by the FSB using a false passport, it was still possible for the police to learn about his arrival and report to Moscow for verification. Such a process could disclose Al-Zawahri as an FSB collaborator.”
Litvinenko detailed Russia’s role as the originator of modern terrorism in his July 2005 interview with Rzeczpospolita: “I know only one organization that has made terrorism the main tool of solving political problems. It is the Russian special services. The KGB has been engaged in terrorism for many years, and mass terrorism. At the special department of the KGB they trained terrorists from practically every country in the world. These courses lasted, as a rule, for half a year. Specially trained and prepared agents of the KGB organized murders and explosions, including explosions of tankers, the hijacking of passenger airliners, along with hits on diplomatic, state and commercial organizations worldwide.” Litvinenko added that the agents of the KGB/FSB were “the bloodiest terrorist in the world.” He then listed Carlos Ilyich Ramiros (Carlos the Jackal), Yassir Arafat, Saddam Hussein, and a host of others. According to Litvinenko, “all these figures and movements operated under their own slogans; however, none of them especially hid their ‘intimate’ … relationship with the Kremlin and Lubyanka. There is a simple question: whether the Russian special services would train and finance people and groups which are unsupervised by Lubyanka and did not serve the interests of the Kremlin? You understand perfectly, they would not. Each act of terrorism made by these people was carried out as an assignment and under the rigid control of the KGB of the USSR.”
Asked if this terrorism continues under the post-Soviet leadership, Litvinenko warned that “the center of global terrorism is not in Iraq, Iran, Afghanistan or the Chechen Republic. The terrorist infection is spread worldwide from Lubyanka Square and the Kremlin cabinet. And until the Russian special services are outlawed, dispersed and condemned, the terrorism will never stop.” Roughly 16 months after his public statements about the KGB’s connection to Al Qaeda, Litvinenko was poisoned at the bar of a London hotel by Kremlin agents who put radioactive polonium-210 in his tea. He died in November 2006.
The strategic crisis facing the United States is a life-and-death crisis. If we continue to ignore the growing evidence of danger, the free world may not survive. The Strategic Crisis Center wants to encourage widespread debate, involvement, and concern with these issues. Citizens need to get educated, they need to get involved, and they need to alert their neighbors, their friends, and their families to the danger.
Jeff Nyquist Mission Statement
http://www.strategiccrisis.com/index.php?option=com_content&view=article&id=170:7-december-2009&catid=48:mission-statement&Itemid=18
A grave strategic crisis is coming. The U.S. Congress has decided to allow the nation's nuclear arsenal to sink into disrepair. At the same time, the president is eager to sign a nuclear arms reduction treaty with Russia, while Russia is modernizing its nuclear forces (not to mention what China is doing). It is possible, within a year, that America will have less than 400 strategic nuclear warheads. The strategic posture of the United States has become a makeshift affair; partly based on the dictates of political correctness, partly based on the false market optimism of a business community that wants to trade with Communist China. It does not occur to these businessmen that China is trading with them today in order to hang them tomorrow.
Today's strategic crisis is an intellectual crisis. It occurs because men have not studied the strategic situation with due diligence. They have abandoned common sense, and they have failed to name their enemies. The Islamic threat notwithstanding, the United States faces two powerful opponents: Russia and China. Due to the advance of "politically correct" thinking in Washington, and to the softening of the American psyche, few politicians are willing to admit that Russia and China are working against the security interests of the United States. Other countries, as well, are part of the Russian-Chinese alliance. These include Iran, North Korea, Cuba, Vietnam, Venezuela, and others.
It would seem, indeed, that the old Communist Bloc still exists, and is growing, especially in the Third World. Meanwhile, Communist influence in Europe is spreading through KGB-businesses, Russian organized crime, and agents of influence. Though former Soviet Republics and Warsaw Pact states have gained entry into NATO, the governments and economies of these countries are largely in the hands of Moscow's agents. Even Lech Walesa in Poland has long since been exposed as an agent of the communist secret police. It is no wonder, therefore, that Russia and China are engaged in a military buildup while the strategic attention of the United States is focused on Iran and Afghanistan. A deception has been promulgated, and the United States has been taken for a ride.
It now becomes evident, twenty years after the so-called collapse of communism, that America didn't win the Cold War. The communist bloc merely reorganized itself under new banners and new slogans. The old ideology was outwardly abandoned to facilitate the interpenetration of East and West. It is an indisputable fact that the collapse of Communism in 1989 was part of a longstanding Kremlin plan. We know this from the testimony of defectors and researchers like Jan Sejna, Anatoliy Golitsyn and Vladimir Bukovsky. It was Bukovsky who acquired documents from the Communist Party Soviet Union archive proving the existence of the plan. We also know that this plan did not play out as envisioned. After the unification of Germany, the German people did not abandon NATO as Kremlin strategists had projected. The Kremlin's miscalculation in this regard led to a major upset for the Soviet side, leading to a series of setbacks. To recover lost ground, the Kremlin strategists set to work after 1991. They built what has been called a KGB regime in Moscow. And they have been building an international alliance with which to change the global balance of power.
Some historical background is necessary to understand how we got where we are today: In December 1961 a KGB major named Golitsyn defected to the United States with information about a Soviet long-range strategy. He provided the CIA with a package of documents, including one that described a new KGB directorate of disinformation (Department “D”). The document said that catching American spies was not the KGB’s primary concern. Better to create an elaborate web of disinformation “to negate and discredit authentic information the enemy has obtained.” The KGB’s tactic was to feed the CIA a steady diet of pleasing falsehoods. Eventually, the CIA would only believe stories tailored by the KGB. This, in turn, would allow Soviet agents to penetrate more easily into the heart of U.S. intelligence.
Golitsyn warned the CIA that Soviet disinformation was carefully devised to support a long-range plan in which the balance of power would be inconspicuously shifted in favor of the communist bloc. With the exception of the CIA’s James Angleton, few credited Golitsyn’s warning. Having been disbelieved and cast aside, Golitsyn submitted a top secret manuscript to the CIA in 1982. According to this manuscript, by 1986 the Soviet Union would be led by a man “with a more liberal image.” This man would initiate “changes that would have been beyond the imagination of Marx or the practical reach of Lenin and unthinkable to Stalin.” The Soviet system would be liberalized, and the liberalization “would be spectacular and impressive. Formal pronouncements might be made about a reduction in the Communist Party’s role; its monopoly would be apparently curtailed…. The KGB would be reformed. Dissidents at home would be amnestied; those in exile abroad would be allowed to take up positions in the government…. Political clubs would be opened to nonmembers of the Communist Party. Leading dissidents might form one or more alternative political parties. Censorship would be relaxed; controversial books, plays, films, and art would be published, performed, and exhibited.”
The CIA did not take Golitsyn’s manuscript seriously, and gave Golitsyn permission to publish it as a book, titled New Lies for Old, which appeared in 1984. It included 148 falsifiable predictions. According to researcher Mark Riebling “139 out of 148” of Golitsyn’s predictions “were fulfilled by the end of 1993 – an accuracy rate of nearly 94 percent.” Did anyone agree with Golitsyn’s analysis, or approve his predictions at the time? Leading pundits and CIA analysts mocked Golitsyn’s work. “Unfortunate is the only term for this book,” wrote a CIA analyst in 1985. There were no CIA apologies tendered to Golitsyn when 139 of his predictions came true. By that time Golitsyn’s critics were busy congratulating themselves on winning the Cold War. The success of Soviet disinformation was total. From that point forward the world would only understand what the KGB wanted them to understand.
According to the 1982 memoirs of a high-level Czechoslovakian defector named Jan Sejna,, “One of the basic problems of the West is its frequent failure to recognize the existence of any Soviet ‘grand design’ at all. Those rejecting this concept unwittingly serve Soviet efforts to conceal their objectives and further complicate the process of determining such objectives.” As a leading official, Sejna worked directly for the top level of the Czech communist government. In 1967 Sejna and his colleagues were briefed on Moscow’s strategy. “It had always been made clear that the Plan’s objectives were firm but the means and methods of achieving them were flexible,” wrote Sejna in his memoirs. “This flexibility often serves to confound Western political analysts, who tend to confuse a change in tactics with a profound change in … thinking.” Therefore, Khrushchev’s denunciation of Stalin in 1956 was a tactic and not a change of heart. According to Sejna, even though Khrushchev denounced Stalin’s crimes, the Kremlin had not abandoned Stalin’s objectives.
While addressing Western ambassadors during a reception at the Polish Embassy in Moscow on 18 November 1956, Khrushchev publicly stated: “Whether you like it or not, history is on our side. We will bury you!” ("Мы вас похороним!") On 24 July 1959 Khrushchev told visiting U.S. Vice President Richard Nixon that his grandchildren would live under communism. Two months later Khrushchev visited the United States where he made the exact same boast to U.S. Agriculture Secretary Ezra Taft Benson. When Benson assured him the opposite, Khrushchev reportedly said: “You Americans are so gullible. No, you won’t accept communism outright, but we’ll keep feeding you small doses of socialism until you’ll finally wake up and find you already have communism. We won’t have to fight you. We’ll so weaken your economy until you’ll fall like overripe fruit into our hands.”
Khrushchev’s intention was recently explained by the former deputy chief of Romania’s foreign intelligence service, Ion Pacepa, who made the following observation to the Czech-American researcher Robert Buchar: “The whole foreign policy of the Soviet bloc states, indeed its whole economic and military might, revolved around the larger Soviet objective of destroying America from within through the use of lies. The Soviets saw disinformation as a vital tool in the dialectical advance of world communism. KGB priority number one was to damage American power, judgment, and credibility.”
It is noteworthy that Khrushchev did not say, “You will live under communism.” He also did not say, “Your children will live under communism.” He told his American opposites that their grandchildren would live under communism. Khrushchev was admitting that Moscow’s plan was a long-range plan, involving decades of work. Starting in February 1967 the Warsaw Pact countries received regular directives detailing their part in the overall Plan. “When my friends and I studied the Strategic Plan,” wrote Sejna, “our initial reactions were identical: we considered it quite unrealistic, especially in its timing, which we thought wildly optimistic.” Only after Sejna defected to the West did he change this opinion. “I could find no unity, no consistent objective or strategy among Western countries. It is not possible to fight the Soviet system and strategy with small tactical steps. For the first time I began to believe that the Soviet Union would be able to achieve her goals – something I had not believed in Czechoslovakia.”
The Kremlin strategists envisioned that sometime after 1990 an economic and political sequence would unfold, leading to the collapse of the American economy and “the advent to power in Washington of a transitional liberal and progressive government.” In September 1967 the Secretary of the Soviet Central Committee, Konstantin Katushev, arrived in Prague to orally brief the Czech communist leaders. The Czechs feared that an economic crisis in America would lead to the emergence of a right-wing regime. The United States could move to “either extreme,” Katushev admitted, “as … in the McCarthy period and the Vietnam War. If we can impose on the U.S.A. the external restraints proposed in our Plan, and seriously disrupt the American economy, the working and lower middle classes will suffer the consequences and they will turn on the society that has failed them. They will be ready for revolution.”
The Russian strategists foresaw that the American workforce would be facing a difficult situation in twenty to forty years. America’s enormous progress in technology, said Katushev, was a destabilizing influence because it led to underemployment by unskilled workers. “This phenomenon,” Katushev noted, “is one I consider the United States cannot deal with.” Though American workers could turn to the right, he added, “It’s more likely … that a progressive regime will emerge because, in spite of their power, the governing bureaucratic elite and industrial elite, and the media, are fundamentally liberal in their outlook and ashamed of their failure to solve basic national problems.”
In 1967 Soviet Marshal Matvei Zhakarov visited Prague to encourage the recruitment of “high-level agents of influence” in the rising elite of America’s universities, media and government. Moscow perceived that power was passing from the hands of the “old industrial plutocracy.” If the Soviet bloc could penetrate the U.S. media and academia, it would be easier to manipulate the society as a whole. While the Strategic Plan called for disrupting the U.S. economy and encouraging the election of a progressive presidential candidate, it also aimed at splitting the United States from Europe. According to Sejna, “The Russians planned to play upon the nationalist, bourgeois prejudices of the leading European countries in order to convince them that Europe must strive to become a distinct entity, separate from the United States.”
In order to gain technology and money from the West, Moscow also planned to launch an unprecedented peace offensive, which would involve the liquidation of the communist bloc. About this plan, Sejna wrote: “The erosion of NATO begun in Phase Two [of the Plan] would be completed by the withdrawal of the United States from its commitment to the defense of Europe, and by European hostility to military expenditure, generated by economic recession and fanned by the efforts of the ‘progressive’ movements. To this end we envisaged that it might be necessary to dissolve the Warsaw Pact, in which event we had already prepared a web of bilateral defense arrangements, to be supervised by secret committees of Comecon.”
In terms of operational details, the Plan relied on future sabotage and terrorist operations. These would benefit from the infiltration of organized crime and Soviet-sponsored drug trafficking. The Russian planners believed that the American economy could be sabotaged, that the CIA was effectively blind, and that drug trafficking could open a back door to America’s financial centers and geographical heartland. Sejna’s testimony on this subject was published in 1990 a book titled Red Cocaine, written by Joseph D. Douglass, Jr., with an introduction by Ray S. Cline, former Deputy Director for Intelligence at the CIA.
The role of terrorism was especially important to the thrust of the Strategic Plan. When researcher Robert Buchar asked Russian historian Vladimir Bukovsky whether the Soviets fathered modern terrorism, Bukovsky replied: “Oh definitely. I can show you hundreds of documents proving that. I mean how they supplied, trained, created and … control almost every terrorist organization on earth. I have these documents.”
The former Deputy Director of the Romanian intelligence service, Ion Mihai Pacepa, has written about Russia’s involvement with international terrorism. “Today’s international terrorism,” he wrote in August 2006, “was conceived at the Lubyanka, the headquarters of the KGB…. I witnessed its birth in my other life, as a Communist general.”
In a 1987 book, titled Spetsnaz: The Inside Story of the Soviet Special Forces, a Soviet military intelligence defector writing under the pen name Viktor Suvorov explained the ultimate purpose to which terrorism would be put to use. In Chapter 15 of the book, Suvorov listed various acts of economic sabotage and terrorism to be undertaken in advance of all-out war against the United States. “All these operations,” wrote Suvorov, “are known officially in the GRU as the ‘preparatory period,’ and unofficially as the ‘overture.’ The overture is a series of large and small operations the purpose of which is, before actual military operations begin, to weaken the enemy’s morale, create an atmosphere of general suspicion, fear and uncertainty, and divert the attention of the enemy’s armies and police forces to a huge number of different targets, each which may be the object of the next attack.” According to Suvorov, the overture is carried out by intelligence agents and by “mercenaries recruited by intermediaries.” The strategy they follow is known as “grey terror,” described by Suvorov as “a kind of terror which is not conducted in the name of the Soviet Union.” Instead, the terror is carried out in the name of “already existing extremist groups not connected in any way” with Russia. According to Suvorov, “The terrorist acts carried out in the course of the ‘overture’ require very few people, very few weapons and little equipment.” The example of 19 men with box-cutters comes to mind, though Suvorov lists “a screw driver, a box of matches or a glass ampoule.”
In a July 2005 interview with the Polish Newspaper Rzeczpospolita, FSB/KGB defector Alexander Litvinenko alleged that al Qaeda’s second-in-command, Ayman Al-Zawahri, was “an old agent of the FSB.” Political writer and former KGB officer, Konstantin Preobrazhenskiy, confirmed Litvinenko’s allegation, stating: “[Litvinenko] was responsible for securing the secrecy of Al-Zawahri’s arrival in Russia, who was trained by FSB instructors in Dagestan, Northern Caucasus, in 1996-97.” Preobrazhenskiy further stated: "At that time, Litvinenko was the Head of the Subdivision for Internationally Wanted Terrorists of the First Department of the Operative-Inquiry Directorate of the FSB Anti-Terrorist Department. He was ordered to undertake the delicate mission of securing Al-Zawahri from unintentional disclosure by the Russian police. Though Al-Zawahri had been brought to Russia by the FSB using a false passport, it was still possible for the police to learn about his arrival and report to Moscow for verification. Such a process could disclose Al-Zawahri as an FSB collaborator.”
Litvinenko detailed Russia’s role as the originator of modern terrorism in his July 2005 interview with Rzeczpospolita: “I know only one organization that has made terrorism the main tool of solving political problems. It is the Russian special services. The KGB has been engaged in terrorism for many years, and mass terrorism. At the special department of the KGB they trained terrorists from practically every country in the world. These courses lasted, as a rule, for half a year. Specially trained and prepared agents of the KGB organized murders and explosions, including explosions of tankers, the hijacking of passenger airliners, along with hits on diplomatic, state and commercial organizations worldwide.” Litvinenko added that the agents of the KGB/FSB were “the bloodiest terrorist in the world.” He then listed Carlos Ilyich Ramiros (Carlos the Jackal), Yassir Arafat, Saddam Hussein, and a host of others. According to Litvinenko, “all these figures and movements operated under their own slogans; however, none of them especially hid their ‘intimate’ … relationship with the Kremlin and Lubyanka. There is a simple question: whether the Russian special services would train and finance people and groups which are unsupervised by Lubyanka and did not serve the interests of the Kremlin? You understand perfectly, they would not. Each act of terrorism made by these people was carried out as an assignment and under the rigid control of the KGB of the USSR.”
Asked if this terrorism continues under the post-Soviet leadership, Litvinenko warned that “the center of global terrorism is not in Iraq, Iran, Afghanistan or the Chechen Republic. The terrorist infection is spread worldwide from Lubyanka Square and the Kremlin cabinet. And until the Russian special services are outlawed, dispersed and condemned, the terrorism will never stop.” Roughly 16 months after his public statements about the KGB’s connection to Al Qaeda, Litvinenko was poisoned at the bar of a London hotel by Kremlin agents who put radioactive polonium-210 in his tea. He died in November 2006.
The strategic crisis facing the United States is a life-and-death crisis. If we continue to ignore the growing evidence of danger, the free world may not survive. The Strategic Crisis Center wants to encourage widespread debate, involvement, and concern with these issues. Citizens need to get educated, they need to get involved, and they need to alert their neighbors, their friends, and their families to the danger.
Sunday, December 6, 2009
Sunday, November 22, 2009
The Second Wave of The Financial Tsunami
The Wave Is gathering force & could hit between the first & second quarter of 2010
http://www.globalresearch.ca/index.p...t=va&aid=16218
November 22, 2009
by Matthias Chang
Many of my friends who have been receiving my e-mail alerts over the last two years have lamented that in recent weeks I have not commented on the state of the global economy. I appreciate their anxiety but they forget that I am not a stock market analyst who is paid to write articles to lure investors back into the market. My website is free and I do not sell a financial newsletter so there is no need for me to churn out daily forecasts or analysis.
However, when the data is compelling and supports an inevitable trend, it is time for another review. This Red Alert is to enable visitors to my website to take appropriate actions to safeguard their wealth and welfare of their families in the coming months.
Since the last quarter of 2008, unrelenting currency warfare has been waged by the key global economies and while this competition thus far has been non-antagonistic, it will soon be antagonistic because the inherent differences are irreconcilable. The consequences to the global economy will be devastating and for the ordinary people, massive unemployment and social unrest are assured.
The policy-makers of these countries faced with the total collapse of the international financial architecture have concluded that the solution, the only solution is quantitative easing (i.e. massive injection of liquidity) to salvage the “too big to fail” banks and reflate their depressed economies. This is best reflected in Bernanke’s candid remark that, “the US government has a technology, called the printing press (or today, its electronic equivalent), that allows it to produce as many US dollars as it wishes at essentially no cost”.
This is the crux of the problem!
The Irreconcilable Differences
Some two decades ago, it was decided by the global financial elites that the framework for the global economy shall consist of:
1) A global derivative-based financial system, controlled by the US Federal Reserve Bank and its associate global banks in the developed countries.
2) The re-location from the West to the East in the production of goods, principally to China and India to “feed” the developed economies.
The entire system was built on a simple principle, that of a FED-controlled global reserve currency which will be the engine for growth for the global economy. It is essentially an imperialist economic principle.
Once we grasp this fundamental truth, Bernanke’s boast that the “US can produce as many US dollars as it wishes at no cost” takes on a different dimension.
I have talked to so many economists and when asked what is the crux of the present financial problem, they all respond in unison, “it is the global imbalances… the West consumes too much while the East saves too much and consumes not enough”. This is exemplified by the huge US trade deficits on the one part and China’s massive surpluses on the other.
Incredible wisdom and almost everyone echoes this mantra. The recent concluded APEC Summit was no different. This mantra was repeated as well as the call for freer trade between trading nations.
This is a grand hoax. All the current leaders on the world’s stage are corrupted to the rotten core and as such have no interest to call a spade a spade and expose the inherent contradictions within the existing financial system.
The call for a multi-polar world is meaningless when the entire global financial system is based on the unipolar US dollar reserve currency. This is the inherent contradiction within the present system and the problems associated with it cannot be resolved by another global reserve currency based on the IMF’s Special Drawing Rights as advocated by some countries. It was stillborn, the very moment it was conceived!
The leaders of China, Japan and the oil producing countries of the Middle East are all cursing and pissing about the current situation, but they don’t have the courage of their convictions to spell it out to their countrymen that they have been conned by the financial spin masters from the Fed acting on the instructions from Goldman Sachs.
Tell me which leader would dare admit that they have exchanged the nation’s wealth for toilet papers?
The toilet paper currency pantomime continues.
We have now reached a stalemate in the current currency war, not unlike the situation of the Cold War between the NATO pact countries and the Warsaw pact countries. Both sides were deterred by the MAD (Mutually Assured Destruction) doctrine of nuclear wars. The costs to both sides were horrendous and it was only when the Soviet Union could not continue with the pace and cost of maintaining a nuclear deterrent and was forced into bankruptcy that the balance tilted in favour of the NATO alliance.
But it was a pyrrhic victory for the US and it allies. What kept the ability of the US to maintain its military might and outspend the Soviet Union was the right to print toilet paper currency and the acceptance of the US dollar by her allies as the world’s reserve currency.
But why did the countries allied to the US during the Cold War accepted the status quo?
Simple! They were all conned into believing that without the protection of Big Brother and its military outreach, they would be swallowed up by the communist menace. They agreed to march to the tune of the US Pied-Piper.
The next big question – why did the so-called “liberated” former communist allies of the Soviet bloc jump on the bandwagon?
Simple! They all believed in the illusion that was fostered by the global banks, led by Goldman Sachs that trading and selling their goods and services for the toilet paper US reserve currency would ensure untold wealth and prosperity.
But the biggest game in town was the Asia gambit. Japan, after a decade of recession following the burst of her property bubble did not have the means and the capacity to bring the game to the next level as envisaged by the financial architects in Goldman Sachs.
And China was the biggest beneficiary. The senior management of Goldman Sachs brokered a secret pact with China’s leaders that in exchange for orchestrating the most massive injection of US dollar capital and wholesale re-location of manufacturing capacity in the history of the global economy, China would recycle their hard-earned US toilet paper reserve currency wealth into US treasuries and other US debt instruments.
This was the necessary condition precedent for the global financial casino to rise to the next level of play.
Why?
The New Game
The financial architects at Goldman Sachs had a master plan – to dominate the global financial system. The means to achieve this financial power was the Shadow Banking System, the lynchpin being the derivative market and the securitization of assets, real and synthetic. The stakes would be huge, in the hundreds of US$ trillions and the way to transform the market was through massive leverage at all levels of the financial game.
But there was an inherent weakness in the overall scheme – the threat of inflation, more precisely hyperinflation. Such huge amounts of liquidity in the system would invariably trigger the depreciation of the reserve currency and the confidence in the system.
Hence the need for a system to keep in check price inflation and the illusion that the purchasing power of the toilet paper reserve currency could be maintained.
This is where China came in. Once China became the world’s factory, the problem would be resolved. When a suit which previously cost US$600 could be had for less than US$100, and a pair of shoes for less than US$5, the scam masterminds concluded that there would be no foreseeable threat to the largest casino operation in history.
China agreed to the exchange as it has over a billion mouths to feed and jobs for hundreds of millions needed to be secured, without which the system could not be maintained. But China was pragmatic enough to have two “economic systems” – a Yuan based domestic economy and a US$ based export economy, in the hope that the profits and benefits of the export economy would enable China to transform and establish a viable and dynamic domestic market which in time would replace the export dependent economy. It was a deal made with the devil, but there were no viable alternative options at the material time, more so after the collapse of the Soviet Union.
The Next Level of the Game
The next level of the game was reached when the toilet paper reserve currency literally went virtual – through the simple operation of a click of the mouse in the computers of the global banks.
The big boys at Goldman Sachs and other global banks were more than content to leave Las Vegas for the mafia and their miserable billions in turnover. The profits were considered dimes when compared to the hundreds of trillions generated by the virtual casino. It was a financial conquest beyond their wildest dreams. They even called themselves, “Master of the Universe”. Creating massive debts was the new game, and the big boys could even leverage more than 40 times capital! Asset values soared with so much liquidity chasing so few good assets.
However, the financial wizards failed to appreciate and or underestimate the amount of financial products that were needed to keep the game in play. They resorted to financial engineering – the securitization of assets. And when real assets were insufficient for securitization, synthetic assets were created. Soon enough, toxic waste was even considered as legitimate instruments for the game so long as it could be unloaded to greedy suckers with no recourse to the originators of these so-called investments.
For a time, it looked as if the financial wizards have solved the problem of how to feed the global casino monster.
Unfortunately, the music stopped and the bubble burst! And as they say the rest is history.
The Goldman Sachs Remedy
When losses are in the US$ trillions and whatever assets / capital remaining are in the US$ billions, we have a huge problem – a financial black-hole.
The preferred remedy by the financial masterminds at Goldman Sachs was to create another hoax – that if the big global banks were to fail triggering a systemic collapse, there would be Armageddon. These “too big to fail” banks must be injected with massive amount of virtual monies to recapitalize and get rid of the toxic assets on their balance sheet. The major central banks in the developed countries in cahoots with Goldman Sachs sang the same tune. All sorts of schemes were conjured to legitimize this bailout.
In essence, what transpired was the mere transfer of monies from the left pocket to the right pocket, with the twist that the banks were in fact helping the Government to overcome the financial crisis.
The Fed and key central banks agreed to lend “virtual monies” to the “too big to fail” global banks at zero or near zero interest rate and these banks in turn would “deposit” these monies with the Fed and other central banks at agreed interest rates. These transactions are all mere book entries. Other “loans” from the Fed and central banks (again at zero or near zero interest rates) are used to purchase government debts, these debts being the stimulus monies needed to revive the real economy and create jobs for the growing unemployed. So in essence, these banks are given “free money” to lend to the government at prior agreed interest rates with no risks at all. It is a hoax!
These “monies” are not even the dollar bills, but mere book entries created out of thin air.
So when the Fed injects US$ trillions into the banking system, it merely credits the amount in the accounts of the “too big to fail” banks at the Fed.
When the system is applied to international trade, the same modus operandi is used to pay for the goods imported from China, Japan etc.
For the rest of world, when buying goods denominated in US$, these countries must produce goods and services, sell them for dollars in order to purchase goods needed in their country. Simply put, they have to earn an income to purchase whatever goods and services needed. In contrast, all that the US needs to do is to create monies out of thin air and use them to pay for their imports!
The US can get away with this scam because it has the military muscle to compel and enforce this hoax. As stated earlier, this status quo was accepted especially during the Cold War and with some reluctance post the collapse of the Soviet Union, but with a proviso – that the US agrees to be the consumer of last resort. This arrangement provided some comfort because countries which have sold their goods to the US, can now use the dollars to buy goods from other countries as more than 80 per cent of world trade is denominated in dollars especially crude oil, the lifeline of the global economy.
But with the US in full bankruptcy and its citizens (the largest consumers in the world) being unable to borrow further monies to buy fancy goods from China, Japan and the rest of the world, the demand for dollar has evaporated. The dollar status as a reserve currency and its usefulness is being questioned more vocally.
The End Game
The present fallout can be summarized in simple terms:
Should a bankrupt country (the US) be allowed to use money created out of thin air to pay for goods produced with the sweat and tears of hardworking citizens of exporting countries? Adding insult to injury, the same dollars are now purchasing a lot less than before. So what is the use of being paid in a currency that is losing rapidly its value?
On the other hand, the US is telling the whole world, especially the Chinese that if they are not happy with the status quo, there is nothing to stop them from selling to the other countries and accepting their currencies. But if they want to sell to the mighty USA, they must accept US toilet paper reserve currency and its right to create monies out of thin air!
This is the ultimate poker game and whosoever blinks first loses and will suffer irreparable financial consequences. But who has the winning hand?
The US does not have the winning hand. Neither has China the winning hand.
This state of affairs cannot continue for long, for whatever cards the US or China may be contemplating to throw at the table to gain strategic advantage, any short term gains will be pyrrhic, for it will not be able to address the underlying antagonistic contradictions.
When the survival of the system is dependent on the availability of credit (i.e. accumulating more debts) it is only a matter of time before both the debtor and creditor come to the inevitable conclusion that the debt will never be paid. And unless the creditor is willing to write off the debt, resorting to drastic means to collect the outstanding debt is inevitable.
It would be naïve to think that the US would quietly allow itself to be foreclosed! When we reach that stage, war will be inevitable. It will be the US-UK-Israel Axis against the rest of the world.
The Prelude to the End Game
The US economy will be spiraling out of control in the coming months and will reach critical point by the end of the 1st quarter 2010 and implode by the 2nd quarter.
The massive US$ trillions of dollars stimulus has failed to turn the economy around. The massive blood transfusion may have kept the patient alive, but there are numerous signs of multi-organ failure.
There will be another wave of foreclosures of residential and more importantly commercial properties by end December and early 2010. And the foreclosed properties in 2009 will lead to depressed prices once they come through the pipeline. Home and commercial property values will plunge. Banks’ balance sheets will turn ugly and whatever “record profits” in the last two quarters of 2009 will not cover the additional red ink.
Given the above situation, will the Fed continue to buy mortgage-backed securities to prop up the markets? The Fed has already spent trillions buying Fannie Mae and Freddie Mac mortgages with no potential substitute buyer in sight. Therefore, the Fed’s balance sheet is as toxic as the “too big to fail” banks that it rescued.
In the circumstances, it makes no sense for anyone to assert that the worst is over and that the global economy is on the road to recovery.
And the surest sign that all is not well with the big banks is the recent speech by the President of the Federal Reserve Bank of New York, William Dudley at Princeton, New Jersey when he said that the Fed would curtail the risk of future liquidity crisis by providing a “backstop” to solvent firms with sufficient collateral.
This warning and assurance deserves further consideration. Firstly, it is a contradiction to state that a solvent firm with sufficient collateral would in fact encounter a liquidity crisis to warrant the need for a fall back on the Fed. It is in fact an admission that banks are not sufficiently capitalized and when the second wave of the tsunami hits them again, confidence will be sorely lacking.
Dudley actually said that, “the central bank could commit to being the lender of last resort… [and this would reduce] the risk of panics sparked by uncertainty among lenders about what other creditors think”.
To put it bluntly what he is saying is that the Fed will endeavour to avoid the repeat of the collapse of Bear Stearns, Lehman Bros and AIG. It is also an indication that the remaining big banks are in trouble.
It is interesting to note that a Bloomberg report in early November revealed that Citigroup Inc and JP Morgan Chase have been hoarding cash. The former has almost doubled its cash holdings to US$244.2 billion. In the case of the latter, the cash hoard amounted to US$453.6 billion. Yet, given this hoarding by the leading banks, the New York Federal Reserve Bank had to reassure the financial community that it is ready to inject massive liquidity to prop up the system.
It should come as no surprise that the value of the dollar is heading south.
When currencies are being debased, volatility in the stock market increases. But the gains are not worth the risks and if anyone is still in the market, they will be wiped out by the 1st quarter of 2010. The S&P may have shot up since the beginning of the year by over 25 per cent but it has been out-performed by gold. The gains have also lagged behind the official US inflation rate. It has in fact delivered a total return after inflation of approximately minus 25 per cent. When Meredith Whitney remarked that, “I don’t know what’s going on in the market right now, because it makes no sense to me”, it is time to get out of the market fast.
In a report to its clients, Société Générale warned that public debt would be massive in the next two years – 105 per cent of GDP in the UK, 125 per cent in the US and in Europe and 270 per cent in Japan. Global debt would reach US$45 trillion.
At some point in time, all these debts must be repaid. How will these debts be repaid?
If we go by what Bernanke has been preaching and practising, it means more toilet paper currency will be created to repay the debts.
As a result, debasement of currencies will continue and this will further aggravate existing tensions between the competing economies. And when creditors have enough of this toilet paper scam, expect violent reactions!
__________________
http://www.globalresearch.ca/index.p...t=va&aid=16218
November 22, 2009
by Matthias Chang
Many of my friends who have been receiving my e-mail alerts over the last two years have lamented that in recent weeks I have not commented on the state of the global economy. I appreciate their anxiety but they forget that I am not a stock market analyst who is paid to write articles to lure investors back into the market. My website is free and I do not sell a financial newsletter so there is no need for me to churn out daily forecasts or analysis.
However, when the data is compelling and supports an inevitable trend, it is time for another review. This Red Alert is to enable visitors to my website to take appropriate actions to safeguard their wealth and welfare of their families in the coming months.
Since the last quarter of 2008, unrelenting currency warfare has been waged by the key global economies and while this competition thus far has been non-antagonistic, it will soon be antagonistic because the inherent differences are irreconcilable. The consequences to the global economy will be devastating and for the ordinary people, massive unemployment and social unrest are assured.
The policy-makers of these countries faced with the total collapse of the international financial architecture have concluded that the solution, the only solution is quantitative easing (i.e. massive injection of liquidity) to salvage the “too big to fail” banks and reflate their depressed economies. This is best reflected in Bernanke’s candid remark that, “the US government has a technology, called the printing press (or today, its electronic equivalent), that allows it to produce as many US dollars as it wishes at essentially no cost”.
This is the crux of the problem!
The Irreconcilable Differences
Some two decades ago, it was decided by the global financial elites that the framework for the global economy shall consist of:
1) A global derivative-based financial system, controlled by the US Federal Reserve Bank and its associate global banks in the developed countries.
2) The re-location from the West to the East in the production of goods, principally to China and India to “feed” the developed economies.
The entire system was built on a simple principle, that of a FED-controlled global reserve currency which will be the engine for growth for the global economy. It is essentially an imperialist economic principle.
Once we grasp this fundamental truth, Bernanke’s boast that the “US can produce as many US dollars as it wishes at no cost” takes on a different dimension.
I have talked to so many economists and when asked what is the crux of the present financial problem, they all respond in unison, “it is the global imbalances… the West consumes too much while the East saves too much and consumes not enough”. This is exemplified by the huge US trade deficits on the one part and China’s massive surpluses on the other.
Incredible wisdom and almost everyone echoes this mantra. The recent concluded APEC Summit was no different. This mantra was repeated as well as the call for freer trade between trading nations.
This is a grand hoax. All the current leaders on the world’s stage are corrupted to the rotten core and as such have no interest to call a spade a spade and expose the inherent contradictions within the existing financial system.
The call for a multi-polar world is meaningless when the entire global financial system is based on the unipolar US dollar reserve currency. This is the inherent contradiction within the present system and the problems associated with it cannot be resolved by another global reserve currency based on the IMF’s Special Drawing Rights as advocated by some countries. It was stillborn, the very moment it was conceived!
The leaders of China, Japan and the oil producing countries of the Middle East are all cursing and pissing about the current situation, but they don’t have the courage of their convictions to spell it out to their countrymen that they have been conned by the financial spin masters from the Fed acting on the instructions from Goldman Sachs.
Tell me which leader would dare admit that they have exchanged the nation’s wealth for toilet papers?
The toilet paper currency pantomime continues.
We have now reached a stalemate in the current currency war, not unlike the situation of the Cold War between the NATO pact countries and the Warsaw pact countries. Both sides were deterred by the MAD (Mutually Assured Destruction) doctrine of nuclear wars. The costs to both sides were horrendous and it was only when the Soviet Union could not continue with the pace and cost of maintaining a nuclear deterrent and was forced into bankruptcy that the balance tilted in favour of the NATO alliance.
But it was a pyrrhic victory for the US and it allies. What kept the ability of the US to maintain its military might and outspend the Soviet Union was the right to print toilet paper currency and the acceptance of the US dollar by her allies as the world’s reserve currency.
But why did the countries allied to the US during the Cold War accepted the status quo?
Simple! They were all conned into believing that without the protection of Big Brother and its military outreach, they would be swallowed up by the communist menace. They agreed to march to the tune of the US Pied-Piper.
The next big question – why did the so-called “liberated” former communist allies of the Soviet bloc jump on the bandwagon?
Simple! They all believed in the illusion that was fostered by the global banks, led by Goldman Sachs that trading and selling their goods and services for the toilet paper US reserve currency would ensure untold wealth and prosperity.
But the biggest game in town was the Asia gambit. Japan, after a decade of recession following the burst of her property bubble did not have the means and the capacity to bring the game to the next level as envisaged by the financial architects in Goldman Sachs.
And China was the biggest beneficiary. The senior management of Goldman Sachs brokered a secret pact with China’s leaders that in exchange for orchestrating the most massive injection of US dollar capital and wholesale re-location of manufacturing capacity in the history of the global economy, China would recycle their hard-earned US toilet paper reserve currency wealth into US treasuries and other US debt instruments.
This was the necessary condition precedent for the global financial casino to rise to the next level of play.
Why?
The New Game
The financial architects at Goldman Sachs had a master plan – to dominate the global financial system. The means to achieve this financial power was the Shadow Banking System, the lynchpin being the derivative market and the securitization of assets, real and synthetic. The stakes would be huge, in the hundreds of US$ trillions and the way to transform the market was through massive leverage at all levels of the financial game.
But there was an inherent weakness in the overall scheme – the threat of inflation, more precisely hyperinflation. Such huge amounts of liquidity in the system would invariably trigger the depreciation of the reserve currency and the confidence in the system.
Hence the need for a system to keep in check price inflation and the illusion that the purchasing power of the toilet paper reserve currency could be maintained.
This is where China came in. Once China became the world’s factory, the problem would be resolved. When a suit which previously cost US$600 could be had for less than US$100, and a pair of shoes for less than US$5, the scam masterminds concluded that there would be no foreseeable threat to the largest casino operation in history.
China agreed to the exchange as it has over a billion mouths to feed and jobs for hundreds of millions needed to be secured, without which the system could not be maintained. But China was pragmatic enough to have two “economic systems” – a Yuan based domestic economy and a US$ based export economy, in the hope that the profits and benefits of the export economy would enable China to transform and establish a viable and dynamic domestic market which in time would replace the export dependent economy. It was a deal made with the devil, but there were no viable alternative options at the material time, more so after the collapse of the Soviet Union.
The Next Level of the Game
The next level of the game was reached when the toilet paper reserve currency literally went virtual – through the simple operation of a click of the mouse in the computers of the global banks.
The big boys at Goldman Sachs and other global banks were more than content to leave Las Vegas for the mafia and their miserable billions in turnover. The profits were considered dimes when compared to the hundreds of trillions generated by the virtual casino. It was a financial conquest beyond their wildest dreams. They even called themselves, “Master of the Universe”. Creating massive debts was the new game, and the big boys could even leverage more than 40 times capital! Asset values soared with so much liquidity chasing so few good assets.
However, the financial wizards failed to appreciate and or underestimate the amount of financial products that were needed to keep the game in play. They resorted to financial engineering – the securitization of assets. And when real assets were insufficient for securitization, synthetic assets were created. Soon enough, toxic waste was even considered as legitimate instruments for the game so long as it could be unloaded to greedy suckers with no recourse to the originators of these so-called investments.
For a time, it looked as if the financial wizards have solved the problem of how to feed the global casino monster.
Unfortunately, the music stopped and the bubble burst! And as they say the rest is history.
The Goldman Sachs Remedy
When losses are in the US$ trillions and whatever assets / capital remaining are in the US$ billions, we have a huge problem – a financial black-hole.
The preferred remedy by the financial masterminds at Goldman Sachs was to create another hoax – that if the big global banks were to fail triggering a systemic collapse, there would be Armageddon. These “too big to fail” banks must be injected with massive amount of virtual monies to recapitalize and get rid of the toxic assets on their balance sheet. The major central banks in the developed countries in cahoots with Goldman Sachs sang the same tune. All sorts of schemes were conjured to legitimize this bailout.
In essence, what transpired was the mere transfer of monies from the left pocket to the right pocket, with the twist that the banks were in fact helping the Government to overcome the financial crisis.
The Fed and key central banks agreed to lend “virtual monies” to the “too big to fail” global banks at zero or near zero interest rate and these banks in turn would “deposit” these monies with the Fed and other central banks at agreed interest rates. These transactions are all mere book entries. Other “loans” from the Fed and central banks (again at zero or near zero interest rates) are used to purchase government debts, these debts being the stimulus monies needed to revive the real economy and create jobs for the growing unemployed. So in essence, these banks are given “free money” to lend to the government at prior agreed interest rates with no risks at all. It is a hoax!
These “monies” are not even the dollar bills, but mere book entries created out of thin air.
So when the Fed injects US$ trillions into the banking system, it merely credits the amount in the accounts of the “too big to fail” banks at the Fed.
When the system is applied to international trade, the same modus operandi is used to pay for the goods imported from China, Japan etc.
For the rest of world, when buying goods denominated in US$, these countries must produce goods and services, sell them for dollars in order to purchase goods needed in their country. Simply put, they have to earn an income to purchase whatever goods and services needed. In contrast, all that the US needs to do is to create monies out of thin air and use them to pay for their imports!
The US can get away with this scam because it has the military muscle to compel and enforce this hoax. As stated earlier, this status quo was accepted especially during the Cold War and with some reluctance post the collapse of the Soviet Union, but with a proviso – that the US agrees to be the consumer of last resort. This arrangement provided some comfort because countries which have sold their goods to the US, can now use the dollars to buy goods from other countries as more than 80 per cent of world trade is denominated in dollars especially crude oil, the lifeline of the global economy.
But with the US in full bankruptcy and its citizens (the largest consumers in the world) being unable to borrow further monies to buy fancy goods from China, Japan and the rest of the world, the demand for dollar has evaporated. The dollar status as a reserve currency and its usefulness is being questioned more vocally.
The End Game
The present fallout can be summarized in simple terms:
Should a bankrupt country (the US) be allowed to use money created out of thin air to pay for goods produced with the sweat and tears of hardworking citizens of exporting countries? Adding insult to injury, the same dollars are now purchasing a lot less than before. So what is the use of being paid in a currency that is losing rapidly its value?
On the other hand, the US is telling the whole world, especially the Chinese that if they are not happy with the status quo, there is nothing to stop them from selling to the other countries and accepting their currencies. But if they want to sell to the mighty USA, they must accept US toilet paper reserve currency and its right to create monies out of thin air!
This is the ultimate poker game and whosoever blinks first loses and will suffer irreparable financial consequences. But who has the winning hand?
The US does not have the winning hand. Neither has China the winning hand.
This state of affairs cannot continue for long, for whatever cards the US or China may be contemplating to throw at the table to gain strategic advantage, any short term gains will be pyrrhic, for it will not be able to address the underlying antagonistic contradictions.
When the survival of the system is dependent on the availability of credit (i.e. accumulating more debts) it is only a matter of time before both the debtor and creditor come to the inevitable conclusion that the debt will never be paid. And unless the creditor is willing to write off the debt, resorting to drastic means to collect the outstanding debt is inevitable.
It would be naïve to think that the US would quietly allow itself to be foreclosed! When we reach that stage, war will be inevitable. It will be the US-UK-Israel Axis against the rest of the world.
The Prelude to the End Game
The US economy will be spiraling out of control in the coming months and will reach critical point by the end of the 1st quarter 2010 and implode by the 2nd quarter.
The massive US$ trillions of dollars stimulus has failed to turn the economy around. The massive blood transfusion may have kept the patient alive, but there are numerous signs of multi-organ failure.
There will be another wave of foreclosures of residential and more importantly commercial properties by end December and early 2010. And the foreclosed properties in 2009 will lead to depressed prices once they come through the pipeline. Home and commercial property values will plunge. Banks’ balance sheets will turn ugly and whatever “record profits” in the last two quarters of 2009 will not cover the additional red ink.
Given the above situation, will the Fed continue to buy mortgage-backed securities to prop up the markets? The Fed has already spent trillions buying Fannie Mae and Freddie Mac mortgages with no potential substitute buyer in sight. Therefore, the Fed’s balance sheet is as toxic as the “too big to fail” banks that it rescued.
In the circumstances, it makes no sense for anyone to assert that the worst is over and that the global economy is on the road to recovery.
And the surest sign that all is not well with the big banks is the recent speech by the President of the Federal Reserve Bank of New York, William Dudley at Princeton, New Jersey when he said that the Fed would curtail the risk of future liquidity crisis by providing a “backstop” to solvent firms with sufficient collateral.
This warning and assurance deserves further consideration. Firstly, it is a contradiction to state that a solvent firm with sufficient collateral would in fact encounter a liquidity crisis to warrant the need for a fall back on the Fed. It is in fact an admission that banks are not sufficiently capitalized and when the second wave of the tsunami hits them again, confidence will be sorely lacking.
Dudley actually said that, “the central bank could commit to being the lender of last resort… [and this would reduce] the risk of panics sparked by uncertainty among lenders about what other creditors think”.
To put it bluntly what he is saying is that the Fed will endeavour to avoid the repeat of the collapse of Bear Stearns, Lehman Bros and AIG. It is also an indication that the remaining big banks are in trouble.
It is interesting to note that a Bloomberg report in early November revealed that Citigroup Inc and JP Morgan Chase have been hoarding cash. The former has almost doubled its cash holdings to US$244.2 billion. In the case of the latter, the cash hoard amounted to US$453.6 billion. Yet, given this hoarding by the leading banks, the New York Federal Reserve Bank had to reassure the financial community that it is ready to inject massive liquidity to prop up the system.
It should come as no surprise that the value of the dollar is heading south.
When currencies are being debased, volatility in the stock market increases. But the gains are not worth the risks and if anyone is still in the market, they will be wiped out by the 1st quarter of 2010. The S&P may have shot up since the beginning of the year by over 25 per cent but it has been out-performed by gold. The gains have also lagged behind the official US inflation rate. It has in fact delivered a total return after inflation of approximately minus 25 per cent. When Meredith Whitney remarked that, “I don’t know what’s going on in the market right now, because it makes no sense to me”, it is time to get out of the market fast.
In a report to its clients, Société Générale warned that public debt would be massive in the next two years – 105 per cent of GDP in the UK, 125 per cent in the US and in Europe and 270 per cent in Japan. Global debt would reach US$45 trillion.
At some point in time, all these debts must be repaid. How will these debts be repaid?
If we go by what Bernanke has been preaching and practising, it means more toilet paper currency will be created to repay the debts.
As a result, debasement of currencies will continue and this will further aggravate existing tensions between the competing economies. And when creditors have enough of this toilet paper scam, expect violent reactions!
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