Against the backdrop of Grecian history including the indomitable Spartans, Paul Craig Roberts explains the uphill contest between the new Greek government and the EU and its kleptocrat banksters.

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Paul Craig Roberts – EU And Banksters Threaten: “Defy Us And We Will Destroy You”

January 29, 2015                                                                                                Original Here

As the West stares into the great abyss and the world prepares for even greater economic turmoil, today Dr. Paul Craig Roberts warned King World News that the EU and banksters are now threatening: "Defy us and we will destroy you."  This is an ominous warning from the former U.S. Treasury official as the world prepares to descend into total chaos.

By Dr. Paul Craig Roberts Former U.S. Treasury Official

January 29 (King World News) – We will find out the answer to the question posed in the title in the outcome of the contest between the new Greek government, formed by the political party Syriza, and the ECB and the private banks, with whose interests the EU and Washington align against Greece.

The Spartans, whose red cloaks and military prowess struck fear into the hearts of both foreign invaders and Greek opponents in the city-states, are no more. Athens itself is a ruin of its historical self. The Greeks, who were once to be contended with, who were able with 300 Spartans, supplemented with a few thousand Corinthians, Thebans, and other warriors, to stop a one hundred thousand man Persian army at Thermopylae, with the final outcome being the defeat of the Persian fleet in the Battle of Salamis and the defeat of the Persian army in the Battle of Plataea, are no more.

The Greeks of history have become a people of legend. Not even the Romans were able to conquer Persia, but little more than a handful of Greeks stopped the attempted Persian conquest of Greece.

But the Greeks, despite their glorious history, could not stop their conquest by the EU and a handful of German and Dutch banks. If the Greece of history still existed, the EU and the private banks would be cowering in fear, because the EU and the private banks have ruthlessly exploited the Greek people and represent the same threat to Greek sovereignty as Persia did.

Greece, stripped of its independence by its EU membership and acceptance of the euro as its currency, has lost is sovereignty. Without control over its own money, Greece cannot finance itself. Greece must rely on private banks from other countries. In the 21st century European private banks are not allowed to lose money simply because they are incompetent and over-lent to EU member countries. This is not considered to be the fault of the banks, but of the borrower governments and populations.

Goldman Sachs Strikes Again

According to reports, the American bankster firm, Goldman Sachs, sometimes known as Gold Sacks, hid Greek debt from view in order that banks would extent more credit to Greece, thus setting the Greek people up for looting.

The EU’s disingenuous argument is that this bankster trickery benefitted the Greek people. The people enjoyed the resources from these loans. Therefore, the Greek people must pay back the loans through reductions in old age pensions, through unemployment, through lower wages, and through the sale of Greek national assets.

This is the austerity that has been imposed on ordinary Greek people by the EU and Greece’s creditors.

Greece is prostrate. Greeks are actually committing suicide, because Greeks cannot provide for themselves in the depressed conditions that the EU and the private banks have created for them for no other reason than that the private banks must not have to write down the loans.

Greek Suicide As Banksters Loot The World

So, one result from “democracy” in Greece is suicide. With enough democracy, we can control world population and halt the destruction of nature’s capital. All we have to do is to enable the banksters to loot the entire world.

What can Syriza do?

Without Spartans, very little.

The party’s intentions and that of its leaders are honest and deserve our respect. Syriza is a people’s party, and that is what marks it for doom. The voice of the people is no longer permitted to affect politics in the Western world. The powerful rich interest groups that rule the West could not care less about the people over whom they rule.

No sooner was Syriza in office than Bloomberg, a business news service, conveyed to the new Greek Prime Minister, Alexis Tsipras, that Syriza needs to play by the creditors’ rules. http://www.bloomberg.com/news/articles/2015-01-28/tsipras-plans-to-avert-catastrophe-as-greek-markets-sink-further

Catastrophic Clash

Tsipras stated that the new Greek government does not intend a “catastrophic clash” with its creditors, only an acceptable amelioration of the unreasonable conditions imposed on Greece, in order that Greece can give some satisfaction to its private bank creditors and also avoid social, political and economic instability in Greece.

Against this reasonable statement, Bloomberg reports that the new Greek cabinet contains communists who favor closer ties with Russia. To remind the newly elected Greek government of the whip that is held over Greek financial markets, Greek bond and stock prices were assaulted and driven down.

"Defy Us And We Will Destroy You"

The warning from the EU and Wall Street is clear: Defy us and we will destroy you.

The punishment of the new Greek government was instant. This from Bloomberg:

“Greek stocks and bonds slumped for a third day, after new ministers said they will cease the sale of some state assets and increase the minimum wage. Yields on three-year bonds rose 2.66 percentage points to 16.69 percent. The benchmark Athens General Index decreased 9.2 percent to its lowest level since 2012, led by a collapse in the value of banks.”

Does Tsipras understand that Greek financial institutions will continue to be punished if they stand behind his government? Bloomberg makes it clear: “Germany warned the Mediterranean nation against abandoning prior agreements on aid, after analysts said that setting Greece on a collision course with its European peers might lead to its exit from the euro region.”

Statements of newly appointed ministers “imply confrontation and tense negotiations in the near future,” Vangelis Karanikas, head of research at Athens-based Euroxx Securities, wrote in a note to clients.”

Collision Course

What is Syriza’s “collusion course”? The new government wants to moderate the agreements made by previous Greek governments that sold out the Greek people. The new government wants to stop giving away at bargain prices Greek public assets to clients of its creditors, and the new Greek government wants to raise the Greek minimum wage so that the Greek people have enough bread and water on which to live.

However, for the private bank creditors, for Merkel’s Germany that stands behind the banks, for Washington which could care less about the Greeks, for the Greek elites who see themselves as “part of Europe,” Syriza is something to be rid of.

Greece Attacked

And so the Greek bonds are attacked, the Greek stocks are attacked, threats are issued that arouse fear in that part of the Greek population that is propagandized into the belief that Greece must be part of the euro and the EU or be bypassed by history.

What it boils down to is that the Greek people, like the Americans, are insouciant. Only about 37% of the voters voted for Syriza. That is far more votes than any rival party received, but it is not enough to show Washington, the EU and creditors that Greeks stand behind their government.

Instead it shows that the new party had to form a government with another party that money, perhaps, can buy off. It shows that Syriza can be demonized in the Western media and presented to the Greek public as a threat to Greece.

The new government is aware of its weakness. The new prime minister says that he does not want confrontation, but that the new government cannot continue the kowtowing of previous Greek governments. A reasonable accommodation must be reached.

Accommodation is unlikely to occur, because a reasonable accommodation is not the desire of Washington, the EU, or of Greece’s creditors.

A purpose of the “Greek financial crisis” is to establish that EU members are not sovereign countries and that banks that lend to these non-sovereign entities are not responsible for any losses with regard to the loans. The population of the indebted countries are the responsible parties. And these populations must accept the reduction of their living standards in order to ensure that the banks do not lose any money.

Super-Rich And Serfs

This is the “New Democracy.” It is a resurrection of the old feudal order. A few super-rich aristocrats and everyone else serfs obliged to support the ruling order. The looting that began in Greece has spread into Ukraine, and who knows who is next?

With only 37% of the vote, does Syriza have the clout to stand up for Greece against the looters?
 
Can Greece escape from a situation comparable to the European Dark Ages when populations were ravaged by marauding raiders? Perhaps if Greece realigns with Russia and gains financing from BRICS. ***ALSO JUST RELEASED: As Europe Disintegrates, Is Full-Scale War Now On The Horizon CLICK HERE.

© 2015 by King World News®. All Rights Reserved.

Paul Craig Roberts (slightly edited for this over view): “The new principle in Europe that the IMF has relentlessly applied to Latin American and Third World debtors, is that when foreign lenders make mistakes and over-lend to foreign governments, loading them up with debt, the bankers’ mistakes are rectified by robbing the poor populations. Pensions, social services, and public employment are cut, valuable resources are sold off to foreigners for pennies on the dollar, and the government is forced to support US foreign policy. The EU and the euro were deception and trickery. Countries lost their sovereignty. So much for Western 'self-rule,' 'freedom,' and 'democracy.' In the entire West there is nothing but the looting of people by the One Percent who control the governments. In America, the looting does not rely on indebtedness because the US dollar is the reserve currency and the US can print all the money needed in order to pay its bills and redeem its debt. In America the looting of labor has been through jobs offshoring.”

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Freedom, Where Are You? Not in America or Europe — PCR

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January 25, 2015 | Original Here                                            Go here to sign up to receive email notice of this news letter

Freedom, Where Are You?
Not in America or Europe

Paul Craig Roberts

When the former Goldman Sachs executive who runs the European Central Bank (ECB) announced that he was going to print 720 billion euros annually with which to purchase bad debts from the politically connected big banks, the euro sank and the stock market and Swiss franc shot up. As in the US, quantitative easing (QE) serves to enrich the already rich. It has no other purpose.

The well-heeled financial institutions that bought up the troubled sovereign debt of Greece, Italy, Portugal, and Spain at low prices will now sell the bonds to the ECB for high prices. And despite depression level unemployment in most of Europe and austerity imposed on citizens, the stock market rose in anticipation that much of the 60 billion new euros that will be created each month will find its way into equity prices. Liquidity fuels the stock market.

Where else can the money to go? Some will go into Swiss francs and some into gold while gold is still available, but for the most part the ECB is running the printing press in order to boost the wealth of the stock-owning One Percent. The Federal Reserve and the ECB have taken the West back to the days when a handful of aristocrats owned everything.

The stock markets are bubbles blown by central bank money creation. On the basis of traditional reasoning there is no sound reason to be in equities, and sound investors have avoided them.

But there is no return anywhere else, and as the central banks are run by the rich for the rich, sound reasoning has proved to be a mistake for the past six years. This shows that corruption can prevail for an indeterminable period over fundamentals.

As I demonstrated in my book, The Failure of Laissez Faire Capitalism, first Goldman Sachs deceived lenders into over-lending to the Greek government. Then Goldman Sachs former executives took over Greece’s financial affairs and forced austerity upon the population in order to prevent losses to the foreign lenders.

This established a new principle in Europe, one that the IMF has relentlessly applied to Latin American and Third World debtors. The principle is that when foreign lenders make mistakes and over-lend to foreign governments, loading them up with debt, the bankers’ mistakes are rectified by robbing the poor populations. Pensions, social services, and public employment are cut, valuable resources are sold off to foreigners for pennies on the dollar, and the government is forced to support US foreign policy. John Perkins’ Confessions of an Economic Hit Man describes the process perfectly. If you haven’t read Perkins book, you have little idea how corrupt and vicious the United States is. Indeed, Perkins shows that over-lending is intentional in order to set up the country for looting.

This is what Goldman Sachs did to Greece, intentionally or unintentionally.

It took the Greeks a long time to realize it. Apparently, 36.5 percent of the population was awoken by rising poverty, unemployment, and suicide rates. That figure, a little over one-third of the vote, was enough to put Syriza in power in the just concluded Greek election, throwing out the corrupt New Democracy party that has consistently sold out the Greek people to the foreign banks. Nevertheless, 27.7 percent of the Greeks, if the vote reporting is correct, voted for the party that has sacrificed the Greek people to the banksters. Even in Greece, a country accustomed to outpourings of people into the streets, a significant percentage of the population is sufficiently brainwashed to vote against their own interests.

Can Syriza do anything? It remains to be seen, but probably not. If the political party had received 55% or 65% or 75% of the vote, yes. But the largest vote at 36.5% does not show a unified country aware of its plight and its looting at the hands of rich banksters. The vote shows that a significant percentage of the Greek population supports foreign looting of Greece.

Moreover, Syriza is up against the heavies: the German and Netherlands banks who hold Greece’s loans and the governments that back the banks, the European Union which is using the sovereign debt crisis to destroy the sovereignty of the individual countries that comprise the European Union, Washington which backs EU sovereign power over the individual countries as it is easier to control one government than a couple of dozen.

Already the Western financial presstitutes are warning Syriza not to endanger its membership in the common currency by diverting from the austerity model imposed from abroad on Greek citizens with the complicity of New Democracy.

Apparently, there is a lack of formal means of exiting the EU and the euro, but nevertheless Greece can be threatened with being thrown out. Greece should welcome being thrown out.

Exiting the EU and the euro is the best thing that can happen to Greece. A country without its own currency is not a sovereign country. It is a vassal state of another power. A country without its own currency cannot finance its own needs. Although the UK is a member of the EU, the UK kept its own currency and is not subject to control by the ECB. A country without its own money is powerless. It is a non-entity.

If the US did not have its own dollar, the US would be of no consequence whatsoever on the world scene.

The EU and the euro were deception and trickery. Countries lost their sovereignty. So much for Western “self-rule,” “freedom,” “democracy,” all slogans without content. In the entire West there is nothing but the looting of people by the One Percent who control the governments.

In America, the looting does not rely on indebtedness, because the US dollar is the reserve currency and the US can print all the money needed in order to pay its bills and redeem its debt. In America the looting of labor has been through jobs offshoring.

American corporations discovered, and if they did not they were informed by Wall Street to move offshore or be taken over, that they could raise profits by moving their manufacturing operations abroad. The lower labor cost resulted in higher profits, higher share prices, huge managerial bonuses based on “performance,” and shareholder capital gains. Offshoring greatly increased the inequality in income and wealth in the US. Capital succeeded in looting labor.

The displaced well-paid manufacturing workers, if they were able to find replacement jobs, worked part-time minimum wage jobs at Walmart and Home Depot.

Economists, if they are entitled to the designation, such as Michael Porter and Matthew Slaughter, promised Americans that the fictional “New Economy” would produce better, higher-paying, and cleaner jobs for Americans than the “dirty fingernail” jobs that we were fortunate our corporations were moving offshore.

Years later, as I have proven conclusively, there is no sign of these “New Economy” jobs. What we have instead is a sharp decline in the labor force participation rate as the unemployed cannot find jobs. The replacement jobs for the manufacturing jobs are mainly part-time domestic service jobs.

People have to hold 2 or 3 of these jobs to make ends meet. These part time jobs offer no medical or pension benefits.

Now that this fact, once controversial believe it or not, has proven completely true, the same bought-and-paid-for spokespersons for robbing labor and destroying unions claim, without a shred of evidence, that the offshored jobs are coming home.

According to these propagandists, we now have what is called “reshoring.” A “reshoring” propagandist claims that the growth of “reshoring” over the past four years is 1,775 percent, an 18 times increase. http://www.manufacturingnews.com/news/2015/A.T.Kearny-No-Data-Supporting-Reshoring-0112151.html

There is no sign whatsoever of these alleged “reshoring” jobs in the monthly BLS payroll jobs statistics.

What reshoring is all about is propaganda to counteract the belated realization that “free trade” agreements and job offshoring were not beneficial to the American economy or its work force, but were beneficial only to the super-rich.

Like people throughout history, the American people are being turned into serfs and slaves because the fools believe the lies that are fed to them. They sit in front of Fox News, CNN, and whatever. They read the New York Times. If you want to learn how badly Americans have been served by the so-called media, read Howard Zinn’s A People’s History of the United States and Oliver Stone and Peter Kuznick’s The Untold History of the United States.

The media helps the government, and the private interests that profit from their control of government, control the brainwashed public. We have to invade Afghanistan because a faction there fighting for political control of the country is protecting Osama bin Laden, whom the US accuses without any proof of embarrassing the mighty US with the 9/11 attack. We have to invade Iraq because Saddam has “weapons of mass destruction” that he surely has despite the reports to the contrary by the weapons inspectors. We have to overthrow Gaddafi because of a slate of lies that have best been forgotten. We have to overthrow Assad because he used chemical weapons even though all evidence is to the contrary. Russia is responsible for Ukraine problems, not because the US overthrew the elected democratic government but because Russia accepted a 97.6% vote of Crimeans to rejoin Russia where the province had resided for hundreds of years before a Ukrainian Soviet leader, Khrushchev, stuck Crimea into Ukraine, at the time a part of the Soviet Union along with Russia.

War, War, War, that is all Washington wants. It enriches the military/security complex, the largest component of the US GNP and the largest contributor, along with Wall Street and the Israel Lobby, to US political campaigns.

Anyone or any organization that offers truth to the lies is demonized. Last week the new chief of the US Broadcasting Board of Governors, Andrew Lack, listed the Russian TV Internet service Russia Today as the equivalent of Boko Haram and the Islamic State terrorist groups. This absurd accusation is a prelude to closing down RT in the US just as Washington’s puppet UK government closed down Iran’s Press TV. http://rt.com/usa/225819-rt-isis-point-view-competition/

In other words, Anglo-Americans are not permitted any different news than what is served to them by “their” governments.

That is the state of “freedom” in the West today.

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Excerpt: "The FDIC was set up to ensure the safety of deposits. Now, it seems, its function will be the confiscation of deposits to save Wall Street."

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Winner Takes All: The Super-priority Status of Derivatives

Posted on April 9, 2013 by Ellen Brown

Cyprus-style confiscation of depositor funds has been called the “new normal.”  Bail-in policies are appearing in multiple countries directing failing TBTF banks to convert the funds of “unsecured creditors” into capital; and those creditors, it turns out, include ordinary depositors. Even “secured” creditors, including state and local governments, may be at risk.  Derivatives have “super-priority” status in bankruptcy, and Dodd Frank precludes further taxpayer bailouts. In a big derivatives bust, there may be no collateral left for the creditors who are next in line.   

Shock waves went around the world when the IMF, the EU, and the ECB not only approved but mandated the confiscation of depositor funds to “bail in” two bankrupt banks in Cyprus. A “bail in” is a quantum leap beyond a “bail out.” When governments are no longer willing to use taxpayer money to bail out banks that have gambled away their capital, the banks are now being instructed to “recapitalize” themselves by confiscating the funds of their creditors, turning debt into equity, or stock; and the “creditors” include the depositors who put their money in the bank thinking it was a secure place to store their savings.

 
The Cyprus bail-in was not a one-off emergency measure but was consistent with similar policies already in the works for the US, UK, EU, Canada, New Zealand, and Australia, as detailed in my earlier articles here and here.  “Too big to fail” now trumps all.  Rather than banks being put into bankruptcy to salvage the deposits of their customers, the customers will be put into bankruptcy to save the banks.

Why Derivatives Threaten Your Bank Account

 
The big risk behind all this is the massive $230 trillion derivatives boondoggle managed by US banks. Derivatives are sold as a kind of insurance for managing profits and risk; but as Satyajit Das points out in Extreme Money, they actually increase risk to the system as a whole.
 
In the US after the Glass-Steagall Act was implemented in 1933, a bank could not gamble with depositor funds for its own account; but in 1999, that barrier was removed. Recent congressional investigations have revealed that in the biggest derivative banks, JPMorgan and Bank of America, massive commingling has occurred between their depository arms and their unregulated and highly vulnerable derivatives arms. Under both the Dodd Frank Act and the 2005 Bankruptcy Act, derivative claims have super-priority over all other claims, secured and unsecured, insured and uninsured. In a major derivatives fiasco, derivative claimants could well grab all the collateral, leaving other claimants, public and private, holding the bag.
 
The tab for the 2008 bailout was $700 billion in taxpayer funds, and that was just to start. Another $700 billion disaster could easily wipe out all the money in the FDIC insurance fund, which has only about $25 billion in it.  Both JPMorgan and Bank of America have over $1 trillion in deposits, and total deposits covered by FDIC insurance are about $9 trillion. According to an article on Bloomberg in November 2011, Bank of America’s holding company then had almost $75 trillion in derivatives, and 71% were held in its depository arm; while J.P. Morgan had $79 trillion in derivatives, and 99% were in its depository arm. Those whole mega-sums are not actually at risk, but the cash calculated to be at risk from derivatives from all sources is at least $12 trillion; and JPM is the biggest player, with 30% of the market.
 
It used to be that the government would backstop the FDIC if it ran out of money. But section 716 of the Dodd Frank Act now precludes the payment of further taxpayer funds to bail out a bank from a bad derivatives gamble. As summarized in a letter from Americans for Financial Reform quoted by Yves Smith:

Section 716 bans taxpayer bailouts of a broad range of derivatives dealing and speculative derivatives activities. Section 716 does not in any way limit the swaps activities which banks or other financial institutions may engage in. It simply prohibits public support for such activities.

There will be no more $700 billion taxpayer bailouts. So where will the banks get the money in the next crisis? It seems the plan has just been revealed in the new bail-in policies.

All Depositors, Secured and Unsecured, May Be at Risk

 
The bail-in policy for the US and UK is set forth in a document put out jointly by the Federal Deposit Insurance Corporation (FDIC) and the Bank of England (BOE) in December 2012, titled Resolving Globally Active, Systemically Important, Financial Institutions.
 
In an April 4th article in Financial Sense, John Butler points out that the directive does not explicitly refer to “depositors.”  It refers only to “unsecured creditors.”  But the effective meaning of the term, says Butler, is belied by the fact that the FDIC has been put on the job. The FDIC has direct responsibility only for depositors, not for the bondholders who are wholesale non-depositor sources of bank credit. Butler comments:
 
Do you see the sleight-of-hand at work here? Under the guise of protecting taxpayers, depositors of failing institutions are to be arbitrarily, de-facto subordinated to interbank claims, when in fact they are legally senior to those claims!

. . . [C]onsider the brutal, unjust irony of the entire proposal. Remember, its stated purpose is to solve the problem revealed in 2008, namely the existence of insolvent TBTF institutions that were “highly leveraged and complex, with numerous and dispersed financial operations, extensive off-balance-sheet activities, and opaque financial statements.” Yet what is being proposed is a framework sacrificing depositors in order to maintain precisely this complex, opaque, leverage-laden financial edifice!

If you believe that what has happened recently in Cyprus is unlikely to happen elsewhere, think again. Economic policy officials in the US, UK and other countries are preparing for it. Remember, someone has to pay. Will it be you? If you are a depositor, the answer is yes.

The FDIC was set up to ensure the safety of deposits. Now, it seems, its function will be the confiscation of deposits to save Wall Street. In the only mention of “depositors” in the FDIC-BOE directive as it pertains to US policy, paragraph 47 says that “the authorities recognize the need for effective communication to depositors, making it clear that their deposits will be protected.” But protected with what? As with MF Global, the pot will already have been gambled away. From whom will the bank get it back? Not the derivatives claimants, who are first in line to be paid; not the taxpayers, since Congress has sealed the vault; not the FDIC insurance fund, which has a paltry $25 billion in it. As long as the derivatives counterparties have super-priority status, the claims of all other parties are in jeopardy.
 
That could mean not just the “unsecured creditors” but the “secured creditors,” including state and local governments. Local governments keep a significant portion of their revenues in Wall Street banks because smaller local banks lack the capacity to handle their complex business. In the US, banks taking deposits of public funds are required to pledge collateral against any funds exceeding the deposit insurance limit of $250,000. But derivative claims are also secured with collateral, and they have super-priority over all other claimants, including other secured creditors. The vault may be empty by the time local government officials get to the teller’s window. Main Street will again have been plundered by Wall Street.

Super-priority Status for Derivatives Increases Rather than Decreases Risk 

 
Harvard Law Professor Mark Row maintains that the super-priority status of derivatives needs to be repealed. He writes:
 
. . . [D]erivatives counterparties, . . . unlike most other secured creditors, can seize and immediately liquidate collateral, readily net out gains and losses in their dealings with the bankrupt, terminate their contracts with the bankrupt, and keep both preferential eve-of-bankruptcy payments and fraudulent conveyances they obtained from the debtor, all in ways that favor them over the bankrupt’s other creditors.
 
. . . [W]hen we subsidize derivatives and similar financial activity via bankruptcy benefits unavailable to other creditors, we get more of the activity than we otherwise would. Repeal would induce these burgeoning financial markets to better recognize the risks of counterparty financial failure, which in turn should dampen the possibility of another AIG-, Bear Stearns-, or Lehman Brothers-style financial meltdown, thereby helping to maintain systemic financial stability.
 
In The New Financial Deal: Understanding the Dodd-Frank Act and Its (Unintended) Consequences, David Skeel agrees. He calls the Dodd-Frank policy approach “corporatism” – a partnership between government and corporations. Congress has made no attempt in the legislation to reduce the size of the big banks or to undermine the implicit subsidy provided by the knowledge that they will be bailed out in the event of trouble.
 
Undergirding this approach is what Skeel calls “the Lehman myth,” which blames the 2008 banking collapse on the decision to allow Lehman Brothers to fail. Skeel counters that the Lehman bankruptcy was actually orderly, and the derivatives were unwound relatively quickly. Rather than preventing the Lehman collapse, the bankruptcy exemption for derivatives may have helped precipitate it.  When the bank appeared to be on shaky ground, the derivatives players all rushed to put in their claims, in a run on the collateral before it ran out. Skeel says the problem could be resolved by eliminating the derivatives exemption from the stay of proceedings that a bankruptcy court applies to other contracts to prevent this sort of run.

Putting the Brakes on the Wall Street End Game

  Besides eliminating the super-priority of derivatives, here are some other ways to block the Wall Street asset grab:
 
(1) Restore the Glass-Steagall Act separating depository banking from investment banking. Support Marcy Kaptur’s H.R. 129.
 
(2) Break up the giant derivatives banks.  Support Bernie Sanders’ “too big to jail” legislation.
 
(3) Alternatively, nationalize the TBTFs, as advised in the New York Times by Gar Alperovitz.  If taxpayer bailouts to save the TBTFs are unacceptable, depositor bailouts are even more unacceptable.
 
(4) Make derivatives illegal, as they were between 1936 and 1982 under the Commodities Exchange Act. They can be unwound by simply netting them out, declaring them null and void.  As noted by Paul Craig Roberts, “the only major effect of closing out or netting all the swaps (mostly over-the-counter contracts between counter-parties) would be to take $230 trillion of leveraged risk out of the financial system.”
 
(5) Support the Harkin-Whitehouse bill to impose a financial transactions tax on Wall Street trading.  Among other uses, a tax on all trades might supplement the FDIC insurance fund to cover another derivatives disaster.
 
(5) Establish postal savings banks as government-guaranteed depositories for individual savings. Many countries have public savings banks, which became particularly popular after savings in private banks were wiped out in the banking crisis of the late 1990s.
 
(6) Establish publicly-owned banks to be depositories of public monies, following the lead of North Dakota, the only state to completely escape the 2008 banking crisis. North Dakota does not keep its revenues in Wall Street banks but deposits them in the state-owned Bank of North Dakota by law.  The bank has a mandate to serve the public, and it does not gamble in derivatives.
 
A motivated state legislature could set up a publicly-owned bank very quickly. Having its own bank would allow the state to protect both its own revenues and those of its citizens while generating the credit needed to support local business and restore prosperity to Main Street.
 
For more information on the public bank option, see here. Learn more at the Public Banking Institute conference June 2-4 in San Rafael, California, featuring Matt Taibbi, Birgitta Jonsdottir, Gar Alperovitz and others.  
 
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Ellen Brown is an attorney, chairman of the Public Banking Institute, and the author of eleven books, including Web of Debt: The Shocking Truth About Our Money System and How We Can Break Free. Her websites are webofdebt.com and ellenbrown.com.

According to Ellen Brown, who knows as much about banking as anyone in the world, what is now facing to the Cypriots can, and one day certainly will happen to Americans. The facts are that today's monster banks can loan much more money than their depositors deposit. However, in the event of a run on the banks, neither the banks nor those owning bank stocks will be liable. All losses will be borne by the depositors!!! You can look this up on Wikipedia. Advice: Move your savings account to a reliable credit union, STAT!

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A Safe and a Shotgun or Publicly-owned Banks? The Battle of Cyprus

Posted on March 21, 2013 by Ellen Brown

If these worries become really serious, . . . [s]mall savers will take their money out of banks and resort to household safes and a shotgun.

– Martin Hutchinson on the attempted EU raid on deposits in Cyprus banks

The deposit confiscation scheme has long been in the making.  US depositors could be next . . . .  
On Tuesday, March 19, the national legislature of Cyprus overwhelmingly rejected a proposed levy on bank deposits as a condition for a European bailout.  Reuters called it “a stunning setback for the 17-nation currency bloc,” but it was a stunning victory for democracy. As Reuters quoted one 65-year-old pensioner, “The voice of the people was heard.”
 
The EU had warned that it would withhold €10 billion in bailout loans, and the European Central Bank (ECB) had threatened to end emergency lending assistance for distressed Cypriot banks, unless depositors – including small savers – shared the cost of the rescue. In the deal rejected by the legislature, a one-time levy on depositors would be required in return for a bailout of the banking system. Deposits below €100,000 would be subject to a 6.75% levy or “haircut”, while those over €100,000 would have been subject to a 9.99% “fine.”
 
The move was bold, but the battle isn’t over yet.  The EU has now given Cyprus until Monday to raise the billions of euros it needs to clinch an international bailout or face the threatened collapse of its financial system and likely exit from the euro currency zone.

The Long-planned Confiscation Scheme

 
The deal pushed by the “troika” – the EU, ECB and IMF – has been characterized as a one-off event devised as an emergency measure in this one extreme case. But the confiscation plan has long been in the making, and it isn’t limited to Cyprus.

In a September 2011 article in the Bulletin of the Reserve Bank of New Zealand titled “A Primer on Open Bank Resolution,” Kevin Hoskin and Ian Woolford discussed a very similar haircut plan that had been in the works, they said, since the 1997 Asian financial crisis.  The article referenced recommendations made in 2010 and 2011 by the Basel Committee of the Bank for International Settlements, the “central bankers’ central bank” in Switzerland.

The purpose of the plan, called the Open Bank Resolution (OBR) , is to deal with bank failures when they have become so expensive that governments are no longer willing to bail out the lenders. The authors wrote that the primary objectives of OBR are to:

• ensure that, as far as possible, any losses are ultimately borne by the bank’s shareholders and creditors . . . .

The spectrum of “creditors” is defined to include depositors:

At one end of the spectrum, there are large international financial institutions that invest in debt issued by the bank (commonly referred to as wholesale funding). At the other end of the spectrum, are customers with cheque and savings accounts and term deposits.

Most people would be surprised to learn that they are legally considered “creditors” of their banks rather than customers who have trusted the bank with their money for safekeeping, but that seems to be the case. According to Wikipedia:

In most legal systems, . . . the funds deposited are no longer the property of the customer. The funds become the property of the bank, and the customer in turn receives an asset called a deposit account (a checking or savings account). That deposit account is a liability of the bank on the bank’s books and on its balance sheet.  Because the bank is authorized by law to make loans up to a multiple of its reserves, the bank’s reserves on hand to satisfy payment of deposit liabilities amounts to only a fraction of the total which the bank is obligated to pay in satisfaction of its demand deposits.

The bank gets the money. The depositor becomes only a creditor with an IOU. The bank is not required to keep the deposits available for withdrawal but can lend them out, keeping only a “fraction” on reserve, following accepted fractional reserve banking principles. When too many creditors come for their money at once, the result can be a run on the banks and bank failure.

The New Zealand OBR said the creditors had all enjoyed a return on their investments and had freely accepted the risk, but most people would be surprised to learn that too. What return do you get from a bank on a deposit account these days? And isn’t your deposit protected against risk by FDIC deposit insurance?

Not anymore, apparently. As Martin Hutchinson observed in Money Morning, “if governments can just seize deposits by means of a ‘tax’ then deposit insurance is worth absolutely zippo.”

The Real Profiteers Get Off Scot-Free

Felix Salmon wrote in Reuters of the Cyprus confiscation:

Meanwhile, people who deserve to lose money here, won’t. If you lent money to Cyprus’s banks by buying their debt rather than by depositing money, you will suffer no losses at all. And if you lent money to the insolvent Cypriot government, then you too will be paid off at 100 cents on the euro. . . .
The big winner here is the ECB, which has extended a lot of credit to dubiously-solvent Cypriot banks and which is taking no losses at all.

It is the ECB that can most afford to take the hit, because it has the power to print euros. It could simply create the money to bail out the Cyprus banks and take no loss at all. But imposing austerity on the people is apparently part of the plan.  Salmon writes:

From a drily technocratic perspective, this move can be seen as simply being part of a standard Euro-austerity program: the EU wants tax hikes and spending cuts, and this is a kind of tax . . . .
The big losers are working-class Cypriots, whose elected government has proved powerless . . . . The Eurozone has always had a democratic deficit: monetary union was imposed by the elite on unthankful and unwilling citizens. Now the citizens are revolting: just look at Beppe Grillo.

But that was before the Cyprus government stood up for the depositors and refused to go along with the plan, in what will be a stunning victory for democracy if they can hold their ground.

It CAN Happen Here

Cyprus is a small island, of little apparent significance. But one day, the bold move of its legislators may be compared to the Battle of Marathon, the pivotal moment in European history when their Greek forebears fended off the Persians, allowing classical Greek civilization to flourish.  The current battle on this tiny island has taken on global significance.  If the technocrat bankers can push through their confiscation scheme there, precedent will be established for doing it elsewhere when bank bailouts become prohibitive for governments.

That situation could be looming even now in the United States.  As Gretchen Morgenson warned in a recent article on the 307-page Senate report detailing last year’s $6.2 billion trading fiasco at JPMorganChase: “Be afraid.”  The report resoundingly disproves the premise that the Dodd-Frank legislation has made our system safe from the reckless banking activities that brought the economy to its knees in 2008. Writes Morgenson:

JPMorgan . . . Is the largest derivatives dealer in the world. Trillions of dollars in such instruments sit on its and other big banks’ balance sheets. The ease with which the bank hid losses and fiddled with valuations should be a major concern to investors.

Pam Martens observed in a March 18th article that JPMorgan was gambling in the stock market with depositor funds. She writes, “trading stocks with customers’ savings deposits – that truly has the ring of the excesses of 1929 . . . .”

The large institutional banks not only could fail; they are likely to fail.  When the derivative scheme collapses and the US government refuses a bailout, JPMorgan could be giving its depositors’ accounts sizeable “haircuts” along guidelines established by the BIS and Reserve Bank of New Zealand.

Time for Some Public Sector Banks?

The bold moves of the Cypriots and such firebrand political activists as Italy’s Grillo are not the only bulwarks against bankster confiscation. While the credit crisis is strangling the Western banking system, the BRIC countries – Brazil, Russia, India and China – have sailed through largely unscathed. According to a May 2010 article in The Economist, what has allowed them to escape are their strong and stable publicly-owned banks.

Professor Kurt von Mettenheim of the Sao Paulo Business School of Brazil writes, “The credit policies of BRIC government banks help explain why these countries experienced shorter and milder economic downturns during 2007-2008.” Government banks countered the effects of the financial crisis by providing counter-cyclical credit and greater client confidence.

Russia is an Eastern European country that weathered the credit crisis although being very close to the Eurozone. According to a March 2010 article in Forbes:

As in other countries, the [2008] crisis prompted the state to take on a greater role in the banking system.  State-owned systemic banks . . . have been used to carry out anticrisis measures, such as driving growth in lending (however limited) and supporting private institutions.

In the 1998 Asian crisis, many Russians who had put all their savings in private banks lost everything; and the credit crisis of 2008 has reinforced their distrust of private banks.  Russian businesses as well as individuals have turned to their government-owned banks as the more trustworthy alternative. As a result, state-owned banks are expected to continue dominating the Russian banking industry for the foreseeable future.

The entire Eurozone conundrum is unnecessary. It is the result of too little money in a system in which the money supply is fixed, and the Eurozone governments and their central banks cannot issue their own currencies. There are insufficient euros to pay principal plus interest in a pyramid scheme in which only the principal is injected by the banks that create money as “bank credit” on their books. A central bank with the power to issue money could remedy that systemic flaw, by injecting the liquidity needed to jumpstart the economy and turn back the tide of austerity choking the people.

The push to confiscate the savings of hard-working Cypriot citizens is a shot across the bow for every working person in the world, a wake-up call to the perils of a system in which tiny cadres of elites call the shots and the rest of us pay the price. When we finally pull back the veils of power to expose the men pulling the levers in an age-old game they devised, we will see that prosperity is indeed possible for all.

For more on the public bank solution and for details of the June 2013 Public Banking Institute conference in San Rafael, California, see here.
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Ellen Brown is an attorney, chairman of the Public Banking Institute, and the author of eleven books, including Web of Debt: The Shocking Truth About Our Money System and How We Can Break Free. Her websites are webofdebt.com and ellenbrown.com.

ELLEN BROWN EXPLAINS HOW GREECE, SPAIN, AND OTHER EUROPEAN NATIONS PRESENTLY BEING CRUSHED BY EXPONENTIALLY INCREASING NATIONAL DEBTS CAN *LEGALLY* RESTART THEIR ECONOMIES INSTANTLY, RESTORE EMPLOYMENT, AND WORK THEIR WAY OUT OF DEBT IN JUST A FEW YEARS

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Greece and the Euro: Fifty Ways to Leave Your Lover

Posted on June 6, 2012 by Ellen Brown

The problem is all inside your head she said to me
The answer is easy if you take it logically
I’d like to help you in your struggle to be free
There must be fifty ways to leave your lover.

–Lyrics by Paul Simon

The Euro appears to be a marriage of incompatible partners. A June 1^st article in the UK Telegraph titled “Why Europe’s Love Affair with the European Project Is Ending” reported that two-thirds of 9,000 respondents thought that having the euro as their single currency was a mistake.

For Greece, it was a tragic mismatch from the beginning; and like many a breakup, it is really about money.  Greece is a vivacious young woman chained to a tyrannical old man.  She yearns to be free to dance on her own; but breaking up is hard to do.  Defaulting on her debts will force her out of the Eurozone and back to issuing drachmas, and she could get brutally beaten by speculators on foreign exchange markets for her insolence.

Fortunately, there are alternatives to an ugly divorce.  The treaties binding the 17 member nations are just a set of rules, entered into by mutual agreement; and rules can be bent or broken, especially in crises.  The ECB (European Central Bank) broke a litany of rules to save the banks, and so did the Federal Reserve to save Wall Street in 2008.  Rules that can be bent for banks can be bent for people and nations—not just Greece, but all the other Eurozone countries threatening to file for divorce.

Paul Simon says there are 50 ways, but here are five creative alternatives.

1.     The Open Marriage: Return to the Drachma Without Abandoning the Euro

James Skinner, former chairman of NEF (the New Economics Foundation in the UK), suggests that the Greek government could start issuing drachmas without abandoning the euro.  Drachmas could be reserved for domestic use—to pay the government’s budget, hire workers, build infrastructure and expand social services.  He writes:

Greece is suffering from a lack of money because the only source, the single currency, has dried up. But there is no law that states that there has to be only one currency.
. . . By enabling the Government, monitored by the Central Bank, to spend newly created money directly into the economy, bypassing the banking sector, the burden of increasing national debt can be avoided. . . .

This programme for creating a new Greek Drachma, bypassing the private banking sector, could start tomorrow. Its immediate effect would be to get the unemployed back to work. All existing Euro transactions can continue as before, quite separately from the new currency. The two currencies can perfectly well co-exist and run alongside each other. . . . Foreign banks will continue to deal in Euros and other currencies as usual.

This solution was successfully used in Argentina when its currency collapsed in 2001. The government walked away from its debts and started issuing its own Argentine pesos.  Three years after a record debt default on more than $100 billion, the country was well on the road to recovery.  Exports increased, the currency was stable, investors returned, unemployment diminished and the economy grew by 8 percent for 2 consecutive years.

2.  Separate Bank Accounts: Fire Up the Printing Presses at the Greek Central Bank

In a March 19 article on Seeking Alpha, George Kesarios observed that the Greek central bank has the power to issue more than just drachmas.  The ECB is not an ordinary central bank:

Rather, it is a confederation of central banks. Each European national central bank can theoretically do the same types of market operations as the ECB and then some. The forefathers of the euro have left many monetary windows open, which, if used correctly, can solve the European debt crisis in a very short period without taxpayer funds.

He cited article 14.4 of the Protocol on the Statute of the European System of Central Banks, which provides:

14.4. National central banks may perform functions other than those specified in this Statute unless the Governing Council finds, by a majority of two thirds of the votes cast, that these interfere with the objectives and tasks of the ESCB. Such functions shall be performed on the responsibility and liability of national central banks and shall not be regarded as being part of the functions of the ESCB.

That means the National Center Banks can do whatever the ECB can do—and even things it can’t.  The Greek central bank could step in and start issuing euros itself.  Again, there is precedent for this.  It was under Article 14.4 that the Irish Central Bank was able to print 80 billion euros as “emergency liquidity assistance,” and the Greek central bank has already printed 44 billion euros itself.

The Greek government could print euros, refinance its sovereign debt, and pay the interest to itself, effectively eliminating the interest burden.  Among other precedents, there is Canada, which borrowed from its own central bank from 1939 to 1974 to fund major infrastructure projects and social programs.  It pulled this off over a 25-year period without hyperinflating the currency, driving up prices, or increasing the public debt, which remained low and sustainable.

There is the concern that the euro might suffer by devaluation if other Eurozone members followed suit.  But Kesarios points to the Japanese experience, “where one can print and print and then print some more, without the value of the currency being marked down (due to positive trade flows).”   The euro might be equally resilient.

3.  Divorce: Just Walk Away

According to the May 29^th New York Times, the 130 billion euro bailout that was supposed to buy time for Greece is now mainly just servicing the interest on the debt.  The “troika”—the ECB, IMF, and European Commission—which holds three-fourths of the debt, is sequestering the bailout funds to be paid right back to themselves in interest payments. This is merely going to compound the debt to disastrous levels, without a single cent going to the Greeks or their comatose economy.

Interest rates on Greek ten-year bonds have gone to nearly 30 percent recently.  Under the Rule of 72, at 30% compounded annually, debt doubles in 2.4 years.  If the Greeks can’t even pay the interest on the debt today except by borrowing, how are they going to repay double the principal in a mere 2.4 years?  At 30%, the Greeks could be paying over 100% of their GDP in interest charges.  Legally, a contract that is impossible to perform is void.

Alexis Tsipras, leader of the radical left-wing Greek party Syriza, which is now in second place in the Greek parliament, calls it an “odious debt,” a legal term for a national debt incurred by a regime for purposes that do not serve the best interests of the nation.  An odious debt under international law need not be repaid.

4.  Spousal Support: The Public Bank Option

If divorce is too much to contemplate, Greece’s crippling interest burden can be relieved by taking advantage of the ECB’s very generous 1% rate for bankers.  Article 123 of the Maastricht Treaty forbids member governments from borrowing directly from the ECB, but it makes an exception in paragraph 2 for “publicly-owned credit institutions”—something Greece will have plenty of when it nationalizes its banks.  They can line up at the ECB’s window for its bargain-basement 1% banking rate and use the borrowed funds to buy up the national debt.

Researcher Simon Thorpe wrote to the ECB and asked whether they would object if a publicly-owned credit institution were to borrow from the ECB and use the funds “to supply the money to a government such as the Greek government in order for that government to pay off its debts to financial markets.”  The ECB replied:

According to the Treaty—as you have just quoted—such publicly owned credit institutions “shall be given the same treatment by national central banks and the ECB as private credit institutions.”  It is up to the banks to decide how to use the money they have borrowed from the central bank system.

5.  The Dowry: Impose a Financial Transaction Tax

Thorpe notes that the ECB has issued and lent nearly one trillion euros to the banks at 1% since December 2011—three times the total Greek debt of 355 billion euros.  If Greek public banks borrowed from the ECB at 1% and bought Greece’s sovereign debt, the debt could be paid off in 10 years just from the returns on a very modest Financial Transaction Tax (FTT) of 0.3%.

Imposing a tiny FTT on all financial trades would not only be a lucrative source of revenue but would prevent the attacks of speculators, both on the newly-issued drachma and on the sovereign debt of Greece and other Eurozone countries.  The FTT has already been implemented in many countries.  In 2011, there were 40 countries that had FTT in operation, raising $38 billion (€29bn).

Where There Is a Will, There Is a Way

The problem is finding the will, particularly among the Eurocrat leaders holding the reins of power, who may not be looking for an amicable workout. The marital problems of Greece and the Eurozone stem from an arbitrary set of rules that were entered into and can be changed by agreement.   But as Mike Whitney maintained in a June 3 article titled “Europe Moves Closer to Banktatorship”:

These people are not interested in fixing the EZ economy. They are engaged in a stealth campaign to . . . solidify the power of big finance over the individual states . . . .

To avoid that dire scenario, the popular majority needs to grab the reins of power.  It is fitting that Greece, the birthplace of European culture and democracy, is the focus of the struggle against bondage to an elite banker class.  Greece can dance again if she can set herself free.

About the Author: Ellen Brown developed her research skills as an attorney practicing civil litigation in Los Angeles. In Web of Debt, her latest book, she turns those skills to an analysis of the Federal Reserve and "the money trust." She shows how this private cartel has usurped the power to create money from the people themselves, and how we the people can get it back. Brown developed an interest in the developing world and its problems while living abroad for eleven years in Kenya, Honduras, Guatemala and Nicaragua. She returned to practicing law when she was asked to join the legal team of a popular Tijuana healer with an innovative cancer therapy, who was targeted by the chemotherapy industry in the 1990s. That experience produced her book Forbidden Medicine, which traces the suppression of natural health treatments to the same corrupting influences that have captured the money system. Brown's eleven books include the bestselling Nature's Pharmacy, co-authored with Dr. Lynne Walker, which has sold 285,000 copies.