Rescuing Capitalism or Grand Theft & Military Dictatorship?

By Simon Davies and Donald Hunt
SOTT.net

World stock indexes fell the week ending 16th February led by the Dow losing more than 5% while gold continued to inch its way towards the psychologically important $1,000/oz level, driven by the approach of what looks like another emerging market crisis in Eastern Europe which is driving the Euro and Sterling lower, sending - it would seem - mobile money towards gold. The big US news, however, was the passage of the almost $800 billion stimulus package in the United States and the decidedly lukewarm reception to US Treasury Secretary Timothy Geithner's much heralded $2 trillion bank rescue plan.

The G7 finance ministers met in Rome in an exercise in hot air generation, stating, as if we needed reminding, that the "downturn" will persist through 2009 and that the various "stimulus measures" won't have any noticeable effect for a while as they "build over time". The ministers did pledge to restore confidence to financial markets and growth to the world economy but didn't happen to mention how they plan to do it. Timothy Geithner demanded "exceptional measures" from his counterparts which we can only assume means "exceptionally large amounts of money" to prop up the international banking system so that it can continue to concentrate even greater wealth in even fewer hands.

The vagueness of Mr Geithner's plan for rescuing US banks is rather strange considering his technocrat status and that his boss promised "change" which one might have hoped meant something different. Yet all we have seen so far from both Mr Geithner and Barack Obama is more of the same. They haven't the simple courage nor the desire to tell us straight that they need to recapitalise the US banking system to the tune of some $6 trillion - that's $6,000,000,000,000 - that they plan to have the US taxpayer bear the burden of almost incalculable losses from worthless assets all the while urging austerity and sacrifice for all but the elite including the further decimation of the last threads of America's social fabric. Instead they brandish rescue plans, stimulus packages and a myriad of programme acronyms in the hope that we might not notice.

Across the Atlantic the same games are being played. The distraction of the week being a ritualized bashing of banker's bonuses. In the UK, the Chancellor of the Exchequer, Alastair Darling, was decidedly ill at ease in a Channel 4 TV interview when pressed on the bonuses to be paid to bankers at the Royal Bank of Scotland which is now 69% government owned and whose excess liabilities over the every diminishing value of its assets are now on the balance sheet of the UK Treasury. He really is caught between a rock and a hard place - in one ear he can hear the clamour of the street, the people whose money he has liberally dished out to the Royal Bank of Scotland while in the other he has the whispering bankers who tell him that all will be lost if he can't retain the best staff, the ones who can make the bank profitable again. No doubt Barack Obama finds himself in much the same position.

Both of those voices are right; it is ridiculous to have a business that has been rescued with public money pay out vast wads of it to the already well remunerated employees when in any other business they'd have been sent home as the shutters were pulled down for the last time. That is what happened to the coal miners, steel workers and printer workers under Margaret Thatcher, that is what happened in every other industry and business that "couldn't cut it" in the world of the free market, that is what is happening to millions around the globe now. That bankers even have jobs should be sufficient; that they need bonuses to retain them is beyond ridiculous. Yet, those that earn the bank the most money are indeed highly mobile and until the wheeler-dealing banking industry is brought crashing to its final demise there will be those who are more than happy to employ bankers who can generate millions in income, and pay them accordingly. This will not change until there is a fundamental change in the way banks are run and in the activities in which they engage.

The brand of free market capitalism whose inevitable conclusion is exactly the crisis we see today is a pathological system that sucks all economic activity into its gapping maw; it is a system where the lowest denominator rules. Whoever sinks the lowest wins. It is a world driven by quarterly financial results, by illusory "shareholder value", by pure monetary valuation of all things and by insatiable greed, until there is fundamental change there will be no change at all.

What is needed is somebody with the power to deliver, to stand up and announce a truly radical reform of the financial system, one in which banks go back to being boring money lenders, one in which the derivatives they deal in are for the benefit of their clients to manage risk and not for themselves and their gambling cohorts in the hedge fund and "wealth management" industries, one where capital is allocated not to where it can make the hottest buck to where it can generate the greatest social benefit and one in which no bank is too big to fail so that should it fail it can be allowed to fall without the need for government life support. When that happens we will be seeing the "exceptional measures" that the US Treasury Secretary demanded of the G7 this weekend.

However, as a hollow parody of what might be, Mr Geithner and his fellow finance ministers final summit statement was a collective affirmation of what they have all already done in handing out citizens dollars to the banks and other favoured sectors and the by now familiar statement championing free trade and decrying protectionism.

The shallowness of these statements being illustrated by the fact that the US stimulus package that had just been passed by Congress as Timothy Geithner headed for Rome had "buy American" provisions in, albeit significantly more limited than originally proposed. Protectionism is on the rise in Europe, with the catchy slogan in the UK of "British jobs for British workers". Not to mention the recent bailout by the Dutch government of ING Bank, the terms of which require the bank to expand lending domestically within the Netherlands; an understandable provision given the Dutch taxpayer had just handed ING another €25 billion to ING - but protectionist, in the literal sense of favouring the domestic market, nonetheless.

We were left with the impression from the G7 summit that there is much more going on behind the scenes than we are being told. There is a G20 summit in April and a G8 one in July as which we are vaguely told that new "common principles" on transparency and regulation are expected, no doubt these new regulations will be trumpeted as being designed to prevent "failures" in the future while in fact completely failing to address the root causes of this crisis while in actuality creating the walls of the new economic world order. We wonder if the details of this new order are so staggeringly awful that they will only be revealed once full dictatorship is in place; if so it's going to be an interesting spring and summer.

We are also highly skeptical at the wave of government and media attention being focused on banker's bonuses. It is not that we do not think the matter a valid one it is just the amount of energy and focus on it makes us wonder what it is that we are not seeing. We know that governments do not and will not address the real issues of the collapsing economic order nor seize the real culprits, so our radar tells us that something is afoot when so much media space and government energy is focused on this one topic. Perhaps it just a diversion from the details of the deals being done behind the scenes; details that would cause uproar if widely circulated.

One such deal is the aforementioned state support for ING Bank. The deal is extraordinarily sweet for ING and, by definition, the converse for the Dutch citizen. The deal has been structured so that the Dutch state will buy a €27.7 billion portfolio of US Alt-A mortgaged backed securities (one level better than sub-prime) for 90% of the face value at a time when the market value is about 60% to 65% of face value. The other details of the deal are such that the negative effects to ING will be covered by the state, one example being the payment of a management fee of €700 million to the bank. In return ING has promised to provide new lending of €25 billion inside the Netherlands during 2009. However, that will be using "at least €10 billion of the government's credit guarantee scheme." Even financial analysts had to admit that, "this deal sounds almost too good to be true".

We came across the details of this deal in one of the professional banking magazines for which we have a limited free trial. To be a subscriber costs over €5,000 per annum and that is for just one magazine. We worked out that to have access to a reasonable level of information regarding what is happening in the banking world would cost us €20,000 or more per annum and even then that would be a less than complete picture. With these sorts of barriers to market information it is no wonder that we are kept in the dark. We certainly cannot afford such expenses and the mainstream media that can has no interest in informing us of the details.

If this deal is even partly indicative of what is happening behind the scenes, and the complete lack of transparency in the US and the UK suggests it is, then it is little wonder that we are being directed to the topic of banker's bonuses rather than the shenanigans of state handouts to the banks themselves.

While on the topic of banker's bonuses here are the details of the pay out to Merrill Lynch banker's just prior to the bank announcing $15 billion quarterly loss and $27 billion full year loss, losses that have been absorbed by the US citizen through the US government's support of Bank of America:-

- the top four bonus recipients received $121 million in aggregate,
- the next four, $62 million in aggregate,
- the next six, $66 million in aggregate,
- ie. the top fourteen people received $10 million or more and combined more than $250 million,
- Twenty received more than $8 million but less then $10 million,
- Fifty three received between $5 million and $8 million,
- One hundred and forty nine received between $3 million and $5 million,
- The top one hundred and forty nine bonus recipients received a combined $858 million, and
- Six hundred and ninety six individuals received $1 million or more.

You will notice that we have referred to "citizen's" money being used rather than the more familiar "taxpayer's" money as it is all the citizens of a nation that are paying for these bailouts not just the ones that pay taxes for it is the unemployed, the underemployed and the children who also suffer due to the raping of their nations treasury.

So just where is all this headed?

United States and Canada

The three-quarters of a trillion dollar economic stimulus package was passed by the U.S. Congress with the usual partisan pork barrel politics from both "sides" of the corrupt elite. Seeing as it's the Democrats whose president is in power its the turn of the Republicans to play the role of the opposition and seek personal favours to allow the passing of the Bill. For a president whose mandate is to provide change for the American people, Obama has been singularly unimpressive in his handling of the stimulus package, not only is not nearly radical enough to truly make a difference to ordinary Americans but it relies on the idea that tax cuts will result in more spending rather than saving and therefore falls back on the hackneyed and desperately out of place notion that Americans must consume their way out of this crisis. It is frustrating to see so much money being thrown around in an attempt to keep an economy based on excessive consumption going when what is needed is a fundamental re-balancing and restructuring.

The lack of clear direction in the stimulus package is of course a reflection of the political elite's loyalty to their corporate and banking paymasters and to political dogma. Patrick Martin, in noting that the Republicans had fewer qualms voting for the same spending last year in a giveaway to banks to hide their insolvency, puts their recent reticence down to ideology:-

A large section of the congressional Republican caucus adheres to an ultra-right ideological opposition to any government spending except on the military and direct handouts to the wealthy...

The editorial page of the Wall Street Journal denounced the stimulus bill in revealing terms, declaring, "Combine this new spending, and the borrowing it will require, with the trillions of dollars still needed for the banking system, and we are about to test the outer limits of our national balance sheet." The newspaper howls about the evils of deficit spending to meet the needs of the unemployed, while passing over the "trillions of dollars" for the banks as though it was a given.

While the entire political establishment fails to admit that there are infinitely better alternatives to pumping more and more money in the organs and institutions of a corrupt and diseased system they do acknowledge the likely effects of their bailouts and stimulus failing to rejuvenate that system. It is infuriating to see them sleep walking us towards economic Armageddon while being seemingly aware that that is exactly where they are taking us.

Here it is from the horse's mouth, the New York Times:-

Rise in Jobless Poses Threat to Stability Worldwide

From lawyers in Paris to factory workers in China and bodyguards in Colombia, the ranks of the jobless are swelling rapidly across the globe.

Worldwide job losses from the recession that started in the United States in December 2007 could hit a staggering 50 million by the end of 2009, according to the International Labor Organization, a United Nations agency. The slowdown has already claimed 3.6 million American jobs.

High unemployment rates, especially among young workers, have led to protests in countries as varied as Latvia, Chile, Greece, Bulgaria and Iceland and contributed to strikes in Britain and France.

Last month, the government of Iceland, whose economy is expected to contract 10 percent this year, collapsed and the prime minister moved up national elections after weeks of protests by Icelanders angered by soaring unemployment and rising prices.

Just last week, the new United States director of national intelligence, Dennis C. Blair, told Congress that instability caused by the global economic crisis had become the biggest security threat facing the United States, outpacing terrorism.

"Nearly everybody has been caught by surprise at the speed in which unemployment is increasing, and are groping for a response," said Nicolas Véron, a fellow at Bruegel, a research center in Brussels that focuses on Europe's role in the global economy.

In emerging economies like those in Eastern Europe, there are fears that growing joblessness might encourage a move away from free-market, pro-Western policies, while in developed countries unemployment could bolster efforts to protect local industries at the expense of global trade.

So, if the U.S. DNI (Director of National Intelligence), the spy chief, says that unemployment is the biggest threat to national security and we are told that they are "groping for a response" we wonder whether they honestly believe that bailing out the banking system and economic stimulus will work or whether they are preparing for a war against their own citizenry, a war that will be fought with the Taser, the prison camp and all the powers garnered under the guise of the "war-on-terror'. It would certainly put the last eight years into perspective.

According to Ed Hightower, the biggest problem with the U.S. stimulus package is that it is not big enough, the infrastructure investments in the stimulus bill only providing 5% of infrastructure needed according to a January report by the American Society of Civil Engineers. When we combine this with the assessment that the US banking system, as we said earlier is estimated to need at least $6 trillion, a number well in excess of what has been admitted to date, we are inclined to agree with Bill Van Auken that military dictatorship may not be far off:-

US intelligence chief: World capitalist crisis poses greatest threat

In testimony before the Senate Committee on Intelligence Thursday, Washington's new director of national intelligence, Dennis Blair, warned that the deepening world capitalist crisis posed the paramount threat to US national security and warned that its continuation could trigger a return to the "violent extremism" of the 1920s and 1930s.

This frank assessment, contained in the unclassified version of the "annual threat assessment" presented by Blair on behalf of 16 separate US intelligence agencies, represented a striking departure from earlier years, in which a supposedly ubiquitous threat from Al Qaeda terrorism and the two wars launched under the Bush administration topped the list of concerns.

Clearly underlying his remarks are fears within the massive US intelligence apparatus as well as among more conscious layers of the American ruling elite that a protracted economic crisis accompanied by rising unemployment and reduced social spending will trigger a global eruption of the class struggle and the threat of social revolution.

The presentation was not only the first for Blair, a former Navy admiral who took over as director of national intelligence only two weeks ago, but also marked the first detailed elaboration of the perspective of the US intelligence apparatus since the inauguration of President Barack Obama.

"The primary near-term security concern of the United States is the global economic crisis and its geopolitical implications," Blair declared in his opening remarks. He continued: "The crisis has been ongoing for over a year, and economists are divided over whether and when we could hit bottom. Some even fear that the recession could further deepen and reach the level of the Great Depression. Of course, all of us recall the dramatic political consequences wrought by the economic turmoil of the 1920s and 1930s in Europe, the instability, and high levels of violent extremism."

Blair described the ongoing financial and economic meltdown as "the most serious one in decades, if not in centuries."

"Time is probably our greatest threat," he said. "The longer it takes for the recovery to begin, the greater the likelihood of serious damage to US strategic interests."

The intelligence chief noted that "roughly a quarter of the countries in the world have already experienced low-level instability such as government changes because of the current slowdown." He added that the "bulk of anti-state demonstrations" internationally have been seen in Europe and the former Soviet Union.

But Blair stressed that the threat that the crisis will produce revolutionary upheavals is global. The financial meltdown, he said, is "likely to produce a wave of economic crises in emerging market nations over the next year." He added that "much of Latin America, former Soviet Union states and sub-Saharan Africa lack sufficient cash reserves, access to international aid or credit, or other coping mechanism."

Noting that economic growth in these regions of the globe had fallen dramatically in recent months, Blair stated, "When those growth rates go down, my gut tells me that there are going to be problems coming out of that, and we're looking for that." He cited "statistical modeling" showing that "economic crises increase the risk of regime-threatening instability if they persist over a one to two year period."

In another parallel to the 1930s, the US intelligence director pointed to the implications of the crisis for world trade and relations between national capitalist economies. "The globally synchronized nature of this slowdown means that countries will not be able to export their way out of this recession," he said. "Indeed, policies designed to promote domestic export industries - so-called beggar-thy-neighbor policies such as competitive currency devaluations, import tariffs, and/or export subsidies - risk unleashing a wave of destructive protectionism."

It was precisely such policies pursued in the 1930s that set the stage for the eruption of the Second World War.

Blair also raised the damage that the crisis has done to the global credibility of American capitalism, declaring that the "widely held perception that excesses in US financial markets and inadequate regulation were responsible has increased criticism about free market policies, which may make it difficult to achieve long-time US objectives." The collapse of Wall Street, he added, "has increased questioning of US stewardship of the global economy and the international financial structure."

The threat assessment also included evaluations of potential terrorist threats, the "arc of instability" stretching from the Middle East to South Asia, conditions in Latin America and Africa and strategic challenges from both China and Russia, centering in Eurasia. It likewise dealt with the war in Afghanistan, which the Obama administration is preparing to escalate, providing a scathing assessment of the Karzai regime in Kabul and the familiar demand for an escalation of the intervention in Pakistan. Nonetheless, the report's undeniable focus was on the danger that economic turmoil will ignite revolutionary challenges on a world scale.

Blair's emphasis on the global capitalist crisis as the overriding national security concern for American imperialism seemed to leave some of the Senate intelligence panel's members taken aback. They have been accustomed over the last seven years to having all US national security issues subsumed in the "global war on terrorism," a propaganda catch-all used to justify US aggression abroad while papering over the immense contradictions underlying Washington's global position.

The committee's Republican vice chairman, Senator Christopher Bond of Missouri, expressed his concern that Blair was making the "conditions in the country" and the global economic crisis "the primary focus of the intelligence community."

Blair responded that he was "trying to act as your intelligence officer today, telling you what I thought the Senate ought to be caring about." It sounded like a rebuke and a warning to the senators that it is high time to ditch the ideological baggage of the past several years and confront the real and growing threat to capitalist rule posed by the crisis and the resulting radicalization of the masses in country after country.

It may have been lost on some of those sitting at the dais in the Senate hearing room, but when Blair referred to a return to the conditions of "violent extremism" of the 1920s and 1930s, he was warning that American and world capitalism once again faces the specter of a revolutionary challenge by the working class.

There is no doubt that behind the façade of Obama, the US national security apparatus is making its counter-revolutionary preparations accordingly.

Including Blair, Obama has named three recently retired four-star military officers to serve in his cabinet. The other two are former Marine Gen. James Jones, his national security adviser, and former Army chief of staff Gen. Erik Shinseki, his secretary of veterans affairs. This unprecedented representation of the senior officer corps within the new Democratic administration is indicative of a growth in the political power of the US military that poses a serious threat to basic democratic rights.

A report that appeared in a magazine published by the US Army War College last November, just weeks after the election, indicates that the Pentagon and the US intelligence establishment are preparing for what they see as a historic crisis of the existing order that could require the use of armed force to quell social struggles at home.

Entitled "Known Unknowns: Unconventional 'Strategic Shocks' in Defense Strategy Development," the monograph insists that one of the key contingencies for which the US military must prepare is a "violent, strategic dislocation inside the United States," which could be provoked by "unforeseen economic collapse" or "loss of functioning political and legal order."

The report states: "Widespread civil violence inside the United States would force the defense establishment to reorient priorities in extremis to defend basic domestic order... An American government and defense establishment lulled into complacency by a long-secure domestic order would be forced to rapidly divest some or most external security commitments in order to address rapidly expanding human insecurity at home."

In other words, a sharp intensification of the unfolding capitalist crisis accompanied by an eruption of class struggle and the threat of social revolution in the US itself could force the Pentagon to call back its expeditionary armies from Iraq and Afghanistan for use against American workers.

The document continues: "Under the most extreme circumstances, this might include use of military force against hostile groups inside the United States. Further, DoD [the Department of Defense] would be, by necessity, an essential enabling hub for the continuity of political authority in a multi-state or nationwide civil conflict or disturbance." The phrase - "an essential enabling hub for continuity of authority" - is a euphemism for military dictatorship...

Markets

The markets this week (to Feb 16th)

	Previous week's close	This week's close	Change	% change
Gold (USD)	914.30	942.70	28.40	3.11%
Gold (EUR)	706.51	732.59	26.08	3.69%
Oil (USD)	40.17	37.95	2.22	5.53%
Oil (EUR)	31.04	29.49	1.55	4.99%
Gold:Oil	22.76	24.84	2.08	9.14%
USD / EUR	0.7727 / 1.2941	0.7771 / 1.2868	0.0044 / 0.0073	0.57% / 0.56%
USD / GBP	0.6763 / 1.4786	0.7008 / 1.4270	0.0245 / 0.0516	3.62% / 3.49%
USD / JPY	91.893 / 0.0109	90.750/ 0.0110	1.143 / 0.0001	1.24% / 0.92%
DOW	8,281	7,850	430	5.20%
FTSE	4,292	4,190	102	2.38%
DAX	4,645	4,413	231	4.98%
NIKKEI	8,077	7,779	297	3.68%
BOVESPA	42,756	41,674	1,082	2.53%
HANG SENG	13,655	13,555	100	0.74%
US Fed Funds	0.25%	0.25%	0.00	n/a
$ 3month	0.27%	0.29%	0.02	n/a
$ 10 year	2.99%	2.89%	0.10	n/a

Africa

Nigeria is cutting spending due to sharp drops in oil revenues.

Asia

Asian stocks fell last week amid a deteriorating outlook for corporate profits and doubts over whether U.S. stimulus measures will succeed in alleviating the financial crisis.

"Investors are disappointed with the lack of clarity on the U.S. bank-rescue plan," said Daphne Roth, Singapore-based head of Asia equity research at ABN Amro Private Bank, which manages about $27 billion of Asian assets. "We will see more earnings downgrades going into the next few months and that's going to drag down Asian stocks at least till the end of the first half."

India's currency strengthened on news that it will continue offering stimulus programs.

Rupee Strengthens as India May Step Up Efforts to Boost Growth

India's rupee strengthened the most in more than two weeks on speculation the government and the central bank will announce more measures next week to revive economic growth.

[ ] The government unveiled two stimulus packages and the central bank cut its key rate four times since Oct. 20.

"The rupee is stronger as the market expects additional measures to boost growth to be announced next week," said Sudarshan Bhatt, chief currency trader at state-owned Corporation Bank in Mumbai. "Such measures look inevitable after yesterday's industrial output report. The central bank may cut rates and help restructure loans of companies."

[ ]

Industrial production fell 2 percent in December, the most since 1993, after a revised 1.7 percent gain in November, the government said yesterday. India expects the $1.2 trillion economy will expand 7.1 percent in the fiscal year to March, the slowest pace in six years.

Record Low

The rupee will weaken almost 10 percent to a record low of 54 to the dollar by the end of the year as the worldwide credit crisis curbs foreign direct investment, HSBC Holdings Plc said.

The rupee may also extend last year's 19 percent slide as employers cut jobs overseas amid a global recession, reducing remittances from Indian workers abroad, Richard Yetsenga, HSBC's Hong Kong-based strategist, wrote in a research report today. The U.K. bank revised its rupee forecast from 45, HSBC's Singapore-based economist Robert Prior-Wandesforde, who co-wrote the report, confirmed in a phone call.

"We expect the slower moving remittance and FDI [Foreign Direct Investment] flows to now start to show the strain," wrote Yetsenga. "Our estimates suggest FDI into Asia could fall to roughly zero this year. While that may be overly pessimistic, the fall in FDI should certainly be spectacular for global reasons."

Overseas direct investment in India averaged $3.1 billion a month in 2008, compared with $1.3 billion in the previous year, government data show.

"The boom in FDI is long overdue, but cannot last, given the state of corporate finances globally," Yetsenga wrote.

Renault SA, France's second-largest carmaker, may abandon a factory project in the southern Indian city of Chennai, Chief Financial Officer Thierry Moulonguet said yesterday. The French company said it is reducing capital investment by 20 percent.

John Chan puts the vulnerabilities of export dependent Asian economies in perspective:-

Asia's export economies in free fall

Staggering falls in exports across Asia have shocked economic analysts and ended all claims that the global slump may be nearing its bottom. The IMF's growth forecast for Asia this year is just 2.7 percent - less than a third of the 9 percent growth rate of 2007. The prediction is a full percentage point less than during the 1997-98 Asian financial crisis.

IMA Asia analyst Richard Martin commented in the Australian: "It's a bit like watching a train wreck in slow motion. North Asia is suffering the biggest collapse in demand since World War II." Westpac bank's Richard Franulovich said that the "speed of the decline embedded in the latest Asia data is on par with the collapse in the US during the 1930s Depression."

Japan, the world's second largest economy, is already in recession and still declining. Japanese exports fell 35 percent in December from a year earlier, as the global demand for its cars, electronics and capital goods dried up. Industrial production plunged a record 9.6 percent, month on month, in December.

Bank of Japan chief economist Kazuo Momma warned this week that the economy was facing an "unimaginable" contraction, as analysts estimated that there was an annualised rate of contraction of 10 percent in the last quarter of 2008, even worse than the US. The government warned that 125,000 irregular workers, mainly in manufacturing, will lose their jobs in the six months to March, but an industry estimate put the figure far higher at 400,000.

China, the so-called "workshop of the world," is being hit particularly hard. Exports declined for the third consecutive month in January, falling 17.5 percent from a year earlier, after a 2.8 percent decline in December. Imports plunged even further - 43.1 percent, twice as much as December's 21.3 percent year-on-year drop, the General Administration of Customs said on Wednesday.

Because many of China's imports are inputs into the country's manufacturing exports, the sharp decline in imports indicates further falls in industrial activity. Imports of machinery and high-tech goods fell by roughly 40 percent, also spelling disaster for the countries that sell such components for Chinese factories to assemble. Shipments from Japan fell by 43.5 percent from a year earlier; those from South Korea were down 46.4 percent and from Taiwan, 58 percent.

Although many economists are predicting that China will still grow at 5-6 percent this year, these figures are no more reliable than the previous claims that China would continue to expand at a near-record pace. More than 20 million migrant workers have lost their jobs so far, with some analysts warning of 50 million more job losses if the economy deteriorates further.

India, the other economy previously touted as a possible bulwark against world depression, is suffering as well. Exports fell 24 percent in January. According to official data, one million Indian workers in the export sector have lost their jobs since September, when the global financial crisis erupted in the US. Textile, gem and jewelery workers have been worst affected. Another half a million workers are expected to lose their jobs by March.

Although better known for its IT outsourcing services, India has become a major Asian exporter in recent years. Its exports increased from 16.9 percent of India's GDP in 2002-03 to 24.8 percent in 2007-08. Export industries employ 150 million workers, the second largest sector after farming. India's economic growth for the fiscal year ending in March is officially projected to be 7.1 percent - down from 9.1 percent last year.

For the next fiscal year, economists believe the Indian growth rates will be near 6 percent at best. Citigroup estimated a growth rate of just 5.5 percent. Although India is less dependent on exports than most East Asian countries, its financial position is much weaker. New Delhi's public debt stands at 75 percent of its GDP, compared to just 18.5 percent in China, leaving less room for large stimulus packages.

South Korea's plight is equally stark. Exports, the main driving force of the economy, plunged 32.8 percent in January. Finance minister Yoon Jeung-hyun warned on Tuesday that the fourth largest economy in Asia would shrink by about 2 percent this year - a sharp revision from the previous official forecast of 3 percent growth. According to Yoon, this would mean the loss of 200,000 jobs in 2009. Even this figure is too optimistic compared to the IMF's forecast of 4 percent negative growth. Credit Suisse has projected as much as a 7 percent contraction.

Taiwan, the sixth largest Asian economy, saw its exports fall 44.1 percent in January from a year earlier - the biggest fall since records began in 1972. Imports plunged 56.5 percent in the same month. For an economy where exports account for 70 percent of GDP, the impact is devastating. Morgan Stanley has sharply revised down Taiwan's growth rate this year to minus 6 percent - down from the previous positive 0.5 percent. CLSA, a Hong Kong-based brokerage house, last week predicted an even greater contraction - 11 percent.

The export-dependent economies of South East Asia are also suffering. The IMF's projection for Philippines is just 2.25 percent this year, down from 4.6 percent last year and 7.1 percent in 2007. The official predication for Singapore, the region's trade and financial hub, in 2009 is a contraction of 5 percent - the deepest recession since the city-state was founded in 1965. Malaysia's exports in December plunged 14.9 percent from a year earlier, with exports to the US falling by 30 percent. Analysts expected the Malaysian economy to grow by just 1-1.5 percent in 2009, far lower than the government's target of 3.5 percent. Indonesia's central bank predicts the country's economy will slow to 4-5 percent in 2009 compared to 6.2 percent for 2008.

High saving rates and relatively secure financial institutions have not prevented the Asian economies from suffering massive losses. After the financial crisis of 1997-98, Asian countries strove to increase their exports in order to build large foreign currency reserves as a shield against further financial shocks. As a result, however, they have merely swapped dependence on global finance for reliance on global demand.

Credit Suisse analyst Cem Karacadag has estimated that net exports account for two-thirds of GDP in Hong Kong and Singapore, almost half in Malaysia and Thailand and one-third in Taiwan and South Korea. He calculated that, even without taking into account secondary impacts, every 10 percent fall in exports would cut 2 percentage points of growth in South Korea and Taiwan, and up to 7 percentage points in Hong Kong and Singapore.

Over the past decade, the export share of Chinese GDP doubled to 40 percent. With a vast supply of heavily-policed cheap labour, combined with infrastructure developed by the state, it became a final assembly point for transnational corporations. They supplied factories in China with components, raw materials and capital goods made elsewhere in Asia, transforming the region into a giant export machine. It appeared that China had replaced the US as the growth engine for many Asian countries.

In fact, as Jong Wha-Lee of the Asian Development Bank pointed out, the intra-regional trade disguised the fact that 60 percent of the final demand for Asian goods still came from advanced capitalist countries in North America, Europe and Japan. China's exports to the United States and European Union fell by 9.8 percent and 17.4 percent, respectively, in January. As the demand in the West has collapsed, the booming intra-trade, which involved mainly components, inputs and capital goods, has quickly evaporated.

The Korea Times complained last week: "China has been emerging as the biggest threat to the Korean economy" because the "high dependence on China has made the country particularly vulnerable to the emerging China risk". Korea's exports to China, much of them for re-export, fell 33 percent in December, and 46.4 percent in January, compared to a year earlier, due to the accelerating drop in global demand for "Chinese" goods.

Chinese officials have been loudly talking up the prospect of sparking a "rebound" by stimulating infrastructure spending and ordering state banks to increase lending. But analysts are skeptical that the state spending will boost private investment. The Morgan Stanley China economist Wang Qing told the Wall Street Journal: "Profits and profitability in 2009 will be very poor, and this is the key reason why I do not expect much private investment - especially in the manufacturing sector where China suffers from an overcapacity problem." He estimated that manufacturing investment would be zero this year, with a 12 percent drop in property investment.

The Financial Times on February 10 explained: "Most of all, China cannot escape the broader global economic environment. The government's fiscal stimulus was designed to keep the economy going until Western consumers recover. Yet the recent indications are that the global economy could be in for a more prolonged slump than first thought."

The same conclusion can be applied to all the stimulus packages across Asia. Most Asian countries are largely cheap labour platforms whose exports outweigh their relatively small domestic markets. Confronted by the global slump, each is trying to export more, which means taking market share at their neighbours' expense. This is causing rising trade tensions. India has started 17 investigations into Chinese imports since October, and imposed restrictions on Chinese steel, textiles and petrochemicals. In January, India banned Chinese toys imports for six months to protect its own toy industry.

Apart from pitting their "own" workers against other workers in neighbouring countries, the Asian elites have no understanding of, let along solution for, the economic crisis. Some have turned to the gods for answers. During the Chinese New Year a senior Hong Kong official selected a fortune stick on the city's behalf. It was the unluckiest, 27. "A fortune teller at Che Kung temple, shrouded in incense and consulting the heavens for inspiration, declared it meant Hong Kong could not isolate itself from global financial turmoil," the Financial Times reported.

The world's economies are like a group of people chained together and sliding down a mountain. No one economy can de-link and save itself, the inevitable result from decades of globalisation. The Chinese are stuck holding U.S. government bonds while they watch the deficit spending of the U.S. skyrocket. And there is nowhere else for them to put their money. As the director-general of China's Banking Regulatory Commissions said to the Americans last week, "We hate you guys."

China to stick with US bonds

China will continue to buy US Treasury bonds even though it knows the dollar will depreciate because such investments remain its "only option" in a perilous world, a senior Chinese banking regulator said on Wednesday.

China has used the dollars it accumulates selling manufactured goods to US consumers to accumulate the world's largest holding of Treasuries.

However, the increasing US budget deficit and its potential impact on the dollar have raised questions about the future Chinese appetite for US debt.

Luo Ping, a director-general at the China Banking Regulatory Commission, said after a speech in New York on Wednesday that China would continue to buy Treasuries in spite of its misgivings about US finances.

"Except for US Treasuries, what can you hold?" he asked. "Gold? You don't hold Japanese government bonds or UK bonds. US Treasuries are the safe haven. For everyone, including China, it is the only option."

Mr Luo, whose English tends toward the colloquial, added: "We hate you guys. Once you start issuing $1 trillion-$2 trillion [$1,000bn-$2,000bn] . . .we know the dollar is going to depreciate, so we hate you guys but there is nothing much we can do."

However, Mr Luo said Chinese officials would encourage its banks to finance domestic mergers and acquisitions rather than provide rescue finance to distressed financial companies in other countries: "There will be no bottom-fishing of financial institutions, particularly in the US, because there is a lot of uncertainty about the quality of the books."

Mr Luo said China intends to maintain its separation of investment and commercial banking based on its observations of the US after repeal of the Glass-Steagall Act that enforced a similar division of banking activities.

"To some extent, Glass-Steagall has fuelled the crisis," Mr Luo said. "The separation of commercial and investment banking is likely to stay longer [in China] than before." Like senior financial officials in other developing nations - such as Mohammad Al Jasser, vice-governor of the Saudi Arabian Monetary Agency - Mr Luo also spoke out against what he called America's laissez-faire capitalism.

"Government ownership was viewed as something negative but the pendulum is swinging the other way. Perhaps banking is [no different from] public utilities where government participation is necessary," he said.

"Deregulation in the US has gone a little bit too far. The market can't be omnipotent."

Eastern Europe

In Russia, the ruble rose as the governments attempts to defend it bore fruit. Eastern European economies continued to show signs of serious trouble as Estonia and Hungary announced that their economies contracted in the 4th quarter of 2008, and growth slowed sharply in the Czech Republic and Slovakia.

"The data was all pretty grim," said Neil Shearing, an emerging Europe analyst at Capital Economics in London. "The big point is it will become worse before it gets better. The region's economy may contract 3 percent this year, while the consensus in the market still seems to be for a 1 percent growth."

In fact, it looks like Eastern Europe is shaping up to be a key determinant in the next phase of the global financial crisis:-

European governments, the European Union and international financial organizations need to act fast on risks stemming form banks' exposure in the eastern part of the continent to avert an escalation of the credit crisis, Nomura Holdings Inc. said.

East European countries are struggling to refinance foreign currency loans taken out by borrowers during years of prosperity through 2007, when economic growth averaged at more than 5 percent. The International Monetary Fund, which has bailed out Latvia, Hungary, Serbia, Ukraine and Belarus, warned on Jan. 28 that bank losses may widen as "shocks are transmitted between mature and emerging market banking systems."

[ ]

As companies and consumers [ ]sought cheap loans, denominated mainly in euros and Swiss francs, external liabilities reached about 100 percent of gross domestic product in Poland and the Czech Republic and almost twice the national output in Hungary, according to figures compiled by Nomura.

Banks' Exposure

Euro region banks' exposure totals $1.25 trillion in the region, and including U.K., Swedish and Swiss banks' liabilities it pushes the figure to $1.45 trillion, Nomura said, citing figures from the Basel, Switzerland-based Bank of International Settlements.

"We find the absolute levels and some of the risks worrying," wrote Montalto. There's "a serious risk that these exposures will have grave consequences for the central and east European economies themselves as well as for the European banks that hold the ultimate risk."

Non-performing loans in the region rose to 8 percent, from 5 percent through last year, and Standard & Poor's has forecast they may top 25 percent on average.
The risks stemming from the level of exposure are aggravated by the slump in currencies in the region and the increasing default risks on repayments as more workers lose their jobs and companies scale back production and pay, Montalto wrote. The region will have a recession this year as exports collapse, the IMF has said.

'Upside Risks'

The "upside risks" to bad loans are "very large" as wages are falling and unemployment rising, Montalto said.

A group of six banks, including Italy's UniCredit SpA and Austria's Raiffeisen International Bank Holding AG, have pressed the European Union to organize financial aid for countries on its eastern fringes like Romania and Ukraine.

Austrian banks alone have lent 230 billion euros ($294 billion) in the region, equal to about 80 percent of the country's GDP, according to data compiled by the Bank for International Settlements.

The banks, which also include Italy's Intesa SanPaolo SpA, Austria's Erste Group Bank AG, Societe Generale SA of France and KBC Groep NV in Belgium, requested a 12-point assistance program for the region ranging from foreign-exchange loans for banks to guarantees for customer deposits from organizations such as the European Bank for Reconstruction and Development, according to a Dec. 1 letter sent to the European Commission.

"There does not currently seem to be a consensus about a solution, with opinion split on whether any bailout should be at the EU or member-state level and where funding could come from," Montalto said. "With continued weakness in currencies in the region and a worsening economic picture, this issue is not going to go away on its own."

The EBRD, the World bank and euro-area governments should provide capital to banks, Montalto wrote. The EBRD is in talks about providing financial support to OTP Bank Nyrt., Hungary's largest bank.

The Ukrainian finance minister resigned as that country's credit rating and currency fell.

Hryvnia Drops After Ukraine Rating Downgraded, Minister Resigns

Ukraine's hryvnia weakened against the dollar after Fitch Ratings downgraded the country yesterday and the finance minister resigned, deepening concern the former Soviet republic won't be able to shore up the economy.

The currency, which has slumped 52 percent versus the dollar over the past six months, dropped 0.6 percent to 8.0550 per dollar by 1:46 p.m. in Kiev, paring a 0.9 percent advance this week. It lost 0.9 percent to 10.3549 per euro.

Fitch yesterday reduced Ukraine's credit rating to B, five levels below investment grade, the same day Finance Minister Viktor Pynzenyk submitted his resignation after saying the post had become "hostage" to politics. Pynzenyk objected to the parliament-endorsed budget for 2009, which plans for a budget deficit of 2.97 percent of gross domestic product in violation of the country's $16.4 billion loan agreement with the International Monetary Fund.

"It's negative news, it's unwelcome news as the situation in Ukraine is deteriorating," said Ali Al-Eyd, an emerging markets fixed-income analyst in London at Citigroup Inc. "Ukraine is going to be hit with a vicious slowdown."

The political instability in Ukraine during the worst global financial crisis since the Great Depression puts the country at risk of a banking and currency crisis, Fitch said yesterday. The outlook for the nation's ratings was kept at "negative," indicating that it may be reduced further.

Fitch predicts the economy will shrink 4.5 percent this year, and Citigroup may revise its current forecast of a 3 percent contraction "much lower," Al-Eyd said. Ukraine, dependent on exports of steel and other products as the global economic slowdown depresses demand, is struggling to fund a $12.3 billion current-account deficit amid the seizure in credit markets.

In what many might consider an upside to all this bad economic news out of Eastern Europe, the number of Russian billionaires fell by half.

Western Europe and UK

Meanwhile, at least publicly, European Central Bank officials continue to downplay the crisis.

ECB Policy Makers Signal no Rush to Start Unconventional Tools

European Central Bank policy makers signaled they are in no rush to step up their response to the credit crisis by purchasing securities and downplayed concerns about the fiscal health of some euro-region nations.

"We have already introduced a number of unconventional measures," ECB governing council member Axel Weber said in Rome today, echoing comments by President Jean-Claude Trichet, Italy's Mario Draghi and France's Christian Noyer. Trichet said "no decision has been taken yet on top of the non-standard action" announced so far.

The ECB is coming under pressure to follow the Federal Reserve and the Bank of England's policy to buy government or corporate debt as Europe faces its worst recession in decades. Investors are also increasing bets that the price of banking bailouts and stimulus packages will strain public finances and hobble governments' ability to meet bond payments.

Ireland yesterday led a surge in the perceived risk of holding European government bonds, with credit-default swaps on Irish debt rising 7.5 points to a record 355. Trichet indicated that investors' concerns may be overdone, saying that market expectations go "up and down."

"I would say that the euro area is not in question in any respect," Trichet said after meeting officials from the Group of Seven nations. "I have absolutely full confidence that the governments at stake will continue to take the appropriate decisions to have sustainable policy, particularly on the fiscal side."

ECB officials have so far resisted pledging to buy securities to increase the supply of money in the economy and grease credit markets. Unlike the U.S. and U.K., which have indemnified their central banks against any default risk, it is also unclear how the ECB could be covered.

[ ]

German Finance Minister Peer Steinbrueck said that unprecedented liquidity injections may stoke inflation pressures in the future. Earlier, ECB colleague Juergen Stark said in Tutzing, Germany that the central bank is prepared to act "but always with appropriate caution."

Less Aggressive

The ECB has also been less aggressive than the Fed and the Bank of England in reducing rates. The Fed has cut the benchmark rate to close to zero, while the Bank of England has lobbed off 400 basis points since October, bringing the key rate to 1 percent.

While the ECB lowered its benchmark down to 2 percent from 4.25 percent in the past five months, it's still the highest among the G-7 group of nations.

The ECB last year more than doubled the amount of funds offered in its longer-term refinancing operations and increased the provision of dollars and Swiss francs. In addition, it loosened its rules on the collateral it accepts when making loans.

The U.K. is projecting a 3.3% shrinkage in its economy this year, the worst since 1980.

Inevitably politicians, seeking to retain their power, are increasingly playing to their domestic audiences desire for their governments to focus their economic policies at home. Nations now find themselves in the carefully laid traps that make up the web known as the global economy. In Europe, without the ability to have any influence on their currency, politicians are reverting to old fashioned protectionism. Such measures threaten both other countries' exports and, possibly, the survival of the European Union itself.

Europe turns to protectionism as industry plummets

For some time, leading European politicians have attempted to put a positive gloss on declining figures for European production, but the results released Thursday ushered in a new tone. European Union Industry Commissioner Günter Verheugen told the Financial Times Deutschland, "The extent and speed of the crisis is completely new."

One day previously, an Ifo Institute for Economic Research survey revealed that business sentiment within the 16-country common-currency eurozone declined for the sixth consecutive quarter, plunging to its lowest point since the survey began 16 years ago. The European Central Bank (ECB) also issued a warning that the recession gripping Europe will not be short-lived. Rather, it will be a "long-lasting and clear downturn," the ECB said.

The response of the individual European nations to the growing crisis has been to embrace a raft of protectionist measures. Italian Premier Silvio Berlusconi recently warned appliance maker Indesit SpA not to transfer production and jobs to Poland, and in Britain, trade unions and politicians are demanding "British jobs for British workers."

On Wednesday, the acting EU Council president, Czech Prime Minister Mirek Topolanek, appeared before the press in Brussels and warned of a "protectionist race" in Europe, while acknowledging that national economies in the European Union were being hit hard by the international crisis and losing ground with unanticipated speed.

[ ]

After a meeting with EU Commission President José Manuel Barroso, Topolanek described the situation in Europe "as worse than it has ever been." The confidence of citizens in the economic and political system had been shaken, he said, and warned that the battening down of national markets endangered the European domestic market and the world economy.

The Süddeutsche Zeitung echoed the statements of the EU Council president, writing, "Any politician seeking to solve the economic crisis by protectionist measures only worsens the situation."

Barroso also warned against states going it alone. European heads of state and government should put an end to any "nationalist navel gazing," he said. Otherwise, there was a danger of "intensifying the powerful downward trend."

[ ]

Last Wednesday, the French automaker Peugeot announced it was shedding at least 11,000 jobs, and one day later, Renault announced its own plans to cut its workforce by 9,000. These job cuts have been agreed to by the French government and trade unions and are bound up with the announcement by French President Nicolas Sarkozy that he plans to subsidise domestic automakers with the sum of €6 billion.

Sarkozy declared that, in his opinion, it was irresponsible "to continue to manufacture French cars in the Czech Republic." He demanded a halt to the transfer of production to other countries. "If we give financial aid to the automotive industry," he said, "we do not want them to set up a factory in the Czech Republic again." He also urged the carmakers to support French industries involved in supplying parts and services to French auto companies.

Czech Prime Minister Topolanek reacted sharply to this openly protectionist policy and called for a special European summit to block it and similar policies.

German Chancellor Angela Merkel (Christian Democratic Union - CDU) also criticised the French action. The defence of free trade and the European domestic market is of crucial importance, Merkel said.

The German economy, which is heavily dependent on its export industries, would be especially vulnerable to any growth of protectionist measures in Europe.

Sarkozy defended his decision and drew attention to the fact that the German chancellor had rejected a joint European stimulus programme just a few weeks before. Now, every government was forced to take its own measures to deal with the crisis, he said. He added that the latest German stimulus programme includes many measures aimed at subsidising German enterprises.

The conflict between Berlin and Paris runs deep. In his role as EU Council president last year, Sarkozy repeatedly raised the demand for an "economic administration" for the eurozone. He made it quite clear that he regarded himself as best suited to head such an administration.

Supported by a majority of the 16 eurozone countries, Sarkozy is seeking to compel the German government to take more responsibility for financial policy. According to the Élysée Palace, Germany, as the continent's biggest national economy, must contribute much more to managing the crisis.

The German government wants precisely to prevent such a development. It regards itself better prepared for the crisis than other euro countries due to the labour market reforms introduced by the previous Social Democratic-Green government, which slashed welfare payments and opened the way for the creation of a huge low-wage sector in Germany.

Backed by the country's business federations, the Merkel government is seeking to exploit the crisis to strengthen Germany's dominant role in Europe. Berlin is vehemently opposed to taking any responsibility for Europe's "weak states" - i.e., those countries that have thus far failed to implement drastic social and welfare cuts.

Behind the German chancellor's appeals for adherence to "free trade" and rejection of protectionism lie the egoistic interests of the German business elite, which profits most from the European domestic market.

The varying economic performances of individual euro countries and the absence of a uniform financial and economic policy have led to increasing discrepancies ("spreads") between the government loans of the euro countries. In mid-January, Greece had to take out a new government loan at an interest rate well above the 3 percent levied on German government securities. Financial experts have said that the trend of rising spreads has "definitely not stopped" and warn that it could have explosive consequences for the fate of the euro as a common currency.

When the chairman of the euro group, Luxembourg Finance Minister and Prime Minister Jean-Claude Juncker, suggested introducing eurobonds to allow weaker member states access to credit on the basis of a pan-European solution, his proposal was immediately rejected by German Finance Minister Peer Steinbrück (Social Democratic Party - SPD). Instead, the German government is seeking to use its EU industry commissioner, Günter Verheugen, to force member states to implement budget cuts and strict austerity policies.

In view of increasing tensions, the EU presidency and the European Commission have announced plans for no fewer than three separate summits in the coming three months. On March 1, the heads of state and government will meet in Brussels to "coordinate national stimulus packages." The agenda is to include the struggle against protectionist tendencies, measures to revive the circulation of credit, the handling of "toxic" securities, and policies directed against the rise of unemployment. Three weeks later, the regular spring summit of the EU takes place in Brussels, which is also likely to concentrate on the economic and financial crisis. In May, the Czech council president has invited member countries to Prague for an employment summit.

Behind this summit frenzy are fears of a possible break-up of the European Union and an escalation of working class resistance to mass unemployment and growing poverty.

Latin America

Argentina Unlikely to Pay Back Paris Club During Global Slump

Argentina is unlikely to pay back $6.7 billion of defaulted debt owed to Paris Club creditors until the global recession shows signs of easing, a government official said.

It would be a mistake to drain the country's foreign reserves to pay back the debt amid the global credit crisis, said the official, who declined to be identified in accordance with government policy. He said the government is comfortable with its current foreign reserve level of $47.1 billion.

Argentina continues to negotiate with the Paris Club, an informal association of creditors that includes the U.S., Germany, Italy and Japan, the official said.

President Cristina Fernandez de Kirchner had said on Sept. 2 that the government would tap central bank reserves to pay off the Paris Club, a move that would help companies obtain financing as growth falters in South America's second-biggest economy.

Signs of the Economic Apocalypse, 9-22-08

From SOTT.net:

Gold closed at 864.70 dollars an ounce Friday, up 12.5% from $768.70 for the week. The dollar closed at 0.6913 euros Friday, down 1.7% from 0.7032 at the close of the previous week. That put the euro at 1.4466 dollars compared to 1.4221 the week before. Gold in euros would be 597.75 euros an ounce, up 10.6% from 540.54 at the close of the previous Friday. Oil closed at 104.55 dollars an ounce Friday, up 3.8% from $100.69 at the end of the week before. Oil in euros would be 72.27 euros a barrel, up 2.1% from 70.80 for the week. The gold/oil ratio closed at 8.27 Friday, up 8.4% from 7.63 at the close of the previous week. In U.S. stocks, the Dow closed at 11,388.44 Friday, down 0.3% from 11,421.99 at the close of the previous Friday. The NASDAQ closed at 2,273.90 Friday, up 0.6% from 2,261.27 for the week. In U.S. interest rates, the yield on the ten-year U.S. Treasury note closed at 3.81%, up nine basis points from 3.72 the week before.

What a week! It began with Treasury Secretary Henry Paulson’s decision to let Lehman Brothers go bankrupt. Then news began to come out on Sunday and Monday about the shaky finances of the insurance giant AIG. Then the Federal Reserve took over AIG in exchange for an $85 billion loan. So the stock markets crashed as fear an panic spread, only to recover late in the week as the rescue plan to end all rescue plans was announced. They even brought Bush out of hiding to announce it. When the details were released, everyone was shocked. The U.S. government will be on the hook for at least $700 billion, but probably for more than a trillion. The taxpayers will be forced to buy whichever bad mortgage securities Henry Paulson tells them to. In other words, Bush’s friends will get bailed out again by the rest of us. Oh, also, short selling of financial firms’ stocks was banned.

Where will all this lead? It could go two ways. Since now the entire U.S. government and all the taxpayers will own shaky mortgages, if they decide to pay U.S. workers more, housing prices can start to rise again and the collapse can be prevented. If not it will probably the end of the U.S. dollar, its replacement by the Amero, the new currency of a North American Union ruled by U.S. military’s Northern Command and Blackwater Consulting. Unfortunately, given who is calling the shots, the latter plan seems more likely.

Before we look at some startling evidence for the latter scenario, let’s look at some commentary on the events of the past week. The best and calmest summary comes once again from Barry Grey:

US government to bail out Wall Street

Barry Grey

20 September 2008

The Bush administration on Friday announced plans for a massive and unprecedented federal bailout of the US banking system. In separate appearances Friday morning, Treasury Secretary Henry Paulson and President Bush announced a series of measures to shore up collapsing financial markets and called on Congress to pass legislation next week to use, in Paulson’s words, “hundreds of billions” of taxpayer dollars to buy virtually worthless mortgage-backed assets that cannot be sold on the market from banks and other financial institutions.

Paulson said he would meet over the weekend with congressional leaders to lay out the details of the government plan.

With this plan, the full cost of the immense debts piled up by the banks will be imposed on the American people. It will shift the banks’ liabilities onto the federal government, sharply increasing government budget deficits and the US debt, a process that can only further erode the creditworthiness of the United States and place a bigger question mark on the value of the US dollar.

In the past week alone, the US Treasury has announced cash injections into the Federal Reserve Board of $200 billion to bolster the sagging balance sheet of the central bank, which has already expended hundreds of billions in loans and subsidies to the major Wall Street banks and put out another $85 billion in the takeover this week of the insurance giant American International Group.

The presidential candidates of both major parties, Republican Senator John McCain and Democratic Senator Barack Obama, quickly signaled their support for the wholesale bailout of the banks and big investors, and prominent congressional Democrats issued assurances that they would obey the demands of Paulson, Federal Reserve Board Chairman Ben Bernanke and Bush and pass the required legislation by the end of next week.

The immediate line-up of both parties and the media behind the bailout plan for Wall Street stands in the starkest contrast to their indifference and inaction in regard to the plight of millions of American working people, who face a rising tide of home foreclosures, layoffs and sinking living standards. When it comes to the social needs of the people, the universal cry from corporate America and the two parties is, “There is no money,” but when the fortunes of the financial elite are threatened, the full power of the government and unlimited resources are marshaled virtually at a moment’s notice.

There was no suggestion in the statements of Bush and Paulson of any relief for the working class—nothing to stop home foreclosures or help those who have already lost their homes. Rather, hundreds of billions—and more likely trillions—of dollars in public funds will be used to prop up the banks.

The resulting bankrupting of the government will be used to justify a brutal assault on what remains of social programs, including Medicaid, Medicare and Social Security, and demand even greater financial “sacrifices” from workers, whether the next administration is headed by Obama or McCain. Nothing could more clearly demonstrate that behind the façade of American democracy there stands a dictatorship of big business.

Paulson made his announcement following a meeting Thursday night, with Bernanke and Securities and Exchange Commission Chairman Christopher Cox also in attendance, along with congressional leaders from both parties. At the meeting, Paulson warned that the US and global financial system was on the brink of collapse and outlined in general terms the plan to set up some form of government agency to take “illiquid” mortgage-backed securities off of the balance sheets of the banks.

News of the plan first broke Thursday afternoon, at a point when a massive injection of liquidity by the Federal Reserve and central banks in Europe, Canada and Japan had failed to unfreeze credit markets that had collapsed over the previous days. The Fed loaned $180 billion to the other central banks and then added another $120 billion in an attempt to get banks to lend to one another and to other companies, under conditions where confidence in the financial markets and major institutions had fallen so sharply that credit markets had ceased to function. But instead of lending the fresh money to other companies, the big banks were hoarding it to protect themselves against possible default.

The breakdown in the world capitalist system—widely acknowledged to be the worst crisis since the 1929 stock market crash and heading toward another Great Depression—came in the wake of the US government takeover of the mortgage giants Fannie Mae and Freddie Mac less than two weeks ago and the collapse this week of Wall Street icons Lehman Brothers and Merrill Lynch, followed on Tuesday by the US takeover of American International Group.

In the aftermath of these developments, other major US banks had come under immense pressure and were facing bankruptcy, including the investment bank Morgan Stanley and the savings and loan giant Washington Mutual. Both were scrambling to find buyers as their share prices plummeted. The domino effect of falling banks was threatening the biggest US investment bank, Goldman Sachs, headed by Paulson prior to his becoming treasury secretary, whose stock had suffered enormous losses in the course of the week.

The crisis reached the tipping point on Tuesday and Wednesday when major US money market funds announced losses and some were forced to close. This sparked a growing run on the funds, with $78.7 billion withdrawn from the largest funds on Wednesday and, according to one industry estimate, a total of $145.3 billion over a two-day period.

Money market funds are considered the safest form of investment, and tens of millions of Americans have their savings in them. More immediately, from the standpoint of Wall Street, the funds pump money into credit markets by buying short-term IOUs issued by banks and companies, called “commercial paper.” The growing crisis of the money market funds threatened to collapse the commercial paper market, precipitating a chain reaction of defaults and bankruptcies across the economy.

“It’s the ultimate nightmare to have a run on the money markets—that is truly Armageddon—and they’re not going to allow that to happen,” said Paul McCulley at Pacific Investment Management Co.

The Dow Jones Industrial Average had already lost nearly 800 points in the first three trading days of the week, and by Thursday afternoon a rally sparked by the coordinated action of the Fed and other central banks that morning was faltering. At about 3 PM news broke of the government’s plan for a bailout of the banks, the floor of the New York Stock Exchange erupted in cheers, and the market immediately reversed itself and rocketed upward in a frenzy of buying.

In the final hour of trading, the Dow Jones Industrial Average recouped most of Wednesday’s 449-point loss, rising 410.03 points in the biggest percentage gain in almost six years. From its midday low to its late-afternoon high, shortly before the finish, the Dow swung 617 points.

The biggest winners were the financial stocks, including Morgan Stanley and Washington Mutual, which lurched from heavy losses to big gains.

On Friday morning, the government announced a series of immediate measures to bail out the markets, including a temporary ban on short-selling (betting on a fall in prices) of financial stocks and a $50 billion government program to insure money market funds. The Treasury Department also announced that Fannie Mae and Freddie Mac, now under government ownership, would increase their purchases of mortgage-backed securities and the Treasury would directly buy up a larger number of such assets. The Fed added that it would extend low-cost loans to the banks to unfreeze the commercial paper market.

These moves and the statements of Paulson and Bush set off another orgy of buying on the stock exchange, with the Dow closing up 368.75 for the day.
In his statement, Paulson said “comprehensive” action was needed “to address the root cause of our financial system stresses. The underlying weakness in our financial system today is illiquid mortgage assets that have lost value as the housing correction has proceeded.”

This is a lie. The root cause of the crisis is the unbridled parasitism of American capitalism, which over a period of decades has dismantled huge sections of industry in order to reap super profits for the rich by means of financial speculation and fraud, based on a colossal buildup of debt. Now the bill is being passed to the American people.

Bush, flanked by Paulson, Bernanke and Cox, called for a government bailout of Wall Street in the name of “our system of free enterprise.”

“There will be ample opportunity to debate the origins of this problem,” he said. “Now is the time to solve it.”

There will, in fact, be no debate or discussion. Nobody will be held accountable for the greatest financial scandal in world history. There will be no penalties. No one who made tens and hundreds of millions from the plundering of America will be forced to give back a dime.

All of the financial resources of the United States are being placed at the disposal of Wall Street and every American citizen, without being asked, is being given the responsibility for covering the debts of the richest people in the country.

Certainly no debate or resistance will come from the supposed political opposition—the Democratic Party. Speaking Friday in Miami, Obama said he fully supported the bailout plan. “John McCain and I can continue to argue about our different economic agendas for next year, but we should come together now to work on what this country urgently needs this year,” he said.

Obama is no less bound to Wall Street than his Republican opponent. In fact, he has received more campaign money from the financial industry—$22.5 million—than McCain, who has taken in $19.6 million.

Democratic congressional leaders lined up Friday to back the administration plan. New York Senator Charles Schumer, who chairs the Joint Economic Committee, said he was optimistic that Congress could approve the package in a week.
House Financial Services Committee Chairman Barney Frank, Democrat of Massachusetts, said his panel could hold a vote on the package as soon as Wednesday. “They said they would like legislation to do it, and there was virtually unanimous agreement that there would be legislation to do it,” said Frank.

Rep. Nancy Pelosi, the Democratic speaker of the House of Representatives, added, “We hope to move very quickly—time is of the essence.”

All of those involved in pushing through this scheme to funnel the entire wealth of the country into the coffers of the financial elite have direct financial stakes in the outcome. Paulson made hundreds of millions of dollars as chairman of Goldman Sachs. Pelosi reportedly has major investments in American International Group. Many of the congressional leaders of both parties are themselves multi-millionaires and rely on handouts from big business to get elected. They are all ruled by personal interests that reflect the interest of the American ruling class.

The result of the government moves announced Thursday and Friday has already been to not only cover the debts of the super-rich, but to expand their stock portfolios and bank accounts by millions more through the run-up of share prices.

As for the mother of all bailout plans itself, even more shocking than the dollar amount were the terms. Glenn Greenwald summarizes:

Here is the current draft for the latest plan. It's elegantly simple. The three key provisions: (1) The Treasury Secretary is authorized to buy up to $700 billion of any mortgage-related assets (so he can just transfer that amount to any corporations in exchange for their worthless or severely crippled "assets") [Sec. 6]; (2) The ceiling on the national debt is raised to $11.3 trillion to accommodate this scheme [Sec. 10]; and (3) best of all: "Decisions by the Secretary pursuant to the authority of this Act are non-reviewable and committed to agency discretion, and may not be reviewed by any court of law or any administrative agency" [Sec. 8].

Put another way, this authorizes Hank Paulson to transfer $700 billion of taxpayer money to private industry in his sole discretion, and nobody has the right or ability to review or challenge any decision he makes.

More commentary from the Housing Panic blog:

The end of America as you knew it is at hand. It was a good 232 year run. But it is about to be stolen in the night.

America is about to be legally stolen from the people, and given to a very small group of powerful men.

Yes, HP can be a bit dramatic sometimes.

This is not one of those sometimes.

The Patriot Act of Finance, otherwise known as Paulson's $700 billion bailout bill, if passed in its present form will be the nail in the coffin for an America by, for and of the people.

Just like the Patriot Act appeared to be written before 9/11, so does this Patriot Act of Finance appear to be written before the housing crash. And yes, both were rushed through a panicked Congress and complacent media in the middle of the night.

A nation founded by the people, for the people will be given to a very select group of bankers. Legally. Without a shot fired. Because Americans were too distracted and too dumb to know what was going on.

Brilliant.

Here's how it will be done:

1) The key line in the proposed bill is this one:

"The Secretary's authority to purchase mortgage-related assets under this Act shall be limited to 700,000,000,000 dollars outstanding at any one time"

What this does is give Hank Paulson, acting as an emperor with unchecked control over the nation's treasury, a $700 billion line of credit in which he can buy up toxic debt for whatever price he'd like to pay, $700 billion at a time.

In other words - he could buy trillions. Trillions and trillions and trillions. Buying and selling, buying and selling.

He can sell the junk he buys from his banker friends for whatever price he wants, saddling the taxpayers with the loss. He keeps this process going, using his $700 billion credit card. Buy for 60 cents on the dollar, sell for 30 cents on the dollar. Buy for 80 cents on the dollar, sell for 5 cents on the dollar. He's in charge.

$700 billion folks IS JUST THE LINE OF CREDIT. He can purchase trillions and trillions of bad debt with this credit card, as long as only $700 billion is OUTSTANDING at any one time.

2) Hank Paulson, CEO of Goldman Sachs on leave, has complete and total control over the nation's treasure. He would be unchecked by Congress, unchecked by the President. He will be king. Here's the text:

"The Secretary is authorized to take such actions as the Secretary deems necessary to carry out the authorities in this Act, including, without limitation"

Using this power, Hank Paulson of Goldman Sachs could pay Goldman Sachs anything he wanted for their mortgage assets. Let's say the market value was 20 cents on the dollar. Hank Paulson could pay them 100 cents on the dollar. Its his decision and his alone. No oversight. No limitations. Hank Paulson could simply give the nation's treasure to Goldman Sachs.

Get it now?

3) Deputizing the banks and investment banks as "agents of the government". Seriously. Here's the text:

"Designating financial institutions as financial agents of the Government, and they shall perform all such reasonable duties related to this Act as financial agents of the Government as may be required of them"

4) Have no outside control over the firesale of assets and loss to the taxpayer. Again, Hank Paulson and Hank Paulson alone shall be in control. No auditors. No oversight. No multiple bids. No nothing. Hank Paulson and Hank Paulson alone. Here you go:

"Sale of Mortgage-Related Assets. The Secretary may, at any time, upon terms and conditions and at prices determined by the Secretary, sell, or enter into securities loans, repurchase transactions or other financial transactions in regard to, any mortgage-related asset purchased under this Act."

5) Hank Paulson has final say. Hank Paulson knows what's best. Hank Paulson cannot be reversed. Hank Paulson cannot be sued. Hank Paulson is king.

"Decisions by the Secretary pursuant to the authority of this Act are non-reviewable and committed to agency discretion, and may not be reviewed by any court of law or any administrative agency"

So, what can you do? Normally here I'd say contact your corrupt Congressman or Senator. Contact the media. But folks, Congress has been bought. The media have been bought.

The American people have lost.

Deal with it.

So unless there's rage in the street, which there won't be - the new Fall TV season is starting - it's over. They win. In eight short years, they took everything they wanted. And nobody could stop them.

The only hope, for the hopeful? That we can run out the clock, and this bill doesn't pass until Bush and Paulson are gone. But if that's the case, and the bill does pass after January 2009, then the question is - who do you trust more - the outsider or the insider. And with this much on the line, will the outsider be allowed to win?

If this bill does pass ASAP, well, then watch Paulson get busy with his new credit card as fast as he can. He only has four more months. He'll be buying up crap as fast as he can in a desperate and reckless orgy of greed.

Regardless of how this plays out, prepare the best you can. Know what is happening in your former country, and do what is best for you and your family to survive.

I'm off to go find my tin foil hat now. I'm not usually one for conspiracy theories.

Until now.

Here is Mike Whitney on the consequences:

Full-Spectrum Breakdown: Grasping at Straws

Mike Whitney

September 20 / 21, 2008

On Friday morning, Senator Christopher Dodd, the head of the Senate Banking Committee, was interviewed on ABC's “Good Morning America.” Dodd revealed that just hours earlier at an emergency meeting convened by Secretary of the Treasury Henry Paulson and Federal Reserve chairman Ben Bernanke, lawmakers were told that "We’re literally maybe days away from a complete meltdown of our financial system.” Dodd added somberly, that in his three decades of serving in public office, he had "never heard language like this.”

The system is at the breaking point, and despite Wall Street's elation from the proposed $1 trillion dollar bailout to remove toxic mortgage-backed debt from banks balance sheets, the market is still correcting in what has become a vicious downward cycle. This cycle will persist until the bad debts are accounted for and written off for or until the exhausted dollar-system collapses altogether. Either way, the volatility and violent dislocations will continue for the foreseeable future.

Most people don't understand what happened on Thursday, but the build-up of bad news on the Lehman default and the $85 billion government takeover of AIG, triggered a run on the money markets and a freeze in interbank lending. The overnight LIBOR rate (London Interbank Offered Rate) more than doubled to 6.44 per cent. Bank of America reported overnight borrowing rates in excess of 6 per cent. Longer-term LIBOR rates also rose sharply. On Wednesday, jittery investors removed their money from money markets and flooded short-term US Treasurys for the assurance of a government guarantee on their savings even though interest rates had turned negative which means that their balance would actually shrink at the date of maturity. This is unprecedented, but it does help to illustrate how raw fear can drive the market.

The TED spread (the TED Spread measures market stress by revealing the reluctance of banks to lend to each other) widened and the credit markets froze in place. Borrowing three-month dollars on the interbank market and the U.S. Treasury's three-month borrowing costs widened five full percentage points. That's huge. The banking system shut down.

What does it mean? It means the Federal Reserve has lost control of the system. The market is driving interest rates now, and the market is terrified. End of story.

When the Fed announced its emergency program to dump $180 billion into the global banking system, short term Libor retreated slightly but long-term rates have remained stubbornly high. The noose continues to tighten. These rates are pinned to 6 million US mortgages which will be resetting in the next few years. That's more bad news for the housing industry.

The entire system is deleveraging with the ferocity of a Force-5 gale touching down in the Gulf, and yet, Henry Paulson has decided that the prudent thing to do is build levees around the system with paper dollars. Naturally, many people who understand the power of market-corrections are skeptical. It won't work. Libor is pushing rates upwards--that's the "true" cost of money. The Fed Funds rate (2 per cent) is supported by infusions of paper dollars into the banking system to keep interest rates artificially low. Now the extreme pace of deleveraging has the Fed on the ropes. Trillions of dollars of credit is being sucked into a black hole which is raising the price of money. It's out of Bernanke's control. He needs to step out of the way and let prices fall or the dollar system will vanish in a deflationary vacuum.

The problems cannot be resolved by shifting the debts of the banks onto the taxpayer. That's an illusion. By adding another $1 or $2 trillion dollars to the National Debt, Paulson is just ensuring that interest rates will go up, real estate will crash, unemployment will soar, and foreign central banks will abandon the dollar. In truth, there is no fix for a deleveraging market anymore than there is a fix for gravity. The belief that massive debts and insolvency can be erased by increasing liquidity just shows a fundamental misunderstanding of economics. That's why Henry Paulson is the worst possible person to be orchestrating the so called rescue project. Paulson comes from a business culture which rewards deception, personal acquisitiveness, and extreme risk-taking. Paulson is to finance capitalism what Rumsfeld is to military strategy. His leadership, and the congress' pathetic abdication of responsibility, assures disaster. Besides, why should the taxpayers be happy that the stocks of Morgan Stanley, Washington Mutual and Goldman Sachs surged on the news that there would be a government bailout yesterday? These banks are essentially bankrupt and their business models are broken. Keeping insolvent banks on life support is not a rescue plan; it's insanity.

No one has any idea of the magnitude of the deleveraging ahead or the size of the debts that will have to be written down. That's because 30 years of deregulation has allowed a parallel financial system to arise in which over $500 trillion dollars in derivatives are traded without any government supervision or accounting. These counterparty transactions are interwoven throughout the entire "regulated" system in a way that poses a clear and present danger to the broader economy. It's a mess. For example, there are an estimated $62 trillion of Credit Default Swaps (CDS) alone, which are basically insurance policies for defaulting bonds. AIG was as heavily involved in CDS as they were in regulated insurance products. So why would AIG sell CDS rather than conventional insurance?

Because, just like the banks, AIG could maximize its profits by minimizing its capital cushion. In other words, it didn't really have the capital to pay off claims when its CDS contracts began to blow up. If it had been properly regulated, then government regulators would have made sure that it was sufficiently capitalized with adequate reserves to pay off claims in a down-market. Now taxpayers will pay for the lawless system which men like "industry rep" Henry Paulson put in place. That's deregulation in a nutshell; a system that allows Wall Street banksters to create credit out of thin air and then run weeping to Congress when their swindles backfire.

Inflating the currency, printing more money, and increasing the deficits won't help. The bad debts have to be accounted for and liquidated. The Paulson strategy is to create another ocean of red ink while refusing to face the underlying problem head-on. This just further exacerbates the consumer-led recession which economists know is already setting in everywhere across the country. Demand is down and consumer spending is off due to falling home equity, job losses, and tighter lending standards at the banks. The broader economy does not need the added downward pressure from higher taxes, bigger deficits, or inflation. Paulson's plan is a band-aid approach to a sucking chest wound. The debts are enormous and the pain will be substantial, but the problem cannot be resolved by crushing the middle class or destroying the currency.

The malfunctioning of the markets and the freeze-over in the banking system are the outcome of a massive credit unwind instigated by trillions of dollars of low interest credit from the Federal Reserve which was magnified many times over via complex derivatives contracts and extreme leveraging by speculative investment bankers. This has generated the biggest equity bubble in history. That bubble is now set for a "hard-landing" which is the predictable result of an unsupervised marketplace where individual players are allowed to create as much credit as they choose.

Stef Zucconi has some fun with the statement sometimes heard in the mainstream media that no one could have predicted it would get this bad.

Rambling #2 - aka The Genius of Darwin

… As it happens, whether Darwin was right or wrong about the Evolution of Life makes virtually bugger all difference to most people's daily lives. However, Darwinism has affected the way people interpret tangible events that do impact on their daily lives.

Before Darwinism and the Enlightenment, most people believed that someone, or some entity, was responsible for everything that happened. The weather, the outcome of battles, the shape of tea leaves in a cup, the outcome of the throw of some dice; all was the Will of some god or other.

There was no such thing as chance. Everything that happened was the predetermined outcome of a controlling intelligence.

After Darwin, it was considered very clever to believe that everything of any importance or scale was the result of blind chance. Any pattern of events that appeared to be result of design was simply the result of blind chance combined with some kind of selection mechanism.

The result was that, in the act of denying the Hand of God in natural affairs, Darwinism also had the consequence of denying the Hand of Man in human affairs.

Anyone who suggests that the course of human, or natural affairs, may be the result of the interplay of intelligent planning and the natural selection of random events is now branded an irrational religious lunatic or a conspiracy theorist.

Shit just happens.

And if you don't believe that Shit just happens then you're only fit for the Funny Farm.

Because I'm a Loon I believe that the promotion of this kind of thinking, as an essentially exclusive model to explain how the world works, was an entirely deliberate course of action - but I would wouldn't I?

If you would like to witness a nice example of what I'm talking about, the mainstream coverage of the recent financial turmoil is a nice case history.

The unwavering message of the mainstream coverage of the 'Credit Crunch' is...

-- The impending implosion of our financial system is an unintended consequence of unreasoning, animalistic, undirected greed and fear.

-- No-one could have predicted it.

-- There is no predetermined objective.

-- The people responsible for our great financial institutions are honestly trying to unf*** things as best as they can for the Common Good.

The possibility that the crisis could have been deliberately engineered in some way, and that some very clever, powerful people knew exactly what was going to happen, is deemed so unlikely it is not raised even to be debunked.

Presumably, the fact that so many on-line Conspiranauts have been predicting this crash for years, in accordance with their insane models of how the world really works, is merely blind luck.

And if all those CCTV cameras, databases, terrorism laws and detention infrastructure are turned towards, instead of the shadowy terrorists, a general public f*****-off with being robbed blind that will be an unintended outcome too.

Speaking of “detention infrastructure,” here is a bit of news courtesy of the U.S. Army Times (thanks to Cryptagon for finding this), that might offer some clues as to the future planned for the U.S. if the economy should collapse:

Brigade homeland tours start Oct. 1

3rd Infantry’s 1st BCT trains for a new dwell-time mission. Helping ‘people at home’ may become a permanent part of the active Army

Gina Cavallaro

Monday Sep 8, 2008

The 3rd Infantry Division’s 1st Brigade Combat Team has spent 35 of the last 60 months in Iraq patrolling in full battle rattle, helping restore essential services and escorting supply convoys.

Now they’re training for the same mission — with a twist — at home.

Beginning Oct. 1 for 12 months, the 1st BCT will be under the day-to-day control of U.S. Army North, the Army service component of Northern Command, as an on-call federal response force for natural or manmade emergencies and disasters, including terrorist attacks.

It is not the first time an active-duty unit has been tapped to help at home. In August 2005, for example, when Hurricane Katrina unleashed hell in Mississippi and Louisiana, several active-duty units were pulled from various posts and mobilized to those areas.

But this new mission marks the first time an active unit has been given a dedicated assignment to NorthCom, a joint command established in 2002 to provide command and control for federal homeland defense efforts and coordinate defense support of civil authorities.

After 1st BCT finishes its dwell-time mission, expectations are that another, as yet unnamed, active-duty brigade will take over and that the mission will be a permanent one.

“Right now, the response force requirement will be an enduring mission. How the [Defense Department] chooses to source that and whether or not they continue to assign them to NorthCom, that could change in the future,” said Army Col. Louis Vogler, chief of NorthCom future operations. “Now, the plan is to assign a force every year.”

…They may be called upon to help with civil unrest and crowd control or to deal with potentially horrific scenarios such as massive poisoning and chaos in response to a chemical, biological, radiological, nuclear or high-yield explosive, or CBRNE, attack.

Training for homeland scenarios has already begun at Fort Stewart and includes specialty tasks such as knowing how to use the “jaws of life” to extract a person from a mangled vehicle; extra medical training for a CBRNE incident; and working with U.S. Forestry Service experts on how to go in with chainsaws and cut and clear trees to clear a road or area.

The 1st BCT’s soldiers also will learn how to use “the first ever nonlethal package that the Army has fielded,” 1st BCT commander Col. Roger Cloutier said, referring to crowd and traffic control equipment and nonlethal weapons designed to subdue unruly or dangerous individuals without killing them.

“It’s a new modular package of nonlethal capabilities that they’re fielding. They’ve been using pieces of it in Iraq, but this is the first time that these modules were consolidated and this package fielded, and because of this mission we’re undertaking we were the first to get it.”

The package includes equipment to stand up a hasty road block; spike strips for slowing, stopping or controlling traffic; shields and batons; and, beanbag bullets.

“I was the first guy in the brigade to get Tasered,” said Cloutier, describing the experience as “your worst muscle cramp ever — times 10 throughout your whole body.

“I’m not a small guy, I weigh 230 pounds ... it put me on my knees in seconds.”

The brigade will not change its name, but the force will be known for the next year as a CBRNE Consequence Management Response Force, or CCMRF (pronounced “sea-smurf”).

“I can’t think of a more noble mission than this,” said Cloutier, who took command in July. “We’ve been all over the world during this time of conflict, but now our mission is to take care of citizens at home ... and depending on where an event occurred, you’re going home to take care of your home town, your loved ones.”

While soldiers’ combat training is applicable, he said, some nuances don’t apply.

“If we go in, we’re going in to help American citizens on American soil, to save lives, provide critical life support, help clear debris, restore normalcy and support whatever local agencies need us to do, so it’s kind of a different role,” said Cloutier, who, as the division operations officer on the last rotation, learned of the homeland mission a few months ago while they were still in Iraq.

Some brigade elements will be on call around the clock, during which time they’ll do their regular marksmanship, gunnery and other deployment training. That’s because the unit will continue to train and reset for the next deployment, even as it serves in its CCMRF mission.

Should personnel be needed at an earthquake in California, for example, all or part of the brigade could be scrambled there, depending on the extent of the need and the specialties involved.

…“I don’t know what America’s overall plan is — I just know that 24 hours a day, seven days a week, there are soldiers, sailors, airmen and Marines that are standing by to come and help if they’re called,” Cloutier said. “It makes me feel good as an American to know that my country has dedicated a force to come in and help the people at home.”

Any questions?