WTO members
were induced to sign the agreement by threatening their access to global
markets if they refused; and they all did sign, except Brazil. Brazil was then threatened
with an embargo; but its resistance paid off, since it alone among Western
nations survived and thrived during the 2007-2009 crisis. As for the others:
"The new FSA pulled the lid off the Pandora's box of worldwide
derivatives trade. Among the notorious transactions legalized: Goldman
Sachs (where Treasury Secretary Rubin had been Co-Chairman) worked a secret
euro-derivatives swap with Greece which, ultimately, destroyed that nation.
Ecuador, its own banking sector de-regulated and demolished, exploded into
riots. Argentina had to sell off its oil companies (to the Spanish) and
water systems (to Enron) while its teachers hunted for food in garbage
cans. Then, Bankers Gone Wild in the Eurozone dove head-first into
derivatives pools without knowing how to swim--and the continent is now being
sold off in tiny, cheap pieces to Germany."
The Holdouts
That was the fate of countries in the
WTO, but Palast did not discuss those that were not in that organization at
all, including Iraq, Syria, Lebanon, Libya, Somalia, Sudan, and Iran. These seven
countries were named by U.S. General
Wesley Clark (Ret.) in
a 2007 "Democracy Now" interview as the new "rogue states" being targeted for take
down after September 11, 2001. He
said that about 10 days after 9-11, he was told by a general that the decision
had been made to go to war with Iraq. Later,
the same general said they planned to
take out seven countries in five years: Iraq, Syria, Lebanon, Libya, Somalia, Sudan, and Iran.
What did these
countries have in common? Besides being Islamic, they were not members either
of the WTO or of the Bank for
International Settlements (BIS).
That left them outside the long regulatory
arm of the central bankers' central bank in
Switzerland. Other countries later identified as "rogue states" that
were also not members of the BIS included North Korea, Cuba, and Afghanistan.
The body
regulating banks today is called the Financial Stability Board (FSB), and it is
housed in the BIS in Switzerland. In 2009, the heads of the G20 nations agreed
to be bound by rules imposed by the FSB, ostensibly to prevent another global
banking crisis. Its regulations are not merely advisory but are binding, and
they can make or break not just banks but whole nations. This was first demonstrated
in 1989, when the Basel I Accord raised capital requirements a mere 2%, from 6%
to 8%. The result was to force
a drastic reduction in lending by major Japanese banks, which were then the
world's largest and most powerful creditors. They were undercapitalized,
however, relative to other banks. The Japanese economy sank along with its banks
and has yet to fully recover.
Among other
game-changing regulations in play under the FSB are Basel III and the new
bail-in rules. Basel III is slated to impose crippling capital requirements on
public, cooperative and community banks, coercing their sale to large
multinational banks.
The "bail-in"
template was first tested in Cyprus and follows regulations imposed by the FSB
in 2011. Too-big-to-fail banks are required to draft
"living wills" setting forth how they will avoid insolvency in the absence
of government bailouts. The FSB solution is to "bail in" creditors -- including
depositors -- turning deposits into bank stock, effectively confiscating them.
The Public Bank Alternative
Countries laboring
under the yoke of an extractive private banking system are being forced into "structural
adjustment" and austerity by their unrepayable debt. But some countries have
managed to escape. In the Middle East, these are the targeted "rogue nations." Their
state-owned banks can issue the
credit of the state on behalf of the state, leveraging public funds for public
use without paying a massive tribute to private middlemen. Generous state funding allows them to
provide generously for their people.
Like Libya and
Iraq before they were embroiled in war, Syria provides free
education at all levels and free medical care. It also provides subsidized
housing for everyone (although some of this has been compromised by adoption of
an IMF structural adjustment program in 2006 and the presence of about 2
million Iraqi and Palestinian refugees). Iran too provides nearly free higher
education and primary health
care.
Like Libya and
Iraq before takedown, Syria and Iran have state-owned central banks that issue the national currency
and are under government control. Whether these countries will succeed in
maintaining their financial sovereignty in the face of enormous economic,
political and military pressure remains to be seen.
As for Larry
Summers, he went on to become president of Harvard, where he approved a
derivative bet on interest rate swaps that lost over $1 billion for the
university. He resigned in 2006 to
manage a hedge fund among other business activities, and went on to become State
Senator Barack Obama's key campaign benefactor.
Summers played a key
role in the banking deregulation that brought on the current crisis, causing
millions of US citizens to lose their jobs and their homes. Yet he is President
Obama's first choice to replace Ben Bernanke as Federal Reserve Chairman. Why? He
has proven he can manipulate the system to make the world safe for Wall Street;
and in an upside-down world in which bankers rule, that seems to be the name of
the game.
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