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The Fed’s policy of creating inflation: A massive wealth transfer

By Rodrigue Tremblay | Intrepid Report | February 16, 2011

“If once [the people] become inattentive to the public affairs, you and I, and Congress and Assemblies, Judges and Governors, shall all become wolves. It seems to be the law of our general nature, in spite of individual exceptions.”—Thomas Jefferson (1743–1826), 3rd US President

“If the American people ever allow private banks to control the issuance of their currency, first by inflation and then by deflation, the banks and corporations that will grow up around them will deprive the people of all their property until their children will wake up homeless on the continent their fathers conquered.”—Thomas Jefferson (1743–1826), 3rd US President

[Corruption in high places would follow as] “all wealth is aggregated in a few hands and the Republic is destroyed.”—Abraham Lincoln (1809–1865), American 16th US President (1861–65)

“When plunder becomes a way of life for a group of men living together in society, they create for themselves, in the course of time, a legal system that authorizes it and a moral code that glorifies it.”—Frederic Bastiat (1801–1850), French economist

“Inflation made here in the United States is very, very low.”—Ben Bernanke, Fed Chairman, Thursday, February 10, 2011

Let us begin with some macroeconomic indicators of reference.

In October 2010, the world value of total production (all Gross Domestic Products or GDPs) was estimated to be $61.96 trillion U.S. dollars at current nominal prices. The U.S.GDP was estimated at $16.11 trillion or 26 % of world GDP.

The two largest financial markets in terms of trading values are the global foreign exchange market (all currency markets) that has an average daily turnover in global foreign exchange transactions of about $4 trillion per day, and the privately-traded and mostly unregulated world derivatives market (all the derivatives markets) whose total world outstanding contracts has been estimated by the Bank for International Settlements in Switzerland to have a notional or face value of about $791 trillion in 2010.

In terms of real wealth, however, the two most important financial markets are the world bond market and the world stock market. In 2009, for example, the global bond market had an outstanding value of $US 91 trillion, with the U.S. bond market, at a value of $US 35.5 trillion, being the largest domestic bond market.–In mid-2010, the global equity market capitalization on regulated exchanges was estimated at $US 54.9 trillion, with the U.S. stock market having a value of some $US 19.8 trillion.

With such a large amount of financial assets, it is understandable that shifts in prices and interest rates have important effects on each market. If long-term interest rates go up, the nominal value of bonds goes down, and conversely, when interest rates decline, bond prices go up. As for stocks, many factors, such as company earnings, future profit prospects and inflation expectations, as well as political and taxation considerations, can influence their value. However, in general, they tend to fare better when short-term interest rates are low rather than high.

Sometimes, these two important financial markets move up together, especially in an environment of general disinflation, when interest rates tend to decline. They also tend to decline in tandem when real interest rates are on the rise, both bond prices and stock prices are then falling.

Sometimes, however, they can move in different directions, especially in the early phase of an inflationary period, such unexpected inflation being good for the stock market but bad for the bond market. Since last fall, this has been case, with the bond market falling and the stock market rising. The question is how long this decoupling can last.

And how does the Fed’s monetary policy fit into such an environment of oncoming inflation, and what should the Fed do?

Last November 3rd, the day after the 2010 mid-term elections, the Bernanke Fed announced that it will be embarking on a second round of quantitative easing (QE2), a fancy word for printing new money in exchange for government bonds—in other words, monetizing the public debt. It seems that Chairman Bernanke and the Fed board felt that months of lending to the large American banks trillions of dollars at close to zero interest rate, while paying them 0.25 percent to keep their excess reserves on its books, was not enough. They announced that the Fed would buy $600 billion-worth of additional Treasury bonds until June 2011, while reinvesting some $300 billion of principal payments from its portfolio holdings of mortgage-backed securities.

In doing so, the Fed professed to follow two somewhat interrelated objectives; 1- to lower long-term real interest rates in order to stimulate economic activity and create employment; and 2- to simultaneously raise inflation expectations in order to avoid the effect of deflation on the U.S. debt-leveraged economy. It should be remembered that from 1913 to 1977, the Fed had only one objective to pursue, i.e. price stability. Currently, however, the Fed has officially a double mandate. As a matter of fact, since 1977, the amended Federal Reserve Act of 1913 stipulates that the U.S. central bank should set its monetary policy in order to promote employment while maintaining price stability. It says that the Fed should promote “maximum employment, stable prices, and moderate long-term interest rates.”

Of course, a central bank in a fiat currency system can always create inflation through monetary policy and its printing press, but, in a market economy, it has little direct influence on job creation and on long-term interest rates. Employment depends on investments, innovation and market opportunities at home and abroad, while long-term interest rates depend on the amount of savings available, on investment demand and on long-term inflation expectations, all factors that are more or less out of the reach of a central bank. It is easy to delude oneself into thinking otherwise, but that’s the reality.

What the Fed can do with certainty, however, is to create inflation by expanding the monetary base and the money supply; it can also reign in inflation by draining liquidity from the system. If it goes overboard one way or the other, it can also create asset price bubbles by maintaining its managed short-run interest rates too low for too long, or it can create a credit crunch by putting the brakes too hard on credit creation, usually in a haste to correct its previous mistake.

These short-term gyrations in monetary policy are very destabilizing to the real economy, sometimes creating a temporary boom; sometimes precipitating an economic downturn. They are also accompanied by massive shifts of wealth between creditors and debtors.

In the first instance, when the Fed (or any central bank for that matter) creates too much money by buying financial assets and writing checks on itself, inflation and inflation expectations ensue. This pushes short-term interest rates down and long-term interest rates up (a steepening of the yield curve) and the price of long bonds goes down, with the effect of imposing an inflation tax on all the holders of fiat dollars. This inflation tax results in a transfer of wealth between unsuspecting dollar holders and bond holders who see the real value of their holdings go down, while net debtors and stock owners see their real debt load being reduced by inflation and the value of most shares in the stock market going up.

In the second instance, the reverse can happen if the economy is starved of liquidity: the yield curve inverts with short-run interest rates moving way up as compared to long-term interest rates. A stock market crash and an economic recession generally follow.

—That’s pretty much what the Fed has been doing over its nearly 100 years of existence, keeping short-run interest rates too low for too long, creating unsustainable asset bubbles, and then applying the monetary brakes to kill inflation expectations that it has created on its own. Sometimes, the Fed has maintained price stability and the value of the U.S. dollar; but at other times, it has willingly acted to destroy the purchasing power of the dollar by printing too much of it.

As a general principle, if inflation expectations increase faster than nominal long-term interest rates, real interest rates, i.e. the real cost of capital for investors and home buyers, would decline and this would, hopefully, stimulate economic activity and employment.

Unfortunately for the Fed, its Nov. 3rd announcement translated into an important loss of confidence in its ability to design and pursue an appropriate monetary policy and was immediately decried by other central banks and by America’s biggest creditor, China, as a blatant attempt to generate and export inflation. Bond prices began immediately to fall and bond yields to rise. It seems that bondholders began selling longer-term Treasuries at a faster rate than the Fed could buy them.

Chairman Ben Bernanke and his board seem to have forgotten that the United States is now a debtor nation, not a creditor nation. A creditor nation could get away with an outspoken policy of creating inflation—but not a debtor nation. In 2010 alone, the U.S. registered another half a trillion-dollar trade deficit with the rest of the world. This has to be financed, and it is done with foreign borrowings. To a large extent, foreign creditors now decide the final outcome of American monetary policy.

The 10-year Treasury yield, which hit a low at 2.40 percent in October 2010, was at 2.63 percent the day before the Fed’s announcement on November 2, 2010. As it turned out, it closed at 3.64 on Friday February 11, after hitting a high of 3.75 percent on February 8. The same is true of the 30-year Treasury yield that hit a high of 4.76 percent on February 8, thus approaching the dangerous threshold of 4.90 percent. The latter stood at 3.93 percent on Nov. 2, 2010.

Obviously, the Fed’s ultra loose monetary policy has backfired. Its intended policy of printing money in excess of what the economy demands has resulted in raising real long-term interest rates, not lowering them. Indeed, with long-term nominal rates on the rise while inflation will take many months to surface, the immediate effect of the Fed’s November announcement was to raise real long-term Treasury rates, not to lower them. Mortgage rates are also on the rise, threatening to postpone the long anticipated recovery in the housing market.

It is certainly possible that we are entering a period when the already observed rise in real interest rates can derail the stock market rally that has been in force since early March 2009. Later on, however, a slowdown in the economy coupled with fiscal compressions can be expected to push long-term rates down again. Such a roller-coaster path for interest rates is not very helpful.

The current Fed board seems to believe that the Fed is more than a central bank, that it is a sort of a government unto itself that can both control monetary conditions and solve the structural problems in the real economy at the same time, irrespective of what the rest of the world thinks. This would seem to be most unrealistic. Perhaps a dose of humility would be salutary at this time, before irreparable damage is done.

~

Rodrigue Tremblay is professor emeritus of economics at the University of Montreal and can be reached at rodrigue.tremblay@yahoo.com. He is the author of the book “The Code for Global Ethics.”

February 16, 2011 Posted by | Economics | Leave a comment

Police clash with Bahraini protesters

Press TV – February 14, 2011
Bahraini youths protest in front of the police in Manama on February 14, 2011

Witnesses say police in Bahrain have violently clashed with pro-democracy protesters during the “Day of Rage” rallies across the country.

On Monday, police fired tear gas and rubber bullets at hundreds of demonstrators in Karkazan, a Shia village south of the capital, Manama, AFP reported.

Security forces stepped up their presence with helicopters circling over Manama.

At least 14 people were wounded in overnight and Monday clashes.

Activists, inspired by revolutions in Egypt and Tunisia, have dubbed Monday “the Day of Rage” to express disappointment at the political reforms of the past decade, which have failed to bring prosperity and real change.

The majority Shia population in Bahrain has been complaining about inequality and oppression. The government has been clamping down on the opposition since the country’s controversial general elections in August last year.

Since late Sunday, Bahrain’s security forces have been patrolling shopping centers and other locations to monitor people’s movements amid calls by opposition groups for pro-democracy protests.

February 14, 2011 Posted by | Civil Liberties, Economics, Solidarity and Activism | Leave a comment

O’Grady’s Honduran Free Market Fantasies

By Belen Fernandez | Pulse Media | February 14, 2011

Mary O’Grady, editorial board member of The Wall Street Journal and champion of the 2009 coup d’état against Honduran President Mel Zelaya “because he was trying to extend his presidency in violation of the nation’s constitution” [read: because he was trying to conduct a nonbinding public opinion survey to gauge popular will to rewrite a document produced at the height of Honduras’ cold war service as a U.S. military base], has finally found an acceptable reason for constitutional revision.

O’Grady’s latest dispatch from Tegucigalpa begins:

What advocate of free markets hasn’t, at one time or another, fantasized about running away to a desert island to start a country where economic liberty would be the law of the land? If things go according to plan, more than one such ‘island’ may soon pop up here.

Honduras calls these visionary islands ‘model cities,’ and as the Journal’s David Wessel reported from Washington 10 days ago, the Honduran Congress is expected to soon pass an amendment to the constitution that would clear the way to put the concept into action.

The idea is simple: A sizable piece of unpopulated government land is designated for use as a model city. A charter that will govern the city is drafted and the Congress approves it. A development authority is appointed by the national government. The authority signs contracts with the investors who will develop the infrastructure. The city opens for business under rules that act as a magnet for investment.”

It would seem that free market advocates fantasizing about running away to desert islands of economic liberty might have already had their fantasies sufficiently fulfilled via sweatshop opportunities in Honduras.

Undeterred, O’Grady insists:

Now the little country that stood up to the world to defend its democracy seems to be affirming a belief that it needs to change if it wants to ward off future assaults on freedom.”

The valiant Honduran defense of democracy consisted, of course, of the overthrow by the country’s tiny elite, in concert with the U.S., of a president engaged in such assaults on freedom as a raise of the minimum wage to approximately $290 a month in certain sectors, support for legislation to ban open-pit mining, and willingness to discuss land reform.

It is meanwhile unclear how the designation of government land for what is essentially an experiment by an American economist can be construed as democratic in nature when Honduran farmers attempting to reclaim property illegally acquired by wealthy businessmen are subjected to assassinations and other forms of harassment by military and paramilitary units.

In case there is any doubt as to the identity of “the Honduran people” that O’Grady claims to speak for in her articles, she ends this particular one with a quote from Zelaya’s predecessor Ricardo Maduro, described as “a fan” of the model cities scheme:

If we want to develop we have to find a way to counterbalance the populism that causes us so much harm. The model city is a way of decentralizing power and connecting people to their government.”

As for previous counterbalancing efforts against threats posed by the non-elite, Maduro holds the distinction of having presided over a regime that, according to former chief of internal affairs for the Honduran police María Luisa Borjas, exterminated 3,000 extraneous Honduran youths via a liberal application of the term “gang member.”

February 14, 2011 Posted by | Civil Liberties, Economics, Timeless or most popular | Leave a comment

Democracy Without Economic Independence is Worthless

By Sarakenos | KABOBfest | February 12, 2011

The Egyptian military, with a US green light, got rid of Mubarak for precisely the same reason they sent the police and thugs that killed over 300 and injured thousands last week — to allow for the economy to run smoothly again. In other words, the disposing of Mubarak is just another solution, as undesirable as it may be, to re-open banks and have business run as usual. Factories, banks, real state, and other businesses are still owned by the same corrupt leaders, with the fate of the Mubarak family stock still unknown.

The High Council of Armed Forces, in all their four communiqués, stressed the “economic interests” of the country, which, in a heavily-privatized economy like Egypt’s, means the interests of the private owners, some of whom are military generals. The forced removal of Mubarak, in the end, served owners’ interests foremost. This economic concern was ranked as the most important objective in the High Council of Armed Forces’ latest communiqué:

  • First: The High Council of the Armed Forces is committed to all contents in previous communiqués.
  • Second: The High Council of the Armed Forces has great confidence in the ability of Egypt, its institutions, and its people in surpassing the current critical conditions. And based on this, all sectors, public and private, must commit to their glorious and patriotic mission to push the wheel of economy forward, and that the people are held responsible in this matter.

The third point in the communiqué was only natural to forcefully uphold “the glorious and patriotic mission,” which is to keep the current government under Suleiman in power until new elections are held. The Council did not set up a time frame for these elections, but it definitively did so for resuscitating the economy (i.e. retrieve flow of income and profits on their investments) as a priority that cannot wait for democracy; which is now!  This communiqué went short of repeating Suleiman’s patronizing words yesterday when he said: “Go back to your homes and your jobs.”

There are a lot of people who simply cannot accept that the economy, at this stage, is of much concern to the Egyptian military regime (which is still in power) and the Obama administration and other US officials, let alone the general public and the revolution. But that is because these people are not trained sufficiently to have an economic eye on world affairs. The focus then shifts to the political aspects of the revolution: democracy, fair elections, and freedom of speech and religion. Make no mistake, these are absolutely important elements of any successful revolution, and achieving them deserves euphoric celebrations. But to ignore the economic demands, the very reason why this revolution even took place, is really an act of infanticide against this new-born Egyptian revolution. Bou Azizi (the true catalyst of the Tunisian and Egyptian revolutions) did not set himself on fire because he couldn’t vote in free elections. He set himself on fire because his only source of income was humiliatingly taken away from him.

All indications seem to favor sustaining the Egyptian economic system and excluding it from the revolution. For example, the Finance minister, Samir Radwan, appointed by Mubarak during the January 25 Revolution, is still running the country’s economic affairs with almost no objection from anyone. He spoke to CNN’s Piers Morgan last night to share his feelings of jubilee, but in fact refrained from using any revolutionary words, and referred to the last eighteen days as “the crisis.” Luckily so far, according to Qatar News Agency (Feb 7, 2011), he refused IMF intervention:

“The minister quoted the CBK chief as stressing that the government’s procedures would be enough to confront the current crisis.”

But then yesterday, he was quoted saying that a stimulus package may be needed, without specifying the source of those funds, to boost up employment.  These all sound like innocent events to the economically illiterate. But lessons must be learned from past revolutions, like the Polish Revolution in 1989, when all the fruits of revolution were finally reaped by private owners of the country’s most important resources and industries, after being drowned by IMF loans in return for speeding up the process of privatization and doing away with labor laws and trade barriers.

The January 25 Revolution does not address the private ownership of the country’s telecommunications industry, power grid, water, post, and other major financial infrastructures. Should the country’s resources also belong to the people in the same way that the parliament and presidency ought to? Would democracy be worth anything if the democratically-elected government had no say or authority over the country’s oil, gas, water, energy, agriculture, stock markets and banking regulations, because they are “privately” owned?

Recall that the world stood by watching as the Free Officers Movement, led by Mohammad Najib and Abdul Nasser, took over power in Egypt in 1952. It was only when Abdul Nasser began a campaign of nationalizing the economy (especially the Suez Canal), that the world super powers (Britain, France, and Israel) turned against Egypt and declared war in 1953. This must be a hint to all spectators, that as long as the new freely-elected Egyptian government (to be) secures business contracts and foreign investments, the world shall embrace Egyptian democracy. However, should they choose to nationalize the major sectors of the economy, the free world will turn against Egypt, and we’ll hear western media pundits talking about how Egyptians were never ready for democracy, and how democracy does not fit the Arab mentality or society, and how dictatorships are necessary for the security of the United States of America against possible terrorist cells growing in chaos-hot-bed Egypt.

The Egyptian military, however, being itself invested in the privately owned neo-liberal economy of Egypt, had made assurances in their communiqués to the effect that they are going to protect the economy (read securing investments, foreign and domestic) as a major priority. The Egyptian Revolution of January 25 has put Egypt on the road to democracy, but will it lead to Egyptian economic independence — where economic decisions are made in Egypt, by Egyptians, and serve the interests of Egyptians? Or will they forfeit economic independence and honor free trade agreements that supersede democracy and the people’s will?

One thing is for certain. The Egyptian military rule (and all other dictatorships) can only be forced to make concessions through peaceful and total economic paralysis, as had been witnessed in the past eighteen days of the greatest Arab victory since Saladdin. The lesson to be learned for future Arab revolutions, and all world revolutions, is to keep the economy in the background of all tactics, strategies, and objectives.

February 14, 2011 Posted by | Economics, Solidarity and Activism | Leave a comment

The workers, middle class, military junta and the permanent revolution

By Hossam el-Hamalawy | 3Arabawy | February 12th, 2011

Since yesterday, and actually earlier, middle class activists have been urging Egyptians to suspend the protests and return to work, in the name of patriotism, singing some of the most ridiculous lullabies about “let’s build new Egypt,” “Let’s work harder than even before,” etc… In case you didn’t know, actually Egyptians are among the hardest working people in the globe already..

Those activists want us to trust Mubarak’s generals with the transition to democracy–the same junta that has provided the backbone of his dictatorship over the past 30 years. And while I believe the Supreme Council of the Armed Forces, who receive $1.3 billion annually from the US, will eventually engineer the transition to a “civilian” government, I have no doubt it will be a government that will guarantee the continuation of a system that will never touch the army’s privileges, keep the armed forces as the institution that will have the final say in politics (like for example Turkey), guarantee Egypt will continue to follow the US foreign policy whether it’s the undesired peace with the Apartheid State of Israel, safe passage for the US navy in the Suez Canal, the continuation of the Gaza siege and exports of natural gas to Israel at subsidized rates. The “civilian” government is not about cabinet members who do not wear military uniforms. A civilian government means a government that fully represents the Egyptian people’s demands and desires without any intervention from the brass. And I see this as hard to be accomplished or allowed by the junta.

The military has been the ruling institution in this country since 1952. Its leaders are part of the establishment. And while the young officers and soldiers are our allies, we cannot for one second lend our trust and confidence to the generals. Moreover, those army leaders need to be investigated. I want to know more about their involvement in the business sector.

All classes in Egypt took part in the uprising. In Tahrir Square you found sons and daughters of the Egyptian elite, together with the workers, middle class citizens, and the urban poor. Mubarak has managed to alienate all social classes in society including wide section of the bourgeoisie. But remember that it’s only when the mass strikes started three days ago that the regime started crumbling and the army had to force Mubarak to resign because the system was about to collapse.

Some have been surprised that the workers started striking. I really don’t know what to say. This is completely idiotic. The workers have been staging the longest and most sustained strike wave in Egypt’s history since 1946, triggered by the Mahalla strike in December 2006. It’s not the workers’ fault that you were not paying attention to their news. Every single day over the past three years there was a strike in some factory whether it’s in Cairo or the provinces. These strikes were not just economic, they were also political in nature.

From day 1 of our uprising, the working class has been taking part in the protests. Who do you think were the protesters in Mahalla, Suez and Kafr el-Dawwar for example? However, the workers were taking part as “demonstrators” and not necessarily as “workers”– meaning, they were not moving independently. The govt had brought the economy to halt, not the protesters by its curfew, shutting down of banks and business. It was a capitalist strike, aiming at terrorizing the Egyptian people. Only when the govt tried to bring the country back to “normal” on Sunday that workers returned to their factories, discussed the current situation, and started to organize en masse, moving as a block.

The strikes waged by the workers this week were both economic and political fused together. In some of the locations the workers did not list the regime’s fall among their demands, but they used the same slogans as those protesting in Tahrir and in many cases, at least those I managed to learn about and I’m sure there are others, the workers put forward a list of political demands in solidarity with the revolution.

These workers are not going home anytime soon. They started strikes because they couldn’t feed their families anymore. They have been emboldened by Mubarak’s overthrow, and cannot go back to their children and tell them the army has promised to bring them food and their rights in I don’t know how many months. Many of the strikers have already started raising additional demands of establishing free trade unions away from the corrupt, state backed Egyptian Federation of Trade Unions.

Today, I’ve already started receiving news that thousands of Public Transport workers are staging protests in el-Gabal el-Ahmar. The temporary workers at Helwan Steel Mills are also protesting. The Railway technicians continue to bring trains to halt. Thousands at el-Hawamdiya Sugar Factory are protesting and oil workers will start a strike tomorrow over economic demands and also to impeach Minister Sameh Fahmy and halt gas exports to Israel. And more reports are coming from other industrial centers.

At this point, the Tahrir Square occupation is likely to be suspended. But we have to take Tahrir to the factories now. As the revolution proceeds, an inevitable class polarization is to happen. We have to be vigilant. We shouldn’t stop here… We hold the keys to the liberation of the entire region, not just Egypt… Onwards with a permanent revolution that will empower the people of this country with direct democracy from below…

February 12, 2011 Posted by | Economics, Solidarity and Activism, Timeless or most popular | Leave a comment

Egypt’s Dignity Revolution

By SALWA ISMAIL | CounterPunch | February 10, 2011

In commenting on the unfolding Egyptian revolution, media and analysts have emphasised the role of social media in building up networks of dissidents and facilitating the organisation of protests. Some have credited the ‘Facebook generation’ with lighting the spark of collective action. Undoubtedly, social media activists, in calling for ‘the day of anger’, put the tools of virtual communication to remarkable use. However these ‘days of anger’ can only be understood if we look at what the vast majority of Egyptians have experienced over the last three decades under Mubarak’s rule.

Successive waves of protests by wide segments of the population, particularly over the last decade, have also given a clear indication of growing opposition to the regime’s economic and social policies and its instruments of government and control. Prior to the recent protests, there were numerous massive strikes by textile workers demanding better pay, week-long street occupation by tax collectors protesting their low wages, and various sit-ins by university professors, doctors and lawyers calling for policy change.

Under Mubarak, the Egyptian state abandoned its welfare responsibilities and left citizens to fend for themselves. The so called free market became dominated by monopolies and oligopolies, with party elites and regime cronies controlling entire markets in basic and strategic commodities such as iron and steel, cement, and wood. The ruling clique and its business partners appropriated the country’s lands converting publicly-owned property into gated communities and turning entire coastal areas into exclusive resorts for the super rich. Built on vast areas of privatised state land, enclaves like Qatamiyya Heights and Mirage City catered to multi-million dollar palaces for the very privileged few. The scale of the land grab has threatened to deprive future generations of any chance of descent housing and a share of the country’s resources and wealth.

At the same time, masked and not-so-masked privatisation of education and health robbed citizens of the few citizenship rights gained in the country’s post-independence period. Social disparities have grown at extraordinary rates as state offices turned into personal fiefdoms in order to maintain the regime and its clients and to implement the neo-liberal agenda of economic reform.

To try and prevent growing resistance to these economic and social policies, Egypt and the Egyptians became subject to a police government. The Egyptian police departments govern vast areas of social life. They have responsibilities over security and public order, but also have jurisdiction over the regulation of, among other things, outdoor markets, the use of public utilities such as electricity, and the implementation of municipal building codes. With regular outdoor market raids and campaigns to monitor citizens’ use of these utilities, the police intruded into the daily life of ordinary citizens. Endowed with the arbitrary powers of emergency laws, the police engaged in practices of extortion, and used violence to intimidate and silence any questioning of their powers.

Security checks and roadblocks on the streets of Cairo and many other cities were part of Egyptian citizens’ daily reality. Drivers and pedestrians were randomly stopped, arrested and subjected to arbitrary investigation. Young men, feared by the regime for their potential for activism and resistance, were the main target of these practices. The everyday experience of humiliation at the hands of the police fuelled the youth’s opposition and rejection of the regime and its coercive arm, the police.

It was befitting that the revolution had its spectacular beginning on Police Day and that the youth would take the lead in breaking down the barrier of fear that the police have erected over a long period of time. Egypt’s youth have bravely put themselves forward along with vast segments of society to reassert their right to dignity and freedom. They have taken the first steps towards reclaiming their rights and towards exercising fully the responsibilities of citizenship. It is in reference to these objectives that the protesters’ main and most powerful slogan “the people want to bring down the system” should be understood. The desired change is nothing short of an overhaul of the institutions and structures of government.

~

Salwa Ismail is Professor of Politics with reference to the Middle East at the School of Oriental and African Studies (SOAS).

February 11, 2011 Posted by | Civil Liberties, Corruption, Economics, Mainstream Media, Warmongering | Leave a comment

Police clash with protesters in Dhaka

Press TV – February 7, 2011
Activists of the Bangladesh Nationalist Party (BNP) clash with the riot police during a nationwide strike in Dhaka on February 7, 2011.

Riot police in Bangladesh have clashed with hundreds of protesters in the Capital Dhaka who insist swift parliamentary elections to topple the country’s ruling power.

The fighting erupted during a nationwide strike, called by Bagladesh Nationalist Party (BNP), which is the country’s main opposition party.

Scores of protesters were wounded and at least 70 activists were arrested in clashes with the police, according to witnesses.

The police patrolled the capital and the main cities, using water cannons and batons to disperse the protesters who are discontent with high prices, weak public services in the impoverished land.

On Sunday, fighting between the police and the demonstrators left one policeman dead and dozens of people injured.

The BNP, which has been led by two times ex-Premier Khaleda Zia, is objecting the government’s economic policies and its alleged crackdown on the opposition.

February 7, 2011 Posted by | Economics | Leave a comment

Food, Egypt and Wall Street

Soaring Prices, Growing Destabilization

By ROBERT ALVAREZ | CounterPunch | February 4, 2011

The dramatic rise in food prices is fueling a great deal of discontent in Tunisia, Egypt and elsewhere. It’s a deep undercurrent propelling many of the poor, who face prospects of starvation to resort to the streets and to violence. According to the United Nation’s Food Agency (Food and Agriculture Organization — FAO) world food prices are up for the 7th month in a row and are likely to surpass the record high reached in December 2010.

No end is in sight for this destabilizing battle with food price inflation in places like Egypt, where more than half of an average income goes for food. According to the State Department, more than 60 food riots occurred worldwide over the past two years.

In March 2008, a dramatic spike in food prices led thousands of people on the brink of starvation in Egypt to violently riot — sending a seismic shock wave through the Mubarak regime. After the Egyptian military was able to distribute enough wheat to dispel the rioting, efforts to stockpile wheat by the Mubarak government have failed, as food prices continue to hover at record highs.

The media is reporting many reasons for this problem ranging from soaring demand, cuts in food subsidies, droughts, and government mandates to use more grain-based biofuel. But, another significant factor is at play: unfettered speculation by investment banks. As noted in USA Today, in 2008, “the bulls may not be running on Wall Street, but they’re charging in the commodities pits.

At issue are the still deregulated commodity markets ushered in by the Clinton administration and the U.S. Congress with the passage of the Commodity Futures Modernization Act of 2000. Before this law, the Commodity Futures Trading Commission (CFTC) served as a cop on the beat, enforcing rules that prevent the distortion or manipulation of prices beyond normal supply and demand. But Wall Street banks and companies such as ENRON and British Petroleum were determined to make a lot more money from speculation by exempting energy-derivative contracts and related swaps from government oversight.

For this reason, the 2000 law allows entities that have no stake in whether adequate amounts of food and fuel are available for ordinary people and commodity-dependent businesses to make huge sums of money by gambling with other people’s money.

Soon after passage of the 2000 law, “dark” unregulated futures trading markets emerged, most notably the Intercontinental Exchange (ICE) in London — created by Wall Street and European investment banks and several oil companies. A key practice involves “over the counter index trading” in which hundreds of billions of dollars of pension, sovereign wealth, and other institutional funds are used to flood “dark” commodity markets to buy and hold futures contracts without an expiration date or oversight. When it’s time to make money on a losing bet, these funds are withdrawn, causing commodity price crashes and economic instability.

These transactions don’t involve customary “bona fide” commodity traders, such as an airline company hedging on the price of jet fuel by purchasing futures contracts. As prominent hedge fund manager Michael McMasters noted before a U.S. Senate panel in 2008, this amounts to “a form of electronic hoarding and greatly increases the inflationary effect of the market. It literally means starvation for millions of the world’s poor.”

Some world leaders are willing to speak out against the pernicious role of “dark” commodity markets. Recently, French President Sarkozy warned of further unrest and even war at the Davos forum, unless commodity speculation is reined in — something that Wall Street and Republican lawmakers are bitterly fighting. The Dodd/Frank Financial Reform Law places some restrictions on this practice by the CFTC. In particular, the CFTC is beginning the process of weeding out “non bona fide” investment bank speculators.

True to form, House Republicans are demanding that the CFTC slam on the brakes. They’re planning hearings and legislation to hamstring these efforts.

The spontaneous mass uprising of ordinary people in Egypt and the Middle East against their authoritarian regimes has many root causes. One that deserves much greater attention is unfettered speculation by powerful private financial institutions that don’t care about world-wide starvation and its impacts. It’s distorting global food supplies.

Robert Alvarez, an Institute for Policy Studies senior scholar, served as senior policy adviser to the Energy Department’s secretary from 1993 to 1999.

February 4, 2011 Posted by | Corruption, Economics, Malthusian Ideology, Phony Scarcity, Timeless or most popular | Leave a comment

Egypt and the false dilemma — decline and fall

By Michael Collins | Online Journal | February 2, 2011

The people of Egypt have had enough of a failed dictatorship masquerading as a democracy. As events unfold, we’re seeing a cautionary message entering the corporate media coverage of this event. Having never exposed the dire conditions that prompted the massive protests and demands for change, we’re now told that this could negatively impact oil supplies, the stock market, and anti-terror efforts. No foundation for the claims was provided but they’re repeated regularly on CNN, the NBCs, Fox, and the print media.

Thus, a false dilemma is created for the public: support the right of people to determine their own fate or protect your safety and the current standard of living, as it were.

Egypt’s oppressive tyranny

Eighty million Egyptians have suffered under an oppressive regime for thirty years. President Hosni Murbark became Egypt’s president and dictator in 1981 after the assassination of the late President Answer Sadat in 1981. Sadat had just completed a peace treaty with Israel. Since then, Mubarak has ruled through emergency law for all but 18 months. Using this law, the government has the, “right to arrest people without charge, detain prisoners indefinitely, limit freedom of expression and assembly, and maintain a special security court.” The Egyptian parliament extended for two years in May 2010. For those who get too far out of line, there are the famous torture facilities of the national police.

The Egyptian revolution followed the successful peoples uprising in Tunisia just days before. The Egyptian economy has not performed for the people. The majority of Egyptians live in substandard conditions and they see little reason for hope. Conditions were no better in Tunisia. Future hot spots for revolution, Algeria and Yemen, are equally bereft of the conditions that allow for human dignity – gainful employment, health, and safety.

Children are particularly hard hit, one-third of Egypt’s population. A recent UNISEF that, “Increases in child mortality and morbidity, child labour, child exploitation, violence against children and women and other forms of abuse, alongside declines in school attendance and the quality of education, nurture, care and emotional well-being, can all be traced to times of economic crisis.” (Harper et al, 2009). The Egyptian economic crisis has been devastating to children.

The conditions in Egypt are different from those in the United States in terms of income and material wealth. On a structural level, however, the class inequalities mirror those faced here. A robust stock market failed to translate into employment gains or basic benefits for the vast majority. Policies are friendly to businesses but discriminate against worker rights and unions. Privatization has sapped the public coffers.

While conditions were building up to a boiling point, the Egyptian Stock Exchange became a favorite for foreign investors. Somehow, the geniuses on Wall Street convinced President Mubarak to privatize and adopt a market economy [crony capitalism]. He did, the people suffered more, and the results led to the near universal demand that Mubarak step down. The globalization of crony capitalism has reached the point where the main stimulus is revolution.

The false dilemma

The coverage of Egypt’s revolution has been a bit timelier than the Tunisian affair, which the corporate media nearly missed. The initial focus was on events and the questions determining the survival of Hosni Mubarak. Who will win? There was no explanation of conditions prompting the protests. That would legitimize the protesters and foreclose media manipulation that may be needed to continue the three-decade support for the present dictatorship and oligarchy.

A Wall Street Journal article Sunday laid out the talking points for fear mongering and the false dilemma – support a peoples revolution? – take an oil shock and more terror.

US stocks are taking a big hit because of the revolution. We’re supposed to react by thinking, Is this really worth it? The recession may get worse.

“Anti-government protests in Egypt have affected world financial markets, with US stocks suffering the biggest one-day loss in six months.” Egyptian Unrest Has Repercussions in Global Economy Wall Street Journal (WSJ), January 30

The specific fear of oil price increases appears. Somehow, we’re asked to believe that a new government might say, all of a sudden, no more United States ships in the Suez Canal.

“In the short term, the biggest global economic worry remains oil prices. Egypt itself isn’t a big energy producer. But significant shipments of oil and petroleum products pass through Egypt each day on their way from the Mideast to European and U.S. markets.” WSJ 01/30

There is absolutely no basis for this. Therefore, the fabrication is deliberate and ill intended.

Then the Journal trots out an expert who draws a conclusion based on the unproven hypothetical. Once again, there is no basis for saying that there would be any shipping disruptions. Why would a new Egyptian government give up that income or pick a fight with a White House with a record of military aggression?

“If oil shipments through Egypt were disrupted, European supply — and global prices — would be affected tremendously, said Dalton Garis, an associate professor in petroleum-market behavior at the Petroleum Institute, an energy-research center in Abu Dhabi.” WSJ 01/30

The media is like a dog on point. They just can’t give up the notion that we’re headed for an oil shock.

“Apart from Egypt’s role as an energy transporter, fear that unrest could spread to bigger oil producers could exacerbate worries.” WSJ 01/30

Where is the information that would justify this fear?

Where is the explanation that accounts for this remarkable mass uprising?

Where are the questions about the three decades of neglect by several U.S. administrations and the requests by presidents Bush and perhaps Obama to carry out “renditions” [torture] in behalf of the United States.

When you support a tyrant who oppresses his/her people, you risk the antipathy of the people when they gain control.

Apparently, our ruling class hasn’t paid any attention to recent history. For years, successive US regimes supported dictatorial rule in South America. The dictators are gone, left leaning governments are in place, and no one is lining up to punish the United States.

The real concern about change in Egypt is all about control. The elite of the US and Europe may encounter a leader who isn’t in their pocket, doesn’t care whether or not he or she is invited to Davos, and actually seeks the benefit of the vast majority of citizens rather than the crony capitalist network also known as the global economy.

Michael Collins is a writer in the DC area who researches and comments on the corruptions of the new millennium. His articles focus on the financial manipulations of The Money Party, the abuse of power by government, and features on elections and election fraud. His articles can be found here. His website is called The Money Party.

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February 2, 2011 Posted by | Deception, Economics, Mainstream Media, Warmongering, Timeless or most popular | Leave a comment

Egyptians feel economic pinch of protest

By Fatima El-Bacha | Middle East Online | February 1, 2011

CAIRO – There is no money at the banks. Fuel is scarce. Tourism is evaporating.

As a popular uprising to oust President Hosni Mubark enters its second week, Egyptians are feeling the economic pinch.

Banks have been shut since Sunday, and they remained so on Tuesday, the day that protesters hope will see a million-strong demonstration in Cairo to demand an end to Mubarak’s regime.

Many automatic teller machines (ATM) in the teeming capital have run out of cash, and those still working were dispensing only a limited number of banknotes.

“I scoured the city in search of an automatic teller and I found only one place — in a neighbourhood where people do not normally use ATMs,” said Mohamed, a driver.

In Cairo, supermarkets that usually accepted credit cards insisted on cash instead, while crowds flocked to grocery stores in several neighbourhoods to stock up on essentials.

Many gas stations were closed, with long lines at those that were still open. The Chamber of Commerce in Cairo appealed to shopkeepers on Monday to reopen, but most ignored the call.

Some kiosks complained of an early shortage of cigarettes, in a country with a large number of smokers and relatively cheap tobacco. Top-up cards for mobile phones were also running short.

Responding to growing fears of shortages, the authorities said Egypt still had sufficient stocks of food, including wheat reserves, to feed itself until June.

Tourism, a crucial source of foreign revenue, has been hit hard by the uprising in which at least 125 people have died and thousands injured since it began last Tuesday.

This is high season for the tourist industry, with Europeans escaping their winter for sunshine by the Red Sea and the River Nile, but many tour operators have suspended departures and leisure bookings have dried up.

With 14.7 million visitors in 2010 and revenues estimated at about 13 billion dollars, tourism is an important source of income for Egypt, a developing nation with an estimated 20 percent living under the poverty line.

Some foreign firms have suspended their activities, such as the Danish shipping and oil concern A.P. Moeller-Maersk, the French cement manufacturer Lafarge and Japanese automaker Nissan.

Egyptair cancelled all domestic and international flights between 3 p.m. and 8 a.m. — the hours of a government-imposed curfew — starting Monday. Other flight times are to be modified.

Air freight is off sharply as well, said Ayman Nasr, head of Egyptair’s cargo department.

He said foreign trade had been affected by “the inability to pay for imports due to lack of liquidity resulting from the closure of banks or, the inability to arrive at the airport (to collect shipments) due to the curfew.”

The Cairo stock exchange had been shut since Thursday, after more than 10 percent of its value or 70 billion Egyptian pounds (about 12 billion dollars) was wiped out over its last two days of trading.

February 1, 2011 Posted by | Economics, Timeless or most popular | Leave a comment

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