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hile
the American taxpayers prepared for the Christmas Holiday, the international
bankers at the IMF and World Bank were preparing to give
them a very special Christmas present they not only were not expecting
but didnt wantthe debtload of Argentina. And the European
Union Central Bank hurried to protect the European Unions monetary system by rushing the kickoff date of the Euro from
February 1, 2002 to January 1, 2002after moving up the timeline
last year from July 1, 2003 to February 1, 2002 to coincide with the
introduction of the Western Hemisphere Free Trade Agreement (which
will replace the North American Free Trade Agreement [NAFTA].
On December 23, Argentina, which has been
fighting a decade-long effort by the World Bank and the IMF to force Argentina to dollarization of its currency, decided it could
no longer afford to base the value of its peso on the American dollar
(one peso = one American dollar). Cash
starved Argentina began raiding all of that nations pension plansprivate
as well as publicbefore Christmas in order to find the pesos it
needed to keep its government fluid.
The monetary problem in Argentina stems
from a financial bailout by a U.S. taxpayer-guaranteed IMF loan in 1991
in which Argentina was forced to accept an IMF-controlled Currency Board
to monitor the printing of pesos in Argentina. To secure the 1991 bailout,
Argentina was required to pass the Peso Convertibility Law of
1991 that prevented Argentina from printing more pesos than
dollars in its treasury
In serious financial trouble, the Argentine
government applied to the International Monetary Fund for an emergency
loan, as it did in March, 2000 when they were granted a loan of $7.4
billion. This time, however, they were denied, since the new loans were
simply being used to make the interest payments on previous loans.
As the Argentine government began unilaterally
seizing the retirement fund assets of its citizens, nationwide riots
broke out resulting in the deaths of 28 Argentine citizens. The riots
brought about the resignations of three presidents within 10 days.
As the Argentine financial debacle began
to quietly unfold (quietly in the sense that what was happening in South
America was not reported in the United States by the Wall Street Journal
or any of the key mainstream newspapers that honestly
give you all the news thats fit to print (or is that,
all the news they want you to know) the bankers at the Federal
Reserve, the World Bank and the IMF were suddenly sweating
bullets since the Western Hemisphere Free Trade Agreement is
already set up to replace the North American Free Trade Agreement in February when the World Trade Organization meets at some obscure,
hard-to-reach location in northern Canada to prevent the types of outbursts
that accompanied the last two WTO meetings. If Argentinas
economy collapsed not only would it put a crimp in the New World
Orders plans to regionalize the economies of the western hemisphere
between February and December, 2002, they knew it could have a domino
effect first on western hemisphere regional banks, and second on the
international banks that originally wrote the notes that advanced ten
years of bad loans to Argentina.
Remembering that it was the collapse
of the Credit Anstalt Bank of Austria in 1931 that caused the European
Depression, triggered the devaluation of all of the currencies of Europe
that took all of them off the gold standard, the European Central Bank
acted quickly to shore up the Euro, jumping the gun and advancing Euroization
by 30 days. The
last thing the European Union needed was a financial crisis that
could impact the value of the Euro.
Argentina, like far too many second world
nations, has an insatiable fetish for borrowed money and not too much
interest in repayment plans. Over the past two or three decades Argentina
has changed currencies like most people change their underwear. From
the days of Juan Peron, Argentina has experienced the peso, the argentino,
the austral, the American greenbackand now its the dollar, the
peso and the argentino...all together.
Its hard to blame Argentina.
The IMF, the World Bank,
the Federal Reserve and several American presidentsthe
last of whom was Bill Clintonat the urging of several large
commercial and investment banks not only in the United States but in
England, Japan and a handful of other nations as well (who wanted some
taxpayer guarantees that if Argentina defaulted once again someone other
than themselves would be on the hook to repay the banks) found a willing
debtor. Argentinas government debt today stands at $264.28 billionnot
much compared to Americas $1.7 trillion national debtbut
far more than Argentinas balance of trade can afford. Much of
that debt was incurred from American largesse to deadbeat nations (that
include both England and France during both the first and second world
wars). Of Argentinas total outstanding debt, only $3.95 billion
is in the form of Argentine domestic treasury notes. The majority of
that nations debt is from borrowed money$260.33 billion...of
which $155 billion is in default.
The bulk of those loans came from American
banks$95.19 billion. Argentina owes the European Union Central
Bank $24.56 billionslightly over 25% of what they owe to the
American bankersbut more than enough to make the European Union more than a little nervous when it appeared that Argentina was going
to default on their IMF loan if they did not receive additional
credit. In yen, Argentina owes the Japanese ¥6.26 billion. They
owe the Bank of England £1.35 billion. And, in chicken
feed loans from around the world, Argentina owes another $819
million. Of Argentinas total debt, much of it is in the form of
a trade deficit of $94.64 billionowed to American, Japanese, Chinese,
Taiwanese, Korean and European industrialists.
Argentina is a nation in troubleand
its central bank could very well become the Credit Anstalt Bank
of 21st century, creating the domino affect that devalues half of the
currencies in the world. At least, that was the fear of the one-worlders
behind the European Union and the Euro. At the urging of the Federal Reserve and European Central Bank, the IMF put together a $40 billion bail-out package a year ago and deferred
Argentinas $124 billion loan payment to the IMF. It proved
to be a drop-in-the-bucket to the cash-starved nation. Government spending
in Argentina increased from 38.9% of gross domestic product to 49.4%
from 1997and increase of 10.5%. As that happened, public sector
debt rose from 26% to 32.1%. Tax revenues plummeted and privatization
proceeds dried up. Argentina, in every practical sense, was bankrupt.
If you, as a consumer, had not paid any
of the principle on a loan you owed for a decadeand barely paid
any of the interest on that loan eitherwhat do you think your
chances would be of getting either an extension on that loan or an additional
loan from that, or any, bank? Your chances would be somewhere between
none and forget it. Prior to the October, 1929 Stock Market
Crash, the behemoth banks that had the financial resources to loan money
to impoverished nations (like Argentina) were investment banks like
the First National Bank and City National (now Citibank)
and Chase Manhattan and J.P. Morgan (now Chase Morgan)
and a few other New York investment banking institutions. The Rockefeller
and Morgan banks openly boasted of their ability to control Presidents
and even dictate foreign policy (a task now carried out for them by
the Council on Foreign Relations that is controlled by the wealthiest
European banking and industrial families). Rockefeller and Morgan both had a legal way of getting rid of bad loansthey packaged
them as bond issues and sold them to unsuspecting consumers through
the investment branches of their banks. The bank recouped
all of their losses from the bad loans to second and third world nations,
and the unsuspecting consumer got stuck with the losses. It is interesting
that before the Great Depression and before the post-depression bank
reform acts forced upon the Roosevelt Administration by
Senator Carter Glass, who with Congressman Henry B. Steagall engineered the Glass-Steagall Act of 1933 that created the FDIC and divorced commercial and investment bankingand forced it down Roosevelts throat. While Roosevelt wanted, and even
planned to veto Glass-Steagall, Carter Glass assured Roosevelt that the New Deal would die with that piece of legislation.
And even though history gives FDR credit for banking reforms
that led to insuring the deposits of the common depositor,
in reality, with a gun to his head not to veto it, Glass-Steagall became law without Roosevelts signature.
While the large commercial banks in the
United States (the portion of Glass-Steagall divorcing commercial
and investment banking was vacated in 2000 allowing the reunion of commercial
and investment banking and bringing about the merger of Chase Manhattan and J.P. Morgan) can now engage in investment banking, scrutiny
is much closer today to make sure loans are properly collaterialized,
and that bad loans are not being foisted off on unsuspecting depositors
as valid bond issues. That makes it much harder for the megabanks to
bolster poor risk debtors like Argentina by throwing good money after
bad.
The Argentine government, with no where
else to go, turned to the IMF which, like your friendly neighborhood
tavern bartender serving the neighborhood drunk more liquor than he
can handle, kept pouring. However, instead of serving Del la Rua shots of rye whiskey or vodka, the IMF kept pouring out moneyand
with it, the strings that bound Argentinas financial fate to the
one-worlders, tying the peso to the American dollar and obligating the
central bank of Argentina to limit the number of pesos in circulation
to the number of dollars in its treasury.
The problem with the IMF is that
they are too willing to loan money to nations like Argentina, or any
second or third world nation today because the strings that
come with the loans are tethers of steel from which that nation cannot
escape.
When Argentina got into trouble eleven
years ago, the Peronist government under President Carlos Menem was forced to enact the Peso Convertibility Law to keep the peso
from collapsing. While that action temporarily saved the Menem government it destroyed the Argentine economy because it priced Argentine
exports out of the market. Tragically, the value of the American dollar
rose 35% over the past five years, further reducing the buying power
of the average Argentine by a like amount.
Menems government fell to
the Radical Party candidate, Fernando de la Rua who began
to impose even stricter austerity measures after the IMF, at
the insistence of the Bush Administration, denied Argentina
a new line of credit. (It was important for the Bush Administration,
that will shortly be attending the Western Hemisphere Free Trade
Agreement meetings in northern Canada, to educate all of the second
world nations to the reality of financial responsibilityeven if
it means financial austerity.
Cash-starved, De la Rua decided
to temporarily raid the nations retirement income
fundsboth government-sponsored and those owned and managed by
private industry. Pension payments to 1.4 million retirees were also
suspended.
This
action triggered widespread rioting in Buenos Aires with rioters demanding
the overthrow not only of De la Rua but of every politician in
Argentina. In addition to rioting against government agencies, the rioters
became looters, breaking into supermarkets and department stores, emptying
the shelves. The rioters finally congregated in the Plaza de Mayo around
the Presidential Palace in Buenos Aires. De la Rua, fearing for
his life, resigned and fled from the city.
The Argentine government appointed another
Peronist, Adolfo Rodriguez-Saa. Rodriguez-Saa (the governor
of a small but competently-run province) called out the troops to restore
order. The death toll, which occurred during De la Ruas
administration, began to mount. Before the shooting stopped, 28 Argentines,
angry because the government had confiscated not only their retirement
savings but their bank deposits as well, lay dead in the streets of
Buenos Aires. Several hundred others were wounded. Adding to the chaos, De la Rua was forced to declare a bank holiday since the banks
had no cash to dispense to angry depositors. This served only to further
infuriate the Argentine people who now surmised that in addition to
stealing their retirement incomes, the government was now prepared to
steal their checking and savings accounts.
As this scenario was unfolding in South
America in December, halfway around the world the European Union saw their plans to Euroize 12 nations in February jeopardized. If the
Argentine monetary collapse created a domino-affect beyond the Argentine
border into other South American nations it could pose problems all
over the world. The European Central Bank worried that the European
nations planning to Euroize their currencies in February might get cold
feet and want to delay euroization until July, 2004the original
date the Euro was to become not only the official currency
of the 12 nations who gave up their national currencies in favor of
the Euro on January 1, but the remaining nations in Europelike
Englandwho have not yet euroized and will not do so until between
2004 and 2008.
In addition, the Europeans saw a potential
problem for transnational European industrialists in Argentina if the
peso collapsed. And, that was a problem that could also affect euroization.
As his first official act, Rodriguez-Saa suspended all foreign debt paymentsa decision that did not help
the interim presidents position with either the IMF or
the Bush Administration. Then, ignoring the Peso Convertibility
Act, Rodriguez-Saa began to construct plans that would allow him
to print enough additional money to cut poverty by increasing employment.
When his proposal was made, unemployment in Argentina exceeded 18%.
Due to a lack of liquidity and not necessarily a lack of assets
recorded on a ledger sheet in an Argentine bank, two thousand people
per day were falling below the poverty line. (Most Americans dont
remember the 1929 Stock Market Crash and the ensuing Roosevelt bank
closures that cost over 1/3 of all Americans their living savings due
to banking regulations that protected the bankers and not the citizen
depositors. Those watching the banking debacle in Argentina had a front
row seat of memory lane. It was a history lesson that every American
needed to witness but most ignored. After all, who cares what happened
last month in Argentina?)
Because
he was prevented from devaluing the peso due to the Peso Convertibility
Act, Rodriguez-Saa proposed the creation of a third currencyan
internal currency that would be used by the Argentine people as a national
currency while the pesowhich would remain pegged to the American
dollarcould be used as an international monetary unit. The proposed
devaluation was set at 30%and it was immediately met with resistance
by the Argentine Communist Party which viewed the devaluation as an
assault on the Argentine workers standard of living by an unelected
government in order to protect the transnationalist bankers in the IMF and World Bank. While the international banking community did
not have a problem with Argentina creating a devalued internal currency
called the "argentino it did have a problem with Rodriguez-Saas
decision to suspend its foreign debt payments to its creditors.
The socialists mounted a massive public
relations campaign against Rodriguez-Saa but they could not gain
the support of the General Confederation of Workers, the Peronist-led
trade union. The wealthy transnational industrialists who control
the fates of the equally wealthy bureaucrats who head the General
Confederation of Workers Union support the Peronists since the Peronists
are pro-industry. Even the Peronist union heads are pro-industrynot
pro-worker.
(Although most labor union members in
the United States do not realize itand although the union leadership
would vehemently deny itthe management hierarchy of every labor
union in the United States is linked at the hip with industry.)
Duhalde, who assumed the much-handled
reins of government on January 7, attempted to implement Rodriguez-Saas
argentino, but the IMF objected to the introduction of a
third currency in Argentina. Duhalde gained approved from the European
Central Bank, the IMF, the World Bank and the Federal
Reserve to devalue the peso only after he agreed to guarantee foreign
(transnational) industries from the fallout. The devaluation of the
internal peso was $1.40 per dollar.
Under pressure from the European Union to protect European interests in Argentina, Duhalde insisted to Argentine media that he would not cede to pressures
from Europe. Duhalde, like his Economy Minister, condemned the
United States for forcing it to enact the Peso Convertibility Act in 1991, reiterating that it was the US and IMF-backed economic
program that led to the collapse of the Argentine monetary system in
December.
Defending the White House, a spokesman
for the Bush Administration noted that ...its not
in our interest to have huge packages that bail out bondholders.
That of course, does not sound like a message the investment bankers
at 23 Wall Street and 26 Broad Street would want to hear from the White
House. Several provisions before the US Congress could have a heavy
impact on banks, utility companies...and oil companiesmost of
what are owned by transnational corporationsas the Bush Administration plans for its western hemisphere conference on trade.
Since the campaign war chests of every
member of Congressin both Houses and on both sides of the aisleare
filled by the wealthy elite in business and industrylogic suggests
that any such legislation will have a surface appearance
of penalizing transnational corporations who move their industrial facilities
from the United States by obligating them to invest in retraining and/or
compensating displaced workers, it will most likely genuinely penalize
only those American companies who do not export jobs to our neighbors
in the north and south.
The pressure which was exerted on Duhaldes
government to protect those industries is evidence of the
power of the transnationalists. Likewise, Duhaldes inability
to introduce an internal currency through the Argentine parliament because
it was objected to by the IMF, the World Bank, the European
Central Bank and the Federal Reserve is indicative of the
power wielded by the international banking community to control the
economy of any nation in the worldor to bankrupt any nation with
whom they disagree.
In the meantime, 12 European nations have
successfully merged financially. Their national currencies will expire
on February 17. By February 1 six additional nations should join those
who converted their currencies to the Euro on January 1. At that time
the bankers and the industrialists of Europe have successfully overthrown
the elected governments of those 12 nations and those which follow them
into the Euro.
In February, as the nations of the European
Union surrender their financial sovereignty to international banking
community, the United States will meet at an undisclosed location in
northern Canada to finalize plans for the Western Hemisphere Free
Trade Agreement (which will replace the North American Free Trade
Agreement [NAFTA]. The purpose of WHFTA is to create
a western hemisphere union like the European Union in which the nations will be linked to one another by a common currency:
the American dollar. On December 1, 2002, the western hemisphere will
be dollarized. Any nation in the western hemisphere that refused to
dollarize their currency will be economically ostracized. Under the
terms of the General Agreement on Trades and Tariffs [GATT],
those nations will be subject to punitive tariffs that will put them
at a global trade disadvantagethe same trade disadvantages that
Argentina has found itself. Only, there will be no debt relief.
Following euroization and dollarization,
which will reduce some 50-odd currencies into two, the nations on the
African continent and those in Asia will merge their currencies by 2004.
All that remains unclear today is whether Australia, New Zealand and
the southern tier Pacific Islands will produce a 5th regional currency
or if the island nations clustered around Australia will join either
the Asian or African monetary alliance. In any event, by July 1, 2004
185 different national currencies will be reduced to four or five regional
monetary systems.
When that happens, world government with
a single global monetary unitvery likely a cyber unit that exists
only electronicallywill occur. World government will be a reality
by the end of this decade. |
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