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mother earth

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"Beggar Thy Neighbor" A Lesson on How Germany Plays Dirty

For the full transcript:


Heiner Flassbeck says Germany has played a devastating role in the European Monetary Union and the "Greece guilty and Germany innocent" narrative is completely false - February 22, 2015

Two snips:

FLASSBECK: Yeah, that's a wonderful example, because 20 percent is exactly something--what is needed, depending on your productivity. But let me take the example of France. You'll see France is much more important than Greece. Everybody is focusing on Greece, but the real problem is France. France did everything right. France had a productivity increase of 1.5 percent. French wages increase increased by 3.5 percent. So the difference was exactly the 2 percent inflation target. And so France was perfect. But France is in the same difficulties as Greece--in principle not has acute, but in principle they have a huge gap with Germany in terms of competitiveness. Why? Well, because German productivity was also 1.5 percent, but German nominal wages only increased by 1.5 percent and not by 3.5 percent like in France. So they did nothing, they did everything right, but they're in trouble anyway. And this is where the unfairness comes in and where it is absolutely clear that if you do not tackle this root problem of the currency union, it was not tackled in the first ten years. But if you don't tackle it now, then you will never find a solution for the Eurozone. Forget about Greece. If France and Italy have to do the same thing as Greece did, it goes through a Great Depression. Could you imagine what it means politically? It will be a disaster. It will not be a radical left-wing government that comes to power in France, but a right-wing, and in Italy also.

JAY: Now, you talk about the difference in the wage levels. But how did Germany keep wages down? Is not like it's a state-run economy. I mean, why couldn't the German workers fight for higher wages?

FLASSBECK: Well, this is easily explained. It was, first of all, in agreement. In Germany we have a long tradition of having tripartite negotiations or agreements between the government, the employers, and the unions on wages. So that was the first step, that it was an agreement where everybody agreed that now we have to, so to say, keep our wages low to reduce unemployment, and nobody thought about the currency union. It was only by chance that the currency union started exactly at that moment of time.

And then the second step was that indeed the right-wing government passed a lot of legislation that weakened the unions dramatically. And this package of legislations are not one measure, but ten, 20 measures that all weakened the negotiating power of the unions, all in the attempt to reduce unemployment in Germany. But what nobody thought about: that this is the classical begger thy neighbor policy for the rest of the European Union and for the rest of the world. Don't forget the United States. The United States have a permanent, huge deficit with Germany, because Germany is hidden, so to say, is protected by the low value of the euro. So if there would not be euro, then clearly the D mark would appreciate against the dollar. But with the low euro, the euro is, so to say, the average of weaker countries and stronger countries. Germany has a wonderful, wonderful goal to increase its surplus with United States and begger the neighbors, because it's absolutely clear that the country that is increasing its current account surplus all the time--and it did so for the last ten, 15 years--this country has huge absolute advantage from international trade, where all its trading partners have negative effect. It's not trade as something that helps everyone; if there is absolute advantages through rising current account surpluses in one country, the other countries have negative contribution from trade. And then the whole idea of free trade is useless and the whole negotiations about TTIP, this agreement between Europe and Germany, is absolutely useless. And I saw it was now discussed in the United States and Congress, and rightly so, if there is no clear idea about the exchange rates.

JAY: So, I mean, does this mean the Eurozone really doesn't make any sense, that as long as you've got these different nation-states and at heart they really are competitive--how can they exist within the same monetary union?

FLASSBECK: It could have made sense. You see, if everybody would have obeyed to this rule that I mentioned, wages in line with national productivity, plus commonly agreed inflation target, well, it would have been a nice idea. But if one country goes for a totally mercantilist approach, then there is no chance to make sense of it. Then there is no way to bring it back, or it's very difficult to bring it back, because the other countries would need absolute cuts in wages. But absolute cuts in wages lead to deflation. So if Germany is not moving, nothing will happen. And that is why the book Against the Troika, the German title of it is Only Germany Can Save the Euro--nobody else.

JAY: And doesn't seem like they're--at least when it comes to Greece--are so intended. In fact, they have this counsel of what they call wise men, these group of economists who issued a statement--I think it was today--apparently saying, let Greece go, we'll be better off, the better defense of the Eurozone is actually to let Greece go.

FLASSBECK: Yeah. Well, these people are stupid. You know, I do not not even think about them. This is a club of extremely radical conservative economists with no clue about the world and all the important relationships in this world. So don't even--ignore it.

But what is really dramatic is the collective denial of Germany's position in the currency union from the very beginning. In Germany we have--in the mass media and the important media, everybody's trying to defend the German position along the lines--all the others are wrong, only Germany got it right from the very beginning. And this is a disaster. You know, if a society that is now living in a--has a democracy for more than 50 years and understands itself as an open society, as an open society where everybody can discuss freely everything, and then you see that you have such a collective denial of a very simple fact, then really it's getting critical, and then many people are really frustrated about this.


An astute comment after the above at TRNN link. I don't usually copy comments, but this one sums it up so well...

This highlights why unfettered capitalism is so destructive. Germany are only being 'good' capitalists, they are working for their own advantage and 'externalizing' all ill effects, "beggar thy neighbor" is the essence of capitalism, and that is why in the long run we go through these cycles of collapse and rebuild. Capitalism is a short term gain philosophy. That is why much of the events in the world make no sense on the surface, it is because we are trying to understand them from the perspective that leaders are working towards at least 'national' interest, but they are not, they are working towards the self interest of small groups of interested parties.

This is the source of the Austerity policy throughout Europe, Germany played dirty with wages, it has triggered a race to the bottom for the rest of Europe just to compete. It would be interesting to know the source of this strategy (because Austerity is a strategy) is it internal to Germany or external, all of the European leaders seem to go and bend their knee at the White House.

Greece and the Endgame of the Neocolonial Model of Exploitation (February 19, 2015)


With the bankruptcy of Greece now undeniable, we've finally reached the endgame of the Neocolonial-Financialization Model.
We all know how old-fashioned colonialism worked: the imperial power takes physical control of previously independent lands and declares its ownership of the region as a newly minted colony.

What's the benefit of controlling colonies? In the traditional colonial model, there are two primary benefits:
1. The imperial power (the core) extracts valuable commodities and low-cost labor from its colony (the periphery)
2. The imperial power sells its own high-margin manufactured goods to the captured-market of its colony.

This buy low, sell high dynamic is the heart of colonialism, which can be understood as one example of the The Core-Periphery Model (June 11, 2013).
The book Sweetness and Power: The Place of Sugar in Modern History is an excellent history of how this model worked for Great Britain.
The tensions this model generated in the colonial elites of America are brought to life in Tobacco Culture: The Mentality of the Great Tidewater Planters on the Eve of Revolution.
This traditional model of colonialism was forcibly dismantled in the 1940s-1960s. Former colonies established their political independence, a process that diminished the wealth and global reach of former colonial powers.

In response, global financial powers sought financial control rather than political control. This is one dynamic of what I call the Neocolonial-Financialization Model (May 24, 2012), which substitutes the economic power of financialization (debt, leverage and speculation) for the raw power of political conquest and control.

The main strategy of financialization is: extend cheap credit to those with limited access to capital. Those with limited access to capital will swallow the bait of cheap credit whole, and willingly agree to penalties, high interest rates, etc.
Then, when the credit expansion reaches levels that cannot be supported, the lenders demand collateral and/or favorable trade and financial concessions.
These tactics have been well-documented in books such as The Shock Doctrine: The Rise of Disaster Capitalism and Confessions of an Economic Hit Man.

But the economic pillaging of former colonies has limits, and as a consequence the global financial powers developed the Neocolonial Model, which turns these same techniques on one's home region.

Thus Greece and other capital-poor European nations were recognized as the periphery that could be exploited by the core, and the euro was the ideal tool to financialize the economies of nations which could never have generated credit/housing bubbles without the wide-open spigots of cheap credit flooding their economies.

In Neocolonialism, the forces of financialization are used to indenture the local Elites and populace to the financial core: the peripheral "colonials" borrow money to buy the finished goods manufactured in the core economies, enriching the Imperial Elites with A) the profits made selling goods to the debtors B) interest on credit extended to the peripheral colonies to buy the core economies' goods and "live large", and C) the transactional skim of financializing peripheral assets such as real estate and State debt.

In essence, the core banks of the EU colonized the peripheral nations via the financializing euro, which enabled a massive expansion of debt and consumption in the periphery. The banks and exporters of the core extracted enormous profits from this expansion of debt and consumption.

Now that the financialization scheme of the euro has run its course, the periphery's neocolonial standing is starkly revealed: the assets and income of the periphery are flowing to the core as interest on the private and sovereign debts that are owed to the core's central bank and its money-center private banks.

Note how little of the Greek "bailout" actually went to the citizenry of Greece and how much was interest paid to the financial powers.
This is not just the perfection of neocolonialism but of neofeudalism as well. The peripheral nations of the EU are effectively neocolonial debtors of the core, and the taxpayers of the core nations are now feudal serfs whose labor is devoted to making good on any loans to the periphery that go bad.

Neocolonialism benefits both the core's financial Aristocracy and national oligarchies/ kleptocracies. This is ably demonstrated in the recent essay Misrule of the Few: How the Oligarchs Ruined Greece.
With the bankruptcy of Greece now undeniable, we've finally reached the endgame of the Neocolonial-Financialization Model. There are no more markets to exploit with financialization, and the fact that the mountains of debt are unpayable can no longer be masked.

At this point, the financial Aristocracy has an unsolvable dilemma: writing off defaulted debt also writes off assets and income streams, for every debt is somebody else's asset and income stream. When all those phantom assets are recognized as worthless, the system implodes.

Sam Seder w Paul Mason: Syriza, Varoufakis, Corrupt Elites. What Next?


Stay with this until the end, it is what is playing out and a bit more insight.

If you have time to view Varoufakis' Ted Talk you will understand his vision for the future of the EU.

Yanis Varoufakis: The Global Minotaur: America, Europe and the Future of the Global Economy

15/05/2013, 18h, cinema Europa, Hall Müller, Zagreb, Croatia
Yanis Varoufakis: The Global Minotaur: America, Europe and the Future of the Global Economy (book promotion)

Q&A: Marko Kostanić

Yanis Varoufakis: "The Global Minotaur: America, Europe and the Future of the Global Economy" (Zed Books, London, 2013)

In this remarkable and provocative book, Yanis Varoufakis explodes the myth that financialization, ineffectual regulation of banks, greed and globalisation were the root causes of the global economic crisis. Rather, they are symptoms of a much deeper malaise which can be traced all the way back to the Great Crash of 1929, then on through the 1970s: the time when a 'Global Minotaur' was born. Just as the Athenians maintained a steady flow of tributes to the Cretan beast, so the 'rest of the world' began sending incredible amounts of capital to America and Wall Street. Thus, the Global Minotaur became the 'engine' that pulled the world economy from the early 1980s to 2008.


In this book promo, Varoufakis gives us a synopsis of economic history and explains the underlying dynamics.
You'll recognize some big names in his account of history, I'm sure...good stuff.

John Perkins, Confessions of An Economic Hitman

“There are two ways to conquer and enslave a nation. One is by sword. The other is by debt.” John Adams 1735-1826

According to Perkins, he began writing Confessions of an Economic Hit Man in the 1980s, but "threats or bribes always convinced [him] to stop."

According to his book, Perkins' function was to convince the political and financial leadership of underdeveloped countries to accept enormous development loans from institutions like the World Bank and USAID. Saddled with debts they could not hope to pay, those countries were forced to acquiesce to political pressure from the United States on a variety of issues. Perkins argues in his book that developing nations were effectively neutralized politically, had their wealth gaps driven wider and economies crippled in the long run. In this capacity Perkins recounts his meetings with some prominent individuals, including Graham Greene and Omar Torrijos. Perkins describes the role of an EHM as follows:

Economic Hit Man (EHMs) are highly paid professionals who cheat countries around the globe out of trillions of dollars. They funnel money from the World Bank, the U.S. Agency for International Development (USAID), and other foreign "aid" organizations into the coffers of huge corporations and the pockets of a few wealthy families who control the planet's natural resources. Their tools included fraudulent financial reports, rigged elections, payoffs, extortion, sex, and murder. They play a game as old as empire, but one that has taken on new and terrifying dimensions during this time of globalization.

Perkins charges that the proposed conditions for this debt forgiveness require countries to privatize their health, education, electric, water and other public services. Those countries would also have to discontinue subsidies and trade restrictions that support local business, but accept the continued subsidization of certain G8 businesses by the US and other G8 countries, and the erection of trade barriers on imports that threaten G8 industries.

In the book, Perkins repeatedly denies the existence of a "conspiracy." Instead, Perkins carefully discusses the role of corporatocracy.

Meet Yanis Varoufakis

Is This Capitulation or Did They Just Force A Grexit? When There Really is No Other Choice...


So it from the very beginning--understandably, from one perspective, because it is in a very difficult position in terms of the financing needs of the state, but it took off the table its most powerful weapons. And furthermore, it's negotiating with people who are, down to their very bones, committed to a radical neoliberal agenda, and furthermore, who quite apart from what their ideology may be, are heavily politically invested in the disaster of austerity. You know, if there were to be an implicit or explicit recognition by the government of Angela Merkel, for example, that austerity has gone too far, it hasn't worked, or has actually undermined the ability of countries like Greece to service their debts, which it clearly has, these people would go down in infamy as having been the architects of a European disaster. So they're politically invested, they're ideologically hostile to SYRIZA, and SYRIZA has taken off the table its most powerful weapons.

So, ultimately, what can it do in the current circumstances? Very little. However, if it were to reconsider its commitment to the euro, which is precisely what it should do, and if it were to put on the table in a responsible and intelligent manner the option of a Grexit, which precisely what it would do, I suspect that it would be able to achieve a much better outcome in this.

PERIES: And those options are really not off the table, even though they have stated that that's not the preferred option. Those options still remain.

LASCARIS: Well, clearly they could embrace that option. And there are clearly people within SYRIZA who, at least in the past, have embraced that option. One such person, a very able and eloquent economist who's been on The Real News several times, Costas Lapavitsas, he's embraced that option, although he's begun to moderate his tone since becoming an MP for SYRIZA in the most recent election. There clearly is within SYRIZA a significant constituency that favors a Grexit. Within the party now they have the economic sophistication to navigate through the very difficult project of exiting the Eurozone. What remains to be seen is whether the political will to do this is there.


What is at stake is everything...and the ripple effect will be monumental, IMHO. Does anyone honestly believe Syriza has any other choice? If one understands the implications and desperation of a nation who overwhelming wants an end to austerity vs. the complete denial that IMO Germany is in...what is really left? The fast road to rejecting austerity globally may be upon us.

Pentagon Will Cut Services and Benefits To Soldiers While Protecting Profits of Defense Industry

William Hartung: Those who fight the wars will face cuts, but not high- ranking military personnel or the companies that build weapons - February 25, 2014

JAISAL NOOR, TRNN PRODUCER: Welcome to The Real News Network. I'm Jaisal Noor in Baltimore.
Now joining us to discuss this is William Hartung.
William D. Hartung is the director of the Arms and Security Project at the Center for International Policy. He is an internationally recognized expert on the arms trade, nuclear policy, and military spending. He is the author of Prophets of War: Lockheed Martin and the Making of the Military-Industrial Complex (Nation Books: 2011). His previous books include And Weapons for All (HarperCollins, 1995), a critique of U.S. arms sales policies from the Nixon through Clinton administrations; and Lessons from Iraq: Avoiding the Next War, co-edited with Miram Pemberton (Paradigm Press, 2008). Prior to working at the Center for International Policy Mr. Hartung was a project director at the New America Foundation and a Senior Research Fellow at the New York-based World Policy Institute. He also worked as a speechwriter and policy analyst for New York State Attorney General Robert Abrams and a project director at the New York-based Council on Economic Priorities

On Monday, Defense Secretary Chuck Hagel outlined a Pentagon budget that will reduce the size of the military and curtail certain weapons systems. The proposal is an alternative to across-the-board cuts which will be implemented because of the so-called sequester.

We mentioned defense contractors and how they will be benefiting from this. The stocks of all but three major defense contractors hit a 52-week high on Monday, and the stock price of Lockheed Martin, the nation's largest defense contractor, hit an all-time high as Hagel detailed the Pentagon's plans.


For a full understanding of what this means please listen to the interview, transcript available at TRNN.
No surprises, the money always finds its way to those who profit from war, while the way we war morphs...as we realize the true cost of these neverending wars.

MoveOn statement on President Obama's AUMF


By Brian Stewart. Thursday, February 12 2015

MoveOn.org Civic Action Campaign Director Jo Comerford on the White House’s request for Congress to authorize military force against ISIS:

President Obama’s proposed Authorization for Use of Military Force (AUMF) is a recipe for endless–and costly–war. It does nothing to repeal the sweeping 2001 AUMF, which 14 years later, is still being used to justify ongoing military action.

Congress must not abdicate its responsibility to oversee U.S. war-making by giving the president a blank check to pursue multiple years of war, in Iraq, Syria, or any nation, against an open-ended array of possible targets. And it certainly must not allow the president to leave open the real possibility of deploying U.S. ground troops, as the proposed AUMF does.

MoveOn members call on members of Congress to reject the proposed AUMF — and will mobilize to ensure this message is heard.

Barbara Boxer: Why I'm Not Giving Obama War Powers

Confronting Terrorism Without Another American Ground War

Three months ago when Democrats were in control of the Senate, I voted in the Foreign Relations Committee for an AUMF (Authorization for the Use of Military Force) which authorized the President to continue working with a broad coalition to degrade and destroy the terrorist group ISIL.

Unfortunately, that sensible AUMF never got a vote in the full Senate.

President Obama is absolutely correct that our nation must confront these ruthless terrorists. But he was also correct to promise that America would not be sending U.S. combat troops back to the Middle East to fight another ground war.

This is the commitment the President made last June when he said, "I think we always have to guard against mission creep, so let me repeat what I've said in the past: American combat troops are not going to be fighting in Iraq again." He made the same point again during his State of the Union Address last month when he stated, "Instead of getting dragged into another ground war in the Middle East, we are leading a broad coalition, including Arab nations, to degrade and ultimately destroy this terrorist group."

That is why I was so surprised by the Administration's draft AUMF which would allow this Administration and the next one broad discretion to commit American troops in the fight against ISIL. The only limitation is no "enduring offensive ground combat operations.

At best, this language is vague, overly broad and confusing - and no one has defined the meaning of "enduring." At worst, it is a dangerous loophole that could lead to another large-scale conflict involving tens of thousands of American troops. I cannot and will not support such an AUMF.

Even worse, some of my Republicans colleagues are now pressing to pass an AUMF with virtually no restrictions at all. Some of these same lawmakers have argued that the only way to defeat ISIL is to have American troops on the ground fighting against ISIL wherever they go.

(Continued at link below...)


All of this on the front page of HuffPo under "Endless War", and rightly so...is this really something we want the nation to commit to? Is this really power we want to hand off to a new administration, with the prospect of yet another Bush vs. Clinton contest?

Kudos to Barbara Boxer, let's hope others join her. Haven't we devoted enough to the MIC? Our infrastructure and countless other avenues need attention...it's time for this rally to endless war to stop.
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