US Demands may Kill WTO Agreement

May 27, 2011
The Real News

After 10 years WTO Doha round negotiations supposed to be dedicated to the developing countries have reached an impasse.

Bio
Timothy A. Wise is the Research Director of the Global Development and Environment Institute (GDAE), Tufts University, and leads its Globalization and Sustainable Development Program. With a background in international development, he specializes in agricultural policy and rural development. He is involved in ongoing research in the areas of: Sustainable Rural Development, Beyond Agricultural Subsidies, Mexico Under NAFTA, WTO and Global Trade. He is the co-author of the book (in English and Spanish), Confronting Globalization: Economic Integration and Popular Resistance in Mexico, and The Promise and the Perils of Agricultural Trade Liberalization: Lessons from Latin America. He is the former executive director of Grassroots International, a Boston-based international aid organization. He holds a Masters in Public Policy from Tufts' Urban and Environmental Policy and Planning Department.

Transcript

PAUL JAY, SENIOR EDITOR, TRNN: Welcome to The Real News Network. I'm Paul Jay in Washington. The World Trade Organization, which involves most countries in the world, although not some big ones, like Russia, but most of the big trading partners in the world are involved, is supposed to create a level playing field, somewhat fair trade, you could say--at least that's the rhetoric. But in truth, for most of its life, it's been seen by the developing countries as a way that the more developed countries take advantage of them. So then comes the Doha round. This is a set of negotiations taking place in Doha, Qatar, that is supposed to be aimed at increasing development and benefit for the developing countries. Well, the Doha round might be dead. Now joining us to talk about why the Doha round might be on life support is Tim Wise. Thanks for joining us.

TIM WISE, DIRECTOR OF GDAE, TUFTS UNIVERSITY: My pleasure.

JAY: So Tim is director of Research and Policy Program at the Global Development and Environment Institute at Tufts University. So why is the Doha round about done?

WISE: Well, the negotiations have been going on for ten years, which is a record since they were started, and they've been floundering for a good three years now. They finally hit an impasse where even the ever-optimistic Pascal Lamay, the secretary-general of the WTO, said he's not sure that there's the basis for an agreement, essentially, on the biggest areas of negotiation. Developing countries, particularly the larger developing countries like China, India, Brazil, feel that the United States has come in making far too severe demands on them to open their markets to US products.

JAY: Now, President Obama's made one of his signature pieces of his foreign policy that economic development leads to democracy. Of course, I think we also heard that from President Bush. But anyway. So what is the position of the United States? If they say they want to promote development, why are the developing countries saying what President Obama wants is not going to help?

WISE: Well, I think the question in multilateral trade negotiations like this--this is the one body that negotiates one country, one vote multilateral trade negotiations--and that in the past, as you noted, rules have tended to favor the wealthier countries. This round was supposed to be different. It was called the development round when it was launched in Doha, Qatar, in 2001. And the promise there was that the least developed countries in the world would--the rules would benefit them in trade, and that other developing countries, including the growing emerging markets like Brazil, China, India, would not be expected to make the same kinds of market-opening steps that the richer countries--.

JAY: Give us some specific examples.

WISE: Well, how much do you have to cut your tariffs in manufacturing--that's the kind of thing you negotiate. Those are called the NAMA negotiations.

JAY: And the US wants essentially no tariffs. They want an open market wherever they can.

WISE: And that's the nature of negotiations, that people come in with the industries and the sectors they want opened, and they try to--and you negotiate, and you negotiate multilaterally. The problem is that with the financial crisis and the economic crisis, now the food crisis on top of it all, I just think the Doha round has been left talking about liberalization when in fact the world is suffering from too much liberalization, not too little. And they just have become largely irrelevant to the discussion. The financial crisis was largely the product of deregulation. And here's the Doha negotiators talking about trying to get further financial sector liberalization.

JAY: In developing countries.

WISE: In developing countries.

JAY: And this, when we say that, we are saying American negotiators.

WISE: US negotiators, European negotiators. The food crisis is ravaging the poorest countries, which have lost, a lot of them, their ability to grow their own food as imports have flooded in under the current trade rules. And what are they talking about in the Doha negotiations? More liberalization, deeper liberalization. So the negotiations just have reached a level almost of irrelevance to world events.

JAY: Now, for the American--certainly the big American corporate sector and Europe, is it not also to their advantage that this round of negotiation collapses, in the sense they like these bilateral agreements where they can kind of beat up one or two countries at a time and try to push through what they want?

WISE: Well, I think it's probably true that the majority of those multinational firms would prefer a multilateral system that opened trade worldwide to their operations. But it's definitely been true in recent years that as the Doha negotiations have floundered, there's been a period of what's been called competitive liberalization, where developed countries, the European Union and Africa, have gone in with their economic partnership agreements and tried to--with a much stronger negotiating position, with Europe negotiating with individual African countries, to pry open those markets. The US has done the same with its own free-trade agreements, and we have three of the Bush-era trade agreements now being proposed by Obama for passage for Korea, Columbia, and Panama. All of those are second-best options, I think, but ones that from an economist's perspective are far worse for the global economy.

JAY: Now, ten years ago when this round began, it was hard to say no to the United States. People have some options now, I should say, people, countries have some options. You know, there's a China, there's an India, there's a Brazil--there are some other serious players now. How has that changed the dynamics?

WISE: Oh, the dynamics are entirely different. I mean, new trading blocs have emerged. The G-20 of the WTO, not to be confused with the G-20, the international financial powers, they emerged in the negotiations in Cancun in 2003 as a trading bloc to say, in the WTO negotiations, no, we're not going to open up investment rules, and no, we need more movement on agriculture from developing countries, and on cotton in particular.

JAY: And how is the Obama administration in comparison to the Bush administration? Is there any--seem to be more understanding of the problems with this liberalization or not?

WISE: Well, I think the Obama administration came in showing a much stronger commitment to multilateralism, and that was very positive. They tended to treat other countries with much greater respect and treat these bodies, these negotiations, with more respect. That said, if you don't come to the table willing to compromise,--

JAY: Meaning open your markets.

WISE: --meaning don't demand that developing countries open their markets prematurely, earlier than the United States ever did in its own development process, then you're really seen as being somewhat hypocritical. And, in fact, the Obama administration in some areas has come in demanding far more from developing countries than the Bush administration did in the earlier stages of the Doha negotiations.

JAY: This is to do with Obama's strategy to try to deal with unemployment in the United States by boosting exports, which means you need to beat up some of the other economies to make room for American products.

WISE: Right. But in international trade negotiations and in an international economic crisis, every country wants to increase its exports. So it's a nonstarter to come in and say, you have to do more than we are. And that's where we find ourselves. Now people are, negotiators are taking this month to assess the state of disrepair in the negotiations and to try to figure out if there's anything that could be salvaged. There are things that can be salvaged, and in a way it might be a good way to move forward. Some have suggested that some of the prodevelopment elements that have already been agreed upon, like trade facilitation--it's just a way to aid countries in being able to access international markets better, mainly developing countries funded by the developed world--benefits everybody to have them be more capable trading partners. But that could just go forward on its own. People have cited a number of other areas. But unless there's a much more serious push to, for example, put a moratorium on these regional and bilateral trade agreements, which are so much worse than the WTO agreements, and which put so much pressure on developing countries, and which just create what people have described as a spaghetti bowl of regulations that companies that have to navigate, depending on which trading partner they're dealing with--.

JAY: And you might--we're seeing it even again now: President Obama, when he said there'd be a $1 billion of debt relief and another $1 billion of loan given, but he tied it again to open markets. So it's the same idea. And the fact is, I think, as you pointed out, is that this [incompr.] these open markets has been part of a policy that's actually undermined all these economies.

WISE: That's right. I think there's a legitimate reason. Aand I think it has played a good role--so has the G-20--in saying let's not in this financial crisis go to a period of protectionism, of closing markets, because that could in the long run be a disaster for the global economy. To the multilateral system's credit, that has not happened. Countries have not overwhelmingly closed off their economies, even in this terrible financial crisis. That's something to build on. But if you want to build on it, you're going to have to build positively, and granting that developing countries need a development round, they need the kind of--.

JAY: They need to be allowed a certain amount of protection until they are able to play in a more equal way.

WISE: Just like the United States had, just like Europe had.

JAY: Right. Thanks for joining us.

WISE: My pleasure.

JAY: And thank you for joining us on The Real News Network.

End of Transcript

DISCLAIMER: Please note that transcripts for The Real News Network are typed from a recording of the program. TRNN cannot guarantee their complete accuracy.

Economist Ha-Joon Chang on Currency Wars, the G20, and Why "There’s No Such Thing As a Free Market"

November 19, 2010

Korean-born economist Ha-Joon Chang teaches economics at the University of Cambridge and is the author of the forthcoming book, 23 Things They Don’t Tell You About Capitalism. "Obama] has to buy time to restructure the economy without creating a recession by sustaining this deficit spending, because otherwise our other option is going back to the 1930s," Chang says. "Don’t forget that in the 1930s a lot of countries started cutting this deficit as soon as things looked slightly better, and many of them went back into recession."


Ha-Joon Chang, teaches economics at the University of Cambridge. He is the author of the forthcoming book, 23 Things They Don’t Tell You About Capitalism. His previous book was titled, Bad Samaritans: The Myth of Free Trade and the Secret History of Capitalism.



AMY GOODMAN: President Obama has just left again for Portugal. He just came back from his 10-day Asian trip where he emerged from the G-20 summit in Seoul, South Korea saying the countries at the summit had agreed to "Get the global economy back on the path of recovery."

But critics have pointed to Obama’s failure to secure a free trade agreement with South Korea and the lack of progress between the United States and China on currency issues. Before leaving Seoul, Obama defended the $600 billion move by the Federal Reserve to buy up government bonds and rejected claims that the U.S. is waging a currency war by devaluing the dollar. Meanwhile, although the U.S. has accused China of artificially manipulating the price of the yuan for economic gain, Obama failed to win international backing for his effort to pressure China to raise its currency value.

JUAN GONZALEZ: For more on the currency wars, capitalism, and the free market, I spoke to the Korean-born economist Ha-Joon Chang last week. He teaches economics at the University of Cambridge. He’s the author of the forthcoming book, 23 Things They Don’t Tell You About Capitalism. His previous book was titled, Bad Samaritans: The Myth of Free Trade and the Secret History of Capitalism. I began by asking him for his assessment of President Obama’s visit to Seoul.

HA-JOON CHANG: Currency, I think was unrealistic to expect any concrete agreement there. Both countries have such different views about what is the right way forward; they have all very different interests. So I think it was quite unrealistic to expect anything on that account.

But I think that there was probably a more realistic expectation of the Korea-U.S.A. free trade agreement. But once again, the problem is that the deal was already agreed and then the Americans are asking for more. The South Korean government is actually quite keen to sign this agreement, although I personally oppose it. But even they couldn’t quite stomach it because they had made all the concessions – well they thought they had – and then now the U.S. is coming back, “We want more.”

JUAN GONZALEZ: What were some of those concessions? Because the president portrayed it as an attempt to get more protections for American workers in a renegotiated part of the deal.

HA-JOON CHANG: Yes, that is the fundamental problem with bilateral free trade agreements because when you open up trade in this kind of way, a lot of people on both sides are going to get hurt and none of the countries have come up with an adequate compensation mechanism. It’s understandable that the Korean farmers or U.S. auto workers – people who are going to get hurt – want to protect themselves and oppose these agreements.

JUAN GONZALEZ: In terms of the currency debate, clearly, the United States now and other countries in the world for more than several years have been claiming that China is refusing to peg its currency at what it’s really worth now on the international scene.
And now suddenly though the tide – especially after the Federal Reserve action in the past week, to begin to buy up more bonds and in effect drive the currency value of the U.S. dollar down – now the charges are being leveled against the United States. Who is right here? And what is the role not only of the emerging Third World countries, but also of the European Union in this debate?

HA-JOON CHANG: Well, you know, it is quite understandable why Americans are frustrated by the slowness in the adjustment of the Chinese currency. Let’s get the facts right. It has been adjusted, only very, very slowly. So it is not like China is absolutely refusing to move, but yes, given the imbalances that the U.S. is facing, it looks painfully slow.

But on the Chinese side, you have to understand. First of all, they don’t want the kind of abrupt adjustment that Japan had to make to its own currency in the 1980s in the so-called Plaza Accord, which then created this huge financial bubble and destroyed the Japanese economy. So the Chinese want to do it slowly. Secondly, it’s not just China who manipulates currency value. As you just said, the Fed flooding America with this money is also currency manipulation, so the Chinese are rightly upset.

But on the other hand, yes, the problem is that since the 1970s, we have lived under the notion that only the deficit countries have to make adjustments. Surplus countries have to make adjustments, too. But in the last 30 years, the reigning orthodoxy has been that anyone who is spending beyond his means has to be punished. This is exactly the logic behind the punishment of Third World countries in the debt crisis and later, the Asian economies and Argentine economy.

So in that sense, actually, the very thing the U.S. has tried to impose on the world is coming to haunt itself. If the U.S. has been on the forefront of this logic that it’s only the deficit countries that have to make adjustments, and now other countries are logically saying, “Well, why don’t you then, do the same?”

JUAN GONZALEZ: But in terms of the currency, in terms of this flood now of American capital that is heading overseas now because the government has driven interest rates down here so drastically, several of the emerging economies – certainly Brazil, India, and others – are increasingly looking at how to prevent this entrance into their economies of basically, speculative capital.

What is your sense of how this will develop? And again, how Europe, which is this other huge power force in the world economic scene, how Europe will react to the debate between the emerging countries and the United States over currency controls?

HA-JOON CHANG: Well, first of all, let’s put this into perspective. The reason why the Fed has to engage in this massive quantitative easing is because of the inability of the American political system to agree on continued deficit spending. So although the brunt of adjustment is put on monetary policy, this is at the root of the problem. In a way, monetary easing wouldn’t be as big if the American political scene is such that it can continue the stimulus package. But it is not going to happen.

So we’re stuck with the situation now. Given the low interest rate and a huge amount of liquidity released into the system, a lot of money is flowing into the so-called emerging economies – that is, middle-level developing countries – and they are really desperate. I mean, some of these countries have seen huge appreciation of their currency values which is making their export difficult.

Now, most of them are beginning to put capital controls in place. This is quite amazing because until recently, it was a mortal sin. Now, in certain countries, even the IMF is saying, maybe you should put capital controls in so that the speculative capital wouldn’t destabilize your economy.

JUAN GONZALEZ: By capital controls, you mean what, precisely? The taxing of investments, of financial investments that are coming in from abroad? Restrictions on their leaving?

HA-JOON CHANG: Yes, well, there are a range of measures. The most kind of draconian measures will be that you have to get government approval when you are bringing money, you have to get approval when you are bringing it out. That is still where a lot of countries are putting, for example, deposit requirements. When you’re bringing money in, you deposit, say, the equivalent of 30% to 50% of the money, which you will get back when and if you leave after, say, a year or two, but if you leave earlier, then you lose the money. So this is to –

JUAN GONZALEZ: To curb speculation.

HA-JOON CHANG: Exactly, yes. Some other countries have studied taxing capital gains from this speculative flows. So a range of measures are being used, but the direction is clear: these speculative inflows cannot be managed through market mechanisms.

Just put it into perspective, even the biggest stock markets in the developing countries are less than 1% or 2% of the U.S. stock market. So a tiny drop flowing out of the U.S. is a flood for these economies so that they need these kind of protective mechanisms.

JUAN GONZALEZ: Ever since the financial collapse a couple of years ago, first, all the governments tried to engage in some sort of stimulus of their economies, but now the clear debate is over is the way forward to reduce deficits and to impose austerity on government spending? Or is it to continue to stimulate economies and promote economic growth? Obviously, you fall clearly on one side or another – could you explain why?

HA-JOON CHANG: Yes. Look, one thing that has to be made clear at the very beginning is that the main reason for these large deficits is not excessive government spending, but falling tax revenue through the collapse in private sector demand. So if we are in a full implement situation, cutting government spending might create room for the private sector to come and create jobs and so on.

But the very reason why we have this deficit is the private sector is not investing, and cutting deficits is not going to make them invest because the root cause of their unwillingness to invest is the problems with their balance sheets. This cut is not going to solve the problem.

But more importantly, in the short run, that is viewed that it is the best if you cut the deficit as much and as quickly as possible. There’s no economic logic. The British government, you know, says to cut the deficit down to basically zero in four years’ time. But four years makes sense in calendar terms, but in economic terms, it doesn’t make any sense.

If you want to cut this deficit, you have to cut to the state of the economy. So maybe in some cases, you can cut it in two years, maybe in some cases it will have to be 12. Unfortunately a lot of deficit hawks have a hidden agenda. They basically want to rollback the welfare state and they’re using it as an excuse to do it.

JUAN GONZALEZ: As Naomi Klein says, “Disaster capitalism is the opportunity to implement policies that you have always wanted to do.”

HA-JOON CHANG: Exactly and then the kind of political sleight of hand they have deployed is quite remarkable. All this crises that have basically been generated by the bankers and other financiers, I mean, these people are still paying themselves billions of bonuses while the poorest people are asked to make the adjustment. I mean, this is outrageous.

JUAN GONZALEZ: Now you are seeing one country after another – Greece, France, England with its austerity measures – and now, of course, the United States, the Debt Commission recommending potentially huge cuts in Social Security and Medicare here in the United States. How do you see President Obama’s policies so far in terms of the way he’s handling this crisis, since he got into office?

HA-JOON CHANG: Well, luckily the U.S. still hasn’t yet given into the deficit hawks, but with the Republican victory in the midterm elections and the Debt Commission, it’s coming. But he has to resist it. He has to, if possible, buy time to restructure the economy, without creating a recession, by sustaining this deficit spending.

Otherwise, the other option is going back to the 1930s. Don’t forget that in the 1930s, a lot of countries started cutting the deficit as soon as things looked slightly better and many of them went back into recession. It is already happening in Ireland. They started cutting the deficit, now they are in bigger trouble.

AMY GOODMAN: Korean-born economist Ha-Joon Chang speaking to Juan Gonzalez. He teaches economics at the University of Cambridge in Britain; the author of the forthcoming book, 23 Things They Don’t Tell You About Capitalism; his previous book, Bad Samaritans: The Myth of Free Trade and the Secret History of Capitalism.

The Economic Recovery is an Illusion

The Bank for International Settlements (BIS) Warns of Future Crises

by Andrew Gavin Marshall

War is Peace, Freedom is Slavery, Ignorance is Strength, and Debt is Recovery



In light of the ever-present and unyieldingly persistent exclamations of ‘an end’ to the recession, a ‘solution’ to the crisis, and a ‘recovery’ of the economy; we must remember that we are being told this by the very same people and institutions which told us, in years past, that there was ‘nothing to worry about,’ that ‘the fundamentals are fine,’ and that there was ‘no danger’ of an economic crisis.



Why do we continue to believe the same people that have, in both statements and choices, been nothing but wrong? Who should we believe and turn to for more accurate information and analysis? Perhaps a useful source would be those at the epicenter of the crisis, in the heart of the shadowy world of central banking, at the global banking regulator, and the “most prestigious financial institution in the world,” which accurately predicted the crisis thus far: The Bank for International Settlements (BIS). This would be a good place to start.



The economic crisis is anything but over, the “solutions” have been akin to putting a band-aid on an amputated arm. The Bank for International Settlements (BIS), the central bank to the world’s central banks, has warned and continues to warn against such misplaced hopes.



What is the Bank for International Settlements (BIS)?



The BIS emerged from the Young Committee set up in 1929, which was created to handle the settlements of German reparations payments outlined in the Versailles Treaty of 1919. The Committee was headed by Owen D. Young, President and CEO of General Electric, co-author of the 1924 Dawes Plan, member of the Board of Trustees of the Rockefeller Foundation and was Deputy Chairman of the Federal Reserve Bank of New York. As the main American delegate to the conference on German reparations, he was also accompanied by J.P. Morgan, Jr.[1] What emerged was the Young Plan for German reparations payments.



The Plan went into effect in 1930, following the stock market crash. Part of the Plan entailed the creation of an international settlement organization, which was formed in 1930, and known as the Bank for International Settlements (BIS). It was purportedly designed to facilitate and coordinate the reparations payments of Weimar Germany to the Allied powers. However, its secondary function, which is much more secretive, and much more important, was to act as “a coordinator of the operations of central banks around the world.” Described as “a bank for central banks,” the BIS “is a private institution with shareholders but it does operations for public agencies. Such operations are kept strictly confidential so that the public is usually unaware of most of the BIS operations.”[2]



The BIS was founded by “the central banks of Belgium, France, Germany, Italy, the Netherlands, Japan, and the United Kingdom along with three leading commercial banks from the United States, including J.P. Morgan & Company, First National Bank of New York, and First National Bank of Chicago. Each central bank subscribed to 16,000 shares and the three U.S. banks also subscribed to this same number of shares.” However, “Only central banks have voting power.”[3]



Central bank members have bi-monthly meetings at the BIS where they discuss a variety of issues. It should be noted that most “of the transactions carried out by the BIS on behalf of central banks require the utmost secrecy,”[4] which is likely why most people have not even heard of it. The BIS can offer central banks “confidentiality and secrecy which is higher than a triple-A rated bank.”[5]



The BIS was established “to remedy the decline of London as the world’s financial center by providing a mechanism by which a world with three chief financial centers in London, New York, and Paris could still operate as one.”[6] As Carroll Quigley explained:



[T]he powers of financial capitalism had another far-reaching aim, nothing less than to create a world system of financial control in private hands able to dominate the political system of each country and the economy of the world as a whole. This system was to be controlled in a feudalist fashion by the central banks of the world acting in concert, by secret agreements arrived at in frequent private meetings and conferences. The apex of the system was to be the Bank for International Settlements in Basle, Switzerland, a private bank owned and controlled by the world’s central banks which were themselves private corporations.[7]



The BIS, is, without a doubt, the most important, powerful, and secretive financial institution in the world. It’s warnings should not be taken lightly, as it would be the one institution in the world that would be privy to such information more than any other.



Derivatives Crisis Ahead



In September of 2009, the BIS reported that, “The global market for derivatives rebounded to $426 trillion in the second quarter as risk appetite returned, but the system remains unstable and prone to crises.” The BIS quarterly report said that derivatives rose 16% “mostly due to a surge in futures and options contracts on three-month interest rates.” The Chief Economist of the BIS warned that the derivatives market poses “major systemic risks” in the international financial sector, and that, “The danger is that regulators will again fail to see that big institutions have taken far more exposure than they can handle in shock conditions.” The economist added that, “The use of derivatives by hedge funds and the like can create large, hidden exposures.”[8]



The day after the report by the BIS was published, the former Chief Economist of the BIS, William White, warned that, “The world has not tackled the problems at the heart of the economic downturn and is likely to slip back into recession,” and he further “warned that government actions to help the economy in the short run may be sowing the seeds for future crises.” He was quoted as warning of entering a double-dip recession, “Are we going into a W[-shaped recession]? Almost certainly. Are we going into an L? I would not be in the slightest bit surprised.” He added, “The only thing that would really surprise me is a rapid and sustainable recovery from the position we’re in.”



An article in the Financial Times explained that White’s comments are not to be taken lightly, as apart from heading the economic department at the BIS from 1995 to 2008, he had, “repeatedly warned of dangerous imbalances in the global financial system as far back as 2003 and – breaking a great taboo in central banking circles at the time – he dared to challenge Alan Greenspan, then chairman of the Federal Reserve, over his policy of persistent cheap money.”



The Financial Times continued:



Worldwide, central banks have pumped thousands of billions of dollars of new money into the financial system over the past two years in an effort to prevent a depression. Meanwhile, governments have gone to similar extremes, taking on vast sums of debt to prop up industries from banking to car making.



White warned that, “These measures may already be inflating a bubble in asset prices, from equities to commodities,” and that, “there was a small risk that inflation would get out of control over the medium term.” In a speech given in Hong Kong, White explained that, “the underlying problems in the global economy, such as unsustainable trade imbalances between the US, Europe and Asia, had not been resolved.”[9]



On September 20, 2009, the Financial Times reported that the BIS, “the head of the body that oversees global banking regulation,” while at the G20 meeting, “issued a stern warning that the world cannot afford to slip into a ‘complacent’ assumption that the financial sector has rebounded for good,” and that, “Jaime Caruana, general manager of the Bank for International Settlements and a former governor of Spain’s central bank, said the market rebound should not be misinterpreted.”[10]



This follows warnings from the BIS over the summer of 2009, regarding misplaced hope over the stimulus packages organized by various governments around the world. In late June, the BIS warned that, “fiscal stimulus packages may provide no more than a temporary boost to growth, and be followed by an extended period of economic stagnation.”



An article in the Australian reported that, “The only international body to correctly predict the financial crisis ... has warned the biggest risk is that governments might be forced by world bond investors to abandon their stimulus packages, and instead slash spending while lifting taxes and interest rates,” as the annual report of the BIS “has for the past three years been warning of the dangers of a repeat of the depression.” Further, “Its latest annual report warned that countries such as Australia faced the possibility of a run on the currency, which would force interest rates to rise.” The BIS warned that, “a temporary respite may make it more difficult for authorities to take the actions that are necessary, if unpopular, to restore the health of the financial system, and may thus ultimately prolong the period of slow growth.”



Further, “At the same time, government guarantees and asset insurance have exposed taxpayers to potentially large losses,” and explaining how fiscal packages posed significant risks, it said that, “There is a danger that fiscal policy-makers will exhaust their debt capacity before finishing the costly job of repairing the financial system,” and that, “There is the definite possibility that stimulus programs will drive up real interest rates and inflation expectations.” Inflation “would intensify as the downturn abated,” and the BIS “expressed doubt about the bank rescue package adopted in the US.”[11]



The BIS further warned of inflation, saying that, “The big and justifiable worry is that, before it can be reversed, the dramatic easing in monetary policy will translate into growth in the broader monetary and credit aggregates.” That will “lead to inflation that feeds inflation expectations or it may fuel yet another asset-price bubble, sowing the seeds of the next financial boom-bust cycle.”[12] With the latest report on the derivatives bubble being created, it has become painfully clear that this is exactly what has happened: the creation of another asset-price bubble. The problem with bubbles is that they burst.



The Financial Times reported that William White, former Chief Economist at the BIS, also “argued that after two years of government support for the financial system, we now have a set of banks that are even bigger - and more dangerous - than ever before,” which also, “has been argued by Simon Johnson, former chief economist at the International Monetary Fund,” who “says that the finance industry has in effect captured the US government,” and pointedly stated: “recovery will fail unless we break the financial oligarchy that is blocking essential reform.”[13] [Emphasis added].



At the beginning of September 2009, central bankers met at the BIS, and it was reported that, “they had agreed on a package of measures to strengthen the regulation and supervision of the banking industry in the wake of the financial crisis,” and the chief of the European Central Bank was quoted as saying, “The agreements reached today among 27 major countries of the world are essential as they set the new standards for banking regulation and supervision at the global level.”[14]



Among the agreed measures, “lenders should raise the quality of their capital by including more stock,” and “Banks will also have to raise the amount and quality of the assets they keep in reserve and curb leverage.” One of the key decisions made at the Basel conference, which is named after the Basel Committee on Banking Supervision, set up under the BIS, was that, “banks will need to raise the quality of their so-called Tier 1 capital base, which measures a bank’s ability to absorb sudden losses,” meaning that, “The majority of such reserves should be common shares and retained earnings and the holdings will be fully disclosed.”[15]



In mid-September, the BIS said that, “Central banks must coordinate global supervision of derivatives clearinghouses and consider offering them access to emergency funds to limit systemic risk.” In other words, “Regulators are pushing for much of the $592 trillion market in over-the-counter derivatives trades to be moved to clearinghouses which act as the buyer to every seller and seller to every buyer, reducing the risk to the financial system from defaults.” The report released by the BIS asked if clearing houses “should have access to central bank credit facilities and, if so, when?”[16]



A Coming Crisis



The derivatives market represents a massive threat to the stability of the global economy. However, it is one among many threats, all of which are related and intertwined; one will set off another. The big elephant in the room is the major financial bubble created from the bailouts and “stimulus” packages worldwide. This money has been used by major banks to consolidate the economy; buying up smaller banks and absorbing the real economy; productive industry. The money has also gone into speculation, feeding the derivatives bubble and leading to a rise in stock markets, a completely illusory and manufactured occurrence. The bailouts have, in effect, fed the derivatives bubble to dangerous new levels as well as inflating the stock market to an unsustainable position.



However, a massive threat looms in the cost of the bailouts and so-called “stimulus” packages. The economic crisis was created as a result of low interest rates and easy money: high-risk loans were being made, money was invested in anything and everything, the housing market inflated, the commercial real estate market inflated, derivatives trade soared to the hundreds of trillions per year, speculation ran rampant and dominated the global financial system. Hedge funds were the willing facilitators of the derivatives trade, and the large banks were the major participants and holders.



At the same time, governments spent money loosely, specifically the United States, paying for multi-trillion dollar wars and defense budgets, printing money out of thin air, courtesy of the global central banking system. All the money that was produced, in turn, produced debt. By 2007, the total debt – domestic, commercial and consumer debt – of the United States stood at a shocking $51 trillion.[17]



As if this debt burden was not enough, considering it would be impossible to ever pay back, the past two years has seen the most expansive and rapid debt expansion ever seen in world history – in the form of stimulus and bailout packages around the world. In July of 2009, it was reported that, “U.S. taxpayers may be on the hook for as much as $23.7 trillion to bolster the economy and bail out financial companies, said Neil Barofsky, special inspector general for the Treasury’s Troubled Asset Relief Program.”[18]



Bilderberg Plan in Action?



In May of 2009, I wrote an article covering the Bilderberg meeting of 2009, a highly secretive meeting of major elites from Europe and North America, who meet once a year behind closed doors. Bilderberg acts as an informal international think tank, and they do not release any information, so reports from the meetings are leaked and the sources cannot be verified. However, the information provided by Bilderberg trackers and journalists Daniel Estulin and Jim Tucker have proven surprisingly accurate in the past.



In May, the information that leaked from the meetings regarded the main topic of conversation being, unsurprisingly, the economic crisis. The big question was to undertake “Either a prolonged, agonizing depression that dooms the world to decades of stagnation, decline and poverty ... or an intense-but-shorter depression that paves the way for a new sustainable economic world order, with less sovereignty but more efficiency.”



Important to note, was that one major point on the agenda was to “continue to deceive millions of savers and investors who believe the hype about the supposed up-turn in the economy. They are about to be set up for massive losses and searing financial pain in the months ahead.”



Estulin reported on a leaked report he claimed to have received following the meeting, which reported that there were large disagreements among the participants, as “The hardliners are for dramatic decline and a severe, short-term depression, but there are those who think that things have gone too far and that the fallout from the global economic cataclysm cannot be accurately calculated.” However, the consensus view was that the recession would get worse, and that recovery would be “relatively slow and protracted,” and to look for these terms in the press over the next weeks and months. Sure enough, these terms have appeared ad infinitum in the global media.



Estulin further reported, “that some leading European bankers faced with the specter of their own financial mortality are extremely concerned, calling this high wire act ‘unsustainable,’ and saying that US budget and trade deficits could result in the demise of the dollar.” One Bilderberger said that, “the banks themselves don't know the answer to when (the bottom will be hit).” Everyone appeared to agree, “that the level of capital needed for the American banks may be considerably higher than the US government suggested through their recent stress tests.” Further, “someone from the IMF pointed out that its own study on historical recessions suggests that the US is only a third of the way through this current one; therefore economies expecting to recover with resurgence in demand from the US will have a long wait.” One attendee stated that, “Equity losses in 2008 were worse than those of 1929,” and that, “The next phase of the economic decline will also be worse than the '30s, mostly because the US economy carries about $20 trillion of excess debt. Until that debt is eliminated, the idea of a healthy boom is a mirage.”[19]



Could the general perception of an economy in recovery be the manifestation of the Bilderberg plan in action? Well, to provide insight into attempting to answer that question, we must review who some of the key participants at the conference were.



Central Bankers



Many central bankers were present, as per usual. Among them, were the Governor of the National Bank of Greece, Governor of the Bank of Italy, President of the European Investment Bank; James Wolfensohn, former President of the World Bank; Nout Wellink, President of the Central Bank of the Netherlands and is on the board of the Bank for International Settlements (BIS); Jean-Claude Trichet, the President of the European Central Bank was also present; the Vice Governor of the National Bank of Belgium; and a member of the Board of the Executive Directors of the Central Bank of Austria.



Finance Ministers and Media



Finance Ministers and officials also attended from many different countries. Among the countries with representatives present from the financial department were Finland, France, Great Britain, Italy, Greece, Portugal, and Spain. There were also many representatives present from major media enterprises around the world. These include the publisher and editor of Der Standard in Austria; the Chairman and CEO of the Washington Post Company; the Editor-in-Chief of the Economist; the Deputy Editor of Die Zeit in Germany; the CEO and Editor-in-Chief of Le Nouvel Observateur in France; the Associate Editor and Chief Economics Commentator of the Financial Times; as well as the Business Correspondent and the Business Editor of the Economist. So, these are some of the major financial publications in the world present at this meeting. Naturally, they have a large influence on public perceptions of the economy.



Bankers



Also of importance to note is the attendance of private bankers at the meeting, for it is the major international banks that own the shares of the world’s central banks, which in turn, control the shares of the Bank for International Settlements (BIS). Among the banks and financial companies represented at the meeting were Deutsche Bank AG, ING, Lazard Freres & Co., Morgan Stanley International, Goldman Sachs, Royal Bank of Scotland, and of importance to note is David Rockefeller,[20] former Chairman and CEO of Chase Manhattan (now J.P. Morgan Chase), who can arguably be referred to as the current reigning ‘King of Capitalism.’



The Obama Administration



Heavy representation at the Bilderberg meeting also came from members of the Obama administration who are tasked with resolving the economic crisis. Among them were Timothy Geithner, the US Treasury Secretary and former President of the Federal Reserve Bank of New York; Lawrence Summers, Director of the White House's National Economic Council, former Treasury Secretary in the Clinton administration, former President of Harvard University, and former Chief Economist of the World Bank; Paul Volcker, former Governor of the Federal Reserve System and Chair of Obama’s Economic Recovery Advisory Board; Robert Zoellick, former Chairman of Goldman Sachs and current President of the World Bank.[21]



Unconfirmed were reports of the Fed Chairman, Ben Bernanke being present. However, if the history and precedent of Bilderberg meetings is anything to go by, both the Chairman of the Federal Reserve and the President of the Federal Reserve Bank of New York are always present, so it would indeed be surprising if they were not present at the 2009 meeting. I contacted the New York Fed to ask if the President attended any organization or group meetings in Greece over the scheduled dates that Bilderberg met, and the response told me to ask the particular organization for a list of attendees. While not confirming his presence, they also did not deny it. However, it is still unverified.



Naturally, all of these key players to wield enough influence to alter public opinion and perception of the economic crisis. They also have the most to gain from it. However, whatever image they construct, it remains just that; an image. The illusion will tear apart soon enough, and the world will come to realize that the crisis we have gone through thus far is merely the introductory chapter to the economic crisis as it will be written in history books.



Conclusion



The warnings from the Bank for International Settlements (BIS) and its former Chief Economist, William White, must not be taken lightly. Both the warnings of the BIS and William White in the past have gone unheralded and have been proven accurate with time. Do not allow the media-driven hope of ‘economic recovery’ sideline the ‘economic reality.’ Though it can be depressing to acknowledge; it is a far greater thing to be aware of the ground on which you tread, even if it is strewn with dangers; than to be ignorant and run recklessly through a minefield. Ignorance is not bliss; ignorance is delayed catastrophe.



A doctor must first properly identify and diagnose the problem before he can offer any sort of prescription as a solution. If the diagnosis is inaccurate, the prescription won’t work, and could in fact, make things worse. The global economy has a large cancer in it: it has been properly diagnosed by some, yet the prescription it was given was to cure a cough. The economic tumor has been identified; the question is: do we accept this and try to address it, or do we pretend that the cough prescription will cure it? What do you think gives a stronger chance of survival? Now try accepting the idea that ‘ignorance is bliss.’



As Gandhi said, “There is no god higher than truth.”



For an overview of the coming financial crises, see: "Entering the Greatest Depression in History: More Bubbles Waiting to Burst," Global Research, August 7, 2009.