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UILDING THE NEW WORLD ORDER WITH IMF, WORLD BANK, AND TAXPAYERS PAY THE BILL
The Game-Called-Bailout reexamined and shown to be far more than merely a means of getting taxpayers to foot the cost of bad loans MADE DOMESTICALLY; the final play revealed as the merger of all nations into world government; the unfolding of that strategy as applied to Panama, Mexico, Brazil, Argentina, China, Eastern Europe, and Russia.
Let us return now to the game called bailout. Everything in the previous chapter has been merely background information to understand the game as it is played in the international arena. Here, finally, are the rules:
- Commercial banks in the industrialized nations, backed by their respective central banks, create money out of nothing and lend it to the governments of underdeveloped nations. They know that these are risky loans, so they charge an interest rate that is high enough to compensate. It is more than what they expect to receive in the long run.
- When the underdeveloped nations cannot pay the interest on their loans, the IMF and World Bank enter the game as both players and referees. Using additional money created out of nothing by the central b&lks of their member nations, they advance "development" loans to the governments which now have enough to pay the interest on the original loans with enough left over for their own political purposes.
- The recipient country quickly exhausts the new supply of money, and the play returns to point number two. This time, however, the new loans are guaranteed by the World Bank and the central banks of the industrialized nations. Now that the risk of default is removed, the commercial banks agree to reduce the interest to the point anticipated at the beginning. The debtor governments resume payments
4. The final play is - well, in this version of the game there appears to be no final play, because the plan is to keep the game going forever. To make that possible, certain things must happen that are very final, indeed. They include the conversion of the IMF into a world central bank as Keynes had planned, which then issues an international fiat money. Once that "Bank of Issue" is in place, the IMF can collect unlimited resources from the citizens of the world through the hidden tax called inflation. The money stream then can be sustained indefinitely-with or without the approval of the separate nations-because they will no longer have money of their own.
Since this game results in a hemorrhage of wealth from the industrialized nations, their economies are doomed to be brought down further and further, a process that has been going on since Bretton Woods. The result will be a severe lowering of their living standards and their demise as independent nations. The hidden reality behind so-called development loans is that America and other industrialized nations are being subverted by that process. That is not an accident; it is the essence of the plan. A strong nation is not likely to surrender its sovereignty. Americans would not agree to turn over their monetary system, their military, or their courts to a world body made up of governments which have been despotic to their own people, especially since most of those regimes have already revealed anti-American hostility. But if Americans can be brought to the point where they are suffering from a collapse of their economy and from a breakdown in civil order, things will be different. When they stand in bread lines and face anarchy in their streets, they will be more willing to give up sovereignty in return for "assistance" from the World Bank and the UN "peacekeeping" forces. This will become even more acceptable if a structured demise of Communism can be arranged ahead of time to make it appear that the world's major political systems have converged into the common denominator of "social democracy."
THE FINAL PLAY
The underdeveloped nations, on the other hand, are not being raised up. What is happening to them is that their political leaders are becoming addicted to the IMF cash flow and will be unable to break the habit. These countries are being conquered by money instead of arms. Soon they will no longer be truly independent nations. They are becoming mere components in the system of world socialism planned by Harry Dexter White and John Maynard Keynes. Their leaders are being groomed to become potentates in a new, high-tech feudalism, paying homage to their Lords in New York. And they are eager to do it in return for privilege and power within the "New World Order." That is the final play.
The essence of socialism is redistribution of the wealth. The goal is equality, and that means taking from the rich and giving to the poor. At least that's the theory. Unfortunately, the poor are never benefited by this maneuver. They either do not get the money in the first place-too much is siphoned off by the bureaucracies which administer the programs-or, if they do get any of it, they don't know what to do with it. They merely spend it until it is gone, and then no one has any money- except, of course, those who administer the government programs. Nevertheless, politicians know that promises to redistribute the wealth are popular among two groups: the voters who naively believe it will help the poor, and the socialist managers who see it as job security. Supported by these two voting blocs, election to office is assured.
One of the early American advocates of socialism on a global scale-including the draining of wealth away from the "rich" United States-was John F. Kennedy. He undoubtedly learned the concept while attending the Fabian London School of Economics in 1935-36 just prior to his father's appointment as Ambassador to England. When JFK became President, his political views continued to carry the imprint of that training. In September of 1963, he addressed the finance ministers and central-bank governors from 102 nations at the annual meeting of the IMF/World Bank. He explained the concept of world socialism in glowing terms:
Twenty years ago, when the architects of these institutions met to design an international banking structure, the economic life of the world was polarized in overwhelming, and even alarming, measure on the United States.... Sixty per cent of the gold reserves of the world were here in the United States.... There was a need for redistribution of the financial resources of the world.... And there was an equal need to organize a flow of capital to the impoverished countries of the world. All this has come about. It did not come about by chance but by conscious and deliberate and responsible planning
CFR SETS STRATEGY
The brain trust for implementing the Fabian plan in America is called the Council on Foreign Relations (NYSE:CFR). We shall look at it closely in future chapters, but it is important to know at this point that almost all of America's leadership has come from this small group. That includes our presidents and their advisers, cabinet members, ambassadors, board members of the Federal Reserve System, directors of the largest banks and investment houses, presidents of universities, and heads of metropolitan newspapers, news services, and TV networks. 2 It is not an exaggeration to describe this group as the hidden government of the United States.
CFR members have never been shy about calling for the weakening of America as a necessary step toward the greater good of building world government. One of the CFR founders was John Foster Dulles, who later was appointed Secretary-of-State by CFR member Dwight Eisenhower. In 1939, Dulles said:
Some dilution or leveling off of the sovereignty system as it prevails in the world today must take place ... to the immediate disadvantage of those nations which now possess the preponderance of power.... The establishment of a common money ... would deprive our government of exclusive control over a national money.... The United States must be prepared to make sacrifices afterward in setting up a world politico-economic order which would level off inequalities of economic opportunity with respect to nations."
CFR member Zbigniew Brzezinski was the National Security Adviser to CFR member Jimmy Carter. In 1970, Brzezinski wrote:
... some international cooperation has already been achieved, but further progress will require greater American sacrifices. More intensive efforts to shape a new world monetary structure will have to be undertaken, with some consequent risk to the present relatively favorable American position. 4
"Text of Kennedy Speech to World Monetary Parley," New York Times, October 1, 1963, p. 16.
For an in-depth analysis of the CFR, including a comprehensive list of members, see James Perloff, Shadows of Power (Appleton, Wisconsin: Western Islands, 1988).
"Dulles Outlines World Peace Plan," New York Times, October 28, 1939.
Zbigniew Brzezinski, Between Two Ages: America's Role in the Technetronic Era (Westport, Connecticut: Greenwood Press, 1970), p. 300.
At the Spring, 1983, Economic Summit in Williamsburg, Virginia, President Ronald Reagan declared:
National economies need monetary coordination mechanisms, and that is why an integrated world economy needs a common monetary standard.... But, no national currency will do-only a world currency will work.
The CFR strategy for convergence of the world's monetary systems was spelled out by Harvard Professor Richard N. Cooper, a CFR member who had been the Under Secretary of State for
Economic Affairs in the Carter Administration:
I suggest a radical alternative scheme for the next century: the creation of a common currency for all of the industrial democracies, with a common monetary policy and a joint Bank of Issue to determine that monetary policy.... How can independent states accomplish that? They need to turn over the determination of monetary policy to a supranational body. [Emphasis in original]...
It is highly doubtful whether the American public, to take just one example, could ever accept that countries with oppressive autocratic regimes should vote on the monetary policy that would affect monetary conditions in the United States.... For such a bold step to work at all, it presupposes a certain convergence of political values.... 1
Phrases such as, monetary coordination mechanisms, modern world economic order, convergence of political values, or new world order are not very specific. To the average person, they sound pleasant and harmless. Yet, to the insiders of the dub, they are code phrases which have a specific meaning: the termination of national sovereignty and the creation of world government. CFR member, Richard Gardner-another adviser to President Carter-explains the meaning of these phrases and also calls for the Fabian strategy of deception and gradualism.
In short, the "house of world order" will have to be built from the bottom up.... An end run around national sovereignty, eroding it piece by piece will accomplish much more than the old-fashioned frontal assault.
As for the programmed decline of the American economy, CFR member Samuel Huntington argues that, if higher education is
"A Monetary System for the Future," by Richard N. Cooper, Foreign Affairs, Fall, 1984, pp. 166, 177, 184.
"The Hard Road to World Order," by Richard Gardner, Foreign Affairs, April, 1974, p. 558.
considered to be desirable for the general population, "a program is then necessary to lower the job expectations of those who receive a college education." 1 CFR member Paul Volcker, former Chairman of the Federal Reserve, says: "The standard of living of the average American has to decline.... I don't think you can escape that."
By 1993, Volcker had become the U.S. Chairman of the Trilateral Commission. The TLC was created by David Rockefeller to coordinate the building of The New World Order in accordance with the Gardner strategy: "An end run around national sovereignty, eroding it piece by piece." The objective is to draw the United States, Mexico, Canada, Japan, and Western Europe into political and economic union. Under slogans such as free trade and environmental protection, each nation is to surrender its sovereignty "piece by piece" until a full-blown regional government emerges from the process. The new government will control each nation's working conditions, wages, and taxes. Once that has happened, it will be a relatively simple step to merge the regionals into global government. That is the reality behind the so-called trade treaties within the European Union (NYSEARCA:EU), the North American Free Trade Agreement (NAFTA), the Asia-Pacific Economic Cooperation agreement (APEC), and the General Agreement on Tariffs and Trade (OTC:GATT). They have little to do with trade. In the Trilateral Commission's annual report for 1993, Volcker explains:
Interdependence is driving our countries toward convergence in areas once considered fully within the domestic purview. Some of these areas involve government regulatory policy, such as environmental standards, the fair treatment of workers, and taxation. 3
In 1992, the Trilateral Commission released a report coauthored by Toyoo Gyohten, Chairman of the Board of the Bank of Tokyo and formerly Japan's Minister of Finance for International Affairs. Gyohten had been a Fulbright Scholar who was trained at Princeton and taught at Harvard Business School. He also had been in charge of the Japan Desk of the International Monetary Fund. In short, he represents the Japanese monetary interests within The New World Order.
Michael Crozier, Samuel P. Huntington, and Joji Watanuki, The Crisis of Democracy (New York: New York University Press, 1975), pp. 183-84.
"Volcker Asserts U.S. Must Trim Living Standard," New York Times, October 18, 1979, p. 1.
Washington 1993: The Annual Meeting of the Trilateral Commission, Trialogue 46 (New York: Trilateral Commission, 1993), p. 77.
New World Order. In this report, Gyohten explains that the real importance of "trade" agreements is not trade but the building of global government:
"Regional trade arrangements should not be regarded as ends in themselves, but as supplements to global liberalization.... Regional arrangements provide models or building blocks for increased or strengthened globalism.... Western Europe [the EU] represents regionalism in its truest form.... The steps toward deepening [increasing the number of agreements] are dramatic and designed to be irreversible.... A common currency.... central bank.... court and parliament-will have expanded powers.... After the Maastricht summit [the Dutch town where the meeting was held], an Economist editorial pronounced the verdict: "Call it what you will: by any other name it is federal government."... In sum, the regional integration process in Europe can be seen as akin to an exercise in nation-building.1
Applying this same perspective to the NAFTA treaty, former Secretary-of-State, Henry Kissinger (CFR), said it "is not a conventional trade agreement but the architecture of a new international system.... the vital first step for a new kind of community of nations." The newspaper article that contained this statement was appropriately entitled: "With NAFTA, U.S. Finally Creates a New World Order."2 David Rockefeller (CFR) was even more emphatic. He said that it would be "criminal" not to pass the treaty because: "Everything is in place-after 500 years-to build a true 'new world' in the Western Hemisphere." 3
By early 1994, the drift toward the New World Order had become a rush. On April 15, the government of Morocco placed a full-page ad in the New York Times celebrating the creation of the World Trade Organization which was formed by the signing of the General Agreement on Tariffs and Trade (OTC:GATT) which took place in the Moroccan city of Marrakech. While Americans were still being told that GATT was merely a "trade" agreement, the internationalists were celebrating a much larger concept. The ad spelled it out in unmistakable terms:
Toyoo Gyohten and Charles E. Morrison, Regionalism in A Converging World (New York: Trilateral Commission, 1992), pp. 4, 7-9,11.
"With NAFTA, U.S. Finally Creates a New World Order," by Henry Kissinger, Los Angeles Times, July 18, 1993, pp. M-2, 6.
"A Hemisphere in the Balance," by David Rockefeller, Wall Street Journal, October 1, 1993, p. A-10.
1944, Bretton Woods: The IMF and the World Bank
1945, San Francisco: The United Nations
1994, Marrakech: The World Trade Organization
History knows where it is going.... The World Trade Organization,
the third pillar of the New World Order, along with the United
Nations and the International Monetary Fund.
A RARE GLIMPSE INTO THE INNER WORKINGS
So much for the final play. Let us return, now, to the game called bailout as it is actually played today on the international scene. Let us begin with a glimpse into the inner workings of the Presidential Cabinet. James Watt was the Secretary of the Interior in the Reagan Administration. In his memoirs, he described an incident at a Cabinet meeting in the spring of 1982. The first items on the agenda were reports by Treasury Secretary Donald Regan and Budget Director David Stockman concerning problems the less-developed countries were having with their bank loans. Watt said:
'Secretary Regan was explaining the inability of those destitute countries to pay even the interest on the loans that individual banks such as Bank of America, Chase Manhattan and Citibank had made. The President was being told what actions the United States "must" take to salvage the situation.'
After the Regan and Stockman briefings, there were several minutes of discussion before I asked, "Does anyone believe that these less developed countries will ever be able to pay back the principal on these loans?" When no one spoke up, I asked, "If the loans are never going to be repaid, why should we again bail out the countries and arrange payment for their interest?"
The answer came from several voices at once, "If we don't arrange for their interest payments, the loans will go into default, and it could put our American banks in jeopardy." Would the customers lose their money? No, came the answer, but the stockholders might lose dividends.
In amazement, I leaned back in my large, leather chair, only two seats from the President of the United States. I realized that nothing in the world could keep these high government officials from scrambling to protect and bail out a few very large and sorely troubled American banks.2
New York Times, April 15, 1994, p. A9.
James G. Watt, The Courage of A Conservative (New York: Simon and Schuster, 1985), pp. 124-25.
The first major score in the game had been made under the Carter Administration when Panama fell in arrears on the payment of its loans. A consortium of banks including Chase Manhattan, First National of Chicago, and Citibank brought pressure to bear on Washington to give the Canal to the Panamanian government so it could use the revenue to pay interest on its loans. Although there was massive opposition to this move among the American people, the Senate yielded to insider pressure and passed the give-away treaty. The Panamanian government inherited $120 million in annual revenue, and the interest payments to the banks were restored. As Congressman Philip Crane observed:
At the time of the Torrijos-backed coup in 1968, Panama's total official overseas debt stood at a manageable and, by world standards, modest $167 million. Under Torrijos, indebtedness has skyrocketed nearly one thousand percent to a massive $1.5 billion. Debt-service ratio now consumes an estimated 39 percent of the entire Panamanian budget.... What it appears we really have here is not just aid to a tinhorn dictator in the form of new subsidies and canal revenues the treaties would give to the Torrijos regime, but a bailout of a number of banks which should have known better than to invest in Panama and, in any event, should not escape responsibility for having done so. 1
The Panama bailout was a unique play. In no other country did we have an income-producing property to give away, so from that point forward the bailout would have to be done with mere money. To pave the way for that, Congress passed the Monetary Control Act of 1980 which authorized the Federal Reserve to "monetize foreign debt." That is banker language meaning that the Fed was now authorized to create money out of nothing for the purpose of lending to foreign governments. It classifies those loans as "assets" and then uses them as collateral for the creation of even more money here in the United States. That was truly a revolutionary expansion of the Fed's power to inflate. Until then, it was permitted to make money only for the American government. Now, it was able to do it for any government. Since then it has been functioning as a central bank for the entire world.
By 1982, almost every Third-World government was running behind in payments. Mexico led the way by announcing it could not send any more money that year on its $85 billion debt. Federal Reserve Governor Henry Wallich rushed to Switzerland to negotiate an IMF loan of $4.5 billion through the Bank of International Settlements. The central banks of Europe and Japan provided $1.85 billion (about 40%); the rest came from the Federal Reserve. Commercial banks postponed payments on the principal for two years; but, with the infusion of new loans, payment on the interest was resumed. That did not solve the problem. Within a few years, Mexico was in arrears again and, in 1985, the banks agreed to postpone $29 billion in payments and rolled over another $20 billion, which means they issued new loans to pay off the old.
In that same year, Secretary of the Treasury James Baker announced the government's plan to solve the world's debt crisis. It was a formal statement encouraging banks to continue lending to Third-World governments provided they promised to enact economic reforms favoring a free market. It was more of a philosophy than a plan, because there was no hope that it would be implemented by any of the socialist governments receiving the loans. Behind the announcement was the implication that the federal government, acting through the Federal Reserve System, could be counted on to assist if the loans went sour. Baker called for funneling $29 billion over three years primarily to Latin American countries, of which Mexico was a prime recipient.
Shortly after the Mexican government had loaned $55 million to Fidel Castro, it announced to the banks: "We will pay only what we have, and no more." Whereupon Paul Volcker, head of the Federal Reserve, rushed to meet with Mexico's finance minister, Jesus Silva Herzog, and offered to put the American taxpayer into the breach. A $600 million short-term loan was extended to get Mexico past its election date of July 4. It was called a "currency swap" because Mexico exchanged an equal number of pesos which it promised to redeem in U.S. dollars. Pesos, of course, were worthless in international markets-which is the reason Mexico wanted the dollars.
The importance of this loan was not its size nor even the question of repayment. It was the manner in which it was made. First, it was made by the Federal Reserve directly, acting as a central bank for Mexico, not the U.S.; and secondly, it was done almost in total secrecy. William Greider gives the details:
The currency swaps had another advantage: they could be done secretly. Volcker discreetly informed both the Administration and the key congressional chairmen, and none objected. But the public reporting of currency swaps was required only every quarter, so the emergency loan from the Fed would not be disclosed for three or four months.... By that time, Volcker hoped, Mexico would be arranging more substantial new financing from the IMF.... The foreign assistance was done as discreetly as possible to avoid setting off a panic, but also to avoid domestic political controversy.... Bailing out Mexico, it seemed, was too grave to be controversial. 1
The currency swap did not solve the problem. So, in March of 1988, the players and referees agreed to introduce a new maneuver in the game: an accounting trick called a "debt swap." A debt swap is similar to a currency swap in that the United States exchanges something of real value in return for something that is worthless. But, instead of currencies, they exchange government bonds. The transaction is complicated by the time-value of those bonds. Currencies are valued by their immediate worth, what they will buy today, but bonds are valued by their future worth, what they will buy in the future. After that differential factor is calculated, the process is essentially the same. Here is how it worked.
Mexico, using U.S. dollars, purchased $492 million worth of American Treasury Bonds that pay no interest but which will pay $3.67 billion when they mature in twenty years. (Technically, these are called zero-coupon bonds.) Then Mexico issued its own bonds with the U.S. securities tied to them as collateral. This meant that the future value of Mexico's bonds, previously considered worthless, were now guaranteed by the United States government. The banks eagerly swapped their old loans for these new Mexican bonds at a ratio of about 1.4 to 1. In other words, they accepted $100 million in bonds in return for canceling $140 million in old debt. That reduced their interest income, but they were happy to do it, because they had swapped worthless loans for fully-guaranteed bonds.
1. Greider, pp. 485-6.
This maneuver was hailed in the press as true monetary magic. It would save the Mexican government more than $200 million in annual interest charges; it would restore cash flow to the banks; and-miracle of miracles-it would cost nothing to American taxpayers.1 The reasoning was that the Treasury bonds were sold at normal market rates. The Mexican government paid as much for them as anyone else. That part was true, but what the commentators failed to notice was where Mexico got the American dollars with which to buy the bonds. They came through the IMF in the form of "foreign-currency exchange reserves." In other words, they were subsidies from the industrialized nations, primarily the United States. So, the U.S. Treasury put up the lion's share of the money to buy its own bonds. It went a half-billion dollars deeper in debt and agreed to pay $3.7 billion more in future payments so the Mexican government could continue paying interest to the banks. That is called bailout, and it does fall on the American taxpayer.
IMF BECOMES FINAL GUARANTOR
The following year, Secretary of State, James Baker (CFR), and Treasury Secretary, Nicholas Brady (CFR), flew to Mexico to work out a new debt agreement that would begin to phase in the IMF as final guarantor. The IMF gave Mexico a new loan of $3.5 billion (later increased to $7.5 billion), the World Bank gave another $1.5 billion, and the banks reduced their previous loan values by about a third. The private banks were quite willing to extend new loans and reschedule the old. Why not? Interest payments would now be guaranteed by the taxpayers of the United States and Japan.
That did not permanently solve the problem, either, because the Mexican economy was suffering from massive inflation caused by internal debt, which was in addition to the external debt owed to the banks. The phrases "internal debt" and "domestic borrowing" are code for the fact that government has inflated its money supply by selling bonds. The interest it must pay to entice people to purchase those bonds can be staggering and, in fact, interest on Mexico's domestic borrowing was draining three times as much from the economy as the foreign debt service had been siphoning off.
2. "U.S. Bond Issue Will Aid Mexico in Paying Debts," by Tom Redburn, Los Angeles Times, December 30, 1987.
"With Foreign IOUs Massaged, Interest Turns to Internal Debt," Insight, October 2, 1989, p. 34.
Notwithstanding this reality, Citicorp chairman, John S. Reed (CFR), whose bank is one of Mexico's largest lenders, said they were prepared to lend even more now. Why? Did it have anything to do with the fact that the Federal Reserve and the IMF would guarantee payments? Not so. "Because we believe the Mexican economy is doing well," he said. 1
At the end of 1994, the game was still going, and the play was the same. On December 21, the Mexican government announced that it could no longer pay the fixed exchange rate between the peso and the dollar and that the peso would now have to float in the free market to find its true value. The next day it plummeted 39 per cent, and the Mexican stock market tumbled. Once again, Mexico could not pay the interest on its loans. On January 11, President Clinton (CFR) urged Congress to approve U.S. guarantees for new loans up to $40 billion. Secretary of the Treasury Robert Rubin (CFR) explained: "It is the judgment of all, including Chairman Alan Greenspan [CFR], that the probability of the debts being paid [by Mexico] is exceedingly high." But, while Congress debated the issue, the loan clock was ticking. Payment of $17 billion in Mexican bonds was due within 60 days, and $4 billion of that was due on the first of February! Who was going to pay the banks?
This matter could not wait. On January 31, acting independently of Congress, President Clinton announced a bailout package of over $50 billion in loan guarantees to Mexico; $20 billion from the U.S. Exchange Stabilization Fund, $17.8 billion from the IMF, $10 billion from the Bank of International Settlements, and $3 billion from commercial banks.
Brazil became a major player in 1982 when it announced that it too was unable to make payments on its debt. In response, the U.S. Treasury made a direct loan of $1.23 billion to keep those checks going to the banks while negotiations were under way for a more permanent solution through the IMF. Twenty days later, it gave another $1.5 billion; the Bank of International Settlements advanced $1.2 billion. The following month, the IMF provided $5.5 billion; Western banks extended $10 billion in trade credits; old loans were rescheduled; and $4.4 billion in new loans were made by a Morgan Bank syndication. The "temporary" loans from the U.S. Treasury were extended with no repayment date established. Ron Chernow comments:
The plan set a fateful precedent of "curing" the debt crisis by heaping on more debt. In this charade, bankers would lend more to Brazil with one hand, then take it back with the other. This preserved the fictitious book value of loans on bank balance sheets. Approaching the rescue as a grand new syndication, the bankers piled on high interest rates and rescheduling fees.'
By 1983, Third-World governments owed $300 billion to banks and $400 billion to the industrialized governments. Twenty-five nations were behind in their payments. Brazil was in default a second time and asked for rescheduling, as did Rumania, Cuba, and Zambia. The IMF stepped in and made additional billions of dollars available to the delinquent countries. The Department of Agriculture, through its Commodity Credit Corporation, paid $431 million to American banks to cover payments on loans from Brazil, Morocco, Peru, and Rumania. At the conclusion of these agreements, the April 20, 1983, Wall Street Journal editorialized that "the international debt crisis ... is, for all practical purposes, over."
Not quite. By 1987, Brazil was again in default on its monstrous $121 billion debt, this time for one and a-half years. In spite of the torrent of money that had passed through its hands, it was now so broke, it couldn't even buy gasoline for its police cars. In 1989, as a new round of bailout was being organized, President Bush, Sr. (CFR) announced that the only real solution to the Third-World debt problem was debt forgiveness. Thirteen years later, President Bush, Jr., was continuing the tradition and calling for another $30 billion IMF loan to Brazil, backed by the U.S taxpayer.
At the risk of running this history into the ground through repetition, here are just a few more examples before moving along.
By 1982, Argentina was unable to make a $2.3 billion payment that was due in July and August. The banks extended their loans while the IMF prepared a new infusion in the amount of $2.15 billion. This restored the interest payments and gave the Argentinian politicians a little extra spending money.
1. Chernow, p. 644.
Seven months later, Argentina announced it could not make any more payments until the fall of 1983. The banks immediately began negotiations for rollovers, guarantees, and new IMF loans.
Argentina then signed an agreement with 350 creditor banks to stretch out payments on nearly a fourth of its $13.4 billion debt, and the banks agreed to lend an extra $4.2 billion to cover interest payments and political incentives. The IMF gave $1.7 billion. The United States government gave an additional $500 million directly. Argentina then paid $850 million in overdue interest charges to the banks.
By 1988, Argentina had again stopped payment on its loans and was falling hopelessly behind as bankers and politicians went into a huddle to call the next bailout play. They came out of the huddle with yet another package of new loans, rollovers, and guarantees. As summarized by Larry A. Sjaastad at the University of Chicago:
There isn't a U.S. bank that would not sell its entire Latin American portfolio for 40 cents on the dollar were it not for the possibility that skillful political lobbying might turn up a sucker willing to pay 50 or 60 or even 90 cents on the dollar. And that sucker is the U.S. Taxpayer. 1
The IMF bailed out Argentina again for $40 billion in 2001 and another $8 billion in 2002.
This history can become repetitious and boring. It would be counterproductive to cover the same sordid story as it has unfolded in each country. Suffice it to say that the identical game has been played with teams from Bolivia, Peru, Venezuela, Costa Rica, Morocco, the Philippines, the Dominican Republic, and almost every other less-developed country in the world.
THE NEED FOR CONVERGENCE
This sets the stage for understanding the next phase of the game which is unfolding as these words are being written. It is the inclusion of China and the former Soviet bloc into the Grand Design for global government. As with all the other countries in the world, the primary mechanism being used to accomplish this goal-at least in the field of economics-is the IMF /World Bank.' The process is: (1) the transfer of money from the industrialized nations-
"Another Plan to Mop Up the Mess," Insight, April 10, 1989, p. 31.
Other mechanisms which involve culture, education, political sovereignty, and military power are embodied in agencies of the United Nations.
-which drags them down economically to a suitable common denominator-and (2) the acquisition of effective control over the political leaders of the recipient countries as they become dependent upon the money stream. The thing that is new and which sets this stage apart from previous developments is that the apparent crumbling of Communism has created an acceptable rationale for the industrialized nations to now allow their lifeblood to flow into the veins of their former enemies. It also creates the appearance of global, political "convergence," a condition which CFR theoretician, Richard Cooper, said was necessary before Americans would accept having their own destinies determined by governments other than their own.
Red China joined the IMF/World Bank in 1980 and immediately began to receive billions of dollars in loans, although it was well known that she was devoting a huge portion of her resources to military development. By 1987, China was the INIF's second largest borrower, next to India, and the transfusions have grown at a steady pace ever since.
The Bank has asserted that loans will encourage economic reforms in favor of the private sector. Yet, none of the money has gone to the private sector. All of it is funneled into the government bureaucracy which, in turn, wages war against the free market. In 1989, after small businesses and farms in the private sector had begun to flourish and surpass the performance of similar government enterprises, Red China's leaders clamped down on them with harsh controls and increased taxes. Vice Premier Yao Yilin announced that there was too much needless construction, too many private loans, and too much spending on "luxuries" such as cars and banquets. To stop these excesses, he said, it would be necessary to increase government controls over wages, prices, and business activities.
Then there is the question of why China needs the money in the first place. Is it to develop her industry or natural resources? Is it to fight poverty and improve the living standard of her citizens? James Bovard answers:
The Bank's defense of its China Policy is especially puzzling because China itself is going on a foreign investment binge. The World Bank gives China money at zero interest, and then China buys property in Hong Kong, the United States, Australia, and elsewhere. An economist with Citibank estimated that China's "direct investment in property, manufacturing and services [in Hong Kong alone] topped $6 billion." In 1984, China had a net outflow of capital of $1 billion. Moreover, China has its own foreign aid program, which has given more than $6 billion in recent decades, largely to leftist governments. 1
THE GREAT DECEPTION
It is the author's contention that the much heralded demise of Communism in the Soviet bloc is a mixture of fact and fantasy. It is fact at the bottom level of Communist society where the people, in truth, rejected it long ago. The only reason they appeared to embrace it for so many years was that they had no choice. As long as the Soviets held control of the weapons and the means of communication, the people had to accept their fate.
But at the tip of the pyramid of state power, it is a different story. The top Communist leaders have never been as hostile to their counterparts in the West as the rhetoric suggests. They are quite friendly to the world's leading financiers and have worked closely with them when it suits their purposes. As we shall see in the following section, the Bolshevik revolution actually was financed by wealthy financiers in London and New York. Lenin and Trotsky were on the closest of terms with these moneyed interests-both before and after the Revolution. Those hidden liaisons have continued to this day and occasionally pop to the surface when we discover a David Rockefeller holding confidential meetings with a Mikhail Gorbachev in the absence of government sponsorship or diplomatic purpose.
It is not unreasonable to imagine a scenario in which the leaders of the Communist bloc come to realize they cannot hold themselves in power much longer. There comes a point where even physical force is not enough, especially when the loyalties of those who hold the weapons also begin to falter. With economic gangrene creeping up the legs of their socialist systems, they realize they must obtain outside financial assistance or perish.
In such a scenario, quiet agreements can be worked out to the mutual advantage of all negotiators. The plan could be as simple as a statue-of-liberty play in a college football game: the appearance of doing one thing as a cover for accomplishing something else.
1. Bovard, pp. 18-19.
Americans are prepared to accept such deception on a football field, they cannot believe that world financiers and politicians are capable of it. The concept is rejected out of hand as a "conspiracy theory."
Nevertheless, in this scenario, we theorize it is agreed among the negotiators that the Soviet Bloc needs financial support. It is agreed that the Western nations have the capacity to provide it. It is agreed that the best way to move money from the industrialized nations into the Soviet bloc is through international agencies such as the IMF /World Bank. It is agreed this cannot happen until hostility between world systems is replaced by political convergence. It is agreed that future conflict is wasteful and dangerous to all parties. Therefore, it is finally agreed that the Soviet bloc must abandon its posture of global aggression while the Western nations continue to move toward socialism, necessary steps for the long-range goal of merger into a world government. But, in doing so, it must be insured that the existing Communist leaders retain control over their respective states.
COMMUNISTS BECOME SOCIAL DEMOCRATS
To that end, they change their public identities to "Social Democrats." They speak out against the brutal excesses of their predecessors and they offer greater freedom of expression in the media. A few dispensable individuals among their ranks are publicly purged as examples of the demise of the old order. States that once were held captive by the Soviet Union are allowed to break away and then return on a voluntary basis. If any leaders of the newly emancipated states prefer true independence instead of alignment with Russia, they are replaced.
No other changes are required. Socialism remains the economic system of choice and, although lip service may be given to free-market concepts, the economy and all means of production remain under state control. The old Communists are now Social Democrats and, without exception, they become the leaders in the new system.
The West rejoices, and the money starts to move. As an extra bonus, the former Bolsheviks are now hailed by the world as great statesmen who put an end to the Cold War, brought freedom to their people, and helped to forge a New World Order.
When did Communism depart? We are not quite sure. All we know is that one day we opened our newspapers and it was accomplished. Social Democrats were everywhere. No one could find any Communists. Russian leaders spoke as long-time enemies of the old regime. Peristroika was here. Communism was dead. It was not killed by an enemy. It voted itself out of existence. It committed suicide!
Does it not seem strange that Communism fell without a struggle? Is it not curious that the system which was born out of class conflict and revolution and which maintained itself by force and violence for almost a century just went away on its own? Communism was not overthrown by people rising up with clubs and pitchforks to throw off their yoke of tyranny. There was no revolution or counterrevolution, no long period of fragmentation, no bloody surges between opposing forces. Poof! It just happened. True, there was blood in the streets in those areas where opposing groups vied for power, but that was after Communism had departed, not before. Such an event had never occurred in history. Until then, it had been contrary to the way governments act; contrary to the very nature of power which never surrenders without a life-and-death struggle. This, indeed, is a great curiosity-which should cause people to think.
Our premise is that the so-called demise of Communism is a Great Deception-not awfully different from many of the others that are the focus of this volume. We see it as having been stage managed for the purposes outlined previously: the transition to world government. In our view, that scenario is the only one that makes sense in terms of today's geopolitical realities and the only one consistent with the lessons of history.
We realize, of course, that such a view runs contrary to popular opinion and conventional wisdom. For many, it is shocking just to hear it spelled out. It would not be possible to convince anyone of its truth without extensive evidence. Certainly, such evidence abounds, but it is not within the scope of this study. So, now that we have stated it, we shall leave it behind merely as a clarification
of the author's point of view so the reader can step around it if he wishes.
American aid to Eastern European governments, while they were still puppet states of the Soviet Union, has been justified by the same theory advanced on behalf of China: it would improve their economies, show their people a better way of life, and wean them from Communism. Advocates of that theory now point to the demise of Communism as evidence of the soundness of their plan. The truth, however, is that the money did not improve the economy and did not show the people a better way of life. In fact, it did not help the people in any way. It went directly to their governments and was used for government priorities. It strengthened the ruling parties and enabled them to solidify their control.
It is well known that one of the reasons Poland's economy was weak is that much of her productive output was shipped to the Soviet Union at concessionary prices, primarily to support the military. Polish-built tanks fought in the Vietnam war; 20% of the Soviet merchant marine was built in Poland; 70% of Poland's computer and locomotive production and 80% of her communications equipment was shipped to the Soviets; American grain purchased by Poland with money borrowed from American banks was sent to Cuba. Poland was merely a middle man, a conduit to Russia and her satellites. The banks were really funding Russia.
It was in 1982 that Poland first defaulted on bank loans which had been guaranteed by the U.S. government through the Commodity Credit Corporation. Under the terms of the guarantee, taxpayers would make payments on any bank loan that went into default. That was what the banks were counting on when they made those loans, but to classify them as "in default" would require the banks to remove them from their books as assets. That was unacceptable, because it would make their balance sheets look as bad as they really were. So the Treasury agreed to bend the rules and make payments without requiring the loans to be in default. That was eventually stopped by an irate Congress, but not until the Reagan Administration had stalled long enough to pay $400 million directly to the banks on behalf of Poland.
In November, 1988, the World Bank made its first loan to Poland in the amount of $17.9 million. Three years later, in a dramatic demonstration of what the President had meant when he advocated "debt forgiveness," the Bush Administration canceled a full 70% of the $3.8 billion owed to the United States. Taxpayers picked up the bill
The same story has been unfolding in all the former Soviet-bloc countries. In 1980, for example, just before Hungary was brought into the IMF/World Bank, her annual per-capita GNP was $4,180. This was a problem, because the policy of the World Bank was to make development loans only to countries that had per-capita GNPs of less than $2,650. Not to worry. In 1981, the Hungarian government simply revised its statistics downward from $4,180 to $2,100.1 That was a drop of 50% in one year, surely one of the sharpest depressions in world history. Everyone knew it was a lie, but no one raised an eyebrow. It was all part of the game. By 1989, the Bush Administration had granted "most favored nation" trade status to the Hungarian government and established on its behalf a special $25 million development fund.
American banks had always been willing to make loans to the Soviet Union, except for short periods of expediency during the Cuban Missile Crisis, the Vietnam War, the Soviet invasion of Afghanistan, and other minor business interruptions. In 1985, after the public had lost interest in Afghanistan, banks of the "free world" reopened their loan windows to the Soviets. A $400 million package was put together by a consortium of First National of Chicago, Morgan Guaranty, Bankers Trust, and Irving Trust-plus a London subsidiary of the Royal Bank of Canada. The loan was offered at unusually low interest rates "to buy American and Canadian grain."
Public indignation is easily disarmed when the announced purpose of a loan to a totalitarian government is to purchase commodities from the country where the Wn originates-especially if the commodity is grain for the assumed purpose of making bread or feeding livestock. Who could possibly object to having the money come right back to our own farmers and merchants in the form of profits? And who could fault a project that provided food for the hungry?
The deception is subtly appealing. It is true that the money will be used-in part at least-to buy grain or other locally produced
commodities. But the borrowing nations are like a homeowner who increases the mortgage on his house "to enlarge his living room." He probably will make the addition, but he borrows twice as much as he needs so he can also buy a new car. Since the government allows a tax deduction on mortgage interest, in effect he now gets a tax deduction for the interest paid on his car as well. Likewise, the borrowing nations usually borrow more than they need for the announced purchase, but they receive all the money at favorable rates.
Yet, this is not the most serious fault in the transaction. In the case of Russia, the grain was no small item on her list of needs. After repeated failures of her socialist agriculture, she was not able to feed her population. Hungry people are dangerous to a government. Russia needed grain to head off internal revolt far more than the homeowner needed to increase the size of his living room. In other words, Russia had to have the grain, with or without the loan. Without it, she would have had to curtail spending somewhere else to obtain the money, most likely in her military. By giving her the money "to buy grain," we actually allowed her to spend more money on armaments.
But even that is not the primary flaw in making loans to Russia. The bottom line is that most of those loans will never be repaid! As we have seen, the name of the game is bailout, and it is as certain as the setting sun that, somewhere down the line, Russia will not be able to make her payments, and the taxpayers of the industrialized nations will be put through the IMF wringer one more time to squeeze out the transferred purchasing power.
BUSINESS VENTURES IN RUSSIA INSURED BY U.S.
In 1990, the U.S. Export-Import Bank announced it would begin making direct loans to Russia. Meanwhile, the U.S. Overseas Private Investment Corporation was providing free "insurance" to private companies that were willing to invest in the ex-Soviet state. In other words, it was now doing for industrial corporations what it had been doing all along for banks: guaranteeing that, if their investments turned sour, the government-make that taxpayers- would compensate them for their losses. The limit on that insurance had been $100 million, a generous figure, indeed. But, to encourage an even greater flow of private capital into Russia, the
Bush Administration authorized unlimited protection for "sound American corporate investments."
If these truly were sound investments, they would not need foreign-aid subsidies or government guarantees. What is really happening in this play is a triple score:
International lending agencies provide the Social Democrats with money to purchase goods and services from American firms. No one really expects them to repay. It is merely a clever method of redistributing wealth from those who have it to those who don't-without those who have it catching on.
American firms do not need money to participate. Since their ventures are guaranteed, banks are anxious to loan whatever amount of money is required. Efficiency or competitiveness are not important factors. Contracts are awarded on the basis of political influence. Profits are generous and without risk.
When the Social Democrats eventually default in their contracts to the American firms or when the joint venture loses money because of socialist mismanagement, the federal government provides funds to cover corporate profits and repayment of bank loans.
There you have it: The Social Democrats get the goodies; the corporations get the profits, and the banks get the interest on money created out of nothing. You know what the taxpayers get!
By 1992, the wearisome pattern was clearly visible. Writing in the New York Times, columnist Leslie H. Gelb gave the numbers:
The ex-Soviet states are now meeting only 30 percent of their interest payments (and almost no principal) on debts to the West of $70 billion.... Various forms of Western aid to the ex-Soviet states totaled about $50 billion in the last 20 months, and the money has virtually disappeared without a trace or a dent on the economic picture.'
The interesting thing about this report is that Leslie Gelb has been a member of the CFR since 1973. Why would a CFR spokesman blow the whistle on one of their most important maneuvers toward The New World Order? The answer is that he is doing just the opposite. Actually he is making a plea for more loans
and more outright aid on the basis that the need is so great! He advocates the prioritizing of funding with first attention to aiding Russia's nuclear-power facilities, agriculture, and industrial capacity. At the end of his article, he writes: "The stakes could not be higher. All the more reason for substantial, practical and immediate aid-not for grand illusions."
The excuse for all of this is that, if we do not keep the money flowing, Russia may fall back into the hands of those "bad Communists" who are just waiting to unleash nuclear war against us. Congress hears and obeys. In spite of the fact that all the preceding billions have "disappeared without a trace or a dent," the transfusion continues. In 1993 the World Bank advanced another half-billion-dollar loan to Russia; before leaving office, President Bush arranged for another $2 billion loan through the Export-Import Bank; and Congress authorized hitting the voters with another $2.5 billion in foreign aid specifically for Russia. In July of that year, at the meeting of the Group-of-Seven industrialized nations, another $24 billion was promised, half of which was to come from the IMF. In 1998, Russia defaulted on several billions of its debt, so the IMF restructured the old loans and issued new ones. In 1999, it was discovered that Russian officials had "laundered" (stolen) about $20 billion of this funding. The IMF publicly expressed shock and dismay; but soon resumed negotiations to issue new loans. As this book goes to print, there is no end in sight.
THE CONSPIRACY THEORY
A moment's reflection on these events leads us to a crossroads of conscience. We must choose between two paths. Either we conclude that Americans have lost control over their government, or we reject this information as a mere distortion of history. In the first case, we become advocates of the conspiratorial view of history. In the latter, we endorse the accidental view. It is a difficult choice because we have been conditioned to laugh at conspiracy theories, and few people will risk public ridicule by advocating them. On the other hand, to endorse the accidental view is absurd. Almost all of history is an unbroken trail of one conspiracy after another. Conspiracies are the norm, not the exception.
The industrialized nations of the world are being bled to death in a global transfer of their wealth to the less developed countries. Furthermore, it is not being done to them by their enemies. It is being done by their own leaders. The process is well coordinated across national lines and perfectly dovetails with the actions of other leaders who are doing the same thing in their respective countries, and these leaders regularly meet together to better coordinate their activities. This could not happen without planning.
A spokesman from the IMF would answer, yes, there is a plan, and it is to aid the less developed countries. But, after forty years and hundreds of billions of dollars, they have totally failed to accomplish that goal. Would intelligent people believe that pursuing the same plan will produce different results in the future? Then why do they follow a plan that cannot work? The answer is they are not following that plan. They are following a different one: one that has been very successful from their point of view. Otherwise, we must conclude that the leaders of the industrialized nations are, to a man, just plain stupid. We do not believe it.
These men and women are following a higher loyalty than to their respective countries. In their hearts they may honestly believe that, in the long run, the world will be better for it, including their fellow countrymen. But, for the present, their goals are not shared by those who have placed them in office, which is why they must conceal their plan from public view. If their fellow citizens knew what they were really doing, they would be thrown out of office and, in some cases, might even be shot as traitors.
If all of this is accidental, then there is no plan, no cooperation, no goal, and no deceit, just the blind forces of history following the path of least resistance. For some it is easier and more comfortable to accept that model. But the evidence speaks against it; not just the evidence in the previous chapters, but everything that follows in this book. By contrast, the evidence for the accidental theory of history is - a blank page.
The international version of the game called Bailout is similar to the domestic version in that the overall objective is to have the taxpayers cover the defaulted loans so that interest payments can continue going to the banks. The differences are: (1) instead of justifying this as protecting the American public, the pretense is that it is to save the world from poverty; and (2) the main money pipeline goes from the Federal Reserve through the IMF /World Bank. Otherwise, the rules are basically the same.
There is another dimension to the game, however, that involves more than mere profits and scam. It is the conscious and deliberate evolution of the IMF/World Bank into a world central bank with the power to issue a world fiat currency. And that is an important step in an even larger plan to build a true world government within the framework of the United Nations.
Economically strong nations are not candidates for surrendering their sovereignty to a world government. Therefore, through "loans" that will never be paid back, the IMF /World Bank directs the massive transfer of wealth from the industrialized nations to the less developed nations. This ongoing process eventually drains their economies to the point where they also will be in need of assistance. No longer capable of independent action, they will accept the loss of sovereignty in return for international aid.
The less developed countries, on the other hand, are being brought into The New World Order along an entirely different route. Many of these countries are ruled by petty tyrants who care little for their people except how to extract more taxes from them without causing a revolt. Loans from the IMF/World Bank are used primarily to perpetuate themselves and their ruling parties in power-and that is exactly what the IMF/World Bank intends. Rhetoric about helping the poor notwithstanding, the true goal of the transfer of wealth disguised as loans is to get control over the leaders of the less developed countries. After these despots get used to the taste of such an unlimited supply of sweet cash, they will never be able to break the habit. They will be content-already are content-to become little gold-plated cogs in the giant machinery of world government. Ideology means nothing to them: capitalist, communist, socialist, fascist, what does it matter so long as the money keeps coming. The IMF/World Bank literally is buying these countries and using our money to do it.
The recent inclusion of Red China and the former Soviet bloc on the list of IMF /World Bank recipient countries signals the final phase of the game. Now that Latin America and Africa have been "purchased" into the New World Order, this is the final frontier. In a relatively short time span, China, Russia, and the Eastern European countries have now become the biggest borrowers and, already, they are in arrears on their payments. This is where the action will lie in the months ahead.
Disclosure: The author has no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.
Additional disclosure: information supplied with permission of G. Edward Griffin