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First off, great diary...
It's interesting... if you watch Paul Krugman's lecture on BookTV's coverage of the Miami Book Fair, you'll hear him say things like "America is NOT an empire" and "America does not demand tribute payments". I just about fell out of my chair when I heard that.
First off... the IMF forced loans that you speak of are usually diktakt of Structural Adjustment Programs imposed on the debtor nations with highly unfavorable conditions. Such IMF/WB programs have been described in detail by writers like Greg Palast:
A closer look at the Structural Adjustment Program suggests that the World Bank may not be putting Ecuador’s interests first. Paragraph III-2 requires electricity rates to rise to double the average price charged in the United States, far above production costs. This is quite a boon to the Ecuadorean electricity suppliers such as Noble Energy of Houston and Duke Power of the Carolinas. (link)
Many of the IMF prescriptions were locked in with high interest rates back in the early 80s as well, meaning that nations ended up getting locked into those loans at those rates:
Around 1980, when interest rates were soaring, Johnny Carson quipped on The Tonight Show that "Scientists have developed a powerful new weapon that destroys people but leaves buildings standing - it's called the 17% interest rate." Compound interest is the secret weapon that has allowed a global banking cartel to control most of the resources of the world. The debt trap snapped shut for many countries in 1980, when international interest rates shot up to 20 percent. At 20 percent interest compounded annually, $100 doubles in under 4 years; and in 20 years, it becomes a breathtaking $3,834.66 The devastating impact on Third World debtors was underscored by President Obasanjo of Nigeria, speaking in 2000 about his country's mounting burden to international creditors. He said: All that we had borrowed up to 1985 was around $5 billion, and we have paid about $16 billion; yet we are still being told that we owe about $28 billion. That $28 billion came about because of the injustice in the foreign creditors' interest rates. If you ask me what is the worst thing in the world, I will say it is compound interest.7 In the late 1970s, the World Bank and International Monetary Fund began imposing "conditionalities" on loans to Third World debtor countries, requiring them to open up their capital markets, privatize their industries, and slash spending on social programs to insure that international lenders got their interest. By 2001, enough money had flowed back to First World banks from Third World debtors to pay the principal due on these loans six times over; but interest had consumed so much of those payments that the total debt actually quadrupled during the same period.88 In 1980, median income in the richest 10 percent of countries was 77 times greater than in the poorest 10 percent. By 1999, that gap had grown to 122 times greater. In December 2006, the United Nations released a reported titled "World Distribution of Household Wealth," which concluded that 50 percent of the world's population now owns only 1 percent of its wealth, while the richest 10 percent of adults owns 85 percent. Under current conditions, the debts of the poorer nations can never be repaid but will just continue to grow. (link)
Around 1980, when interest rates were soaring, Johnny Carson quipped on The Tonight Show that "Scientists have developed a powerful new weapon that destroys people but leaves buildings standing - it's called the 17% interest rate." Compound interest is the secret weapon that has allowed a global banking cartel to control most of the resources of the world. The debt trap snapped shut for many countries in 1980, when international interest rates shot up to 20 percent. At 20 percent interest compounded annually, $100 doubles in under 4 years; and in 20 years, it becomes a breathtaking $3,834.66 The devastating impact on Third World debtors was underscored by President Obasanjo of Nigeria, speaking in 2000 about his country's mounting burden to international creditors. He said:
All that we had borrowed up to 1985 was around $5 billion, and we have paid about $16 billion; yet we are still being told that we owe about $28 billion. That $28 billion came about because of the injustice in the foreign creditors' interest rates. If you ask me what is the worst thing in the world, I will say it is compound interest.7
In the late 1970s, the World Bank and International Monetary Fund began imposing "conditionalities" on loans to Third World debtor countries, requiring them to open up their capital markets, privatize their industries, and slash spending on social programs to insure that international lenders got their interest. By 2001, enough money had flowed back to First World banks from Third World debtors to pay the principal due on these loans six times over; but interest had consumed so much of those payments that the total debt actually quadrupled during the same period.88 In 1980, median income in the richest 10 percent of countries was 77 times greater than in the poorest 10 percent. By 1999, that gap had grown to 122 times greater. In December 2006, the United Nations released a reported titled "World Distribution of Household Wealth," which concluded that 50 percent of the world's population now owns only 1 percent of its wealth, while the richest 10 percent of adults owns 85 percent. Under current conditions, the debts of the poorer nations can never be repaid but will just continue to grow. (link)
by dantyrant on Wed Nov 14, 2007 at 01:26:38 PM PDT
Your quoted statements are indeed echoed in the middle part of Super Imperialism -- there are other texts, of course, which have gone over this material as well...
"Imagine all the people/ Sharing all the world" -- John Lennon
by Cassiodorus on Wed Nov 14, 2007 at 01:47:02 PM PDT
[ Parent ]
I hadn't heard about Super Imperialism- thanks for the heads-up!
To your earlier point, I agree that it's astonishing how little our monetary policies enter into our political dialog - as if the monetary system we have in place is somehow natural. The only two congressmen who I've heard talk about this in any sort of reasonable way are Ron Paul and Dennis Kucinich, and I disagree with Paul's prescription for the gold standard.
Mike Whitney, in his excellent article The Great Dollar Crash of 07, writes about the same point which you articulate - namely that we cannot possibly hope to pay off our debts by growth alone or increasing exports:
Just look at Bush’s budget for 2007-2008; $700 billion for foreign wars?!? There’s no way the US can pay off that debt through the normal means of increasing exports. In fact, Bush has already said that he plans to preserve his unfunded tax cuts whether they produce massive deficits or not. What Bush plans to do is force the foreign central banks to hold more dollar-based assets, thus, thrusting our gigantic debt onto our trading partners. According to Bob Chapman of The International Forecaster, "US debt was up 10.1% to $4.085 trillion and accounts for 58.8% OF ALL THE CREDIT ISSUED GLOBALLY LAST YEAR. The US is producing more debt than the rest of the world combined. As long as foreign lenders are willing to take our paper, Bush will keep expanding our debt. As Chalmers Johnson opined, "We are dependent on ‘the kindness of strangers’". (The Blanche Dubois economy) Of course, if the central banks grow tired of this pyramid-scheme and dump the dollar; the world can get on with the business of addressing global warming, poverty, AIDs, Peak Oil, nuclear proliferation etc. That won’t happen as long as the dollar reigns supreme and a small cadre of unelected racketeers at the Fed continue Gerry-rig the system.
Just look at Bush’s budget for 2007-2008; $700 billion for foreign wars?!? There’s no way the US can pay off that debt through the normal means of increasing exports. In fact, Bush has already said that he plans to preserve his unfunded tax cuts whether they produce massive deficits or not.
What Bush plans to do is force the foreign central banks to hold more dollar-based assets, thus, thrusting our gigantic debt onto our trading partners. According to Bob Chapman of The International Forecaster, "US debt was up 10.1% to $4.085 trillion and accounts for 58.8% OF ALL THE CREDIT ISSUED GLOBALLY LAST YEAR. The US is producing more debt than the rest of the world combined.
As long as foreign lenders are willing to take our paper, Bush will keep expanding our debt. As Chalmers Johnson opined, "We are dependent on ‘the kindness of strangers’". (The Blanche Dubois economy)
Of course, if the central banks grow tired of this pyramid-scheme and dump the dollar; the world can get on with the business of addressing global warming, poverty, AIDs, Peak Oil, nuclear proliferation etc. That won’t happen as long as the dollar reigns supreme and a small cadre of unelected racketeers at the Fed continue Gerry-rig the system.
by dantyrant on Wed Nov 14, 2007 at 02:11:55 PM PDT
If the banks were to tire of dollar-based assets, their current dollar-based assets would suffer major losses in value, that and the world economy would tank... at some point, however, the world economy could tank (and their assets would depreciate) anyway, making bank allegiance to dollar hegemony less relevant...
by Cassiodorus on Wed Nov 14, 2007 at 02:14:53 PM PDT
Japan and China led a record withdrawl of foreign funds from the United States in August, heightening fears of a fresh slide in the dollar and a spike in US bond yields. Data from the US Treasury showed outflows of $163bn (£80bn) from all forms of US investments. "These numbers are absolutely stunning," said Marc Ostwald, an economist at Insinger de Beaufort. Asian investors dumped $52bn worth of US Treasury bonds alone, led by Japan ($23bn), China ($14.2bn) and Taiwan ($5bn). It is the first time since 1998 that foreigners have, on balance, sold Treasuries. Mr Ostwald warned that US bond yields could start to rise again unless the outflows reverse quickly. "Woe betide US Treasuries if inflation does not remain benign," he said. (link)
Japan and China led a record withdrawl of foreign funds from the United States in August, heightening fears of a fresh slide in the dollar and a spike in US bond yields.
Data from the US Treasury showed outflows of $163bn (£80bn) from all forms of US investments. "These numbers are absolutely stunning," said Marc Ostwald, an economist at Insinger de Beaufort.
Asian investors dumped $52bn worth of US Treasury bonds alone, led by Japan ($23bn), China ($14.2bn) and Taiwan ($5bn). It is the first time since 1998 that foreigners have, on balance, sold Treasuries. Mr Ostwald warned that US bond yields could start to rise again unless the outflows reverse quickly. "Woe betide US Treasuries if inflation does not remain benign," he said. (link)
And of course, there was last Wednesday's announcement which caused the dollar to drop two full cents relative to the CAD.
I don't think anyone wants to create a global financial crisis, but these countries holding dollars are seeing the value of those holdings plummet in real times. And, the weakness in American financial markets has prompted lower interest rates, creating an additional downward pressure on the dollar. I don't think the dollar can survive much more of this abuse.
by dantyrant on Wed Nov 14, 2007 at 02:54:14 PM PDT
Now Argentina pays for its oil and power instead of selling it. Argentina effectively dumped its own currency by fixing it one-for-one to the US dollar. It opened its borders to free trade and ended capital controls – permitting money to move in and out. Predictably, the money moved out and out. At least $189 billion of the nation's savings in its own banks, once freed from capital controls, floated north on the Money Gulf Stream to seek a safe haven in U.S. Treasury bills and other North American securities. In return for safety, Argentines accepted 4% and 5% returns on their U.S. investments. But then Argentina's government had to borrow it all back, paying, in 2001, a 16% interest rate to U.S. lenders. Out to the United States at 4%, back in from the United States at 16%, then out and in again-the ebb and flow, Mr. Beale-a financial suicide cycle that exploded, in December 2001, into riots in Buenos Aires, national bankruptcy and starvation in what had been South America's breadbasket. (link)
by dantyrant on Wed Nov 14, 2007 at 01:47:32 PM PDT
wide narrow
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