Iran Starts Building First Gas Pipeline to Europe, Commits $1.55 Billion

By Ladane Nasseri

Iran started to build a long-planned pipeline to export natural gas to Europe with an investment of at least 1.3 billion euros ($1.55 billion), state television reported today.

Iran plans to complete its section of the pipeline by 2013, the TV network said, without citing a source. The system will pass through Turkey and have a capacity of as much as 110 million cubic meters of gas a day, it said. The route of the pipeline is unclear.

An earlier, unrealized version of this project was to extend to Greece, Italy, Switzerland, Austria and Germany, according to details disclosed in September 2008. It was not immediately clear if the government intends the new project as an alternative to the planned Nabucco pipeline, a 7.9 billion- euro network for transporting gas from the Caspian Sea through Turkey to Europe. Iran already operates a pipeline to Turkey, its western neighbor.

Iran, home to the world’s second-largest gas reserves after Russia, has for years been under United Nations sanctions and U.S.-imposed restrictions on foreign investment. The sanctions aim to deter Iran from pursuing a nuclear weapons capability. These economic and financial constraints have made it difficult for Iran to fulfill its energy plans and have hampered foreign investment in the country.

Iran insists that its nuclear program is for civilian purposes.

The Iranian section of the pipeline to Europe will stretch from the South Pars gas field to the Bazargan border post with Turkey, for a distance of about 1,850 kilometers (1,150 miles), state television said.

Of the 1.3 billion euros that Iran has allocated to its construction, about 825 million euros will come from the Oil Ministry and the rest from other sources, the Tehran-based Pool newspaper reported, without elaborating or disclosing the source of the information.

Ashgabat, 29 June 2010 (nCa) — Gazprom, the largest natural gas company in the world and the mainstay of the Russian economy, is in deep crisis. By Gazprom’s own estimates, it will not be able to reach the pre-crisis level until 2013. It is a conditional assessment: To climb back to its former position, Gazprom needs to make sure that there is no alternate route for gas supplies to Europe.

This, in essence, is the reason why Russia supported the UN Security Council sanctions on Iran.

Shrinking Gazprom

In May 2008, Gazprom’s market capitalization exceeded US $ 350 billion. Its current market capitalization is US $ 140 billion, a dwarfish 40% of its former self. [1]

The oil sector of Russia is showing signs of coming out of the last year’s financial and economic crisis but the gas sector is still sluggish. By the end of 2009, the oil production and export of Russia increased marginally but the gas exports fell by 11% and Gazprom production decreased by 16% because of lack of gas demand. [2]

Although Gazprom claims to have practical plans to regain its former position by 2013, the abundant availability of cheaper shale gas in the US, the advancement in LNG liquefaction and transportation technologies and the prospects of accessibility of vast volumes of shale gas in Europe are all stacked against Gazprom ambitions.

The markets where Gazprom has near monopoly – the European markets – are not showing any signs of substantially increasing their imports from Russia.

On the other hand, the markets that are ready to consume more gas – China and Iran – are not connected with Russia by any pipeline system.

Even in the captive Russian market, Gazprom is being challenged by rising stars such as Rosneft and Novatek. Gazprom traditionally had 85% share of the domestic market but by the end of 2009 it had shrunk to 75%. [3]

Suicidal Gazprom

Faced with sharply declining export market, Gazprom did the thing only a Russian giant could do: It shot itself in the foot.

Gazprom stopped taking Turkmen gas in April 2009 without giving an adequate notice for shutting down of gas intake. As a result, the accumulated pressure in the pipeline system led to a string of accidents in Turkmenistan, causing severe damage to an expensive compressor station, a segment of the main trunk, and 20 gas wells.

This suicidal act of Gazprom prompted Turkmenistan to quickly build the second pipeline (Daulatabat-Khangiran) to Iran, increasing the export capacity to 25 bcm. Currently the combined export from both pipes (Korpeje-Kurtkui and Daulatabat-Khangiran) is around 9 bcm. It will reach 14 bcm in the coming winter, and to 20 bcm in foreseeable future.

At the time of the accident caused by Gazprom, Turkmenistan was already building a pipeline to China, which came into operation in December 2009. The present flow of gas from this pipe is 5 bcm. It will be raised to 13 bcm by the end of 2011 and then there would be sharp increase in the next two years.

The existing arrangements between Turkmenistan and China envisage eventual annual export of 40 bcm but the negotiations are underway to go even beyond that. The ultimate exports of Turkmen gas in the Chinese direction could be substantially more than 40 bcm. [4]

Increasing production

Gazprom plans to produce 519.3 bcm this year. The target for 2011 is 528.6 bcm, and for 2012 – 542.4 bcm. The idea is to reach the pre-crisis levels by 2013. [5]

However, Gazprom has lowered its gas export forecast for 2010 from 160.8 to 145 bcm, a decrease of nearly 10%. [6]

The exports this year would be just 4.35 bcm more than the 140.65 that Gazprom exported last year.

Decreasing prices

While there are efforts to increase production, there is nothing Gazprom can do to increase the export prices, or even hold them at the previous level.

The average forecast contract price has been lowered from US $ 326 to 308 per thousand cubic meters. [7]

Nord Stream and South Stream

Gazprom is relentlessly pushing for two hulks: Nord Stream and South Stream. Both of these projects are based on the assumption that Russia will always be able to remain the near-monopoly supplier of gas to Europe.

Gazprom expects that within the next decade the requirement of gas in Europe will increase by nearly 200 bcm or about 50%. [8]

The combined capacity of both strings of Nord Stream would be 55 bcm. [9]

The capacity of South Stream would be 63 bcm. [10]

Taken together, Nord Stream and South Stream will increase the gas export capacity of Russia in the European direction by 118 bcm.

In other words, Gazprom has the ambitions to meet about 60% of the additional demand of gas in Europe within the next ten years.

Encroachment in Ukraine

Gazprom chief Alexi Miller said during the annual meeting of the shareholders in Moscow on 27 June 2010 that a merger between Gazprom and Ukrainian utility Naftogaz is “historically predetermined.” He said that it would “increase efficiency for the Ukrainian gas industry and the industries that are large consumers of the gas.” Miller also said that “Naftogaz could gain access to gas fields holding as much as 35 trillion cubic feet of gas as an incentive for the merger.” [11]

With Yanukovich leading Ukraine and Boyko back to the oil and gas ministry of Ukraine, this could not be just empty talk.

Iran Pipe to Europe

While Russia is putting together an elaborate and meticulous plan to remain overseer of the gas market in Europe, Iran has started building its own pipeline in the European direction.

The Iranian pipeline will have capacity of 40 bcm, and expected cost is around US $ 1.5 billion. It is expected to be completed by 2013. It will start from South Pars field and terminate at Bazargon border point with Turkey, a distance of about 1850 km. The oil ministry of Iran will provide some 63% of funding for the project and the rest will come from other sources. [12]

Frightened Gazprom

Iran is already exporting some gas to Europe and that capacity would increase within the next three years. Moreover, Iran has two pipelines connecting to the gas network of Turkmenistan, and by default, Central Asia. This fact is especially significant if we consider that Iran produces enough gas to meet its domestic demands and any volumes it imports from Turkmenistan are exported to Turkey.

Because of flexible methods of negotiation, Iran can offer betters terms to European buyers of gas. In fact, the existing supply situation and the pipeline infrastructure are such that even today Iran can either supply or transit at least 15 bcm of gas to Europe.

The lucrative and politically pragmatic markets of central and Eastern Europe are in easy reach of Iran, and some buyers are already in talks with Iran.

If Iran starts exporting its own gas and transiting Central Asian gas to Europe, the entire gas reserve of Russia would be at risk of becoming ‘stranded gas.’

This possibility is not acceptable to Gazprom.

Gazprom’s fear of receding into irrelevance and Putin’s economic patriotism are the factors that compelled Russia to vote for the fresh sanctions against Iran.

References:

1. Gazprom in crisis: a chance for reform by Anders Åslund, European Energy Review, 26 April 2010 (http://www.europeanenergyreview.eu/index.php?id=740&id_referer=1898&id_artikel=1898)

2. Ibid

3. Ibid

4. Press briefing by the foreign office of Turkmenistan on 28 June 2010.

5. Dow Jones, 9 June 2010 (http://www.foxbusiness.com/story/markets/industries/energy/correctgazprom-plans-reach-pre-crisis-output-level/)

6. Xinhua, 23 June 2010 (http://english.people.com.cn/90001/90778/90858/90865/7036298.html)

7. Ibid

8. Gazprom website (http://www.gazprom.com/production/projects/pipelines/nord-stream/)

9. Ibid

10. Gazprom website (http://www.gazprom.com/production/projects/pipelines/south-stream/)

11. UPI, 28 June 2010 (http://www.upi.com/Science_News/Resource-Wars/2010/06/28/Naftogaz-Gazprom-link-destiny-Miller-says/UPI-47021277734221/)

12. Bloomberg, 7 June 2010 (http://www.bloomberg.com/news/2010-06-07/iran-starts-building-first-gas-pipeline-to-europe-commits-1-55-billion.html)

Stamp of idiocy in USA's shameful politics...

Stamp of idiocy in USA's shameful politics...

http://www.bloomberg.com/news/2010-06-25/states-of-crisis-widen-as-46-governments-in-u-s-face-greek-style-deficits.html

http://rense.com/general91/treach.htm

A whole series of alarms occurred after I got the news, although I lost the source, that "food stamp usage just soared to a new record high" of 40.2 million persons.

This number is alarming in itself because it means that the economy is so bad that more and more hungry people cannot afford to even feed themselves, sort of like teenagers but with hopefully better manners and dietary choices.

Also alarming is that the number of people needing government assistance to buy food "soared", which is probably a verb of some kind, which indicates action, which is a signal to me, a real Mogambo Action Hero (MAH) kind of guy, to spring into action with my awesome superhuman power to instantly perceive trends in even random data.

Ergo, it made me shriek alarmingly "We're freaking doomed!" which alarmed the other diners in the restaurant.

In terms of households, "18.5 million households receive benefits", which means little to me other than the fact that these needy people live in households of about two, which ain't bad, considering. This low-density housing situation is good news, in that it means that these people have a lot of room for much more suffering, which will surely happen when consumer prices zoom as a result of all of this insane creation of more and more money by the Federal Reserve so that the federal government can borrow and spend it.

Now, people know that I always take the alarmist, doomsday position because I am naturally paranoid and suspicious, and I have learned that I should never trust any creatures on this planet, especially seeing that half of America's population are Democrats, and as such, they are so demonstrably clueless as to actually declare that it is always the purpose of elected officials to use government money to help more and more people! Even taxing half of all income, and running deficits of trillions of dollars when even that proves insufficient to do it! Wow!

Perhaps I am so dyspeptic about such displays of raw stupidity because I had just found out that the Federal Reserve created another huge US$8.5 billion of new Fed Credit in mid-June, and simultaneously bought up $7.2 billion in US government securities, which had the effect of removing a nominal $7.2 billion in crappy assets (actual worth pennies on the dollar) out of the economy, thus bailing out some halfwit scumbags who owned the toxic assets and would otherwise go bust, and replaced it with cash, recapitalizing the idiots! In One Freaking Week (OFW)!

Nobody can really know how much new money will be made out of this new Fed credit, but I notice that the M2 money supply, which causes inflation in price when it grows, as famously summarized as "inflation in prices is always and everywhere a monetary phenomenon", instantly jumped $80 billion from the previous monthly report, the Treasury Gross Public Debt jumped by $27 billion in the same week, a towering mountain of government-borrowed debt which is up an outrageous $1.5 trillion in the last year, and indebting us by a staggering $13.07 trillion! Yikes!

Perhaps to give you a clue as to why I am so insane with fear that I babble incoherently, and why I am trying to drink myself into blissful inebriation but spilling most of it down my chin and into my lap because my hands are shaking so much and I mindlessly try to babble while I am drinking, for some weird reason that even I don't understand, all of which increases my anger and babbling, this horrifying criminally-insane inflation in the money supply by the Federal Reserve buying up assets with newly-created money has already resulted in an increase of $888 billion in the last year alone! In One Freaking Year (OFY)!

In desperation, I turned for solace and sobering words to Lew Rockwell of the Mises Institute, thinking that his wisdom would calm me down and show me what I had misunderstood and why people think I am a raving idiot.

Instead, I saw that he wrote about the same thing! He writes, "Fiat paper money is destroying civilization right now. It has fueled the predator state. It has destabilized markets. It has wrecked balance sheets and distorted financial markets. It has wrecked the culture by leading the whole world to believe that prosperity can come as if by magic, that stones can be turned into bread."

He notes that, in referring to what is popularly referred to as the "Austrian theory of economics," and that "'The Austrians were right' is a phrase we hear often now, and for good reason."

As for the "good reason", I say that you can save a lot of time by not reading any further, but just get up, go over to the window and look out at the results of a half century of the absurd neo-Keynesian econometric claptrap that the academic economists and fellow idiot-savants have foisted upon us.

We are, as a result, ruined as a result of their abject stupidity, and now the jobs are gone, the purchasing power of the money is gone, the middle class is almost all gone, and all we have left is bankrupted people, bankrupted governments, bankrupted banks, and bankrupting companies, all because of the despicable Federal Reserve creating too much money and credit, aided and abetted by their loathsome and willing comrades-in-arms, namely the Democrats in the mainstream media and the Democrat-controlled schools, a crime of such monumental stupidity, and of such devastating consequences, that they should all go to prison and stay there until science develops some intelligence-enhancing therapy so that they would not be so stupid and could be trusted to vote intelligently from then on.

Well, Mr Rockwell is apparently not ready to be dragged into some Hysterical Mogambo Rant (HMR), and instead of saying something like, "Bravo, Mogambo!" or "That's just what I was thinking, too, Marvelous Mogambo Genius (MMG)!" he sticks to the main fact, which is that "issues concerning fiat money and the business cycle stand out because the Austrians possess unique insight. Only the Austrians have consistently warned that fiat money creates the wrong incentives for the banking industry, that central-bank manipulation of interest rates distorts the structure of production, that the combination of paper money and central banking leads to economic calamity."

Exactly! And when that first budget-deficit dollar was, for the first time, financed by the Federal Reserve first creating the credit in the banks, so that the banks could, for the first time, use it to loan out and thus create the first fiat money to pay for, for the first time, that first food stamp, that was issued to that first needy person, it caused the whole "structure of production" to be forever distorted, giving producers the idea that their increasing sales of dietary staples and yummy snack foods were coming from real demand, when in fact it was just fiat money!

Judging by the sudden rash of e-mails, everybody prefers Mr Rockwell's explanation better than mine. Since I seem to be outclassed at every turn, I take a different tack and wonder how many of the non-taxpayer-paid workers in the private economy (and thus the only ones who can generate a profit from their labors with which to pay the taxes with which to support the welfare state that the American system of governments has become), a population of workers currently numbering less than 100 million, can continue to support the food expense of 40 million people or, up close and personal, five people paying to feed two people.

And since this is just a small part of the pandemic governmental bankruptcies that the neo-Keynesian econometric insanity has caused, as the intractable problems of Medicare and Social Security dwarf those of the food stamp program, it is indeed unfortunate that there is - and you can trust me on this one by merely looking deep into my Bloodshot Mogambo Eyes (BME) to see my total sincerity - no way out of this governmental bankruptcy mess, just like there has never, ever been a way of out of governmental bankruptcy in the last 4,500 years, despite innumerable attempts of innumerable idiotic governments trying to do so, desperately trying everything that they can think of, including murdering those considered "non-compliant", yet consistently failing miserably.

And what were the winners of the last 4,500 years? Simple! Precious metals! Whee! This investing stuff is easy!

http://www.justice-integrity.org/index.php?option=com_content&view=article&id=685&Itemid=318

America has become a dictatorial ruling clique continually increasing it's militaristic imperialism operations under the laughably false premise of "fighting for our freedom"..., following the abominable and criminal inside job of 9/11...by the US Deep State... while intentionally out sourcing good jobs and in-sourcing illegal aliens who simultaneously assist the elite in destroying the U.S. economy. There is no "economic recovery" in spite of what the controlled media is paid to say. It's no accident that for many young people, the only job available is to join the military. The government has shipped our able bodied men off to foreign nations while plundering Americans of health, wealth, knowledge and freedom through various methods such as mind numbing TV, toxic additives in the food and water, pharmaceuticals & vaccines that cause disease, biowarfare/weather modification, illegal taxes, fees, licenses, inflation, mortgages & federal reserve funny money printed out of thing air. They have turned Americans into dead-end-job debt zombies hooked on pharmakia. The current Gulf Oil Disaster was no 'accident.' It was allowed to happen via bribery of beaurocrats to serve an agenda. Now they are hoping to pass the cap and tax carbon law so they can tax us for breathing and will soon ram down our throats (the working class that is) their massive government "health" insurance premiums. This should finish off what's left of the hardworking middle class whom the elites have pillaged & plundered for decades via the above mentioned methodologies. At the same time, the welfare bums, drug addicts and illegal aliens continue to suck us dry and give thanks for their blessings of food stamps and "free healthcare" to their "wonderful government" who steals it from us and hands it to them, which is why so many middle class citizens cannot afford the current health insurance, MUCH LESS the coming monstrosity called "Obamacare"! Einstein's definition of insanity is to do the same thing over and over expecting different results each time. This type of insane redundancy is exemplified perfectly by the majority of Americans who STILL think the Republican/Democrat 2-party facade is real and 'voting' this November will somehow change things for the better. As former Alabama governor George Wallace said (over 40 years ago), "There's not a dime's worth of difference between the two parties." It should be obvious to anyone with more than 3 neurons firing that 95% of politics/banking is run by wealthy mobsters and everyone is too scared or dumbed down to do anything about it. You people talk like there is really a difference between republican and democrat. NEWSFLASH: They're all LAUGHING at you schmucks when the cameras are off while you all argue amongst yourselves about the illusion they created for you....

It's nice to see the Justice Integrity Project urges a NO vote on Kagan, but I have the feeling it won't matter. The Zionists control congress and I have the feeling that this Kagan is related to all those other neocon Kagans who were all over those neocon "think tanks" propagandizing for the Iraq war (and probably behind the plans for the war on Iran). I personally don't think there is any hope for this country until the American people wake up and realize that their government has been hijacked by a people loyal to a foreign nation. And, I think the only hope of people waking up to this will have to come from the left b/c those on the right who watch Fox news have been so propagandized w/Christian Zionism (funded by the Israel Lobby, according to Michael Collins Piper) that no matter what you tell them about Israel (like Israel's role in USS Liberty, 911 and Oklahoma City) they always come back w/"God blesses those who bless Israel." And, sadly, I am not hopeful that we can wake up the left b/c any forums for interacting and sharing information are heavily monitored and infiltrated by Zionists....
And, for those interested learning more about what's going on we/the Catholic Church--you should look up the book "The Plot Against the Church" by Maurice Pinay....

The Third Depression

By PAUL KRUGMAN

Recessions are common; depressions are rare. As far as I can tell, there were only two eras in economic history that were widely described as “depressions” at the time: the years of deflation and instability that followed the Panic of 1873 and the years of mass unemployment that followed the financial crisis of 1929-31.

Neither the Long Depression of the 19th century nor the Great Depression of the 20th was an era of nonstop decline — on the contrary, both included periods when the economy grew. But these episodes of improvement were never enough to undo the damage from the initial slump, and were followed by relapses.

We are now, I fear, in the early stages of a third depression. It will probably look more like the Long Depression than the much more severe Great Depression. But the cost — to the world economy and, above all, to the millions of lives blighted by the absence of jobs — will nonetheless be immense.

And this third depression will be primarily a failure of policy. Around the world — most recently at last weekend’s deeply discouraging G-20 meeting — governments are obsessing about inflation when the real threat is deflation, preaching the need for belt-tightening when the real problem is inadequate spending.

In 2008 and 2009, it seemed as if we might have learned from history. Unlike their predecessors, who raised interest rates in the face of financial crisis, the current leaders of the Federal Reserve and the European Central Bank slashed rates and moved to support credit markets. Unlike governments of the past, which tried to balance budgets in the face of a plunging economy, today’s governments allowed deficits to rise. And better policies helped the world avoid complete collapse: the recession brought on by the financial crisis arguably ended last summer.

But future historians will tell us that this wasn’t the end of the third depression, just as the business upturn that began in 1933 wasn’t the end of the Great Depression. After all, unemployment — especially long-term unemployment — remains at levels that would have been considered catastrophic not long ago, and shows no sign of coming down rapidly. And both the United States and Europe are well on their way toward Japan-style deflationary traps.

In the face of this grim picture, you might have expected policy makers to realize that they haven’t yet done enough to promote recovery. But no: over the last few months there has been a stunning resurgence of hard-money and balanced-budget orthodoxy.

As far as rhetoric is concerned, the revival of the old-time religion is most evident in Europe, where officials seem to be getting their talking points from the collected speeches of Herbert Hoover, up to and including the claim that raising taxes and cutting spending will actually expand the economy, by improving business confidence. As a practical matter, however, America isn’t doing much better. The Fed seems aware of the deflationary risks — but what it proposes to do about these risks is, well, nothing. The Obama administration understands the dangers of premature fiscal austerity — but because Republicans and conservative Democrats in Congress won’t authorize additional aid to state governments, that austerity is coming anyway, in the form of budget cuts at the state and local levels.

Why the wrong turn in policy? The hard-liners often invoke the troubles facing Greece and other nations around the edges of Europe to justify their actions. And it’s true that bond investors have turned on governments with intractable deficits. But there is no evidence that short-run fiscal austerity in the face of a depressed economy reassures investors. On the contrary: Greece has agreed to harsh austerity, only to find its risk spreads growing ever wider; Ireland has imposed savage cuts in public spending, only to be treated by the markets as a worse risk than Spain, which has been far more reluctant to take the hard-liners’ medicine.

It’s almost as if the financial markets understand what policy makers seemingly don’t: that while long-term fiscal responsibility is important, slashing spending in the midst of a depression, which deepens that depression and paves the way for deflation, is actually self-defeating.

So I don’t think this is really about Greece, or indeed about any realistic appreciation of the tradeoffs between deficits and jobs. It is, instead, the victory of an orthodoxy that has little to do with rational analysis, whose main tenet is that imposing suffering on other people is how you show leadership in tough times.

And who will pay the price for this triumph of orthodoxy? The answer is, tens of millions of unemployed workers, many of whom will go jobless for years, and some of whom will never work again.

http://seekingalpha.com/instablog/23234-christopher-whalen/79231-country-risk-the-world-according-to-robert-rubin-updated

http://us1.irabankratings.com/pub/IRAMain.asp

Kartik Athreya of the Richmond Federal Reserve Bank argues that bloggers are stupid, and that only PhD economists have a right to say anything about economics policy.

This distinction is a little ridiculous, given that many of the world’s top PhD economics professors are bloggers.

And it must be noted that the Fed ignores any PhD economist who exercises any scintilla of independence.

For example, all of the PhD economists who say the economy won't recover unless we break up the giant banks are ignored (even if they happen to be former Federal Reserve chairmen or Fed Bank presidents).

And well-known PhD economist James Galbraith is ignored when he argues that - because fraud caused the economic crisis - economists should move into the background, and "criminologists to the forefront".

And of course, the PhD economists calling for a complete audit of the Fed or - heaven forbid - a challenge to Fed powers, are ignored.

In fact, as I pointed out in December, most economists don't exercise any independent thinking because economists are trained to ignore reality:

As I have repeatedly noted, mainstream economists and financial advisors have been using faulty and unrealistic models for years. See this, this, this, this, this and this.

And I have pointed out numerous times that economists and advisors have a financial incentive to use faulty models. For example, I pointed out last month:

The decision to use faulty models was an economic and political choice, because it benefited the economists and those who hired them.

For example, the elites get wealthy during booms and they get wealthy during busts. Therefore, the boom-and-bust cycle benefits them enormously, as they can trade both ways.

Specifically, as Simon Johnson, William K. Black and others point out, the big boys make bucketloads of money during the booms using fraudulent schemes and knowing that many borrowers will default. Then, during the bust, they know the government will bail them out, and they will be able to buy up competitors for cheap and consolidate power. They may also bet against the same products they are selling during the boom (more here), knowing that they'll make a killing when it busts.

But economists have pretended there is no such thing as a bubble. Indeed, BIS slammed the Fed and other central banks for blowing bubbles and then using "gimmicks and palliatives" afterwards.

It is not like economists weren't warning about booms and busts. Nobel prize winner Hayek and others were, but were ignored because it was "inconvenient" to discuss this "impolite" issue.

Likewise, the entire Federal Reserve model is faulty, benefiting the banks themselves but not the public.

However, as Huffington Post notes:

The Federal Reserve, through its extensive network of consultants, visiting scholars, alumni and staff economists, so thoroughly dominates the field of economics that real criticism of the central bank has become a career liability for members of the profession, an investigation by the Huffington Post has found.

This dominance helps explain how, even after the Fed failed to foresee the greatest economic collapse since the Great Depression, the central bank has largely escaped criticism from academic economists. In the Fed's thrall, the economists missed it, too.

"The Fed has a lock on the economics world," says Joshua Rosner, a Wall Street analyst who correctly called the meltdown. "There is no room for other views, which I guess is why economists got it so wrong."

Read more at: http://www.huffingtonpost.com/2009/09/07/priceless-how-the-federal_n_278805.html

The problems of a massive debt overhang were also thoroughly documented by Minsky, but mainstream economists pretended that debt doesn't matter.

And - even now - mainstream economists are STILL willfully ignoring things like massive leverage, hoping that the economy can be pumped back up to super-leveraged house-of-cards levels.

As the Wall Street Journal article notes:

As they did in the two revolutions in economic thought of the past century, economists are rediscovering relevant work.

It is only "rediscovered" because it was out of favor, and it was only out of favor because it was seen as unnecessarily crimping profits by, for example, arguing for more moderation during boom times.

The powers-that-be do not like economists who say "Boys, if you don't slow down, that bubble is going to get too big and pop right in your face". They don't want to hear that they can't make endless money using crazy levels of leverage and 30-to-1 levels of fractional reserve banking, and credit derivatives. And of course, they don't want to hear that the Federal Reserve is a big part of the problem.

Indeed, the Journal and the economists it quotes seem to be in no hurry whatsoever to change things:

The quest is bringing financial economists -- long viewed by some as a curiosity mostly relevant to Wall Street -- together with macroeconomists. Some believe a viable solution will emerge within a couple of years; others say it could take decades.

Saturday, PhD economist Michael Hudson made the same point:

I think that the question that needs to be asked is how the discipline was untracked and trivialized from its classical flowering? How did it become marginalized and trivialized, taking for granted the social structures and dynamics that should be the substance and focal point of its analysis?...

To answer this question, my book describes the "intellectual engineering" that has turned the economics discipline into a public relations exercise for the rentier classes criticized by the classical economists: landlords, bankers and monopolists. It was largely to counter criticisms of their unearned income and wealth, after all, that the post-classical reaction aimed to limit the conceptual "toolbox" of economists to become so unrealistic, narrow-minded and self-serving to the status quo. It has ended up as an intellectual ploy to distract attention away from the financial and property dynamics that are polarizing our world between debtors and creditors, property owners and renters, while steering politics from democracy to oligarchy...

[As one Nobel prize winning economist stated,] "In pointing out the consequences of a set of abstract assumptions, one need not be committed unduly as to the relation between reality and these assumptions."

This attitude did not deter him from drawing policy conclusions affecting the material world in which real people live. These conclusions are diametrically opposed to the empirically successful protectionism by which Britain, the United States and Germany rose to industrial supremacy.

Typical of this now widespread attitude is the textbook Microeconomics by William Vickery, winner of the 1997 Nobel Economics Prize:

"Economic theory proper, indeed, is nothing more than a system of logical relations between certain sets of assumptions and the conclusions derived from them... The validity of a theory proper does not depend on the correspondence or lack of it between the assumptions of the theory or its conclusions and observations in the real world. A theory as an internally consistent system is valid if the conclusions follow logically from its premises, and the fact that neither the premises nor theconclusions correspond to reality may show that the theory is not very useful, but does not invalidate it. In any pure theory, all propositions are essentially tautological, in the sense that the results are implicit in the assumptions made."

Such disdain for empirical verification is not found in the physical sciences. Its popularity in the social sciences is sponsored by vested interests. There is always self-interest behind methodological madness. That is because success requires heavy subsidies from special interests, who benefit from an erroneous, misleading or deceptive economic logic. Why promote unrealistic abstractions, after all, if not to distract attention from reforms aimed at creating rules that oblige people actually to earn their income rather than simply extracting it from the rest of the economy?

As I have previously written, mainstream economists and financial advisors who promote flawed models are not necessarily bad people:

I am not necessarily saying that mainstream economists were intentionally wrong, or that they lied because it led to promotions or pleased their Wall Street, Fed or academic bosses.

But it is harder to fight the current and swim upstream then to go with the flow, and with so many rewards for doing so, there is a strong unconscious bias towards believing the prevailing myths. Just like regulators who are too close to their wards often come to adopt their views, many economists suffered "intellectual capture" by being too closely allied with Wall Street and the Fed.

As Upton Sinclair said:

It is difficult to get a man to understand something, when his salary depends upon his not understanding it.

See this, this, this, this and this.

Michael Rivero may have the hardest-hitting critique of all:

This seems to be a return to the mindset of the middle ages where only the clergy were allowed to read and interpret the bible and the laity were presumed incapable of comprehending the intricacies and subtle nuances of the faith.

And indeed there is a great deal of similarity between economics and [fundamentalist version of] religion in that both depend on the unquestioning faith of the masses that those pretty printed pieces of paper represent something real, albeit invisible.

But the advent of the printing press led people to take a closer look at the actual content of [fundamentalist version of] religion and it has been revealed not as a complex and sophisticated system but as a mish-mash of half-baked myths and legends often in contradiction with itself and used to enrich the church ....

The same is true of eocnomics. the advent of the blog has led people to take a closer look at the actual content of economics and it has been revealed not as a complex and sophisticated system but as a mish-mash of half-baked theories and math often in contradiction with itself and used to enrich the bankers and conceal their fraud against the public. Athreya is reacting to the blogs the way [fundamentalist] priests reacted to Gutenberg's Printing Press.

The fraud and danger of the Federal Reserve system of banking stands exposed to the public eye, sans the "benefit" of correct interpretation by the self-appointed priests of Mammon. The public now understands that when a private bank issues the public currency at interest, debt will always exceed the available money supply. The public now understands that the Federal Reserve is no more Federal than Federal Express. The public now understands that the Federal Reserve is a legalized counterfeiting operation, that creates the money they loan out out of thin air! The public now understands that the Federal Reserve system of banking, since its creation in 1913, has reduced the value of a dollar down to about four cents! The public now understands that the Federal Reserve system is a pyramid scam that only works when ever larger populations of borrowers can be found, and that once an entire nation or planet has borrowed to the max, the system must crash (which is what is happening now).

Just as the [fundamentalist] priests, stripped of the arcane scriptures and rituals, stand exposed ... so too the economists, stripped of their arcane equations and theories, stand exposed ....

Karthik Athreya doesn't like that fact that the public sees the Federal Reserve for what it really is.

Italian Finance Minister Warns of Blowout....

June , 2010 (EIRNS)—Speaking at the yearly ceremony of the Italian Financial Police, Finance Minister Giulio Tremonti warned against an imminent blowout of the financial system, driven by the derivatives bubble, and called for bringing to an end the creation of derivatives paper. This statement, on the eve of the annual meeting of the G8/G20, gives a small glimpse into the kinds of discussions on the real state of the financial system, which are going on behind the scenes.

"The economy is still threatened by the risk of a dramatic and devastating new financial 'offside,' " Tremonti said, using soccer terminology. "Today, on the markets, the notional value of the 'over the counter' derivatives is equal to 12 times the value of world GDP, exactly the same as before the collapse of banking pyramids in Autumn 2008. The financial mass has grown, and continues to grow disproportionately and for itself, and threatens the real economy, in the imminent and permanent form typical of systemic risk."

The previous day, Tremonti had made similar statements in a forum on the Papal Encyclical Caritas in Veritate, together with Vatican banker Ettore Gotti Tedeschi in Milan. We have lost two years, Tremonti said, because, since the 2008 crisis, "nothing has been done" to bring derivatives under control, as reported by the daily Avvenire. Proposals so far implemented or drafted are "insufficient," unless "we prevent the use of derivatives contracts to anticipate and distribute future wealth." The White House and the EU have recently taken some actions, but we must still "brake the mechanism..."

Bob Chapman's International Forecaster today, 30 June 2010:

...As you are now well aware Fannie and Freddie are going to punish people who have stopped paying their mortgages, who can pay them, and who are paying other bills instead. This leaves lenders with foreclosures and much more inventory than they ever imagined. This additional problem will bring on the double dip that
Wall Street and Washington so fear. As a result of this and other failures we are about to experience the worst economic collapse sine 1348. The stock market is topping out readying itself for its most disastrous fall in history. The fall will be followed by years of depression, all of which has been deliberately created to bring the world economically and financially to its knees in an attempt to bring about world government by Illuminists. Some market analysts understand where the market is headed, but most who do understand, write and talk about the mundane observable trappings and not what the situation is really all about. We have several analysts talking about a market collapse. They do not talk about the real forces behind our misfortune. We recently watched an interview of a man who wrote about the Bush family. His only admission was that they were players in the game controlled by other forces, which he refused to mention. He wouldn’t say what they were up to and who they were. This shows you how terrified writers are who are confronted by the power of the Illuminists.
There are always these lone voices in the wilderness, which at best – some 15% of the populace – listens too. You had better listen this time because it could well cost you not only your assets, but your life, especially when another war is being prepared for you to engage in. Nothing is really as it seems to be and there are no coincidences. You are about to enter a world of chaos from which few will survive unscathed. A world of no banks, no public facilities, no food and rampaging gangs of desperate people. Unemployment of 50% and little law and order. Violence will be rife. This is not a pretty picture, but we have spared you the details. The world had better wake up fast so they’ll be prepared to deal with what is to come. If you were not aware of it the dark side really exists. We also want to remind you that for more than 20 years we have been almost totally right, and we have made some stupendous calls...
We are now entering the next to last phase of our journey. The wanton creation of wealth, inflation and perhaps hyperinflation, which will rob you of your assets. A stealth attack on what you have left by the people who control your government. Such monetary creation is the only way these people can keep the game going. They know it won’t last, but they proceed anyway. For awhile they’ll keep the multitudes at bay with extended unemployment and food stamps, but that will fade in time for lack of financial control, as the system begins to break down....

La vengeance du démon Pazuzu ; du rififi chez les Khazars des deux côtés de la Manche

La vengeance du démon Pazuzu ; du rififi chez les Khazars des deux côtés de la Manche.....

Qu'elle provienne d'une source mystérieuse mais fiable,
ou bien qu'elle soit un hoax sophistiqué et ciblé élaboré
par des connaisseurs, l'histoire de la mystérieuse statue
d'un démon babylonien achetée très cher par un membre
de la branche britannique des Rothschild semble n'être
que le dernier épisode à ce jour d'une brouille qui prend
de l'ampleur entre Khazars des deux côtés de la Manche.
Par-delà cette incertitude, l'occasion d'associer ainsi un
tel personnage aux clichés de la mythologie sanguinaire si
particulière des illuminatis aura décidément semblé trop
belle à certains - qui, détail curieux, auront choisi un canal
conspirationniste francophone pour diffuser l'histoire.

http://www.mecanopolis.org/?cat=3649
http://www.jovanovic.com/blog.htm

Il se trouve que nous avons déjà pu observer récemment
un lynchage médiatique visant un autre Khazar jusqu'ici
en cour, en la personne de Tony Blair. Si je n'ai pu avoir
encore confirmation de la nouvelle, il se pourrait que la
France du Nabot soit à l'origine de ce torpillage.

http://www.maghreb-intelligence.com/libye/260-tony-blair-rattrape-par-ses-affaires-libyennes


Il convient de se rappeler que Tony Blair fut le candidat
malheureux soutenu par les états Khazars, au premier
rang desquels le Naboland et le Vatican, dans leur projet
avorté de prendre le contôle de l'Union Européenne pour
l'instrumentaliser, en toile de fond de l'affrontement sans
merci entre la vision khazare d'un Nouvel Ordre Mondial
et le changement de paradigme de gouvernance planétaire
proposé par l'alliance multipolaire.

Par ailleurs, il est de notoriété publique qu'un des parrains
les plus puissants du clan du Nabot français est la branche
française des Rothschild - cela, depuis l'époque d'Edouard
Balladur.

http://hebdo.nouvelobs.com/sommaire/enquete/082561/le-rothschild-de-sarkozy.html



L'évolution stratégique majeure à l'origine de ces bisbilles
diverses, signes visibles d'un affrontement en cours, est le
ralliement progressif du Royaume-Uni, désormais acquis, à
l'alliance multipolaire et à son projet de changement de
paradigme, tout simplement aussi parce que, dans ce pays,
la logique khazare a perdu la partie. En effet, elle s'avérait
incapable de faire face à tout un ensemble de données:
- la stratégie suivie par la Reine sur le long terme, visant à
préserver son pays des multiples dangers le menaçant;
- les défaites successives des oligarques russes renégats
installés dans ce pays (y compris l'affaire de l'Arctic Sea
et ses conséquences multiples, jusqu'à Tambov);
- le ralliement des Etats-Unis à l'alliance multipolaire suite
à l'élection de Barack Obama (on connaît l'importance des
liens bilatéraux entre ces deux pays);
- les conséquences pour le pays de la perte considérable de
puissance de la City résultant de la crise financière;
- la perte, à terme, des profits tirés par les Khazars du trafic
de drogue provenant d'Afghanistan, en particulier dans la
zone censée être contrôlée par l'armée britannique;
- la forte impulsion sur la durée donnée à ces différentes
réorientations par les récentes élections législatives au
Royaume-Uni.


On peut donc imaginer la colère des Khazars français à se
voir ainsi lâchés par la Grande-Bretagne, qui constituait
jusqu'ici un allié indispensable à leurs projets, et même
comprendre qu'ils soient présentement si occupés à se
venger de leurs anciens alliés, perçus désormais comme
autant de traîtres et de bons à rien.

Et avouons que question traîtrise, mais aussi entourage
d'incapables finis, le Nabot et ses potes s'y connaissent.

Gold: The Invisible Bull Market

http://www.atimes.com/atimes/Global_Economy/LG16Dj02.html

June 2010

800 $ threshold in 2007....offering evidence that at that time, we remained in an early-stage gold bull market....

OK. Gold touched bottom at $255 per ounce for the last time on April 1, 2001 - over 9 years ago. That is, gold's bull market has persisted for almost a decade. Gold has gained in market price in every year since, with no exception, making it an ideal investment for cautious investors.

Today, gold set yet another record high, this time $1262.30. Ho hum. Apparently that's not news either. Certainly it's getting little media attention, and I've heard no one talking of it on the street.

Now, no doubt, coin collectors are wise to the precious metal boom - but hey, that's what the world's most desirable coins have always been made of, so coin collectors can only be identified as a special interest group.

And of course, the gold exchange traded funds are vacuuming up gold, sometimes at tons per day, accumulating gold holdings weightier than those of most countries. But these continue to be viewed as marginal investments by most financial advisors.

The Chinese government recently pronounced gold "too volatile" (that is, variable in price), to justify it as a primary investment. Meanwhile, China is steadily adding to its gold reserves and advertising to the public - through state-sponsored television ads - that it is a wise investment. Hmmm....

Most of today's investment advisers were trained, and certainly accumulated their experience, during the great equity bull market of 1982-2000. Well, no secret that equities have been in a bear market since. But the old conditioning seems to die hard, as almost all of today's advisories continue to push mainstream stocks. By my analysis, that backward-looking investment class could remain locked in a holding pattern for another decade to come, and a further equity "crash" is not out of the question!

So where should conservative investors look today?

Well, while stocks have gone nowhere this decade, gold has gained over $1000 in market valuation during the same period, adding almost exactly 400% to its cash exchange value during the past 9 years. I don't know what that tells you, but it suggests to me that gold might actually be a better investment than equities!

What do most people think of gold today? I most commonly hear others ask, "Well, gold has gone pretty high, can it go much higher?" Beyond this naturally skeptical response, many professional advisers suggest that gold is a risky asset class, that it "doesn't do anything - it doesn't pay dividends or interest," and that it "will soon start heading back the other way." It is "too dangerous," "too volatile," or "already in bubble territory."

WRONG.

Unfortunately, the professionals have been talking like this since 2001, missing the full 400% appreciation in gold's value.

For those who have been following my blog, you know that I am expecting an ultimate high in the gold price in perhaps the $5-6000 range in approximately 2019, assuming that we don't slip into hyperinflation - in which case the price of virtually everything - including gold - will be dramatically higher than today, due to a currency collapse.

So, can gold go much higher than the present $1200 mark? Based again on my personal analysis, I think we'll see $1300-1400 later this year, and $2000-3000 as soon as 2012. Another slow period is likely following the next strong run, I'd guess at some point following an interim 2012 high, perhaps through 2014 or so. Then, I think popular sentiment will shift to something very different than the early-to-mid bull market behavior we are seeing today.

Between 2014 and 2020, my guess is that "everyone" will be talking about gold, most people will hold a significant portion of gold in their portfolios, and gold will gain over $1000 in some years during that period. But that will also signal the final years of the gold bull market.

That is, it's not too late to catch another decade-long 400% gain in the gold price. I think it's going to do it again next decade!

It is an ineluctable quality of human psychology that we are late to detect trends. And, just when gold is truly popular, another asset class (possibly bonds and equities again) will be stirring in the beginnings of a new bull market - and most members of the public will be left behind - again!

My advice. Don't be left standing and watching. Examine the evidence for yourself, and think big - think gold for the decade to come!

And... enjoy the ride (which will be choppy at times)!

U.S. Offshore Oil and Gas Resources: Prospects and Processes

Access to potential oil and gas resources under the U.S. Outer Continental Shelf (OCS) continues to be controversial. Moratorium on leasing and development in certain areas were established by Congress (beginning in 1981) and by the President (beginning in 1990). These moratorium were largely eliminated in 2008 and 2009, although a few areas remain legislatively off limits to leasing. The 111th Congress may be unlikely to reinstate broad leasing moratorium, but some members have expressed interest in protecting areas (e.g., the Georges Bank or Northern California) or establishing protective coastal buffers. Pressure to expand oil and gas supplies and protect coastal environments and communities will likely lead Congress and the Administration to consider carefully which areas to keep open to leasing and which to protect from development.

Download:

• English (PDF · 33 pages · 383 KB)

---

Author:

Marc Humphries, Robert Pirog, Gene Whitney

Series:

US Congressional Research Service Reports

Note:

Includes appendix containing definition of terms

Publisher:

Congressional Research Service (CRS), Washington DC, United States

AMERICA's Boys....Keep dying, there's stuff to steal says Israhell

There's talk about abandoning the War For The Jews in Afghanistan - the United States is tired of getting its ass kicked up and down the entire breadth and width of the country while blowing through hundreds of billions of dollars of borrowed money - so the Jew York Times publishes an old story - see the 'update' at the bottom of the story here - as 'news' to convince Americans that this War For The Jews might be useful as there is actually something for Americans to steal. The story is so old the Chinese (of course) are already mining. This manipulation of Americans by World Jewry has become so obvious that even the most credulous are starting to feel used.

Trillion-Dollar Bash: Mineral Find Means More Blood Money in Afghan War: At the same time, American officials fear resource-hungry China will try to dominate the development of Afghanistan’s mineral wealth, which could upset the United States, given its heavy investment in the region. After winning the bid for its Aynak copper mine in Logar Province, China clearly wants more, American CIA officials said....

Pakistan seals pipeline deal with Iran

Pakistan seals pipeline deal with Iran
By Syed Fazl-e-Haider

KARACHI - Iran

has finalized a US$7 billion gas pipeline deal to export natural gas to Pakistan. The two countries on Sunday formally signed an export contract that commits the Islamic republic to supplying its eastern neighbor with natural gas from 2014.

The Iran-Pakistan (IP) pipeline, which has been talked about for 17 years, will connect Iran's South Pars gas field with Pakistan's southern Balochistan and Sindh provinces and will be crucial in Pakistan's attempts to ease countrywide electricity shortages.

The deal was signed days after a UN Security Council voted to tighten sanctions against Iran, but Islamabad believes that these will not affect the pipeline project.

"As far as our ... project is concerned, it is a commercial agreement to meet our energy deficit and beyond the purview of this resolution,'' Dawn newspaper reported Abdul Basit, Foreign Office spokesman as saying.

The United States has sought to dissuade Pakistan and India, which has also considered joining the project, because of Tehran's nuclear ambitions.

"We have advised Pakistan to seek other alternatives,” Dawn quoted Robert Blake, the US Assistant Secretary of State for South and Central Asian affairs as saying in April. "We do not think it is the right time for doing this kind of transaction (building the pipeline) with Iran."

Iran, which has the world's second-largest gas reserves after Russia, needs around $25 billion a year in oil and gas industry investment, according to Reuters. Its gas production capacity of 600 million cubic meters per day is expected to rise to 1.1 billion cubic meters by 2015, but sanctions by the West, political turmoil and construction delays have slowed its development as an exporter.

US Defense Secretary Robert Gates reportedly said before the UN sanctions vote last week that the UN resolution could clear a way for individual states and the European Union to block foreign firms expanding Tehran's oil and gas exports and impose other curbs on business activity.

The pipeline will provide gas to the power sector to generate about 5,000 megawatts of electricity, Some analysts say it will not be possible for the government to provide the fuel to domestic consumers due to its high price, which was one reason behind India's withdrawal from the project.

Pakistan's Deputy Energy Minister Kamran Lashari, who was present at the signing ceremony, said Islamabad will conduct a one-year feasibility study for building its section of the pipeline, local media reported. Iran has built 907 kilometers of the pipeline between Asalooyeh, in southern Iran, and Iranshahr. Iran's Deputy Oil Minister Javad Ouji reportedly said that Iran this week will start building the next 300km stretch to the Pakistani border, through the Iranian port of Chabahar. Pakistan will take three years to build the 700km link from the Iranian border to Nawabshah, in Sindh province.

"This is a happy day," Ouji said at the contract signing ceremony in Tehran, Agence France-Press reported. "After decades of negotiations, we are witnessing today the execution of the agreement ... to export more than 21 million cubic meters of natural gas daily from 2014 to Pakistan."

On May 28, the two countries signed the sovereign guarantee agreement, which makes effective made Gas Sales Purchase Agreement (GSPA) signed by the countries last year in Istanbul. Under the GSPA, Iran agreed to export 750 million cubic feet per day (mmcfd) with a provision to increase it to one billion cubic feet a day (bcfd) at the rate equal to 78% of crude oil for the next 25 years.

The pipeline was originally planned to extend from Pakistan to India in 1993. India walked away from the project last year, but has kept its options open to join at a later stage. After India's withdrawal, Beijing has shown interest in building a pipeline through Pakistan carrying Iranian gas to China. China's National Petroleum Corporation is already involved in developing the South Pars field.

Pakistan's demand for gas, which is the primary fuel helping run the economy, has surged to 4.7 billion cubic feet a day (bcfd) against actual supply of 3.6 bcfd. The country's natural gas reserves, which meet over 50% of its requirement for energy, have depleted rapidly in recent years with few hydrocarbon discoveries and decline in production from its largest Sui gas field in Balochistan.

The Economic Warfare Waged Against the Human Race

http://www.voltairenet.org/article165797.html

11 06 2010

[This is an excellent article, to illustrate the utter ruthlessness of the empire's planners, as they bring about the ruin of civilization in order to establish their new order built upon the ashes.

The only sane solution for Europe is for it to separate itself from "Leviathan," the all-powerful American corporate state. Instead of sinking vast amounts of un-borrowed money into preventing the PIIGS countries from entering bankruptcy, EU leaders must see that the only solution is not finding new belt-tightening ways to keep-up payments, but the stopping of all payments to American/Western banks. Take away American power to issue credible economic threats and the playing field becomes leveled between America (the world's most-indebted debtor state) and the rest of the world. Eliminate the American power to dictate terms to the world and it becomes possible to change the American-designed world which is being constructed in spite of the common will.

All the chips are going to fall, no matter what anyone does to prevent global economic collapse. When debtor states stop holding up the collapsing economic order, then they will be left with national and local concerns and very few real resources to meet the needs of the people. This is the point where leaders will regret their American alliances and begin to remove anything remotely American from national life. The American military leaders have operated on this assumption for a long time, meaning that all plans that have been developed to deal with today's crises have included this contingency. The American game plan has been to position US assets and interests in such a way as to assure American dominance after the pie hits the fan.

Every responsible leader should be finding ways now to separate his country from this voracious, ever-growing Leviathian. When responsible leaders from any two countries join together to oppose the encroaching superstate, they will have formed the first anti-empire political bloc. It will only be possible to resist, or to slow, the superstate barreling down upon us if leaders of the people stand-up and begin the coalescing process. The formation of a power bloc requires that the people be drawn together. This has yet to happen.

The economic warfare that is now focused upon the shaky European Union is the same warfare that has been used against Americans themselves, in the 2001 attacks. These people have so much money and influence that they can initiate financial highs or lows, upon which they make sure bets in the stock market. This power has set them above the fray. They have discovered an effective tool for creating limitless profit from human suffering. Their power enables them to manufacture crises and make investments before the fact, in industries destined to profit from the ensuing human suffering. This is what was meant in the leaked empire document known as "Silent Weapons for Quiet Wars."

These inhuman monsters have been waging war against the entire human race for many decades. Isn't it time that we fought back?]

€uro: the worst case scenario

by Jean-Michel Vernochet*

The Greek budgetary crisis, which has become a crisis of the euro, is not the inevitable result of market self-regulation, but rather the consequence of a deliberate attack. According to Jean-Michel Vernochet, the crisis was provoked by an economic offensive directed from Washington and London that followed similar principles to those of contemporary military warfare, employing game theory and a strategy of ‘constructive chaos’. The ultimate aim is to oblige the Europeans to enter into an Atlantic bloc, i.e. an empire where Anglo-American budgetary deficits would be automatically financed through the expedient of a dollarised euro. The agreement concluded between the European Union and the IMF, giving the Fund partial oversight of Union economic policies, is a first step in this direction.

The director of the International Monetary Fund, Dominique Strauss-Kahn, and the German Chancellor, Angela Merkel. Prevented from returning to the Deutsche Mark, Germany must consent to a European loan from the IMF.

The financial attack launched against Greece because of its sovereign debt and its potential insolvency soon proved to be an offensive against the Euro and to have only a distant relationship with the flaws and structural deficits of the Greek economy itself. These ‘vices’, incidentally, are largely shared by the bulk of post-industrial countries which have acquired the bad habit of living beyond their means and on credit, hence the soaring quantum of debt, a bubble (as any other) doomed to burst.

Everything seems to indicate that behind the brutality of the attack and beyond a simple stampede to pillage some European economies loom other objectives, notably of a geopolitical character, carefully thought out. In any case, the appetites of anonymous financial predators – as sharp as they might be – cannot account for the sustained intensity of the offensive which, in the short term, threatens to shatter the Euro zone, the European Union itself, indeed even beyond …

With the proliferation of crises over the last two decades, a quick reading of the pawn movements on the Grand Eurasian Chessboard is enough to suggest that Europe is actually one battle ground within a geo-economic war (war in the proper sense), a battle that it has besides already potentially lost.

Indeed, the adoption of a European plan – at the insistence of the White House – for the bailing out of heavily indebted EU member states not only does not constitute a panacea, a durable remedy to the structural budgetary crisis that has been rapidly affecting all Western states, but points in the direction desired by the U.S. of a rapid integration of the EU, a necessary prerequisite for the constitution of a united Western bloc.

This European plan responds to a crisis of confidence and solvency (largely artificial at the outset, but which became contagious and is now snowballing) by the recapitalisation of states as if it were a matter of a simple liquidity crisis. A European plan of 750 billion euros, even greater than the 700 billion-dollar Paulson plan designed to bail out the American financial establishment with public funds after the debacle of September 2008. The deviant consequences of that solution can be seen at present in the heavy expansion of the public debt on both sides of the Atlantic.

Thus, the U.S.-born crisis, after having triggered the recession which de-activated the economic pump, has since dried up the fiscal resources of states rendering it more difficult to service an ever expanding debt. Now, the EU has just increased the existing debt by an additional 750 billion euros, which further strain member states’ national budgets (the average indebtedness of the euro zone being actually 78% of GDP), all this with the illusory plan of ‘re-establishing market confidence’.

To this end, the EU has voluntarily placed itself under the thumb of the IMF which has consented to have up to 250 billion euros at the ready. This is the same IMF, whose calling until now has been to support tottering Third World economies through crippling recipes in the guise of so-called structural adjustment plans. It is thus a supranational entity, formally ‘globalist’, which will head, indeed supervise more or less directly, the structures of economic governance which the EU will most certainly adopt if the euro zone does not spontaneously break up beforehand.

Such integrative measures have been vigorously called for by Paul Volcker, Chairman of the White House Economic Recovery Advisory Board, who, while recently in London, lambasted European leaders demanding a boosting of the euro which the Americans and British need to keep their own economies afloat.

Let us note, in passing, that it is probably with a heavy heart that the German Chancellor accepted to subscribe to this mind-boggling support plan for the faltering Euro zone countries since her French counterpart – according to persistent rumors – was threatening to return to France if she did not conform. But, while it is true that ‘the worker ant is not altruistic’, a return to the Deutsche Mark would be equivalent to signing the death warrant of the German economy as a strong currency would restrain its industrial exports, at the base of its economy. Like it or not, the situation forces Berlin, under duress, to navigate the strictures drawn up by the Obama Administration.

American ukases that lead to a big open trap: capital borrowed from the markets or lent by the IMF to save the ‘PIIGS’ (Portugal, Italy, Ireland, Greece and Spain) – threatened with cessation of repayment – must rely on structures guaranteeing long term solvency of the euro. A currency whose soundness cannot be assured, however, by the type of federal institutions which Jacques Attali has been promoting in calling for “… the creation of a European Treasury, immediately authorized to borrow in the name of the EU, and of a European Budgetary Fund, given immediate mandate to control the budget expenditures of any country whose debt exceeds the 80% of the GDP.”

It essentially boils down to subjecting States to economic tutelage under the guise of saving the Euro zone from an allegedly inevitable collapse … since the abandonment of the Euro is an inviolable taboo that nobody apparently dreams of touching.

Certain projects go even further, by prescribing that the budgets of member states should be entirely controlled and decided on by a triumvirate comprising the European Commission, the European Central Bank and the Eurogroup (the member states’ Finance Ministers). What about the popular will and the European Parliament in Strasbourg?

No one cares about denouncing the sophistry or the fallacy of equating economic integration with a return to market confidence. First of all, why should markets, and markets alone, impose their own laws? Besides, is it not time to revisit stock market capitalism, anonymous and volatile, and capable of ruining countries on a whim or from self-interest?

On this account, centralized economic control from Brussels is no more the panacea than is a flood of liquidity the solution to the current crisis. The additional indebtedness generated by the ‘plan’ is without doubt a false solution imposed from outside with the end goal of further enslaving us Europeans to capital markets and their unspeakable dictatorship.

The idea of centralized control proceeds from the same stance for it is literally a non-sense in that it ignores all the societal differences operating across all layers of the European construct: types or models of economic growth, fiscal and social systems, etc. It is basically a “non-idea”, one which is fundamentally ideological by its nature … a smokescreen concealing a whole range of ulterior motives, all in fact foreign to the economic prosperity and well being of the peoples of the EU.

Some have rightly seen that this crisis was only the means and the pretext to precipitate the introduction of a hard-core federal system [1] encompassing all twenty seven member states despite and in contempt of the popular will over which the Treaty of Lisbon has been imposed in the most underhanded fashion. A crisis which is and remains – a cardinal fact to be borne in mind – artificial, fabricated; in a word, it is the opposite of an inherent ‘inevitability’ implied by a self-regulating and disembodied market environment, supposedly steered by an ‘invisible hand’. A reputedly ‘mechanical’ process, which, despite its anonymity, is none the less constituted by corporate executives and traders made of flesh and blood that call the shots and manipulate the market.

It is for this reason that the U.S speaks with a forked tongue through two separate voices, that of its ‘market’ representatives and President Obama himself. The latter intervened to berate the Europeans and press them to stabilize their currency, or, in other words, the European economic policies, good or otherwise, which are inextricably linked to the health of their own currency. Now, don’t start imagining for one second that some kind of meddling in the affairs of Continental Europe could be involved here! Can you picture Madame Merkel and Monsieur Sarkozy asking the White House to clean up Manhattan?

The other voice belongs to those who call the shots … in short, the managers of the self-regulating order, anonymous even to the governments themselves, as French Finance Minister Christine Lagarde shamefully confessed; those who play yo-yo with the markets like a cat plays with a mouse, anticipating the lows and highs that they themselves intentionally provoke. In practice, these people are promoting a very different discourse.

For Paul Volcker, chair of the White House Economic Recovery Advisory Board, Europe must accept external control of economic policy and put the euro at parity with the dollar.

Indeed, how else to explain the evident contradiction between the concerns expressed by President Obama – legitimate by the way, for the EU needs a strong euro that penalizes European exporters, but is advantageous to American industry, a useful bonus given the record US fiscal deficit ($1400 billion for 2008-09) and above all necessary to support the ongoing war effort in Iraq, Afghanistan and Pakistan – and the radical destabilization of Western economies by the persistent attacks by the markets against the euro?

No matter how voracious, inconsistent or irrational, the ‘operators’ are nevertheless aware that the pursuit of the offensive against the euro jeopardizes the system in its totality and risks plunging the global economy into a new phase of chaos. Then why this dance on the edge of the abyss? Nobody will have us believe this nonsense that the markets have a life of their own, that they are uncontrollable and that all this is simply the result of the economic machine gone awry … In short, that it’s ‘nobody’s fault’, but the simple consequence of the impossibility of managing the agents and the irrational faux pas of the markets?

Clearly said, the risk of systemic collapse is at the very heart of the game currently being played. The big players, the cold calculators, are obvious disciples of the theory of games (since von Neumann & Morgenstern), probabilistic edifice on the foundations of which has been constructed the doctrine of nuclear deterrence … The winners are those who push the lethal bids the highest. A scenario that corresponds line for line to that which is unfolding before our eyes: increasing destabilization of the European economies, with non-negligible effects for the U.S.

Let’s add that the financial chaos, monetary and economic, on both sides of the Atlantic is an undeniable windfall, for those who prosper in the backwash of the market’s trajectory, provoking and anticipating the cycles of panic and euphoria to play indiscriminately with the rising and falling currents of the hysterically erratic markets.

At the beginning of the Twentieth Century, the economist Werner Sombart conceived an embryonic theory of ‘creative destruction’ (subsequently taken up by Joseph Schumpeter). Since then this theory has been developed by, among others, the mathematical theory of the frenchman René Thom (‘catastrophe theory’). Amended by Benoît Mandelbrot, the theory was applied via fractal geometry to market behavior, perceived already at that time to fall within the province of a theory of chaos, decidedly fashionable.

In the meantime, the economist Friedrich von Hayek, one of the theorists of neoliberalism, claimed to have raised the free-market economy to the status of an exact science. According to his hagiographer Guy Sorman, “… liberalism converges with the most recent theories of physics, chemistry and biology, in particular the science of chaos formalized by Ilya Prigogine. In the market economy as in nature, order is born out of chaos: the spontaneous agency of millions of decisions and pieces of information leads not to disorder, but to a superior order” … One could not say it any better, for a priori we hold there the keys to understanding the crisis.

At the end of the 1990s, the Neo-conservative disciples of Leo Strauss have carried to its logical limits the new dogma of greater disorder in making themselves the bards of ‘constructive chaos’ as a legitimation a priori for all the wars of conquest of the Twenty First Century. From this viewpoint, each is able to see this chaos at work in the Greater Middle East as s/he is able to see it at work today in Europe.

We can wager that the new regional order that the great organizers of chaos intend to see emerge from the crisis itself will be a unified Europe, centralized and federal, placed under the direct influence of the US with the aid of the Federal Reserve of which the European Central Bank will be only a branch, and under the vigilant watch of the IMF, representative or product of an emergent global power, deterritorialised yet omnipresent.

One understands quickly enough that the deification of the market associated with the idea of ‘constructive chaos’, itself complemented by an intensive application of game theory in the hands of the disciples of demolition, constitutes a mixture that promises to blow up in one’s face. An observation immediately comes to mind: ‘chaos’ (intentional) is these days a mode of government, of socio-economic transformation and of unopposed conquest. A heavy duty version of ‘divide and conquer’ even if it means nations will perish and the people with them.

For it’s a risk worth taking if in the end Europe finds itself on its knees. Greece – certainly at the soft underbelly of the euro zone but no more so than Italy, Spain, Ireland or Portugal – has been until now a sort of free electron frustrating a full integration of the Balkans in the American geostrategic orbit.

By way of a provisionary conclusion, if the EU, facing crisis, advances at forced march towards central economic control, a stage will be reached whereby quasi-discretionary power will be granted to the European Commission – for the most part composed of non-elected technocrats and recruits – for a stainless Atlanticist allegiance. To put it plainly, this will signify the obliteration of the European nation states.

In reality, nothing can prevent the integration of Europe within a trans-Atlantic Bloc. In the end, the merging of the euro with the dollar will accelerate the union of the old world and the new world. This conclusion is evidently not a matter of pure speculation but a simple projection of the architectonic tendencies visibly at work in the framework of a process of redistribution or of geopolitical re-composition of the global map. Sufficient to say that if the euro zone does not break apart, the fate of the European peoples seems definitely sealed, tied for better or worse to the manifest destiny of the United States. And this irrespective of a ‘reform’ of the global economic system.

The financiers will perhaps get their fingers burnt if the international community agrees to curb their appetites in regulating the markets, but the fact remains that the promoters of constructive chaos will have won this hand as they set out to recreate the conditions for new conflagrations.

The worse case scenario, often evoked in France by such influential men as Bernard Kouchner and Jacque Attali, happens to be the least improbable at a time when governments, backs to the wall, see themselves condemned to fleeing headlong into the unknown. In Kuwait in 1991, in Iraq in 2003 among the thinly disguised objectives of war, the boosting of the economic machinery through plans of reconstruction was high on the list. Not to mention other more flagrant and immediate interests such as fossil fuels, arms sales and all the related industries.

Whatever the accords between Turkey and Iran on uranium enrichment for medical purposes, whatever the related diplomatic annoyance for the State Department, it suffices to re-read the fabulist Jean de la Fontaine to know that the rhetoric of the wolf always prevails over that of the lamb! In a situation of extreme fragility of the global economy, one must await an end to the crisis at the harrowing door of the chaos constructor.