‘Obama is Extremely Successful for Powerful Interest Groups’
Has President Obama delivered on his pledges? Whose interests has he been protecting? Radio Sputnik is looking into the issue with Dr. Paul Craig Roberts (US), Fredrik Erixon (EU) and Peter Koenig (Switzerland).
On the 20th of January President Obama is delivering his annual State of the Union address to a joint session of Congress. “The new year will bring a new American Congress, and with it, the opportunity to continue our work to build a stronger economy and secure a better future for our country,” John Boehner — the House speaker- wrote to his President.
According to Princeton economists Alan S. Blinder (formerly Vice Chairman of the Federal Reserve Board) and Mark W. Watson, as quoted in the Time magazine, ‘Even though the U.S. economy had improved substantially in recent years, Democrats lost decidedly in many sections of the nation.
Democrats’ failed to excite voter support, partly because average American workers had seen little or no personal economic improvement in the years of the Obama presidency and Democratic influence in Washington’.
So what exactly has President Obama achieved and how has he handled what still remains the biggest global economy – as of now?
Says Dr. Paul Craig Roberts, Former Assistant US Treasury Secretary:
He has achieved the agenda of the neoconservatives and the military security complex. He has demonized Russia and its President. He has broken up the economic and political relationships between Russia and Europe. He has secured the agenda of the Wall Street, by establishing through the Department of Justice that there would be no prosecution of the criminal gangsters that dislocated the American financial system and ripped off millions of people. He has achieved the agenda of the lawlessness of the US, having determined that the people who tortured detainees will not be prosecuted, even though torture is a felony under the US law and is also prohibited under the international law.
He has achieved the agenda of the Israeli lobby by continuing the wars against the Muslims in the ME. And he’s done his best to achieve the agenda of agro business and Monsanto, by continuing to allow the production and sale of genetically modified organisms, without any studies proving their safety. And he has done his best to achieve the agenda of the extractive industries – oil, mining and timber. So, on the whole, from the standpoint of the six powerful private interest groups that rule the US, and indeed much of the world, Obama has been amazingly successful. Perhaps, the most successful of all presidents.
Dr. Roberts, there is an increased concern in the analytical communities about the future of the banking system. They are saying that, in fact, the biggest banks are coming back to their pre-crisis policy, which is indiscriminate lending, and that could end in another wave of crisis. But certainly, bankers are clever enough not to realize that. So, is it also part of the neocon’s agenda?
Dr. Paul Craig Roberts: The Wall Street’s agenda of course benefits from the neoconservative agenda, because if the neoconservatives achieve more American hegemony over the other economies, then it opens the door for the financial imperialism of the large American banks. So, in that sense, their agendas are allied – the neoconservatives’ and the Wall Street’s.
As for the banks failing, the big banks have been declared by the US Government to be too big to fail. In other words, the US Government will not permit their failure and has not, and that is why we had six years of what the Federal Reserve and the Central Bank called quantitative easing, which is the creation of massive amounts of new dollars in order to purchase the debt-related derivatives on the books of the big banks, in order to keep them solvent. So, whatever trouble the big banks get into for themselves and whatever trouble they cause the rest of the population, the Federal Government stands behind them and has declared that it will not permit them to fail.
So, yes, the massive holdings of poorly understood derivative instruments could indeed again rack the economy not only here, but abroad. But there is to be no punishment of these banks, other than some relatively small fines.
Is it going to punish the world economy?
Dr. Paul Craig Roberts: It could very easily, yes, because the dollar is the world’s reserve currency and so much is hooked to that. If the derivative bubbles blow up, it can blow up all kinds of markets, not just the stock markets and bond markets, but it can blow up the commodities markets, all markets. And this is especially the case when so much of the world economy is in difficulties, such as Europe, which was already fading into recession and high unemployment prior to the sanctions that Washington required Europe to impose on Russia, which has further hurt Europe. So, the collapse of the financial system would have consequences in most parts of the world.
So, is it fair to describe President Obama as the worst president in the history of the US? I mean, he’s been delivering – in a sense.
Dr. Paul Craig Roberts: From the standpoint of the public interest and the interest of peace – he is probably the worst. Certainly, he is as bad, as George W. Bush. But from the standpoint of the five or six powerful interest groups, who control the Government through their campaign donations, Obama is extremely successful, because he has achieved the agenda of those people. So, Obama is successful for the Wall Street, for the military security complex, for the Israel lobby, for agro business, but is unsuccessful for the American people, for the peoples of the world, for peace.
Fredrik Erixon, the Director and co-founder of the European Centre for International Political Economy (ECIPE) a world economy think tank in Brussels:
There still are risks associated with the financial sector. And that risk you can find in many different parts of the world. Obviously in Europe, where the banks remain fragile and where there are remaining doubts about their solidity, even after the stress test and the asset quality review that the ECB did early this autumn. But we also have growing financial instabilities in China, in Russia and in other parts of the world too. And I think, given the role of the banks in the financial sector in the world economy, that remains a risk factor.
The overall political environment in the world is of course another one. There are different hotspots in different parts of the world and all of them at least can make a serious bent into the economic prospects for the world economy, if they are not managed properly. I think there are issues related to the way that the central banks are planning for 2015 at a time when the US Fed is scaling back its monetary stimulus, at the same time as we are seeing other countries beginning to doubt the effect of the monetary stimulus they have used in the past.
So, the extent to which you are going to have a sort of stop\go central bank policy where the central banks at one point or in one country is going to stamp on the pedal, at the same time, as they may do the opposite at the other part of the world or, perhaps, at another point in time for the same central bank. So, I’d say that the financial sector, the central banks and geopolitics – these are my three areas of balance and risks for 2015.
You said, given the role the banks are playing in the current situation, are there any indications that this role could be somehow reviewed or revised, or corrected?
Fredrik Erixon: The entire world is moving gradually towards a different policy for banks. And give it another two years we are going to have the new possibilities to kick in on the capitalization of banks. And I wouldn’t be surprised to see governments taking further actions a few years down the road, in order to impose even stronger capital adequacy demands on the banks. But for the time being that is difficult, because banks in many different parts of the world are trying to recover the balance sheets from the pre-crisis area and from the developments during the crisis.
This of course is especially true in Europe, but it is also true in other parts of the world. And it is difficult to achieve the improvements on the balance sheet, at the same time as the economies are growing slowly and, at the same time as the governments are putting even tougher capitalization demands on the banks. The more the governments are trying to press on the banks right now in order to shore up their balance sheets, the less capable the banks are going to be to lend to the economy. And if they can’t lend to the economy, that is going to have a detrimental effect on the economic growth.
So, I think that sort of two-step dance is a difficult one to do and it is not the one where the central banks and the governments have acted in a coordinated way in the past years, they’ve rather taken policies in different directions.
Peter Koenig, financial analyst and former World Bank economist, currently based in Zurich:
And if people worldwide, or at least in Europe, would not react and protest, it was considered to be a new methodology of saving the financial system, of course, at the cost of the small savers and, as I said earlier, for the enrichment of the elite. With each one of these crises the gap between rich and poor grows.
And I've just heard this morning in the Swiss news that even in Switzerland they predict lower growth in the future, because the gap between the rich and poor is growing rather rapidly, which they then say is the reason for lower growth. But, of course, it is much more complex, but that is part of the manipulation with the people.
So, in Cyprus people did not react and the system was institutionalized. Now, in fact, this Financial Stability Board I've mentioned before, that was rubberstamped in Brisbane, has become a de facto law that can be now institutionalized by every country. And in Europe it has been already approved, as I also said earlier, by the European Commission.
So, it is already a fact that in the future in countries of the EU with banks that are insolvent, the Financial Stability Board will make sure they will call their banks to duty to bail themselves in. What a shame!
But that cannot go on forever, because when the gap is growing, the social instability is growing.
Peter Koenig: Absolutely! And of course what can be stolen will become less. Take Greece, they basically no longer have the social system which belongs to the people. It is all being privatized. So, they have absolutely no say in the social system anymore. And that was the purpose of it.
So, if this continues, then eventually the system will collapse. The sad story is that nobody talks about it. So, the people are really kept ignorant. The leaders don’t talk about it. This was little noticed, buried somewhere in the mainstream media – the rubberstamping at the G20 meeting in Brisbane of this crazy law.
If people would know that their savings are at stake, I think that there would be a run on the banks absolutely and very quickly. And that would of course be the end of our Western financial system. And I think it may happen. I think that eventually more and more people will become aware of it, because there is the Internet and I write a lot about it, there are lots of other people who write about it and you talk about it now. And so, I believe the awareness is growing.
And if this really happens, then our Western financial system will be collapsing. And that is when we need another system…
And that’s when the Western system might take steps to somehow protect itself.
Peter Koenig: Right! If you look at the proportion of gold, Switzerland, with only their 7% has proportionately and per capita most of the gold in the world. But let’s forget that. Look at the US, they report gold holdings of somewhat like 8200 tons, which they say constitutes 72% of their reserves. That’s quite a lot! Germany has 3300 or 4000 tons of gold, which is about two thirds of their total reserves. And so on.
Some European countries have much more gold than others. Especially the US, it looks to me as if they probably have much more gold than is reported. That is my guess, I have no proof for it. And, of course, gold is a very secret shiny metal, nobody really wants to talk about how much they have and where it is stored. But my guess is that they have much more. And so does Russia, and certainly so does China – much more than they report.
And the reason is because I could imagine that if the system collapses, they would suddenly have to go back to the gold standard, to some form of the gold standard. It doesn’t have to be the same and, of course, it wouldn’t be the same, as it was in the 1970s, as it was in 1944 and until 1971 designed by the Bretton Woods meeting.
There will be some kind of a gold standard which would bind currencies to gold. And if you have a lot of gold, then of course your currency is safe. And all those who do not have that gold and depend on other reserves, they would basically bear the brunt. That will be a possibility.
I hope it will not, I hope the rest of the world will not accept that and will really require another backing, a physical backing. For me the gold backing has never been really a solution. As I said earlier, you cannot feed the people with it, you only feed the illusions that you have gold. But what can you do with it in the end? Its industrial worth, I believe, maybe, is about 5-15%. So, it is really highly speculative.
A new financial system or monetary system should be really backed by the sovereign output of a country, by the economic strength of a country.
What I'm actually concerned about, when we are talking about the financial stability boards etc. – these are the instruments which the existing banking system, with all its schemes and with its virtual money, is inventing to protect itself, right? Do I get it right that there only are two financial stability boards – one in the US and one in the EU, is my understanding correct?
Peter Koenig: Right! But there are other institutions which back that financial stability board, but they are not that important for the moment. In Europe they have created something like a stability fund which doesn’t yet exist, and I think they are aiming for its physical existence in 2016.
And it depends not only on the creation, but also on how much money people put into that fund. And that fund would then be helping to bail in or bail out the insolvent banks. But already now it is very clear that it wouldn’t even cover a fraction of what the bank would owe when it collapses. So, it is really not important.
But as to the decision making, it looks pretty much centralized.
Peter Koenig: Oh yes, absolutely! You are right! I mean, the people in Europe have totally lost their sovereignty. They are totally controlled by Brussels or by the ECB and have no more say.
Switzerland is a little bit of an exception, because they are not part of the Eurozone, but they are certainly very-very closely linked to the Eurozone. And by this forced devaluation of 2011, as you may know, they have devalued the Swiss franc by force to tie it closer to the euro, to make the Swiss industry more competitive or competitive again, which they felt it wouldn’t be (and that in itself was already a shame).
So, the Swiss franc, even though it is still more or less independent, it is also tired to the euro. And the Norwegian krone, it is very similar, it is tired to the euro. So, you actually have 30 European countries that basically have lost their sovereignty by institutionalizing this stability board which decides which bank has to go and which bank has to live.
Which implies that crucial decisions are taken by a handful of people. Of course, there is something known as conspiracy theory, but can you help drawing parallels. I mean, a handful of people are taking decisions on behalf of a good part of the world. And that money, which is virtual, which is losing its value, isn’t it a good enough reason to start the WW III?
Peter Koenig: I hope not! That’s why my hope is and, of course, I understand that this cannot happen overnight, but my hope is that the new monetary system will see the light of the day soon.
And I think the beginnings have already happened by the very close collaboration of the central banks of Russia and China. They already have a regular currency swap arrangement, so that their trading doesn’t have to go through the Wall Street, as it used to be. So, they deal in their currencies absolutely detached from the dollar, which I think is a good thing.
And if you look at these two countries together, alone they control about 27% or so of the world GDP. And if you add the other BRICS together, which is of course not so easy to bring them all under the same roof, but if you add them together, then it would be a third of the world GDP.
Maybe it starts simply with Russia and China, and some other countries may join. There probably was an announcement, or it could almost be considered an announcement now, of the recent Shanghai Cooperation Organization meeting where Iran and Mongolia, and Pakistan, and India were also invited to join the organization.
And if that actually materializes, then this block gains in strength, and could easily issue their own currency. Of course, they don’t want to destroy the dollar alliance overnight, because that would mean that that line there would be broken. That is not the purpose.
And if that actually materializes, then this block gains in strength, and could easily issue their own currency. Of course, they don’t want to destroy the dollar alliance overnight, because that would mean that that line there would be broken. That is not the purpose.
The purpose is to have a gradual shift – countries gradually shifting to this new system, because I'm sure and I know that there are many who would do that tomorrow, if the system would have existed. The reason they don’t do it is simply because they are afraid of the US, of sanctions and maybe even of a war, of invasion.
But this may change if there is a new system available physically. And I really hope that it will happen soon, because otherwise, yes, there is a risk of a war. You are right! But I do hope that that can be avoided, because the system itself, as it is now, it produces war. I mean, without that fiat money, money that is printed at will, you couldn’t finance a war machine, as the US is doing.
So, if you break that system, you can basically stop the wars. Maybe overnight, but also gradually you bring an era of peace to the world, through economics and not through killing.
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