Greek Spring: My 160 Days as Finance Minister

January 30th, 2018

Adults in the Room; My Battle with the European and American Deep Establishment, Yanis Varoufakis 2017.

This political memoir is best read as a companion to Varoufakis’ 2016 And the Weak Suffer What they Must? Europe’s Crisis and America’s Economic Future. Both were written after Varoufakis’ short term as the Greek Syriza government’s Finance Minister in 2015.

The 2016 book is a macroeconomic primer describing how we got from the 1920 gold standard to Bretton Woods to financialization and the Great Moderation to the worldwide economic and banking collapse of 2006. It explains how the European Union was set up without a political union, with a currency like the 1920′s gold standard and without a central bank like the US Federal Reserve capable of recycling surpluses. What can possibly go wrong? The 2008 global financial meltdown. Yanis estimates a Greek bankrupsy in 2010 would have required a European wide bailout costing each European citizen €10,000. A similar market turn against Wall Street would have cost U.S. taxpayers an estimated $258. That is why the 2010 Greek bailout was so important to the EU.

Finance Minister Limousine Yanis limo2

The 2017 book is a page turner describing Varoufakis’ attempts to deal with the European troika made up of the European Commission the European Central Bank and the IMF to restructure Greece’s debts and to put the Greek economy on a path to recovery. The troika were only interested in a third bailout with even harsher austerity to punish Greece for having elected a left leaning government and to serve as an example to other weak EU members not to defy the troika.

Yanis describes an early meeting with the formidable Larry Summers who Yanis had previously called “the prince of darkness”. Summers:

There are two kinds of politicians, he said, insiders and outsiders. The outsiders prioritize their freedom to speak their version of the truth. The price of their freedom is that they are ignored by the insiders, who make the important decisions. The insiders, for their part, follow a sacrosanct rule: never turn against other insiders and never talk to outsiders about what insiders say or do. Their reward? Access to inside information and a chance though not a guarantee, of influencing powerful people and outcomes… So, Yanis, he said, which of the two are you?

In 2009 Germany’s Angela Merkel had requested a €406 Billion bank bailout from her Bundestag. It was barely enough to cover losses from German bank investments in US toxic derivatives. By 2010, losses from German bank loans to the governments of Italy, Spain, Ireland, Portugal and Greece totaled €477 Billion of which €102 Billion had gone to Greece. Merkel knew it would be suicide to return to the Bundestag to request a second bailout. This was the birth of “Bailoutistan”; a complex and deceptive way to get the banks their bailout without the voters knowing how it was done. Corrupt Greek politicians and tax dodging oligarchs were complicit in the deception which pretended to put weak European countries on the road to recovery via extreme austerity measures.

Strauss-Kahn and wife at his NY Trial Strauss-Kahn

The EU charter prohibits financing of government debt. To get around this the EU persuaded the notorious Dominic Strauss-Kahn, who was desperate to save the French banks, to have the IMF make the loans. The beauty for Germany and France was that more than half the loans were guaranteed by the citizens of other poorer countries, many of whom are not in the EU. The other countries all believed they were lending money to the troubled countries. They were unaware the money went directly to the German and French banks. Bailoutistan ultimately became a more than €1 Trillion scam.

James Galbraith James Galbraith

In 2012, James Galbraith arranged for Yanis to teach at the University of Texas LBJ School of Public Affairs in Austin Texas where he taught courses, including one on the European financial crisis. Yanis was able to organize lectures by Syriza’s leaders that he hoped would reassure Washington, should Syriza became the government of Greece. When Syriza came to power in 2015, Jamie joined Yanis in the finance ministry where he worked tirelessly on plans to restructure the EU debt and economy of Greece. Jamie was nearby during most of Yanis’ meetings with troika leaders, continually revising plans for reform and writing presentations.

Economist William Black who exposed the frauds at the heart of the US Savings and Loan scandal and wrote the book The Best Way to Rob a Bank is to Own One, wrote in support of Yanis after a BBC profile labeled Yanis Greece’s Cassandra:

So why does the BBC treat Varoufakis as a sexy leftist and Dijsselbloem (president of the Eurogroup) as the respected spokeperson for the troika even though Dijsselbloem is a fanatic ideologue who has caused massive human misery because of the intersection of his inflexible ideology and economic incompetence? Varoufakis’ views on the self destructive nature of austerity as a response to the Great Recession are mainstream economic views. He certainly is a leftist, but his policy view arise from different ideological traditions most people would find antagonistic (to left wing thinking). That makes him a non ideologue as the term is defined. The troika, by contrast, is led entirely by ideologues. The primary difference is that they are exceptionally bad economists and exceptionally indifferent to the human misery they inflict on the workers of the periphery that they despise and ridicule. The BBC, the New York Times, and the Wall Street Journal will never write a profile of the troika’s leadership that makes any of these points. The BBC profile is another of what I and call revealed biases. Journalists and media organs routinely reveal and betray their biases — biases that they hotly deny but rarely escape.

Jeffrey Sachs jeffrey Sachs

Among Yanis’ strongest supporters was American Jeffrey Sachs who was involved in the attempts to restructure the economies of Eastern Europe after the breakup of the Soviet Union in the 1990s and who came to understand the destruction caused by austerity. Sachs accompanied Yanis at many meetings and worked behind the scenes on developing plans:

Yanis and Christine Laguarde IMF headChristine Yanis“We need adults in the room”

At the end of a busy but arid day punctuated only by Wolfgang Schauble’s (German Finance Minister) statement that Grexit (Greece leaving the EU) was inevitable, Jeff (Sachs) rewarded me with what I took to be a massive compliment. “Having sat in your meetings with Thomasen (European IMF Director), Draghi (ECU president), Schauble, and Regling (head of the ESM), I must tell you that I have never seem anything like this in my decades of experience with meetings between debtor governments and creditors such as the IMF the US government, the World Bank…In every meeting you were positive, bristling with ideas regarding practical solutions. And they kept knocking your ideas down, even though they were good ideas, without proposing a single one of their own. Unbelievable.”

Daniel Ellsberg (Pentagon Strategist, Whistleblower, and economist) emailed Yanis:

Keep in mind that the ruling class can be self-destructively mad, not just pretending:

Yanis and Alexis Yanis Alexis Merkel and Alexis Merkel Alexis

On June 26, after the troika issued an ultimatum, Alexis Tsipras, Greece’s Prime Minister, called a cabinet meeting to announce a referendum on the third bailout to take place in one month. During the wait, the troika closed all Greek banks. The Greek oligarchs, the Greek media, previous political leaders and even Syriza leaders all advocated voting yes to a third bailout. Vanis attended a huge rally for “no” where he was cheered for standing up to the troika. It was one of the happiest moments of his time as finance minister. The Greek people voted 61.3% no to the troika. When Yanis went to get his government’s instructions to proceed with plans for a counter offensive he realized that Alexis was capitulating to troika demands. He commented to Danae that evening: “Tonight we had the curious phenomenon of a government overthrowing its people.” Because Yanis would never sign a third bailout he was replaced as finance minister.

Inside Edge

April 17th, 2017

Black Edge, Inside Information, Dirty Money, and the Quest to bring down the Most Wanted Man on Wall Street,Sheelah Kolhatkar, 2017
We previously looked at high frequency traders and how they get their edge to make massive questionable money on the market using High Frequency Extortion. This book is a look at hedge fund traders who rely on illegal inside information to make massive profits on Wall Street.
Stephen A. Cohen steve cohen
At the center of this story is Steve Cohen and his solely owned hedge fund SAC Capital, a $15 Billion hedge fund of which $10 Billion is Cohen’s own money. It is the story of the FBI, using RICO (organized crime) laws to go after hedge funds, the SEC, and the New York Attorney General’s office.
The US Justice Department was unable or unwilling to bring criminal charges against any senior Wall Street executive for their role in the financial collapse of 2008. Instead they levied “slap on the wrist” fines. There is a widespread believe in government that Billionaires are untouchable.
Raj Rajaratnam Rajatnam
The biggest success in the book is the arrest and conviction of Raj Rajaratnam and the closure of his Galleon Group fund. They found $55 million trade profits from 11 trades involving inside information. By comparison, a single pharmaceutical deal netted SAC Capital more than $250 million in profits, yet Steve Cohen got a small fine, closed his fund for two years and went on trading, presumably relying on inside information he calls Black Edge. Cohen was free to continue to invest his own $10 Billion and in less than a year he recovered the amount of his “slap on the wrist” fine. He is expected to open a new fund to outside investors.
sac money

Two of Cohen’s fund portfolio managers were tried, convicted and sentenced to long jail terms but one of those convictions was overturned on appeal. The overturn greatly increased the government’s difficulty in bringing insider trading cases and the New York Attorney general had to drop a number of pending cases. The government expected one or both of the managers to enter a plea bargain and implicate Cohen but neither did. Maybe Cohen promised some future reward or the fact that SAC Capital paid for the defense explains why neither entered a plea bargain. Mathew Martoma is the only successful criminal conviction of SAC Capital.

One reason for the difficulty to bring a case against Cohen is the way he organized SAC Capital, like a spider web with Cohen the spider at the center. It is well understood by anyone working for Cohen that he expects them to collect “black edge” exclusive inside information but Cohen has never explicitly stated this. The inside information reaches him in the form of simple buy or sell recommendation with a level of confidence index from 1 to 10. The higher the number the more certainty Cohen has that the recommendation is based on illegal inside information. Cohen never sees the information or knows where the information came from, at least in theory. Cohen also has instant feedback on any trade entered into by any of his portfolio managers. He uses these trades to confirm the confidence level numbers and can then enter his own trades based on all this information. In the case of the pharmaceutical deal, an email containing the phase II drug trial results was sent to Cohen before the official announcement but the government was unable to find this email. They also have phone records of calls during the key periods of the big trades but these are all but useless without the actual phone conversations. The FBI got phone tap orders for Cohen but on the wrong house at the key times. Once Cohen was tipped on the Pharmaceutical trial results he was able to sell a $1 billion position in the two Pharmaceutical companies and to take massive short positions in both companies all without alerting anyone else on Wall Street what he was doing. For this level of activity to go unnoticed is really remarkable.
Like the subprime financial meltdown and the lack of government corrective action, so there is little hope that trading on inside information is likely to end soon. In fact marketing inside information is now its own big industry with organizations like Primary Global Research (PGR) matching those having access to inside information with investors willing to buy that information.
Cohen has a rule that you never enter into a trade if Goldman Sachs is on the other end. For any ordinary trader trying to manage his own personal portfolio the presence of illegal “edge” in the markets makes almost any trade too risky to enter. To inside traders the rest of the trade world are suckers waiting to be fleeced.

Macro Economics 101 From Bretton Woods to the Wall Street Minotaur to the Shock of 2008

July 7th, 2016

And the Weak Suffer What they Must? Europe’s Crisis and America’s Economic Future, Yanis Varoufakis, 2016

White and Keynes at Bretton Woods keynes white battle bretton woods

Shortly after D day in 1944, the allies met at Bretton Woods to hammer out a post war global economic order. The American delegation was led by New Deal economist Harry Dexter White:

Bretton Woods offered White an opportunity to project the New Deal onto a global canvas. His brief for the Bretton Woods conference was nothing less than to design from scratch a stable, viable worldwide financial system for the postwar era.

But the New Deal stabilized capitalism in the US by instituting a broad range of political recycling mechanisms; among them the Federal Reserve, the FDIC Federal Deposit Insurance with the power to restructure failed banks, social security, even the military budget.

John Maynard Keynes attended the conference armed with a plan that would stabilize global capitalism for the long run by creating just such political recycling structures on a global scale. But White, who as a student had been heavily influence by Keynes, was charged to push through a very different and flawed system, totally dependent on America maintaining a global trade surplus and recycling that surplus to deficit nations at the will and whim of the American government. Thus was born the system wherein all other currencies would be tied to the dollar at fixed rates of exchange and the dollar would in turn be tied to gold at $35 an ounce.

By the late 1960′s, America’s trade surplus evaporated as Europe, led by Germany, and Japan started exporting more manufactured goods to the US than the US was exporting to them. This could not continue and in 1971 the Nixon administration, led by Paul Volcker, announced the Nixon Shock, dumping the gold standard and cutting all other currencies loose from the dollar.

volcker nixon shock

The moment men like Paul Volcker saw that political surplus recycling was beyond the American economy’s capacity, they brought the whole damned (Bretton Woods) system down- with the 1971 Nixon shock. For they understood the fallacy that Europe refuses to grasp: if you set up a free trade, free capital and single currency system without a political surplus recycling mechanism, you will end up with something like the 1920′s gold standard.

From the moment that Europe was discarded form America’s comforting postwar dollar zone, European elites struggled to re create the defunct dollar zone within Europe. Never having grasped the lessons that the New Dealers learned during the 1930s and 1940s, European officialdom repeated the same mistakes made during the 1920s, creating an ill designed gold standard like currency in the heart of Europe

It is dangerous error to believe that monetary and economic union can precede a political union or that it will act (in the words of the Werner report) “as a leaven for the evolvement of a political union which in the long run it will in any case be unable to do without. Cambridge economist Nicholas Kaldor 1971

France’s Francois Mitterrand and Britain’s Margaret Thatcher believed that the next big economic shock in Europe would force Europe into a political federation with the creation of political institutions capable of recycling surpluses just as the US has done in the 1930′s and 1940′s.

Francois Mitterrand and Margaret Thatcher mitterrand thatcher

Thatcher’s mistake was to assume that Mitterrand’s scheme would succeed. She failed to recognize, as Mitterrand had also failed, that is was not in the European Union’s DNA to carve a federation out of its monetary union’s troubles…Only inefficient, sweeping authoritarianism could emerge from its wooden underbelly.

So, unable to learn from history and unwilling to forget their petty agendas, Europe’s ruling class set out to re-create the gold standard, demonstrating a grandiose failure of perception of what they were doing. Keynes had described the gold standard as a “a dangerous and barbarous relic of a bygone era.” Little did he know that Europe would re-create it in the late 1990′s, thus replicating circumstances ripe for another Great Depression in the 2010′s; and economic crisis that ended up…preventing the very political union that was to have been its antidote.

Lacking a political surplus recycling mechanism, Europe’s monetary union meant that the weakest nations and their frailest citizens had to suffer a sharp contraction the moment Europe’s capitalism went into a spasm in response to financialization’s inescapable seizures. Mitterrand’s original hope (that a future global financial would force upon the euro zone a federal solution) offered any respite from the pitiless reality. By 2010, two years after the type of crisis Mitterrand had in mind, that hope had died out too.

Paul Volcker, now President of the New York Federal Reserve next brilliant move came during the Carter Administration with his little known Warwick speech in which he declared: “A controlled disintegration in the world economy is a legitimate objective for the 1980′s.” Here is what Volcker, about to become Federal Reserve Chairman had in mind:

Volcker’s Controlled Disintegration Paulvolcker warwick Prime Lending Rate

If America cannot recycle its surplus, having slipped into a deficit position back in the mid-1960′s, it must now recycle other people’s surpluses!
The trick for America to gain the power to recycle other countries’ surpluses in the 1980′s, Volcker believed, was to persuade foreign capitalists to voluntarily send their capital to Wall Street…The trick was to hit two usually contradictory targets at once: on the one hand push American interest rates through the roof while on the other, ensuring that Wall Street offered a more lucrative market for investors than its equivalent in London, Frankfurt, Tokyo, Paris, or anywhere else.

What do bankers do when such a tsunami of capital comes their way daily? When billions of dollars, net, run through their fingers every morning of each week? They find ways to make it breed on their behalf. Throughout the 1980′s the 1990′s and all the way to 2008, Wall Street took in the daily influx of foreign capital and, on its back, built mountains of derivative trades which, in time, acquired the property of private money.
Financialization, as we now call this process, was the critical byproduct of maintaining and enhancing US dominance on the back of increasing trade imbalances and in the interest of financing America’s ever-expanding twin deficits. It began as froth on top of the stream of profits flowing from Germany and Japan to Wall Street, once Volcker’s “controlled disintegration” of the world economy was taking effect. But soon the froth took over, usurping the underlying stream of actual values, turning finance into the driver and industry into the servant.

Reagan’s Massive Government Spending Program star wars

But things began to go awry after 1986 when American authorities decided to wind back their vacuum cleaner, limiting the rate at which US deficits grew. The recession in the early 1980′s, caused by Volcker’s sky high interest rates and Ronald Reagan’s early budget cuts, frightened the Reagan administration into action. Using the US military budget as its main instrument, Washington effected the most Keynesian macroeconomic expansion in America’s history… The president,who had won the 1980 election by preaching against public spending and in favor of shrinking the state, won reelection in 1984…on the basis of a massive public spending spree.

Undermining New Deal Regulations rubin summers

Enter Bill Clinton in 1993:

The Clinton administration, and especially Robert Rubin and Larry Summers in the National Economic Council and the US Treasury Department respectively, were busily working toward maintaining the Minotaur’s feeding frenzy. America’s deficits kept global capitalism effervescent, creating the illusion of a Great Moderation when underneath the surface, markets were increasingly addicted to America’s growing imbalances. If the American Minotaur’s frantic consumption of other people’s products and money were to end, markets take a hit, banks would go under, and the global economy might keel over. Precisely as it did in 2008.

Global Minotaur global minotaurwall street bull

As we have seen, the birth of America’s global Minotaur needed finance to be liberated so that the beast could do its work (supplying German, Japanese, Swedish, and later Chinese factories with sufficient demand) while also being nourished (by the profit of the German, Japanese, Swedish, and later Chinese factory owners), who sent them streaming into Wall Street.

The banker’s emancipation from their New Deal fetters was both a symptom and prerequisite for the new phase of American dominance. Who else but the bankers could facilitate the vast capital transfers, the perpetual tsunami of capital necessary to satiate American deficits that had to keep growing in order to maintain the illusion of what Ben Bernanke, one of Volcker’s successors, named the Great Moderation? Fair-weather recycling writ large, had taken over globally from the planned, political recycling that was the essence of the Bretton Woods system. Though this was never going to end well, it had the capacity to put the global economy on a spending spree that lasted three decades before crashing down in 2008.

During the same period, from the 1990s onward, Europe’s banks were copying the practices of the Anglo-sphere’s all-singing all-dancing financial sector, without having the safety net of a Federal Reserve, or a Bank of England, or even a Bank of Japan to catch them when the inevitable fall from grace occurred. The combination of the euro zone’s flimsy monetary architecture and the imperatives of Anglo-Saxon financialization, which infect the Parisian and Frankfurt banks under the noses of Brussels and Frankfurt, produced a reliance on money markets that Europe’s monetary union could not withstand.

Of American Officials views, Varoufakis notes:

They know America no longer has the power to stabilize the world economy by itself. They understand that Europe’s policies are detrimental to America’s future. And they are frustrated that their European interlocutors are not only ignorant of simple macroeconomic laws, but, curiously that they are not even ashamed of their ignorance.

Ponzi Austerity austerity

The European monetary union’s reaction to the 2008 crisis was to create the mother of all Ponzi schemes Ponzi austerity:

These toxic transfers (of bank debt into taxpayer debt), effected in the name of European solidarity, led to a death dance of insolvent banks and bankrupt states, and couples that were sequentially marched off the cliff of competitive austerity. Deflation, ultra-low investment, social fragmentation and rising poverty ensured that large sections of proud European nations, most the weakest of their citizenry, were dragged into the contemporary equivalent of the Victorian poorhouse.

Allen Dulles, Pioneer to the dark side and faithful servant to the Ruling Class

February 27th, 2016

The Devil’s Chessboard, Allen Dulles, the CIA, and the Rise of America’s Secret Government, David Talbot, 2015

This book is a reminder that our government’s journey to the dark side did not begin with Dick Cheney, Donald Rumsfeld, and W, or even with Henry Kissinger and Nixon. No its real roots go back to the OSS in WWII and to one man in particular, Allen Dulles.

kennedy duless

Any book dealing with Allen Dulles must also include his older brother John Foster Dulles. We will take Talbot’s nomenclature and use “Dulles” when referring to Allen, and “Foster” when referring to John Foster. There was also a brilliant younger sister Eleanor Dulles who was a lifelong diplomat and ambassador to Bonn Germany under Eisenhower. The Dulles clan were the children of a Presbyterian minister and Dulles sometimes referred to himself as the Calvinist.

Eleanor recalled a childhood incident summering on lake Ontario when Dulles was ten, Eleanor eight, and Nataline five. Nataline was playing with a rock when she fell into the lake. Eleanor screamed but Dulles, a strong swimmer, stood passively on the dock observing the struggling sister. He never moved but the mother, hearing Eleanor, ran from the house to rescue Nataline.

oss 55 and Carl Jung Agent 488 carl-jung

Dulles joined the OSS in WWII and assigned himself to serve in Bern Switzerland. His own wife Clover called Dulles the “shark” and she and Dulles’ long time mistress Mary Bancroft (they became close friends) sought counseling from Carl Jung in Switzerland. Jung observed in Dulles the disturbing mix of magnetism and ruthlessness common to dictators but Dulles had an impenetrable blankness making him hard to read. Other people, for Dulles, were either useful or nonexistent. Dulles was not capable of experiencing love. Only power was real to him. Dulles met Jung in 1943 and gave Jung an OSS spy number, Agent 488.

When Dulles’s brilliant only son Allen Jr., an Oxford graduate, failed to win affection or even attention from his father, he volunteered for the Korean War and was seriously brain damaged. Dulles subjected his son to CIA brain control researchers first with the notorious Dr. Wolff at Cornell and later with the equally notorious McGill University psychiatric facility. Clover finally intervened, moving Allen Jr. to a private institution in Switzerland where he remained until Dulles death. Allen Jr. was terrified of his father. Was Dulles a sociopath or a psychopath? Talbot never uses either term.

The Dulles brothers both worked at the Sullivan and Cromwell Wall Street Law Firm where Foster was the top executive. After WWI the firm developed a deep understanding of Swiss banking and played a central role in arranging German reparation contracts for leading German industrial firms like the cartels IG Farbin and Krupp steel. The brothers knew the key players in both Switzerland and Germany. It was no accident that Dulles positioned himself in Switzerland during WWII. For their entire lives, the Dulles brothers put their Sullivan and Cromwell clients and other American elite families like the Rockefellers, the Fords, the Carnegies, the Morgans ahead of the interests of their government. They remained throughout their lives faithful and trustworthy servants and stewards to those C Wright Mills referred to in his 1956 masterpiece as The Power Elite. Their class were almost exclusively ivy league educated WASPS belonging to the proper clubs.

C Wright Mills c wright mills

The men of the highest circles are not representative men; their high position is not a result of moral virtue; their fabulous success is not firmly connected with meritorious ability…They are not men shaped by nationally responsible parties that debate openly and clearly the issues this nation now so unintelligently confronts. They are not men held in responsible check by a plurality of volunteer associations which connect debating publics with the pinnacles of decision. Commanders of power unequaled in human history, they have succeeded within the American system of organized irresponsibility.

from The Power Elite

FDR was considered a traitor to their class because of his “radical New Deal” policies and they worked actively to ignore or undermine his policies. When FDR announced that only unconditional surrender would end WWII, Dulles acted treasonously to negotiate a truce with the fascists in Italy and attempted the same with the Nazis in Germany. He felt only existing right wing leaders in Italy and Germany would be able to withstand the encroachment of hated communism in both countries.

After FDR’s death in 1945, the Dulles brothers and their power elite set out to purge the government of all New Deal supporters. One of those recruited by Dulles for this purpose was Richard Nixon. Nixon was a Californian with Quaker roots and educated at Whittier College and Duke Law School. He applied to top law firms in New York in 1937 including Sullivan and Cromwell and received no offers (wrong class) an experience that left him bitter for the rest of his life. In 1945, naval officer Nixon was sorting through Nazi papers in an old torpedo factory in Alexandria when he found documents showing how the Dulles brothers laundered Nazi funds during the war. Nixon did what any patriotic military officer would do, he blackmailed Dulles. In return for his silence about the documents, Dulles would sponsor Nixon in the 1946 congressional race run against Jerry Voorhis, leader the the progressive caucus and one the the most powerful New Dealers in Congress. Dulles corporate friends supported Nixon lavishly and he won the election taking significant cash and a new car to Washington.

Alger Hiss hearings alger hiss

Nixon then went after New Dealer and FDR high ranking State Dept official Alger Hiss. Foster had just appointed Hiss to head the Carnegie endowment but Hiss had embarrassed Nixon in front of the HUAC and Nixon wanted revenge. Nixon discovered incriminating documents hidden in a pumpkin and Hiss career was finished. President Nixon later bragged to his staff how he had forged the documents.

truman dewey

The Dulles brothers expected to take over the State Department and CIA with the election of Dewey in 1948. When Truman won a surprising victory, Dulles had to look elsewhere. In 1949 Dulles founded an obscure intelligence outpost in the State Department meaninglessly named the Office of Policy Coordination. Dulles maneuvered Frank Wisner into position as OPC Chief and by 1952 OPC was operating 47 overseas stations and employed 3000 people. It specialized in the black arts of espionage sabotage, subversion, and assassination. Money for its operations came from Nazi loot that Dulles had access to. Many of its recruits were ex-Nazis. The OPC operated with no oversight or supervision. Few even knew it existed.

dulles eisenhower

In 1952 Foster went to London to convince Eisenhower, then head of NATO, to run for President. Foster simply bored Eisenhower and Churchill wickedly quipped, Dull, Duller, Dulles. Nevertheless Eisenhower ran and won and the Dulles era was launched in 1953. Dulles thought the HUAC was useful in the effort to purge New Deal government employee and he counted on Nixon to hold McCarthy in check. But no one could control McCarthy and he immediately attacked the Eisenhower administration starting with Foster’s State Department. Foster also felt cleaning New Dealers from his State Department was important and cooperated with the HUAC, even initiating purges of his own. State Department morale dropped to an all time low as countless careers were crushed. The US Information Service (USIS) was almost totally decimated and its libraries around the globe badly censored of material. Even the music of Aaron Copland (Appalachian Spring, Billie the Kid, etc.) was banned. When McCarthy turned to the tougher Dulles CIA the story was a little different. Dulles initially ignored or misplaced the HUAC subpoenas and when McCarthy refused to take the hint, Dulles went to McCarthy’s capital hill office to confront McCarthy with the extensive intimate dossier the CIA had assembled on McCarthy’s homosexual activities. McCarthy backed off the CIA and his ultimate downfall and Senate censure followed. McCarthy drank himself to death soon after.

The Dulles brothers sabotaged the government’s antitrust case against big oil’s Seven Sisters by having the case moved to Foster’s state department where it languished. Dulles organized the overthrow of the democratically elected Mossadegh’s government in Iran because they nationalized British oil production and cancelled a $650 million contract with Sullivan and Cromwell client Overseas Consultants. Eisenhower resisted efforts to overthrow the Iran government until the brothers convinced him that Iran’s oil was at risk of falling into communist hands. This new tactic worked magic with administrations for decades. Teddy’s grandson Kermit Roosevelt headed the coup efforts for the CIA and when the Shah ran away to Rome, Dulles went personally to escort him back to Iran and put him back on his Peacock throne. In 1954, CIAs Howard Hunt (of Bay of Pigs and Watergate fame) was sent to Guatemala to overthrow the legitimate Arbenz government because he had promised to redistribute unused United Fruit (another Sullivan and Cromwell client) lands to the people of Guatemala. United Fruit would have been compensated under the plan. Again Eisenhower bought into the fallacious threat of communist takeover argument. Then in 1956, CIA contractors picked up Columbia professor Jesus de Galindez who had written a 750 page dissertation critical of Dominican Republic dictator Trujillo, from the streets of Manhatten and flew him to the Dominican Republic where he was handed over to Trujillo who tortured and murdered the scholar. This is the first documented case of CIA Extraordinary Rendition.

This was the era of two revealing movies The Manchurian Candidate about mind control, and Dr. Strangelove.

CIA no match for Castro castro bay of pigs

After 8 years of continuous black ops, Dulles planned the ill fated Bay of Pigs invasion to overthrow Castro in Cuba that internal CIA assessments knew was doomed to failure. The CIA could never have successfully conducted an operation of this scale and against combat hardened well armed troops. Eisenhower amazingly approved the shoddy third rate plan scheduled to take place shortly after the inauguration of the new President JFK. Talbot says it was as if Eisenhower intentionally handed Kennedy a live grenade with the pin pulled. JFK, against the best advise of his team, kept Dulles and Hoover in their jobs upon assuming office but after the Bay of Pigs, for which Kennedy had to take full responsibility, Dulles career at the CIA was finished. Dulles, to the end of his life acted and was received by top CIA officials as if he still ran the agency. The CIA ran a black ops site near Williamsburg nicknamed the farm where Dulles kept an office til near his death in 1969.

Eisenhower had changed while in office. He no longer kept contact with his long time military friends but spent his spare time in the company of the power elite, most famously at Augusta National Golf Club. He embraced coups, assassinations, and other black ops as an inexpensive alternative to costly military action and also embraced massive nuclear retaliation as a reasonable response to soviet aggression. Kennedy promised a different future in this 1957 speech.

The most powerful single force in the world today is neither communism nor capitalism, neither the H-bomb nor the guided missile–it is man’s eternal desire to be free and independent. The great enemy of that tremendous force of freedom is called, for want of a more precise term, imperialism–and today that means Soviet imperisam and, whether we like it or not, and though they are not to be equated, Western imperialism…If we fail to meet the challenge of either Soviet or Western imperialism, then no amount of foreign aid, no aggrandizement of armaments, no new pacts or doctrines, or high-level conferences can prevent further setbacks to our course and to our security.

Congo President Patrice Lumumba lumumba lumumba stamp

Kennedy was a supporter of Patrice Lumumba, Congo’s first democratically elected leader following Belgium’s brutal colonial rule. In an act of incredible insubordination, Dulles went ahead with a CIA plan to kidnap Lumumba and hand him over to his enemies. Dulles was again acting on the wishes of Sullivan and Cromwell client firms with interests in the Congo. Lumumba was horribly tortured and killed but it was more than a month before Kennedy was told of his death.

Warren Commission Controlled by Dulles – Report Widely Discredited warren_report

Almost a third of this more than 600 page work is given to the assassination of the Kennedy brothers. This reader does not follow the research or theories of these events so is uncomfortable commenting on Talbot’s discussion. Talbot clearly believes JFK’s murder was a CIA, FBI, Secret Service conspiracy and a coup d’etat. He thinks RFK, an avid follower of all the research and writing on the JFK assassination did not support reopening the investigation because of the power of those responsible. RFK thought only if he were to occupy the white house would he be able to bring those responsible to justice. Talbot discusses the Jim Garrison New Orleans research which was the subject of Oliver Stone’s movie JFK . Federal agencies in Washington refused to provide documents to Garrison and others who were interested in further investigation like RFK were afraid to join Garrison’s efforts.

RFK’s assassination was eerily similar to that of his brother – problems with facts and evidence, fouled up investigations, and cover-ups. According to Talbot’s research both assassins had to be CIA patsies neither capable of executing anyone. Sirhan Sirhan may have even been drugged and pushed into place because he was totally incoherent at the time and later had no recall of events. During RFK’s assassination, fifteen shots were fired and the fatal shot came from the wrong direction, etc., etc. Dulles very cynically kept up a friendly exchange of letters with Teddy Kennedy after the RFK assassination, no doubt to assure himself that Teddy would not turn into the next big threat to investigate the assassinations.

De Gaulle at JFK’s funeral JFK funeral 1963

Talbot found an interesting quote published in France only in 2002 from Charles de Gaulle, who survived an attempted assassination in 1961 as dramatized in the movie Day of the Jackal.

America is in danger of upheavals. But you’ll see. All of them together will observe the law of silence. They will close ranks. They’ll do everything to stifle any scandal. They will throw Noah’s cloak over these shameful deeds. In order to not lose face in front of the whole world. In order not risk unleashing riots in the United States. In order to preserve the union and to avoid a new civil war. In order not to ask themselves questions. They don’t want to know. They don’t want to find out. They won’t allow themselves to find out.

The CIA’s Gray Ghost angelton
A minor character in the book is OSS spy James Jesus Angleton who met Dulles in Rome in WWII and remained Dulles life long acolyte. On his deathbed in 1987:

Fundamentally, the founding fathers of U.S. intelligence were liars. The better you lied and more you betrayed, the more likely you were to be promoted…Outside their duplicity, the only thing they had in common was a desire for absolute power. I did things that, in looking back on my life, I regret. But I was a part of it and loved being in it…Dulles, Helms, Wisner–these men were the “grand masters”. If you were in a room with them, you were in a room full of people you had to believe would deservedly end up in hell. I guess I will see them soon.

Kissinger, Circular man

November 20th, 2015

Kissinger’s Shadow: The Long Reach of America’s Most Controversial Statesman, Greg Grandin, 2015


Grandin spends some time examining the influence of Oswald Spengler on Kissinger’s metaphysical beliefs:

Spengler wrote as if decline was inevitable, as if the cycle he described – in which each civilization experiences its spring, summer, autumn, winter – were as unavoidable as the spinning of the earth. Once societies pass their great creative stage and the logicians, rationalists, and bureaucrats arrive on the scene, there is no turning back. Having lost a sense of purpose, civilization lurch outward to find meaning. They get caught up in a series of disastrous wars, propelled forward to doom by history’s cosmic beat, power for power’s sake, blood for blood’s. Imperialism is the inevitable product, Kissinger wrote summing up The Decline of the West‘s argument, an outward thrust to hide the inner void. Kissinger acceped Spengler’s critique of past civilizations but rejects his determinism.

The lesson of the Korean War for Kissinger was that the threat of nuclear annihilation had rendered America powerless. Kissinger believed that Moscow had to be convinced that a major war with the United States which he called the only real deterring threat was a significant possibility. To make the threat credible Kissinger developed his mad man president notion which he deployed for both Nixon and Ford to demonstrate (with Cambodia as the victim) that the president was just crazy enough to launch such a major war. Reagan followed this example by invading tiny Granada after assuming office to establish his credentials as a legitimate mad man.

In order to “test” power – that is, in order to create one’s consciousness of power – one needed to be willing to act. And the best way to produce that willingness was to act..”inaction” has to be avoided so as to show that action is possible. Only action could overcome the systemic “incentive for inaction”. Only action could overcome the paralyzing fear (that is, nuclear escalation) that might result from such “action”. Only through “action” – including small wars in marginal areas like Vietnam – could America become vital again, could it produce the awareness by which it understands its power, breaks the impasse caused by an over reliance on nuclear technology, instills cohesion among allies, and reminds an increasingly ossified foreign policy bureaucracy of the purpose of American power.

“Power” is history’s starting and ending point, history’s “manifestation” and its “exclusive objective”. He had built his own perpetual motion machine; the purpose of American power was to create an awareness of American purpose. And since Kissinger held to an extremely plastic notion of reality, other concepts he was associated with, such as “interests”, were also pulled into the whirlpool of his reasoning; we can’t defend our interests until we know what our interests are and we can’t know our interests are until we defend them.

I know, Let’s Secretly Bomb Cambodia!
kissinger nixon

Into this crazy circular metaphysics, American foreign policy was sucked starting in 1969. With Obama’s endless war in more than a hundred countries we see the evidence of the ever growing whirlpool. Interestingly Kissinger uses Obama’s drone strikes as justification for his 1969-1973 secret bombing of Cambodia which was the start of this whirlpool and is the central theme of this book.

Vietnam, he said in 2010, was America’s first experience with limits in foreign policy, and it was something painful to accept. This is a disingenuous interpretation… Rather, the critics that most rankled Kissinger were those – protesters, Congress and former Harvard colleagues like Thomas Schelling – who told him that there were limits to what he could do to Cambodia, Laos, and Vietnam…”I don’t see how it is possible to conduct foreign policy when there’s a systematic attempt to destroy both your threats and your incentives”.

Kissinger didn’t use his time in office to “instruct” citizens in political realism, as he had earlier define the responsibilities of statesmen. Rather, he helped adapt the imperial presidency to new times, based on an increasingly mobilized and polarized citizenry, more spectacular displays of power, more secrecy, and ever more widening justifications for ever more war.

Kissinger and Mao with much admired Zhou Enlai kissinger mao chou

With the autocratic Mao (Tse-tung) he could fantasize about what it would be like to conduct foreign policy and not be tormented by the press and Congress.

Mao and Kissinger shared a mutual appreciation of German metaphysics. Mao: Do you pay attention or not to one of the subjects of Hegel’s philosophy, that is the unity of opposites? Kissinger: Very much. I was much influenced by Hegel in my philosophical thinking…Mao: If it were not for Hegel and Feuerbach, there would not be Marxism,

kissinger bomb cambodia bomb map

But, as Nixon and Kissinger themselves put it, they used foreign policy to “break the back” of domestic opponents and “destroy the confidence of the American people in the American establishment. They had mixed results with the former but succeeded stunningly, with the latter. By the end of Kissinger’s tenure, all of the institutional pillars of society that previous administrations could rely on to uphold government legitimacy – the press, universities, the movie and music industries, churches, courts, and Congress – seemed to be pushing against it, creating that entrenched adversary culture that so worried conservative.

From the New Yorker in 1973:

There was the Kissinger who “established relations with China, improved our relations with Russia, and successfully completed the first phase of SALT – and for these achievements, most Americans are grateful.”…But then there was the Kissinger, who with Nixon, “planned the undisclosed bombing of Cambodia…initiated the unauthorized wiretapping of members of Kissinger’s staff and of newsmen in 1969…planned the invasion of Cambodia in 1970…planned the use of American air power to support the invasion of Laos in 1971…planned the mining and blockading of North Vietnamese harbors…planned the ‘Christmas bombing’ of North Vietnam – all this done in secrecy and without Congressional consent. While the President and the men of Watergate were, it now appears, undermining our democratic system of government in domestic affairs, the President and Henry Kissinger were undermining the system in foreign affairs.

In the years following the end of the Vietnam War, Kissinger, in one region after another, executed policies that helped doom his own grand strategy. Then, once he was out of office, he threw in with America’s new militarists, who were intent on tearing down Détente…By 1980, he was with them, sanctioning their jump-starting of the Cold War and their drive to retake the Third World…In a way, Kissinger did to the larger Third World what he did to Cambodia: he institutionalized a self-fulfilling logic of intervention.

What is certain is that individually, each of Kissinger’s Middle East initiatives – banking on deposits, inflating the shah, providing massive amounts of aid to security forces that tortured and terrorized citizens, pumping up the US defense industry with recycled petrodollars, which in turn spurred a Middle East arms race financed by high gas prices, emboldened Pakistan’s intelligence service, nurturing embryonic Islamic fundamentalism, playing Iran and the Kurds off Iraq, and then Iraq and Iran off the Kurds and committing Washington to defending Israel’s occupation of Arab lands – has been disastrous in the long run.

On a personal note: this blogger had a college friend who was a conscientious objector, a varsity wrestler, and a violinist with the University orchestra. He was assigned to teach English in Laos as his alternate service. In 1969-1970, he witnessed the B52′s and bombings as he sat on his porch playing his violin. When things got too dangerous, he left Laos, stopping briefly to visit us in Honolulu where we first learned of the secret bombing. He was later convicted of draft avoidance and sent to prison in Walla Walla.

bourgeois rebellion

August 20th, 2015

Millennium People, J.C. Ballard, 2003

J C Ballard ballard

In this, the last novel of Ballard, a middle class enclave in London is lead by a psychopathic pediatrician into full scale rebellion. The pediatrician leader of the rebellion, Dr. Gould explains:

Cheap holidays, overpriced housing, educations that no longer buy security. Anyone earning less than £300,000 a year scarcely counts. You’re just a prole in a three-button suit…And we don’t like ourselves for it. People don’t like themselves today. We’re a rentier class left over from the last century. We tolerate everything, but we know that liberal values are designed to make us passive. We think we believe in God but we’re terrified by the mysteries of life and death. We’re deeply self-centered but can’t cope with the idea of our finite selves. We believe in progress and the power of reason, but are haunted by the darker sides of human nature. We’re obsessed with sex, but fear the sexual imagination and have to be protected by huge taboos. We believe in equality but hate the underclasses. We fear our bodies and, above all, we fear death. We’re an accident of nature, but we think we’re at the center of the universe. We’re a few steps from oblivion, but we hope we’re somehow immortal.

The main character, David is a psychologist obsessed with finding the people responsible for a bomb at Heathrow that killed his ex wife. He is led to Chelsea Marina where its residence are up in arms over parking meters installed in front of their houses, increased management fees, and other life threatening issues. He meets and starts sleeping with Kay the charismatic leader of the rebellion, meets Vera the government trained bomb maker, and meets Gould whose idea it is that random acts of vandalism and violence will do most to shake up the power establishment. Gould, the psychopath leads the rebellion into more and more extreme demonstrations while privately engaging in acts of deadly violence.

Interesting in showing that the bourgeois class that is expected to be the stable anchor of society is capable to being the most volatile, capable of leading the revolution. And this was written years before the housing bubble burst, the financial system collapsed, and the political system went into rigor mortis.

Fung-Lin posted Ballard’s death and a remembrance.

500 Years of Global Capitalism in Latin America

August 19th, 2015

Open Veins of Latin America, Eduardo Galeano, 1973, 1997


This is Galeano’s widely read “non specialist” history of Latin American imperial capitalist exploitation.

The book outlines the more than 500 years of exploitation and theft of irreplaceable resources from Latin America by handfuls of global capitalists and their captive developed European and US governments. Galeano describes a continuous repeating pattern of mono-cultures (if you include mineral and carbon deposits), the local and temporary enrichment and empowerment of a few parasitic actors who soon disappear from the scene, and the long term enrichment of global foreign capitalists who successfully steal the wealth generated by the exploitation. The mono-cultures include gold, silver, diamonds, sugar, cacau (chocolate), coffee, rubber, bananas, lumber, oil and gas and numerous other mineral including iron, copper, nickel, manganese, and now rare earths needed for modern electronics.

Spain and Portugal were granted exclusive rights to the Americas by the Pope after the Columbus (who thought he had arrived in Japan) voyage of 1492. The early focus on gold and silver benefited Spain and Portugal only to the extent that the wealth was used to create parasitic aristocracies in both countries and financed the vast expansion of catholic religious orders who parasitically used their power and influence to acquire vast underutilized landholdings in Latin America and the subjugation of the local populations. The Spanish monarchy used the proceeds indirectly by borrowing from bankers at outrageous terms to finance a long series of religious wars against the Moors and protestants. The Spanish armada and other foolish regressions were financed in this way with the silver going to the bankers. Virtually none of the gold and silver proceeds remained in the imperial counties and less was used to promote industrialization and modernization. These benefits went elsewhere in Europe, primarily to England, Holland, and Germany. Galeano argues that the European industrial revolution would not have happened at all were it not for the exploitation of Latin America, Africa, India, and elsewhere. Modern industrial capitalism was built on the foundation of the theft of foreign natural resources and on the slave labor needed to extract and export it.

Lest you think this is ancient history, the stories of rubber, bananas, and oil happened in the 20th Century. Oil extracted from Venezuela alone exceeds the total value of all the gold and silver extracted from all of Latin America and continues today.

Bolivar Dreamt of a free, unified Latin America bolivar

Spain and Portugal were overthrown in Latin America in the early 19th Century but England and the US were already dominant economic and capitalist influences in the region. They and other local forces assured the Balkanization of Latin America into numerous smaller entities where governments could be influenced or overthrown more easily. Galeano talks of the time when English and American ambassadors had more power in Latin America than the local president – military dictator. In fact, often the president/dictator was hand picked by the foreign capitalist powers. And if the local leader didn’t follow orders, he could easily be deposed until a compliant occupier of office could be installed. And all this trouble to assure the continued exploitation – theft of the natural resources important at the time. For more than 500 years this pattern assured that Latin America would never develop a sustaining economy, industrialize, or improve the lives of the exploited.

An essential, perhaps most important element of the resource exploitation was cheap labor. Latin America imported far more African slave labor than North America. This labor was supplemented by massive use of indentured servitude where local and indigenous populations were forced into labor as the only means of survival. A byproduct of mono-culture is that all available arable land is dedicated to the growth of the crop of the moment. The concentration of land ownership by the church and few landowners meant that all lands not growing the crop of the moment was left idle. Food crops were simply not grown and local populations were left with a choice between indentured servitude and starvation. Land was simply not made available for growing food and the food needed to sustain the capitalist mono-culture had to be imported from abroad at high prices. These practices assured a steady stream of cheap labor for hundreds of years.

Mono-culture for export exhibits all the problems of capitalism with bubbles and busts. During the good times, the handful of controlling owners amass huge fortunes which they used to build mansions and impressive towns with opera houses and numerous massive churches. All products consumed in these towns were imported including food, clothing, furniture, etc. When the bubble burst due to exhaustion of the resource or due to a plummeting in price of the commodity these towns turned overnight into ghost towns. These towns today are maintained as tourist attractions and exist throughout Latin America as reminders of capitalist excess and instability. The wealth generated by the enterprises were simply wasted.

Mono culture is one of the fastest ways to ruin the productive land. The richest land is always used for growth of the product and the same product is grown year after year. Erosion and exhaustion of the land is the inevitable result of mono-culture. Latin America now stands last in the world in terms of the use of modern agricultural science and technology. Centuries of misuse and ignorance leaves Latin America with vastly degraded land resources. This on top of export of extractive industry leaves Latin America in bad condition.

What explains the very different experiences of the North American colonies and Latin America? Galeano writes:

The Northern colonies sent no gold, silver, or sugar to England, while their consumption needs produced an excess of imports which had somehow to be checked. Trade across the ocean was light; hence development of local manufactures was indispensable for survival. England paid such scant attention to these colonies in the eighteenth century that they were able to introduce the latest metropolitan techniques into their factories, turning restrictive colonial pacts into scraps of paper. This was far from true of the Latin American colonies, which delivered their air, water, and salt to ascendant European capitalism and, in return, received a largess of the finest and costliest luxury goods to pamper their ruling classes. The only expanding activities in Latin America were those oriented toward export, and so it continued in succeeding centuries: the economic and political interests of the mining and landlord bourgeoisie never coincided with the need for internal economic development, and businessmen were linked less with the New World than with foreign markets for the metals and foodstuffs they wanted to sell and with foreign sources of the manufactured articles they wanted to buy.

The sole exception to this bleak Latin American picture was Paraguay that successfully developed its own manufacture and technical workforce able to sustain it. Paraguay was such a threat to European colonial capitalism that three English banks, Bank of London, Baring Brothers, and the Rothschild bank financed a war for Brazil, Argentina, and Uruguay. These loans at extravagant interest rates were used to fund a five year war against Paraguay that ended at the same time as the American Civil War. Large portions of Paraguay were given to Argentina and Brazil and Paraguay never recovered economically. Neither did Brazil, Uruguay, or Argentina ever recover from the crippling cost of these English loans.

peron vargas cardenas

Mexico, Brazil, and Argentina emerged as the dominant Latin countries after the destruction of Paraguay. For a brief moment each country had a nationalist and broadly popular government; Lazaro Cardenas in Mexico from 1934-1940, Getullo Vargas in Brazil from 1930-1945 and 1951-1954, and Juan Domingo Peron in Argentina from 1946-1955. Cardenas nationalized oil production and instituted the most far reaching agrarian reform in Latin American history. He retired because of Presidential term limits. The manufacturing bourgeoisie of Brazil closed ranks on Vargas and he killed himself in 1945. Peron didn’t go far enough in his efforts to nationalize industry and was swept aside by the rural and manufacturing elites.

The US experience was very instructive. The northern states used protectionist policies to protect its infant industrial development while the southern states used slave labor and free trade policies to prosper. The south exported 80% of its cotton production and never attempted to develop its own mills. The sharp contrast led to the Civil War and Galeano says “The Twentieth Century won this Nineteenth Century war.” By the end of Nineteenth Century the US was the world’s leading industrial power. The center of the capitalist world was starting to move. After WWII the US adopted Britain’s policies of free trade and free competition for everyone else. Galeano says: “the disease was never confused with the remedy.” At the time of WWI US private investment was less than a fifth of total investment in Latin America. By 1970 the private investment of the US had reached three-quarters of total Latin investment. The IMF, World Bank, and giant vertically integrated US oil and manufacturing firms pioneered Satellite capitalism where big US firms own and operate plants in Latin America using low cost local labor. They devised schemes to invest as little as 12% of the needed cost of investment with local partners and long term debt making up the rest of the development cost. Only 11 cents out of every exported product dollar remains in the host country and the majority of that is used to service the debt.

Slave ships no longer ply the ocean. Today the slavers operate from the ministries of labor. African wages, European prices. What are the Latin American coups d’etat but successive episodes in a war of pillage? The dictators hardly grasp their scepters before they invite foreign concerns to exploit the local, cheap, and abundant labor force, the unlimited credit, the tax exemptions, and the natural resources that await them on a silver tray.

In these lands, we are not experiencing the primitive infancy of capitalism but its vicious senility. Underdevelopment isn’t a stage of development but its consequence. Latin America’s underdevelopment arises from external development, and continues to feed it. A system made impotent by its function of international servitude, and moribund since birth, has feet of clay.

This is an excellent companion volume to Samir Amin’s Capitalism in the Age of Globalization focusing on the experience of Latin America.

Fung-Lin blogged at the time of Eduardo Galeano’s death.

A Cry for a new Socialiam

July 23rd, 2015

Capitalism in the Age of Globalization, Samir Amin, 2014 (originally published in 1997)


Samir Amin is a French-Egyptian Marxian economist. He lives in Dakar, Senegal. Amin’s primary focus in this work is this challenge:

The first (capitalism) wishes to fix evolution, more or less submitting it to the perspective of the unilateral action of capital. Socialism on the other hand permits one to see why this capitalist globalization remains truncated, generating, reproducing, and deepening global polarization step by step. The historical limit of capitalism is found exactly here: the polarized world that it creates is and will be more and more inhuman and explosive. Challenged by this enormity, socialism has a duty to propose an alternative vision of globalization, the means of achieving it in the true sense of the word and giving it a human and truly universalistic character. This is, in my opinion, the challenge.

socialism capitalism

Rejection of capitalism by turning to ethnicity and religious fundamentalism actually have become integrated into this brutal globalization and are made use of by it. They cannot be the answer to apocalyptic capitalism.

Capitalism today is sustained by the existence of five monopolies enumerated by Amin:
1. Technological Monopoly. This monopoly is sustained by huge state expenditures especially through military spending.
2. Financial Control of worldwide financial markets. With deregulation and the liberalization of rules governing finance, finance has become capital’s most global component. Past empires like the British maintained financial control through trade surpluses. The US attempts to maintain its dominance and the dollar as the global currency despite massive trade deficits. As a result, today’s financial system is extraordinarily fragile.
3. Monopolistic access to the planet’s natural resources. The reckless environmental dangers of this monopolistic exploitation are dangerous and increasingly obvious.
4. Media and Communications monopolies. These lead to a uniformity of culture and provide effective means for political exploitation. These monopolies are a primary source of the erosion of democratic practices.
5. Monopolies over weapons of mass destruction. The US monopoly of 1945 was held in check through the cold war but today the US again has an unacceptable monopoly that cannot be held in check through international democratic controls.

APTOPIX Bangladesh Building Collapse
Bangladesh Factory Collapse

Amin’s central focus is the evolving social contract between Capital and Labor. The early 20th Century saw the spread of Fordism by which Amin not only refers to mass industrial production but to the rise of labor organization and negotiated social contracts between capital and labor. The name is perhaps unfortunate given Henry Ford’s antipathy toward union organizing. By the end of WWII and up til about 1970, organized labor proved able to hold their own in upholding dignified social contracts with capital. Today, with capital able to physically relocate for tax and labor advantage, the social contracts enabling workers to enjoy a decent middle class living have evaporated to be replaced by a capital induced permanent state of unemployment or “surplus labor” as capital economists prefer to refer to it. Global capital uses subcontracting at the periphery to limit liability (from collapsing factories, indentured labor, environmental damage, etc.). Amin is not a numbers guy (in sharp contrast with French economist Piketty) but he does point out that modern finance is able to move capital around the globe at about 30 times the volume of trade. This has to exaggerate short term opportunism and instability as capital lurches from crisis to crisis.

Amin prefers to refer to the global economy as having a center and a periphery. This replaces the nomenclature of first, second, third, and forth worlds. As the global economy moves away from its center, the level of surplus labor increases until virtually the entire population is included in this category. This state of economic affairs makes modern capitalism inherently unstable lurching from crisis to crisis. Modern capital managers are trained in crisis management and little else. Capital has no long term objectives, vision, or dreams. It blindly lurches along putting out fires as best it can.


Amin equally decries the damage capital is doing to our environment seemingly without constraint or cost. The environmental damage, like “surplus labor” only intensifies as one moves from the center toward the periphery.

The US is the absolute center of destructive capitalism. There is potential for a second East Asian center of China, Japan, and the tigers. India is another potential regional center. The European EC has had some success in integrating markets and allowing some mobility of labor but capitalism intentionally created the EC with very weak central political structures including a weak central bank. The result is becoming a German dominated EC. Germany’s current project is the “Latin Americanization” of Eastern Europe under German control. Already the Czech Republic has become a German protectorate. The EC must strengthen central democratic institutions if it is not to fall apart or become totally dominated by Germany. Amin spends some time examining the failed example of the Bandung Project, the loose coalition of 29 non aligned nations (neither aligned with the US nor the Soviet Union). Formed at the Bandung Conference in 1955, this coalition represented more than half the world’s population.

A major objective of imperialism and colonization as controlled from the center was the Balkanization of Africa and the Middle East. Britain had the same objective in India but largely failed, only able to carve out the two Pakistans as they left India. This Balkanization makes it much more difficult to build regional solutions, whether in Eastern Europe, Africa, or the Middle East. All this leaves only the US-Canada as a continental region with the potential to do something about breaking up the five monopolies of capitalism.

Amin speculates that the IMF, the World Bank, and the GATT-WTO could potentially be reformed to serve to correct some of the extreme problems of global capital but today they serve the interests of global capital at the center and promote neoliberal objectives. Unless they are reformed they will continue to contribute and exaggerate the global economic crises and not abate those crises.

Amin decries the absence today to a towering intelligentsia like that of the enlightenment able to have a profound impact on thinking about new forms of social contract between capital and labor. Amin finds the academic apologists of capital with their non empirical talk of the magic and invisible markets risible and dangerous. Amin admires Marx’s analysis of the problem but finds Marx fell far short of suggesting organizational and political solutions to the problem. He refers to the Soviet revolutionary experience as “Sovietism” and the Chinese revolutionary experience as “Maoism”. He refuses to call either Communism. He believes there has to be a regional political organizational solution to the problem of capital and control over its five monopolies. Amin admits he doesn’t have the answer.

Living in the Surveillance State

April 24th, 2015

Data and Goliath, The hidden Battles to Collect Your Data and Control Your World, Bruce Schneier, 2015

Schneier is a world class expert in cryptography and internet security. He is one of the first people contacted by Glenn Greenwald and the Guardian to help analyze the Edward Snowden papers. Schneider credits Snowden with informing us of the extent of NSA surveillance today.

Schneider’s first book Applied Cryptography, was published in 1993. The US military and government had fought a twenty year battle to prevent use of strong encryption, except by the military, ending with a plan to allow encryption only if government back doors were placed in the technology. The market decreed that such technology was unsellable and Schneider thought by 1990 the battle to control encryption had been won. Snowden revealed that the government had simply gone underground, secretly inserting hardware and software into systems to give themselves the desired encryption back doors. The NSA maintains a small army of cyber hackers who look for vulnerabilities in existing systems. Once found, they may create software hacks to exploit the vulnerability, or they may simply stockpile the vulnerability for future use. Occasionally they may even tell the developers about the problem so the hole can be fixed but this is rare.
cisco beacon
One Snowden disclosure has the NSA intercepting Cisco communications equipment shipments to modify the hardware before forwarding the equipment to its destination. The Watergate break ins pale by comparison with a government acting completely out of control.
Again, after Snowden, the market is speaking, and Schneier puts the three year estimated cost in lost US business because of the Snowden revelations at $180 Billion. So where are the major fixes by Congress and the administration to reign in the illegal and unconstitutional abuses? Nowhere.
A part of the problem is that US corporations are equally guilty of illegally collecting and mining private data on its users. So a lot of pressure that corporations should be applying to the government to reign its surveillance in can backfire and constrain the corporation’s own surveillance. This they strongly oppose. The corporations are as guilty of secrecy as the government so the actual data collected, the length of retention, where the data is kept, the uses made of the data (data mining), the sale of the data, etc. are all kept secret from the user. Without sanctions and enforcement user data will never be safe.
Schneier is an optimist and believes that we can find solutions to this massively invasive surveillance but its hard to see even from this book.
Schneier gives a few hints about protecting yourself from surveillance but admits that, other than encrypting your communications, little can be done. The internet and cell phones won’t work unless location and meta data are clear (not encrypted) and Schneier goes to great length to show how meta data can reveal even more useful detail to government and corporate spies than the content of communications. Meta data can be automatically analyzed by computer and networks of communication easily constructed. Latanya Sweeney, a computer science professor, conducted a study in 1990 using census data, and found that zip code, birth date, and sex could be combined to uniquely identify 87% of the United States population. Meta data mining can be used by government to study protest groups and by business to exploit connections with highly targeted marketing and product placement. Neither government nor the corporations are likely to give this ability up without a major fight.
Schneier mentions DuckDuckGo a search engine that does not track users. Tor is an anonymous web browser. Wicker offers encrypted messaging. Ello is a social network that does not track users. Snowden used encryption and secure messaging when communicating with Greenwald and Poitrus.
Coming under particular scrutiny here are Google and Facebook, both because of their dominant market positions and because of their aggressive exploitation of user data to generate revenue. This reader was an early user of Google when they first were available on the web. The searches for obscure information needed for a software developer were vastly superior to other search engines like Yahoo so this reader has stuck with them. But as advertising hits have become more pervasive and since most of these hits don’t actually retrieve pages, this reader is now in the market for an alternative search engine and is trying DuckDuckGo.

One of Schneier’s scariest observations is that we seem very adaptable, we get used to the obvious use of our private information by corporations for their own exploitation. We conclude quickly that that is just the way things are and we like the modern technology and the capabilities it gives us. We don’t see the dangers of government and corporate surveillance. He gives some attention to the “creepy threshold“, the point at which the user senses that the internet services seem to be drawing inferences about us that we never anticipated. Beyond this threshold, users are likely to object. Schneier points out that mass surveillance is not effective as a means of uncovering either crime or acts of terror. Traditional investigative police work would be far more effective but the governments seem determined to spend their resources on non productive mass surveillance.
Fixing privacy protection is made more difficult by the global nature of the internet. The user’s data can be stored and mined anywhere in the world. Each country has its own privacy rules and levels of enforcement. There could be engineered technical solutions created by the Internet governing bodies but deploying them would encounter enormous resistance from governments and corporations.
Schneier calls for a new magna carta to reaffirm that the legitimacy of rulers (whether political or corporate) comes from the subjects. He points to the 2009 Madrid Privacy Declaration as

…the most robust articulation of privacy rights in the modern age.

Diary from Hell

March 19th, 2015

Guantanamo Diary, Mohamedou Ould SLahi, Edited by Larry Siems, 2015

gtmo cover

An ant’s eye view of the US rendition and torture program by a “high-value” (number one actually) detainee who still resides in GTMO. The only work of comparable depth and insight are the writings of Aleksandr Solzhenitsyn about the Soviet Gulags. How far the US has fallen. Most detainees were captured or handed over to the US for pitiful bounties in Afghanistan and Pakistan and tortured and even killed at Bagram Force Air Base in Afghanistan Many were then rendered to GTMO. Taxi to the Dark Side documents the torture death of an Afghan taxi driver at US hands.

Slahi’s story is quite different. As a young man, Slahi decided to join the Mujahdeen fight against the Soviet occupation of Afghanistan. He was trained at an al Qaeda camp and joined the fighting briefly in 1992. This was the time that the Mujahdeen were supported and trained by the US in their fight against the Soviet occupiers. Slahi returned to Germany where he was studying for an engineering degree. A cousin of Slahi is Mahfouz Ould al-Walid who was spiritual adviser to Osama bin Laden prior to the 9/11 attacks. Both Slahi and al-Walid severed their ties to al Qaeda. After completing his degree, Slahi worked for a small privately held German company. When Germany would no longer issue Slahi a visa, he moved to Canada for work. In Germany, Slahi attended the same Mosque as the 9/11 hijackers, and in Canada, he attended the same Mosque as the Millennium Bomber who planned to blow up LAX. One military officer briefly associated with the Slahi interrogation at GTMO called him a Forest Gump character, always present on the periphery of any significant terror activity.

The US asked a Canadian intelligence officer to investigate and interview Slahi and he so frightened Slahi that Slahi decided it was time to return home to Mauritania in January 2000. He was detained in Senegal at US request and questioned about the Millennium Bomb plot. He was cleared but the US had him rendered to Mauritania for further questioning. Mauritania cleared him and he finally returned home Feb. 18, 2000. On Sept. 29, 2001 the US had Slahi detained and questioned for two weeks while the FBI questioned him further about the Millennium Bomb plot. He was released but asked to come in for further questions on Nov. 20, 2001. He drove his own car to the station from which the US rendered him to Amman Jordan. He has been in US custody since.

Slahi grew up in Mauritania, a former French colony, so learned both Arabic and French at an early age. He has an ear for language and has traveled extensively. He can immediately identify the origin of any Arabic speaker which allowed him instantly to know he had been rendered to Jordan. Later at GTMO he was able to identify visiting torturers (“interrogators”) as being from Egypt or from Jordan. While studying in Germany, he quickly picked up German and became fluent. A computer he was carrying home was the one he used in Germany and while working for the private German company. The FBI seized it and had its contents translated from German to English. The resulting “English” was then translated into Arabic for the Jordanian “interrogators”. The resulting consecutive bad translations resulted in complete gibberish, nonsensical rubbish. Slahi found the incompetence amusing. He learned English at GMTO and constantly questioned willing guards about grammar and vocabulary. He says most guards used incorrect grammar and swore a lot, so learning correct English was a challenge. He persisted and started writing this diary in English in 2005.

Slahi also is gifted with a remarkable memory. He memorized the entire Koran at an early age, and when his personal Koran was taken from him at GTMO, he kept his mind sharp be repeatedly reciting the entire Koran to himself line by line over and over again. This memory extends to events, voices, and faces and he would be able to recall in great detail his experiences and the people involved at each step of his detention and interrogation. If there ever were a war crimes investigation his remarkable memory would contain a wealth of information, an ant’s view of the whole process.

Slahi thinks he was rendered to Jordan because the US was squeamish about torture immediately after 9/11. They quickly got over the squeamishness and found plenty of US sadists to perform their own torture. Slahi was rendered next to Bagram in Afghanistan and from there was rendered to GTMO. In each case, his captors tried to conceal his location but he always knew immediately where he was because of accents and other clues. He at first welcomed being brought to the US because he assumed the US would have to follow the law and he would have legal rights. He quickly learned how wrong this assumption was. He was further shocked to learn that the US considered him high-value detainee number one.

On the US use of Arabs for torturing detainees:

I felt ashamed that my people were being used for this horrible job by a government that claims to be the leader of the democratic free world, a government that preaches against dictatorship and “fights” for human rights and sends its children to die for that purpose: What a joke this government makes of its own people!


Slahi’s torture at GTMO in 2002-2003 was personally approved by Donald Rumsfeld. It is well known that torture does not produce reliable intelligence. But at some point, torture victims will do and say anything to get the pain to stop. This moment arrived for Slahi when his prays had failed him and he knew he would either lose his mind or his life or both if the torture continued. So he made up a confession. His interrogators were also under enormous pressure to produce something for their superiors and so a kind of bargain was struck. Slahi puts this bargain beautifully:

If you’re ready to buy, I am selling.

Slahi confesses that he came to Canada with a plan to blow up the CN Tower in Toronto. Slahi had never even heard of this tower. The Interrogators were delighted and his conditions immediately improved. Interrogators told Slahi he had given them 85% and they needed the remaining 15%. This involved an incident in Germany when a 9/11 hijacker asked Slahi how to travel from Germany to Chechnya and Slahi told him he would look like a Mujahdeen if he traveled through any former Soviet state so he should travel through Afghanistan where he would fit right in. Interrogators wanted Slahi to confess to being a central al Qaeda recruiter for the 9/11 plot and for the Millennium bomb plot. The dates made no sense and Slahi knew such a confession would unravel. Instead he accused another guy in a Florida jail of being a drug smuggler. Slahi while making these “confessions” simultaneously is telling the interrogators they are not true. The interrogators are confused and suggest Slahi take a polygraph test. Slahi’s entire seven page description of this test is redacted. We gather the result were to convince the interrogators that he did not lie in the confession.

So you have interrogators who are prepared, schooled, trained, and pitted to meet their worst enemies. And you have detainees who typically were captured and turned over to US forces without any proper judicial process. After that, they experience heavy mistreatment and found themselves incarcerated in another hemisphere, in GTMO Bay, by a country that claims to safeguard human rights all over the world — but a country that many Muslims suspect is conspiring to wipe the Islamic religion off the face of the earth.

In 2005 Slahi wrote this diary and a petition for habeas corpus. In 2008 the US Supreme Court ruled that detainees have a right to challenge their detention through habeas corpus. In 2010 a judge granted Slahi’s habeas corpus petition and ordered his release. The government appealed and the case is still pending.


This book is heavily redacted throughout in one of the clearest possible examples of the misuse of classification sited in Lords of Secrecy that classification should never be used to cover up illegality, war crimes, or war criminals. There is no other reason than to protect the identity of war criminals and their crimes than the redactions in this book. It took the government all these years to clear the diary, first written in 2005 for publication. This is shameful and inexcusable.