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From The Mailbag

20 years

hile the American taxpayers prepared for the Christmas Holiday, the international bankers at the IMF and World Bank were preparing to give them a very special Christmas present they not only were not expecting but didn’t want—the debtload of Argentina. And the European Union Central Bank hurried to protect the European Union’s monetary system by rushing the kickoff date of the Euro from February 1, 2002 to January 1, 2002—after moving up the timeline last year from July 1, 2003 to February 1, 2002 to coincide with the introduction of the Western Hemisphere Free Trade Agreement (which will replace the North American Free Trade Agreement [NAFTA].
     On December 23, Argentina, which has been fighting a decade-long effort by the World Bank and the IMF to force Argentina to dollarization of its currency, decided it could no longer afford to base the value of its peso on the American dollar (one peso = one American dollar). Cash starved Argentina began raiding all of that nation’s pension plans—private as well as public—before Christmas in order to find the pesos it needed to keep its government fluid.
     The monetary problem in Argentina stems from a financial bailout by a U.S. taxpayer-guaranteed IMF loan in 1991 in which Argentina was forced to accept an IMF-controlled Currency Board to monitor the printing of pesos in Argentina. To secure the 1991 bailout, Argentina was required to pass the Peso Convertibility Law of 1991 that prevented Argentina from printing more pesos than dollars in its treasury
     In serious financial trouble, the Argentine government applied to the International Monetary Fund for an emergency loan, as it did in March, 2000 when they were granted a loan of $7.4 billion. This time, however, they were denied, since the new loans were simply being used to make the interest payments on previous loans.
     As the Argentine government began unilaterally seizing the retirement fund assets of its citizens, nationwide riots broke out resulting in the deaths of 28 Argentine citizens. The riots brought about the resignations of three presidents within 10 days.
     As the Argentine financial debacle began to quietly unfold (quietly in the sense that what was happening in South America was not reported in the United States by the Wall Street Journal or any of the key “mainstream” newspapers that “honestly” give you “all the news that’s fit to print” (or is that, “all the news they want you to know”) the bankers at the Federal Reserve, the World Bank and the IMF were suddenly sweating bullets since the Western Hemisphere Free Trade Agreement is already set up to replace the North American Free Trade Agreement in February when the World Trade Organization meets at some obscure, hard-to-reach location in northern Canada to prevent the types of outbursts that accompanied the last two WTO meetings. If Argentina’s economy collapsed not only would it put a crimp in the New World Order’s plans to regionalize the economies of the western hemisphere between February and December, 2002, they knew it could have a domino effect first on western hemisphere regional banks, and second on the international banks that originally wrote the notes that advanced ten years of bad loans to Argentina.
     Remembering that it was the collapse of the Credit Anstalt Bank of Austria in 1931 that caused the European Depression, triggered the devaluation of all of the currencies of Europe that took all of them off the gold standard, the European Central Bank acted quickly to shore up the Euro, jumping the gun and advancing Euroization by 30 days. The last thing the European Union needed was a financial crisis that could impact the value of the Euro.
     Argentina, like far too many second world nations, has an insatiable fetish for borrowed money and not too much interest in repayment plans. Over the past two or three decades Argentina has changed currencies like most people change their underwear. From the days of Juan Peron, Argentina has experienced the peso, the argentino, the austral, the American greenback—and now its the dollar, the peso and the argentino...all together.
     Its hard to blame Argentina.
     The IMF, the World Bank, the Federal Reserve and several American presidents—the last of whom was Bill Clinton—at the urging of several large commercial and investment banks not only in the United States but in England, Japan and a handful of other nations as well (who wanted some taxpayer guarantees that if Argentina defaulted once again someone other than themselves would be on the hook to repay the banks) found a willing debtor. Argentina’s government debt today stands at $264.28 billion—not much compared to America’s $1.7 trillion national debt—but far more than Argentina’s balance of trade can afford. Much of that debt was incurred from American largesse to deadbeat nations (that include both England and France during both the first and second world wars). Of Argentina’s total outstanding debt, only $3.95 billion is in the form of Argentine domestic treasury notes. The majority of that nation’s debt is from borrowed money—$260.33 billion...of which $155 billion is in default.
     The bulk of those loans came from American banks—$95.19 billion. Argentina owes the European Union Central Bank $24.56 billion—slightly over 25% of what they owe to the American bankers—but more than enough to make the European Union more than a little nervous when it appeared that Argentina was going to default on their IMF loan if they did not receive additional credit. In yen, Argentina owes the Japanese ¥6.26 billion. They owe the Bank of England £1.35 billion. And, in “chicken feed” loans from around the world, Argentina owes another $819 million. Of Argentina’s total debt, much of it is in the form of a trade deficit of $94.64 billion—owed to American, Japanese, Chinese, Taiwanese, Korean and European industrialists.
     Argentina is a nation in trouble—and its central bank could very well become the “Credit Anstalt Bank” of 21st century, creating the domino affect that devalues half of the currencies in the world. At least, that was the fear of the one-worlders behind the European Union and the Euro. At the urging of the Federal Reserve and European Central Bank, the IMF put together a $40 billion bail-out package a year ago and deferred Argentina’s $124 billion loan payment to the IMF. It proved to be a drop-in-the-bucket to the cash-starved nation. Government spending in Argentina increased from 38.9% of gross domestic product to 49.4% from 1997—and increase of 10.5%. As that happened, public sector debt rose from 26% to 32.1%. Tax revenues plummeted and privatization proceeds dried up. Argentina, in every practical sense, was bankrupt.
     If you, as a consumer, had not paid any of the principle on a loan you owed for a decade—and barely paid any of the interest on that loan either—what do you think your chances would be of getting either an extension on that loan or an additional loan from that, or any, bank? Your chances would be somewhere between none and “forget it.” Prior to the October, 1929 Stock Market Crash, the behemoth banks that had the financial resources to loan money to impoverished nations (like Argentina) were investment banks like the First National Bank and City National (now Citibank) and Chase Manhattan and J.P. Morgan (now Chase Morgan) and a few other New York investment banking institutions. The Rockefeller and Morgan banks openly boasted of their ability to control Presidents and even dictate foreign policy (a task now carried out for them by the Council on Foreign Relations that is controlled by the wealthiest European banking and industrial families). Rockefeller and Morgan both had a legal way of getting rid of bad loans—they packaged them as bond issues and sold them to unsuspecting consumers through the “investment branches” of their banks. The bank recouped all of their losses from the bad loans to second and third world nations, and the unsuspecting consumer got stuck with the losses. It is interesting that before the Great Depression and before the post-depression bank reform acts forced upon the Roosevelt Administration by Senator Carter Glass, who with Congressman Henry B. Steagall engineered the Glass-Steagall Act of 1933 that created the FDIC and divorced commercial and investment banking—and forced it down Roosevelt’s throat. While Roosevelt wanted, and even planned to veto Glass-Steagall, Carter Glass assured Roosevelt that the “New Deal” would die with that piece of legislation. And even though history gives FDR credit for banking reforms that led to insuring the deposits of the “common depositor,” in reality, with a gun to his head not to veto it, Glass-Steagall became law without Roosevelt’s signature.
     While the large commercial banks in the United States (the portion of Glass-Steagall divorcing commercial and investment banking was vacated in 2000 allowing the reunion of commercial and investment banking and bringing about the merger of Chase Manhattan and J.P. Morgan) can now engage in investment banking, scrutiny is much closer today to make sure loans are properly collaterialized, and that bad loans are not being foisted off on unsuspecting depositors as valid bond issues. That makes it much harder for the megabanks to bolster poor risk debtors like Argentina by throwing good money after bad.
     The Argentine government, with no where else to go, turned to the IMF which, like your friendly neighborhood tavern bartender serving the neighborhood drunk more liquor than he can handle, kept pouring. However, instead of serving Del la Rua shots of rye whiskey or vodka, the IMF kept pouring out money—and with it, the strings that bound Argentina’s financial fate to the one-worlders, tying the peso to the American dollar and obligating the central bank of Argentina to limit the number of pesos in circulation to the number of dollars in its treasury.
     The problem with the IMF is that they are too willing to loan money to nations like Argentina, or any second or third world nation today because the “strings” that come with the loans are tethers of steel from which that nation cannot escape.
     When Argentina got into trouble eleven years ago, the Peronist government under President Carlos Menem was forced to enact the Peso Convertibility Law to keep the peso from collapsing. While that action temporarily saved the Menem government it destroyed the Argentine economy because it priced Argentine exports out of the market. Tragically, the value of the American dollar rose 35% over the past five years, further reducing the buying power of the average Argentine by a like amount.
     Menem’s government fell to the Radical Party candidate, Fernando de la Rua who began to impose even stricter austerity measures after the IMF, at the insistence of the Bush Administration, denied Argentina a new line of credit. (It was important for the Bush Administration, that will shortly be attending the Western Hemisphere Free Trade Agreement meetings in northern Canada, to educate all of the second world nations to the reality of financial responsibility—even if it means financial austerity.
     Cash-starved, De la Rua decided to “temporarily” raid the nation’s retirement income funds—both government-sponsored and those owned and managed by private industry. Pension payments to 1.4 million retirees were also suspended.
     This action triggered widespread rioting in Buenos Aires with rioters demanding the overthrow not only of De la Rua but of every politician in Argentina. In addition to rioting against government agencies, the rioters became looters, breaking into supermarkets and department stores, emptying the shelves. The rioters finally congregated in the Plaza de Mayo around the Presidential Palace in Buenos Aires. De la Rua, fearing for his life, resigned and fled from the city.
     The Argentine government appointed another Peronist, Adolfo Rodriguez-Saa. Rodriguez-Saa (the governor of a small but competently-run province) called out the troops to restore order. The death toll, which occurred during De la Rua’s administration, began to mount. Before the shooting stopped, 28 Argentines, angry because the government had confiscated not only their retirement savings but their bank deposits as well, lay dead in the streets of Buenos Aires. Several hundred others were wounded. Adding to the chaos, De la Rua was forced to declare a bank holiday since the banks had no cash to dispense to angry depositors. This served only to further infuriate the Argentine people who now surmised that in addition to stealing their retirement incomes, the government was now prepared to steal their checking and savings accounts.
     As this scenario was unfolding in South America in December, halfway around the world the European Union saw their plans to Euroize 12 nations in February jeopardized. If the Argentine monetary collapse created a domino-affect beyond the Argentine border into other South American nations it could pose problems all over the world. The European Central Bank worried that the European nations planning to Euroize their currencies in February might get cold feet and want to delay euroization until July, 2004—the original date the Euro was to become not only the “official” currency of the 12 nations who gave up their national currencies in favor of the Euro on January 1, but the remaining nations in Europe—like England—who have not yet euroized and will not do so until between 2004 and 2008.
     In addition, the Europeans saw a potential problem for transnational European industrialists in Argentina if the peso collapsed. And, that was a problem that could also affect euroization.
     As his first official act, Rodriguez-Saa suspended all foreign debt payments—a decision that did not help the interim president’s position with either the IMF or the Bush Administration. Then, ignoring the Peso Convertibility Act, Rodriguez-Saa began to construct plans that would allow him to print enough additional money to cut poverty by increasing employment. When his proposal was made, unemployment in Argentina exceeded 18%. Due to a lack of liquidity and not necessarily a lack of “assets” recorded on a ledger sheet in an Argentine bank, two thousand people per day were falling below the poverty line. (Most Americans don’t remember the 1929 Stock Market Crash and the ensuing Roosevelt bank closures that cost over 1/3 of all Americans their living savings due to banking regulations that protected the bankers and not the citizen depositors. Those watching the banking debacle in Argentina had a front row seat of memory lane. It was a history lesson that every American needed to witness but most ignored. After all, who cares what happened last month in Argentina?)
     Because he was prevented from devaluing the peso due to the Peso Convertibility Act, Rodriguez-Saa proposed the creation of a third currency—an internal currency that would be used by the Argentine people as a national currency while the peso—which would remain pegged to the American dollar—could be used as an international monetary unit. The proposed devaluation was set at 30%—and it was immediately met with resistance by the Argentine Communist Party which viewed the devaluation as an assault on the Argentine workers’ standard of living by an unelected government in order to protect the transnationalist bankers in the IMF and World Bank. While the international banking community did not have a problem with Argentina creating a devalued internal currency called the "argentino” it did have a problem with Rodriguez-Saa’s decision to suspend its foreign debt payments to its creditors.
     The socialists mounted a massive public relations campaign against Rodriguez-Saa but they could not gain the support of the General Confederation of Workers, the Peronist-led trade union. The wealthy transnational industrialists who “control” the fates of the equally wealthy bureaucrats who head the General Confederation of Workers Union support the Peronists since the Peronists are pro-industry. Even the Peronist union heads are pro-industry—not pro-worker.
     (Although most labor union members in the United States do not realize it—and although the union leadership would vehemently deny it—the management hierarchy of every labor union in the United States is “linked at the hip” with industry.)
     Duhalde, who assumed the much-handled reins of government on January 7, attempted to implement Rodriguez-Saa’s “argentino,” but the IMF objected to the introduction of a third currency in Argentina. Duhalde gained approved from the European Central Bank, the IMF, the World Bank and the Federal Reserve to devalue the peso only after he agreed to guarantee foreign (transnational) industries from the fallout. The devaluation of the internal “peso” was $1.40 per dollar.
     Under pressure from the European Union to protect “European interests” in Argentina, Duhalde insisted to Argentine media that he would not “cede” to pressures from Europe. Duhalde, like his Economy Minister, condemned the United States for forcing it to enact the Peso Convertibility Act in 1991, reiterating that it was the US and IMF-backed economic program that led to the collapse of the Argentine monetary system in December.
     Defending the White House, a spokesman for the Bush Administration noted that “...it’s not in our interest to have huge packages that bail out bondholders.” That of course, does not sound like a message the investment bankers at 23 Wall Street and 26 Broad Street would want to hear from the White House. Several provisions before the US Congress could have a heavy impact on banks, utility companies...and oil companies—most of what are owned by transnational corporations—as the Bush Administration plans for its western hemisphere conference on trade.
     Since the campaign war chests of every member of Congress—in both Houses and on both sides of the aisle—are filled by the wealthy elite in business and industry—logic suggests that any such legislation will have a “surface appearance” of penalizing transnational corporations who move their industrial facilities from the United States by obligating them to invest in retraining and/or compensating displaced workers, it will most likely genuinely penalize only those American companies who do not export jobs to our neighbors in the north and south.
     The pressure which was exerted on Duhalde’s government to “protect” those industries is evidence of the power of the transnationalists. Likewise, Duhalde’s inability to introduce an internal currency through the Argentine parliament because it was objected to by the IMF, the World Bank, the European Central Bank and the Federal Reserve is indicative of the power wielded by the international banking community to control the economy of any nation in the world—or to bankrupt any nation with whom they disagree.
     In the meantime, 12 European nations have successfully merged financially. Their national currencies will expire on February 17. By February 1 six additional nations should join those who converted their currencies to the Euro on January 1. At that time the bankers and the industrialists of Europe have successfully overthrown the elected governments of those 12 nations and those which follow them into the Euro.
     In February, as the nations of the European Union surrender their financial sovereignty to international banking community, the United States will meet at an undisclosed location in northern Canada to finalize plans for the Western Hemisphere Free Trade Agreement (which will replace the North American Free Trade Agreement [NAFTA]. The purpose of WHFTA is to create a western hemisphere “union” like the European Union in which the nations will be linked to one another by a common currency: the American dollar. On December 1, 2002, the western hemisphere will be dollarized. Any nation in the western hemisphere that refused to dollarize their currency will be economically ostracized. Under the terms of the General Agreement on Trades and Tariffs [GATT], those nations will be subject to punitive tariffs that will put them at a global trade disadvantage—the same trade disadvantages that Argentina has found itself. Only, there will be no debt relief.
     Following euroization and dollarization, which will reduce some 50-odd currencies into two, the nations on the African continent and those in Asia will merge their currencies by 2004. All that remains unclear today is whether Australia, New Zealand and the southern tier Pacific Islands will produce a 5th regional currency or if the island nations clustered around Australia will join either the Asian or African monetary alliance. In any event, by July 1, 2004 185 different national currencies will be reduced to four or five regional monetary systems.
     When that happens, world government with a single global monetary unit—very likely a cyber unit that exists only electronically—will occur. World government will be a reality by the end of this decade.