Laura Flander at alternet.org
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|US military aid should be conditional on Israel stopping settlement expansion, writer says [GALLO/GETTY]|
Once upon a time, social security was considered the "third rail" of American politics. The "third rail" is the train track that carries the high-voltage power; touching it means instant death.
The "third rail" metaphor has for decades been applied to social security, a government program so popular with the American public that proposing any changes in it would mean political death to the politician.
No more. Although social security is as popular as ever, politicians routinely propose changes in the program — including privatisation and means testing. While the proposals usually go nowhere, and rightly so, the politicians who support them live to fight another day. Today, with those massive deficits and the astronomical national debt, not even social security is sacrosanct.
Few, if any, government programs are.
But US aid to Israel is. In fact, the $3bn Israel aid package is the new third rail of American politics: touch it and die. It is also the one program that liberals, conservatives, Democrats, Republicans and tea partiers all agree should not sustain even a dollar in cuts.
Actually, that is something of a mis-statement. These various parties and factions do not agree that the $3bn Israel aid package is sacred. They just say that they do because a powerful lobby, the American Israel Public Affairs Committee (AIPAC), makes clear to them that touching the aid package will mean big trouble for them in the next election.
Cuts to social programmes
It no longer comes as much of a surprise that the average Democrat or Republican will rule that Israel aid cuts are off the table — while supporting cuts in programs like head start, which educates poor children, or WIC, which provides nutrition assistance to disadvantaged women and their infants.
It is not a surprise because everyone knows that the Democratic and Republican campaign finance committees warn their members of the dire consequences that might ensue if they dare to stand up to the lobby.
That is why even the most liberal members of congress never point out the absurdity of supporting full funding of military aid to Israel while slashing vital domestic programs. In fact, the only members of congress who have suggested that Israel share some of the sacrifice are Reresentative Ron Paul (R-TX) and his son, Senator Rand Paul (R-KY) who would pretty much cut every program in the budget, including Israel aid.
But the two Pauls, all by themselves, put enough of a scare into AIPAC that it immediately got to work to make sure that other like-minded Republicans (the "cut everything" caucus) did not go off and follow them in the name of, say, logic and consistency.
AIPAC was most concerned about the Republican first-termers, most of whom were elected with the support of tea partiers, who are generally extreme fiscal conservatives and tend not to favor any exemptions from the budget axe.
Almost immediately, AIPAC produced a letter for the Republican first-termers to sign in which they pledged that, no matter what else they cut, Israel would be exempt. And almost immediately, 65 of the 87 Republican freshmen signed on, with more signing on later.
Among the signatories are some of the most vehement supporters of cutting virtually every domestic program. These are people who support programs that cut jobs in their own districts and proudly point to their devotion to the principle that shared sacrifice means everyone.
But not Israel.
The AIPAC letter seems to recognise that virtually every other program is sustaining cuts. It refers to "runaway spending and trillion dollar deficits." It even concedes that "tough choices must be made to control federal spending" and that "we must do a better job of prioritising appropriations". Those priorities can be seen in this list of draconian budget cuts the freshmen support.
But then this: "Therefore, as this congress considers the upcoming continuing resolution, we strongly urge you [the House leadership] to include America's full $3bn commitment for Fiscal Year 2011 under the 10-year US-Israel Memorandum of Understanding.
And that is where fiscal hawks become the most docile of doves: when it comes to Israel.
This is not to say that the United States should eliminate military aid to Israel. Much of the aid package can be justified on the grounds that Israel is an ally, one that still has enemies bent on its destruction.
But how can anyone justify picking this one program out of the entire federal budget and saying, without discussion, that it merits full funding, without scrutiny, while virtually every other program is cut?
The simple fact is that both the United States and Israel would be better off if we attached strings to our aid, as we do with other foreign assistance programmes.
For instance, we might say that for every dollar Israel spends on expanding settlements, we will subtract one dollar from the aid package. Or we can put some of the package on hold until Israel agrees to freeze settlements, thereby enabling negotiations with the Palestinians to resume.
Or we can simply examine the aid budget, item by item, to make sure that each program in it supports US policy goals. Do those US -provided cluster bombs that are still exploding in Lebanon serve our interests?
But we do none of that. Israel prepares a shopping list and congressional appropriators provide the goods. Shop 'til you drop.
This is wrong. Congress should treat the Israel aid package the same way it deals with programs that directly benefit Americans. Those who support it should be forced to defend it, line by line.
But the sad fact is that special interests like AIPAC, the Chamber of Commerce and the Club for Growth intimidate Congress into exempting their favorite projects even from discussion. Aid to Israel will not even be discussed this year, except for members of Congress informing AIPAC of their unquestioning devotion to it.
If only infants, working Americans, and the poor were somebody's special interest. Maybe then, someday, they too could intimidate congress. As the old Jewish expression goes: we should all live so long.
MJ Rosenberg is a senior foreign policy fellow at Media Matters Action Network. The above article first appeared in Foreign Policy Matters, a part of the Media Matters Action Network.
The views expressed in this article are the author's own and do not necessarily reflect Al Jazeera's editorial policy.
As the Pew Center for the States reported earlier this year, “$1 trillion. That’s the gap at the end of fiscal year 2008 between the $2.35 trillion states had set aside to pay for employees’ retirement benefits and the $3.35 trillion price tag of those promises.” Pew says states wound up in this predicament for a number of reasons including :
- failing to make annual payments for pension systems at the levels recommended by their own actuaries;
- expanding benefits and offering cost-of-living increases without fully considering their long-term price tag or determining how to pay for them; and
- providing retiree health care without adequately funding it.
Elected officials are pushing government employees into defined contribution plans, which are nearly identical to 401(k)s, because of the funding issues associated with pensions. Just like in the private sector, employee contributions to these plans are sometimes matched by their employers. They fluctuate in value based on the securities in which they invest. Government employees can lose most of the value of his or her plan in a bad market, such as the one triggered by the Great Recession, potentially delaying their retirement plans for years.
The battle over pensions is not unlike the one over collective bargaining or salary caps. States and cities have begun to run large deficits because the recession has robbed them of their expected tax receipts. Most local governments get the majority of their funds from property taxes. Florida and Arizona face 50% drops in the value of homes, and prices have fallen even further in some cities in these states.
24/7 Wall St. looked at the pension status of workers in all 50 states. We choose those in which pension plans have already been converted from defined benefit plans to defined contributions plans. In some of the cases we examined, states have set up hybrid plans which are a blend of the two traditional types. Other states allow employees who have been in defined contribution plans to keep them. Newer workers are forced to accept 401(k) plans.
The current battle between public unions and states is about financial power. Many governors and state legislators want almost unlimited control over how public workers are paid, what their bargaining rights are and how their health and retirement levels are set. Naturally, workers want to keep their pension funds that guarantee pay-outs and leave the risk of funding those payouts to states and municipalities.
This is the 24/7 Wall St. Sixteen States That Are Killing Their Pensions. These states are those in which governments have gained the upper hand in the war over what public workers will be paid and over what time.
In 2005, the State Legislature voted to enter all new state employees into defined contribution plans. Employees enrolled in defined benefit plans are also allowed to transfer to 401(k) type plans or keep their pension plans. This move, which also has been done in other states such as Utah and Michigan, has been largely unpopular among state workers. Lawmakers have been asked during every legislative session to consider repealing their decision.
Imagine paying your next parking ticket in gold Krugerrands or renewing your driver license using American Gold Eagles.
A proposal in the Utah Legislature would require the state to allow just that, requiring government agencies to accept gold for transactions, and creating a parallel monetary policy for intrastate commerce tied to the price of gold.
Under the legislation that has been drafted, Utah residents could mint their own gold or silver coins, a storehouse would be created to stockpile the precious metal and the Utah Defense Force, an arcane state militia that may be called and armed by the governor, would be responsible for securing the inventories.
“I think it has merit,” said Rep. John Dougall, R-Highland, who had the proposal brought to him by a constituent and committed to opening a bill file. Another representative will probably end up sponsoring the legislation.
“Fundamentally, what it comes down to is people’s concern about the fundamentally reckless policies at the federal reserve and what it does long-term to the financial standing of the country and giving folks another choice of monetary tools for their financial transactions,” Dougall said.
The concern is that the large U.S. debt and policies designed to increase liquidity by putting more dollars in the market have devalued the national currency.
“It’s really about creating an option,” said Larry Hilton, an attorney and insurance salesman who authored the “Utah Sound Money Act” and took it to Dougall. If the dollar falters, he said, it would be beneficial to the state to have an alternative.
“It’s not intended to be compulsory in any way,” Hilton said. “The state is offering to taxpayers, ‘If you want to pay your taxes in gold or silver, we’ll accept them.’ ”
Investing in gold has been pitched as an anchor during the recent economic turmoil. Rep. Ron Paul, R-Texas, has warned of the devaluation of the dollar for years, and conservative radio personality Glenn Beck plugs gold on his program as a hedge against inflation.
If it is enacted, the government would be required to transact any intrastate business in gold if that’s the citizen’s preference. Businesses could, if they choose, also accept gold as a form of payment.
Utah State Treasurer Richard Ellis said he hasn’t seen the bill, but it raises some questions on how the state would comply.
Since gold coins aren’t a standard currency, he said, he had questions about how the state would comply and how, for example, it could give change on a transaction. “Do they chip off a chunk of an ingot?” he asks.
Presumably, Ellis said, there would need to be extra security and he would have to talk with the banks about how they would look on the state doing business in gold and silver.
As treasurer, Ellis would be assigned the task of setting the exchange rate for Utah’s gold and maintaining a registry of gold and silver coins that would be recognized by the state. Coins could be privately minted if they meet certain standards.
The governor would be required to muster the Defense Force — which is authorized in state law — to protect and transport the state’s gold holdings.
The bill envisions “commerce cooperatives” that could be created to act like banks, to store the gold in Fort Knox-like caches and facilitate the gold transactions.Next Page »
March 4th, 2011Watch video http://tinyurl.com/49u29ka
At the semi-annual Monetary Policy Report hearing in Congress yesterday, Chairman of The Federal Reserve Ben Bernanke smiles like a kid that has just been caught with his hand in the cookie jar when Senator Mark Kirk gives him a history lesson on currencies and federal debt, either that or he is smiling because he thinks the notion of a country without a federal deficit and debt is just hilarious. You decide.
Thousands of protesters massed in cities and towns across Iraq after streaming in on foot on Friday in defiance of vehicle bans for rallies over corruption, unemployment and poor public services.
The demonstrations were markedly smaller than similar protests which took place in more than a dozen cities a week ago, spurring Prime Minister Nuri al-Maliki to give his cabinet 100 days to shape up or face the sack.
On Friday, a crowd that rose to around 2,000 in number at its peak descended on Baghdad's Tahrir Square, while 1,500 gathered in the northern city of Mosul and 1,000 rallied in the southern cities of Nasiriyah and Basra.
The Baghdad rally eventually ended when security forces overran the square, forcing the remaining 200-odd protesters to leave. In Basra, security forces used water cannons to disperse demonstrators.
Overall, protests took place in at least 10 cities nationwide, though heavy vehicle restrictions were placed on all non-Kurdish provinces north of Baghdad and in several cities, planned protests were disrupted.
In the capital, protesters, mostly men in their 20s and 30s, chanted "Liar, Liar, Nuri al-Maliki" and "Oil for the people, not for the thieves," while carrying banners that read "Yes for democracy and the protection of freedom."
"We are fighting for freedom and real democracy," said Riyadh Abdullah, 39, who walked for three hours to get to the square from the western neighbourhood of Mansur.
"Corruption is also a major problem. We live in a rich oil country like Iraq but you cannot find electricity, you cannot find clean water, there is no infrastructure," said Abdullah, a writer and activist.
"Where are the billions going?" he asked.
Another demonstrator, 26-year-old doctor Mohammed Khalil, voiced similar grievances.
"What's wrong? Everything is wrong. Look at the roads, the services -- everything is miserable," he said.
The demonstrators were each frisked at least three times before being allowed to enter the area, with dozens of police humvees lining streets leading to Tahrir Square. Several witnesses said that, as the day wore on, it became increasingly difficult to enter the rally site.
Blast walls were also erected to block Jumhuriyah bridge, which connects the square to the capital's Green Zone, home to the US embassy and parliament. Similar measures were taken a week ago.
Vehicle curbs were applied to all of Baghdad, whose streets were deserted but for a handful of cars attempting to evade checkpoints, and the centre of Basra. Nasiriyah barred anyone from entering.
A cameraman for the al-Alam satellite television channel was wounded during the Basra protest, but the circumstances of the incident that left him injured were unclear, a journalist said.
Several cities, meanwhile, disrupted planned rallies.
Hundreds of Iraqis gathered in the central city of Tikrit but were barred from marching, while residents of the town of Samarra were barred even from going to Friday prayers, where demonstrations usually form.
Friday's rallies had been partly on social networking website Facebook, and come nearly one year after parliamentary elections.
It took politicians more than nine months to form a government after the March 2010 polls, and even now several key cabinet positions remain unfilled.
Demonstrations have been taking place in Iraq for the past month.
Last Friday, Iraqis took to the streets of at least 17 cities and towns. A total of 16 people were killed and more than 130 wounded as a result of clashes on the day.
The rallies have led to the resignations of four top officials -- three southern provincial governors and Baghdad's mayor.
In response, Maliki told ministers they would be assessed on their performance in the coming 100 days, with "changes" being made based on whether or not they improved.
Despite their breadth, Friday's protests were generally smaller than similar demonstrations a week ago, which one analyst said was due to the fact politicians seemed to have responded.
"The resignations of several governors and the mayor of Baghdad, as well as Maliki's 100-day ultimatum, has led demonstrators to believe that reforms will take place," said Baghdad University politics professor Hamid Fadhel.
Author and journalist Nomi Prins (“It Takes a Pillage“) explains in an exclusive interview her view of the unrests in the Middle East, the causes for the rising oil price, and the big stories in the precious metal markets.
By Lars Schall
Nomi Prins grew up in the U.S. state of New York. She worked after her studies in mathematics and statistics for Chase Manhattan, Bear Stearns in London and as a managing director at Goldman Sachs on Wall Street. After she left the financial industry, she became an outstanding financial journalist who has written three books, including the highly recommended, “It Takes a Pillage: Behind The Bailout, Bonuses, and Back Room Deals from Washington to Wall Street,” published at Wiley in September 2009.
She is a Senior Fellow at “Demos“ (http://www.demos-usa.org/), a non-partisan public policy research and advocacy organization headquartered in New York City. She gave numerous TV interviews on BBC World, BBC, Russian TV, CNN, CNBC, CSPAN, Fox, and other widely distributated stations. Her writing has appeared in publications such as The New York Times, Fortune, Newsweek, The Nation, The American Prospect, and The Guardian in the UK. Her website is: http://www.nomiprins.com/.
Nomi Prins lives in Los Angeles, California.
In addition to the following interview, we recommend this “Info-Schall” audio-video with Nomi Prins and William K. Black, “The Crisis Isn’t Remotely Over, Yet”:
Ms. Prins, you have written in the recent past about underlying reasons for the uprising in the Middle East and elsewhere (i) – and a major factor are for you the rising commodity and food prices. Why so?
Well, first, there is definitely a timing relationship between the uprisings we are seeing in the Middle East and the rise in commodity prices – in everything from sugar to cotton to oil, and conversely, there is an additional push-up effect on commodity prices because of the revolution itself. A lot of the increase in commodity and food prices, which in turn comprise items that are basic needs for people, can be attributed more to speculative capital and investors seeking quick profits through the use of synthetic trading instruments, rather than the issue of simple supply and demand of the physical commodities, which is the reason that much of the media focuses on when it reflects on the reason for rising prices.
Even the United Nations, in their recent January report, noted that their food and agricultural price index is at historical hights, and cite as an explanation – supply and demand around the globe. But I think the increase is much more related to the increase in volume of speculation in food and other commodities, that they, and others, are ignoring. And that in turn has unfortunately a negative impact on people forced to pay for any given item, because when the futures or the options market or indices linked to commodities increase because of speculative capital, it pushes real prices of food up as well, in a sort of a vicious circle, and that means that people who are buying these things are impacted adversely by market capital. The trading volumes in commodities from food to oil to precious metals have been rising, because this area is really the only place right now where the investment class is seeing opportunities to make money, and they are not really concerned with who has to pay higher prices on the back of their needs to rake in profits.
With regard to the uprising in the Middle East, do you think that this is indeed a spontaneous uprising or does the U.S. has its hand in play behind the scenes on a bigger scale than is widely acknowledged? (ii)
I don’t think the United States directly cause the uprising, though, the United States has supported Hosni Mubarak in Egypt for decades. But indirectly, the United States pushed an economic and financial agenda, whereby explicitly or implicitly, of deregulating its banking industry which in turn, weakened the domestic and global economy. The industry was supported in its reckless practices, by the Federal Reserve bailing out, and subsidizing it, through trumping up trillions of dollars of debt to purchase and guarantee bad assets.
That debt makes the value of money cheaper. That cheap money stimulates investor speculators to increase the commodity prices that we’ve just talked about, which hurts people. In addition, beginning in 2004 specifically, Egypt and other countries opened their financial borders to allow foreign investors, banks, private equity, hedge funds and so forth from the U.S. and Europe to come in and purchase large stakes in their banks, thus privatizing some of their key industries and financial system. External companies could invest international capital within their countries, but without having to keep it their for long-term development or sustainable new jobs for the local population.
Interesting to me is to see that the Egyptian Ministry of Investment said that the volume on the Egyptian stock exchange increased twelve times in the last five years as a result of the opening of Egypt to international capital. And though other countries in the Middle East did not do this to the same extent as Egypt did, they also tried to invite international capital more freely into their countries. The Worldbank and the International Financial Cooperation issues a report that ranks devoloping countries in terms of how much they are open to outside investment, to outside financial interests coming into their countries, and Egypt placed in the top 10 of this report for 4 of the last 5 years.
The result of the worldwide depression that took hold from 2008, is that a lot of the capital that went into these countries searching for quick profits came right back out, that outside investment stopped, foreign capital fled, and the artificial bubble that was temporarily created popped, leaving the developing economies to crumble. The consequence is that people who were already suffering, who were already having trouble looking for jobs, became that much more unable to find them. The young population all across the Middle East – 25 to 40 per cent of the populations happen to be under the age of 30 – can’t find good jobs. The uprising occurred because of the desperation inherent in that situation: high unemployment, high prices of goods, high costs of living, and no financially stable future. That desperation is more tangible because of the speculative capital behavior, that it would have been otherwise.
And yes, there are dictatorial and corrupt regimes across the region, but these are coupled in terms of uprising timing with speculative capital and international investment and the general global bubble and bust comes oppressing the citizens of those countries, further catalyzing the revolutions that have taking place. And I believe, we will see such developments not only throughout the Middle East and Africa, but also in Central and South America where we have a comparable type of economic situation.
Also in the United States?
Yes, this is a very good point, also in the United States. And in Europe. In the United States, we see right now the closest thing to a revolution, which are the protests going on in the state of Wisconsin over the Governor’s desire to pass a budget that cuts benefits, including pensions and certain costs for Health Care from people like teachers. The pivotal issue is that of labor versus the richer interests. One of the other things that Scott Walker, the Governor of Wisconsin, wants to do is to take away the collective burgaining power of the public workers which will mean that in the future they will have a lesser ability to negotiate their contracts and protect themselves. He also wants to take away the requirement to be a part of the unions and therefore to pay union dues within Wisconsin, which will weaken the power of the unions from a negotiation standpoint. (iii)
There are two type of states – well, there are various ways to categorize the states in the U.S., but there is a label for certain states that the conservatives call “Right to Work states.” It means exactly the opposite of what it implies. A “Right to Work state,“ of which there are twenty two, allows public workers to avoid joining a union and takes away the ability to bargain collectively. What “Right to Work“ should mean, is the right to have work with dignity and the ability to determine, or at least negotiate from some point of collective strength, compensation and benefits.
Many of Wisconsin’s citizens are protesting against Walker’s desire for the state to take the power away from labor to have a say in their own financial future, since they know that it is not unions and workers causing budget problems, nor even the cost of their benefits, but the many tax loopholes that corporations enjoy that keep them from providing a fair about of tax revenue to the state budget, or allowing those with the most money to determine what should happen to those with the least. So these are common problems in the United States and throughout the globe that we have seen resulted in revolutions in the Middle East and Northern Africa.
What are your thoughts on the upward movement of the oil price and therefore on the expectations for the economy at large? As you know, physics define energy as the ability to do work, and the financial system as it is today requires infinite growth of the real economy in order to survive – so that’s a little problem, isn’t it? (iv)
The problem with oil prices, and with commodity prices in general, is that those transacting in actual physical oil or actual physical commodities are not the same people that are trading it on the open market. With the recent uprisings in the Middle East, the official mainstream media opinion about the increase in oil prices is fear that the uprisings will cause a stranglehold on oil that is produced and extracted in various countries like Libya and so forth.
But another large part of the upward movement in oil prices, is the volume of speculation that is taking advantage of those perpetuated reasons. The investment money that bets on the price of oil futures, say, pushes in turn, the actual prices of barrels of crude oil up. Again, that will ultimately hurt the pockets of people that have to pay for the costs of things predicated on oil, while the speculators who increase the price of oil even more unnaturally than supply and demand would indicate, take their profit and run, leaving people, that need it, or companies, that are using it and passing on their expenses, stuck with the higher costs.
Of course, there are companies that have no problem with that. Exxon Mobil and international oil companies don’t really care that there may or may not be less production or capacity on any one given day, because they are able to pass on their costs to the people that use their refined resources, plus they are also trading in oil futures, and profiting regardless of whether the oil price is going up or down, which represents a problem for consumers.
In lieu of these developments: what are your expectations for precious metals and what is your opinion related to one of the big stories in the precious metals pits these days – the silver shorts?
The silver shorts have been indeed an interesting story that has been basically covered around the Internet for the past couple of years, mostly focused on the SLV exchange traded fund that is based on silver, of which the custodian of the silver that is supposed to back the shares, is JP Morgan. Today, for example we saw 42 million shares of that ETF traded. That kind of volume is partly attributable to the general rise in investment and speculation in commodities, and partly, because silver is seen right now as an almost unofficially currency, like gold, though with more industrial uses than gold.
You don’t get to 42 million shares of the largest silver ETF that supposedly has adequate amounts of silver backing it (though part of the silver short story, is that it’s not clear how much physical silver is actually backing it, hence JP Morgan may be selling silver behind the scenes to keep the price as low as they can to avoid SLV shareholders redeeming large amounts of it at higher prices that JP Morgan would have to pay to supply the silver) without a lot of trading – index trading, hedge fund trading, and so forth, along the way. This all contributes to pushing up the volume and the price, and if there is a massive short in the silver market, things could get very messy if the shorts have to turn around and purchase silver – it would push prices even higher, very quickly.
For example of a reduced silver supply, I was looking today at the U.S. Mint website catalogues (the U.S. Mint creates new coins, some that get circulated and others that are uncirculated collectors coins like the American Eagle Silver uncirculated coins.) And, they have effectively seized production of those coins, in fact the U.S. Mint on their official website says that they will not resume production of the American Eagle Silver uncirculated coins until they have enough silver to produce all the various kinds of them that have been standard in the past. (v)
So, the U.S. Mint basically ran out of enough silver to meet the demand of the physical silver investors and speculators. And the SLV ETF has become the most highly traded proxy for silver, and because it is, again, not clear how much silver is backing the SLV ETF, people are seeking other ways to buy silver, which is another reason for the price increase, as indicated by the Mint’s supply and demand in addition to non-physical speculator supply and demand. And I think that is going to continue to push up prices, with profit taking dampening them briefly here and there, along the way.
It is very much of a hording mentality right now, a bubble that it is perputuating itself with artificial funds like the SLV. If shareholder really choose to exchange large quantities of their shares for physical silver, or JP Morgan has to make it transparent, what silver they are really holding against their ETF, we will reach an interesting point. Right now, I think there is still a lot of buying frenzy for any form of silver, which is certainly outperforming gold, even though gold is officially seen as a potential reserve currency and silver isn’t.
In general, do you think both metals will go much higher?
Yes, I think they will. There is a fundamental weakness in the global economy. There is a fundamental weakness in the U.S. economy. The Federal Reserve chairman Ben Bernanke, President Obama, and Treasury Secretary Geithner are all talking about this recovery we are supposed to be in. Apparently, to them, we have been in a recovery since the middle of 2009, but real individuals don’t see that. The less they are finding jobs, the longer they are out of jobs, the more expensive it is to buy food, gas, and other basic items, including their health care, and the more people facing foreclosures amidst the month of lowest housing prices since this ‘recovery’ officially started, the more apparent it is, that we aren’t in a recovery.
We are in a weak, not a stable, situation despite all this talk. The dollar is weak, and that takes money out of the pockets of for instance, Americans, that pay more for imported items, and get less on exporting them. Also, our Treasury debt has gone up from $5.4 to $9.4 trillions in two years, that is an exceptional amount and increase. This is debt with which the government buys its own currency and circularly, its own debt, but it doesn’t get out into the real economy. As long as that is the case, as long as the economy is weak and immense debt is used to prop the dollar, and as long as there exists speculative capital seeking somewhat sure investments, at least short-term, the metal market will continue to go up. There might be days where it comes down on profit taking or other reasons, but in general it will climb higher.
Another big story, at least in the alternative financial media scene, is the effort undertaken by the Gold Anti-Trust Action Committee, GATA, to get an independent audit of the U.S. Gold reserve done and also to find out whether the U.S. central bank, the Fed, has secret swap arrangements with other central banks related to gold and maybe also silver. What is your opinion on that?
Well, the Federal Reserve is generally reticent on all audits. The fact that it took two years for them to reveal certain details of their book after the bailouts and subsidization of the banking system, shows that the Fed decides what information to provide the public carefully, as opposed to say, some independent body, conducting a proper audit and disclosure exercise. The Fed’s information was somewhat useful, providing certain extra details, but you have to question the source. It’s in the Fed’s interest to make its actions appear successful.
With respect to gold, because the Fed operates in this tomb of secrecy and lack of transparency and reports about the state of Fort Knox, it would certainly be useful to know their true position. There hasn’t been an audit for more than 50 years. Especially now, with the global economic chaos that is going on, it makes perfect sense to push for the Fed to show its hand. That said, I doubt that a full independent audit will happen, even though the lack of transparency tends to create more fear and uncertainty, or if it does, it will take a long time.
A “naive“ question related to that issue: if you have nothing to hide, you can be perfectly open about it, right?
That is very true. Related to the propping up of the U.S. banking system, the Fed promised to release everything, but only selected certain elements to reveal. It is likely that, if there even were to be an audit for gold, the same thing would occur. My guess is that we’d find a gold shortfall.
Officially, Germany has the second largest gold reserve of the world. Roughly 66 per cent of the total amount is located in the vaults of the New York Fed. Do you think that Germany should relocate its gold reserve from New York City to Frankfurt just to be on the save side in the future?
Well, I wouldn’t keep 66 per cent of my gold at the Fed. (laughs.)
If I was Germany, and taking note of what is going on in the global economy, in the U.S. economy and how the Fed is artificially propping things up, I would want to pull out my gold assets. I would want tangible physical assets in my possession. I don’t see why the German central bank wouldn’t want to do that. It just doesn’t make sense to me.
Final question: is it for you a major problem of our times that we have currencies that are backed by nothing or just by a promise to pay debts back? And also that a quasi-private organization like the Fed can create money out of nothing and has the world reserve currency in its hand?
I think the fact that the Fed is not only able to print money out of nothing, but that it has also substantially increased the printing of that money not backed by tangible gold or silver or anything for that matter, has exaggerated the problem of using debt to finance global speculation and a global economy based predominantly on paper. A high percentage of the GDP of many countries is related to nothing but financial services. So, any quasi-debt that is being used to facilitate transactions that don’t really have something behind them, shows up in stock market volume or commodities futures or options volume, but that is not the real economy. Paper profits do not translate to wages supplying sustenance to most people. These aren’t real things,just cheap borrowed money looking for temporary places to be. Given the increased supply of cheap money, absent the requirement for tangible assets behind it, the global paper economy has actually accelerated in scope, since the Fall of 2008, despite world financial leaders saying they have diverted disaster, and that is indeed a very dangerous state of affairs.
Thank you very much for taking your time, Ms. Prins!
i See Nomi Prins: “Egypt’s Uprising: Direct Response to Ruthless Global Capitalism“, published at Alternet, February 4, 2011 under:
and “Egypt Needs an Economic Revolution and the US could learn from its unrest“, published at
New York Daily News, February 13, 2011 under:
ii Compare for example DJ Pangburn: “Wikileaks: U.S. Government Behind Egypt Revolution?“, published at Death and Taxes on February 4, 2011 under:
See also “Egypt protests: secret US document discloses support for protesters“, published at The Telegraph on January 28, 2011 under:
and Mahdi Darius Nazemroaya: “Libya: Is Washington Pushing for Civil War to Justify a US-NATO Military Intervention?“, published at Global Research on February 24, 2011 under:
iii Compare for example David Bailey / Stefanie Carano: “Wisconsin governor unveils deep spending cuts“, published at Reuters on March 1, 2011 under:
The report says: “Wisconsin Republican Gov. Scott Walker unveiled a budget that makes deep cuts in spending on Tuesday, and he said the cuts could be even worse if Democrats continue to block his plan to curb the power of public sector unions.
Walker, whose proposal to restrict collective bargaining sparked huge protests and a nationwide debate, said his budget would reduce state spending by 6.7 percent and slash more than 21,000 state jobs.“
iv Compare for example Jeff Rubin: “Only A Recession Stands in the Way of $200 Oil“, published at Jeff Rubin’s Smaller World on March 2, 2010 under:
v Compare “American Eagle Silver Uncirculated Coin“ under:
which states: “Production of United States Mint American Eagle Silver Uncirculated Coins continues to be temporarily suspended because of unprecedented demand for American Eagle Silver Bullion Coins. Until recently, all available silver bullion blanks were being allocated to the American Eagle Silver Bullion Coin Program, as the United States Mint is required by Public Law 99-61 to produce these coins ‘in quantities sufficient to meet public demand . . . .’“