Wednesday, May 12, 2010

夢醒時分 The moment when dream is awakened...

你是否和我一 樣,發覺身邊的親戚和朋友,似乎少了許多。

I wonder you feel the same as me ; all the sudden I realized friends and relatives around me seems to get less and less.


Those years when the New Year drew near, all sorts of gathering appointments almost completely filled the diaries, but this year seems so quiet.


Even in normal time, phone calls become less and less, face to face meet up also become much less.

也許,大家各忙各的;或者,目前流行“宅生活”,儘量避免出 門。

Perhaps, everybody is busy with their own things, or perhaps, nowadays people prefer to stay in.

也不盡然如此。 再想一想,很多老友和親戚,已經不在了。嗟!大吉利是,他們都還好好的,只是離開了馬來西亞。

However, it is not entirely like this, thinking further, actually old friends and relatives are not around any more. God bless, they are still alive and well, they just left the country, Malaysia.

去了中國大陸開工廠;王子不做工程師,移民到澳洲開小食檔;阿風離開本地大學,去香港做講師;青蛙去了台灣,開 展事業第二春;還有的到了美國、英國,唔,還有去印尼的……。

They have gone to China to set up factories; Ah Wang quit his engineer job and migrated to Australia to set up his little food store business, Ah Fong left the local University went to Hong Kong as a lecturer. 'Frog' went to Taiwan to pursue his second career life. Others went to America, England, even Indonesia...

起初,以為這只 是個別現象,逐漸的,旁人也有同樣發現;原來,這不是個別現象,而是社會現象;這不是少數,而是相當大的數目。

At first, I thought these are individual cases, but gradually, people around me realized the same, these are not individual cases but a general symptom of our society. they are not small numbers but they are pretty big ones indeed.

外交部早前披露了一個數字,說明這個現象是多麼真實,多麼貼 近。

Department of Foreign Affairs released the figures earlier and confirmed the situation is real.

從去年3月到 今年9月,已經有30萬大馬人移民他國;其 20萬人是今年1月到8月出走的數目。

From March 2008 thru September 2009, a total of 300,000 Malaysian migrated to other countries, among them 200,000 left between Jan - Aug 2009. (in 8 months)

累積下來,已經有 超過200萬大馬人移民,接近今天印尼外勞在大馬的人口。

Cumulatively, 2 million Malaysians migrated, this figure is close to the number of Indonesian workers in Malaysia today.


The difference is, those migrated are mostly professional and middle class people.


They have many reasons to leave: pursue career advancement, for the future of their children, in search of better life and environment... In one sentence, they lost hope of Malaysia.

50年前,大家 說,馬來西亞真好,好過香港,甚至日本。

50 years ago people said: Malaysia is very good, better than Hong Kong and even Japan.


30 years ago people said: Malaysia is not bad, comparable to S. Korea and Taiwan. (No mention of Hong Kong and Japan any more).

年前,大家 說,馬來西亞還可以,至少超越中國、泰國(不能和台、韓比了)。

20 years ago people said: Malaysia can, at least do better than China and Thailand (Cannot compare with Taiwan and Korea)

年前,大家 說,馬來西亞再差,還不至於像越南、印尼(中國已是不同級別)。

10 years ago people said: No matter how bad Malaysia is, it cannot be worse than Vietnam and Indonesia. (China is already in a different category).

今日,越南和印尼的經濟成長率遙遙領先大馬,社會活力和知 識發展也勝過一籌;距離愈來愈近了。

Today, the economic growth rate of Vietnam and Indonesia already far exceeds that of Malaysia, Social activity and intellectual development of the country are also better, the gap between us and them is closing up.


Why worry? Phillipines, Cambodia and Myanmar are still behind us.

但是,一位經濟 學家最近到菲律賓考察之後,認為再過20年,大馬可以取代菲律賓,出口馬籍女傭到全世界 了。

However, according to an economist who recently surveyed Philippines, he think in 20 years' time, Malaysia will replace Philippines to become the World exporter of Malaysian maids.

半個世紀以來,馬來西亞是在大宅院裡,用封建方式,分配祖 宗家業,消耗社會資源,浪費和逼走人才;不談競爭力,忽 略生產力,討厭績效制。

Over half a century, Malaysians live in the big old imperial housing complex, closed up and survive on properties left behind by the ancestor; continued to consume up social resources, wasteful, and drove away talents; they never talk about competitiveness, totally neglected productivity, and hated meritocracy.

亞洲金融風暴來襲時,大馬把門關起來,以為避過一劫,有 人還自我陶醉,自以為是天才策略。

When Asia economic storm hit in 1997, Malaysia closed their doors, thinking we beautifully avoided a disaster, they even think of themselves as genius, being able to handle the situation so well.

然而,其它國家面對風暴,走出風暴,進行體質改革,跨步向 前,登上另一個水平;大馬卻還在原地踏步。

However, just look at other countries in our neighbourhood ; they stood up, faced the storm, and walked out of the storm. They overhauled their system, improved the processes and marched forward ; they moved up to a new level. And Malaysia, still walking on the spot . . !


Dear Malaysia, it's time to wake up !
We are very very late now !

Gold surges, approaches new record

NEW YORK (AP) -- Gold surged Tuesday, nearly setting another record high, as investors had second thoughts about how much long-term debt relief a European bailout package will provide.

Investors returned to safe investments again, a day after stocks and other riskier assets rallied on news that European leaders agreed to a nearly $1 trillion rescue package aimed at helping Greece and other weak European economies manage their debt loads.

Gold for June delivery jumped $19.50 to settle at $1,220.30 an ounce. Earlier in trading, gold rose as high as $1,225.20 an ounce, just shy of the record $1,227.50 it set in December.

Aside from Monday's pullback, gold has climbed steadily in recent days as investors sought safety amid Greece's debt crisis and fears that it would spread, undermining Europe's shared currency.

Gold is "really being looked at as an alternative currency right now," said Nicholas Brooks, head of research and investment strategy at ETF Securities.

Investors are especially favoring gold over the euro, which has fallen sharply against the dollar in recent weeks because of the Greek debt crisis. The euro is hovering near its lowest level against the dollar in 14 months.

Other precious metals, particularly silver, followed gold higher.

Silver for July delivery jumped 74.2 cents, or 3.8 percent, to settle at $19.294 an ounce. July platinum rose $7.30 to $1,700.80 an ounce, while June palladium rose $7.70 to $532.20 an ounce.

July copper fell 2.15 cents to $3.2065 a pound.

The dip in copper comes after a new report showed inflation accelerated in China in April. If inflation continues to be a problem, China could move to raise interest rates in its latest effort to slow down the country's economic growth. China is the largest importer of copper, and any moves to cool its economy could hurt demand for the industrial metal.

Energy prices were narrowly mixed. Benchmark crude for June delivery fell 43 cents to settle at $76.37 a barrel on the New York Mercantile Exchange.

In other June contracts, heating oil rose 1.99 cents to settle at $2.1401 a gallon. Gasoline rose 2.26 cents to $2.1952 a gallon. Natural gas dipped 3.9 cents to $4.131 per 1,000 cubic feet.

Gains and beans rose Wheat for July delivery rose 0.5 cent to $4.9325 a bushel, while corn rose 6.5 cents to $3.77 a bushel. Soybeans rose 5 cents to $9.66 a bushel.

Here We Go, The Crisis Moves to California: $18.6 Billion Budget Deficit

California Governor Arnold Schwarzenegger will seek “terrible cuts” to eliminate an $18.6 billion budget deficit facing the most-populous U.S. state through June 2011, his spokesman said, according to Bloomberg.

“We can’t get through this deficit without very terrible cuts,” Schwarzenegger spokesman Aaron McLear told reporters in Sacramento. “We don’t believe that raising taxes right now is the right thing to do.”

In January, the governor said California may have to eliminate entire welfare programs, including the main one that provides cash and job assistance to families below the poverty line, without an influx of cash from the federal government.

California has the lowest credit rating among U.S. states. A taxable California bond maturing in 2039 traded for a yield of 7.08 percent today, up from an average of 6.87 percent on May 6, according to Municipal Security Rulemaking Board data.

Watered Down Audit the Fed Bill Passes, Ron Paul Says Senator Sanders is a Sell Out

Ron Paul regarding the Senate Audit the Fed bill:

Bernie Sanders has sold out and sided with Chris Dodd to gut Audit the Fed in the Senate. His “compromise” is what the Adminstration and banking interests want: they’ll allow the TARP and TALF to be audited, but no transparency of the FOMC, discount window operations or agreement with foreign central banks. We need to take aciton and stop this!

I am outraged. The Senate just voted down the Vitter Amendment and against a real audit of the Federal Reserve. My entire team and I are going to work very hard to make sure the American people know who voted right, and who voted with the banking special interests.

[source: Ron Paul's Facebook Page]

ORIGINALLY POSTED May 11, 2010 13:50

The Senate has passed what is being called the Audit the Fed bill with overwhelming support (96-0).

Up until about last Thursday (coincidence?) there was a possibility through the Vitter amendment (see below) that the Audit the Fed bill in the Senate was going to actually audit Fed monetary policy and discount window transactions as per the House of Representative’s bill (HR1207) which passed with significant support last year. The new bill, which was passed in the Senate, was changed by Senator Sanders at the very last minute, according to Ron Paul. Additionally, any hope of the Vitter amendment being passed seems to have been wiped out by Thursday’s stock market crash, which we have suggested was an attack on our financial system and a clear message to Congress by parties interested in keeping Fed activities secret.


A compromise amendment requiring the GAO to conduct a one-time audit of the Federal Reserve’s emergency-response programs unanimously passed the Senate by a 96-0 vote. The amendment had been introduced by Sen. Bernie Sanders (I-Vt.) and calls for for releasing the names of institutions that received in total more than $2 trillion in loans from the central bank during the peak of the financial crisis.

Sanders had originally used the language of Ron Paul’s HR 1207, which passed in the House as an amendment last year, but later changed his amendment under pressure by the Federal Reserve and the Obama administration. Sen. Vitter reintroduced an amendment with the original Audit the Fed language.

Basically, the Fed will now give us the names of the banks they lent to and tell us how much money they spent on office supplies, but no real information will likely be shared with the public. This is 21st century government transparency.

David Vitter, Republican of Louisiana, attempted to keep Ron Paul’s original language in the bill, but for some unknown reason (ahem…), the Senate rejected this amendment 37-62.

Senator David Vitter, Republican of Louisiana, put forward an amendment that would have mirrored Ron Paul’s tough Audit the Fed language, but the Senate rejected it today. The vote was 37 to 62. (The Senate instead passed a modified “placebo” amendment that had the support of the Obama administration.)

Before the vote, Vitter appealed for support: “I urge all of my colleagues, Democrats and Republicans, to support both amendments to have full openness and accountability and transparency with all the protections that are included against politicizing individual Fed decisions.”

Every Senator, Republican and Democrat, who voted against this amendment needs to be sent home in the next election cycle. With this vote, they have essentially told the American people that we don’t need to know how the Federal Reserve engages in lending, what assets they have on their books and what they have been doing with the US dollar.

The Federal Reserve’s decisions affect every single American, including those who have yet to be born. The issue of transparency shouldn’t even be an issue! This is common sense, is it not? We do not need “one time disclosures” as per the Senate bill. We need constant transparency. Does anyone really trust the Fed, Treasury and other to do the American people right if there is no cross-check?

This is getting more ridiculous by the day.

Economist Tim Madden: The PIIGS Brief: understanding how oligarchs rig, loot our economies. 2 of 4

Tim Madden is an economist with expertise on credit and banking. Tim and I are colleagues in lobbying government for public banking, with concentration in the US for state-owned banks (and here). The good news is that structural solutions to our economic controlled demolition are obvious and simple; and explained beautifully by many of America’s brightest historical minds. The bad news is that we’re still mired in oligarchic looting of our economies.

Tim’s following article explains collusion of government and judicial “leadership” to facilitate criminal looting through parasitic credit practices. This four-part article explains the principle and law, details a legal example of criminal looting with “official” collusion, and applies this to our international economy.
Tim can be reached at:
For a US face to what Americans are discovering as rigged-casino economics, also consider Fred Burks’ work, like this one.
The article is in four parts (links will be added; one each day: Part 1, Part 2, Part 3, Part 4).
Hell claims his right, and with a roaring voice
Says, “Faustus, come; thine hour is almost come!”
- Christopher Marlowe, The Tragical History of the Life and Death of Doctor Faustus
Interest Front-loading = Leverage, Leverage, Leverage.
A single critical factor lies at the heart of the global financial crisis, and that is the ability of financial institutions to conceal or otherwise misrepresent interest, unlawfully capitalized-in-advance, as principal on the face of a financial instrument or “valuable security” as called under the Criminal Code of Canada. The process is called front-loading and its actual and legal significance is that it is mala in se or evil/wrongful of itself, and has both judicial and common law recognition as such in many countries, and especially and repeatedly in Canada.
Without getting too much into the technical details, at a stated rate of 12% per annum, for example, $2,000 worth (or 2%) of concealed loan fees on a nominal $100,000 security will leverage the total interest cost by over $30,000 over a standard (25-year) amortization period – a 15-to-1 ratio. The greater the front-loading, the exponentially greater the fraud against both the original borrower and the markets into which the securities are sold. If the concealed fees are increased to 4% or $4,000, then the extra cost, per $100,000 of nominal principal, increases to $60,000. A 4% increase in concealed fees causes a 40% increase in the time and total interest payments needed to pay off the security. That is why Parliament has repeatedly made front-loading illegal since 1880.
By 1939, many Canadian Members of Parliament had become so frustrated with the repeated failure and constructive refusal of the commercial courts to enforce any and all laws against the practice of front-loading, that they insisted on the addition of a preamble (and directly related subsections copied below) to their then latest effort (Small loans Act of 1939 (2 GEORGE VI. CH. 23.)). The legal purpose of a preamble is to spell out the evil to be prevented or remedied by a statute, to prevent judges from asserting some other purpose in defeat of the law’s true intent. Even after a statute is repealed, the preamble stands and remains as common law recognition of the evil so identified.
In terms of the real and ultimate effect on people’s lives today, including the global financial crisis, these following are arguably the most important words (or concept) ever written (emphasis added):
Whereas it has become the common practice for money-lenders to make charges against borrowers claimed as discount, deduction from an advance, commission, brokerage, chattel mortgage and recording fees, fines and penalties, or for inquiries, defaults or renewals, which, in truth and substance are, in whole or in part, compensation for the use of money loaned or from the acceptance of risk of loss or are so mixed with such compensation as to be indistinguishable therefrom and are, in some cases, charges primarily payable by the lender [i.e., in respect of services consumed by and for the lender] but required to be paid by the borrowers; and whereas the result of these practices is to add to the cost of the loan without increasing the nominal rate of interest charged [i.e., to disguise the true amount of principal and rate of interest] so that the provisions of the law relating to interest and usury have been rendered ineffective: Therefore His Majesty, by and with the advice and consent of the Senate and the House of Commons of Canada, enact as follows:-
2.(a) "cost" of a loan means the whole of the cost of the loan to the borrower whether the same is called interest or is claimed as discount, deduction from an advance, commission, brokerage, chattel mortgage and recording fees, fines, penalties or charges for inquiries, defaults or renewals or otherwise, and whether paid to or charged by the lender or paid to or charged by any other person, and whether fixed and determined by the loan contract itself, or in whole or in part by any other collateral contract or document [side agreement] by which the charges, if any, imposed under the loan contract or the terms of the repayment of the loan are effectively varied.
6.(2) The cost of any such loan or any part thereof ... shall not be compounded or deducted or received in advance. (i)
The above preamble and provisions were intended, from a certain perspective, to protect borrowers from merely being deceived as to the true rate of interest defined by the true and complete terms of a credit/loan/security contract. But the words underlined in the preamble (commencing “…and whereas the result of these practices…”) can also be logically replaced or augmented with “…the result of these practices is to facilitate the systematic registration and trade in security instruments which systematically misrepresent that a greater principal amount had been advanced or invested, and at a lower rate, than the actual transactions to which the securities correspond, and which transactions-in-fact define and determine the security-in-fact of the said instruments.”
Without that ability-in-fact of financial institutions to so falsify, and trade in, the falsified security instruments , the global financial crisis could not exist. It is the sine qua non, or one essential element, of all financial pyramid schemes in practice.
Canadian Crown courts forsake legal duty, in aid and furtherance of Crown dispensation scheme
The Criminal Code amendment became law in January of 1981 and for about the following six years the commercial/civil courts at all levels in Canada made a series of increasingly and transparently contrived rulings on the meaning and effect of the criminal interest rate law under a commercial (credit) contract. In virtually every case the actual intent of the court (to any sufficiently sophisticated observer) was obviously to avoid the resulting/concurrent issue of the financial liability of the creditor’s solicitors.
By 1987, however, a great deal of commercial uncertainty in the Canadian financial markets had resulted from the utterly confusing and contradictory rulings and rationales used by the courts to avoid applying the new law (but only to corporations, and not when the accused was a conventional criminal).
The Courts at all three levels (Ontario General Division (Queen’s Bench), the Ontario Court of Appeal, and the Supreme Court of Canada), then seized upon the case of Thomson, (William E.) Associates Inc. v. Carpenter [1989] 34 O.A.C. pp. 365-375, to issue a ruling that appears to have nominally settled the matter, but which constituted and continues as technically an act of sedition and insurrection against the lawful authority of the Parliament of Canada, as well as a prima facie offence by the Court itself under ss. 462.31(1) (laundering proceeds of crime) (also contrary to the treaties).
The primary decision explaining the courts’ reasoning was issued as a unanimous decision of a panel of the Ontario Court of Appeal that was then ratified by the Supreme Court of Canada without additional reasons.
Ground Zero – the Thomson decision
The Thomson case involved several independent elements that are common devices for the falsification of securities, and which made it a perfect storm of factors for the courts’ unlawful, illegal and utterly reckless intervention.
William E. Thomson was a director of a mining company located (the mine) in the U.S. but whose corporate head office was in Toronto (Canada). From my reading of the trial judge’s decision, the company had been in serious financial difficulty (likely imminent bankruptcy/insolvency) and needed approximately $200,000 of operating capital to stay afloat for another 90 days (it appeared to me that the company’s intent was to defraud certain secured and unsecured creditors, but such is not necessary to establish here (although technically such intent is automatically established on the facts)).
Mr. Thomson also owned a credit company called William E. Thomson Associates Inc. that appears to have specialized in making short-term loans at very high interest rates to companies in financial difficulty. Mr. Thomson had explained to the other board members that he had personal connections at the Canadian Imperial Bank of Commerce (CIBC) and that he could obtain the necessary funds on behalf of the mining company.
The final arrangement was that Thomson Associates Inc. would advance a net $205,000 in exchange for a promissory note issued and signed by officers of the mining company claiming that the principal sum of the advance was $250,000, with interest at “CIBC prime plus 2%”, at the time about 18% per annum in total. The promissory note was due in 88 days and the real rate of interest defined by the actual terms was 145% per annum, about two-and-a-half times the criminal threshold of 60%, and the court found and accepted the amounts and timing as findings of fact.
According to the trial judge the whole arrangement was coordinated by Mr. Thomson’s solicitors, which the trial judge had described as “a leading Toronto law firm”. The solicitors had clearly understood that what they were doing was criminal because they had taken clear and calculated steps to conceal what they were doing (in law such is prima facie evidence of mens rea or guilty mind in a criminal proceeding). And they made a critical error in the execution.
Management at the CIBC branch where Mr. Thomson obtained his funds was aware of the real terms of the arrangement and would only agree to advance the net $205,000. If Mr. Thomson and his leading Toronto law firm wanted their extra $45,000 in concealed interest-capitalized-in-advance, then they would actually have to collect it at the end of the 88-day term. As a result, the parties failed to go through the motions of paying the $45,000 in advance by secret (unregistered) side-agreement from the nominal proceeds, as per the documentation prepared by the solicitors. They simply falsified the documents.
Note also that the trial judge was technically incorrect in that the $45,000 fee had in fact been compounded at time zero (infinite rate of conversion/compounding) by its inclusion in the “Principal Amount” of the promissory note, and then re-compounded by subjecting it to “prime plus 2%” from day one.
Also it is important to appreciate the frame of reference defined by the Criminal Code. On the facts, the lender had attempted to use the device of a criminal rate of interest to siphon off assets from a failing company. And to conceal such use through constructive and actual falsification of security documents. The relative amounts and/or that the attempt may have failed is not relevant. So there were at least three distinct layers of prima facie criminality/racketeering before the courts.
Mr. Thomson also managed to coerce (as proved-in-law by the criminal-terms-in-fact) Mr. Carpenter, a junior member of the board of the mining company, to issue a $75,000 promissory note to Thomson Associates Inc. as a personal guarantee of the company’s $250,000 “principal” debt.
Not surprisingly (except to the people directly involved), the mining company was forced into receivership/liquidation shortly thereafter and defaulted on the $250,000 note, and Thomson sued Carpenter in civil court to recover on his (Carpenter’s) $75,000 guarantee.
On the facts, Thomson Associates Inc. and its solicitors were prima facie guilty of offending (at least) ss. 347(1)(a) (arrangement to receive interest at a criminal rate), ss. 462.31(1) (laundering proceeds of crime), s. 397(1)(b)(omitting material particular from a valuable security for fraudulent purpose), s. 366 (making false documents with intent to rely upon as genuine), s. 368 (uttering false documents), s. 380 ((fraud) against unsecured creditors of the mining company), and s. 463.3(c) (counselling to commit an enterprise crime/racketeering offence, all of which are enterprise crime/racketeering offences (now and as of 2001 called “designated offences”).
The trial judge, however, (unlawfully and illegally) confined the issues to just ss. 347(1)(a) (agreement or arrangement to receive interest at criminal rate) but could not avoid two essential findings of fact and law, and so presented one as a mitigating factor of the other.
The Act states (in material part):
347. (1) Notwithstanding any Act of Parliament, every one who (a) enters into an agreement or arrangement to receive interest at a criminal rate, ... is guilty of (c) an indictable offence [a felony] and liable to imprisonment for a term not exceeding five years,...
and the appeal court found on the basis of the facts established at trial:
There is no doubt that the corporate plaintiff [Thomson Associates Inc.] committed an offence under s. 347(1)(a) by entering into an agreement or arrangement to receive interest at a criminal rate [and/but] The parties... acted on the advice of their... solicitors....
The finding of criminality of the agreement automatically implicated/criminalized Thomson’s “leading Toronto law firm” who/that had prepared the loan documentation, by ss. 462.3(c):
“enterprise crime offence [now called a “designated offence”]” means
(c) a conspiracy or an attempt to commit, being an accessory after the fact in relation to, or any counselling in relation to, an offence referred to in paragraph (a), (b) or (b.1) [e.g. ss. 462.3(a)(xiii.1) (s. 347)].
Further, the courts are legally and morally (equitably) required to take note of, and to act upon, such direct criminality that arises from the court’s own findings of fact. The offence committed by the solicitors (and by the CIBC) was and remains not a collateral offence to the lender’s principal offence, but a separate and distinct offence by the solicitors arising from (prima facie established by) the same facts. The term “enterprise crime offence” itself includes any counselling to commit as a distinct offence. (A prima facie case, as here, means accepted/proven facts sufficient to convict, such that the onus shifts to the accused (solicitor) to prove that things are not what they appear to be, or else be convicted.)
English/Canadian law is clear (with respect to both the plaintiff (Thomson Associates Inc.) and its solicitors) on the court’s moral/equitable and legal obligation.
It also does not matter that the illegality may only come to light during the course of proceedings and without having been specifically plead in advance (although that was not the case here regardless). This aspect is important due to the existence of a general understanding among lawyers that they will not accuse each other’s clients of criminal conduct in civil litigation. As a result accusations/questions of illegality often arise during and not before the proceedings.
In Snell v. Unity Finance, [English] Court of Appeal, [1963] 3 All E.R. 50, the contract was what the English call a hire-purchase agreement - a kind of rent-to-own loan arrangement. The Hire-Purchase Act required a minimum 25% down-payment on certain types of auto loans and was/is intended as general protection of investors in finance-company bonds. The purchaser/ borrower did not have the stipulated down payment and so the seller/lender (auto dealer acting as agent of the finance company) merely inflated the nominal selling price of the car in the loan contract to cover the 25%/shortfall. The trial judge referred to the dealer’s action as a “dishonourable trick” (it was in law fraud) but ruled in his favour anyway because the illegality of the contract had not been submitted in advance as an issue. The English appeal court explained why the trial judge was wrong to have done so (emphasis added):
We have been referred to a number of other cases in which that principle has been asserted. In Scott v. Brown, Doering, McNab & Co. ([1892] 2 Q.B. at p. 728), the principle was stated by Lindley, L. J., in the following terms (emphasis added):
"No court ought to enforce an illegal contract or allow itself to be made the instrument of enforcing obligations alleged to arise out of a contract or transaction which is illegal, if the illegality is duly brought to the notice of the court, and if the person invoking the aid of the court is himself implicated in the illegality. It matters not whether the defendant has pleaded the illegality or whether he has not. If the evidence adduced by the plaintiff proves the illegality the court ought not to assist him. If authority is wanted for this proposition, it will be found in the well-known judgment of Lord Mansfield in Holman v. Johnson.".
...I refer to the case for the statement of principle by Scrutton, L.J., [Re Mahmoud and Ispahani’s Arbitration, [1921] All E.R. Rep. 217; [1921] 2 K.B. 716], who said:
"In my view the court is bound, once it knows that the contract is illegal, itself to take the objection and to refuse to enforce the contract, whether its knowledge comes from the statement of the party who was guilty of the illegality, or whether its knowledge comes from outside sources. The court does not sit to enforce illegal contracts. There is no question of estoppel [i.e., any kind of waiver clause within the contract]; it is for the protection of the public that the court refuses to enforce such a contract."
The English Court of Appeal also explained that it is the nature of illegal contracts that it is often advantageous to both parties not to raise the issue of illegality. If the courts were to rely solely on the parties themselves, then two commercial parties could use the courts to systematically enforce illegal agreements that are prejudicial to third parties (e.g., bond holders or the public generally) by the simple expedient of agreeing between themselves not to raise the issue. It would be especially easy for two parties to launder money through straw-man insurance contracts between themselves, ratified by a court judgement or payment order.

Part 3 tomorrow...

Coldest weather in 30 years marks the start of a series of extreme winters

After enduring the coldest winter for 30 years, you might have been hoping for some respite from the cold weather.

However, scientists are now warning that Britain can expect to endure a series of extreme winters - the like of which have not seen for more than 300 years.

Researchers have found that low solar activity - marked by a decrease in the sun's magnetic field - influences the weather conditions across northern Europe.

The last time the sun showed similar behaviour, between 1650 and 1700, temperatures dropped so low that Londoners were able to skate and hold fairs on the iced-over River Thames.

According to a study published today, we are moving into "an era of low solar activity which is likely to result in UK winter temperatures more like those at the end of the Seventeenth Century."

According to Mike Lockwood, one of the main researchers, the latest winter marks the start of a Maunder minimum - when solar activity falls for a prolonged time.

The sun's magnetic field is thought to influence the jet stream - a fast-moving, high altitude current of air which moves eastwards at 35,000ft over the Atlantic.

During the famously cold winters of the late 1600s the mild westerly winds were blocked and replaced by much colder blasts from the north-east - bringing Arctic conditions with them.

The link between weaker solar activity and cold winters was made after experts found similarities between early weather records and this year's data.

"This year's winter in the UK has been the fourteenth coldest in the last 160 years and yet the global average temperature for the same period has been the fifth highest," said Prof Lockwood, a space physicist at the University of Reading's department of meteorology. "We have discovered that this kind of anomaly is significantly more common when solar activity is low," he added. "Temperatures should not fall as low as they did in 1684 but we can expect an increased number of cold winters."

Experts from Germany, Korea and the UK's Science and Technology Facilities Council also contributed to the paper published in the journal Environmental Research Letters.

The Second Leg of the Great Depression Was Caused by European Defaults

Many Americans know that the Great Depression was started by the bursting of the giant Wall Street bubble of the 1920's (fueled by the use of bank deposits on speculative gambling, which is why Glass-Steagall was passed) , which in turn caused a run on American banks.

But most Americans don't know that the second leg of the Depression was caused by European defaults.

As Yves Smith reminds us:

Recall that the Great Depression nadir was the sovereign debt default phase.
The second leg down of the Depression was larger than the first, as shown by this chart of the Dow:

[Click here for full chart]

The second leg down was primarily initiated by the failure of the Creditanstalt bank in Austria. Creditanstalt (also spelled Kreditanstalt) declared bankruptcy in May 1931.

As Time Magazine noted on November 2, 1931:

May 14 [1931]: First thunderclap of the present crisis: collapse in Vienna of Kreditanstalt, colossal Rothschild bank, which is taken over by the Austrian Government, shaking confidence in related German banks.

A book written by Aurel Schubert, published by Cambridge University Press, points out that:
Austria played a prominent role in the worldwide events of 1931 as the largest bank in Central and Eastern Europe, the Viennese Credit-Anstalt, collapsed and led Europe into a financial panic that spread to other parts of the world. The events in Austria were pivotal to the economic developments of the 1930s ....

As Megan McArdle points out:

The Great Depression was composed of two separate panics. As you can see from contemporary accounts ... in 1930 people thought they'd seen the worst of things.

Unfortunately, the economic conditions created by the first panic were now eating away at the foundations of financial institutions and governments, notably the failure of Creditanstalt in Austria. The Austrian government, mired in its own problems, couldn't forestall bankruptcy; though the bank was ultimately bought by a Norwegian bank, the contagion had already spread. To Germany. Which was one of the reasons that the Nazis came to power. It's also, ultimately, one of the reasons that we had our second banking crisis, which pushed America to the bottom of the Great Depression, and brought FDR to power here.

Not that I think we're going to get another Third Reich out of this, or even another Great Depression. But it means we should be wary of the infamous "double dip" that a lot of economists have been expecting.
Way to go, guys ... you're re-creating history.

Lehman Bros. linked to drug money

Click this link .....

Bankers Destroy Global Economy By Design To Consolidate Power

American taxpayers have been freshly liberated of hundreds of billions more dollars as part of the IMF’s new bailout package which is principally going straight to European banks, in addition to the Federal Reserve program to ship U.S. dollars to Europe, in a move that represents little more than a desperate effort to save the Euro and rescue the credibility of economic global governance.

“The Federal Reserve late Sunday opened a program to ship U.S. dollars to Europe in a move to head off a broader financial crisis on the continent,” reports the Associated Press.

“The Fed’s action reopens a program put in place during the 2008 global financial crisis under which dollars are shipped overseas through the foreign central banks. In turn, these central banks can lend the dollars out to banks in their home countries that are in need of dollar funding to prevent the European crisis from spreading further.”

As we reported last time this program was enacted, the Federal Reserve refused to say which foreign banks had received an estimated half a trillion dollars in credit swaps. The program is unconstitutional under Article 1 of the U.S. Constitution which states, “No money shall be drawn from the treasury, but in consequence of appropriations made by law.”

In addition to the credit swap program being re-enacted, the IMF portion of a separate European bailout package amounts to around $287 billion dollars. Since American taxpayers represent around 20 per cent of IMF funding, they will fork out something in the region of $57 billion dollars which primarily go straight to French and German banks, not to mention the billions more in transfers of wealth that will occur through the Fed’s credit swap program.

“Politicians everywhere applaud this most recent rape of America’s working class, even as communism is now the global ideology,” writes Tyler Durden. “Who needs when reality is now 10 times more surreal. And the direct recipients of taxpayer generosity: SocGen, AXA, Dexia, CA and all other French and German banks, which right now are all up ~20%.”

But it’s not just American taxpayers who have been looted to save the crumbling facade of the Euro single currency. British taxpayers will be forced to underwrite an estimated £10 billion pounds of the bailout as part of the IMF package. And all for what? The two primary reasons for the bailout are to rescue ailing confidence in the globalist Euro single currency, which was forced upon European citizens against their will when it was introduced, and to prop up the casino stock markets. Neither of these justifications provide any benefit for the average citizen or the middle class, and yet we are the ones paying for it with our depreciated savings, our evaporating pension funds and our crumbling infrastructure and public services, which are all being forgotten in pursuit of one massive banker bailout after another.

Credibility in the agenda to impose global economic governance run by the Nazi-founded Bank for International Settlements rests in upholding confidence in the Euro. If the Euro collapses and ceases to exist, which many financial experts are now seriously predicting, then the entire raison d’être for centralized economic planning in pursuit of global governance will be completely discredited. The globalists must save the Euro in order to legitimize future plans for a North American Union single currency which will replace the dollar.

When the dollar sank to alarming lows against other global currencies little over two years ago, we saw none of the same concern or hand-wringing on behalf of the elite as we are seeing for the Euro. That’s because the survival of the dollar is not part of their framework of global economic governance. For all the elite cares, the dollar can crash and burn but rescuing the Euro from the same fate is imperative. Indeed, it appears as if the chaos in Greece is being deliberately provoked and hyped in order to justify the continued re-alignment and centralization of the entire financial system into fewer globalist hands.

As The Economic Collapse Blog writes today, “Could Greece bring down the entire world economy? Hardly. The truth is that you could remove Greece from the world economy tomorrow and most people would hardly notice. The economy of Greece is only about 2% the size of the United States economy, and it takes in less than 0.1% of U.S. exports. But we are being led to believe that Greece has suddenly become the epicenter of a financial crisis which is going to bring down everything. Could it be that this Greek debt crisis is purposely being hyped and manipulated? Could it be that this Greek debt crisis is yet another example of the “problem, reaction, solution” paradigm that the global elite have employed so many times before?”

“Right now almost all of the governments in the western world operate debt-based economies that rely on ever-inflating amounts of paper money in order to survive. The elite international bankers of the world have made a killing by creating money out of nothing and loaning it to the nations of the world. The interest on those loans is the primary method by which the wealth of the world is slowly transferred into the hands of the ultra-wealthy. When the interest on the loans starts to become too much for a particular nation, they borrow even more money so that they can stay afloat. It is a debt trap that is designed to continue indefinitely. Even the most powerful nations in the world are caught in this debt trap. In fact, most people are absolutely amazed when they learn that it is mathematically impossible to pay off the national debt of the United States. But the United States is far from alone in that respect. Almost all of the other major nations in the world are in the exact same boat.”

It’s horribly ironic that the Euro, global economic governance, and the entire European project was sold under the justification that centralization meant stability, and yet now we are being told that the chaos in Greece is contagious and could spread to Spain, Portugal and Italy unless taxpayers are looted for billions and trillions more.

Reality has proven that centralization of economies under the banner of the EU and the Euro causes economic chaos to go viral. When nearly every country on a single continent uses the same currency, they infect one other with the disease. This is then habitually exploited as an excuse with which to rob taxpayers whose living standards are declining as their currency devalues and their pensions wither on the vine.

The Tonka Report Editor’s Note: And again the question is, will you fight back and educate yourselves as to who is responsible and why this is all happening? Are you a free human being or a slave to the globalists?SJH

Link to original article below…

Communities print their own currency to keep cash flowing

A small but growing number of cash-strapped communities are printing their own money.

Borrowing from a Depression-era idea, they are aiming to help consumers make ends meet and support struggling local businesses.

The systems generally work like this: Businesses and individuals form a network to print currency. Shoppers buy it at a discount — say, 95 cents for $1 value — and spend the full value at stores that accept the currency.

Workers with dwindling wages are paying for groceries, yoga classes and fuel with Detroit Cheers, Ithaca Hours in New York, Plenty in North Carolina or BerkShares in Massachusetts.

Ed Collom, a University of Southern Maine sociologist who has studied local currencies, says they encourage people to buy locally. Merchants, hurting because customers have cut back on spending, benefit as consumers spend the local cash.

"We wanted to make new options available," says Jackie Smith of South Bend, Ind., who is working to launch a local currency. "It reinforces the message that having more control of the economy in local hands can help you cushion yourself from the blows of the marketplace."

About a dozen communities have local currencies, says Susan Witt, founder of BerkShares in the Berkshires region of western Massachusetts. She expects more to do it.

Under the BerkShares system, a buyer goes to one of 12 banks and pays $95 for $100 worth of BerkShares, which can be spent in 370 local businesses. Since its start in 2006, the system, the largest of its kind in the country, has circulated $2.3 million worth of BerkShares. In Detroit, three business owners are printing $4,500 worth of Detroit Cheers, which they are handing out to customers to spend in one of 12 shops.

During the Depression, local governments, businesses and individuals issued currency, known as scrip, to keep commerce flowing when bank closings led to a cash shortage.

By law, local money may not resemble federal bills or be promoted as legal tender of the United States, says Claudia Dickens of the Bureau of Engraving and Printing.

"We print the real thing," she says.

The IRS gets its share. When someone pays for goods or services with local money, the income to the business is taxable, says Tom Ochsenschlager of the American Institute of Certified Public Accountants. "It's not a way to avoid income taxes, or we'd all be paying in Detroit dollars," he says.

Pittsboro, N.C., is reviving the Plenty, a defunct local currency created in 2002. It is being printed in denominations of $1, $5, $20 and $50. A local bank will exchange $9 for $10 worth of Plenty.

"We're a wiped-out small town in America," says Lyle Estill, president of Piedmont Biofuels, which accepts the Plenty. "This will strengthen the local economy. ... The nice thing about the Plenty is that it can't leave here."

FOREX-Euro falls as market doubts rescue package

* Relief impact of emergency aid package prove temporary

* Euro EUR= falls 0.7 percent to $1.2700

* Focus back on structural problems plaguing euro zone

(Adds quote, detail)

By Neal Armstrong

LONDON, May 11 (Reuters) - The euro fell on Tuesday as the relief rally unleashed by an emergency aid package to prevent the spread of a euro zone debt crisis dissipated and the focus switched back to structural problems plaguing the bloc.

European Union finance ministers, central bankers and the International Monetary Fund hammered out an emergency package of loan guarantees to euro zone members over the weekend to try to shore up sentiment in its bond markets and the euro. [ID:nSGE6490HH]

The "shock and awe" plan initially boosted sentiment, propelling the euro EUR= close to $1.31 on Monday and off a 14-month trough of $1.2510 hit on trading platform EBS last week when investors had feared the sovereign credit crisis could spread from Greece to other euro zone countries.

At 0930 GMT on Tuesday, the euro had slipped back to trade with losses of around 0.8 percent at $1.2675, with traders noting sales from macro accounts. Poor liquidity was said to be exacerbating moves.

"Monday was a relief rally and now it's back to reality as people are looking at the facts. Greece has to consolidate its finances and the euro is still not attractive," said Antje Praefcke, currency strategist at Commerzbank.

Investors doubt whether the Greek government will be able to carry out the austerity measures required to restructure its public finances. Other states such as Portugal and Spain also have budgetary concerns.

Moody's Investors Service said on Monday it may still downgrade Portugal and Greece's rating could fall to junk grade. [ID:nN10227186]

The euro fell 1.5 percent to 117.42 yen EURJPY=R, a day after jumping around 4 percent versus the Japanese currency.

Analysts said worries over the specific details of EU/IMF aid package were also weighing on the currency.

"There are question marks regarding the details of the package, such as how bond purchases would be sterlised. Negative sentiment over the currency persists and it should remain under further pressure," said Paul Mackel, director of currency strategy at HSBC.

The options market was showing a clear bias for euro downside. The one-month risk-reversal EUR1MRR=ICAP was trading at 3.00 for euro puts versus 2.65 on Monday, moving beyond the previous record seen at the peak of the Lehman crisis.


Political uncertainty put pressure on sterling as Britain's two big rival political parties planned to resume courting the Liberal Democrats after Prime Minister Gordon Brown said he would step aside to try to keep his Labour Party in power. [ID:nLDE6492UW]

Sterling was able to pare losses to trade at $1.4845 versus the dollar GBP=D4 after UK industrial output jumped more than six times faster than expected in March. [ID:nONS006645]

The dollar was down 0.8 percent at 92.43 yen JPY=. Traders said the yen was helped by Japanese exporters selling other currencies.

The yen's climb picked up pace as stocks slipped into negative territory .FTEU3, prompting investors to reduce risks.

The European Bailout: Not a Very Promising Start

Many people have written insightful criticisms of the European bailout. For example, Tyler Durden, Joe Weisenthal and Gregory White point out that the French banks are the real winners of the bailout (but don't forget JP Morgan).

Ron Paul points out that the Fed opening its swap lines to Europe violated its promise to Congress not to do so. Paul also says the bailout will help lead to the destruction of all fiat paper currencies, ensuring that "gold will rule the roost".

And see Mish's roundup for more general criticisms of the bailout.

Many have predicted that it is only a short-term measure to kick the can down the road. But the numbers themselves show that the bailout might not even be having a sufficient short-term effect.

For example, as the following Euro to Dollar chart shows (courtesy of Finviz), the Euro rallied, and then sunk back almost all the way to it's pre-bailout level today:

(The Euro's rally against the Japanese Yen didn't last very long, either. And Morgan Stanley's Stephen Hull thinks any rally in the Euro will be short-lived, anyway.)

As Bloomberg notes, bank swap and libor rates show that the bailout might not be enough to stem the sovereign default crisis:

Money markets and the cost of protecting bank bonds from losses show investors are concerned the almost $1 trillion rescue plan announced by European leaders may not be enough to contain the region’s sovereign debt crisis.

A credit-default swaps index linked to European banks that usually trades tighter than an investment-grade benchmark is 30 basis points higher, according to CMA DataVision. A measure of banks’ reluctance to lend remained three times higher than it was in March.


The difference between [libor] and the overnight indexed swap rate, the so-called Libor-OIS spread that rises as a signal banks are less willing to lend, climbed yesterday even after the rescue announcement. The rate advanced to 18.83 basis points, from 18.11 at the end of last week and 6 basis points March 15.

Morgan Stanley emerging market strategist Rashique Rahman says that - even after the bailout - Europe's troubles are growing:

Liquidity provision or not, sovereign credit risk has not gone away. Our work suggests ongoing deterioration of DM sovereign creditworthiness going forward, manifested by further downward credit rating pressure. Additionally, the transference of periphery Europe indebtedness to that of core Europe via the stabilization fund – and further, via ECB purchases – bears very close monitoring. Contamination to the core (of DM) lies at the heart of contagion for EM – which again is manifested through DM funding market stresses.
Nouriel Roubini told Bloomberg that the bailout is not a cure-all:

The implications of the plan require fiscal austerity and higher taxes, damping growth and possibly extending economic hardship, Roubini said.

“In the short term, raising taxes and cutting spending is going to imply further recession and further deflationary pressures in the euro zone,” Roubini said.

Greece, Spain, Portugal, Italy, Ireland and other members of the euro zone may struggle to comply with the fiscal requirements and to restore competitiveness after years of an appreciating euro boosting growth, Roubini said. Euro zone countries’ ability to act may be hindered by divided governments such as the U.K.’s hung parliament, German Chancellor Angela Merkel's weakened clout, and the continuing protests in Greece, he said.

In the longer-term, Simon Johnson points out that the bailout creates huge moral hazard risks:

This is a whole new level of global moral hazard – the result of an alliance of convenience between troubled governments in the south of Europe and the north European banks (and implicitly, north American banks) who enabled their debt habit. The Europeans promise to unveil a mechanism this week that will “prevent abuse” by borrowing countries, but it is hard to see how this would really work in Europe today.


The European Central Bank intervention and this package raise enormous moral hazard issues. The ECB’s management was forced into this kicking and screaming. It was only when they realized that the whole euro zone financial system was at risk of collapse that they threw the kitchen sink at the problem. This can now go two ways: either they tighten fiscal policy across the eurozone, and introduce much more rigorous and enforced rules on deficits and profligate credit through banks, or, they let a system persist which is another “doomsday machine” that will live again to grow, and could one day topple them.

And Johnson notes that the bailout might for even more painful decisions in the long-run:

As Willem Buiter (formerly Bank of England, now at Citigroup) remarked last week, you have the greatest incentive to default when you are running a balanced primary budget (i.e., after substantial budget cuts) and still have a large government debt outstanding. His point is that the incentive structure of these programs means they will postpone a decision to default which would otherwise be rational now.


The underlying fiscal problems in Europe could fester – and the “rules” designed to limit moral hazard may turn out to be a complete paper tiger. In that case, the Europeans again have to make a fateful decision: Do they try to inflate out of the debt burdens of their weakest member countries; or do they instead try to manage selective default, keeping in mind that most Greek debt at that stage will be held by other eurozone governments.

As Yves Smith notes:
The real problem is that there appears to be no impetus towards a longer term solution. How do solve imbalances within the eurozone? Without a plan to develop a plan on that front, this simply rearranging the deck chairs on the Titanic.
Of course, the myriad fraudulent schemes (using derivatives and other means) to hide the problems of Greece, Italy and other countries are still continuing to some extent. And the size of the too big to fails means they can take down companies or nations using high-frequency trading, short-selling, credit default swaps and other means. Indeed, Jim Rickards argues that the bailout won't really help because "Goldman can create shorts faster than Europe can print money".

Therefore, without fundamental reform of the financial system, there can be no true and lasting European recovery.

The Greek spirit of resistance turns its guns on the IMF

Years of national denial about looming bankruptcy have turned to resentment as Greece is told how it must tackle its debt crisis

Riot police, Athens, 5 May 2010

Riot police, Athens, 5 May 2010. Photograph: Louisa Gouliamaki/AFP/Getty Images

Deep inside the august halls of Athens University, the renowned political commentator Paschos Mandravelis will deliver a message this week that until very recently was lost on most Greeks.

His speech will focus on a single fact: that the country in the centre of the storm of Europe's worst crisis since the creation of the common market, missed the biggest story ever – its own looming bankruptcy. "Everyone," he says, "starting with the Greek media, was in an incredible state of denial."

Last week escapism was no longer an option as Greece's debt drama claimed its first lives and the nation, teetering on the brink of economic collapse, erupted into violent protests over unprecedented austerity measures.

The deaths on Wednesday of three Greeks, killed in a fire set off by hooded youths throwing petrol bombs into the bank in which they worked, has been the wake-up call – one more shocking than ever thought – to ask questions Greeks would have preferred never to ask.

Yesterday, as tributes continued to pour in for the victims – a man and two women, all recent British university graduates who had shown up for work despite a general strike for fear of losing their jobs – they were asking: "How could it come to this?"

"Greece," says Mandravelis, "is not only confronted with economic failure but a media failure and political failure, and that is what is so frightening."

The financial, and increasingly social, crisis gripping the country has, say analysts, brought the nation face to face with a myth: the myth of a democratic state that thrived not on meritocracy and progress but cronyism and corruption after the last chapter of its troubled history ended with the collapse of military rule in 1974.

As Athens prepares to receive the biggest bailout in history – up to €120bn dispensed from the EU and IMF over the next three years – the consensus is that Greece has reached rock bottom. A point so low that even Brigadier Stylianos Pattakos, the last of the dictators still alive, feels unabashedly vindicated. "In our time," he told the Observer in an interview, "there was no debt. Not one drachma went astray. The Greeks are not disciplined like the Germans or the British. They need authority."

Today the junta is embodied not by the likes of Pattakos, who at the age of 98 has no qualms about his role in quashing liberty in the birthplace of democracy, but the IMF. For the unions and tens of thousands who took to the streets last week – and are girding their loins for the "mother of all battles" in the weeks and months ahead – the Washington-based body is neither saint nor saviour.

Prime minister George Papandreou agreed to activate the emergency international aid after it became clear two weeks ago that Greece was heading for sovereign default, unable to refinance its staggering €300bn (£259bn) debt because of prohibitively high borrowing costs on international markets.

But for those on the left, leading the protests with flags emblazoned with the hammer and sickle, the intervention of the IMF has been the tipping point. The majority of Greeks not only see it as the harbinger of harsh economic reforms but the symbol of foreign occupation. For the abundance of conspiracy theorists on both the left and right, its involvement is part of a grander, but seemingly no less implausible, plan to subjugate Greece after draining the country of its resources.

"This has gone beyond economic matters to a battle for national independence," says Manolis Glezos, the leftist who shot to fame snatching the swastika from the Acropolis shortly after Hitler's forces streamed into Athens in 1941.

"Papandreou himself has admitted we had no say in the economic measures thrust upon us. They were decided by the EU and IMF. We are now under foreign supervision and that raises questions about our economic, military and political independence."

At approaching 88, Glezos embodies the Greek spirit of resistance – a leading light in the struggle against Nazi occupation, bloody civil war, authoritarian right-wing rule and the seven-year military dictatorship that ended with Pattakos sending a tank crashing through the gates of the Athens Polytechnic to crush the students' revolt that would pave the way to the regime's demise.

"We are," he says, "neither at the middle nor the end of political developments, of protesting what is happening in this country. We are at the beginning."

The Greeks' innate anti-authoritarianism, a legacy of 400 years of Ottoman rule, is also at the heart of the problem that has helped to push their country to what President Karolos Papoulias described last week as "the brink of the abyss".

More than any other European nation, the Greeks think nothing of taking to the streets in noisy outbursts of protests. But more than that, in a culture of cutting corners, they also have a problem with being told what to do. It is an attitude that could have profound consequences for Papandreou's ability to enforce policies that include painful wage and pension cuts – and the course of the crisis.

"The capriciousness of Ottoman rule and the weakness of the idea of the rule of law helped to shape the underlying values of Greek society and to determine attitudes to the state and to authorities that have persisted into the present," wrote Richard Clogg, Britain's pre-eminent historian of modern Greece.

Nothing encapsulates the strained relationship with authority more than the nation's predilection for avoiding the taxman – a hobby that has helped to push the public deficit to a European record – and Greeks' love-hate relationship with the state.

Assuming power after five years of scandal-plagued conservative rule last October, the Socialist government discovered that the tax inspectorate had virtually collapsed with revenue losses from tax evasion surpassing €20bn, more than any other eurozone nation.

It also emerged that fewer than 15,000 Greeks declare incomes of over €100,000, despite tens of thousands living in opulent wealth on the outskirts of the capital. A new drive by the Socialists to track down swimming pool owners by deploying Google Earth was met with a virulent response as Greeks invested in fake grass, camouflage and asphalt to hide the tax liabilities from the spies in space.

The country's black economy – estimated conservatively at 30% – has also helped to bring public finances to the point of meltdown.

"When the rest of Europe were living in dukedoms and refining democratic institutions, we were part of a huge empire living in an agrarian and feudal Balkan state," said Nikos Dimou, author of the best-selling book The Misfortune of Being Greek. "We had little relationship to our glorious past. Our institutions were imported or thrust upon us, our identity both eastern and western. It created a human being that feels very strange in his skin, culturally very different to other Europeans."

Dimou wrote the book in the latter years of the junta, but with ordinary Greeks now embroiled in the sort of soul-searching last seen at the end of the junta, the tome is selling like hotcakes. "Greeks want to know why they have got to this point, what went wrong," he says.

The austerity measures that have provoked such unrest aim to trim the budget of €30bn through 2012. Almost all are targeted at the country's dysfunctional and bloated public sector.

"Papandreou is paying for the sins of his father [former prime minister] Andreas, under whom Greece's debt soared," added Dimou. "The cuts he will have to make have never been made before. It is all very new."

But with poverty growing and the country's militant Communist party insisting that "the plutocracy pay" for the crisis, Greece could also be headed for a new class warfare the likes of which have never been seen before. Some commentators have not ruled out kidnappings and assassinations as Greek turns against Greek in the months ahead.

The conspiracy of silence that has marked Greece's troubles may be over, but the battle that could tear it apart has only just begun.

Unions warn of Greek-style riots in Britain against public sector cuts after court victory over capping of redundancies

Militant unions today sent a chilling warning of Greek-style strikes and protests after winning a major legal victory for civil servants made redundant.

The warning raises fears of months of chaos triggered by a furious public sector who refuse to accept painful changes to tackle Britain's financial crisis.

With one in five workers employed by the State, the scale of the crisis could be crippling with unions warning of a 'tidal wave' of strike action.

The Public and Commercial Services Union signalled the nightmare facing the future Prime Minister who tries to wield the axe.

Greek riot police

Predicting a riot: Left-wing Labour MPs and trades unions said they would organise Greek-style resistance to what they called the 'incoming coalition neoliberal government'

The Cabinet Office had been trying to cut a gold-plated redundancy deal for civil servants which it described as 'out of date and more expensive than almost any other available.'

But a High Court judge ruled today that Labour had acted unlawfully, and that the cost-cutting changes to redundancy payments must be scrapped after failing to get the union's approval.

The terms of the old redundancy deal was extraordinarily generous, with some long-serving civil servants eligible to get about six years' pay if they joined before 1987.

For example, a 46-year-old earning £24,000 who had been a civil servant for 25 years could enjoy a cash payment of about 6.2 years' salary, or about £150,000.

Under the new deal, the civil servant would still be eligible for a generous deal of £60,000.

By comparison, a private sector worker who earns the same money and has done the job for the same length of time would get just £8,360 under statutory redundancy rules.

Greek chaos

Greek chaos: One of the survivors is pulled out of the fire-bombed Marfin Egnatia Bank by firefighters in Athens last week

General secretary Mark Serwotka said his 270,000 members, who staged three days of strike action in March, 'refused to sit back and watch their terms and conditions being ripped up.'

He said: 'We will now be knocking on the door of the next government to remind ministers they are legally obliged to reach an agreement with us.

'If they do not meet their obligations, the union will have to consider further industrial and legal action.'

It comes amid tough warnings from other unions that any cuts will be fiercely opposed by a public sector which employs a record 6.1million people.

Left-wing Labour MPs and trades unions said they would organise Greek-style resistance to what they called the 'incoming coalition neoliberal government'.

'There is no popular mandate for cuts and, as in Greece, any attempt to impose them will be firmly resisted,' they said.

John McDonnell

John McDonnell: ' The left and trade unions will be forging a coalition to resist attacks on our communities'

Labour MP John McDonnell, chairman of the left-wing Labour Representation Committee, said: 'The public and private horse-trading masks the fact that whatever government emerges will be somewhere on the neoliberal spectrum, and will soon be driving through large scale cuts in public services, pensions and benefits.

'To face a neoliberal coalition government, the left and trade unions will be forging a coalition to resist attacks on our communities.'

Dave Prentis, general secretary of Unison, warned: 'Unison will fight tooth and nail to defend our public services, oppose more privatisation and any attempts by the new government to attack our members' pay.

'We will fight for the hundreds and thousands of jobs that are in imminent danger. We will support our members forced into taking action to protect services and jobs.'

The firefighters' union also warned that it will oppose any cuts and promised to fight 'as never before'.

Matt Wrack, general secretary of the Fire Brigades Union, said: 'We do not believe that people voted to see their emergency and other essential public services cut, to pay for the banks bail out.

'We will fight to stop our service from being cut to pieces. Local communities and workers in the public services will need to fight as never before to defend our vital public services.'

Yesterday the University and College Union said it is balloting its members over plans to change the gold-plated pension enjoyed by academics.

Under the changes, academics could be forced to pay more money into the scheme and work for an extra five years. Unions say the pension is 'deferred pay' for its poorly paid members.

General secretary Sally Hunt said: 'We cannot rule out the possibility of industrial action to protect our members’ pensions if the employers continue with their intransigent position.'

Bob Crow, general secretary of the Rail and Maritime Transport union said: 'When the British people realize just how seriously they have been misled by the political elite over the attacks on living standards and public services that have been kept under wraps, it will unleash a tidal wave of strikes and public protests that will mirror the growing resistance on the streets of Athens.

'Whatever deals are stitched together, the budget cuts will top the agenda of whoever grabs the levers of power.

'The billions in bankers' bail outs has been creamed off, chewed up and will be spat back in our faces in public spending cuts. There is no question there will be a fight back on a massive scale.