Pepe Escobar Pt.1: A tsunami of hype around another “new world order”
Welcome to the “new world order” Pt.1
GORDON BROWN, BRITISH PRIME MINISTER: A new world order is emerging, and with it the foundations of a new and progressive era of international cooperation.
PEPE ESCOBAR, SENIOR ANALYST, TRNN: After a tsunami of hype, it’s time to really put in perspective all these minds behind the new world order announced at the G20 in London. Professor Michael Hudson of the University of Missouri, he could not be more explicit: neoliberal logic still rules. And if you don’t accept the IMF’s kiss of death, he writes, “The alternative is for debtor countries to suffer the same kind of economic sanctions as Iran, Cuba and pre-invasion Iraq.” So maybe this is a better reflection of the new world order, a world where it’s our gain, your pain. And a leading story tells us capitalism isn’t really democracy. Yes, this is a Financial Times spoof distributed [inaudible] in London during the G20. What kind of new world order is this when countries of the mostly poor south are net creditors of the rich north? The US foreign debt at over $6 trillion is twice the total foreign debt of all the countries of the south. These countries, they should be fleeing the IMF, or at least auditing the debts they’ll be asked to repay. Before the G20 in London, the Global Europe Anticipation Bulletin, the GEAB, in other words, European elites [inaudible] circulating among diplomats, politicians, investors, they were alerting that either we create the conditions for a new global system, and then the crisis would not last more than five years, or if we stick to the current system, the crisis will turn, in 2010s, into a lost decade. So imagine what will happen to this chart illustrating the prevailing sense of doom in the US? In a letter published in The Financial Times, this European think tank had a few crucial suggestions. Number one, create a new global reserve currency based on a basket of currencies. Well, China and other emerging markets, they couldn’t even get the US to discuss this possibility, even though the US economy and the dollar are fragile. Number two, get the IMF to examine the US, the UK, and the Swiss banking systems. That one was a no-go during the G20. And number three, write a simple and short statement. Well, the communique had ten pages. While the G20 sounded like an Obama credit boom with fake money, the global depression rolls on, as this policy analysis website shows. Even though—.
BROWN: The old Washington consensus is over. Today we have reached a new consensus.
ESCOBAR: The London consensus may not fare much better. Already before the G20, the GEAB, that European thinks tank we mentioned, they were projecting what may happen next: the system may disintegrate and global political dislocation (in other words, chaos) may be just around the corner. This amazing story details the crusade led by former Fed chairman Alan Greenspan, former Goldman Sachs CEO Robert Rubin (that’s Obama’s Treasury Secretary Tim Geithner’s mentor, we should remember), and Larry Summers in the late 1990s, during the Clinton administration, to prevent any regulation whatsoever of the derivatives market. And that’s the key source of the global financial crisis. They all said the financial industry was against it. Today we all know the crisis mostly derives from a certain derivative, the famous credit default swap (CDS). Here’s what William Black, the man who cracked down on banks during the Savings and Loan Crisis of the 1980s and who wrote this book [The Best Way to Rob a Bank Is to Own One] told Bill Moyers:
WILLIAM BLACK, AUTHOR, FORMER BANK REGULATOR: We passed a law because there was a very good regulator, Brooksley Born, that everybody should know about [but] probably doesn’t. She tried to do the right thing, to regulate one of these exotic derivatives which you were talking about—we call them CDS. And Summers, Ruben, and Phil Graham came together to say not only will we block this particular regulation; we will pass a law that says you can’t regulate. And it’s this type of derivative that is most involved in the AIG scandal. And AIG all by itself cost the same as the entire Savings and Loan debacle.
BILL MOYERS, HOST, BILL MOYERS JOURNAL: [snip] —cover-up?
BLACK: Sure, it’s a cover-up.
MOYERS: That’s a serious charge.
BLACK: Of course.
MOYERS: Who’s covering up?
BLACK: Geithner is changing—is covering up, just like he did before. Geithner is publicly saying that it’s going to take 2 trillion—a trillion is 1,000 billion, right?—2 trillion taxpayer dollars to deal with this problem. But they’re allowing all the banks to report that they’re not only solvent but fully capitalized. Both statements can’t be true; it can’t be that they need $2 trillion because they have massive losses and that they’re fine. These are all people who have failed. Paulson failed. Geithner failed. They were all promoted because they failed, not because they had succeeded.
MOYERS: What do you mean?
BLACK: Well, Geithner was one of our nation’s top regulators during the entire subprime scandal that I just described. He took absolutely no effective action. He gave no warning. He did nothing in response to the FBI warning that there was an epidemic of fraud. All this pig-in-the-poke stuff happened under him. So, in his phrase about legacy assets, well, he’s a failed legacy regulator.
ESCOBAR: So President Lula of Brazil’s metaphor was, after all, more than correct. But nobody ever thought about the scale of it all, something like $1 quadrillion of derivatives—yes, a pyramid of 1,000 trillion dollars. So make no mistake: fear struck the US ruling elites, and this led to the US government and the Fed giving $10 trillion to big banks. No wonder George Soros, who knows one or two things about money, is now scared of zombie banks sucking the lifeblood out of the economy. This whole thing also led to a new, over half a trillion dollars-strong Pentagon budget, four percent higher than the last Pentagon budget under George W. Bush. And this also led to the new chapter of the Pentagon’s long war, the Af-Pak war.
BARACK OBAMA, US PRESIDENT: I also want to be clear that America’s relationship with the Muslim community, the Muslim world, cannot and will not just be based upon opposition to terrorism.
ESCOBAR: Excellent. But the fact remains: the Af-Pak war is a guaranteed stimulus package for the industrial-military complex. The rest of the world sees it all very differently. Beyond the G20, this is what developing countries are worried about. Number one, a tsunami of surplus dollars traveling the world in financial speculation overdrive. Number two, the fact that central banks have recycled these dollars to buy US Treasury bonds, and thus financed a huge US budget deficit, now 13 percent of the US GDP. And number three, the military character of the US deficits. The new world order can be glimpsed in developing countries. They are trying some other very, very serious options. Example: the petro-currency discussed at the recent meeting between the leaders of South America and the Arab League. The GEAD, that European thinks tank I mentioned, they call it the Khaleeji. It could be out in circulation by January 2010. In a new world order, it is visible in things like China lending in yuan to Argentina. That’s a swap deal. This means that China is lending some of its huge reserves in foreign currency directly to its trade partners. And what about some practical consequences of the new world order? Stay tuned for the second part of this report.
Please note that TRNN transcripts are typed from a recording of the program; The Real News Network cannot guarantee their complete accuracy.