Euro notes with mint sauce Part 1

On 31.12.2011 President Obama signed National Defense Authorization Act (H R 1540) into law.

This NDAA enables the military to indefinitely detain any citizen of any country including US citizens. This means you can be detained without any legal representation. Your embassy does not get informed, nobody knows where you are. Not even the fact that you have been detained by the US military needs to be acknowledged, you have been disappeared just like the 30.000 were disappeared during the military dictatorship in Argentina.

Indefinite detention implies that you can become executed.

The world has entered the Post Democratic Period, PDP, happy 2012!

Obama obviously took guidance from the “Reichstagsbrandverordnung” of 27.2.1933 in Germany which revoked civil liberties including the Habeas Corpus rights. It gave Adolf Hitler the very same powers that Barack Obama enjoys now. It violated the 1919 Weimar constitution in the same manner as H.R.1540 violates the US constitution. Only seven senators opposed H.R.1540 hence we can call the USA a Post Democratic Mono State System, PDMSS.

In a PDMSS all political forces join ranks to concentrate all powers in one person in order to “protect freedom and democracy”.

The USA have been in a presidentially declared state of emergency since 14.9.2001 which has a two year limitation. Obama renewed it in September of 2011, so it is still in effect today. The powers grabbed through the NDAA now are a logical consequence of a military dictatorship cloaked as democracy.

A PDMSS is the result of a failed state that has failed economically, socially and politically.

When we define a failed economy we first need to define what constitutes a sound economy. I illustrate a sound economy with this simplified example:

A shoemaker produces and sells a pair of boots for $100. The state adds 20% Value added tax, VAT, so the price to the consumer is $120.

The shoemaker has costs of $30 with 20% VAT added and a further $45 that do not have VAT. VAT received is $20 and VAT paid out is $6, the difference of $14 is state revenue.

He makes a profit of $25. He pays 20% income tax, that’s another $5. This leaves him with $20 net earnings and the state with $19. The relation of 20 to 19 is about average of economies in Western democracies. The result is a sound economy that covers the state’s expenses and does not require any borrowing.

Now let’s examine the method that capitalism uses to attack and destroy this sound economy:

The capitalist produces a pair of boots for $10 in a third world country where workers are enslaved without rights and no taxes are due but a few bribes to the elements that operate that country.

The capitalist transfers the boots to his offshore entity from where he sells it for $60 to his entity in the sound economy state. VAT on entry is 20% = $12. Then he sells the boots for $50 + $10 VAT = $60. This generates operating losses of 10 which he covers by introducing capital from his offshore entity which harbours the 50 profits.

The sound economy state also refunds him $2 as his VAT receipts are $10 and VAT paid out upon import is $12.

This loss of $2 for the state constitutes the first item in the list of losses. The shoemaker goes bankrupt and the state looses $19 in tax revenue which is accounted for already. The state now has to support the shoemaker and pays him $11 in unemployment benefits.

For the state $19 in revenue have turned to zero revenue and $32 in expenditure. These $32 need to be borrowed by issueing sovereign bonds. The “Market” is the capitalist’s money in the offshore account. The “Market” demands an interest rate on the bonds which reflects the creditworthiness of the state. The more the state has been plundered by the capitalist the higher the interest rate. The interest over time will exceed the principal.

Alternatively the state can raise taxes from its citizens to cover those $32. This option is unpopular with the citizen, hence politicians wishing to become reelected disregard this option.

The capitalist aims to exercise total control over the state which requires the state to be indebted to him. Hence the capitalist provides further credit which the politician uses to enhance his power base.

For example: Great Britain used to be full of decent people up to the mid-1970s serving as councillors. Councillors did not get paid, it was an honour to serve and a service to society.

Today councillors draw salaries – over half of all chief councillors have salaries higher than that of the prime minister, some double and triple that of the prime minister. When this happens as an isolated case it is corruption, when it occurs on the British scale corruption has become systemic, enshrined in society – a failed society.

In a failed society people no longer take any interest in the state and the people representing them. Elections offer two sides of the same coin. The powers of this coin are beyond the control of the people.

The shoemaker in the example above would have retired sometime and would have been replaced by a youth. Today his job no longer exists and the youth becomes unemployed or unempoyable from the start.

An economy has failed when it does not provide jobs for the youth that are its future. When the youth unemployment rate reaches 10% we can declare this economy to be a failed economy, when it reaches 20% as it does in UK or 40 to 50% like in the cases of Greece and Spain we can declare a disaster. The economy no longer sustains its citizens, the citizens have no future.

The “Markets” demand higher interest, interest so high that the accrued interest still provides a return for the depreciated principal. This is due to the knowledge that future, unemployed generations will never be able to service the loans.

Before joining the European Union Portugal, Spain and Greece had to pay between 12% and 20% interests on their bonds. All were military dictorships.

The Greek military junta (1967-73) enjoyed the support (caefully formulated understatement) of the USA. Athens became the base of the 6th US fleet. The US paid the bills and provided credits and the junta created endless government jobs, well paid jobs that drove a division through society. Collaborateurs filled their pockets while the music of Mikki Theodorakis was outlawed – many Greeks fled to France, the only country not in NATO at the time.

Franco of Spain, former ally of Hitler, was now propped up by the USA in return for military bases. Democratic movements were persecuted and a return to democracy was possible after Franco’s death only. A fragile democracy under imminent threat of a military coup.

The “Carnation revolution” in Portugal enabled a peaceful transition from military dictatorship to democracy.

None of those three countries had an economy to speak of when they joined the EU.
It was clear from day one that existing EU members would have to foot the bill for their integration. Footing the bill is not restricted to financial aide, a political union is needed to prevent military juntas to take them over.***

*** Note: on 1.11.11 then prime minister Georgios Papandreou sacked the top generals to prevent a military coup. This eluded most of the Anglo-Saxon press.

So when the three joined the EU some creative accounting was applied to make their economies look not quite as bad and more ingenious accounting was required to meet the criteria for joining the Euro. This was neither fraud nor deception of any party involved.
It served the purpose of throwing these states a lifeline. The interest rates on their bonds dropped from near 20% to below 5% as the “Markets” concluded that the rich members of a currency union could not allow their poor members to fail. These savings should have helped the three to reform their economies. Portugal and Spain made considerable progress while Greece made none. Greece effectively replaced the “$-gifts” with the ability to borrow Euros to pay for their overblown administration and loss-making government owned companies.

So when you want to solve the debt crisis you need to solve the issue of youth unemployment at the same time. If you don’t generate employed, tax-paying youth you cannot borrow on their behalf.

Germany has debts of 2.1tn Euros now. 1.5tn of these are “reunification costs”. Germany pays for these by adding a 5% “reunification surcharge” called “solidarity loan” to income tax, a loan given to the state by its people – but everybody knows that they will never get this back, it is a tax cloaked as loan. They all moan about it for the last 20 years but get told by all parties “that’s what reunification costs and you’ve got to pay, period”.

Germans can be treated like that, but Greek, Spaniards and Portuguese can not. That’s why the “crisis” will continue until the big bond quantities need to be refinanced and they have no choice but to accept German terms. (I have outlined these and their consequences for the European and world economies in my book “2012/20 Capitalism Endgame”).

Due to widespread moaning about having to pay for “Southern Europe” the German finance minister, Schaeuble, had to come clean last week. Germany has been buying bonds to keep Italian bonds below the 7% yield mark, Spanish ones below 5.5%, etc.

This bond buying amounts to 0.5tn of the 2.1tn German sovereign debt. Germany borrows at zero percent interest and loans to Southerners at 3 to 7%. Not a bad profit margin for the Bundesbank. (the Bundesbank transfers its profits to the government). So the “crisis” has not cost the German taxpayer anything so far. Jacques Delors once said “not all believe in god, but all believe in the Bundesbank”.

For the first time German exports have gone through the trillion mark. They would like to improve on this figure which requires the Euro to fall, the original rate of $1.18 at the Euro’s launch would be desirable. It would also eliminate the French trade deficit and a rate of $1.15 would turn a trade deficit into a surplus.

Bringing the Euro down requires a concerted effort by capitalist and Britain could play a major part sacrificing her exports in the wake of it. Murdoch has certainly bought USD and Sterling options by now, he owns the British media and the writings of his financial experts indicate an interest in the fall of the Euro.

Welsh sheep farmers have always alledged that English tourists shout “mint sauce” at their sheep believing this will scare them to death.

I close for today by quoting from my last news flash:

I am writing my book “2012/20” Capitalism Endgame. The price is 12,20 in any currency you like to pay in. For purely sentimental reasons I prefer Sterling (economical truth) but would not object to Euro, USD or anything that can be exchanged for organic food.

I’ll publish as e-book and you get to read the chapters as I write them. So start paying as long as you’ve still got some money. Send me an email to wihaceha@yahoo.com to order 2012/20 and put 2012/20 in subject.

You have read “Dollar notes without ketchup Part 1 to 9” as News Flash via email or online at www.infoholix.net/blog and you know what to expect from 2012/20.

China will break up and evolve into different systems ruled by powers beyond current imagination.

Europe 2 will quickly become replaced by Europe 3 where regions represent themselves directly and nation states are reduced to resorts like art and sports. This will become the opportunity for Scotland and Wales to join. Who will be in E3 and the process that leads to its creation will even fascinate those not interested in politics – there are more aspects than politics only.

The demise of the USA and its resurrection ……. hmmm!

England to emerge as one of the world’s superpowers…….surprising skeptics?

South America united through its common currency, the Sucre.

Africa and India with its combined 2.2bn population will spring another surprise.

This entry was posted in World Economy + Health and tagged , , , , , , , , , , , , , , . Bookmark the permalink.