Sanctions Are US Economic Warfare
by John Lawrence
No less than a military strike, the US uses sanctions to try and effect regime change in Iran, Venezuela and elsewhere. The US forbids third parties from doing business with countries it has targeted and tries to ruin their economies. This may or may not work, but it sure hurts the lives of the common people, the very people the US hopes to "save" from the supposed tyranny of its leaders. It represents warfare by another means. Clausewitz said, "War is the continuation of politics by other means." Well, sanctions are the continuation of war by other means. Forget politics or diplomacy. The Joint Comprehensive Plan of Action or JPCOA was the deal with Iran participated in by the US, China, France, Russia, United Kingdom, Germany) and the European Union. This is the deal that Trump took the US out of and immediately applied sanctions not only to Iran but to every country doing business with Iran.
So force not diplomacy is the trend for the US in international relations. No wonder we're at the brink of war with Iran. First withdraw from diplomacy conducted by numerous nations, then apply economic warfare, then set up the military for provocations by sending numerous ships and aircraft to the region, then strike after some provocation. As Trump said, we will "obliterate" Iran. As if the US hasn't learned its lesson in the middle east after conducting numerous tragic fiascoes in that region involving the killing of hundreds of thousands of locals and thousands of Americans. Those not being killed come home with PTSD and are committing suicide at the rate of 20 a day. Trump, himself, never went to war. Neither did his chief warmonger, John Bolton. Bolton wrote in his Yale 25th reunion book: "I confess I had no desire to die in a Southeast Asian rice paddy. I considered the war in Vietnam already lost." But these guys are just itching for war, if not with Venezuela, than with Iran.
The Guardian reported:
The US is now engaged in three major confrontations around the world that have the potential to degrade into war. And in the driving seat on all three fronts is John Bolton, one of the most fervent believers in American military power ever to work in the White House.
Donald Trump’s 70-year-old national security adviser has been a fixture in US foreign policy over the past four decades, and has spent that time, whether in or out of government, mostly arguing for the most hawkish position on any issue put in front of him.
“He actually believes when America leads, the world is a safer and better place – not just for us but for the world,” said Mark Groombridge, who worked for Bolton for more than 10 years. ...
These days, Bolton looks considerably more cheerful, having reached the peak of the policymaking establishment that had once seemed out of his reach.
Bolton seems to have played a key role in the collapse of the second Trump summit with Kim Jong-un in February, when he appeared to have drafted a maximalist list of demands for all-or-nothing disarmament that was presented to the North Korean dictator in Hanoi. A year of diplomacy ground to a halt, and Kim, who had been expecting a more gradualist approach, has now started goading the US with a return to missile tests.
In the standoff in Venezuela, Bolton was again centre stage, making himself the lead US voice for a failed effort at regime change in Venezuela in late April, producing a personal video appeal calling – in vain – on Nicolás Maduro’s top aides to defect. Behind the scenes he has urged a reluctant US Southern Command to come up with ever more aggressive solutions to Maduro’s hold on power.
And in the fast-moving escalation of tensions with Iran, it is Bolton who has seized the initiative, spun military deployments in the Gulf that were already in the pipeline as confrontational steps against Tehran, and reportedly irritated some in the Pentagon and intelligence agencies by putting a sensationalist spin on intelligence about Iranian military movements.
Bolton is a dangerous man. He wants war so badly just like Dick Cheney and Bush Junior did that he will lie us into it like they did. Hopefully, cooler heads will prevail at least till we can get this crew out of there in the next election. Tulsi Gabbard, a war vet, was the only Democrat to challenge the military-industrial complex in the Democratic debates although Bernie had a few choice words as well. America under Trump and Bolton and the other neocon hawks is a war mongering nation. It is dead set on destroying a nation's economy with sanctions until it can get the war it lusts after. Sanctions only presage military involvement.
Payments can happen cheaply and easily without banks or credit card companies. This has now been demonstrated – not in the United States but in China. Unlike in the US, where numerous firms feast on fees from handling and processing payments, in China most money flows through mobile phones nearly for free. In 2018 these cashless payments totaled a whopping $41.5 trillion; and 90% were through Alipay and WeChat Pay, a pair of digital ecosystems that blend social media, commerce and banking. According to a May 2018 article in Bloomberg titled “Why China’s Payment Apps Give U.S. Bankers Nightmares”:
That threat may now be materializing. On June 18, Facebook unveiled a white paperoutlining ambitious plans to create a new global cryptocurrency called Libra, to be launched in 2020. The New York Times says Facebook has high hopes that Libra will become the foundation for a new financial system free of control by Wall Street power brokers and central banks.
But apparently Libra will not be competing with Visa or Mastercard. In fact the Libra Association lists those two giants among its 28 soon-to-be founding members. Others include Paypal, Stripe, Uber, Lyft and eBay. Facebook has reportedly courted dozens of financial institutions and other tech companies to join the Libra Association, an independent foundation that will contribute capital and help govern the digital currency. Entry barriers are high, with each founding member paying a minimum of $10 million to join. This gives them one vote (or 1% of the total vote, whichever is larger) in the Libra Association council. Members are also entitled to a share proportionate to their investment of the dividends earned from interest on the Libra reserve – the money that users will pay to acquire the Libra currency.
All of which has raised some eyebrows, both among financial analysts and crypto activists. A Zero Hedge commentator calls Libra “Facebook’s Crypto Trojan Rabbit.” An article in FT’s Alphaville calls it “Blockchain, but Without the Blocks or Chain.” Economist Noriel Roubini concurs, tweeting:
It will start as a private, permissioned, not-trustless, centralized oligopolistic members-only club. So much for calling it “blockchain”. … [I]t is blockchain in name only and a monopoly to extract massive seignorage from billions of users. A monopoly scam.
Another Zero Hedge writer calls Libra “The Dollar’s Killer App,” which threatens “not only the power of central banks but also the government’s money monopoly itself.”
From Frying Pan to Fire?
To the crypto-anarchist community, usurping the power of central banks and governments may sound like a good thing. But handing global power to the corporate-controlled Libra Association could be a greater nightmare. So argues Facebook co-founder Chris Hughes, who writes in The Financial Times:
Power will shift to the Fed and ECB because the dollar and the euro will squeeze out weaker currencies in developing countries. As seen recently in Greece, the result will be to cause their governments to lose control of their currencies and their economies.
Pros and Cons
In a June 9 review in Forbes, Caitlin Long, co-founder of the Wyoming Blockchain Coalition, agreed that Libra was a Trojan horse but predicted that it would have some beneficial effects. For one, she thought it would impose discipline on the US banking system by leading to populist calls to repeal their corporate subsidies. The Fed is now paying its member banks 2.35% in risk-free interest on their excess reserves, which this year is projected to total $36 billion of corporate welfare to US banks – about half the sum spent on the US food stamp program. If Facebook parks its entire US dollar balance at the Federal Reserve through one of its bank partners, it could earn the same rate. But Long predicted that Facebook would have to pay interest to Libra users to avoid a chorus of critics, who would loudly publicize how much money Facebook and its partners were pocketing from the interest on the money users traded for their Libra currency.
But that was before the Libra white paper came out. It reveals that the profits will indeed be divvied among Facebook’s Libra partners rather than shared with users. At one time, we earned interest on our deposits in government-insured banks. With Libra, we will get no interest on our money, which will be entrusted to uninsured crypto exchanges, which are coming under increasing regulatory pressure due to lack of transparency and operational irregularities.
UK economics professor Alistair Milne points to another problem with the Libra cryptocurrency: unlike Bitcoin, it will be a “stablecoin,” whose value will be tied to a basket of fiat currencies and short-term government securities. That means it will need the backing of real money to maintain its fixed price. If reserves do not cover withdrawals, who will be responsible for compensating Libra holders? Ideally, Milne writes, reserves would be held with the central bank; but central banks will be reluctant to support a private currency.
Caitlin Long also predicts that Facebook’s cryptocurrency will be a huge honeypot of data for government officials, since every transaction will be traceable. But other reviewers see this as Libra’s most fatal flaw. Facebook has been called Big Brother, the ultimate government surveillance tool. Conspiracy theorists link it to the CIA and the US Department of Defense. Facebook has already demonstrated that it is an untrustworthy manager of personal data. How then can we trust it with our money?
Why Use a Cryptocurrency at All?
A June 20th CoinDesk article asks why Facebook has chosen to use a cryptocurrency rather than following WeChat and AliPay in doing a global payments network in the traditional way. The article quotes Yan Meng, vice president of the Chinese Software Developer Network, who says Facebook’s fragmented user base across the world leaves it with no better choice than to borrow ideas from blockchain and cryptocurrency.
“Facebook just can’t do a global payments network via traditional methods, which require applying for a license and preparing foreign exchange reserves with local banking, one market after another,” said Meng. “The advantage of WeChat and AliPay is they have already gained a significant number of users from just one giant economy that accounts for 20 percent of the world’s population.” They have no need to establish their own digital currencies, which they still regard as too risky.
Meng suspects that Facebook’s long-term ambition is to become a stateless central bank that uses Libra as a base currency. He wrote in a June 16 article, “With sufficient incentives, nodes of Facebook’s Libra network would represent Facebook to push for utility in various countries for its 2.7 billion users in business, investment, trade and financial services,” which “would help complete a full digital economy empire.”
The question is whether regulators will allow that sort of competition with the central banking system. Immediately after Facebook released its Libra cryptocurrency plan, financial regulators in Europe voiced concerns over the potential danger of Facebook running a “shadow bank.” Maxine Waters, who heads the Financial Services Committee for the US House of Representatives, asked Facebook to halt its development of Libra until hearings could be held. She said:
A Stateless Private Central Bank or a Publicly Accountable One?
Facebook may be competing with more than the dollar. Jennifer Grygiel, Assistant Professor of Communications at Syracuse University, writes:
Caitlin Long thinks Bitcoin rather than Libra will come out the winner in all this; but Bitcoin’s blockchain model is too slow, expensive and energy intensive to replace fiat currency as a medium of exchange on a national scale. As Josh Constine writes on Techcrunch.com:
For Libra to scale as a national medium of exchange, its governance had to be centralized rather than “distributed.” But Libra’s governing body is not the sort of global controller we want. Jennifer Grygiel writes:
A currency intended for trade on a national—let alone international—scale needs to be not only centralized but democratized, responding to the will of the people and their elected leaders. Rather than bypassing the existing central banking structure as Facebook plans to do, several groups of economists are proposing a more egalitarian solution: nationalizing and democratizing the central bank by opening its deposit window to everyone. As explored in my latest book, “Banking on the People: Democratizing Money in the Digital Age,” these proposals could allow us all to get 2.35% on our deposits, while eliminating bank runs and banking crises, since the central bank cannot run out of funds. Profits from the public medium of exchange need to return to the public, rather than enriching an unaccountable, corporate-controlled Facebook Trojan horse.
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This article was first posted under a different title on Truthdig.org. Ellen Brown is an attorney, founder of the Public Banking Institute, and author of thirteen books. They include Banking on the People: Democratizing Money in the Digital Age, published by the Democracy Collaborative in June 2019; Web of Debt; and The Public Bank Solution. She also co-hosts a radio program on PRN.FM called “It’s Our Money.” Her 300+ blog articles are posted at EllenBrown.com.