California Free Press

Off the Top of My Head

Why the Fed's Raising Interest Rates Won't Work

by John Lawrence

Inflation is a supply and demand problem. The Fed only sees it as a demand problem: there is too much demand. Therefore, it seeks to reduce the public's ability to demand by reducing wages and creating more unemployment. Problem is that businesses are short staffed. They are trying to hire more workers, not laying them off. There is no "industrial reserve army" of people competing for jobs. Businesses are competing for workers. The reason why prices are going up (hence inflation) is not that there is too much demand, but that there is too little supply. This is caused by supply chain problems which comes down to the fact that most things Americans consume are produced overseas, mainly in China. Also the sanctions on Russian gas and oil combined with Russia cutting off supplies even beyond the sanctions means that everything that is transported including consumer goods is even more expensive. The problem is that the US does not produce much of what it consumes. Again it's a supply problem. Container ships coming from China raise their rates because gas is more expensive. This makes the goods they transport more expensive. When the major things Americans consume come from China (consumer goods) and Russia (energy costs), America is at the behest of countries that it considers enemies. And so is Europe.

The traditional way of fighting inflation is for the Fed to raise interest rates and drive up unemployment. When unemployment increases, demand decreases because unemployed people don't have as much money to spend. In other words money is withdrawn from the economy. This is of course to the detriment of the unemployed people which are usually those on the lowest rung of the economic ladder. But as we've seen during the pandemic, those at the bottom of the economic ladder are usually those who are indispensable workers - grocery workers, agricultural workers, truck drivers, nurses, caregivers. The economy cannot function for anyone without their services. So the only way the Fed can achieve its goal is to drive businesses into bankruptcy. Then all those workers will be in the ranks of the unemployed and be forced to underconsume. Actually, the more that Americans consume, the more greenhouse gasses are created. Underconsumption could have a very salutary effect on the atmosphere and the environment.

Another way to withdraw money from the economy in order to reduce demand is to raise taxes. Again taxes are usually raised on the poor and middle class further immiserizing them. Congress refuses to raise taxes on the rich which Joe Biden has proposed doing. This would help inflation to some extent, but the rich don't consume basic items to the extent that the middle class and poor do. So in order to reduce demand to the point where it is more or less equal to supply, money must be taken out of the pockets of the poor and middle class. The other alternative is to increase supply. But since the US is dependent on supply from foreign suppliers, this is not that easy to do. Long range, the solution is for the US to make more stuff, but corporations have settled on a model of getting stuff produced where labor is cheapest and that means overseas.

Off the Top of My Head

Biden Could Solve the Gas Crisis Today by Taking Sanctions Off Russian Oil

by John Lawrence

Sanctions on Russian oil have been an abysmal failure. Russian oil profits are up 50% from last year! Just as American and British oil corporations have been scoring record profits, so has Russia. Oil prices are set on the world market and soaring prices result in record profits for Russia. If Putin had designed the sanctions himself, he couldn't have wreaked more havoc on the US and European economies. It's time for Biden to admit that his policy of sancti0ns against Russia has failed. They haven't deterred Russia from pursuing a war of attrition against Ukraine. They have demonstrated the abject failure of using US sanctions to control the actions of other countries. They are a total lost cause now and in the future. That's the lesson of the war in Ukraine for the west.

Bloomberg reported:

Russia’s oil revenues are up 50% this year even as trade restrictions following the invasion of Ukraine spurred many refiners to shun its supplies, the International Energy Agency said.

Moscow earned roughly $20 billion each month in 2022 from combined sales of crude and products amounting to about 8 million barrels a day, the Paris-based IEA said in its monthly market report. 

Russian shipments have continued to flow even as the European Union edges towards an import ban, and international oil majors such as Shell Plc and TotalEnergies SE pledge to cease purchases. Asia has remained a keen customer, with China and India picking up cargoes no longer wanted in Europe.

The IEA, which advises major economies, kept its outlook for world oil markets largely unchanged in the report. Global fuel markets are tight and may face further strain in the months ahead as Chinese demand rebounds following a spate of new Covid lockdowns, it said. 

Reduced flows of Russian refined products such as diesel, fuel oil and naphtha have aggravated tightness in global markets, the agency noted. Stockpiles have declined for seven consecutive quarters, with reserves of so-called middle distillates at their lowest since 2008.

But for all the disruption, Moscow has continued to enjoy a financial windfall compared with the first four months of 2021. Despite the EU’s public censure of the Kremlin’s aggression, total oil export revenues were up 50% this year. 

The bloc remained the largest market for Russian exports in April, taking 43% of the country’s exports, the IEA said.

So where is this "world market" that is setting the price of oil? Is it on Wall Street? I'd like to have a word with whoever is in charge of this "world market." Lord knows the US produces enough oil to supply all the US' gas needs so why not take US oil production off the world market and just sell it to the American people at a reasonable price? Oh, I guess that's not how capitalism works. Ironic, isn't it, that a formerly communist country like Russia is now profiting from capitalist markets! So even if the US, Canada and Europe are having record inflation with recessions predicted in the near future, Biden won't take the sanctions off of Russian oil, and basically this is all for spite, all because he hates Putin so much. Biden has staked American prestige on fighting a proxy war with Russia based on the almighty dollar and the power it supposedly possesses over every financial transaction going on in the world. Problem is that all the sanctions on Russia have only proven the weakness and futility of using sanctions to achieve policy goals. Russia has demonstrated that the sanctions just don't work. They haven't deterred Russia in the least. China and India have taken up the slack in Russian oil purchases.

Besides that, what Biden fails to understand is that like the US, Russia's currency, the ruble, is a fiat currency. That means that unlike China, it is not pegged to the US dollar. Russia's central bank can print as many rubles as it wants without asking US permission. The US can of course do the same thing - print as many dollars as it wants except the limiting factor is inflation. So the US can't print dollars right now, but Russia can still print rubles. That means that Russia controls Russian investment in Russia and Russian control of internal consumer markets. Imported products come mainly from China, and China is Russia's friend. Russia is demanding payment for its gas in rubles rather than dollars, and this supports the value of the ruble as a convertible currency just as Nixon's demand that the Saudis price their oil in dollars supported the value of the dollar and made the dollar the world's reserve currency.

All this boils down to the fact that Russia is in the driver's seat with respect to the war in Ukraine. It's hard to see how the unending supply of western weapons is sufficient to win the war for Ukraine now that the policy of sanctions has failed. Demonizing Putin is not a policy that is likely to have an effect on the war one way or other. Putin still has a lot of friends in the world and US inflation, while being primarily a function of sanctions on Russian oil, is also dependent on the supply chain of products coming from China, Russia's friend. Biden should be careful about whom he demonizes. After demonizing MBS, he's now about to get back in bed with him and the Saudis. Biden's Build Back Better policy could have helped the American people, and even now could fight inflation, but alas, after promising that it would be passed "in tandem" with the bipartisan infrastructure bill, it never was. What up with that?

Off the Top of My Head

What Are the Implications of Russia's Pariahdom for Global Warming?

by John Lawrence

All western politicians and pundits (with the possible exception of Tucker Carlson) agree that Russia is and shall ever be a pariah state. Putin is a pariah who should be tried for war crimes. So how is the world and the community of nations going to combat our truly mortal enemy - global warming? As a major producer of fossil fuels, in order to get off the fossil fuel bandwagon, we would need Russia's cooperation. If Putin is to be a pariah, he could care less about global warming. He's probably thinking about all the resorts he could build in Siberia! Besides that, as the world warms, the tundra in Siberia is thawing releasing tons of methane, a far more potent greenhouse gas than carbon dioxide. In recent years, climate scientists have warned thawing permafrost in Siberia may be a “methane time bomb”. But now a study by three geologists says that a heat wave in 2020 has revealed a surge in methane emissions “potentially in much higher amounts” from a different source: thawing rock formations in the Arctic permafrost. Russia and Putin could have the last laugh as the rest of the world goes up in flames and Russia adapts to a more moderate climate.

The Washington Post reported:

"The difference is that thawing wetlands releases “microbial” methane from the decay of soil and organic matter, while thawing limestone — or carbonate rock — releases hydrocarbons and gas hydrates from reservoirs both below and within the permafrost, making it “much more dangerous” than past studies have suggested.

"Nikolaus Froitzheim, who teaches at the Institute of Geosciences at the University of Bonn, said that he and two colleagues used satellite maps that measured intense methane concentrations over two “conspicuous elongated areas” of limestone — stripes that were several miles wide and up to 375 miles long — in the Taymyr Peninsula and the area around northern Siberia.

"The study was published by the Proceedings of the National Academy of Sciences. Surface temperatures during the heat wave in 2020 soared to 10.8 degrees Fahrenheit above the 1979-2000 norms. In the long stripes, there is hardly any soil, and vegetation is scarce, the study says. So the limestone crops out of the surface. As the rock formations warm up, cracks and pockets opened up, releasing methane that had been trapped inside."

Have the western politicos miscalculated or are they just playing into the Russian playbook in which the Russians are thinking 3 moves ahead on the chess board? The politicos and pundits all agree that Russia's financial lifeline is the sale of oil and gas and that the west must do everything it can do to shut off those sales starving Russia financially. But wait a minute. What they fail to understand is that Russia does not need the sale of gas or any other commodity to survive financially because the ruble is a fiat currency. The Russian central bank can print as many rubles as it likes with the only constraint being inflation. The US dollar is also a fiat currency and the US Federal Reserve can print as many dollars as it likes, the only restraints being political and again inflation which the US is now experiencing to a greater degree than Russia is. In fact the printing of Russian rubles will only tend to balance their economy and prevent it from going into recession. Meanwhile, the west, Germany in particular, struggles with replacing Russian gas and oil with gas and oil from other sources in a futile attempt to starve Russia financially. Ellen Brown has pointed out why sanctions may even be good for Russia because it forces Russia to develop sectors of its own economy rather than relying on imports from the west.

Besides Russia has a lot of friends in the world, some of them like Hungary who are even NATO members. Viktor Orban, Hungary's authoritarian leader and key Putin ally, calls Zelensky an 'opponent' after winning reelection. So while the US and Britain mainly fulminate over Russia's Putin being a pariah, not everyone in the non-western world agrees. Russia still has plenty of friends, just not in the US or Britain. Which brings is back to our original question, how can we solve the problem of global warming without Russia's cooperation even if we are not friends with them? Is it worth it to destroy the whole planet earth because of two countries engaging in a war no matter how brutal and ill founded? The west must eventually come to terms with Russia and with Putin if Putin is still the Russian leader when the war ends or watch while planet earth, not just Ukraine, goes up in flames.

Off the Top of My Head

Joe Biden's Policy: Speak Loudly but Carry a Small Stick

by John Lawrence

As opposed to Theodore Roosevelt's policy: speak softly but carry a big stick. I think Biden's policy is correct. By all means we don't want World War III. As Ellen Brown makes clear on Web of Debt blog, sanctions will not do much except hasten the day when the US dollar is not the only world's reserve currency. There are so many workarounds to sanctions, and billionaires can always replace their super yachts. Russia has a fiat currency just like the US dollar. Modern Monetary Theory has shown that a country with a fiat currency can have its central bank print as much of that currency as it wishes. The only constraining factor is inflation. Right now the US is more constrained by inflation than Russia is. There is no need for Russia's domestic economy to suffer because of inflation. Businesses can continue to receive investment loans from the central bank. International trade will continue with friendly countries like India, China, Venezuela and Turkey. Turkey is a member of NATO by the way, and India is the world's largest democracy.

Daily Sabah reported on March 11, 2022 in Turkish businesses expect progress on using rubles in trade with Russia :

"Since the currency dispute with shipping companies is causing problems in the delivery of goods passing through customs, Turkey should actively work to develop a mechanism to facilitate trade with Russia in rubles, Istanbul Chamber of Commerce (ITO) head Şekib Avdagiç said Friday. Avdagiç stated that the companies working with Russia see the withdrawal of Western countries from Moscow as a new opportunity and emphasized that it is important to enable the use of the national currency of Russia. The issue was also brought up during President Recep Tayyip Erdoğan’s phone call with his Russian counterpart Vladimir Putin, he reiterated. Erdoğan told Putin that, apart from the euro and dollar, trade between the two countries can be carried out using the Russian ruble and Chinese yuan."

Aljazeera reported:

Mumbai, India–Indian authorities are actively considering dedicated payment mechanisms for trade with Russia to enable existing trade obligations in the wake of sanctions imposed on the Kremlin, a move that will also pave the way for cheaper oil imports to meet the country’s energy demands. In the past month, as sanctions have been imposed on Russia, the scope of a payment mechanism in local currencies has expanded from being a means to sustain ongoing trade to possibilities of deeper engagement, including increasing bilateral trade.

Of course, US authorities are managing the news here just as they are in Russia. They don't want you to know that our erstwhile ally, India, the world's largest democracy is doing workarounds to avoid US sanctions. As Ellen's article points out, we in the US may be better off once the US dollar is not the only world's reserve currency. At that point we may have to rely more on our domestic economy and infrastructure just as Russia is being forced to do now. So we won't have to be at the mercy of supply chains from other parts of the world. More stuff will be manufactured here in the good old USA, and that's a good thing.

Off the Top of My Head

There are Two Ways War in Ukraine Could Have Been Prevented

by John Lawrence

One, Ukraine could have been made a member of NATO before war began, and (2) Putin could have been given a guarantee that Ukraine would never become a member of NATO. So why didn't either one of these two possibilities prevent a destructive war which has brought death and destruction to the people of Ukraine? The fact is that NATO didn't want Ukraine as a member. Ukraine didn't meet NATO's high standards especially with regard to corruption. According to Wikipedia:

""Corruption is widespread in Ukrainian society. In 2012 Ernst & Young put Ukraine among the three most-corrupt nations of the world—alongside Colombia and Brazil. In 2015 The Guardian called Ukraine "the most corrupt nation in Europe". According to a poll conducted by Ernst & Young in 2017, experts considered Ukraine to be the ninth-most corrupt nation in the world. According to Transparency International's Corruption Perceptions Index (a scale of least to most corrupt nations), Ukraine ranked 122nd out of 180 countries in 2021, the second most corrupt in Europe, ahead of Russia. United States diplomats described Ukraine under Presidents Kuchma (in office from 1994 to 2005) and Yushchenko (in office from 2005 to 2010) as a kleptocracy, according to WikiLeaks cables."

Who knew? So NATO didn't want Ukraine as a member at least until it had cleaned up all the corruption. That gave Putin an open door to invade because Biden had declared that there would be no American involvement in terms of boots on the ground in Ukraine because he didn't want to start World War III. Plausible enough. However, Putin probably would never have invaded Ukraine if it had been a member of NATO which would mean that Russia would have to have been subjected to the collective wrath of all the European countries plus the United States. So instead of starting WW III, we would sanction the hell out of Russia. This, however, is not preventing Russia from wreaking havoc on the Ukrainian people.

Putin's chief demand was that Ukraine never become a member of NATO. Sweden and Finland are non-aligned so why couldn't Ukraine have agreed to the same status thus meeting Putin's main demand and prevented an invasion. All NATO had to do was offer Putin a piece of paper which was signed and dated and contained words to the effect that Ukraine would never become a member of NATO, and, furthermore, if Putin invaded Ukraine, the treaty would be abrogated. Instead the NATO negotiators would not even consider Putin's main concern. His logic was that the US would not allow missiles to be placed right on its border or anywhere in the western hemisphere for that matter. The US had been involved in the overthrow of democratically elected governments in all the Americas. According to Wikipedia:

"In Argentina, military forces overthrew the democratically elected President Isabel Perón in the 1976 Argentine coup d'état, starting the military dictatorship of General Jorge Rafael Videla, known as the National Reorganization Process. Both the coup and the following authoritarian regime was eagerly endorsed and supported by the United States government with US Secretary of State Henry Kissinger paying several official visits to Argentina during the dictatorship.

"After the democratic election of President Salvador Allende in 1970, an economic war ordered by President Richard Nixon, among other things, caused the 1973 Chilean coup d'état with the involvement of the CIA due to Allende's democratic socialist leanings. What followed was the decades-long US-backed military dictatorship of Augusto Pinochet."

In 1981, President Ronald Reagan authorized the Central Intelligence Agency to support the Contras, a right-wing Nicaraguan political group to combat the influence held by the Sandinistas in the Nicaraguan government. Various anti-government rebels in Nicaragua were organized into the Nicaraguan Democratic Force, the first Contra group, at the behest of the CIA. The CIA also supplied the Contras with training and equipment, including materials related to torture and assassination. There have also been allegations that the CIA engaged in drug trafficking in Nicaragua.

The US even sold weapons to its purported enemy, Iran, and used the money to fund the contras after the US Congress refused to do so. So while the US saw fit to protect its hemispheric interests, No one in the present US administration can see why Putin could possibly view Ukraine as a potential member of NATO as a threat even though geographically Ukraine can be seen as a dagger into the midsection of Russia. As a member of NATO, missiles might be stationed right on Russia's border with Ukraine, but why should Russia be concerned about this? NATO are, after all, good guys who wouldn't even let Ukraine join their club unless it cleaned up its act. While the US used the covert operations of the CIA to overthrow democratically elected governments and replace them with brutal military dictatorships, Russia has used its own military troops to do the same thing to protect its interests. That's the only difference.

The heart of the matter goes back to the end of the Cold War. According to The Untold History of the United States:

"Though willing to allow for the radical transformation of eastern Europe, Gorbachev hoped the end of the Cold War would lead to the dissolution of NATO as well as the Warsaw Pact. Recognizing that that might not happen, he insisted that NATO at least not expand farther to the east. He was even willing to allow for reunification of the two Germanys as long as NATO troops and weapons were not permitted on former East German soil. But he and other Russian leaders, who believed they had received ironclad U.S. and German promises that eastward expansion by NATO would never be permitted, were in a for a rude awakening when the Clinton and second Bush administration continued expanding right up to Russia's doorstep. Russian leaders expressed outrage and a sense of betrayal. Although U.S. officials, over the years, have insisted that no such promises were ever given, recently released documents appear to substantiate Russian claims."

So NATO could have proffered a treaty to Putin which guaranteed that Ukraine would never become a member of NATO or they could have negotiated a time period when Ukraine would not be permitted to join. Instead they refused to even negotiate that demand with disastrous results. A hundred years from now NATO might not even exist. It may have been replaced with a new organization that better takes care of the security interests of all European countries including Russia. But the memory of the war in Ukraine will persist a hundred years from now. It represents in the final analysis a total failure of NATO to protect the security interests of all Europeans and not just a select few.

Off the Top of My Head

Instead of Sanctioning Foreign Actors Sanction Domestic Terrorists

by John Lawrence, January 12, 2021

The best development so far post insurrection is taking away Trump's twitter account permanently. The FBI, CIA and other law enforcement are rounding up the insurrectionists and they should get lengthy jail sentences and sanctions. The biggest threat to American democracy is not out there; it's in here. Their gathering places on social media such as Parler have been taken down or will be taken down soon. If the terrorists can't meet to spout their vitriol as well as plan future insurrections, we'll be making progress. Rush Limbaugh and other domestic terrorists should be sanctioned. Anyone egging on, benefiting from, taking advantage of the poor mental health or encouraging hatred and violence of the American people needs to be sanctioned. The fact that these terrorists could overwhelm the Capitol Police was a huge security failure. The fact that it took the Pentagon three hours to supply troops shows the fact that we are wasting huge amounts of money on a worthless military establishment that does not confront the real threats to this country. Perhaps these domestic terrorists need to be reeducated. We don't have the moral authority to mock China any more for doing this with its domestic terrorists.

Right now security forces in the US are on high alert. The National Guard is out in force. There are more forces on the streets of Washington, DC now than there are in Afghanistan. They should stay on high alert for the time being. I think the situation will get under control. Massive arrests and the total deplatforming and isolation of Donald Trump and domestic terrorist social media sites needs to be carried out. If they don't have gathering places on social media, they won't be able to organize. That's important. There needs to be a recognition that the militarization of the mindsets of young Americans which happens in the military and the glorification and seeming ubiquity of war as the only way to deal with other nations is a cause of the recent problems. Instead of funneling all non-college bound youth into the military, there needs to be an upsurge in funding and encouragement for young people to go into the Peace Corps and AmeriCorps. We need to demilitarize the mindsets of the American people.

Terrorist and threatening phone calls need to be traced and the perpetrators brought to justice. No public official should have to live in fear for their lives and their family's lives because of death threats on phone calls or on social media. Social media is a big problem. They have gotten rich off the fact that their algorithms have encouraged, aided and abetted the domestic terrorists. Their business model showed that there was a lot of profit in encouraging conspiracy theories and other activities detached from reality. It's good that it has become evident by reporting on legitimate news outlets that social media is not subject to the First Amendment because that only applies to government hindrance of free speech. Social media platforms are private entities and they do not have to honor so-called free speech. Private entities also don't have to honor the Second Amendment so that there is space to restrict guns on private property which is probably 99% of the property in the US.

The next administration has its work cut out for them. Good leaders and good people will prevail. Deplatforming all right wing media and groups that espouse conspiracy theories and outright lies will be an important step. Sober analysis and critical thinking must replace narcissistic fantasy and entertainment values. This starts with children in school. They need to taught how to distinguish truth from lies. They need to be taught the value of peace and harmony not only in their daily lives but in the pursuit of that status among and between nations. They should be taught that the US has not always been but should aspire to moral and ethical behavior with regard to other nations and within its own country.

Money must be drained from the military establishment which is oriented towards either non-existant or phony threats and reoriented towards the real threats and funded at appropriate levels rather than be treated to carte blanche amounts of superfluous cash. Budgets both military and domestic need to be appropriate to their realistic needs. Right now the greatest need is in overcoming the pandemic and responding to the economic needs of the lower half of the population. Also eliminating energy production from fossil fuels needs to proceed post haste. It's obvious that the private economy can not do this at the rate necessary to save the planet from the ravages of global warming. Only big government programs in conjunction with the programs of other countries can possibly achieve the reality of zero carbon emissions by 2030.

The last word is that Trump must be denied any post Presidential influence or following by any and all legal means. This is the greatest thing that can be done to heal and deradicalize the country. America also will pay a heavy price if it doesn't get its promotion of gun culture under control.

Off the Top of My Head

Has China Won?

by John Lawrence, October 16, 2020

Ian Bremmer wrote in Time magazine: "You might think 2020 had been a pretty good year for China, at least when compared with the West. Though COVID-19 began its global march there, China’s recovery has been remarkable. The government’s unprecedented capacity for surveillance, large-scale testing, contact tracing and quarantine helped contain the outbreak inside China within two months. That success allowed for the restart of supply chains and enabled a state investment-led rebound. China could be the world’s only large economy to grow this year. And as second waves of COVID-19 appear in Europe and the U.S., China hasn’t had any serious outbreaks over the past month. Life there is nearly back to normal."

The Chinese and the US economies were neck and neck prior to COVID. The fact that China has handled its response much better than has the US means that China will emerge as the world's largest economy by 2021. In his book, "Has China Won?", author Kishore Mahbubani sums up the strengths and weaknesses of both societies. He contends that the "Chinese Communist Party" is a misnomer. It should be called the Chinese Civilization Party as it owes more to China's 3000 year civilization than it does to communism. China values stability over chaos. It has pulled 800,000 Chinese citizens out of poverty in the last 40 years, largely because it has privatized large swaths of its society. Chinese citizens are well satisfied with their lot in life because among other things they have access to as wide a variety consumer goods as do the developed western societies.

So what has been the US response to China's rapid economic growth and expansion particularly with regard to its Belt and Road Initiative (BRI) which is building infrastructure all over the world with the intention of recreating the ancient Silk Road trade route? Obama initiated the Trans-Pacific Partnership (TPP) which would have been a trade alliance rivaling the BRI. Trump immediately withdrew from the TPP as well as withdrawing from other global initiatives and alliances under his America First go-it-alone philosophy with the result that even US allies are giving Xi Jinping and China more credibility than the US. Under the Trump administration the response to China's rise has been to try and put roadblocks in the way of Chinese corporations. They had Meng Wanzhou, the CFO of Huawei, China's largest privately held company, arrested on December 1, 2018 in Canada under the pretext that Huawei had sold equipment to Iran violating US sanctions. Subsequently, she was extradited to the US. On February 13, 2020 Meng was personally indicted by the DOJ on charges of trade secrets theft which carries a maximum penalty of 10 years' imprisonment.

Similarly, the Trump administration sought to prohibit the popular Chinese app Tik Tok from being downloaded by American consumers. Tik Tok, however, received a reprieve in September 2020 from an American federal court when a judge put a temporary stop to the Trump administration's ban. The government had argued that Tik Tok may have a "back door" through which it could share American data with the Chinese government. A ban would “be no different from the government locking the doors to a public forum,” said John Hall, a lawyer for TikTok. “We’re pleased that the court agreed with our legal arguments and issued an injunction preventing the implementation of the TikTok app ban,” a spokesman for TikTok said after the judge’s decision.

The American response to the success of Chinese private corporations might have been to cheer the at least partial privatization of the Chinese economy, a laudable development in accordance with US free enterprise, capitalistic principles. Instead, the US under Trump has sought to hinder Chinese corporations every step of the way even when they have won competitions fair and square. It is what I would call the Tonya Harding response. In January 1994, skater Tonya Harding became embroiled in controversy when her ex-husband, Jeff Gillooly, orchestrated an attack on her fellow U.S. skating rival Nancy Kerrigan. Both women then competed in the February 1994 Winter Olympics, where Kerrigan won the silver medal and Harding finished eighth. Harding was later banned from the sport. The US response to China over China's pulling ahead of it is reminiscent of Tonya's response to Kerrigan. If you can't beat your opponent with your natural talent, try to injure them (in this case sanction or ban them) instead.

This leaves aside the legitimacy of the US use of sanctions to demand that another country (in this case China) must not do business with some other country if the US says it can't. A Biden administration would reenter the Iran nuclear agreement which reduced sanctions against Iran, and, supposedly, Meng would be released. Tik Tok also would be allowed to continue its ability to sell its app all over the world. The US should engage constructively and diplomatically with China to allay any fears about "back doors." Diplomatic treaties and agreements are the way to go, not retaliation over imagined and ill defined fears. It's important that the US and China cooperate especially when it comes to global warming. They are the 2 largest greenhouse gas (GHG) emitters, and their cooperation is necessary in working with the rest of the world (in particular India) in bringing GHG emissions to net zero in the shortest time. The destructive effects of global warming are manifesting themselves now all over the world in addition to the wildfires on the US west coast and hurricanes in the Gulf states.

Off the Top of My Head

China's Development of a Digital Currency Threatens Primacy of the Dollar as the World's Reserve Currency

by John Lawrence, May 20, 2020

China is the first country to develop a digital currency based on blockchain technology at the national level. The Guardian reported:

On 17 April [2020], the digital currency research institute at the People’s Bank of China, which is developing the system, said the research and development of a digital renminbi was “advancing steadily” and top-level design, functional research and development, and debugging had largely been completed, according to a CCTV report. ...

“A sovereign digital currency provides a functional alternative to the dollar settlement system and blunts the impact of any sanctions or threats of exclusion both at a country and company level,” last week’s China Daily report said.

The dollar has been the world's reserve currency since the Bretton Woods agreement of 1944. In 1971 President Nixon took the US off the gold standard so that the dollar floated against other currencies but not the Chinese renminbi. In recent years as China has become more of a market economy, its currency has become more important on the world stage. Recently the Trump administration has used sanctions against Iran in an attempt to cripple Iran's economy and force regime change. Other countries wishing to continue doing business with Iran, even US allies, were also threatened with sanctions. Recent use of sanctions has effectively weaponized the dollar as most business transactions worldwide are settled using US dollars.

The new Chinese digital system will effectively bypass the US dollar and allow transactions among different countries without the possibility of US sanctions. As the Chinese currency gets stronger and alternative financial institutions are developed that don't involve settlement in dollars, China might even use sanctions against the US some day. The main institutions which support the dollar as the world's reserve currency are the World Bank, the International Monetary Fund (IMF), the Bank for International Settlements (BIS) and the Society for Worldwide Interbank Financial Telecommunication (SWIFT). China's developing institutions include the Asian Infrastructure Investment Bank (AIIB) and the Belt and Road Initiative (BRI).

One of the advantages of the US dollar is that the US can spend beyond its means. We import more than we export. This creates a trade deficit, and the government spends more than it collects in taxes. This creates a fiscal deficit. The US sells Treasury bonds to make up the difference. Other countries, notably China, purchase this US debt and become US creditors. Lately, China has stopped buying US Treasuries, but still the world’s second largest economy is the largest US creditor. But what happens if China decides to dump its Treasuries on the world market? As a last resort the Federal Reserve can buy US Treasuries, with Wall Street banks acting as intermediaries, thus essentially disappearing the debt down a black hole. The Fed also has to worry about the strength and stability of the dollar, and, if it swallows too much US debt, the value of the dollar vis a vis other currencies may suffer.

It seems that China, if not holding all the cards, holds many of them. A good deal of American manufacturing is done there. It is the largest holder of US debt and it is developing peaceful economic relationships with other nations that allow for increased economic activity that will benefit China. It is developing economic and financial institutions which bypass the dollar and will allow for trade with nations the US has sanctioned. Meanwhile, the Trump administration is overstepping its bounds with regard to sanctioning other countries using a weaponized dollar.

Kishore Mahbubani writes:

In recent years, the US government has imposed even heftier fines on non-American banks for working with countries like Iran, Cuba, and Sudan. For example, BNP Paribas SA was fined US$8.9 billion in 2015. As a result, many countries that had trusted the US dollar now find it to be a double-edged sword, cutting the fingers of whoever holds it. This creates an obvious incentive to reduce dependence on the US dollar, which could eventually precipitate a fall in global demand for US dollars, crippling the US' ability to fund its twin deficits. Donald Trump has recently created an additional incentive for moving away from the US dollar through his calls to devalue the dollar. As the former French President Valery Giscard d'Estaing said, this is an "exhorbitant privilege" that Americans enjoy. Americans should be grateful that the rest of the world is funding this exhorbitant privilege. Trump is unappreciative. The rest of the world is genuinely bewildered, wondering why America is taking steps that could in the long run jeopardize this privilege.

Russia, China, Iran, Cuba and other nations have lately been taking other measures to bypass the dollar in world trade. The BRICS nations (Brazil, Russia, India, China and South Africa) have formed an alliance and are creating alternative financial institutions.The New Development Bank (NDB), formerly referred to as the BRICS Development Bank, is a multilateral development bank operated by the BRICS states. The BRICS Contingent Reserve Arrangement (CRA) is a framework for providing protection against global liquidity pressures. The CRA is generally seen as a competitor to the International Monetary Fund (IMF) and along with the New Development Bank is viewed as an example of increasing South-South cooperation.

Off the Top of My Head

A Jobs Program for Inessential Workers
by John Lawrence, April 30, 2020

Turn inessential workers into essential workers by putting them to work building green infrastructure. This is essential work that is not getting done. Much of the previous inessential work they did is better left undone even in a recovery. It is still inessential. It'll always be inessential compared to what needs to be done in creating and building green infrastructure. Building out solar and wind renewable energy could employ thousands if not millions of people. Repairing roads, bridges, waterways, clean water systems, airports, railroads and all other infrastructure could employ millions. This is essential work that has remained undone despite the fact that the American Society of Civil Engineers has given the US a D rating for infrastructure. High speed rail needs to be built. The widespread adoption of electric cars has to be mandated, and construction of a national electric vehicle charging network to power them has to be built.

Unemployed people still need jobs. Mark Cuban said on CNN this morning that there should be a jobs program similar to that of the New Deal. He is exactly right although he didn't make the necessary connection about the essential work that's still being left undone and the inessential work that doesn't need to be done even in a recovery. Forget Cuban's sports and entertainment enterprises. I hate to tell you that they are basically inessential. What is essential is greatly expanding the public health undertakings of the Federal  government which has been totally behind the curve in this pandemic.

We must ask ourselves what is essential and not go back to a new normal in which all the inessential businesses of the past are brought back just in order to provide employment to the millions who have lost their jobs. The pre-pandemic economy was 70% consumerism. The economy post epidemic should be much less a consumerist economy and much more an investment economy. The four components of gross domestic product are personal consumption, business investment, government spending, and net exports. Of these government spending must be ramped up to provide the essential jobs in infrastructure building as well as in the areas that the pandemic has made clear are indeed essential: health care, education, transportation, agriculture.

Government spending must go up; personal consumption must go down. It's as simple as that. As for business investment, it's a lost cause as business will only do what's profitable for itself as has been made abundantly clear. Investment in fossil fuels and plastics which the big oil companies are making is only destructive to a green economy, not constructive. As far as exports are concerned, the dollar has already been weakened as much as it could possibly be by zero interest rates, so increased exports, although desirable, are not likely to happen any time soon.

Private enterprise knows only one thing in terms of the economy "reopening": get back to consumer spending. It ain't going to happen. People are still afraid of the virus. The pandemic is not over. They will use their money to pay off debts instead of going in debt to the hilt like they are used to. People will save their money instead of entertaining themselves to death. Why? Maybe they have learned their lesson that a high employment economy predicated on the fact that people will always have a job and always have a prepensity to consume is just a chimera. Rather than living paycheck to paycheck, I hope people will understand that there may come a rainy day, and they need to save for that. That lesson has really been brought home by the coronavirus pandemic.

The true heroes are essential workers not the military. The military itself was brought to its knees by COBID-19. There is a lesson there. It's more important to spend our collective money on preparing for the coming pandemic of global warming than on a bloated military. It is more important to house the homeless and guarantee the economic rights of shelter and health care to all Americans as in the 1948 UN Declaration of Human Rights. It is more important to help people all over the world escape from extreme poverty because poverty breeds health crises which then can spread all over the world. It's more important to make peace with our rivals rather than try to control them with military threats and sanctions.

May the next President (and I hope to heaven that it's not Donald Trump) see the light of a more rational, compassionate and humane world, one more concerned about the health and welfare of all the world's peoples. I hope Governor Cuomo's values of being tough, smart, disciplined and most importantly loving spread to every corner of US and world society, and we get on with essential business instead of the inessential business of amusing, entertaining and consuming ourselves to death.

Off the Top of My Head

Trump Wants Absolute Authority But Zero Responsibility

by John  Lawrence, April 15, 2020

How does a democracy elect a complete fool and idiot for its Supreme Leader? It's not a great advertisement for democracy. Part of the idiocy is he sanctions China when all the PPE is manufactured in China. There are 150 countries and 50 US states all competing for PPE. If you were China would you show any favoritism towards the US? Hell no. Other countries will be more highly favored and will receive their shipments first. Trump has gone out of his way to antagonize China first with a trade war, then by arresting the CFO of Huawei, Meng Wanzho, and accusing her of fraud. Meng was still in Canada awaiting an extradition request by the US when the coronavirus first broke out in the US.

Huawei was accused of violating US sanctions against selling equipment to Iran. Leaving aside the argument that one country should be in the position of dictating to another country with whom they can do business, consider the conundrum the US is now in as it begs China for priority in the distribution of PPE and other vital necessities. What is Trump going to do sanction them again for not giving the US the products it needs to combat the coronavirus?

On top of that, the US under Trump refuses to let Iran have even humanitarian assistance combating the coronavirus. I guess we're not in this together after all especially when it comes to Iran. The United States sent Iran a blunt message last month: the spread of the coronavirus will not save it from U.S. sanctions that are choking off its oil revenues and isolating its economy. So in other words the Trump administration hopes that everyone in Iran dies. At least they will not get any mercy from the US. Iran, devastated by the coronavirus, asked the U.S. to lift sanctions on humanitarian grounds. The New York Times reported:

As Iran struggles with a devastating coronavirus outbreak, a broken economy and a severe shortage of medical equipment, it says that American trade sanctions are taking Iranian lives and has called for the United States to lift them on humanitarian grounds.

Iran’s plea is gaining traction around the globe, winning support from allies like Russia and China, but also the European Union, the United Nations secretary general, rights groups and nearly three dozen members of Congress, who have appealed to the Trump administration to suspend the sanctions for as long as Iran is battling the coronavirus.

Iran, a global epicenter of the virus, has confirmed more than 47,000 cases and more than 3,000 deaths, although public health experts estimate the real toll to be several times higher.

“We had always said the sanctions are unjust but coronavirus revealed this injustice to the world,” Foreign Minister Javad Zarif said in a recent video message, which he began by removing a surgical mask from his face with blue latex gloves. He referred to the sanctions as “economic terrorism.”

Trump has isolated the United States. Increasingly, the other countries of the world including US allies are disagreeing and actually finding fault with the way the Trump administration is conducting itself. Iran even applied to the IMF for a loan. Iranian President Hassan Rouhani said last week the IMF would be guilty of discrimination if it withholds the money for the country, which is a member of the IMF. Despite that US Secretary of State Mike Pompeo told the IMF not to grant them a loan. This is just downright mean, cruel and heartless. Despite that Iran has a few friends in the world including China and Russia. The US is doing everything it can do to tweak all three country's noses in the middle of a worldwide pandemic.

Are we really all in this together? I don't think so. In one of the few instances of aid, Britain, France, and Germany used a special trading mechanism for the first time on March 31 to send medical supplies to Iran in a way that does not violate the sanctions. It's also important to point out that, if Hillary Clinton had been elected instead of Donald Trump, the US would never have sanctioned Iran in the first place since it was complying with the JCPOA nuclear plan agreed upon by Iran and the five permanent members of the UN Security Council - China, France, Russia, United Kingdom, United States—plus Germany) together with the European Union. Trump is a rogue President whose sanctions are creating antagonism and chaos in the world community. This is becoming even more obvious in this time of pandemic.

Off the Top of My Head

China and India Now Manufacture About 80% of the Drugs Consumed in the U.S.

by John Lawrence, March 29, 2020

The US doesn't even manufacture vital drugs like antibiotics anymore, with the last penicillin factory closing in 2004. But who can blame the drug manufacturers? They're in it for the money. Drugs that you use once or twice and then you're cured are unprofitable. They only manufacture drugs that need to be taken once a day every day for life like high blood pressure and diabetes medicine, and then they outsource the manufacture of those drugs to China because that's the most profitable way to do it. FDA inspectors are unable or unwilling to provide appropriate oversight of Chinese manufacturing. In contrast to the robust testing required for approval for new prescription drugs, the FDA only requires that generic manufacturers prove that patients will absorb drugs at the same rate as the brand-name medications they copy.

But who needs robust drug testing anyway? Ronald Reagan said that the nine most terrifying words in the English language are, "I'm from the government and I'm here to help." So who needs the government's help to test drugs? Who needs government's help in a pandemic? Let's get government off our back and let'er rip. And what we surely don't need is government getting into the business of manufacturing drugs themselves and competing with the private sector. That would be socialism!

Many of the generic drugs imported from China are contaminated. So? Caveat Emptor! China is our great friend when it comes to trusting life saving drugs manufactured there, but our enemy when it comes to government sanctioning and disapprobation. We hate their form of government, but we love that we get Chinese laborers to work for a fraction of what Americans make. China and India are now restricting the export of some drugs and medical equipment. That means that Americans will not have the medical equipment and drugs they need due to export restrictions from countries that have a domestic need for those products. They will come first. The US will be last, but that's capitalism!

Big pharma continues to walk away from investment in new antibiotics and there are alarmingly few useful new drugs in the pipeline to deal with the worsening crisis of antibiotic resistance, according to the World Health Organization. So the US has to depend on another country for most of its pharmaceutical needs while at the same time the President is saying negative things about that country. According to him they are not our ally. Not our ally but we're depending on them for life saving medicines ? Does this make any sense? Of course it makes sense because it maximizes profits for private enterprise.

The US wants to have it both ways. They want to say negative things about the Chinese government while at the same time being almost totally dependent on that country for critical medical products as well as tons of other products. It's all about the fact that American corporations want to take advantage of cheap Chinese labor while at the same time the US government feels free to chastise China. The big pharmaceutical companies are not investing in antibiotic research because it is not a lucrative market for them. And BIG Pharma has successfully gotten government off its back because they made sure that in the Obamacare bill, Medicare could not negotiate with the drug companies for cheaper prescription drugs for old people. Score one for the free market! The law states that the secretary of Health and Human Services “may not interfere” in negotiations between pharmaceutical companies and prescription drug insurance plan providers.

At the same time there is much military swagger on the part of the US. China better watch itself in the South China Sea or we will send our mighty aircraft carriers there. "The head of the U.S. Navy warned China that hostile behavior from its coast guard and fishing boats will not be treated any differently from the Chinese navy, the Financial Times reported on Sunday." But what good is the military going to do if the whole world is at the mercy of a virus or a bacteria, if the whole world is brought to its knees except the countries who have invested in the manufacturing of their own critically needed products? Are we going to invade China and demand that they give us the medicine? Yes, we will send our military to make sure that China does not control the South China Sea, but then get down on our hands and knees to beg China to send us critical medicines that are manufactured there. The whole foreign policy regarding China is absolutely nuts.

Agribusiness continues to use antibiotics in animal feed not for the treatment or prevention of disease, but to make them attain higher marketable weights in the quickest possible time. This make more profit for the meat growers and slaughterers. At the same time it decreases the medicinal benefits of antibiotics in humans because the bacteria mutate at a faster rate. Therefore, new antibiotics must be developed, but they aren't being developed. The lucrative drugs are the ones that must be taken every day for life not the ones that, once they have cured a disease, are no longer needed. But we don't want to regulate Agribusiness, do we? We want fewer government regulations because we want to get government off our backs or at least off the backs of private enterprise so they can maximize profits.

For the US to be secure against disease the Federal government must develop the drugs and antibiotics that the pharmaceutical corporations are not developing because they are unprofitable. We can't totally rely on the private sector because the private sector is only in it for the money not for the health of the nation. In a pandemic Reagan's words, "I'm from the government and I'm here to help" are not the most terrifying words in the English language. They're the most reassuring words.

Off the Top of My Head

Maybe the Shut Down of Non-Essential Businesses Should Be Made Permanent

by John Lawrence, March 27, 2020

As long as we have electricity, the internet, clean water, waste water disposal, full grocery markets, pharmacies, excellent health care, gas stations, trash collection and other essential businesses, perhaps the shut down of non-essential businesses is a good thing. Already it has cleaned up the environment and significantly reduced the emission of greenhouse gasses. What about all those unemployed people, you say? Put them to work in the Green New Deal building and repairing infrastructure throughout the country. If this COVID-19 thing lasts till January 20, 2021, I'm hoping President Joe Biden will do just that. And we should help build essential businesses in other parts of the world instead of engaging in military adventurism. Billions of people don't even have clean water, adequate sanitation, the internet, full grocery markets and other essential businesses.

Once these essential needs are taken care of for the entire world's population in such a way that GHG emissions are reduced to zero, then maybe some non-essential businesses could be reestablished. The pandemic goes to show that much of the US economy is based on non-essential businesses and the provision of non-essential goods and services. In fact not only are many of them non-essential, they are downright deleterious. Consider the gambling industry: downright deleterious. The movie and TV industry: about 70% deleterious. The fast food industry: 90% deleterious creating obesity and diabetes. Why isn't the school system educating people about nutrition? Many people have essentially a fast food diet. The food is cheap and ubiquitous, and people don't have time to create nutritious meals any more the way Moms used to when they didn't have to work to pay the mortgage and car payments.

The American way of life including may non-essential businesses is sickness producing. The profit oriented health care industry makes money off of sick people, not keeping people healthy. If everyone were healthy or were encouraged to lead healthy lifestyles, there would be far less sickness. But the stress induced by both spouses having to work leads to unhealthy lifestyles. Some families need 2 or 3 jobs just to make ends meet. The children are also subjected to a competitively oriented style of learning in which they are forced to compete with other children to get good grades so they can get into the best colleges. Instead maybe they should be encouraged to think in terms of what they want to do in their lives which would be a service to society in addition to affording a comfortable living for themselves.

More businesses considered to be non-essential:

Theaters, Salons and Spas, Racetracks, Shopping malls, Bowling alleys, Sporting and Concert Venues, Liquor stores, Bars, Cruises, Golf Courses, Resorts, Hair and Nail Salons.

Highly polluting industries and activities which are non-essential:

Most airline travel, the cruise industry, the travel and tourism industry, most automobile travel (use mass transit instead), most of the trucking industry (use rail instead), the beef industry, the hog industry, agribusiness (encourage small organic farms instead), most military and military-industrial complex, the plastic industry, the fossil fuel industry.

In Coronavirus Will Change the World Permanently. Here’s How. Mark Lawrence Schrad writes:

America has long equated patriotism with the armed forces. But you can’t shoot a virus. Those on the frontlines against coronavirus aren’t conscripts, mercenaries or enlisted men; they are our doctors, nurses, pharmacists, teachers, caregivers, store clerks, utility workers, small-business owners and employees. Like Li Wenliang and the doctors of Wuhan, many are suddenly saddled with unfathomable tasks, compounded by an increased risk of contamination and death they never signed up for.

When all is said and done, perhaps we will recognize their sacrifice as true patriotism, saluting our doctors and nurses, genuflecting and saying, “Thank you for your service,” as we now do for military veterans. We will give them guaranteed health benefits and corporate discounts, and build statues and have holidays for this new class of people who sacrifice their health and their lives for ours. Perhaps, too, we will finally start to understand patriotism more as cultivating the health and life of your community, rather than blowing up someone else’s community. Maybe the de-militarization of American patriotism and love of community will be one of the benefits to come out of this whole awful mess.

The same sentiments hold true for teachers and other caregivers. People that take care of people and encourage people to have better lives are the true heroes. The Peace Corps and AmeriCorps should be the preeminent national services not the Army, Navy, Air Force, Coast Guard and Marines. We need to spread good will in the world by spades instead of bullying the rest of the world with US sanctions. We should develop the equivalent of China's Belt and Road initiative and start building clean water plants, sanitation plants, industries which decrease pollution and plastic trash in the ocean. We need to clean the environment around the world not contribute to dirtying it. We need to help bring home all the refugees in refugee camps and guarantee the safety and security of Latin Americans so they don't become migrants and refugees.

Off the Top of My Head

Sanctions Hasten Other Nations' Exit from the Dollar

by John Lawrence, January 11, 2020

The US threatened to put sanctions on any nation buying Iranian oil. So far this strategy doesn't appear to be working since some other nations don't agree with this US policy and are willing to go ahead and buy Iranian oil anyway although they are probably not paying in US dollars. In 1971 President Nixon made a deal with Saudi Arabia that it would accept payment for oil only in dollars. This made the US dollar the world's reserve currency. Since the beginning of 2003, Iran has required payment in euros for exports to Asia and Europe. The government opened an Iranian Oil Bourse on the free trade zone on the island of Kish, for the express purpose of trading oil priced in other currencies, including euros. So even before the sanctions, Iran broke ranks with the US-Saudi agreement and was willing to exchange oil for other currencies.

This is how Iran got in trouble with the US originally when in 1951 Iran nationalized the Anglo-Persian Oil Company. Foreign companies owned most of Iran's oil prior to that time. In August 1953, the government of Mosaddegh, who had spearheaded the nationalization of Iranian oil, was overthrown by a military coup d'état orchestrated by the United States Central Intelligence Agency and the British Secret Intelligence Service. Mosaddegh was sentenced to three years in prison and then kept under house arrest until his death in 1967. This ushered in the era of the notorious Shah of Iran who immediately unnationalized Iranian oil and gave control of its oil back to the US and Britain.

Now that the US is sanctioning all exports of Iranian oil, Iran is selling oil anyway on the "gray market." Essentially it is smuggling Iranian oil to willing buyers who are paying Iran much less than they would be paying other countries in dollars for the same oil. China is the main nation willing to defy US sanctions and buy Iranian oil. However, the US is hesitant to put sanctions on China, a major trading partner, which has become too powerful to bow to US demands. This is all leading to dedollarization in world markets and the use of other currencies for trading. Since the US has weaponized the dollar, the result will be that other currencies will take on perhaps a shared role in becoming world reserve currencies.

In August 2018, Venezuela joined the group of countries that allow their oil to be purchased in currencies other than US Dollars, thus allowing purchases in Euros, Yuan and other directly convertible currencies. This tendency will be increasing around the world as the US tries to bully other countries by using sanctions. This means that petrodollar recycling which has allowed the US to run huge budget deficits will decline. The US will probably continue to run huge budget deficits with the Federal Reserve just printing the money to make up the difference between the deficits and diminished petrodollar recycling.

Another trend that will diminish the role of the dollar as the world's reserve currency is the conversion from fossil fuel products to renewable energy sources which must be done at a faster rate if the earth is to be protected from global warming. As the Fed ramps up its printing of dollars, the dollar will, inevitably lose value even if it doesn't result in inflation in the US. But inflation is in the eyes of the beholder. Already the increased money printing has caused tremendous inflation in asset prices, namely the stock market and real estate. It's just that the government excludes these assets from its inflation index so it seems like there is low inflation. Those experiencing skyrocketing rents would probably disagree.

China became the world's largest trading nation in 2013, overtaking the US. This means that the US can hardly threaten a more powerful nation economically with sanctions. In 2018, China was the world's largest economy for the fourth year in a row. It produced $25.3 trillion in economic output according to estimates by the International Monetary Fund. It contributed 19% of the world's total gross domestic product of $135.2 trillion. The European Union was in second place, generating $22 trillion. Together, China and the EU generate 35% of the world's economic output. The United States remained in third place, producing $20.5 trillion.

The US is losing its ability to push other nations around because the dollar is the world's reserve currency. The dollar is fast losing even that status so, if China wants to buy Iranian oil, they will do so, sanctions or no sanctions. Even the EU is defying US sanctions as Germany continues developing the Nord Stream 2 pipeline which will deliver natural gas from Russia to Germany. The US has no hesitation in sanctioning Russia, but it will back off from sanctioning a major NATO ally, Germany, over this deal which Germany badly wants. The sanctions amount to no more than a slight delay in the completion of the pipeline.

Off the Top of My Head

Why is the Fed Giving Billions to the Big Banks Again?

by John Lawrence, November 14, 2019

After the Great Recession of 2008, the Federal Reserve gave $16.8 trillion to the big Wall Street banks. Now again there is not enough money in the repo market so the Fed has to step in and provide more money to keep the system going even though it said quantitative easing (QE) was over. Under normal circumstance banks would borrow from each other in the repo market to balance their books overnight. That's the purpose of the repo market - short term lending so that everything checks out on a daily basis. So why are banks so short of cash that the Fed has to provide liquidity now? The reason that the Treasury has to issue so much in bonds every month is to cover the Federal budget deficit. The Treasury Department plans to borrow $1.23 billion in 2019. The big banks act as the middle man or conduit to offload this debt onto investors. If they can't offload it, they are stuck with it and become cash short. That's when the Fed has to step in and supply liquidity by taking the Federal debt off the Big Banks' hands. In addition to the short term loans in the repo market, where the Fed purchases Treasury debt, the central bank recently said it would provide emergency liquidity by buying some $60 billion of Treasury bills a month, expanding its balance sheet. So essentially the Treasury debt caused by the Federal budget deficit caused mainly by Trump's tax breaks for the wealthy is being purchased to a high degree by the Fed which disappears it on its balance sheet after it passes through the hands of the middle men. The Fed by law can't buy Federal debt directly.

China is the largest holder of US Treasury debt at about $1.12 trillion. However, China has cut its purchase of US debt recently and its holdings are down about $20 billion. What does this portend? The US has weaponized the dollar applying sanctions liberally. It has put sanctions on Chinese tech giant Huawei and also ZTE. It is engaged in some kind of trade war with China, but as the largest holder of US debt, China has all the cards. It can weaponize right back by not continuing to purchase US deb among other thingst. This will have the effect of creating a glut of Treasuries in the hands of the middlemen, namely the big US banks and hence the liquidity crisis. If no one wants to purchase US Treasuries, the Fed has to do it and put them on its balance sheet essentially disappearing and eating US debt.

So it raises the question, if the Fed can disappear US budget deficits which are caused by tax cuts for the wealthy as well as a bloated trillion dollar defense budget, why couldn't the Fed eat the deficits caused by a Green New Deal and Medicare for All. It seems like more people want to expand the ACA (Obamacare) with a public option than want Medicare for All. This boils down to broad support for a Medicare for All Who Want It plan which is supported by the Democratic moderates like Joe Biden. At any rate Republicans will try to demand from the Democrats a balanced budget as a way to put the damper on bold Democratic initiatives while they effectively spend like drunken sailors and let the Federal Reserve buy the excess debt that China and other nations are increasingly reluctant to buy in light of the weaponized dollar.

Meanwhile, on November 1, 2019, The World Trade Organization ruled that China can impose sanctions on up to $3.6 billion worth of U.S. goods over the U.S. government’s failure to abide by anti-dumping rules with regard to Chinese products. Oh, so two can play that game. I'll sanction you, and you'll sanction me, not that the US ever cared a fig about the World Trade Organization or what it said.

The Democrats can and will play the same game as far as deficits are concerned. Let the Federal Reserve eat the Federal debt that other nations will increasingly not be buying. Both a Green New Deal and a national health care plan are crucially important. In the long run a lot more people will die if we don't get global warming under control than will die with our current patchwork medical system. Most of them will die in other parts of the world, but the US will be heavily impacted as well which is already starting to happen in the present day.

Trump's liberal use of sanctions has created a backlash from the rest of the world especially China which is US' largest creditor. It's as if you go to your rich uncle hat in hand asking for more money while at the same time telling your rich uncle how to live his life. Other nations are building alternative banking institutions in order to bypass the use of the US dollar and that portends bad news for the dollar as the world's reserve currency. When China and other nations start selling instead of buying US debt, teh Fed will have to step in as it's already doing and swallow that debt. In other words perpetual QE even though the Fed doesn't want to call it that.

Off the Top of My Head

How to Counter China's BRI Initiative: A Worldwide Green New Deal

by John Lawrence, July 24, 2019

The American political establishment is all worried about China's Belt and Road Initiative (BRI) because it forges alliances with many countries especially, but not limited to, those of the Eurasian land mass including Russia. They do this by partnering to build infrastructure in those countries thereby increasing trade with China primarily. The Chinese approach is basically the equivalent of Dale Carnegie's book, "How to Win Friends and Influence People." The American approach is to threaten other countries with its military might or its weaponized dollar. These are the only things in the American playbook. Other American interactions with third parties have been left to the private sector because the American government has been hollowed out to the point that all activities with the exception of the military and the use of sanctions have been left to the private sector. America cannot even repair its own infrastructure much less build infrastructure in the rest of the world like China is doing. China can do this because it has a government capable of launching huge initiatives. Unless those initiatives are of a military nature, the US can do nothing of the sort.

Therefore, I have a great idea (I think). The Democrats should think big and their agenda should be (in addition to universal health care which I will discuss later) a Worldwide Green New Deal (WWGND). Climate change will not be ameliorated that much by just greening America. Most of the greenhouse gasses are being emitted elsewhere. So a Green Marshall Plan or a Worldwide Green New Deal is in order, and it will counter China, not militarily like the Washington Republican establishment is trying to do (after all if all you possess is a hammer every problem must be solved by hammering), but by peaceful green development exactly like China is trying to do although I don't know how much the emphasis with the BRI is on green.

Some quibbles with the Green New Deal as presently constituted: it guarantees a government job for anyone who needs a job. No, leave this part out, because the Republicans will slaughter you over this. A Worldwide Green New Deal is necessary not only to save the planet, but to counter China's growing influence in the world. This would be a peaceful competition instead of the military one that has borne no fruit over the last years since WW II. The wars since then have been a waste and a tragedy that have only destroyed infrastructure and alienated major parts of the world's population. A WWGND will also be a change in foreign policy vis a vis the rest of the world. It will say we are not here just to try and control you militarily or to destroy your economies with sanctions if you don't obey our orders. It would be saying to the world "let's have a peaceful competition with China and save the world from the worst effects of climate change at the same time."

The US political establishment is apprehensive about China. It is getting defensive about China. That's why it is taking the attitude towards Huawei which is outdcompeting American companies. The US is trying to use sanctions to block Huawei's progress since it is on the losing end of the competition. But America has no industrial policy; China does and this makes all the difference. America can only react defensively using threats both military and dollarized.

Now regarding universal health care, as much as I like Bernie Sanders, I think Medicare for All as a plank in the platform has to go. The Republicans will slaughter us over that. Hickenlooper and others have a better idea: Medicare for All Who Want It. The rest can stay with their private insurance. Evidently, 180 million Americans are covered by employer based insurance, and, evidently, they like it. This would be similar to restoring the public option that was lobbied out of Obamacare. Let people opt in to Medicare, but don't force them to. This is the winning agenda item. Over the years as more and more people become disenchanted with private insurance, they will start opting in until the point will be reached that effectively Medicare For All will be realized. This is the way to make universal health care evolutionary instead of revolutionary.

The American Republican poltitical establishment is taking a defensive, fearful attitude towards China's BRI. They are trying to control the world not by military supremacy but by peaceful development in conjunction with their neighbors. How dare they! The US has invested the whole ball of wax into military domination of the world to put America first. After all we beat communism leaving America as the world's dominant empire. But if America doesn't change course it will be left in the position of trying to hold back China's peaceful initiatives with its threats of military action and sanctions.

One last note: the US will have to replace the privately owned Federal Reserve with a public central bank in order to fund a WWGND. Ellen Brown has discussed this in detail. Lincoln essentially did this with his issuance of greenbacks to fight the Civil War and build the transcontinental railroad. It worked for him and us.

U.S. Economic Warfare and Likely Foreign Defenses

                from Counterpunch

JULY 22, 2019 by MICHAEL HUDSON

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Photograph Source: Trending Topics 2019 – CC BY 2.0

Today’s world is at war on many fronts. The rules of international law and order put in place toward the end of World War II are being broken by U.S. foreign policy escalating its confrontation with countries that refrain from giving its companies control of their economic surpluses. Countries that do not give the United States control of their oil and financial sectors or privatize their key sectors are being isolated by the United States imposing trade sanctions and unilateral tariffs giving special advantages to U.S. producers in violation of free trade agreements with European, Asian and other countries.

This global fracture has an increasingly military cast. U.S. officials justify tariffs and import quotas illegal under WTO rules on “national security” grounds, claiming that the United States can do whatever it wants as the world’s “exceptional” nation. U.S. officials explain that this means that their nation is not obliged to adhere to international agreements or even to its own treaties and promises. This allegedly sovereign right to ignore on its international agreements was made explicit after Bill Clinton and his Secretary of State Madeline Albright broke the promise by President George Bush and Secretary of State James Baker that NATO would not expand eastward after 1991. (“You didn’t get it in writing,” was the U.S. response to the verbal agreements that were made.)

Likewise, the Trump administration repudiated the multilateral Iranian nuclear agreement signed by the Obama administration, and is escalating warfare with its proxy armies in the Near East. U.S. politicians are waging a New Cold War against Russia, China, Iran, and oil-exporting countries that the United States is seeking to isolate if cannot control their governments, central bank and foreign diplomacy.

* Keynote Paper delivered at the 14th Forum of the World Association for Political Economy, July 21, 2019.

The international framework that originally seemed equitable was pro-U.S. from the outset. In 1945 this was seen as a natural result of the fact that the U.S. economy was the least war-damaged and held by far most of the world’s monetary gold. Still, the postwar trade and financial framework was ostensibly set up on fair and equitable international principles. Other countries were expected to recover and grow, creating diplomatic, financial and trade parity with each other.

But the past decade has seen U.S. diplomacy become one-sided in turning the International Monetary Fund (IMF), World Bank, SWIFT bank-clearing system and world trade into an asymmetrically exploitative system. This unilateral U.S.-centered array of institutions is coming to be widely seen not only as unfair, but as blocking the progress of other countries whose growth and prosperity is seen by U.S. foreign policy as a threat to unilateral U.S. hegemony. What began as an ostensibly international order to promote peaceful prosperity has turned increasingly into an extension of U.S. nationalism, predatory rent-extraction and a more dangerous military confrontation.

 

Off the Top of My Head

Europe Sets Up an Exchange to Get Around American Sanctions

by John Lawrence, July 2, 2019

France, Germany and the UK have set up a payment channel with Iran called INSTEX, to help continue trade and circumvent US sanctions. They are hoping that this will keep Iran from abrogating the JPCOA which is the deal that Trump backed out of and would have limited Iran's nuclear development. By circumventing US sanctions these European countries hope to continue doing business with Iran. But not so fast warns the US. The US will not let any country, even its allies, violate the spirit of the sanctions even if they find a way to violate the letter. The US threatens to sanction those European allies if they continue to do business with Iran under any circumstances. This is driving a wedge between the US and its allies who disagree with Trump's decision to quash the Iran nuclear deal.

The Paris-based Instrument in Support of Trade Exchanges (INSTEX) was formally registered by Britain, France and Germany and is operating essentially like a clearinghouse for credit points. It is now up and running. This avoids a need for the exchanging of real money. Europe hopes that continued trade will keep Iran adherent to its commitments under the nuclear deal. India, which has long relied on Iranian oil but is also a US ally, has started using a system that is separate from but similar to the EU effort. Thus US allies are challenging the global dominance of the American dollar.

U.S. Treasury Undersecretary for Terrorism and Financial Intelligence Sigal Mandelker said in a letter to Instex President Per Fischer. “I urge you to carefully consider the potential sanctions exposure of Instex. Engaging in activities that run afoul of U.S. sanctions can result in severe consequences, including a loss of access to the U.S. financial system.” As the US uses sanctions in an attempt to bully the rest of the world, it is attempting to dictate to other countries who it can and who it cannot do business with. So much for free trade. If the US doesn't like you, it can ruin your economy and the economy of any other nation who does like you. What the US has done is to isolate itself not only from its adversaries but from its allies and friends as well.

What this portends for the US dollar is that other trading systems will be set up around the world which exclude the use of the dollar. This will create alliances in which the US is excluded. Other countries will not bow down to US bullying tactics but will find ways to conduct business without the use of the American dollar. Thus US dominance of the global financial system will be diminished and the US will lose influence in the world.

Off the Top of My Head

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.

U.S. Sanctions: Economic Sabotage That Is Deadly, Illegal and Ineffective

By Medea Benjamin and Nicolas J. S. Davies

from Local Peace Economy



While the mystery of who is responsible for sabotaging the two tankers in the Gulf of Oman remains unsolved, it is clear that the Trump administration has been sabotaging Iranian oil shipments since May 2, when it announced its intention to “bring Iran’s oil exports to zero, denying the regime its principal source of revenue.” The move was aimed at China, India, Japan, South Korea and Turkey, all nations that purchase Iranian oil and now face U.S. threats if they continue to do so. The U.S. military might not have physically blown up tankers carrying Iranian crude, but its actions have the same effect and should be considered acts of economic terrorism.

The Trump administration is also committing a massive oil heist by seizing $7 billion in Venezuela’s oil assets—keeping the Maduro government from getting access to its own money. According to John Bolton, the sanctions on Venezuela will affect $11 billion worth of oil exports in 2019. The Trump administration also threatens shipping companies that carry Venezuelan oil. Two companies—one based in Liberia and the other in Greece—have already been slapped with penalties for shipping Venezuelan oil to Cuba. No gaping holes in their ships, but economic sabotage nonetheless.

Whether in Iran, Venezuela, Cuba, North Korea or one of the 20 countries under the boot of U.S. sanctions, the Trump administration is using its economic weight to try to exact regime change or major policy changes in countries around the globe.

Deadly

The U.S. sanctions against Iran are particularly brutal. While they have utterly failed to advance U.S. regime change goals, they have provoked growing tensions with U.S. trading partners across the world and inflicted terrible pain on the ordinary people of Iran. Although food and medicines are technically exempt from sanctions, U.S. sanctions against Iranian banks like Parsian Bank, Iran’s largest non-state-owned bank, make it nearly impossible to process payments for imported goods, and that includes food and medicine. The resulting shortage of medicines is sure to cause thousands of preventable deaths in Iran, and the victims will be ordinary working people, not ayatollahs or government ministers.

U.S. corporate media have been complicit in the pretense that U.S. sanctions are a non-violent tool to inflict pressure on targeted governments in order to force some kind of democratic regime change. U.S. reports rarely mention their deadly impact on ordinary people, instead blaming the resulting economic crises solely on the governments being targeted.

The deadly impact of sanctions is all too clear in Venezuela, where crippling economic sanctions have decimated an economy already reeling from the drop in oil prices, opposition sabotage, corruption and bad government policies. A joint annual report on mortality in Venezuela in 2018 by three Venezuelan universities found that U.S. sanctions were largely responsible for at least 40,000 additional deaths that year. The Venezuela Pharmaceutical Federation reported an 85 percent shortage of essential medicines in 2018.

Absent U.S. sanctions, the rebound in global oil prices in 2018 should have led to at least a small rebound in Venezuela’s economy and more adequate imports of food and medicine. Instead, U.S. financial sanctions prevented Venezuela from rolling over its debts and deprived the oil industry of cash for parts, repairs and new investment, leading to an even more dramatic fall in oil production than in the previous years of low oil prices and economic depression. The oil industry provides 95 percent of Venezuela’s foreign earnings, so by strangling its oil industry and cutting Venezuela off from international borrowing, the sanctions have predictably—and intentionally—trapped the people of Venezuela in a deadly economic downward spiral.

A study by Jeffrey Sachs and Mark Weisbrot for the Center for Economic and Policy Research, titled “Sanctions as Collective Punishment: the Case of Venezuela,” reported that the combined effect of the 2017 and 2019 U.S. sanctions is projected to lead to an astounding 37.4 percent decline in Venezuela’s real GDP in 2019, on the heels of a 16.7 percent decline in 2018 and the over 60 percent drop in oil prices between 2012 and 2016.

In North Korea, many decades of sanctions, coupled with extended periods of drought, have left millions of the nation’s 25 million people malnourished and impoverished. Rural areas in particular lack medicine and clean water. Even more stringent sanctions imposed in 2018 banned most of the country’s exports, reducing the government’s ability to pay for imported food to alleviate the shortages.

Illegal

One of the most egregious elements of U.S. sanctions is their extraterritorial reach. The U.S. slaps third-country businesses with penalties for “violating” U.S. sanctions. When the U.S. unilaterally left the nuclear deal and imposed sanctions, the U.S. Treasury Department bragged that in just one day, November 5, 2018, it sanctioned more than 700 individuals, entities, aircraft, and vessels doing business with Iran. Regarding Venezuela, Reuters reported that in March 2019 the State Department had “instructed oil trading houses and refiners around the world to further cut dealings with Venezuela or face sanctions themselves, even if the trades made are not prohibited by published U.S. sanctions.”

An oil industry source complained to Reuters, “This is how the United States operates these days. They have written rules, and then they call you to explain that there are also unwritten rules that they want you to follow.”

U.S. officials say that sanctions will benefit the people of Venezuela and Iran by pushing them to rise up and overthrow their governments. Since the use of military force, coups and covert operations to overthrow foreign governments have proven catastrophic in Afghanistan, Iraq, Haiti, Somalia, Honduras, Libya, Syria, Ukraine and Yemen, the idea of using the dominant position of the U.S. and the dollar in international financial markets as a form of “soft power” to achieve “regime change” may strike U.S. policymakers as an easier form of coercion to sell to a war-weary U.S. public and uneasy allies.

But shifting from the “shock and awe” of aerial bombardment and military occupation to the silent killers of preventable diseases, malnutrition and extreme poverty is far from a humanitarian option, and no more legitimate than the use of military force under international humanitarian law.

Denis Halliday was a UN assistant secretary-general who served as humanitarian coordinator in Iraq and resigned from the UN in protest at the brutal sanctions on Iraq in 1998.

“Comprehensive sanctions, when imposed by the UN Security Council or by a State on a sovereign country, are a form of warfare, a blunt weapon that inevitably punishes innocent citizens,” Denis Halliday told CodePink. “If they are deliberately extended when their deadly consequences are known, sanctions can be deemed genocide. When U.S. Ambassador Madeleine Albright said on CBS ‘60 Minutes’ in 1996 that killing 500,000 Iraqi children to try to bring down Saddam Hussein was ‘worth it,’ the continuation of UN sanctions against Iraq met the definition of genocide.”

Today, two UN special rapporteurs appointed by the UN Human Rights Council are serious independent authorities on the impact and illegality of U.S. sanctions on Venezuela, and their general conclusions apply equally to Iran. Alfred De Zayas visited Venezuela soon after the imposition of U.S. financial sanctions in 2017 and wrote an extensive report on what he found there. He found significant impacts due to Venezuela’s long-term dependence on oil, poor governance and corruption, but he also strongly condemned U.S. sanctions and “economic warfare.”

“Modern-day economic sanctions and blockades are comparable with medieval sieges of towns,” De Zayas wrote. “Twenty-first-century sanctions attempt to bring not just a town, but sovereign countries to their knees.” De Zayas’ report recommended that the International Criminal Court should investigate U.S. sanctions against Venezuela as a crime against humanity.

A second UN special rapporteur, Idriss Jazairy, issued a forceful statement in response to the failed U.S.-backed coup in Venezuela in January. He condemned “coercion” by outside powers as a “violation of all norms of international law.” “Sanctions which can lead to starvation and medical shortages are not the answer to the crisis in Venezuela,” Jazairy said, “...precipitating an economic and humanitarian crisis… is not a foundation for the peaceful settlement of disputes.”

Sanctions also violate Article 19 of the Charter of the Organization of American States, which explicitly prohibits intervention “for any reason whatever, in the internal or external affairs of any other State.” It adds that it “prohibits not only armed force but also any other form of interference or attempted threat against the personality of the State or against its political, economic, and cultural elements.”

Article 20 of the OAS Charter is equally pertinent: “No State may use or encourage the use of coercive measures of an economic or political character in order to force the sovereign will of another State and obtain from it advantages of any kind.”

In terms of U.S. law, both the 2017 and 2019 sanctions on Venezuela are based on unsubstantiated presidential declarations that the situation in Venezuela has created a so-called “national emergency” in the United States. If U.S. federal courts were not so afraid to hold the executive branch accountable on matters of foreign policy, this could be challenged and very likely dismissed by a federal court even more quickly and easily than the similar case of a “national emergency” on the Mexican border, which is at least geographically connected to the United States.

Ineffective

There is one more critical reason for sparing the people of Iran, Venezuela and other targeted countries from the deadly and illegal impacts of U.S. economic sanctions: they don’t work.

Twenty years ago, as economic sanctions slashed Iraq’s GDP by 48 percent over five years and serious studies documented their genocidal human cost, they still failed to remove the government of Saddam Hussein from power. Two UN assistant secretaries-general, Denis Halliday and Hans Von Sponeck, resigned in protest from senior positions at the UN rather than enforce these murderous sanctions.

In 1997, Robert Pape, then a professor at Dartmouth College, tried to resolve the most basic questions about the use of economic sanctions to achieve political change in other countries by collecting and analyzing the historical data on 115 cases where this was tried between 1914 and 1990. In his study, titled “Why Economic Sanctions Do Not Work,” he concluded that sanctions had only been successful in 5 out of 115 cases.

Pape also posed an important and provocative question: “If economic sanctions are rarely effective, why do states keep using them?”

He suggested three possible answers:

• “Decision makers who impose sanctions systematically overestimate the prospects of coercive success of sanctions.”
• “Leaders contemplating ultimate resort to force often expect that imposing sanctions first will enhance the credibility of subsequent military threats.”
• “Imposing sanctions usually yields leaders greater domestic political benefits than does refusing calls for sanctions or resorting to force.”

We think that the answer is probably a combination of “all of the above.” But we firmly believe that no combination of these or any other rationale can ever justify the genocidal human cost of economic sanctions in Iraq, North Korea, Iran, Venezuela or anywhere else.

While the world condemns the recent attacks on the oil tankers and tries to identify the culprit, global condemnation should also focus on the country responsible for the deadly, illegal and ineffective economic warfare at the heart of this crisis: the United States.

Medea Benjamin, co-founder of CODEPINK for Peace, is the author of Inside Iran: The Real History and Politics of the Islamic Republic of Iran and Kingdom of the Unjust: Behind the U.S.-Saudi Connection.

Nicolas J. S. Davies is a researcher for CODEPINK and the author of Blood on Our Hands: The American Invasion and Destruction of Iraq.

Off the Top of My Head

The Weaponization of the American Dollar

by John Lawrence, June 24, 2019

Imagine if you had the power to tell your friends what they could buy, where they could buy it, with whom they could do business and with whom they could not do business. That's the power that the US has over other countries, businesses and individuals. It can tell businesses in other countries who they can sell their products to and from whom they can buy needed materials even though those transactions have nothing to do with the United States. It can tell a Chinese company not to sell its products to Iran, and, if it does, it will be hit with enormous fines. Such was the case when the Chinese telecommunications company, ZTE, sold its phones to North Korea. ZTE was hit hard by the inability to buy essential components from suppliers because of sanctions for trading with North Korea and Iran. In these cases, the entity was not in violation of laws where it was domiciled or operated, and the proscribed acts took place outside the US.

That's right. The US is the dictator of the world when it comes to telling the rest of the world who it can do business with. This is the result of sanctions. Sanctions work because every business transaction worldwide has to be processed through SWIFT, the Society for Worldwide Interbank Financial Telecommunications. This system enables financial institutions to send and receive information about financial transactions in a secure, standardized environment. Since the dollar serves as the world's reserve currency, SWIFT facilitates the international dollar system. Obviously, the US controls SWIFT. It is not an independent international institution. The US can impose primary sanctions on any country or entity within a country, and it can impose secondary sanctions even on its allies by telling them they can not do business with that country or entity.

Recently, since Trump dropped out of the nuclear deal with Iran, the US has been imposing sanction after sanction on Iran which has had the effect of ruining that country's economy. Then it has ordered its allies not to do any business with Iran. This amounts to economic warfare, and the US stands all too ready to back up economic warfare with its gargantuan and unparalleled military warfare apparatus. So the US, especially under Trump, is becoming the world's bully even going so far as to sanction companies that it can't outcompete with on a level playing field. Such is the case with Huawei, the Chinese telecommunications giant.

Huawei buys many of its components from the US. Trump has threatened to stop those transactions thus ruining Huawei's business. The Trump administration has decided to add Huawei and about 70 affiliates to its so-called “Entity List," which precludes the company from acquiring equipment from U.S. firms without government approval. It’s the latest broadside to the Shenzen-based company, which U.S. officials have said represents a security threat because of its ties to the Chinese government. Huawei has denied those allegations. So the message is clear. If a US company cannot outcompete a Chinese company, it can screw up its business model and outcompete them that way.

The Foundation for Economic Education reported:

A number of countries, including China, Russia, and Iran, have taken steps to limit their dependence on the dollar and have even been working to establish alternative payment systems. A growing number of central banks have been buying gold as a way to diversify their holdings away from the greenback. It comes as no surprise that countries on shaky ground with the U.S. would take such measures, but even traditional U.S. allies have grown weary of American economic bullying.

On Sept. 24, the E.U. announced its plans to create a special payment channel to circumvent U.S. economic sanctions and facilitate trade with Iran. E.U. foreign policy chief Federica Mogherini made the announcement after a meeting with foreign ministers from Britain, France, Germany, Russia, China, and Iran. She said the new payment channel would allow companies to preserve oil and other business deals with Iran:

In practical terms, this will mean that E.U. member states will set up a legal entity to facilitate legitimate financial transactions with Iran and this will allow European companies to continue to trade with Iran in accordance with European Union law and could be open to other partners in the world.

The plan comes in response to Donald Trump’s decision to withdraw from the Iran nuclear deal. The E.U., Russia, and China released a joint statement saying the “Special Purpose Vehicle” will “assist and reassure economic operators pursuing legitimate business with Iran.” The statement also said the signatories to the Iran deal “reconfirmed their commitment to its full and effective implementation in good faith and in a constructive atmosphere.”

The Special Purpose Vehicle will serve as a clearinghouse for transactions with Iran. An Al Jazeera reporter explained it this way:

If the Italians want to buy some Iranian oil, they will wire the money to this entity which will then handle the financial transactions from there and vice versa. There will be no involvement of commercial banks and central banks, both of whom are terrified at the prospect of US retribution if they are seen to be going against US sanctions.

Rodger Shanahan, a research fellow at the Lowry Institute for International Policy, called the plan “a poke in the eye for the U.S.”

However, although alternative institutions may make financial transactions outside the US banking system possible because they can't be blocked by a US controlled institution, it does not relieve the countries which engage in such transactions from being sanctioned in other ways. Just because a US bank doesn't block the transaction doesn't mean that the US will not find a way to use sanctions to bestow economic hardship on a country. Only when countries are independent of the US dollar as the world's reserve currency will they be free to conduct business with whomever they choose without the threat of economic retaliation from the US.

Off the Top of My Head

Italy Defies US. Makes Deal With China

by John Lawrence, March 18, 2019

Italy has become the latest EU country (there are 13 others) to sign a deal to become a participant in China's Belt and Road Initiative as Xi Jinping gets ready to visit Italy March 21. The US and the EU fear that China is taking over the world, not by military force, but by being a do gooder, increasing trade and building ports, highways, roads and bridges. The US has cautioned its allies that it will not stand idly by and let this happen.

Reuters reported:

The Belt and Road project lies at the heart of China’s foreign policy strategy and was incorporated into the ruling Communist Party constitution in 2017, reflecting Xi’s desire for his country to take a global leadership role.

The United States, locked in a trade war with Beijing, worries that Xi’s initiative is designed to bolster China’s political and military influence, and could be used to spread technologies capable of spying on Western interests.

“No need for Italian government to lend legitimacy to China’s infrastructure vanity project,” a spokesman for the White House’s national security advisers said on Saturday in a rare public rebuke for one of Washington’s staunchest allies.

Refusing to back down, Italy has nonetheless tried to reassure the United States, releasing a draft of the MOU to show it offers up no firm commitments and makes no reference to the sort of technology transfers feared by Washington.

Likewise eager to show that its pro-China policy is bearing fruit, the government has leaked reports that 50 agreements might be signed during Xi’s March 21-23 visit, including deals with oil company Eni, gas infrastructure firm Snam and shipbuilder Fincantieri.

Italy also hopes to unveil projects to develop trade through its ports of Genoa, Trieste and Palermo. Although China’s COSCO Shipping has bought control of the largest port in Greece, Italy says it offers better entry points into Europe.

Germany has already defied the US by going ahead with the NORD II pipeline connecting Germany with Russia. The US has threatened to sanction Germany over the pipeline. So now the US is threatening not only its supposed enemies and the weaker countries in the world, it's threatening its allies. Probably not a good policy or the US won't have any friends left in the world. It has already broken with the EU and the rest of the world over the climate change agreement and over Iran. What next?

Reuters reported:

U.S. sanctions against the Russian-backed Nord Stream 2 pipeline would be the wrong way to solve a dispute over energy supply, German Foreign Minister Heiko Maas said on Thursday.

U.S. President Donald Trump has accused Germany of being a “captive” of Russia due to its energy reliance and urged it to halt work on the $11 billion, Russian-led gas pipeline that is to be built in the Baltic Sea.

“Questions of European energy policy must be decided in Europe, not in the U.S.,” Maas said. “To impose unilateral sanctions against Nord Stream 2 is certainly not the way to go.”

Meanwhile US Secretary of State Mike Pompeo is threatening to deny visas to any member of the International Criminal Court who is investigating US war crimes in Afghanistan and elsewhere. "The United States will revoke or deny visas to any International Criminal Court (ICC) individuals investigating alleged war crimes by U.S. forces or allies, including in Afghanistan, Secretary of State Mike Pompeo has said." Is US policy towards the rest of the world spinning out of control as it seems like the US is making enemies and losing friends? The US is continuing to threaten allies, enemies, the United Nations and everyone and anyone who disagrees with it. Is this any way to run a foreign policy? Before you know it the US will be going it alone in a world united against it.

Off the Top of My Head

El Salvador Has a Problem: Gangs Started in the US Are Running the Country

by John Lawrence, March 12, 2019

Two gangs run El Salvbador: MS-13 and the 18th Street gang. Both gangs were spawned in the US, in Los Angeles to be precise and took root in El Salvador when gang members were deported having been caught as criminals. National Geographics reported: "El Salvador’s government says that criminal gangs command an estimated 60,000 active members, and their battle for supremacy has fractured this tiny country of 6.4 million people along an expanding web of invisible fault lines that run red. In 2017 the homicide rate was 61 per 100,000 people, making El Salvador the second deadliest of any country not at war, after Venezuela."

El Salvador is locked in the latest phase of a social conflict that exploded during the 1980-1992 civil war, in which leftist guerrillas rose up against a wealthy elite and the military state that had long dispossessed the rural underclass of land. With the stated aim of stopping communism in its backyard, the U.S. supported El Salvador’s right-wing dictatorships with billions of dollars of economic and military aid that prolonged the bloodshed. By the time the war ended, in a stalemate, 75,000 people were dead and more than a million were displaced, hundreds of thousands of whom fled to the U.S. From Los Angeles to Washington, D.C., Salvadoran refugees found employment and community, and they sent money home.

The same old story. The US wants to stop communism which in this case would have helped poor peasants so it "prolonged the bloodshed" which led directly to the creation of the gangs here in the US that then took root back in El Salvador. The US' hands are dirty in this whole situation and should take responsibility for the immigration crisis instead of building a wall to keep immigrants out.

The children who came with them, displaced youths craving identity in a foreign land, created MS-13 on the streets of Los Angeles and swelled the ranks of a rival, 18th Street—a Hispanic gang that formed around 18th Street in the Pico-Union neighborhood of Los Angeles and absorbed wayward refugees from Central America. As gang wars, and the war on gangs, intensified, laws were enacted that made it easier to deport immigrants with criminal records. In the late 1990s the U.S. began exporting thousands of convicts back to Central America each year. In the vacuum of weak governance and poverty in their home country, gang members reproduced their social structures and tactics and multiplied exponentially.

The US created the crisis by meddling in El Salvador's civil war as it has done many times before in Central and South America. "At the margins of the mainstream discursive stalemate over immigration lies over a century of historical U.S. intervention that politicians and pundits on both sides of the aisle seem determined to silence. Since Theodore Roosevelt in 1904 declared the U.S.’s right to exercise an “international police power” in Latin America, the U.S. has cut deep wounds throughout the region, leaving scars that will last for generations to come. This history of intervention is inextricable from the contemporary Central American crisis of internal and international displacement and migration."

The liberal rhetoric of inclusion and common humanity is insufficient: we must also acknowledge the role that a century of U.S.-backed military coups, corporate plundering, and neoliberal sapping of resources has played in the poverty, instability, and violence that now drives people from Guatemala, El Salvador, and Honduras toward Mexico and the United States. For decades, U.S. policies of military intervention and economic neoliberalism have undermined democracy and stability in the region, creating vacuums of power in which drug cartels and paramilitary alliances have risen.

The US has made a mess out of Central and South America and is now ironically reaping the whirlwind: They all want to come here to escape the violence and poverty. Here are some more examples.

1) Brazil experienced several decades of right-wing authoritarian governments, especially after the US-backed 1964 Brazilian coup d'état against center-left social democrat João Goulart undertaken, according to then President John F. Kennedy, to "prevent Brazil from becoming another Cuba". Brazil's return to democracy saw several consecutive right-wing neoliberal governments following the Washington Consensus ending in endemic inequality and extreme poverty, one of the worst in the Continent.

2) After the democratic election of President Salvador Allende in 1970, an economic war ordered by President Richard Nixon. Then the CIA backed the 1973 Chilean coup d'état due to Allende’s democratic socialist leanings and installed the murderous military dictatorship of Augusto Pinochet.

3) After several peasant and workers uprisings in the country against oligarchic and anti-democratic governments, often under the control of powerful American corporate interests like the United Fruit Company, efforts by democratically elected governments were often thwarted by US intervention. Civil war spread with US-endorsed far-right governments in El Salvador facing far-left guerrillas.

4) Peasants and workers (mostly of indigenous descent) revolts during the first half of the Guatemalan 20th century due to harsh conditions and abuse from landlords and the government-supported American United Fruit Company were brutally repressed. This led to the democratic election of left-leaning Jacobo Arbenz. Arbenz was overthrown during the US-backed 1954 Guatemalan coup d'état leading to right-wing US-endorsed authoritarian governments and nearly 40 years of civil war in the Central American country.

There are many more examples of US intervention in Central and South America always on the side of right wing dictatorships and corporations like United Fruit and against the interests of the common people. The US is ever eager to destroy regimes which claim to have the interests of the people at heart and to install regimes favorable to the US model of unbridled capitalism at any cost, the cost usually being born by people suffering from extreme inequality and poverty. The US has tried again and again to make little " USes" out of every country in what it considers its sphere of influence which includes in particular Central and South America but in general the whole world.

Today some 200,000 Salvadorans in the U.S. have temporary protected status (TPS), a designation that allows undocumented migrants deemed at risk because of armed conflict or environmental disasters in their home countries to stay in the U.S. In January 2018, President Donald Trump’s administration ordered an end to TPS for Salvadorans. It was set to expire in September 2019, but a U.S. district court halted that plan, allowing Salvadorans to continue to live and work in the U.S. until a final decision is made.

Off the Top of My Head

Sanctions Explained

by John Lawrence, March 4, 2019

Sanctions are the prohibition of financial transactions with a targeted country, business or individual. They can be applied by any country or group of countries like the EU or international group like the UN to any other country or entity. The US has the biggest stick in applying sanctions because the US dollar is used so much in international trade. In 1971, President Nixon took the US off the gold standard and made a deal with Saudi Arabia that it would sell oil only for dollars and not for any other currency. This made it mandatory for other nations to accumulate dollars in order to buy oil. In the intervening years the dollar has been seen as a stable currency so that many individuals, businesses and nations have accumulated large positions in dollars.

Because of the widespread use of the dollar, the US has a huge amount of power in applying sanctions as a policy tool. It can not only forbid US corporations from doing business with targeted nations, it can order banks doing business with dollars to freeze assets and not process any economic transactions by certain countries if they wish to conduct their business using dollars. Since many countries and individuals have large dollar denominated assets, they may wish to use these assets to conduct business but are forbidden to do so by US sanctions.

Since the pipeline for business transactions using US dollars must go through a bank controlled by the US, it is easy for the US to order that bank not to process the transaction. If it does, there may be severe penalties imposed on that bank. Recently, the US has threatened any country doing business with a sanctioned country even if the transaction is not conducted in US dollars. So, for example, if some country wants to do business with Iran, a targeted country, even if the business is conducted in some other currency or even by barter, the US has threatened that country with sanctions. So even if a US ally like Germany for example wants to do business with Russia, for example, the US has gotten increasingly bold in threatening sanctions even against allies of the US.

This has led to the diminution of business transactions conducted in US dollars among nations that don't consider themselves particularly allies of the US in order to get around US sanctions. In particular Russia and China want to do business with Iran which they don't consider to be an enemy or a pariah. Iran might even be considered an ally. This means that certain countries of the world to which the US has applied sanctions may become allies just to thwart US sanctions leading to a bipolar world - those that support US sanctions and those that are determined to work around them.

Sanctions are usually imposed by a stronger nation on a weaker nation. Therefore, the US as the strongest nation in the world, feels free to impose sanctions on almost any other nation. However, China is arguably too strong at this point for the US to impose sanctions on it. Instead, it has imposed tariffs on $60 billion dollars worth of Chinese products. The US can't order other nations not to do business with China or order China not to do business with other nations, and so it takes the tariff approach which is much more limited. China in return will put tariffs on US products since it cannot order the US around nor can it order other countries not to trade with the US. What China and other nations loosely allied with China can do is to create alternative institutions which do not conduct trade in US dollars. That would weaken the US' use of sanctions among countries doing business in other currencies like the Chinese yuan or even the European euro.

China has embarked on a powerful initiative called the Belt and Road in which China has invested heavily in many countries of the world building infrastructure and paving the way for profitable trade relationships between China and those countries. The US, taking note of this development, is now taking action to place roadblocks in all this productive development, productive at least for China. The US is increasingly sizing up China as its rival which is rapidly overtaking the US in economic transactions around the world and in development at home like its huge investment in Artificial Intelligence.

The US is strapped by its ongoing bloated investment in its military-industrial complex and its increasing national debt so that it does not have the wherewithal to invest in productive development as China is doing. Besides its capitalistic economic model essentially forbids large scale government investment in commercial activities leaving that to the private sector. China has no such qualms. As China's business model surpasses that of the US, other nations are looking more to China than they are to the US as an example of a successful alternative economic model.

Canada’s Huawei Arrest Lending Support to Rogue U.S. Behavior

Published on Saturday, December 22, 2018 by the Toronto Star

by Linda McQuaig

 

4 Comments

Huawei chief financial officer Meng Wanzhou, right, is escorted by a member of her private security detail while arriving at a parole office, in Vancouver, on Dec. 12.  (DARRYL DYCK / THE CANADIAN PRESS)

The phrase “rule of law” has a nice, lofty ring to it, so it’s not surprising that Prime Minister Justin Trudeau is invoking it to defend Canada’s detention of a Chinese business executive.

But while one can imagine many reasons why Canada decided to co-operate with the U.S. request to extradite Meng Wanzhou, it’s doubtful that the desire to uphold the “rule of law” was one of them.

In fact, what Canada is really doing is lending support to rogue and reckless behaviour by the Trump administration.

The U.S. extradition case is based on allegations that Meng, a senior executive with China’s technology giant Huawei,committed fraud as part of a scheme to violate U.S. trade sanctions against Iran.

But Washington’s efforts to punish Huawei for trading with Iran are of dubious legality.

The UN Security Council (in Resolution 2231) called on all countries to drop sanctions against Iran as part of the 2015 treaty aimed at limiting Iran from developing nuclear weapons — a treaty that was welcomed around the world as a chance to reduce the risk of nuclear war.

That treaty, negotiated by the Obama administration, quickly became a target of U.S. Republicans, who were more interested in destroying Iran than in making the world a less perilous place. The treaty was particularly annoying to the wildly insecure Donald Trump who, as president, was keen to take a baseball bat to anything that could be seen as an accomplishment of his predecessor.

In addition to withdrawing from this important nuclear treaty — which had been endorsed by the UN Security Council as well as Germany and the EU — the Trump administration decided it has the right to unilaterally punish foreign countries, companies and individuals doing business with Iran (even though the UN treaty permits them to do so).

Washington’s actions amount to a kind of international thuggery. U.S. economist Jeffrey Sachs argues they pose a threat to the international rule of law. “The U.S. would certainly not tolerate China or any other country telling American companies with whom they can or cannot trade,” he maintains.

Another apparent motive behind the Meng extradition request was Washington’s interest in heating up its economic war against China by blocking Huawei from making further inroads into Western markets, where it already threatens the dominance of U.S. technology giants.

Given the questionable lawfulness and suspect motives of the U.S. extradition request, the appropriate Canadian response might have been to simply avoid making the arrest, by resorting to some “creative incompetence,” as former Foreign Affairs minister John Manley has suggested.

For that matter, we are not obliged to extradite Meng.

Robert J. Currie, a professor at Dalhousie University’s Schulich School of Law, writes that under Canada’s Extradition Act, the decision whether to extradite in a case like this “is made not by the courts, but by the federal Minister of Justice.” In other words, it’s not strictly a legal matter but ultimately a political decision to be made by the Trudeau government.

Currie also points out that Canada has a long history of co-operating with U.S. extradition requests “because such neighbourliness makes for smooth relations.”

Now we’re getting to the nub of the matter. Trudeau’s keenness to co-operate is likely rooted in his desire to try to restore some semblance of neighbourly relations, after the petulant U.S. president went out of his way last June to pick a fight with us.

There’s nothing wrong with trying to restore neighbourly feelings — except that in this case there are a lot of extremely negative consequences, such as China’s retaliatory detention of three innocent Canadians, and the major tensions that have now needlessly developed between China and Canada.

At least, Trudeau should drop the pretense that his compliance with the U.S. extradition request springs from a deep commitment to the “rule of law.”

If he really cared about that principle he’d be speaking up in defence of the UN treaty, not knuckling under to an administration that recently showed its concept of the “rule of law” by flashing a wink and a nod at the Saudi crown prince after he silenced an outspoken journalist with a bone-saw.

© Linda McQuaig

Off the Top of My Head

From Moral Arbiter to Bully: The US Has Stooped to a New Low Under Trump

by John Lawrence, December 18, 2018

The recent arrest and apprehension of the CFO of a major Chinese company by Canada, having been ordered to do so by the US, is practically an act of war. What is her alleged offense? Doing business in Iran. So the US arrogates to itself the right to tell other countries' corporations who they can and cannot do business with? This goes way beyond sanctions. Sanctions require that the business be conducted in dollars and that those dollars pass through some US controlled bank. Evidently, that was not the case with the Huawei Corporation which recently surpassed Apple as the largest smart phone manufacturer in the world.

Jeffrey Sachs writes in Project Syndicate:

The unprecedented arrest of Meng is even more provocative because it is based on US extra-territorial sanctions, that is, the claim by the US that it can order other countries to stop trading with third parties such as Cuba or Iran. The US would certainly not tolerate China or any other country telling American companies with whom they can or cannot trade

Will China now attempt to tell the US who it cannot do business with and arrest corporate CEOs if they violate China's orders? The rest of the world has already had it with US sanctions which are only possible by the prevalent use of the US dollar in transactions all over the world so they are developing workarounds that don't require that the transactions be conducted in US dollars.

Nomi Prins writes in her book, Collusion: How Central Bankers Rigged the World:

... the establishment of the New Development Bank (formerly know as the BRICS bank) and the Asian Infrastructure Investment Bank in 2014 indicated a significant swing away from the historically Western-Japan-dominated banking system. The IMF, by permitting China to enter its reserve currency basket allowed a change not seen since the Euro replaced the German and French national currencies in 1999. The move signaled a growing trend away from the United States and a dollar-based system.

So now the US is losing its grip on a worldwide dollar based monetary system which can be controlled by the US and which allows sanctions to be imposed on individuals and countries at the US' whim. So the US, not to be outdone by Chinese workarounds, is issuing direct orders to its allies to arrest corporate executives if it suspects their companies are doing business with a country that the US has sanctions against. It's one thing if the US doesn't want to do business with Iran. It's another thing if the US attempts to block any transactions by anybody else if those transactions are in US dollars. It's another thing altogether if the US starts arresting people from other countries just because they have violated US fiats about who they may or may not trade with.

Off the Top of My Head

Trump Proves You Can "Grab'em by the Pussy", but Then You Have to Pay'Em Through the Nose

by John Lawrence, December 16, 2018

Just being a star didn't mean that Trump could grab'em by the pussy and then not have to pay hush money. Especially when you're running for President of the United States. However, Trump is completely off the hook, legally speaking, because he ordered Cohen to pay hush money but to do it in a legal manner. Trump figured that, since Cohen was a lawyer, he knew how to handle these matters legally so it's all on Cohen's head if he did anything wrong which evidently he did. Trump even got Pecker of the National Enquirer involved since, if a third party pays hush money and not Trump himself, this is no reflection on Trump. That's why Cohen and Pecker insisted that Trump was not involved in these transactions with Stormy Daniels and Karen McDougal. The money came out of their own pockets not Trump's. Trump was not even involved, and, therefore, he has no legal culpability.

America turned down the best qualified person to become President in the history of the union in order to elect a pussy grabber. What does this say about the American people? What does this say about democracy? The Roman Empire had its share of corrupt emperors who eventually brought down the "empire that wasn't created in a day." Caligua, Nero, Commodus were corrupt Roman emperors who did dastardly deeds. Eventually the Roman Empire was brought down but it lasted 507 years, probably a lot longer than the American Empire will. The American Empire dates from the end of the Second World War in 1945, and so is less than 100 years old. Will it survive the reign of Donald Trump? Probably it will, but not if it keeps electing Trump like figures instead of qualified people. Hillary Clinton was not perfect by any means, but she had a lot more going for herself in terms of smarts and experience than Trump.

The world's financial transactions are conducted mainly in US dollars. That gives a lot of power to Trump who can sanction individuals and nations if they don't do what he wants them to do. Right now he doesn't want any one or nation to do any business with Iran. Trump can order banks that do business with nations or individuals to freeze their assets if they attempt to do business with Iran. So other countries are in the process of setting up their own banks using their own currencies in order to circumvent the use of the American dollar. However, even this is not enough to get around American sanctions as is seen by the recent kidnapping of Meng Wanzhou, chief financial officer of Huawei Technologies, a leading Chinese tech company who had the audacity to do business with Iran, whether or not the business was conducted using American dollars.

The Globe and Mail reported:

China is demanding that Canada release Huawei Technologies chief financial officer Meng Wanzhou, whose arrest is now being characterized as kidnapping in Beijing.

The Vancouver airport arrest of Ms. Meng at the request of U.S. authorities in the midst of a contentious trade war has jolted financial markets and thrust Ottawa into the middle of a fraying relationship between the world’s two most powerful economies.

It also made Canada the object of Chinese fury.

“Without any solid evidence, the Canadian and U.S. governments trampled on international law by basically ‘kidnapping’ Chinese citizen Meng Wanzhou,” Mei Xinyu, a research fellow with an institute under the Ministry of Commerce, wrote in the pages of the Global Times, a nationalist tabloid published by the Communist Party.

Tom Fowdy, a British political analyst writing for the state-run CGTN network, called Canada a party to a “political hostage-taking by the Trump administration.” More than 10,000 commenters piled on to the Twitter-like Weibo page of the Canadian embassy in China, calling Canada an indecent nation, a thug, a jackal and worse.

And the Chinese Foreign Ministry demanded Canada release Ms. Meng, accusing Ottawa of abusing one of its citizens.

“Detaining a person without providing an explanation has undoubtedly violated her human rights,” Chinese Foreign Ministry spokesman Geng Shuang said on Thursday. The Chinese government “has made clear our solemn positions to the U.S. and Canada,” Mr. Geng said. Neither Canada nor the United States has yet to give “any explanation on the reason for the detention,” he added.

Huawei has said Ms. Meng was arrested at the request of the United States, which is seeking her extradition. The Americans allege she violated U.S. trade sanctions against Iran.

The United States has warned the Chinese government could use Huawei technology to threaten the national security of countries that install its devices.

Ms. Meng, 46, is the daughter of Ren Zhengfei, the former army engineer who founded Huawei and led its immense growth. Huawei is now China’s biggest private company, with a payroll of 180,000, and the world’s second-largest maker of smartphones.

So Trump is now the equivalent of a Roman Emperor who can order the arrest of anyone anywhere in the world and control the business taking place between any two parties in the world if he decides that they violate US sanctions which he can place on any individual or nation for any reason whatsoever. 

This is a lot of power for a pussy grabber who thinks he can do anything he wants and get away with it.

Off the Top of My Head

The American Empire

by John Lawrence, October5, 2018

It's an empire when you have 1000 military bases in almost every country of the world. Those countries without American military bases are surrounded by countries that do have them. It's an empire when you control the world's reserve currency and financial system. It's an empire when the American central bank (the Federal Reserve) controls the other central banks of the world. It's an empire when you can apply sanctions that limit the rights of other countries to do business with each other. It's an empire when you can freeze bank accounts of anyone anywhere in the world.

Total, the French oil company, won't do business with Iran because the US applied sanctions that would threaten Total's bottom line if they persisted in their business relationship with Iran.

CNBC reported:

French energy giant Total has yet to permanently pull out of Iran following the renewal of U.S. sanctions, but CEO Patrick Pouyanne on Wednesday sounded a pessimistic note about his company's prospects in the country.

Total positioned itself to develop a portion of the world's largest natural gas field after the 2015 Iran nuclear deal lifted punishing sanctions on the Iranian economy. However, the company is now preparing to abandon the Persian Gulf project unless the U.S. government issues the company a sanctions waiver.

That would protect Total from so-called secondary sanctions, which the United States can use to punish foreign companies that engage in prohibited activity with Iran. Washington gave firms 90 to 180 days to wind down their business in the country after President Donald Trump withdrew the United States from the nuclear deal last month.

"There's not a single international company like Total who can work in any country with secondary sanctions. I don't have the right. It's just the reality of the world," Pouyanne told CNBC at an OPEC seminar in Vienna.

Pouyanne acknowledged that his position probably does not sit well with Europe's leaders. The European Union has attempted to salvage the nuclear deal by passing measures aimed at protecting the bloc's firms that have business dealings in Iran.

But Pouyanne told CNBC he must be pragmatic and face reality.

"The reality is that the capital of the world today is in the hands of the U.S.," he said. "Is it right that in this world the U.S. [is] using that ... to impose some rules for other countries? That's a debate."

Secondary sanctions are particularly perilous for multinationals like Total. Engaging in sanctioned activity with Iran could prompt the American government to cut Total off from the massive U.S. financial system and force the firm to wind down its operations in the States.

"The U.S. could decide that I could not have access to any U.S. financing," Pouyanne said. "It's impossible, let me be clear, to run an international company like Total without having access to U.S. financing or to U.S. shareholding."

Total says U.S. banks are involved in about 90 percent of the company's financing operations, while American investors account for more than 30 percent of its shareholding. The company has more than $10 billion deployed in U.S. operations.

By comparison, Total spent less than 40 million euros, or roughly $46 million, on its project developing the massive South Pars natural gas field in Iranian waters.

America was already great before Trump came to office if by great you mean that the US controls every other country in the world both militarily and economically. The only thing not great about America is that it has a great underclass of homeless and people living paycheck to paycheck but every empire has had its slaves or peons. I guess Trump is going to double down on American greatness and really crack the whip on these other countries that don't fall into line. When he's done with them, they will either pay up or be forced into submission as American sanctions are applied to them.

Off the Top of My Head

Will the US Sanction the EU?

by John Lawrence

The rest of the world doesn't agree with President Trump's pulling out of the nuclear agreement with Iran. Iran has been complying with the agreement so why should the US pull out based on the judgment of one man? If the US is a democracy, shouldn't it take more than one to reverse a policy that was entered into on behalf of the world's greatest super power? The US has vowed to put sanctions on any entity doing business with Iran. However, the EU is standing up to the US in the persona of Trump and devising a workaround that will supply Iran with everything it needs regardless of Trump's threat of sanctions.

DW reported:

The remaining signatories of the Iran nuclear deal announced on Monday that they would establish a channel to facilitate payments for Iran's exports, including oil, as well as its imports. The decision was reached after high-level closed-door talks at the UN in New York.

"Mindful of the urgency and the need for tangible results, the participants welcomed practical proposals to maintain and develop payment channels, notably the initiative to establish a Special Purpose Vehicle (SPV) to facilitate payments related to Iran's exports, including oil," Britain, China, France, Germany, Russia and the EU announced in a joint statement.

The members' stated intent is "to protect the freedom of their economic operators to pursue legitimate business with Iran."

The SPV could breathe life into the 2015 Joint Comprehensive Plan of Action (JCPOA), the Iran nuclear deal, and was sought by Tehran in order to counter the reimposition of sanctions triggered by the US's exit from the deal.

The European Union has struggled to devise a workable legal framework to shield its companies from the effects of US sanctions, which are set to come into effect in November, and has tried to deter firms from pulling out of Iran.

If Trump can singlehandedly and unilaterally pull out of an international deal, it effectively makes him a dictator. The fact that this deal was never ratified by Congress signifies the fact that the US Congress is totally dysfunctional. In a democracy, the people or their representatives should stand behind the deals made in their name. Just because Trump thinks the Iran deal was a bad deal does not make it so. Every other signatory to the deal thinks it was a good deal. Trump is just exercising dictatorial powers turning the US into a dictatorship with a Congress that is irrelevant. This is how democracies become dictatorships.

Will the US then sanction the EU and drive the US further apart from its erstwhile allies? Already China and Russia are developing ways to circumvent US sanctions. They are tired of having the US, which they thought was a rational and trustworthy actor, control the world's financial system. When the dollar no longer reigns supreme, the chickens will soon be coming home to roost on the US national debt. But no worries. The Federal Reserve will simply print more money to pay off the debt. That seems to be working so far.

EU, China and Russia in move to sidestep US sanctions on Iran

From the Guardian:

Special Purpose Vehicle aims to keep Iran in 2015 nuclear deal with barter system

 Russian foreign minister Sergey Lavrov with EU external affairs chief Federica Mogherini in New York on Tuesday. Photograph: Alexander Shcherbak/TASS

The European Union, Iran, China and Russia have set out a plan to sidestep unilateral US sanctions designed to cripple the Iranian economy and force the Iranians to renegotiate the nuclear deal signed in 2015.

European diplomats hope the proposed measure – known as a special purpose vehicle (SPV) – will help persuade an increasingly reluctant Iran to stay inside the deal in the hope of rescuing its economy.

Speaking on the sidelines of the UN general assembly in New York, Federica Mogherini, the EU external affairs chief, said the SPV was designed to facilitate payments related to Iran’s exports – including oil – and imports, so long as the firms involved were carrying out legitimate business under EU law.

Speaking on the sidelines of the UN general assembly in New York, Federica Mogherini, the EU external affairs chief, said the SPV was designed to facilitate payments related to Iran’s exports – including oil – and imports, so long as the firms involved were carrying out legitimate business under EU law.

The aim is to make the SPV available not just to EU firms but to others, she added.

In his address to the United Nations general assembly, Iran’s president, Hassan Rouhani, stressed Tehran’s continued commitment to the deal and accused the US of pressurising other countries into violating the nuclear agreement.

“Confronting multilateralism is not a sign of strength,” he said. “Rather, it is a symptom of the weakness of intellect. It betrays an inability in understanding a complex and interconnected world.”

But the US president Donald Trump’s secretary of state, Mike Pompeo, addressing an anti-Iran pressure group, said he was “disturbed and indeed deeply disappointed” by the EU plan.

“This is one of the of the most counterproductive measures imaginable for regional and global peace and security,” Pompeo said.

Versions of the SPV floated by thinktanks suggest it could underpin a sophisticated barter system that can avoid US Treasury sanctions. For example, Iran could ship crude oil to a French firm, accumulating credit that could then be used to pay an Italian manufacturer for goods shipped the other way, without any funds traversing through Iranian hands or the banking system.

A multinational European state-backed financial intermediary would be set up to handle deals with companies interested in Iran transactions and with Iranian counter-parties. Any transactions would not be transparent to the US, and involve euros and sterling rather than dollars.

The proposal is additional to a blocking statute passed by the EU in August that theoretically makes EU companies immune from sanctions imposed by the US in pursuit of its Iran policy. In theory, the statute empowers EU firms to seek compensation from US Treasury for trying to impose extra-territorial sanctions in breach of the statute. So far this statute has not been tested in court.

Richard Nephew, a former Barack Obama official and author of The Art of Sanctions, expressed scepticism on Twitter, saying that for the SPV to be taken up, European firms – many with either US employees, or US subsidiaries – must still be prepared to take the risk of being sanctioned by the US.

He also suggested US sanctions could be applied to the traded good as much as to the cash to fund the trade. He predicted few firms would take that risk, outside some SMEs [small and medium-sized enterprises] heavily dependent on Iran for their income.

Jarrett Blanc, another former Obama staffer for the Iran deal, broadly agreed with Nephew, but was more sympathetic, writing that “the symbolism here is probably Europe’s most important contribution, and it may be sufficient depending on what China, India, Turkey do on oil”. He added: “The payment mechanism move opens the door to a longer-term degradation of US sanctions power.”

Either way, Europe needs a solution soon after months of railing against US economic imperialism. The vast majority of European firms are planning to pull out.

Trump announced two sets of US secondary sanctions in May, and other sanctions imposed in August cover shipping and insurance. The other more important sanctions – aimed at ending Iranian oil exports, still the heart of the faltering Iranian economy – do not bite until 5 November.

In advance of the oil sanctions, Iran’s crude sales to China fell 21% between May and August, according to Eurasia Group. But it is unclear how long China will stick to that trend.

The assumption is that many countries like India and Russia will continue to trade with Iran and challenge the US to try to impose sanctions, pointing out that in reality it is the US, by tearing up the agreement and not them, that is in breach of UN resolutions.

Off the Top of My Head

What Will Happen to the US Dollar When Its Not the World's Reserve Currency Any More?

by John Lawrence, September 13, 2018

The dollar is the world's reserve currency by virtue of the fact that Saudi Arabia agreed to sell its oil only for dollars in return for US military protection, a deal struck by President Nixon in 1971 when he took the dollar off the gold standard. Other nations had to buy and sell goods in dollars to get enough dollars to buy oil. But the world is changing. For one thing the world is converting to renewable energy so the price of oil will eventually plummet just as the US with its shale oil is becoming the world's leading oil exporter.

However, other nations are losing faith in the US as the world's moral arbiter. US imposed sanctions, brought about because the US controls international financial institutions like SWIFT, have caused the nations that are usually the target of US sanctions to form their own alliances, form their own financial, institutions and trade among themselves using other currencies. Eventually the dollar will only be one of many instead of being the only reserve currency. Eventually, other nations may even impose sanctions on the US, something unheard of at the present time.

So the US dollar may well lose value with respect to other currencies making imports to the US more expensive. However, exports would be cheaper for other countries to buy and that would boost exports which would help manufacturing in the US. If the US dollar loses value with respect to other currencies, other nations will not be as willing to park their savings in US Treasury bonds which means that the Federal Reserve will have to raise interest rates to attract buyers of US debt. Or the Fed could just print dollars and give the money to US banks to buy up US debt which is just what it has been doing with its quantitative easing policy.

The US will be stuck with its enormous national debt with creditors not willing to fund any more of it. Paying it off with "conjured money" will cheapen the US dollar and even perhaps result in the same sort of austerity that has been imposed on Greece and other countries that get behind in their payments to investors. We'll see. In any event it won't happen any time soon. But by mid century as hurricanes, floods and wildfires take their tolls, the paucity of dollars in the US Treasury and the reluctance of investors to fund more US debt may not augur well.

Off the Top of My Head

Economic Warfare?

by John Lawrence

The US under Trump with its America First policy is pissing off the rest of the world including enemies and allies alike. Trump is using sanctions and tariffs as financial weapons to get what he wants.If some country doesn't bow down to the US, BAM, they're hit with sanctions. If Trump thinks that some country has an unfair trade advantage with the US, BAM they're hit with tariffs. Turkey, a NATO ally supposedly is so pissed off that they are looking eastward for friends and allies. The BRICS nations are forming their alternative financial system to get around US sanctions which are predicated on the dollar being the world's reserve currency.

The NY Times wrote:

The Trump administration imposed sanctions on Wednesday against two top Turkish government officials over the detention of an American pastor being held on espionage charges, threatening to plunge already-fraught relations with a vital NATO ally into crisis.

The move was an extraordinary use of financial sanctions against an allied government. It is sure to inflame tensions that were already simmering over a litany of disagreements, including Washington’s refusal to extradite a cleric suspected of leading a failed 2016 coup against President Recep Tayyip Erdogan of Turkey and his country’s growing use of what many Western analysts have described as hostage diplomacy.

“The relationship is now officially in crisis, and the only way out is for Erdogan to do what he hates the most: back down,” said Julianne Smith, the deputy national security adviser to former Vice President Joseph R. Biden Jr.

Sanctions can target whole countries or just certain individuals within countries.The dollar has been weaponized and so is toxic to many areas of the world. The US is losing its credibility as a just and fair partner. It is becoming a wiorld class bully. It's the Trump way or the highway. All this face off with Turkey is about the release of one pastor. Surely relations between two countries shouldn't boil down to the fate of one individual. This is totally petty. It is the demand of a madman to put international relations in the hands of one megalomaniacal bully.

Now the US is going to impose more sanctions on Russia because they helped North Korea evade the sanctions imposed on them. This has got to stop somewhere and where it's likely to stop is with the US losing power and prestige in the world. When the whole world is pissed at you, they will lose respect and devise alternative ways to get around US sanctions and tariffs. The dollar will lose its status as the world's only reserve currency, and the rest of the world will ignore US demands especially those made by Mr. Trump out of pique.

 

Off the Top of My Head

US Expects EU to Sacrifice Economic Interests in Order to Impose Sanctions

by John Lawrence, May 22, 2018

Trump's unilateral withdrawal from the Iran nuclear agreement sets the stage for reimposing sanctions on Iran. However, European countries have billions of euros in trade deals with Iran that would go by the wayside if they followed through and reimposed sanctions. They didn't want out of the nuclear deal in the first place, and they don't want to let go of those trade deals.

Take Italy for example. Their economy is struggling, and they have billions of euros in trade deals signed with Iran that could help their economy. They are blocking the EU from participating in Trump's sanctions. If one country in the EU blocks the sanctions, the EU cannot reimpose sanctions. Trump's capriciousness in backing out of the deal would cost other countries billions of euros if they go along with Trump whom they disagree with vehemently in the first place. Let Trump fuss and fume and tweet all he wants. Finally, the EU as well as other countries are standing up to him and will find ways to circumvent the American dollar.

The US is screwing around with major European economies all because of Trump's volatility and arbitrariness. His is a government by pet peeves and irrationality. He knows nothing about government or world affairs. Instead he has a layman's angst over perceived threats to his self-interest. His impetuousness leads to the US shooting itself in the foot and offending our allies. Case in point: Secretary of State Mike Pompeo threatens to impose the “strongest sanctions in history” on Iran. The French economy minister proposes that Europe fight the U.S. sanctions by compensating European businesses hurt by the sanctions.

The pipeline between Russia and Europe is a major investment that Europe will not give up no matter how much Trump tries to bully them. The Nord Stream II pipeline connects Russia to Germany through the Baltic Sea. Germany gets a third of its natural gas from Russia.

Forbes reports:

France's Engie is involved. Germany's Uniper and Wintershall are stakeholders. So is Royal Dutch Shell of the U.K., meaning all three signatories to the Iran deal are also getting punished for doing business with Gazprom.

Gazprom was sanctioned by Obama in July 2014, but not by Europe. Europe relies on Gazprom as its chief foreign source of natural gas. This is particularly true in Germany, where Russian gas accounts for nearly a third of supply.

In August 2017, Nord Stream II was placed under discretionary sanctions, which is sort of like sanctions-light. It means a company can proceed, but faces the risk that Treasury may decide to go after them someday.

The Trump Administration later added Gazprom CEO Alexei Miller to its sanctions list in February. Worth noting, Exxon was fined a couple million dollars last year just for signing a legal document with Igor Sechin, the sanctioned CEO of oil firm Rosneft. Exxon is disputing the fine.

Gazprom and Miller are the latest persona non grata in Washington. But Europe is not giving up on them. Not the French. Not the Germans. Not the Brits, either.

Despite the sanctions against Nord Stream II, the threat has not put a stop to its construction.

With the Iran deal being canceled, European leaders impacted by it are likely to be in "enough is enough" mode when it comes to Washington. These extraterritorial sanctions are not in their interests.

OK. Europeans disagree with Trump's withdrawal from the Iran nuclear deal which was working great as far as they were concerned. They developed economic ties and interests with Iran which are, after all peace time activities designed to further understanding and peaceful development. Now Trump wants to punish our allies and cause them economic hardship because of his capriciousness. What's wrong with this picture?