Time to Change Bernanke's Medication?
Secret White House letter to G-20
Monday, September 21, 2009
by Greg Palast
I still get a thrill whenever I get my hands on a confidential memo with "The White House, Washington" appearing on the letterhead. Even when—like the one I'm looking at now—it's about a snoozy topic: This week's G-20 summit.
But the letter's content shook me awake, and may keep me up the rest of the night.
The 6-page letter from the White House, dated September 3, was sent to the 20 heads of state that will meet this Thursday in Pittsburgh. After some initial diplo-blather, our President's "sherpa" for the summit, Michael Froman, does a little victory dance, announcing that the recession has been defeated. "Global equity markets have risen 35 percent since the end of March," writes Froman. In other words, the stock market is up and all's well.
While acknowledging that this year's economy has gone to hell in a handbag, Obama's aide and ambassador to the G-20 seems to be parroting the irrational exuberance of Federal Reserve Chief Ben Bernanke who declared last week that, "The recession is very likely over." All that was missing from Bernanke's statement was a banner, "MISSION ACCOMPLISHED."
And the French are furious. The White House letter to the G-20 leaders was a response to a confidential diplomatic missive from the chief of the European Union Fredrik Reinfeldt written a day earlier to "Monsieur le Président" Obama.
We have Reinfeldt's confidential note as well. In it, the EU president says, despite Bernanke's happy-talk, "la crise n'est pas terminée (the crisis is not over) and (continuing in translation) the labor market will continue to suffer the consequences of weak use of capacity and production in the coming months." This is diplomatic speak for, What the hell is Bernanke smoking?
May I remind you Monsieur le Président, that last month 216,000 Americans lost their jobs, bringing the total lost since your inauguration to about seven million. And rising.
The Wall Street Journal also has a copy of the White House letter, though they haven't released it. (I have: read it here , with the EU message and our translation.) The Journal spins the leak as the White House would want it: "Big Changes to Global Economic Policy" to produce "lasting growth." Obama takes charge! What's missing in the Journal report is that Obama's plan subtly but significantly throttles back European demands to tighten finance industry regulation and, most important, deflects the EU's concern about fighting unemployment.
Europe's leaders are scared witless that the Obama Administration will prematurely turn off the fiscal and monetary stimulus. Europe demands that the US continue pumping the economy under an internationally coordinated worldwide save-our-butts program. As the EU's Reinfeldt puts it in his plea to the White House, "It is essential that the Heads of State and Government, at this summit, continue to implement the economic policy measures they have adopted," and not act unilaterally. "Exit strategies [must] be implemented in a coordinated manner." Translating from the diplomatique: If you in the USA turn off fiscal and monetary stimulus now, on your own, Europe and the planet sinks, America with it.
Obama's ambassador says, Non! Instead, he writes that each nation should be allowed to "unwind" anti-recession efforts "at a pace appropriate to the circumstances of each economy." In other words, "Europe, you're on your own!" So much for Obama channeling FDR.
The technical policy conflict between the Obama and EU plans reflects a deep difference in the answer to a crucial question: Whose recession is it, anyway? To Obama and Bernanke, this is a bankers' recession and so, as "stresses in financial markets have abated significantly," to use the words of the White House epistle, then Happy Days Are Here Again. But, if this recession is about workers the world over losing their jobs and life savings, the EU view, then it's still Buddy, Can You Spare a Dime.
If Bernanke and Obama were truly concerned about preserving jobs, they would have required banks loaded with taxpayer bail-out loot to lend these funds to consumers and business. China did so, ordering its banks to increase credit. And boy, did they, expanding credit by an eye-popping 30%, rocketing China's economy out of recession and into double-digit growth.
But the Obama Administration has gone the opposite way. The White House letter to the G-20 calls for slowly increasing bank reserves, and that can only cause a tight credit market to tighten further.
It's not that the White House completely ignores job losses. The US letter suggests, "The G-20 should commit to ...income support for the unemployed." You can imagine the Europeans, who already have generous unemployment benefits—most without time limits—turning purple over that one. America's stingy unemployment compensation extension under the Stimulus Plan is already beginning to expire with no live proposal to continue aid for the jobless victims of this recession.
The Europeans are so cute when they're angry, when they pound their little fists. Obama assumes he can ignore them. The EU, once the big player in the G-7, has seen its members' status diluted into the G-20, where the BRIC powers (Brazil, Russia, India and China) now flex their muscle. But Europeans have a thing or two to teach Americans about the economics of the twilight of empire.
Maybe the differences are cultural, not economic; that Europeans lack America's Manifest Destiny can-do optimism.
So, to give the visitors a taste of the yes-we-can spirit, Obama should invite Pittsburgh's 93,700 jobless to the G-20 meet to celebrate that 35% rise in the stock market.
Or -- my own suggestion -- change Bernanke's medication.
********
For the entirety of the White House-EU exchange, go to GregPalast.com.
Greg Palast is the author of The Best Democracy Money Can Buy. Palast wrote the column, "Inside Corporate America" for the business section of Britain's Observer newspaper.
Sign up for Palast's investigative reports at www.GregPalast.com and subscribe to Palast's podcast.
Print This Post
Correct me if I'm wrong, but didn't President Obama travel to Europe earlier this year for the G-7 summit, and ask European countries to step up stimulus spending, and they mostly turned him down?
Personally I think stimulus spending is a good idea, but the idea that American government spending has to keep the world's economy afloat is just as dumb as the idea the American consumer should keep the world's economy afloat. If they won't put up, they need to shut up.
Excepting of course that it was US economic policy which started this mess in the first place. You think that every country in the world collapsed at the same time by coincidence??? It was the "Free Market" policies of US-led initiatives such as the World Bank and IMF which created this problem, and it now has a responsibility to make amends.
The economy collapsed because people believed they could get something for nothing. It will continue to collapse so long as they continue to believe this. Put simply, the US got the world into this mess, now it has an obligation to get it out again.
In the UK, we have been bailing out everyone but ourselves, the Brownie scheme called 'scrppage' helps foreign car makers, whilst our industry goes bust. Nipple headed Broon, is hell bent on destroying this country, just to prop up the phoney EU super bug.
Europe's response to the banking mess was vastly different from the U. S. They didn't throw trillions at the banks - with few strings attached. Be that as it may, the US needs to spend(buy up other countries) before it inflates to make up for future ficticious created value which isn't going to be there. Duh! It's a giant ponzi scheme "if" they lose and at the least one big casino gamble.
Summers and the rest aren't geniuses, they're just great bull shitters who believe what they're saying.
Moral bankruptcy of the financial system means they have no honor, which means they're lying when they open their mouths. As they are the ones being allowed to place the words into Obama's mouth - what does one think Obama is saying? Too big to fail?
How about,,, they're just too big a crook to go to jail? Or, go pennieless? As the rest of us are supposed to do?
Sorry, Greg, you're groping this time. Bernanke said the _recession_ *might* be over. That's caution and restraint, not "irrational exuberance." Reassuring words, hope, not hype. Bernanke knows damn well the _crisis_ isn't over. Would you prefer he appear on TV screaming that the sky is falling? I'll grant that it may,in fact, be falling, but that's no qway to inspire confidence in anyone.
given that American corruption *caused* 2 global economic meltdowns in under a single century...
I'm thinking they should pay their bills, stick with the agreements they jammed down everybody's throats which killed off everybody else's economies, & stop complaining that they have to pay back what they owe the Rest of the World.
Theft occurred.
Time for some reimbursement, kiddies.
...& I wish that the World would stop watching all that American propaganda that keeps trying to tell us that 'American prosperity' is something we want.
Americans certainly don't have any answers, but they do have the sexiest propaganda which is entirely crafted to tell the rest of the Globe that they do... listening to that garbage is destroying Canada.
Americans barely care about their own neighbours, much less fair treatment & rights for UN-Americans.
I think the rest of the world acts so sullen and petulant because they resent the fact that the U.S. is the most powerful country on the planet. Yeah, the economy's down...these things happen. But for people in other countries to act like we need to assist them simply because they're too weak and lack the vision to succeed on their own...well, that's their own fault. I guess life's much more difficult when you're that low on the totem pole. To be jealous and bitter though, like most of Europe is, simply because you lack the intellect, the drive, or the vision to flourish alone...well, that's just sad. Bitter and jealous.
You guys(and gals)should check tis article out that I wrote a few months ago: http://www.saint8.com/onlinecomics-pxn/pxn2/ It explains alot.
ok ok
terra giordano you lack the wisdom and compassion much like a politician does. your theory is much like "every man for himself" and "only the strong survive" and "you made your bed" ...im not religious but were would you be if god thought that way? and to all those that believe obama is behind all this then open your eyes!(again) yes you all know that its all about big money and business and who has the biggest check book has the biggest say. its not rocket science big oil got there big bonus under 1 guy "bush" who was puppet for them $4:50 at the pumps and now big money banks etc... get there bonus under obama hand puppet! oh and all those in washington get a small slice of what evers left behind..oh and on a side note big health insurance is also getting a big slice of the cake thanks to the "you will have insurance or else" mantra...i wonder which bloody health insurance company is gonna pay the biggest money to guarantee that most of them 40 million will get insurance from that company...what a load of crap..and greg i love your "leaked documents" but half of that crap your actually given by them to throw you off scent(the people who actually wrote them)
What do most enfranchised and I mean rich Americans do when the going get's tough; plaster that dumb smile on your messed up, hellbound face, and LIE, LIE, LIE. the contrived optimism of the past 30 years covered up scam after scam after scam done by scumbag after scumbag after scumbag. I gotta say though that Bernacke and Paulson bailing out their lowlife global scumbanking friends at Goldman Sachs has to take the cake. Duuuuhhhhhhhh, did these guys all go to harvard, learned the lying free market banking thing from Mankiw (who is not really an economics professor, he can only teach one school of thought, his); they all sold you the Kool Aid and you believed them too.
Wanna read an article? Check out the one on the caspian sea oil fields and how essential Pipelineistan is to the US hanging on to some of them in Paranoia magazine, you know, that one back issue that was so good. Hey, ole' kill the poor Obama is from harvard too, huh. Mebbe that's why he is so busy capping federal salaries; I know, why don't you cap them after they get over !125,000/yr.?
---Finally I just have to say that it just demonstrated how far gone american academia is; getting up on that nazi corporate TV and have them LIE and sell you economic snake oil over and over and over again.
You don't get rich saving poor people and promoting peace in the US.
---better watch out what happens when that illegal nuclear arsenal is exposed in israel; is it 400 warheads or more? Remember, even low level radiation around "safe" power plants still kills. Can we do anything that affirms life besides killing abortion doctors?
Lyle Courtsal
Terry: Reality Check, I am a American and proud of it, but, and there is always a but. But if you believe we are the most powerful country in the world you have your head in the clouds believing our governments propaganda. (both republican and democrats) . We are now financially a 3rd world country, owing our economic survival to borrowed money of which a lot is china's. We cannot field enough men for our Army to properly rotate and man the 2 war fronts we are fighting, Iran and Afghanistan and need to be in a 3rd Iran. unless we get wise and quit trying to rule the world. Right now China is the top dog, militarily and financially.
The reason the real estate market collapsed was the property owner not having the financial ability to service his debt. Similarity what is going to happen when we have to start paying interest on the trillions of dollars wasted on the big banks, insurance companies and car companies. Once again similarly we will not be able to pay unless we print money then we will see hyper inflation, we America are on our way out as a super power.
We are letting our manufacturing base move out to cheaper production countries. We sure as hell cannot support ourselves as we are accustomed to by selling each other hamburgers. Think about reality not propaganda.
We no longer have a lot of thing that we used to have re:
best educated population
lowest infant mortality rate
Highest income
best health care system
Biggest Army
longest life span
It ain't over yet baby. If you think the $4 trillion that went missing, of which the $7 billion at HUD derivatives is credited with starting the landslide, you ain't seen nothing yet. In Florida timeshare condos, huge highrises have 20% occupancy or less. They can't even afford to turn off the lights. All this on borrowed money. Them loans are due. Now what's going to happen? Well Charlie Crist our sweet governor wants to get elected to Congress, so we'll try to keep the lid on this. I don't think Crist will succeed.