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Presidential Crimes: Then And Now

Writing for Americans is not always an enjoyable experience. Many readers want to have their prejudices confirmed, not challenged. Emotions rule their reason, and they are capable of a determined resistance to facts and are not inhibited from displays of rudeness and ignorance. Indeed, some are so proud of their shortcomings that they can’t wait to show them to others. Some simply cannot read and confuse explanations with justifications as if the act of explaining something justifies the person or event explained. Thankfully, all readers are not handicapped in these ways or there would be no point in trying to inform the American people.

In a recent column I used some examples of Clinton-era scandals to make a point about the media, pointing out that the media and the American people were more interested in Clinton’s sexual escapades and in his choice of underwear than in the many anomalies associated with such serious events as the Oklahoma City bombing, Waco, and the mysterious death of a White House legal counsel.

Reaganphobes responded in an infantile way, remonstrating that the same standards should be applied to “your dear beloved Ray-Gun” as to Clinton. Those readers were unable to understand that the article was not about Clinton, but about how the media sensationalizes unimportant events in order to distract attention from serious ones. Examples from the Clinton era were used, because no question better epitomizes the level of the American public’s interest in political life than the young woman’s question to President Clinton–”boxers or briefs?”

It is doubtful that journalists and historians are capable of providing accurate understandings of any presidential term. Even those personally involved often do not know why some things happened. I have been in White House meetings from which every participant departed with a different understanding of what the president’s policy was. This was not the result of lack of clarity on the president’s part, but from the various interests present shaping the policy to their agendas.

Many Americans regard the White House as the lair of a powerful being who can snap his fingers and make things happen. The fact of the matter is that presidents have little idea of what is transpiring in the vast cabinet departments and federal agencies that constitute “their” administration. Many parts of government are empires unto themselves. The “Deep State,” about which Mike Lofgren, formerly a senior member of the Congressional staff has written, is unaccountable to anyone. But even the accountable part of the government isn’t. For example, the information flows from the cabinet departments, such as defense, state, and treasury, are reported to Assistant Secretaries, who control the flow of information to the Secretaries, who inform the President. The civil service professionals can massage the information one way, the Assistant Secretaries another, and the Secretaries yet another. If the Secretaries report the information to the White House Chief of Staff, the information can be massaged yet again. In my day before George W. Bush and Dick Cheney gave us the Gestapo-sounding Department of Homeland Security, the Secret Service reported to an Assistant Secretary of the Treasury, but the official had no way of evaluating the reliability of the information. The Secret Service reported whatever it suited the Secret Service to report.

Those who think that “the President knows” can test their conviction by trying to keep up with the daily announcements from all departments and agencies of the government. It is a known fact that CEOs of large corporations, the relative size of which are tiny compared to the US government, cannot know all that is happening within their organizations.

Nixon: Villain or Centrist Reformer?

I am not particularly knowledgeable about the terms of our various presidents. Nevertheless, I suspect that the Nixon and Reagan terms are among the least understood. Both presidents had more ideological opponents among journalists and historians than they had defenders. Consequently, their stories are more distorted by how their ideological opponents want them to be seen and remembered. For example, compare your view of Richard Nixon with the portrait Patrick Buchanan provides in his latest book, The Greatest Comeback. A person doesn’t have to agree with Buchanan’s view of the issues of those years, or with how Buchanan positioned, or tried to position, Nixon on various issues, to learn a great deal about Nixon. Buchanan can be wrong on issues, but he is not dishonest.

For a politician, Richard Nixon was a very knowledgable person. He travelled widely, visiting foreign leaders. Nixon was the most knowledgable president about foreign policy we have ever had. He knew more than Obama, Bush I and II, Clinton, Reagan, Ford, and Johnson combined.

The liberal-left created an image of Nixon as paranoid and secretive with a long enemies list, but Buchanan shows that Nixon was inclusive, a “big tent” politician with a wide range of advisors. There is no doubt that Nixon had enemies. Many of them continue to operate against him long after his death.

Indeed, it was Nixon’s inclusiveness that made conservatives suspicious of him. To keep conservatives in his camp, Nixon used their rhetoric, and it was Nixon’s rhetoric rather than his policies that generated Nixon-hatred among the liberal-left. The inclination to focus on words rather than deeds is another indication of the insubstantiality of American political comprehension.

Probably, the US has never had a more liberal president than Nixon. Nixon went against conservatives and established the Environmental Protection Agency (EPA) by executive order. He supported the Clean Air Act of 1970. Nixon federalized Medicaid for poor families with dependent children and proposed a mandate that private employers provide health insurance to employees. He desegregated public schools and implemented the first federal affirmative action program.

Declaring that “there is no place on this planet for a billion of its potentially most able people to live in angry isolation,” Nixon engineered the opening to Communist China. He ended the Vietnam War and replaced the draft with the volunteer army. He established economic trade with the Soviet Union and negotiated with Soviet leader Brezhnev landmark arms control treaties–SALT I and the Anti-Ballistic Missile Treaty in 1972, which lasted for 30 years until the neoconized George W. Bush regime violated and terminated the treaty in 2002.

These are astonishing achievements for any president, especially a Republican one. But if you ask Americans what they know about Nixon, the response is Watergate and President Nixon’s forced resignation.

I am convinced that Nixon’s opening to China and Nixon’s arms control treaties and de-escalation of tensions with the Soviet Union threatened the power and profit of the military/security complex. Watergate was an orchestration used to remove the threat. If you read the Watergate reporting by Woodward and Bernstein in the Washington Post, there is no real information in it. In place of information, words are used to create an ominous presence and sinister atmosphere that is transferred to Nixon.

Nixon himself had done nothing that justified impeachment, but his liberal policies had alienated conservative Republicans. Conservatives never forgave Nixon for agreeing with Zhou Enlai that Taiwan was part of China. When the Washington Post, John Dean, and a missing segment of a tape got Nixon in trouble, conservatives did not come to his defense. The liberal-left was overjoyed that Nixon got his comeuppance for supporting the exposure and prosecution of Alger Hiss two decades previously.

The Reagan era is also misunderstood. Just as President Jimmy Carter was regarded as an outsider by the Democratic Washington Establishment, Ronald Reagan was an outsider to the Republican Establishment whose candidate was George H. W. Bush. Just as Carter’s presidency was neutered by the Washington Establishment with the frame-up of Carter’s Budget Director and Chief of Staff, Reagan was partially neutered before he assumed office, and the Establishment removed in succession two national security advisors who were loyal to him.

Reagan’s Priorities and the Establishment’s Agenda

When Reagan won the Republican presidential nomination, he was told that although he had defeated the Establishment in the primaries, the voters would not be able to come to his defense in Washington. He must not make Goldwater’s mistake and shun the Republican Establishment, but pick its presidential candidate for his vice president. Otherwise, the Republican Establishment would work to defeat him in the presidential election just as Rockefeller had undermined Goldwater.

As a former movie star, Nancy Reagan put great store on personal appearance. Reagan’s California crew was a motley one. Lynn Nofziger, for example, sported a beard and a loosely knotted tie if a tie at all. He moved around his office in sock feet without shoes. When Nancy saw Bush’s man, Jim Baker, she concluded that the properly attired Baker was the person that she wanted standing next to her husband when photos were made. Consequently, Reagan’s first term had Bush’s most capable operative as Chief of Staff of the White House.

To get Reagan’s program implemented with the Republican Establishment occupying the chief of staff position was a hard fight. I don’t mean that Jim Baker was malevolent and wished to damage Reagan. For a member of the Republican Establishment, Jim Baker was very intelligent, and he is a hard person to dislike.

The problem with Baker was two-fold. He was not part of the Reagan team and did not understand what we were about or why Reagan was elected. Americans wanted the stagflation that had destroyed Jimmy Carter’s presidency ended, and they were tired of the ongoing Cold War with the Soviet Union and its ever present threat of nuclear armageddon.

It is not that Baker (or VP Bush) were personally opposed to these goals. The problem was, and still is, that the Establishment, whether Republican or Democratic, is responsive not to solving issues but to accommodating the special interest groups that comprise the Establishment. For the Establishment, preserving power is the primary issue.

The Republican Establishment and the Federal Reserve did not understand Reagan’s Supply-Side economic policy. In the entire post World War II period, reductions in tax rates were associated with the Keynesian demand management macroeconomic policy of increasing aggregate demand. The Reagan administration had inherited high inflation, and economists, Wall Street, and the Republican Establishment misunderstood Reagan’s Supply-side policy as a stimulus to consumer demand that would cause inflation, already high, to explode.

On top of this, conservatives in Congress were disturbed that Reagan’s policy would worsen the deficit–in their opinion the worst evil of all.

Reagan’s supply-side economic policy was designed not to increase aggregate demand, but to increase aggregate supply. Instead of prices rising, output and employment would rise. This was a radically new way of using fiscal policy, but instead of helping people to understand the new policy, the media ridiculed and mischaracterized the policy as “voodoo economics,” “trickle-down economics,” and “tax cuts for the rich.” These mischaracterizations are still with us three decades later.

Nevertheless, the supply-side policy was partially implemented. It was enough to end stagflation and provided the basis for Clinton’s economic success.

Ending the Cold War and Bad CIA Advice

President Reagan’s goal of ending the Cold War was also upsetting to both conservatives and the Establishment. Conservatives warned that wily Soviets would deceive Reagan and gain from the negotiations. The Establishment regarded Reagan’s goal of ending the cold war as a threat to the military/security complex comparable to Nixon’s opening to China and arms limitations treaties with the Soviet Union. President John F. Kennedy had threatened the same powerful interests when he realized from the Cuban Missile Crisis that the US must put an end to the risk of nuclear confrontation with the Soviet Union.

With the success of his economic policy in putting the US economy back on its feet, Reagan intended to force a negotiated end to the Cold War by threatening the Soviets with an arms race that their suffering economy could not endure. However, the CIA advised Reagan that if he renewed the arms race, he would lose it, because the Soviet economy, being centrally planned, was in the hands of Soviet leaders, who, unlike Reagan, could allocate as much of the economy as necessary to win the arms race.

Reagan did not believe the CIA. He created a secret presidential committee with authority to investigate the CIA’s evidence for its claim, and he appointed me to the committee. The committee concluded that the CIA was wrong.

Reagan always told us that his purpose was to end, not win, the Cold War. He said that the only victory he wanted was to remove the threat of nuclear annihilation. He made it clear that he did not want a Soviet scalp. Like Nixon, to keep conservatives on board, he used their rhetoric.

Curing stagflation and ending the Cold War were the main interests of President Reagan. Perhaps I am mistaken, but I do not think he paid much attention to anything else.

Grenada and the Contras in Nicaragua were explained to Reagan by the military/security complex as necessary interventions to make the Soviets aware that there would be no further Soviet advances and, thus, help to bring the Soviets to the negotiating table to end the nuclear threat. Unlike the George W. Bush and Obama regimes, the Reagan administration had no goal of a universal American Empire exercising hegemony over the world. Granada and Nicaragua were not part of an empire-building policy. Reagan understood them as a message to the Soviets that “you are not going any further, so lets negotiate.” Some conservatives regarded the revolutionary movements in Grenada and Nicaragua as communist subversion, but the general concern was that they would ally with the Soviet Union, thus creating more Cuba-like situations. Even President Carter opposed the rise of a left-wing government in Nicaragua.

America Playing the Foreign Policy Game

Today the Western governments support and participate in Washington’s invasions, but not then. The invasion of Grenada was criticized by both the British and Canadian governments. The US had to use its UN Security Council veto to save itself from being condemned for “a flagrant violation of international law.”

The Sandinistas in Nicaragua were reformers opposed to the corruption of the Somoza regime that catered to Washington’s interests. The Sandinistas aroused the same opposition from Washington as every reformist government in Latin America always has. Washington has traditionally regarded Latin American reformers as Marxist revolutionary movements and has consistently overthrown reformist governments in behalf of the United Fruit Company and other private interests that have large holdings in countries ruled by unrepresentative governments.

Washington’s policy was, and still is, short-sighted and hypocritical. The United States should have allied with representative governments, not against them. However, no American president, no matter how wise and well-intentioned, would have been a match for the combination of the interests of politically-connected US corporations and the fear of more Cubas. Remember Marine General Smedley Butler’s confession that he and his US Marines served to make Latin America safe for the United Fruit Company and “some lousy investment of the bankers.”

Information is Power

Americans, even well informed ones, dramatically over-estimate the knowledge of presidents and the neutrality of the information that is fed to them by the various agencies and advisors. Information is power, and presidents get the information that Washington wants them to receive. In Washington private agendas abound, and no president is immune from these agendas. A cabinet secretary, budget director, or White House chief of staff who knows how Washington works and has media allies is capable, if so inclined, of shaping the agenda independently of the president’s preferences.

The Establishment prefers a nonentity as president, a person without experience and a cadre of knowledgable supporters to serve him. Harry Truman was, and Obama is, putty in the hands of the Establishment.

If you read Oliver Stone and Peter Kuznick’s True History of the US, you will see that the Democratic Establishment, realizing that FDR would not survive his fourth term, forced his popular Vice President Henry Wallace off the ticket and put in his place the inconsequential Truman. With Truman in place, the military/security complex was able to create the Cold War.

From Bad to Worse

The transgressions of law that occurred during the Nixon and Reagan years are small when compared to the crimes of Clinton, George W. Bush and Obama, and the crimes were punished. Nixon and Reagan would have been impeached if they had started major wars in the Middle East based on lies and used US armed forces to invade or bomb numerous countries without Congressional authorization, or had claimed to be above both Constitution and statutory law, setting aside habeas corpus and due process and detaining US citizens indefinitely, engaging in torture, spying without warrants, and executing US citizens without due process of law.

Moreover, unlike the Clinton, Bush, and Obama regimes, the Reagan administration prosecuted those who broke the law. Assistant Secretary of State Elliott Abrams was convicted, National Security Advisor Robert McFarlane was convicted, Chief of CIA Central American Task Force Alan Fiers was convicted, Clair George, Chief of the CIA’s Division of Covert Operations was convicted. Richard Secord was convicted. National Security Advisor John Poindexter was convicted. Oliver North was convicted. North’s conviction was later overturned, and President George H.W. Bush pardoned others. But the Reagan Administration held its operatives accountable to law. No American President since Reagan has held the government accountable.

Clair George was convicted of lying to congressional committees. Richard Secord was convicted of lying to Congress. John Poindexter was convicted of lying to Congress. Alan Fiers was convicted of withholding information from Congress. Compare these convictions then with James R. Clapper now. President Obama appointed Clapper Director of National Intelligence on June 5, 2010, declaring that Clapper “possesses a quality that I value in all my advisers: a willingness to tell leaders what we need to know even if its’s not what we want to hear.” With this endorsement, Clapper proceeded to lie to Congress under oath, a felony. Clapper was not indicted and prosecuted. He was not even fired or forced to resign. For executive branch officials, perjury is now a dead letter law.

The destruction of the rule of law and accountable government has extended to state and local levels. Police officers no longer “serve and protect” the public. The most dangerous encounter most Americans will ever experience is with police, who brutalize citizens without cause and even shoot them down in their homes and on their streets. A police badge has become a license to kill, and police use it to the hilt. During the Iraq War, more Americans were murdered by police than the military lost troops in combat.

And nothing is done about it. The country is facing the November 4 elections, and the abuse of US citizens by “their” police is not an issue. Neither are the many illegal interventions by Washington into the internal affairs of other sovereign countries or the unconstitutional spying that violates citizens’ privacy. The fact that Washington is gearing up for yet another war in the Middle East is not an important issue in the election.

In the US the rule of law, and with it liberty, have been lost. With few exceptions, Americans are too ignorant and unconcerned to do anything about it. The longer the rule of law is set aside, the more difficult it is to reestablish it. Sooner or later the rule of law ceases even as a memory. No candidate in the upcoming election has made the rule of law an issue.

Americans have become a small-minded divided people, ruled by petty hatreds, who are easily set against one another and against other peoples by their rulers.

Dr. Paul Craig Roberts was Assistant Secretary of the Treasury for Economic Policy and associate editor of the Wall Street Journal. He was columnist for Business Week, Scripps Howard News Service, and Creators Syndicate. He has had many university appointments. His internet columns have attracted a worldwide following. Roberts’ latest books are The Failure of Laissez Faire Capitalism and Economic Dissolution of the West and How America Was Lost.

China launches World Bank rival

China and India are backing a 21 country $100 billion Asian Infrastructure Investment Bank (AIIB) to challenge to the World Bank and Asian Development Bank.

Memorandum of understanding were signed with 21 Asian countries in Beijing Friday. Australia, Indonesia and South Korea were absent following hidden pressure from Washington.

The development bank was proposed a year ago by Chinese President Xi Jinping, and is to offer financing for infrastructure projects in underdeveloped Asian countries.

Headquartered in Beijing, former chairman of the China International Capital Corp investment bank Jim Liqun, is expected to take a leading role.

The bank will initially be capitalized with $50 billion, most of it contributed by China. The country is planning to increase authorized capital to $100 billion. With that amount the AIIB would be two-thirds the size of the $175 billion Asian Development Bank.

India will be the second largest bank shareholder though Kuwait, Qatar, Mongolia, Kazakhstan, Pakistan, Nepal, Oman, and all the countries of the Association of Southeast Asia, except Indonesia are involved.

Australia, Indonesia and South Korea did not participate following US claims of ‘concerns’ about a rival to Western-dominated multilateral lenders.

Japan, China’s main rival in Asia, which dominates the Asian Development Bank along with the United States, did not attend but had not been expected to do so.

Indonesia refused to participate claiming it needs time to discuss China’s proposal.

The Australian Financial Review said US Secretary of State John Kerry had personally asked Australian Prime Minister Tony Abbott to “steer clear” from joining AIIB.

“Australia has been under pressure from the US for some time to not become a founding member of the bank and it is understood Mr. Kerry put the case directly to the prime minister when the pair met in Jakarta on Monday following the inauguration of Indonesian President Joko Widodo,” the paper said.

South Korea, one of America’s closest allies in Asia, is also prevaricating. Its finance ministry said it spoke with China to request more time to consider details such as the AIIB’s governance and operational principles.

US officials have said they do not want to support an initiative Washington thinks is unlikely to promote good environmental, procurement and human rights standards in the way the World Bank and ADB are required to do.

But Chinese officials are convinced the American opposition is an attempt to contain the global rise of China and its ambition to remain the dominant power in Asia.

“You could think of this as a basketball game in which the US wants to set the duration of the game, the size of the court, the height of the basket and everything else to suit itself,” Wei Jianguo, a former Chinese commerce minister, told the Financial Times.

Matthew Goodman, scholar at the Center for Strategic and International Studies in Washington DC believes the initiatives of a BRICS Bank and AIIB “represent the first serious institutional challenge to the global economic order.”

Chinese Finance Minister Lou Jiwei said the AIIB will set high standards, safeguard policies and improve on bureaucratic, unrealistic and irrelevant policies, according to the Xinhua news agency.

Source: RT

Ministerial visits to Japanese nationalist shrine provoke Chinese ire

Three nationalist ministers in Japan’s cabinet paid homage at a war shrine hated by China Saturday, despite tentative signs of a thaw in Tokyo’s long-frozen relationship with Beijing.

The visits to Yasukuni by three of the five women in Prime Minister Shinzo Abe’s cabinet came as a fourth — the moderate daughter of a former premier — reportedly mulled resignation over a cash scandal.

They also come after what appeared to be a breakthrough in Sino-Japanese ties, with a handshake between Abe and Chinese Prime Minister Li Keqiang on the sidelines of an international gathering in Italy.

Abe has set his sights on a summit with Chinese President Xi Jinping — his first — when Beijing hosts a meeting of the Asia Pacific Economic Cooperation bloc (APEC) next month, and had been talking up the head-to-head in the hope of bouncing China into the meeting.

But a mass visit to Yasukuni on Friday by 110 lawmakers provoked a rebuke from Beijing.

Then in what has become a standard way for China to signal its annoyance with Japan, official Chinese ships were Saturday sent into waters around islands at the centre of a long-running territorial dispute between the two.

The pilgrimage to Yasukuni by three of Abe’s ministers — all well-known for their strident nationalist views — will likely do little to curry favour abroad, including in key ally the United States, but will play well with a core group of right wing supporters at home.

Internal Affairs and Communications Minister Sanae Takaichi, who was first to the shrine on Saturday morning, made international headlines last month when a picture emerged of her standing alongside the leader of a domestic neo-Nazi party.

National Public Safety Commission chief Eriko Yamatani, who has also been pictured with fringe right-wingers, and Haruko Arimura, the state minister in charge of female empowerment, also paid homage.

The 145-year-old Shinto shrine is the supposed repository of the souls of some 2.5 million citizens and soldiers who died in World War II and other conflicts.

It is controversial because they include senior figures in the WWII administration, such as General Hideki Tojo, who ordered the attack on Pearl Harbor.

It is seen as a symbol of Japan’s militarist past, and the continued observance of festivals there by public officials is taken as proof in neighbouring countries of Japan’s lack of repentance for its warring.

China lashed out Friday after the mass lawmakers’ visit, saying it was “gravely concerned” by the activity.

“China would like to reiterate that Sino-Japan relations can only realise healthy and stable development when Japan seriously faces up to and repents of its aggressive past and disassociates itself with militarism,” a statement said.

While China gets publicly annoyed by politicians’ visits to the shrine, it would likely react very strongly to the prime minister going to Yasukuni.

Since a trip in December 2013, Abe has stayed away, although he made offerings for the spring festival, on the war anniversary on August 15 and again on Friday.

He is thought unlikely to visit the shrine after he returns home Saturday from Italy.

Instead, he is likely to turn his attention to damage limitation in the wake of the cash-scandal that has erupted around one of his most popular ministers.

The loss of Yuko Obuchi, a telegenic mother-of-two who is in charge of Japan’s energy sector, would be a blow to his bid to convince Fukushima-scarred voters the country’s shuttered nuclear reactors are safe to turn back on.

Obuchi has told sources close to Abe that she intends to resign when the prime minister gets home, the Nikkei business daily reported.

That follows reports that her political funds have been misspent, including on make-up, theatre tickets for supporters and accessories.

However, after a feverish morning of speculation and rumour in Tokyo’s political world, Obuchi appeared to be rowing away from an immediate resignation.

“What I must do now is thoroughly investigate my own political fund,” she told reporters.

“I have no plans” to meet Abe, she said.

America usurped: China becomes world’s largest economy

Last week the International Monetary Fund updated its data on the world economy. For the first time it ranks China’s economy as the world’s biggest in purchasing-power-parity terms.

Historians, though, point out that China is merely regaining a title that it has held for much of recorded history.

In 1820 it probably produced one-third of global economic output. The brief interlude in which America overshadowed it is now over.

The White House seemed oblivious on Wednesday, crowing that “the economic policies that this president put in place are the envy of the world”.

They seemed caught flat-footed by the news.

The latest IMF figures show the Chinese economy is worth $17.61 trillion compared with $17.4 trillion for the U.S.

The figure is controversial as it requires the comparison of a huge amount of goods and services, and is therefore a vast statistical undertaking that can only be conducted infrequently with estimates used during intervening periods. The methods used to collect the data have also led to controversy in the past.

When it comes the raw GDP data base on exchange rates, China will eventually also overtake the US if it carries on growing as it has, but that is still likely to take some years.

Game over for Australian coal

China, the world’s top coal importer, will levy import tariffs on the commodity after nearly a decade, in its latest bid to prop up ailing domestic miners who have been buffeted by rising costs and tumbling prices.

The sudden move by China to levy import tariffs of between 3 percent and 6 percent from October 15 is set to hit miners in Australia and Russia – among the top coal exporters into the country.

Traders said Indonesia, the second-biggest shipper of the fuel to China, will be exempt from the tariffs since a free trade agreement between China and the Association of Southeast Asian Nations (ASEAN) means Beijing has promised the signatory nations zero import tariffs for some resources.

A 3 percent import tariff imposed on lignite last year did not include Indonesia.

“China is clearly moving to protect its local miners. Given that the tariff also covers coking coal, Australia, being the top supplier to China, is likely going to be the most affected,” said Serene Lim, an analyst at Standard Chartered.

The Ministry of Finance said in a statement on Thursday that import tariffs for anthracite coal and coking coal will return to 3 percent, while non-coking coal will have an import tax of 6 percent. Briquettes, a fuel manufactured from coal, and other coal-based fuels will see their import tariffs return to 5 percent.

Import taxes for all coals, with the exception of coking coal, was at 6 percent prior to 2005 before they were scrapped in 2007. Coking coal import taxes were set at 3 percent before being abolished in 2005.

News of the tariff lifted China’s thermal coal futures by 1.9 percent to 529.2 yuan ($86.33) a tonne, while China-listed shares in top miners such as Shenhua Energy and China Coal Energy also rose.

Chinese traders were only willing to pay about $65 a tonne for coal with heating value of 5,500 kcal/kg (NAR) on a landed basis before the tariff was announced, against offers of about $66 a tonne by Australians, traders said.

“With the latest tax, Chinese can only offer around $62, which means Australian sellers will need to cut prices by about $3.50-$4 a tonne,” said a senior trader at major international trading house.

“It is game over for Australian coal.”

INTENSE LOBBYING

The latest effort to limit imports comes after nearly a year of intense lobbying by China’s top miners for Beijing to stem the flood of cheap supplies that have inundated the domestic market and dragged local prices to a six-year low.

The China National Coal Association, which had submitted proposals to reduce domestic output, reduce the tax burden and regulate imports, had urged Beijing to act swiftly to support the besieged sector, where 70 percent of the miners were making losses and more than half were owing wages.

On a broader level, the persistent slump in coal prices has put a severe financial strain on coal-dependent provinces such as Inner Mongolia, Shanxi and Shaanxi, which are already struggling with high debts and a weakening property market.

China said last month it will ban the import and local sale of coal with high ash and sulphur content starting from 2015 in a bid to tackle air pollution. But Australian miners were left unscathed by that regulation as the most stringent standards did not apply to power plants.

Separately, trade sources said Beijing has also asked its state-owned power utilities to cut coal imports by as much as 40 million tonnes from September to December, a move that is set to hit imports in the fourth quarter.

China, also the world’s top coal producer and consumer, saw imports rise 13 percent from a year ago to 327.1 million tonnes in 2013, accounting for about 10 percent of the country’s total consumption. (1 US dollar = 6.1299 Chinese yuan)

Source: Reuters

China says US behind Hong Kong protests

A commentary in the official newspaper of the Chinese Communist Party on Saturday accused the U.S. of trying to foment a “color revolution” in Hong Kong.

The commentary, which was entitled “Why is the U.S. so keen on ‘Color Revolutions’?”, appeared on the front page of the The People’s Daily overseas editions on Saturday. The People’s Daily is the official newspaper of the Chinese Communist Party.

The commentary deems it “inevitable” that the U.S. actions towards Hong Kong “will be associated with the US involvement in the ‘Color Revolutions’ in the Commonwealth of Independent States, the Middle East, North Africa and elsewhere.” The People’s Daily then slams the U.S. for pretending to be interested in democracy when it is really only trying to advance its “strategic interests.” For the United States, the commentary claims, a “‘democratic’ country is one that conducts its affairs in line with American interests.”

The commentary ends by stating that “U.S. may enjoy the sweet taste of interfering in other countries’ internal affairs, but on the issue of Hong Kong it stands little chance of overcoming the determination of the Chinese government to maintain stability and prosperity.”

Although China has strongly implied that foreigners were secretly controlling the Hong Kong protests in recent weeks, the commentary was the first time it so explicitly accused the U.S. of being behind the movement. Its support for this accusation is not very compelling, however, as it mostly focuses on the coverage of independent different media outlets, one of which appears to be a Hong Kong-based online publication.

The commentary begins by noting that, “according to media reports,” Louisa Greve, National Endowment for Democracy’s (NED) the Vice President for Asia, Middle East & North Africa, and Global Programs, met with “key people” in Occupy Central “several months ago” to “talk about the movement.” The unidentified media reports the article references likely refers to an earlier report published in a “Hong Kong-based pro-Beijing newspaper,” according to the Hong Kong-based South China Morning Post. The allegations themselves are most likely based on a NED-hosted public discussion on democracy in Hong Kong between Occupy Central leaders Martin Lee and Anson Chan that was held in Washington, DC in April of this year. Louisa Greve mediated the hour long talk, a video of which is available on YouTube.

The National Endowment for Democracy is a democracy promotion organization that, while administered as a private non-profit organization, receives the bulk of its funding from the U.S. government. In 2013 it gave two grants that together totaled less than $300,000 to two organizations for work on Hong Kong. Only one of those organizations is based in Hong Kong.

However, the National Democratic Institute (NDI), a subsidiary of the NED, does maintain a tiny office in Hong Kong. The Diplomat has learned that NDI’s Hong Kong office typically employs one international staff member and occasionally hires one or two locals to help out when needed. Most of NDI’s work in Hong Kong focuses on holding workshops attended by young leaders from all interested political parties that focus on building skills in areas like public speaking, campaign strategy, message development and message delivery. The Diplomat has learned that NDI has regularly worked with pro-Beijing political parties in Hong Kong who, like all political parties, hope to prevail in local elections. Local Hong Kong press have occasionally accused NDI of being a front for the Central Intelligence Agency (CIA) in the past.

Beyond NED, the People’s Daily article notes that three former U.S. Consuls General to Hong Kong had “recently united” to write an open letter to Hong Kong Chief Executive CY Leung.

Most of the People’s Daily’s claim that the U.S. is trying to foment a color revolution in Hong Kong, however, is based on mainstream newspapers using the term “Umbrella Revolution” in their coverage of the Hong Kong protests. For example, it notes that the Associated Press and Wall Street Journal had used the term “Umbrella Revolution” in their Hong Kong coverage. Neither organization is affiliated with the U.S. government.

The People’s Daily commentary also claimed the “The Times Asia” had used the Umbrella Revolution phrase. It wasn’t entirely clear which publication the commentary was referring to, but it most likely it meant Asia Times Online. Asia Times Online is a Hong Kong-based online publication that grew out of a former Hong Kong and Bangkok-based daily print newspaper. Asia Times Online claims to cover issues “from an Asian perspective; this distinguishes us from the mainstream English-language media, whose reporting on Asian matters is generally by Westerners, for Westerners.”

Source: The Diplomat

‘Russia inseperable part of European culture and politics’

Russia’s top diplomat said in an interview with Moscow State Institute of International Relations’ MGIMO Journal, that for at least the past 300 years Russia has been an inseparable part of European culture and politics.

“The periods of Russia’s most active participation in European affairs were marked by stability and peace on the continent,” Lavrov added.

He noted that only collective efforts can put up efficient counteraction to the challenges like terrorism, drug industry, proliferation of weapons of mass destruction, illegal migration, climate change and many others. “To give up collaboration is not a good option for relations between Russia and the West — neither for ourselves nor for them.”

Russia has been ostracized by Western countries as a most active upholder of independent views, Lavrov said. “Over the past quarter of a century, we have been holding discussions with our North-Atlantic partners on how to build a strategic relationship and set up joint agencies tasked with facilitating this relationship,” Lavrov said. “We passed political declarations and called for forming a unified space in the world, for stability and security.”

“Still our Western partners were pressing forward with their own agenda, ignoring Russia’s interests in many ways, expanding NATO, and generally seeking to push the geopolitical territory under their control right up to Russia’s borders,” he said.

One may clearly get an impression that Russia got under a strike as a most active upholder of independent views in the modern world, as a force considering independent politics to be its natural right. “A line of this kind doesn’t match the claims for exceptionality made by whoever, no doubt,” Lavrov said.

“It’s equally clear, however, that there is no return to the previous model of actions towards Russia that was based on insincerity and filled with double standards,” he said. “It’s impossible to keep adjusting international law to someone’s petty one-sided plans and ruining the authority of the UN Security Council by unscrupulous interpretations of its resolutions.”

“Business should be conducted decently and with respect for international law, in the first place for the UN Charter with all of the norms and principles embedded in it,” Lavrov said.

Meanwhile the Speaker of the Russian State Duma Sergey Naryshkin declared at a meeting with Prime Minister of the Chinese State Council Li Keqiang that “Russia regards the developments in Hong Kong as China’s internal affair.”

Naryshkin said he did not agree with interference by any external forces.

Demonstrations involving thousands of students have been supported by Western interests. Hong Kong is a former British colony.

Will China enter the heart of global finance?

The issue of whether the Chinese should be part of the International Monetary Fund’s Special Drawing Right, the composite reserve currency used in official financing, is highly technocratic, but the political questions at stake go to the core of world money and power – and will be discussed, in the background, at the annual meetings of the IMF and World Bank in Washington this week.

China is bidding to enter the heart of global finance by establishing its currency, the renminbi, as part of an ubiquitous monetary unit used in official transactions around the world.

The decision on a new SDR structure, to be made in the next 15 months, will influence how China and its currency can play a bigger part in driving world trade, investment and capital flows. The renminbi could eventually challenge the dollar and its pivotal position in world money — which is why the U.S. government and Federal Reserve are examining this with intense interest.

China is unlikely to mount an open campaign to enter the SDR, grouping the main reserve currencies, the dollar, the euro (linking countries in European monetary union led by Germany and France), the Japanese yen and British pound, and is valued at around $1.5.

Beijing would prefer the question of recalculating the composition of the SDR, which comes up for review in 2015, to follow market developments, reflecting a big increase in demand for renminbi financing from private banks, central banks, traders, corporations and asset managers.

Many hurdles remain. These include the renminbi’s lack of formal convertibility for transactions that shift capital inside and outside the country, where Beijing is reluctant to abolish all controls. In addition, China still has to release more statistics to the Fund about its monetary reserves and other matters. However, Chinese measures over the past three years to liberalize and internationalize its currency, and a big increase in financial market interest in China, are pointing toward a broadening of the SDR’s composition from January 2016.

An additional factor is China’s own action to galvanize emerging market economies toward reforming word monetary arrangements. This includes the five-nation Brics group’s decision to set up the New Development Bank in Shanghai, potentially challenging the IMF and the World Bank.

China believes it is close to earning the status of a reserve money, the first time that an emerging market currency would attain this position. Chinese entry into the “magic circle” has been advanced by the British government’s September decision to issue renminbi-denominated bonds, the first big government to take such a step, and allow the proceeds to be held as reserves by the Bank of England.

The main conditions for the renminbi to pass the SDR test are that it should be widely used in trade and be “freely usable” in international payments and asset management. Although a long way behind the dollar, the renminbi has made impressive strides recently and is challenging the euro in several key fields.

Next year’s planned review will touch, too, on the opportunity for the SDR to play a greater role on financial markets, for example in denominating bond issues. The SDR has lost ground as a financial vehicle in the past two decades, reflecting the surging importance of international private sector capital markets. But with the addition of the renminbi, it may be about to make a comeback.

Source: USA Today

China warns US not to meddle in Hong Kong

China’s foreign minister made it clear Beijing would not allow other countries to meddle into its ‘internal affairs’, responding in this way to US Secretary of State’s call for Beijing to grant Hong Kong the “highest possible degree of autonomy.”

The American and the Chinese heads of foreign offices exchanged their views on the massive protests in Hong Kong before their talks at the US State Department on Wednesday.

“Hong Kong affairs are China’s internal affairs,” Chinese Foreign Minister Wang Yi said. “All countries should respect China’s sovereignty. And this is also a basic principle governing international relations. I believe for any country, for any society, no one will allow those illegal acts that violate public order.”

Wang added he believed the current Hong Kong leadership was able to handle the large-scale sit-ins by itself.

The remark was made after US Secretary of State John Kerry reiterated Washington’s support for “universal suffrage” in Hong Kong, the main demand put forward by protesters in the Asian financial hub.

“We support universal suffrage in Hong Kong accordant with the Basic Law, and we believe in open society with the highest possible degree of autonomy and governed by rule of law is essential for Hong Kong’s stability and prosperity,” Kerry said.

Wang Yi received the same message from Barack Obama, whom he met later the same day, according to a White House statement about the meeting.

“The United States has consistently supported the open system that is essential to Hong Kong’s stability and prosperity, universal suffrage, and the aspiration of the Hong Kong people,” the statement reads.

Protesters in Hong Kong have been demanding election reform. They’re against the central government’s August decision to only allow Beijing-approved nominees run for the city’s leader post in the next election in 2017.

Sunday’s massive crackdown on thousands of protesters, when police use of tear gas, pepper spray and baton charges did not lead to a dispersal of the crowds. What it did inspire is more anger with Hong Kong’s current leader, Leung Chun-ying, with protesters starting to demand his resignation.

On Wednesday, a leader of the pro-reform protests warned the demonstrators were ready to occupy government buildings if the city’s chief didn’t step down by the end of Thursday.

An unnamed government source close to Leung says Hong Kong’s chief executive is ready to wait for weeks for the protests to quiet down.

“Unless there’s some chaotic situation, we won’t send in riot police… We hope this doesn’t happen,” the source told Reuters. “We have to deal with it peacefully, even if it lasts weeks or months.”

Source: RT

De-dollarization: Europe and China start direct trading

China will started direct trading between the yuan and the euro today as the world’s second-largest economy seeks to spur global use of its currency.

The move will lower transaction costs and so make yuan and euros more attractive to conduct bilateral trade and investment, the People’s Bank of China said today in a statement on its website. HSBC Holdings Plc said separately it has received regulatory approval to be one of the first market makers when trading begins in China’s domestic market.

The euro will become the sixth major currency to be exchangeable directly for yuan in Shanghai, joining the U.S., Australian and New Zealand dollars, the British pound and the Japanese yen. The yuan ranked seventh for global payments in August and more than one-third of the world’s financial institutions have used it for transfers to China and Hong Kong, the Society for Worldwide International Financial Telecommunications said last week.

“It’s a fresh step forward in China’s yuan internationalization,” said Liu Dongliang, an analyst with China Merchants Bank Co. in Shenzhen. “However, the real impact on foreign exchange rates and companies may be limited as onshore trading volumes between yuan and non-dollars are still too small to gain real pricing power.”

Transactions exchanging yuan for dollars totaled 12.2 trillion yuan in the first half of 2014, dwarfing the 110.4 billion yuan worth of trades for euros and the 251.7 billion yuan for yen, the PBOC said in a monetary policy report last month.

Trading Ties

China’s trade with European Union nations grew 12 percent from a year earlier to $404 billion in the first eight months of 2014, according to data from the Asian nation’s customs department. That compares with just $354 billion with the U.S. during the period.

French and German companies lead among countries outside of greater China in the use of the yuan, according to a July report by HSBC that was based on a survey of 1,304 businesses in 11 major economies that have ties with mainland China. Some 26 percent of French corporates and 23 percent of German companies were using the currency to settle trade, the highest proportions apart from mainland China, Hong Kong and Taiwan.

Last One

China appointed yuan clearing banks this year in Frankfurt, Paris and Luxembourg, and Germany’s financial capital as well as Paris were awarded quotas under the Renminbi Qualified Foreign Institutional Investor program to invest the currency raised offshore in China’s domestic capital markets.

“Given the appointments of renminbi clearing banks in Frankfurt and Paris, today’s announcement is largely expected,” Australia & New Zealand Banking Group Ltd.’s economists led by Liu Li-gang wrote in a research note today. The agreement marks a “significant milestone” in yuan internationalization as the euro is the only G3 currency that has not had direct conversion with the yuan, Liu said.

The European Central Bank is able to draw on a maximum 350 billion yuan ($57 billion) swap line from the People’s Bank of China under the terms of an agreement signed in October 2013. The PBOC can access 45 billion euros ($57 billion) under the terms of the currency swap.

Source: Bloomberg

Emerging markets eye renminbi as alternative to dollar

With some effort, it is possible to discern the outline of a future “renminbi zone” emerging as a rival to the “dollar zone” that has dominated the world’s financial system since the end of the second world war.

Though still indistinct, the contours of this new currency contingency are nowhere clearer than among the Brics countries (Brazil, Russia, India, China and South Africa), following a decision to create a Brics bank in July.

The bank’s two key entities – a New Development Bank (NDB) and a Contingent Reserve Arrangement (CRA) – are designed to form a developing world alternative to the two institutional bulwarks of the “dollar zone”, the World Bank and International Monetary Fund (IMF).

The Brics bank has not disclosed which currencies it intends to use to disburse development funding (through the NDB) and support against short-term liquidity pressures (through the CRA), but given China’s status as the world’s second-largest economy the renminbi is expected to dominate, officials and analysts say.

“It will represent a spectacular own goal if the Brics bank ends up having its assets denominated in US dollars,” says Jan Dehn, head of research at Ashmore, an emerging markets investment manager.

So a vision of a future “renminbi zone” starts to take shape: funding in renminbi is to be disbursed from a Shanghai-based multilateral organisation to emerging economy recipients to finance infrastructure projects and assist governments when liquidity crises strike.

If this future materialises, it will mean a rebalancing in global governance powers towards China and away from the “Washington consensus”. In a sense, the west has only itself to blame. The bank – which will have initial capital of $50bn and maximum allowable capital of $100bn – was formed in response to the west’s reluctance to devolve influence to emerging powers.

The IMF, for instance, allocates just 10.3 per cent of its voting rights to Brics countries despite the fact that they have more than doubled their share of global GDP to 21 per cent in 2013 from less than 10 per cent in 2000. European countries, by contrast, control voting rights of 27.5 per cent for just 18 per cent of the world’s output. To add to the imbalance, the IMF presidency is reserved for a European while that of the World Bank routinely goes to an American.

From another perspective, the Brics bank may evolve to challenge the conditionality – or cash for results – that the IMF and World Bank have sought to inculcate around the world.

With an estimated $8tn needed to finance infrastructure development plans in the Asia-Pacific region between 2010 and 2020, according to an Asian Development Bank estimate, the Brics bank will have ample opportunity to make its presence felt.

The creation of another organisation, the China-led Asian Infrastructure Investment Bank (AIIB), is set further to underline Beijing’s attempt to boost its financial soft power within the developing world.

But while the banks represent key conduits for the projection of Chinese financial power, more immediate determinants of the renminbi’s place in the world hinge on the attractiveness – or otherwise – of the Chinese currency as a unit for trade, a store of value and for portfolio investments.

In all of these categories, the renminbi remains a minnow compared with the US dollar. More than 50 central banks around the world have said they intend to invest part of their foreign currency reserves in the renminbi, according to Jukka Pihlman, global head of central banks and sovereign wealth funds at Standard Chartered. Uptake is strongest among Brics countries and in parts of Asia, Africa and Latin America that have fast-growing trade and investment links with China.

“While the renminbi is unlikely to challenge the US dollar’s dominance as a global reserve currency in the immediate future, the international monetary system is rapidly becoming ‘multipolar’, with the renminbi gaining prominence as a reserve and transaction currency,” Mr Pihlman says.

Under IMF rules, the renminbi cannot be officially included in central banks’ reported totals of reserves because it is not “freely usable”. However, some central banks have started report their offshore and onshore renminbi investments as official reserves anyway, Mr Pihlman says, indicating a further unravelling of IMF influence.

Nevertheless, if the IMF were to include the renminbi as a Special Drawing Rights reserve asset – which is up for review next year – it would act as a significant propellant for renminbi internationalisation, Mr Pihlman says.

The bigger opportunity for the renminbi, though, lies with potential changes in portfolio investment flows, says Ashmore’s Mr Dehn. An inflationary surge in the US dollar zone, which might follow the current recovery in US demand, could lead to a sharp increase in the relative attractiveness in renminbi assets (so long as inflation does not hit China too), Mr Dehn argues.

“So the gradual internationalisation of the renminbi may be followed by the potential for a greater surge, as people try to protect themselves from inflation in developed markets,” says Mr Dehn.

“I’ll eat my hat if the renminbi isn’t the strongest currency on the planet over the next 10 years,” he adds.

Source: FT

Hong Kong democracy protests chaotic

Police repeatedly fired tear gas after tens of thousands of pro-democracy demonstrators brought parts of central Hong Kong to a standstill Sunday in protest at Beijing’s refusal to grant the city unfettered democracy.

The rare chaotic scenes — in which crowds fought running battles with riot police in the streets of the international financial hub — forced protest leaders to warn supporters to “retreat and save their lives” if rubber bullets were fired.

Protesters screamed “Shame!” at officers, many in gas masks and riot gear, as they tried to shield themselves from the clouds of gas which was last used in Hong Kong in 2005.

It marked a dramatic escalation of protests in the city, which rarely sees such violence, after a tense week of largely contained student-led demonstrations exploded into mass angry street protests.

Many officers had rubber bullet rifles slung over their shoulders, prompting protest leaders to call on demonstrators to pull back if police used them of they felt their lives were threatened.

“This is a matter of life or death. If their lives are threatened they should retreat and save their lives,” said professor Chan Kin-man, a co-founder of the Occupy Central group which threw its weight behind the protest on Sunday.

Around three thousand demonstrators blocked a major road, bringing traffic to a standstill and opening up a second significant flashpoint in the key financial hub.

A dozen police looked on helplessly as the demonstrators took over Nathan Road, chanting slogans and wrapping their eyes in clingfilm to protect themselves in the event of pepper spray being deployed, an AFP reporter said.

Beijing “firmly opposes all illegal activities that could undermine rule of law and jeopardise ‘social tranquility’ and it offers its strong backing” to the Hong Kong government, a spokesman for China’s Hong Kong and Macau affairs office was quoted by the Xinhua news agency as saying.

In a statement the Hong Kong government said it had “no intention to seek help from the PLA”.

India, China ignore climate bait

Five years after over 150 heads of state cobbled up a rickety climate deal that fell through, the one-day UN Climate Summit is another attempt of rich nations to push India and China – responsible for one-third of total carbon emissions in 2013 – to accept some strong measures to check global warming.

But the two Asian giants are not willing to take the bait unless the developed world anchored by the United States and the European Union offers substantial incentives to developing nations for adopting a cleaner growth trajectory, cutting down on emissions.

The rich nations’ commitment to provide US $30 billion between 2010 and 2012 for climate mitigation and adaptation is yet to fructify, resulting in the Green Climate Fund remaining a defunct body.

Officially, Prime Minister Narendra Modi and Chinese premier Xi Jinping are not attending the summit called by UN chief Ban Ki-moon because of conflicting schedules.

But it is, in fact, a snub to the developed nations for pushing climate talks outside the United Nations framework. “It creates confusion and we don’t agree,” environment minister Prakash Javadekar, who will represent the country at the summit, said without mentioning to the event.

China has opted for a relatively senior functionary, vice-premier Zhang Gaoli, for the talks. While some island nations threatened by rising sea levels because of climate change expressed shock and disappointment, this will achieve little as India and China do not expect Obama to deliver generous green currency that would motivate emerging economies to revise their country-centric stands.

Neither the American president, nor the European leaders have the mandate to offer money at the summit like in Copenhagen, 2009.

New data shows carbon emissions in the atmosphere closing in on the threshold level to limit temperature rise by two degree Celsius, and India and China being the fastest-growing emitters, would put the two emerging economies under some pressure.

Source: Hindustan Times

Rigged gold price distorts perception of economic reality

The Federal Reserve and its bullion bank agents (JP Morgan, Scotia, and HSBC) have been using naked short-selling to drive down the price of gold since September 2011. The latest containment effort began in mid-July of this year, after gold had moved higher in price from the beginning of June and was threatening to take out key technical levels, which would have triggered a flood of buying from hedge funds.

The Fed and its agents rig the gold price in the New York Comex futures (paper gold) market. The bullion banks have the ability to print an unlimited supply of gold contracts which are sold in large volumes at times when Comex activity is light.

Generally, on the other side of the trade the buyers of contracts are large hedge funds and other speculators, who use the contracts to speculate on the direction of the gold price. The hedge funds and speculators have no interest in acquiring physical gold and settle their bets in cash, which makes it possible for the bullion banks to sell claims to gold that they cannot back with physical metal. Contracts sold without underlying gold to back them are called “uncovered contracts” or “naked shorts.” It is illegal to engage in naked shorting in the stock and bond markets, but it is permitted in the gold futures market.

The fact that the price of gold is determined in a futures market in which paper claims to gold are traded merely to speculate on price means that the Fed and its bank agents can suppress the price of gold even though demand for physical gold is rising. If there were strict requirements that gold shorts could not be naked and had to be backed by the seller’s possession of physical gold represented by the futures contract, the Federal Reserve and its agents would be unable to control the price of gold, and the gold price would be much higher than it is now.

Gold price manipulation is used when demand for delivery of gold bullion begins to put upward pressure on the price of gold and hedge funds speculate on the rising price of gold by purchasing large quantities of Comex futures contracts (paper gold). This speculation accelerates the upward move in the price of gold. The TF Metals Report provides a good description of this illegal manipulation of the gold market:

“Over a period of 10 weeks to begin the year, the Comex bullion banks were able to limit the rally to only 15% by supplying the “market” with 95,000 brand new naked short contracts. That’s 9.5MM ounces of make-believe paper gold or about 295 metric tonnes.

“Over a period of just 5 weeks in June and July, the Comex bullion banks were able to limit the rally to only 7% by supplying the “market” with 79,000 brand new naked short contracts. That’s 7.9MM ounces of make-believe paper gold or about 246 metric tonnes.” http://www.tfmetalsreport.com/comment/429940

In previous columns, we have documented the heavy short-selling into light trading periods.
See for example: http://www.paulcraigroberts.org/2014/07/16/insider-trading-financial-terrorism-comex/.

The bullion banks do not have nearly enough gold in their possession to make deliveries to the buyers if the buyers decide to stand for delivery per the terms of the paper gold contract. The reason this scheme works is because the majority of the buyers of the contracts are speculators, not gold purchasers, and never demand delivery of the gold. Instead, they settle the contracts in cash. They are looking for short-term trading profits, not for a gold hedge against currency inflation. If a majority of the longs (the purchasers of the contracts) required delivery of the gold, the regulators would not tolerate the extent to which gold is shorted with uncovered contracts.

In our opinion, the manipulation is illegal, because it is insider trading. The bullion banks that short the gold market are clearing members of the Comex/NYMEX/CME. In that role, the bullion banks have access to the computer system used to clear and settle trades, which means that the bullion banks have access to all the trading positions, including those of the hedge funds. When the hedge funds are in the deepest, the bullion banks dump naked shorts on the Comex, driving down the futures price, which triggers selling from stop-loss orders and margin calls that drive the price down further. Then the bullion banks buy the contracts at a lower price than they sold and pocket the difference, simultaneously serving the Fed by protecting the dollar from the Fed’s loose monetary policy by lowering the gold price and preventing the concern that a rising gold price would bring to the dollar.

Since mid-July, nearly every night in the US the price of gold remains steady or drifts higher. This is when the eastern hemisphere markets are open and the market players are busy buying physical gold for which delivery is mandatory. But as regular as clockwork, following the close of the Asian markets, the London and New York paper gold markets open, and the price of gold is immediately taken lower as paper gold contracts flood into the market setting a negative tone for the day’s trading.

Gold serves as a warning for aware people that financial and economic trouble are brewing. For instance, from the period of time just before the tech bubble collapsed (January 2000) until just before the collapse of Bear Stearns triggered the Great Financial Crisis (March 2008), gold rose in value from $250 to $1020 per ounce, or just over 400%. Moreover, in the period since the Great Financial Collapse, gold has risen 61% despite claims that the financial system was repaired. It was up as much as 225% (September 2011) before the Fed began the systematic take-down and containment of gold in order to protect the dollar from the massive creation of new dollars required by Quantitative Easing.

The US economy and financial system are in worse condition than the Fed and Treasury claim and the financial media reports. Both public and private debt burdens are high. Corporations are borrowing from banks in order to buy back their own stocks. This leaves corporations with new debt but without income streams from new investments with which to service the debt. Retail stores are in trouble, including dollar store chains. The housing market is showing signs of renewed downturn. The September 16 release of the 2013 Income and Poverty report shows that real median household income has declined to the level in 1994 two decades ago and is actually lower than in the late 1960s and early 1970s. The combination of high debt and decline in real income means that there is no engine to drive the economy.

In the 21st century, US debt and money creation has not been matched by an increase in real goods and services. The implication of this mismatch is inflation. Without the price-rigging by the bullion banks, gold and silver would be reflecting these inflation expectations.

The dollar is also in trouble because its role as world reserve currency is threatened by the abuse of this role in order to gain financial hegemony over others and to punish with sanctions those countries that do not comply with the goals of US foreign policy. The Wolfowitz Doctrine, which is the basis of US foreign policy, says that it is imperative for Washington to prevent the rise of other countries, such as Russia and China, that can limit the exercise of US power.

Sanctions and the threat of sanctions encourage other countries to leave the dollar payments system and to abandon the petrodollar. The BRICS (Brazil, Russia, India, China, South Africa) have formed to do precisely that. Russia and China have arranged a massive long-term energy deal that avoids use of the US dollar. Both countries are settling their trade accounts with each other in their own currencies, and this practice is spreading. China is considering a gold-backed yuan, which would make the Chinese currency highly desirable as a reserve asset. It is possible that the Fed’s attack on gold is also aimed at making Chinese and Russian gold accumulation less supportive of their currencies. A currency linked to a falling gold price is not the same as a currency linked to a rising gold price.

It is unclear whether the new Chinese gold exchange in Shanghai will displace the London and New York futures markets. Naked short-selling is not permitted in the Chinese gold exchange. The world could end up with two gold futures markets: one based on assessments of reality, and the other based on gambling and price-rigging.

The future will also determine whether the role of reserve currency has been overtaken by time. The US dollar took that role in the aftermath of World War II, a time when the US had the only industrial economy that had not been destroyed in the war. A stable means of settling international accounts was needed. Today there are many economies that have tradable currencies, and accounts can be settled between countries in their own currencies. There is no longer a need for a single reserve currency. As this realization spreads, pressure on the dollar’s value will intensify.

For a period the Federal Reserve can support the dollar’s exchange value by pressuring Japan and the European Central Bank to print their currencies with which to support the dollar with purchases in the foreign exchange market. Other countries, such as Switzerland, will print their own currencies so as not to endanger their exports by a rise in the dollar price of their exports. But eventually the large US trade deficits produced by offshoring the production of goods and services sold into US markets and the collapse of the middle class and tax base caused by jobs offshoring will destroy the value of the US dollar.

When that day arrives, US living standards, already endangered, will plummet. American power will have been destroyed by corporate greed and the Fed’s policy of sacrificing the US economy in order to save four or five mega-banks, whose former executives control the Fed, the US Treasury, and the federal financial regulatory agencies.

Dave Kranzler also contributed to this article.