Currency Warfare: What are the Real Targets of the E.U. Oil Embargo against Iran?

Against whom is the European Union’s so-called “oil embargo on Iran” really aimed at? 

by Mahdi Darius Nazemroaya

This is an important geo-strategic question. Aside from rejecting the new E.U. measures against Iran as counter-productive, Tehran has warned the member states of the European Union that the E.U. oil embargo against Iran will hurt them and their economies far more than Iran.

Tehran has thus warned the leaders of the E.U. countries that the new sanctions are foolish and against their national and bloc interests. But is this correct? At the end of the day, who will benefit from the chain of events that are being set into motion? 

Oil Embargos against Iran are Not New

In 1951, the Iranian government of Prime Minister Mohammed Mossadegh with the support of the Iranian Parliament nationalized the Iranian oil industry. As a result of Dr. Mossadegh’s nationalization program, the British militarily blockaded the territorial waters and national ports of Iran with the British Royal Navy and prevented Iran from exporting its oil. They also militarily prevented Iranian trade. London also froze Iranian assets and started a campaign to isolate Iran with sanctions. The government of Dr. Mossadegh was democratic and could not be vilified easily domestically by the British, so they began to portray Mossadegh as a pawn of the Soviet Union who would turn Iran into a communist country together with his Marxist political allies.

The illegal British naval embargo was followed by regime change in Tehran via a 1953 Anglo-American engineered coup d’état. The 1953 coup transformed the Shah of Iran from a constitutional figure head to an absolute monarch and dictator, like the monarchs of Jordan, Saudi Arabia, Bahrain, and Qatar. Iran was transformed overnight from a democratic constitutional monarchy into a dictatorship.

Today, a militarily imposed oil embargo against Iran is not possible like it was in the early 1950s. Instead London and Washington use the language of righteousness and hide behind false pretexts about Iranian nuclear weapons. Like in the 1950s, the oil embargo against Iran is tied to regime change. Yet, there are also broader objectives that go beyond the boundaries of Iran tied to Washington’s project to impose an oil embargo against the Iranians.

The European Union and Iranian Oil Sales

Iran’s largest customer for oil is the People’s Republic of China. According to the Paris-based International Energy Agency (IEA), which was created after the 1973 Arab Oil Embargo as the strategic wing of the Western Bloc’s Organization of Economic Co-operation and Development (OECD), Iran exports 543,000 oil barrels per day to China. Iran’s other large customers are India, Turkey, Japan, and South Korea. India imports 341,000 barrels per day from Iran, Turkey imports 370,000 barrels per day from Iran, Japan imports 251,000 barrels per day from Iran, and South Korea imports 239,000 barrels per day from Iran.

According to the Iranian Ministry of Petroleum the European Union only accounts for 18% of Iranian oil exports, which means less than one-fifth of Iranian oil sales. Only “collectively” is the European Union the second largest customer of Iran. All the E.U. countries together import 510,000 barrels per day from Iran. This collective rank that all Iranian oil importing E.U. countries have together is being highlighted by those that want to emphasize the effectiveness of the E.U. oil embargo against Iran.

Iran can replace oil sales to the European Union via new buyers or by increasing sales to existing customers like China and India. An Iranian agreement to work with China for stockpiling Chinese strategic reserves would fill a large portion of the vacuum left by the European Union. Thus, the oil embargo against Iran will have minimal direct effects on Iran. Rather, it is most likely that any of the effects that the Iranian economy feels will be tied to the global ramifications of the oil embargo against Iran.

Iran and Global Currency Warfare

According to the International Monetary Fund (IMF), both the U.S. dollar and the euro together constitute 84.4% of the world’s currency exchange reserves (end of 2011 date). The U.S. dollar alone, was the largest share of the world’s currency exchange reserves in 2011, namely 61.7%.

Energy sales are an important part of this equation, because the American dollar is tied to the oil trade.

Thus, oil trade, through what is called the petro-dollar, is helping sustain the American dollar’s international standing. Countries around the world have been virtually forced to use the U.S. dollar to maintain their energy and trade needs and transactions. 

To highlight the importance of the international oil trade to the U.S., all the Gulf Cooperation Council (GCC) members – Saudi Arabia, Bahrain, Qatar, Kuwait, Oman, and the United Arab Emirates – have their national currencies pegged to the U.S. dollar and thereby sustain the petro-dollar by trading oil in American dollars. Moreover, the currencies of Lebanon, Jordan, Eritrea, Djibouti, Belize, and several tropical islands in the Caribbean Sea are also all pegged to the U.S. dollar. Aside from the overseas territories of the United States, El Salvador, Ecuador, and Panama also all officially use the U.S. dollar as their national currencies.

The euro on the other hand is both a rival of the U.S. dollar as well as an allied currency. Both currencies work in tandem against other currencies in many cases and seem to be controlled by increasingly merging centres of financial power.

Aside from the seventeen European Union members using the euro as their currency, the Principality of Monaco, San Marino, and Vatican City have issuing rights and both Montenegro and the Albanian-majority Serbian province of Kosovo also use the euro as their national currencies. Outside of the euro area (Eurozone), the currencies of Bosnia, Bulgaria, Denmark, Latvia, and Lithuania in Europe; the currencies of Cape Verde, Comoros, Morocco, the Democratic Republic of São Tomé and Príncipe, and the two CFA zones in Africa; and the currencies of several Western European overseas dependencies, such as Greenland, are all pegged to the euro. 

Several monetary zones are directly tied to the euro. In Oceania, the Comptoirs Français du Pacifique (CFP) franc, simply called the Pacific franc (franc pacifique), used in a monetary union of the French dependencies of French Polynesia, New Caledonia, and the Territory of the Wallis and Futuna Islands is pegged to the euro. As mentioned earlier, both the CFA zones in Africa are also pegged to the euro. Thus, both the Financial Community of Africa (Communauté financière d’Afrique, CFA) franc or West African CFA franc in West Africa – used by Benin, Burkina Faso, Côte d’Ivoire, Guinea-Bissau, Mali, Niger, Senegal and Togo – and the Financial Cooperation in Central Africa (Coopération financière en Afrique central, CFA) franc or Central African CFA franc – used by Cameroon, the Central African Republic, Chad, the Republic of the Congo (Congo-Brazzaville), Equatorial Guinea, and Gabon – have their fates tied to the monetary value of the euro.

Iran is not looking for military confrontation in the rising hostilities with the United States and European Union. Despite the warped narrative being presented, Tehran has said that it will only close the Strait of Hormuz as a last resort. The Iranians have also said that they will not let U.S. or hostile ships go through Iranian territorial water, which is their legal right, and that hostile ships could navigate through Oman’s territorial waters in the Strait of Hormuz instead. As a side note, among other things, the problem for the U.S. and Iran’s other adversaries is that the waters on the Omani side of the Strait of Hormuz are too shallow.

Instead of military confrontation, Tehran is fighting back economically in several ways. The first step, which started before 2012, was Iranian international oil sales and trade were diversified in regards to their currency transactions. This is part of a calculated move by Iran to move away from using the American dollar just like Saddam Hussein of Iraq did in 2000 as a means to fight back against the sanctions imposed on Iraq. In this context, Iran has created an international energy exchange or course competing with the New York Mercantile Exchange (NYMEX) and London’s International Petroleum Exchange (IPE), which both operate using the American dollar for transactions. This energy exchange, called the Kish Oil Bourse, was officially opened in August 2011 on Kish Island in the Persian Gulf. Its first transactions were made using the euro and the Emirati dirhem.

In context of euro and U.S. dollar rivalries, the Iranians originally wanted to turn to the euro and a petro-euro system with the hope that the competition between the American dollar and the euro would make the European Union an ally of Iran and de-link the E.U. from the United States. As political tensions have mounted with the E.U., the petro-euro has become less attractive for Tehran. Iran has realized that the European Union is submissive to U.S. interests under corrupt leaders. Thus, to a lesser extent, Iran has also tried to move away from the euro.

Moreover, Iran has broadened its move away from the use of the U.S. dollar and the euro as policy in bilateral trade relations. Iran and India are talking about gold payments for Iranian oil. Iranian and Russian trade is conducted in Iranian rials and Russian roubles, while Iranian trade with China and other Asian countries is conducted using the Chinese renminbi, Iranian rial, Japanese yen, and other non-dollar and non-euro currencies.

While the euro could have been a big winner from a petro-euro system, the actions of the European Union have worked against this. The E.U. oil embargo against Iran is merely hammering the nails in the coffin. Globally, the emerging matrix of Eurasian and international trade and transaction outside of the umbrellas of the American dollar and the euro is weakening both currencies. The Iranian Parliament is now passing legislation to cut oil exports to the members of the European Union that will be part of the sanctions regime until they rescind the Iranian oil sanctions. The Iranian move will be a blow to the euro, especially since the European Union will not have time to prepare for the Iranian energy cuts.

There are several possibilities that could emerge. One of them is that this could be part of what Washington wants and it could be playing into its hands against the European Union. Another is that the U.S. and specific E.U. members are working together against strategic economic rivals and other markets.

Who Benefits? The Economic Targets are beyond Iran...

The end of Iranian oil exports to the European Union and the decline of the euro will directly benefit the United States and the U.S. dollar. What the European Union is doing is merely weakening itself and giving the U.S. dollar the upper hand in its currency rivalry against the euro. Moreover, should the euro collapse, the American dollar will quickly fill much of the void. Despite the fact that Russia will benefit from higher oil prices and greater leverage over E.U. energy security as a supplier, the Kremlin has also warned the European Union that it is working against its own interests and subordinating itself to Washington.

Many important questions are at play about the economic consequences of increased oil prices.

Will the European Union be able to weather the economic storm or a currency collapse?

What the E.U. oil embargo against Iran will do is destabilize the euro and snowball globally hurting non-E.U. economies. In this regard, Tehran has warned that the U.S. aims to hurt rival economies through the adoption of E.U. oil sanctions against Iran. Within this line of thinking, this is the reason why the U.S. is trying to force China, India, South Korea, and Japan in Asia to reduce or cut Iranian oil imports.

Within the European Union, it will be the most fragile and struggling economies, such as Greece and Spain, which will be hurt by the E.U. oil embargo against Iran.

The oil refineries in the European Union countries that import Iranian oil will have to find new sellers as sources and will also be forced to adjust their operations. Piero De Simone, one of the leaders of Italy’s Unione Petrolifera, has warned that approximately seventy oil refineries in the E.U. could be shutdown and that Asian countries could start selling refined Iranian oil to the European Union at the expense of the local refineries and the local petroleum industries.

Despite the political claims supporting an oil embargo against Iran, neither will Saudi Arabia be able to fill the void of Iranian oil exports to the European Union or other markets. A shortfall in oil supplies and the production changes could have spiralling effects in the European Union and on the costs of industrial production, transportation, and market prices. The prediction is that the E.U. will effectively be deepening the crisis in the euro area or Eurozone. 

Moreover, the rise in everyday prices, ranging from food to transportation, will not be limited to the European Union, but will have global ramifications. As prices rise on a global scale, the economies in Latin American, Caribbean, African, Middle Eastern, Asian, and Pacific countries will face new hardship, which the financial sector in the U.S. and several of its partners – including members of the European Union – could capitalize on by taking over certain sectors and markets. The IMF and World Bank, as the Bretton Woods proxies of Wall Street, could get into the mix and impose more privatization programs benefiting the financial sectors of the U.S. and its main partners. Furthermore, how Iran decides to sell the 18% of oil it will stop selling to E.U. members will also be a mediating factor.

The Ghosts of the 1973 Arab Oil Embargo: Libya and the International Energy Agency

While countries in Africa or the Pacific have no strategic oil reserves and will be at the mercy of global price increases, the U.S. and the European Union have worked and tried to strategically insulate themselves from such scenarios. This is where the Paris-based International Energy Agency (IEA) comes into the picture. Libyan oil reserves are also a factor to the hostilities and petro-politics involving Iran.

The IEA was created after the 1973 Arab Oil Embargo. As mentioned earlier it is a “strategic wing of the Western Bloc’s Organization of Economic Co-operation and Development (OECD).” The OECD is a club of countries that includes the U.S., Britain, France, Germany, Spain, Italy, Belgium, Denmark, Japan, Canada, South Korea, Turkey, Australia, Israel, and New Zealand. It is essentially based on the contours of the Western Bloc, which is comprised of America’s allies and satellites. Aside from Israel, Chile, Estonia, Iceland, Slovenia, and Mexico all the members of the OECD are members of the IEA.

Since its creation in 1974, one of the responsibilities of the IEA has been to stock strategic oil reserves for the OECD countries. During the NATO war against Libya the IEA actually opened its strategic oil reserves to compensate for the void left by a lack of Libyan oil exports. The only other two times this happened were in 1991, when Washington led a military coalition in its first war against Iraq, and in 2005, when Hurricane Katrina devastated the United States. 

The war in Libya had many purposes:

(1) preventing African unity;

(2) driving China out of Africa;

(3) strategically controlling important energy reserves; and

(4) guarding oil supplies in the scenario of any American-led conflicts against Syria and Iran.

What the NATO war in Libya has done is secure oil output from Libya, because there was a chance that the Libyan Arab Jamahiriya under Colonial Muammar Qaddafi could have suspended oil sales to the European Union in support of Syria or Iran in possible conflicts with the U.S., NATO, and Israel. It is also interesting to note that one of the Libyan figures that helped enable the war against Libya in the United Nations was Sliman Bouchuiguir, the head of the Libyan League for Human Rights (LLHR) and the current Libyan ambassador to Switzerland, who worked on formulating a strategy against allowing oil from being used as a strategic weapon to insure that the 1973 oil crisis never repeat itself for the U.S. and its allies.

Aside from Iran, the Syrians have also been a source of oil imports for the European Union. Like Iran, the E.U. has also cut their bloc off from Syrian oil via a sanctions regime engineered by the U.S. government. With Iranian and Syrian oil cut off from the E.U., the strategic value of Libyan oil rises. In this regard, the reports about the deployment of thousands of U.S. troops to Libyan oil fields can also be analyzed as being coordinated or tied to the growing U.S. and E.U. hostilities with Syria and Iran. Rerouting Libyan oil shipments to the E.U. that were intended for China can also be part of such a strategy.

The Psychological War

In reality, the sanctions regime engineered by the U.S. government against Iran has gone as far as it can go. All the speeches about Iranian isolation are bravado and far from the reality of current international relations and trade. Brazil, Russia, China, India, Iraq, Kazakhstan, Venezuela, and various countries in the post-Soviet space, Asia, Africa, and Latin America have all refused to join the sanctions against the Iranian economy.

The E.U. oil embargo, coupled with the broader sanctions against Iran, has broad psychological implications. Iran and its ally Syria both face a multi-dimensional war that has economic, covert, diplomatic, media, and psychological scopes.

The psychological war, which involves the mainstream media as a tool of foreign policy and war, constitutes an efficient propaganda instrument for the U.S. due to its lower costs. Yet, the psychological war can be fought on both sides.

Much of the power of the U.S. is psychological and tied to fear. Like the geography of the Persian Gulf, time is on Iran’s side and working against the United States.

If Iran continues on its present course and is undeterred by sanctions, this will help break a critical psychological threshold, which around the world tends to discourage countries from confronting and opposing the United States.

Should many countries continue to refuse to bow down to the Obama Administration pertaining to the imposition of sanctions against Iran, this will also be a blow to the prestige and power of the U.S., which would also have economic and financial implications.

Moreover, at the end of the day, the E.U. oil embargo will hurt the E.U. instead of Iran. In the long-term it could also hurt the United States.

Structurally, the effects of the E.U. oil embargo will further entrench the E.U. in the orbit of Washington, but these effects will catalyze growing social opposition to Washington, which will eventually manifest in the political and economic arenas.

The truth nothing but the truth

THE LEAGUE OF ARAB STATES OBSERVER MISSION TO SYRIA MISSION REPORT

The Mission report confirms what I have been arguing all along: that the situation in SYRIA is not the way it is portrayed by mainstream media and certain WESTERN governments.

Could the real reason for the withdrawal of the LEAGUE OF ARAB STATES OBSERVER MISSION TO SYRIA was not because of violence but the fact that the content of the report did not fit into the agenda of certain WESTERN POWERS who envision a different outcome for SYRIA?

It seems that mainstream media, under the influence of the world power brokers deliberately “downplay” the content of the report because the results of the findings would in most likelihood change public opinion, something the power elite does not want.

Here are some extracts to that effect:

In Homs and Dera‘a, the Mission observed armed groups committing acts of violence against

Government forces, resulting in death and injury among their ranks. In certain situations, Government forces responded to attacks against their personnel with force. The observers noted that some of the armed groups were using flares and armour-piercing projectiles

In Homs, Idlib and Hama, the Observer Mission witnessed acts of violence being committed against Government forces and civilians that resulted in several deaths and injuries. Examples of those acts include the bombing of a civilian bus, killing eight persons and injuring others, including women and children, and the bombing of a train carrying diesel oil. In another incident in Homs, a police bus was blown up, killing two police officers. A fuel pipeline and some small bridges were also bombed.

The Mission noted that many parties falsely reported that explosions or violence had occurred in several locations. When the observers went to those locations, they found that those reports were unfounded.
The Mission also noted that, according to its teams in the field, the media exaggerated the nature of the incidents and the number of persons killed in incidents and protests in certain towns.

According to their latest reports and their briefings to the Head of the Mission on 17 January 2012 in preparation for this report, group team leaders witnessed peaceful demonstrations by both Government supporters and the opposition in several places. None of those demonstrations were disrupted, except for some minor clashes with the Mission and between loyalists and opposition. These have not resulted in fatalities since the last presentation before the Arab Ministerial Committee on the Situation in Syria at its meeting of 8 January 2012.

Since it began its work, the Mission has been the target of a vicious media campaign. Some media outlets have published unfounded statements, which they attributed to the Head of the Mission. They have also grossly exaggerated events, thereby distorting the truth.
Such contrived reports have helped to increase tensions among the Syrian people and undermined the observers’ work. Some media organizations were exploited in order to defame the Mission and its Head and cause the Mission to fail.

The Mission received reports from parties outside Syria indicating that the number of detainees was16,237. It also received information from the opposition inside the country that the number of detainees was 12,005. In validating those figures, the teams in the field discovered that there were discrepancies between the lists that information was missing and inaccurate, and that names were repeated. The Mission is communicating with the concerned Government agencies to confirm those numbers

The Mission noted that the Government strived to help it succeed in its task and remove any barriers that might stand in its way. The Government also facilitated meetings with all parties. No restrictions were placed on the movement of the Mission and its ability to interview Syrian citizens, both those who opposed the Government and those loyal to it.

Arab and foreign audiences of certain media organizations have questioned the Mission’s credibility because those organizations use the media to distort the facts. It will be difficult to overcome this problem unless there is political and media support for the Mission and its mandate. It is only natural that some negative incidents should occur as it conducts its activities because such incidents occur as a matter of course in similar missions.

Last but not least the statement below reiterates what I have claimed regarding communication restrictions in Syria. See: http://geopoliticsrst.blogspot.com/2012/02/syrian-agenda.html

The Mission communicates with the various groups by mobile phones and facsimile machines

connected to the local Syrian telephone network. Occasional cuts in service prevent the Mission from communicating with the groups. Internet service is unavailable in some regions, and in other areas it is intermittent, including in the capital.

The full report can be viewed under:

http://www.columbia.edu/~hauben/Report_of_Arab_League_Observer_Mission.pdf

To reiterate my views, here is an interesting article on subject matter from a German Middle East Expert: Professor Günther Meyer :

Syrien: Orientexperte erhebt schwere Vorwürfe gegen den Westen 

 

Als vor wenigen Tagen die Beobachtermission der Arabischen Liga in Syrien gestoppt wurde, war die Sachlage in den Medien klar: Assad hat die Gewalt nicht beendet, das Morden Unschuldiger geht weiter. Unterdessen liefert die in London ansässige Syrische Beobachtungsstelle für Menschenrechte Informationen über die genaue Situation und die Zahl der Toten. Überprüfbar sind die Informationen natürlich nicht, dennoch werden sie unkritisch von allen Medien zitiert.

Nun hat der Orientexperte Prof. Dr Günther Meyer  von der Universität Mainz in einem Interview des Radiosenders Bayern 2 eine ganz andere Wahrheit verbreitet. Die Frage, ob die Beobachtermission gescheitert sei, verneint er klar. So sei die Zahl der Toten deutlich gesunken, sehr viele Gefangene seien freigelassen worden und überhaupt würden die westlichen Medien das völlig falsche Bild vermitteln, dass es sich einzig um Gewalt des Regimes gegen friedliche Demonstranten handeln würde. Meyer schildert eine völlig andere Sachlage:

Es ist ganz offensichtlich, dass wir es mit einer bewaffneten terroristischen Organisation zu tun haben, die für einen sehr großen Teil der Toten im Lande ebenfalls verantwortlich ist. Das ist durchaus auch in dieser Situation herausgekommen. Das heißt, wir haben eine klare Anti-Sichtweise gegen das Regime, eine Sichtweise, die massiv gestärkt wird durch die Interessen insbesondere der USA, aber auch durch die westlichen Verbündeten England, Frankreich, nicht zuletzt auch Deutschland. Es geht in erster Linie darum, die Achse Iran, Syrien, Hisbollah auszuschalten.

Der Radiomoderator fragt irritiert, es klinge „fast wie eine westliche Verschwörung gegen Syrien“. Meyer erhebt daraufhin schwere Vorwürfe gegen den Westen, der in Syrien einen Bürgerkrieg entfachen würde:

Wir haben es mit einem massiven Eingreifen von außen zu tun. Nicht zuletzt Berichte darüber, dass etwa 600 Mudschaheddin aus Libyen eingeflogen sind, initiiert vom CIA. CIA-Beamte, Geheimdienstbeamte, Frankreich und Großbritannien genauso, bilden Oppositionelle aus, rüsten sie aus in der Nähe von Iskenderia, nahe der syrischen Grenze, rüsten sie aus mit den Waffen, die aus den Arsenalen von Gaddafi herübergebracht werden, um hier einen Bürgerkrieg zu initiieren, um das Land insgesamt zu schwächen.

Auch betont Meyer, dass Assad nach wie vor die Mehrheit des syrischen Volkes hinter sich hat, wie eine Untersuchung der Katar-Stiftung ergeben habe. Dieses kurze Radiointerview präsentiert die Situation in Syrien völlig anders, als wir es seit Monaten in den Medien zu hören bekommen. Wie schon beim Libyeneinsatz handelt es sich auch hier aller Wahrscheinlichkeit nach um geostrategische Maßnahmen des Westens, die durch massive Propaganda verheimlicht werden. 

Sollten Meyers Vorwürfe stimmen und tatsächlich durch westliche Geheimdienstaktivitäten ein Bürgerkrieg ausgelöst werden, dann wäre Assad kaum vorzuwerfen, dass er diesen von außen initiierten Umsturzversuch mit Militärgewalt niederschlägt. Die Leidtragenden sind die Zivilisten.

Doomsday Scenario:

What Happens When Banks Control the Economy?
By Michael Hudson

Banks weren't meant to be in control of our economy and our governments. How did it get like this and how can we restore sanity to our banking system?


In medieval times, wealthy bankers lent to kings and princes as their major customers. But now it is the banks that are needy, relying on governments for funding – capped by the post-2008 bailouts to save them from going bankrupt from their bad private-sector loans and gambles.
Yet the banks now browbeat governments – not by having ready cash but by threatening to go bust and drag the economy down with them if they are not given control of public tax policy, spending and planning. The process has gone furthest in the United States. Joseph Stiglitz characterizes the Obama administration’s vast transfer of money and pubic debt to the banks as a “privatizing of gains and the socializing of losses. It is a ‘partnership’ in which one partner robs the other.” Professor Bill Black describes banks as becoming criminogenic and innovating “control fraud.” High finance has corrupted regulatory agencies, falsified account-keeping by “Mark of model” trickery, and financed the campaigns of its supporters to disable public oversight. The effect is to leave banks in control of how the economy’s allocates its credit and resources.
If there is any silver lining to today’s debt crisis, it is that the present situation and trends cannot continue. So this is not only an opportunity to restructure banking; we have little choice. The urgent issue is who will control the economy: governments, or the financial sector and monopolies with which it has made an alliance.
Fortunately, it is not necessary to re-invent the wheel. Already a century ago the outlines of a productive industrial banking system were well understood. But recent bank lobbying has been remarkably successful in distracting attention away from classical analyses of how to shape the financial and tax system to best promote economic growth – by public checks on bank privileges.

How banks broke the social compact, promoting their own special interests
People used to know what banks did. Bankers took deposits and lent them out, paying short-term depositors less than they charged for risky or less liquid loans. The risk was borne by bankers, not depositors or the government. But today, bank loans are made increasingly to speculators in recklessly large amounts for quick in-and-out trading. Financial crashes have become deeper and affect a wider swath of the population as debt pyramiding has soared and credit quality plunged into the toxic category of “liars’ loans.”
The first step toward today’s mutual interdependence between high finance and government was for central banks to act as lenders of last resort to mitigate the liquidity crises that periodically resulted from the banks’ privilege of credit creation. In due course governments also provided public deposit insurance, recognizing the need to mobilize and recycle savings into capital investment as the industrial revolution gained momentum. In exchange for this support, they regulated banks as public utilities.

Over time, banks have sought to disable this regulatory oversight, even to the point of decriminalizing fraud. Sponsoring an ideological attack on government, they accuse public bureaucracies of “distorting” free markets (by which they mean markets free for predatory behavior). The financial sector is now making its move to concentrate planning in its own hands.

The problem is that the financial time frame is notoriously short-term and often self-destructive. And inasmuch as the banking system’s product is debt, its business plan tends to be extractive and predatory, leaving economies high-cost. This is why checks and balances are needed, along with regulatory oversight to ensure fair dealing. Dismantling public attempts to steer banking to promote economic growth (rather than merely to make bankers rich) has permitted banks to turn into something nobody anticipated. Their major customers are other financial institutions, insurance and real estate – the FIRE sector, not industrial firms. Debt leveraging by real estate and monopolies, arbitrage speculators, hedge funds and corporate raiders inflates asset prices on credit. The effect of creating “balance sheet wealth” in this way is to load down the “real” production-and-consumption economy with debt and related rentier charges, adding more to the cost of living and doing business than rising productivity reduces production costs.

Since 2008, public bailouts have taken bad loans off the banks’ balance sheet at enormous taxpayer expense – some $13 trillion in the United States, and proportionally higher in Ireland and other economies now being subjected to austerity to pay for “free market” deregulation. Bankers are holding economies hostage, threatening a monetary crash if they do not get more bailouts and nearly free central bank credit, and more mortgage and other loan guarantees for their casino-like game. The resulting “too big to fail” policy means making governments too weak to fight back.
The process that began with central bank support thus has turned into broad government guarantees against bank insolvency. The largest banks have made so many reckless loans that they have become wards of the state. Yet they have become powerful enough to capture lawmakers to act as their facilitators. The popular media and even academic economic theorists have been mobilized to pose as experts in an attempt to convince the public that financial policy is best left to technocrats – of the banks’ own choosing, as if there is no alternative policy but for governments to subsidize a financial free lunch and crown bankers as society’s rulers.

The Bubble Economy and its austerity aftermath could not have occurred without the banking sector’s success in weakening public regulation, capturing national treasuries and even disabling law enforcement. Must governments surrender to this power grab? If not, who should bear the losses run up by a financial system that has become dysfunctional? If taxpayers have to pay, their economy will become high-cost and uncompetitive – and a financial oligarchy will rule.

The present debt quandary

The endgame in times past was to write down bad debts. That meant losses for banks and investors. But today’s debt overhead is being kept in place – shifting bad loans off bank balance sheets to become public debts owed by taxpayers to save banks and their creditors from loss. Governments have given banks newly minted bonds or central bank credit in exchange for junk mortgages and bad gambles – without re-structuring the financial system to create a more stable, less debt-ridden economy. The pretense is that these bailouts will enable banks to lend enough to revive the economy by enough to pay its debts.
Seeing the handwriting on the wall, bankers are taking as much bailout money as they can get, and running, using the money to buy as much tangible property and ownership rights as they can while their lobbyists keep the public subsidy faucet running.

The pretense is that debt-strapped economies can resume business-as-usual growth by borrowing their way out of debt. But a quarter of U.S. real estate already is in negative equity – worth less than the mortgages attached to it – and the property market is still shrinking, so banks are not lending except with public Federal Housing Administration guarantees to cover whatever losses they may suffer. In any event, it already is mathematically impossible to carry today’s debt overhead without imposing austerity, debt deflation and depression.
This is not how banking was supposed to evolve. If governments are to underwrite bank loans, they may as well be doing the lending in the first place – and receiving the gains. Indeed, since 2008 the over-indebted economy’s crash led governments to become the major shareholders of the largest and most troubled banks – Citibank in the United States, Anglo-Irish Bank in Ireland, and Britain’s Royal Bank of Scotland. Yet rather than taking this opportunity to run these banks as public utilities and lower their charges for credit-card services – or most important of all, to stop their lending to speculators and gamblers – governments left these banks operating as part of the “casino capitalism” that has become their business plan.
There is no natural reason for matters to be like this. Relations between banks and government used to be the reverse. In 1307, France’s Philip IV (“The Fair”) set the tone by seizing the Knights Templars’ wealth, arresting them and putting many to death – not on financial charges, but on the accusation of devil-worshipping and satanic sexual practices. In 1344 the Peruzzi bank went broke, followed by the Bardi by making unsecured loans to Edward III of England and other monarchs who died or defaulted. Many subsequent banks had to suffer losses on loans gone bad to real estate or financial speculators.

By contrast, now the U.S., British, Irish and Latvian governments have taken bad bank loans onto their national balance sheets, imposing a heavy burden on taxpayers – while letting bankers cash out with immense wealth. These “cash for trash” swaps have turned the mortgage crisis and general debt collapse into a fiscal problem. Shifting the new public bailout debts onto the non-financial economy threaten to increase the cost of living and doing business. This is the result of the economy’s failure to distinguish productive from unproductive loans and debts. It helps explain why nations now are facing financial austerity and debt peonage instead of the leisure economy promised so eagerly by technological optimists a century ago.
So we are brought back to the question of what the proper role of banks should be. This issue was discussed exhaustively prior to World War I. It is even more urgent today.

How classical economists hoped to modernize banks as agents of industrial capitalism
Britain was the home of the Industrial Revolution, but there was little long-term lending to finance investment in factories or other means of production. British and Dutch merchant banking was to extend short-term credit on the basis of collateral such as real property or sales contracts for merchandise shipped (“receivables”). Buoyed by this trade financing, merchant bankers were successful enough to maintain long-established short-term funding practices. This meant that James Watt and other innovators were obliged to raise investment money from their families and friends rather than from banks.

It was the French and Germans who moved banking into the industrial stage to help their nations catch up. In France, the Saint Simonians described the need to create an industrial credit system aimed at funding means of production. In effect, the Saint-Simonians proposed to restructure banks along lines akin to a mutual fund. A start was made with the Crédit Mobilier, founded by the Péreire Brothers in 1852. Their aim was to shift the banking and financial system away from debt financing at interest toward equity lending, taking returns in the form of dividends that would rise or decline in keeping with the debtor’s business fortunes. By giving businesses leeway to cut back dividends when sales and profits decline, profit-sharing agreements avoid the problem that interest must be paid willy-nilly. If an interest payment is missed, the debtor may be forced into bankruptcy and creditors can foreclose. It was to avoid this favoritism for creditors regardless of the debtor’s ability to pay that prompted Mohammed to ban interest under Islamic law.

Attracting reformers ranging from socialists to investment bankers, the Saint-Simonians won government backing for their policies under France’s Third Empire. Their approach inspired Marx as well as industrialists in Germany and protectionists in the United States and England. The common denominator of this broad spectrum was recognition that an efficient banking system was needed to finance the industry on which a strong national state and military power depended.




Germany develops an industrial banking system

It was above all in Germany that long-term financing found its expression in the Reichsbank and other large industrial banks as part of the “holy trinity” of banking, industry and government planning under Bismarck’s “state socialism.” German banks made a virtue of necessity. British banks “derived the greater part of their funds from the depositors,” and steered these savings and business deposits into mercantile trade financing. This forced domestic firms to finance most new investment out of their own earnings. By contrast, Germany’s “lack of capital … forced industry to turn to the banks for assistance,” noted the financial historian George Edwards. “A considerable proportion of the funds of the German banks came not from the deposits of customers but from the capital subscribed by the proprietors themselves. As a result, German banks “stressed investment operations and were formed not so much for receiving deposits and granting loans but rather for supplying the investment requirements of industry.”

When the Great War broke out in 1914, Germany’s rapid victories were widely viewed as reflecting the superior efficiency of its financial system. To some observers the war appeared as a struggle between rival forms of financial organization. At issue was not only who would rule Europe, but whether the continent would have laissez faire or a more state-socialist economy.

In 1915, shortly after fighting broke out, the Christian Socialist priest-politician Friedrich Naumann published 'Mitteleuropa,' describing how Germany recognized more than any other nation that industrial technology needed long term financing and government support. His book inspired Prof. H. S. Foxwell in England to draw on his arguments in two remarkable essays published in the Economic Journal in September and December 1917: “The Nature of the Industrial Struggle,” and “The Financing of Industry and Trade.” He endorsed Naumann’s contention that “the old individualistic capitalism, of what he calls the English type, is giving way to the new, more impersonal, group form; to the disciplined scientific capitalism he claims as German.”

This was necessarily a group undertaking, with the emerging tripartite integration of industry, banking and government, with finance being “undoubtedly the main cause of the success of modern German enterprise,” Foxwell concluded (p. 514). German bank staffs included industrial experts who were forging industrial policy into a science. And in America, Thorstein Veblen’s 'The Engineers and the Price System' (1921) voiced the new industrial philosophy calling for bankers and government planners to become engineers in shaping credit markets.
Foxwell warned that British steel, automotive, capital equipment and other heavy industry was becoming obsolete largely because its bankers failed to perceive the need to promote equity investment and extend long term credit. They based their loan decisions not on the new production and revenue their lending might create, but simply on what collateral they could liquidate in the event of default: inventories of unsold goods, real estate, and money due on bills for goods sold and awaiting payment from customers. And rather than investing in the shares of the companies that their loans supposedly were building up, they paid out most of their earnings as dividends – and urged companies to do the same. This short time horizon forced business to remain liquid rather than having leeway to pursue long term strategy.

German banks, by contrast, paid out dividends (and expected such dividends from their clients) at only half the rate of British banks, choosing to retain earnings as capital reserves and invest them largely in the stocks of their industrial clients. Viewing these companies as allies rather than merely as customers from whom to make as large a profit as quickly as possible, German bank officials sat on their boards, and helped expand their business by extending loans to foreign governments on condition that their clients be named the chief suppliers in major public investments. Germany viewed the laws of history as favoring national planning to organize the financing of heavy industry, and gave its bankers a voice in formulating international diplomacy, making them “the principal instrument in the extension of her foreign trade and political power.”

A similar contrast existed in the stock market. British brokers were no more up to the task of financing manufacturing in its early stages than were its banks. The nation had taken an early lead by forming Crown corporations such as the East India Company, the Bank of England and even the South Sea Company. Despite the collapse of the South Sea Bubble in 1720, the run-up of share prices from 1715 to 1720 in these joint-stock monopolies established London’s stock market as a popular investment vehicle, for Dutch and other foreigners as well as for British investors. But the market was dominated by railroads, canals and large public utilities. Industrial firms were not major issuers of stock.

In any case, after earning their commissions on one issue, British stockbrokers were notorious for moving on to the next without much concern for what happened to the investors who had bought the earlier securities. “As soon as he has contrived to get his issue quoted at a premium and his underwriters have unloaded at a profit,” complained Foxwell, “his enterprise ceases. ‘To him,’ as the Times says, ‘a successful flotation is of more importance than a sound venture.’”
Much the same was true in the United States. Its merchant heroes were individualistic traders and political insiders often operating on the edge of the law to gain their fortunes by stock-market manipulation, railroad politicking for land giveaways, and insurance companies, mining and natural resource extraction. America’s wealth-seeking spirit found its epitome in Thomas Edison’s hit-or-miss method of invention, coupled with a high degree of litigiousness to obtain patent and monopoly rights.

In sum, neither British nor American banking or stock markets planned for the future. Their time frame was short, and they preferred rent-extracting projects to industrial innovation. Most banks favored large real estate borrowers, railroads and public utilities whose income streams easily could be forecast. Only after manufacturing companies grew fairly large did they obtain significant bank and stock market credit.
What is remarkable is that this is the tradition of banking and high finance that has emerged victorious throughout the world. The explanation is primarily the military victory of the United States, Britain and their Allies in the Great War and a generation later, in World War II.
The regression toward burdensome unproductive debts after World War I

The development of industrial credit led economists to distinguish between productive and unproductive lending. A productive loan provides borrowers with resources to trade or invest at a profit sufficient to pay back the loan and its interest charge. An unproductive loan must be paid out of income earned elsewhere. Governments must pay war loans out of tax revenues. Consumers must pay loans out of income they earn at a job – or by selling assets. These debt payments divert revenue away from being spent on consumption and investment, so the economy shrinks. This traditionally has led to crises that wipe out debts, above all those that are unproductive.
In the aftermath of World War I the economies of Europe’s victorious and defeated nations alike were dominated by postwar arms and reparations debts. These inter-governmental debts were to pay for weapons (by the Allies when the United States unexpectedly demanded that they pay for the arms they had bought before America’s entry into the war), and for the destruction of property (by the Central Powers), not new means of production. Yet to the extent that they were inter-governmental, these debts were more intractable than debts to private bankers and bondholders. Despite the fact that governments in principle are sovereign and hence can annul debts owed to private creditors, the defeated Central Power governments were in no position to do this.

And among the Allies, Britain led the capitulation to U.S. arms billing, captive to the creditor ideology that “a debt is a debt” and must be paid regardless of what this entails in practice or even whether the debt in fact can be paid. Confronted with America’s demand for payment, the Allies turned to Germany to make them whole. After taking its liquid assets and major natural resources, they insisted that it squeeze out payments by taxing its economy. No attempt was made to calculate just how Germany was to do this – or most important, how it was to convert this domestic revenue (the “budgetary problem”) into hard currency or gold. Despite the fact that banking had focused on international credit and currency transfers since the 12th century, there was a broad denial of what John Maynard Keynes identified as a foreign exchange transfer problem.
Never before had there been an obligation of such enormous magnitude. Nevertheless, all of Germany’s political parties and government agencies sought to devise ways to tax the economy to raise the sums being demanded. Taxes, however, are levied in a nation’s own currency. The only way to pay the Allies was for the Reichsbank to take this fiscal revenue and throw it onto the foreign exchange markets to obtain the sterling and other hard currency to pay. Britain, France and the other recipients then paid this money on their Inter-Ally debts to the United States.

Adam Smith pointed out that no government ever had paid down its public debt. But creditors always have been reluctant to acknowledge that debtors are unable to pay. Ever since David Ricardo’s lobbying for their perspective in Britain’s Bullion debates, creditors have found it their self-interest to promote a doctrinaire blind spot, insisting that debts of any magnitude can and should be paid. They resist acknowledging a distinction between raising funds domestically (by running a budget surplus) and obtaining the foreign exchange to pay foreign-currency debt. Furthermore, despite the evident fact that austerity cutbacks on consumption and investment can only be extractive, creditor-oriented economists refused to recognize that debts cannot be paid by shrinking the economy. Or that foreign debts and other international payments cannot be paid in domestic currency without lowering the exchange rate.

The more domestic currency Germany sought to convert, the further its exchange rate was driven down against the dollar and other gold-based currencies. This obliged Germans to pay much more for imports. The collapse of the exchange rate was the source of hyperinflation, not an increase in domestic money creation as today’s creditor-sponsored monetarist economists insist. In vain Keynes pointed to the specific structure of Germany’s balance of payments and asked creditors to specify just how many German exports they were willing to take, and to explain how domestic currency could be converted into foreign exchange without collapsing the exchange rate and causing price inflation.

Tragically, Ricardian tunnel vision won Allied government backing. Bertil Ohlin and Jacques Rueff claimed that economies receiving German payments would recycle their inflows to Germany and other debt-paying countries by buying their imports. If income adjustments did not keep exchange rates and prices stable, then Germany’s falling exchange rate would make its exports sufficiently more attractive to enable it to earn the revenue to pay.

This is the logic that the International Monetary Fund followed half a century later in insisting that Third World countries remit foreign earnings and even permit flight capital as well as pay their foreign debts. It is the neoliberal stance now demanding austerity for Greece, Ireland, Italy and other Eurozone economies.
Bank lobbyists claim that the European Central Bank will risk spurring domestic wage and price inflation if it does what central banks were founded to do: finance budget deficits. Europe’s financial institutions are given a monopoly right to perform this electronic task – and to receive interest for what a real central bank could create on its own computer keyboard.

But why it is less inflationary for commercial banks to finance budget deficits than for central banks to do this? The bank lending that has inflated a global financial bubble since the 1980s has left as its legacy a debt overhead that can no more be supported today than Germany was able to carry its reparations debt in the 1920s. Would government credit have so recklessly inflated asset prices?

How debt creation has fueled asset-price inflation since the 1980s

Banking in recent decades has not followed the productive lines that early economic futurists expected. As noted above, instead of financing tangible investment to expand production and innovation, most loans are made against collateral, with interest to be paid out of what borrowers can make elsewhere. Despite being unproductive in the classical sense, it was remunerative for debtors from 1980 until 2008 – not by investing the loan proceeds to expand economic activity, but by riding the wave of asset-price inflation. Mortgage credit enabled borrowers to bid up property prices, drawing speculators and new customers into the market in the expectation that prices would continue to rise. But hothouse credit infusions meant additional debt service, which ended up shrinking the market for goods and services.

Under normal conditions the effect would have been for rents to decline, with property prices following suit, leading to mortgage defaults. But banks postponed the collapse into negative equity by lowering their lending standards, providing enough new credit to keep on inflating prices. This averted a collapse of their speculative mortgage and stock market lending. It was inflationary – but it was inflating asset prices, not commodity prices or wages. Two decades of asset price inflation enabled speculators, homeowners and commercial investors to borrow the interest falling due and still make a capital gain.

This hope for a price gain made winning bidders willing to pay lenders all the current income – making banks the ultimate and major rentier income recipients. The process of inflating asset prices by easing credit terms and lowering the interest rate was self-feeding. But it also was self-terminating, because raising the multiple by which a given real estate rent or business income can be “capitalized” into bank loans increased the economy’s debt overhead.
Securities markets became part of this problem. Rising stock and bond prices made pension funds pay more to purchase a retirement income – so “pension fund capitalism” was coming undone. So was the industrial economy itself. Instead of raising new equity financing for companies, the stock market became a vehicle for corporate buyouts. Raiders borrowed to buy out stockholders, loading down companies with debt. The most successful looters left them bankrupt shells. And when creditors turned their economic gains from this process into political power to shift the tax burden onto wage earners and industry, this raised the cost of living and doing business – by more than technology was able to lower prices.

The EU rejects central bank money creation, leaving deficit financing to the banks

Article 123 of the Lisbon Treaty forbids the ECB or other central banks to lend to government. But central banks were created specifically – to finance government deficits. The EU has rolled back history to the way things were three hundred years ago, before the Bank of England was created. Reserving the task of credit creation for commercial banks, it leaves governments without a central bank to finance the public spending needed to avert depression and widespread financial collapse.
So the plan has backfired. When “hard money” policy makers limited central bank power, they assumed that public debts would be risk-free. Obliging budget deficits to be financed by private creditors seemed to offer a bonanza: being able to collect interest for creating electronic credit that governments can create themselves. But now, European governments need credit to balance their budget or face default. So banks now want a central bank to create the money to bail them out for the bad loans they have made.

For starters, the ECB’s €489 billion in three-year loans at 1% interest gives banks a free lunch arbitrage opportunity (the “carry trade”) to buy Greek and Spanish bonds yielding a higher rate. The policy of buying government bonds in the open market – after banks first have bought them at a lower issue price – gives the banks a quick and easy trading gain.
How are these giveaways less inflationary than for central banks to directly finance budget deficits and roll over government debts? Is the aim of giving banks easy gains simply to provide them with resources to resume the Bubble Economy lending that led to today’s debt overhead in the first place?

Conclusion

Governments can create new credit electronically on their own computer keyboards as easily as commercial banks can. And unlike banks, their spending is expected to serve a broad social purpose, to be determined democratically. When commercial banks gain policy control over governments and central banks, they tend to support their own remunerative policy of creating asset-inflationary credit – leaving the clean-up costs to be solved by a post-bubble austerity. This makes the debt overhead even harder to pay – indeed, impossible.
So we are brought back to the policy issue of how public money creation to finance budget deficits differs from issuing government bonds for banks to buy. Is not the latter option a convoluted way to finance such deficits – at a needless interest charge? When governments monetize their budget deficits, they do not have to pay bondholders.

I have heard bankers argue that governments need an honest broker to decide whether a loan or public spending policy is responsible. To date their advice has not promoted productive credit. Yet they now are attempting to compensate for the financial crisis by telling debtor governments to sell off property in their public domain. This “solution” relies on the myth that privatization is more efficient and will lower the cost of basic infrastructure services. Yet it involves paying interest to the buyers of rent-extraction rights, higher executive salaries, stock options and other financial fees.

Most cost savings are achieved by shifting to non-unionized labor, and typically end up being paid to the privatizers, their bankers and bondholders, not passed on to the public. And bankers back price deregulation, enabling privatizers to raise access charges. This makes the economy higher cost and hence less competitive – just the opposite of what is promised.

Banking has moved so far away from funding industrial growth and economic development that it now benefits primarily at the economy’s expense in a predator and extractive way, not by making productive loans. This is now the great problem confronting our time. Banks now lend mainly to other financial institutions, hedge funds, corporate raiders, insurance companies and real estate, and engage in their own speculation in foreign currency, interest-rate arbitrage, and computer-driven trading programs. Industrial firms bypass the banking system by financing new capital investment out of their own retained earnings, and meet their liquidity needs by issuing their own commercial paper directly. Yet to keep the bank casino winning, global bankers now want governments not only to bail them out but to enable them to renew their failed business plan – and to keep the present debts in place so that creditors will not have to take a loss.
This wish means that society should lose, and even suffer depression. We are dealing here not only with greed, but with outright antisocial behavior and hostility.

Europe thus has reached a critical point in having to decide whose interest to put first: that of banks, or the “real” economy. History provides a wealth of examples illustrating the dangers of capitulating to bankers, and also for how to restructure banking along more productive lines. The underlying questions are clear enough:
* Have banks outlived their historical role, or can they be restructured to finance productive capital investment rather than simply inflate asset prices?
* Would a public option provide less costly and better directed credit?
* Why not promote economic recovery by writing down debts to reflect the ability to pay, rather than relinquishing more wealth to an increasingly aggressive creditor class?

Solving the Eurozone’s financial problem can be made much easier by the tax reforms that classical economists advocated to complement their financial reforms. To free consumers and employers from taxation, they proposed to levy the burden on the “unearned increment” of land and natural resource rent, monopoly rent and financial privilege. The guiding principle was that property rights in the earth, monopolies and other ownership privileges have no direct cost of production, and hence can be taxed without reducing their supply or raising their price, which is set in the market. Removing the tax deductibility for interest is the other key reform that is needed.

A rent tax holds down housing prices and those of basic infrastructure services, whose untaxed revenue tends to be capitalized into bank loans and paid out in the form of interest charges. Additionally, land and natural resource rents – along with interest – are the easiest to tax, because they are highly visible and their value is easy to assess.

Pressure to narrow existing budget deficits offers a timely opportunity to rationalize the tax systems of Greece and other PIIGS countries in which the wealthy avoid paying their fair share of taxes. The political problem blocking this classical fiscal policy is that it “interferes” with the rent-extracting free lunches that banks seek to lend against. So they act as lobbyists for untaxing real estate and monopolies (and themselves as well). Despite the financial sector’s desire to see governments remain sufficiently solvent to pay bondholders, it has subsidized an enormous public relations apparatus and academic junk economics to oppose the tax policies that can close the fiscal gap in the fairest way.

It is too early to forecast whether banks or governments will emerge victorious from today’s crisis. As economies polarize between debtors and creditors, planning is shifting out of public hands into those of bankers. The easiest way for them to keep this power is to block a true central bank or strong public sector from interfering with their monopoly of credit creation. The counter is for central banks and governments to act as they were intended to, by providing a public option for credit creation.

*This article also appeared in the Frankfurter Algemeine Zeitung.

Michael Hudson is President of The Institute for the Study of Long-Term Economic Trends (ISLET), a Wall Street Financial Analyst, Distinguished Research Professor of Economics at the University of Missouri, Kansas City and author of Super-Imperialism: The Economic Strategy of American Empire (1968 & 2003), Trade, Development and Foreign Debt (1992 & 2009) and of The Myth of Aid (1971).

THE SYRIAN AGENDA

Syrian Presidential Palace 

 

MAINSTREAM MEDIA COVERAGE ON SYRIA

Since the uprising in SYRIA mainstream media happily reported what SYRIAN opposition groups provided them without verifying obtained information. Granted, SYRIA has banned most of foreign journalists and media outlets entering the country, thus corroboration of information is difficult. Mainstream media chose to rely on information provided by opposition groups and political entities whose agenda it is to tumble the ASSAD regime. Either Mainstream Media really are not aware that they are used as a propaganda tool by the opposition, or they are fully aware but comply with doctrines set by entities that finance them and who obviously have their own strategy set for SYRIA.

INFORMATION NEVER VERIFIED THROUGH INDEPENDENT SOURCES

Take for example the death toll figure in the SYRIAN uprising. Have they ever been verified by independent sources? Even the UN publishes its death toll figures based on information obtained from SYRIAN OPPOSITION SOURCES, which hardly can be considered as impartial. The same though applies when quoting SYRIAN state run press releases.
An example on how mainstream media is used to the advantage of the SYRIAN OPPOSITION is the following article published in the AUSTRIAN daily “DER STANDARD”.

Here is the translated version, with comments added below.
 

Alleged escape prevented 

Presidential Palace with Al- Mazzeh military airport located behind the hill

Allegedly the wife of SYRIAN President BASHAR AL-ASSAD, ASMAA AL-ASSAD was stopped by SYRIAN opposition forces when traveling in a convoy to the airport, from where she tried to leave the country secretly. SYRIAN opposition successfully prevented her from leaving the country.

According to the EGYPTIAN newspaper "AL-MASRI AL-YOUM ', information to this fact was obtained from SYRIAN OPPOSITION GROUPS on Sunday. The ISRAELI Internet portal YNET reported on Monday.

Members of the opposition "FREE SYRIAN ARMY," stated that the president's wife and several of her relatives were prevented from leaving. ASMAA AL-ASSAD, and their children, the mother of the President and his cousin were in a convoy to the airport when insurgents under the command of a former high-ranking officer engaged in a heavy fire exchange with the security detail of the President, who in the end succeeded to escort the convoy back to the presidential palace.

Comment on subject matter:

The SYRIAN presidential palace is situated on a hill overlooking Damascus, the international airport is situated on the south eastern outskirts of Damascus where as the AL- MAZZEH Military Airport is situated south-west of the presidential palaces, about 3 km in line of sight of the presidential palace. It is a well known fact that the ASSAD regime has an airplane at standby at AL MAZZEH airport as well as a heavily guarded private road that leads directly from the presidential palace to the airport.
Furthermore AL MAZZEH military airport houses various helicopter types that can carry heavy equipment and troops and can reach the presidential palace in minutes. So why would ASSAD take the risk and send his wife and relatives in a car convoy from the presidential palace to the international airport which is located more than 16 km from the palace and requires the convoy to pass through the dens city of Damascus, where as AL MAZZEH airbase is at the doorsteps of his palace, with a plane and helicopters on standby and the airbase in total control of Regime loyal elite forces? Even taking the private road from the palace to the airbase would bear no risk due to topographic advantages and security details guarding the entire area.

Looking on how this article came about it does reiterate the claim that mainstream media is not impartial, manipulated or simply unable to connect the dots. The rout this information too was as follows: Egyptian newspaper "Al-Masri al-Youm ' obtained the information from Syrian opposition groups on Sunday, Israeli Internet portal YNET reported on Monday and “Der Standard” adopted it thereafter. Needless to say that this kind of information gathering and distribution is neither objective nor impartial and most probably not even correct. Thus it comes as no surprise that current mainstream media coverage of the SYRIAN uprising is a breeding ground for conspiracy theorists and encouragement for alternative media reports and casts serious questions on the true agenda behind the SYRIAN uprising.

In response to mainstream media coverage of the SYRIAN uprising, relying on SYRIAN cell phone YouTube uploads and social network postings and the fact that both internet and mobile phones in SYRIA are rigorously monitored by security forces and the secret police I wrote on 18 August 2011 on this blog:




In view of the fact that the ASSAD regime has a tight grip on Internet traffic and mobile phone services it seems highly unlikely that the regime allows to transmit cell phone video clips and social networks to broadcast the uprising and suppression to the outside world, when at the same time it made sure that all foreign media was banned from the country right at the beginning of the uprising in order to avoid international media coverage.

The totalitarian SYRIAN regime that only permitted internet and mobile phones in recent past, (2002) and this under strict censorship, monitors fax transitions (See my article “The Assad Dilemma “, posted on 12 June 2011), expelled all foreign press at the beginning of the uprising, suddenly permits protesters to use freely cell phones to shoot videos portraying anti regime protests and distributing them via face book and the internet without censorship seems hardly likely.

The regime has means to block the internet and mobile phone services in order to stop postings. Nevertheless it seems that protesters have unlimited access to these medias. Furthermore one also has to question how it is possible that such a large amount of SYRIAN citizens are able to own cell phones, given the fact that cell phones and mobile phone services are extremely expensive in SYRIA, the purpose of which is intentional, in order to favor the upper class of SYRIA who so far have refrained from participated in the uprising. Thus one has to question how the poor of the country are able to suddenly afford and use these media tools without outside help or foreign intervention.