What Are We Headed for? Look to Russia.

It seems that every day the dollar is hitting a new record low. This could all come home to roost sooner than we think. It is easy to write off the problem as lousy economic policy, but I believe there is something much bigger afoot here.

I have been reading Michael Ruppert's Crossing the Rubicon: The Decline of the American Empire at the End of the Age of Oil. This is an exceptional book that deserves your time to read. I felt chills up my back as I read Chapter 6 - Laying the Foundation: Destroy Russia, Prepare the Battlefield which discusses the transition of Russia from communism to democracy and capitalism. It is a short chapter, but enlightening.

The process of looting the former Soviet Union at US taxpayer expense has some haunting correlations to what is happening in the US today. Let me share some of the information from Ruppert's book and then place that within the context of what appears to be happening today.

Two very important things happened immediately after the collapse of the Soviet Union in December 1991. The United States undertook a massive effort to help the FSU (Former Soviet Union), and in particular Russia, make a "successful transition" to capitalism, and the major oil companies stepped up their ongoing, oft-frustrated post-perestroika efforts to explore and establish joint ventures in the newly independent and oil-rich Central Asian republics of Kazakhstan, Turkmenistan, and Uzbekistan. Oil companies frequently has a number of CIA covert operatives on their payrolls posing as geologists and oil experts.

Ruppert, drawing in part on the unpublished manuscript of Anne Williamson (Contagion: The Betrayal of Liberty, Russia, and the United States in the 1990s), details the mechanics of the looting of Russia and the Russian people. Funding from the US, "investors," and the IMF gave Yeltsin the resources to but a constituency including bank executives who were given the power to plunder the country. This elevated a new elite that ultimately became the new oligarchs of Russia.

Russia, which had little private property, was ripe for the massive transfer of selling off of land, resources, and industry into private hands (read corporate hands), and the transfer was supported by the US government, and the funds flowing out of Russia ran directly to Wall Street (and out of Russia). This effectively blocked the Russian people from any participation in the wealth and resources of their nation.

The West's experts found this communal holding established by the Soviet Constitution inconvenient. In the privatization program Harvard University and World Bank operatives devised and US taxpayers unknowingly financed, those constitutionally guaranteed communal ownership rights were transferred to the state, and only then parceled out to elected individuals in rigged elections. Second, the good guys from the West turned loose monopoly markets, which caused prices to skyrocket. What little money individual Russians possessed was quickly transferred into the hands of the corrupt oligarchs - the "mafiya" with whom Boris Yeltsin had made his pact.

Once all the assets had been transferred to the oligarchs, who were becoming fabulously wealthy, it was a simple matter for them to liquidate those assets by selling them to the US and other Western countries, and then laundering their money through US financial institutions such as the Bank of New York. ... Billions of dollars accrued to Bank of New York executives and stockholders in 1999. ...

Compounding the pillage, a number of investment schemes sponsored by the Export-Import Bank of the United States, the Overseas Private Investment Corporation (OPIC), an d number of congressionally mandated "enterprise funds" were designed for individuals, Russian corporations, and banks. In essence, these initiatives wound up being huge money laundries. The domestic bond market's highly unjustified returns, paid with IMF loans, attracted eager investors, and soon developed into a classic pyramid scheme. As quickly as the IMF, the World Bank, and other financial entities lent the money to Russia to realize mind-boggling returns for favored players, the money was taken right back out of Russia. Those huge sums, initially provided by taxpayers, returned to Wall Street, US banks, and Harvard

The outcome of this maneuvering was the total collapse of the Russian economy. The impact on the Russian people was catastrophic: unemployment skyrocketed; prices skyrocketed; pensions, savings, and private bank accounts collapsed with the closure of the banks. With the collapse of the economy and the banking system, ordinary Russians ultimately saw a return on their savings of 25 cents on the dollar. People froze, starved and died. It is estimated that $500 BILLION in real money was looted from Russia.

So what do the events in Russia have to do with current and developing situation in the US?

Privatization anyone?
Since the Reagan administration the constant drumbeat in the US has been privatization. Private corporations taking over public functions. "Shrink" government. The overriding message has been "government bad, corporation good." This process has dramatically accelerated under the GW Bush reign with massive transfers of wealth from the public to the elite (tax law changes. Increasingly, it is happening with transfers of US resources (oil, water, gas, coal, etc.) into the hands of corporations. This transfer continues a process of stripping the wealth of the country through every President since Reagan (at least). Even the ability of the US to feed itself has been stripped - as it was in Russia. In the case of the US, family farmers have been effectively robbed in a move to corporate agriculture. Food production has shifted to export, and to sugar (lots of sugar), and silage for meat producers (poultry, swine, and beef).

We have seen the rise of "no-bid" contracts to high power corporate players. We have seen dramatic increases in corporate welfare - sometimes as outright gifts, and sometimes as underwriting corporate risk. And the drumbeat of privatization continues in all sectors - "corrections," school vouchers and funding of parochial schools, medical care, media, public lands. The list seems endless.

Now, under Bush, we have the record levels fall of the dollar; to speak of US debt as a record is an understatement of massive proportion. The economy appears to be on the verge of collapse. Both the resource and economic wealth of the nation ... looted.

The warnings are becoming increasingly clear (as is the similarity to the example of Russia):

* Foreign Interest Appears to Flag as Dollar Falls (Andrews, 11/27/04, NY Times)

* A Field Guide to the Falling Dollar (Altman, 12/05/04, NY Times)

* The Amazing Shrinking Dollar, (Kuttner, 12/02/04, TAP)

* Debtor Nation, (Reich, 11/24/04, TAP)

* Economic "Armageddon" Predicted (Arends, 11/23/04, On State Street)

But two pieces of information should have all of us particularly worried. First was the warning by the IMF on the falling dollar. In mid-November 2004, the IMF warned the US to take action to reverse the trend of falling currency value and increasing debt. Rodrigo Rato of the IMF said that the situation was not "traumatic" yet, but action needed to be taken to avoid disaster. The US (Bush/Republican) response was to increase the debt limit to $8.2 trillion without any controls on spending or increases in revenue generation. The consequences of that has been the daily news of the ongoing decline of the dollar. The dollar has now lost almost 60 cents against the Euro in the last year - and every day the drop continues.

The other piece of alarming news was the Dollar's Fall Tests Nerve of Asia's Central Bankers (Brooke and Bradsher, 12/04/04, NY Times). Japan and China are footing the major portion of the US debt. As the dollar drops, the products from Japan and (particularly) China increase. The falling dollar also decreases the real value of the US worker's paycheck while increasing the cost of living. Therefore, the ability to purchase those products also declines. China, Japan, and everyone else buying up US bonds to fund the debt, are reaching a point of decision. If the cost of their goods and the economic return through commerce costs more through the support of the US debt, they will stop funding that debt. Further, they could start liquidating their bonds which would more than bankrupt the already bankrupt US treasury. In the event of this rather horrifying (but increasingly possible) scenario, we could definitely see dramatic increases in unemployment, and failure of banks.

It is very important to realize that none of this is accidental or circumstantial. It is "profit taking" at a grand scale, and unwitting US taxpayers who funded the looting in Russia are the same unwitting taxpayers who are funding the looting of the US.