Buckle Seat Belts! World Economy Going Off Cliff!

The world economy is about to fall off a cliff.

We've known that will happen ever since the 2008 failure of Lehman Brothers, but after massive interventions by Western central bankers saved the world economy from collapse then, there has been a desperate hope that happy times would return if everyone just believed in financial fairies. It is now clear that this will not work. 

All that governments have done since 2008 is kick the can down the road, and now they have run out of road. When banks in Cyprus open later today – if they open today – there will be a run and unavoidable contagion.

Whether or not that will send the world economy into a free fall will depend on how successfully European governments contain the situation. All over Europe there are contingency plans to deal with riot and disorder. In Washington, a delegation from London is reported to be in tense meetings with Pentagon brass who are tight-lipped about the agenda.

There are two reasons why tiny Cyprus will have a global impact. One is visible: the “deal” imposed on it by the European Union (read Germany), requiring a heavy 40% “tax” on bank deposits has demolished the foundation of trust necessary for the functioning of a modern banking sector, and it cannot be restored in the short term.

The second reason is that the crisis will hit one of the nodal points of the British-run global money-laundering system. What we are seeing is not an ordinary sovereign debt crisis but a power struggle pitting Germany and the United States against Britain’s criminal empire.

The global impact will come from the sudden collapse of confidence in Britain's capacity to manage the world's enormous stock of black money. That confidence has been dipping ever since the United States charged HSBC last year with money laundering and imposed a fine of nearly $2 billion on Britain's largest bank; the developments in Cypress will push it over a cliff.

Those who hold large undeclared funds in tax havens like Cyprus do so without benefit of official rules and guarantees. They have no legal way of getting their money back if those holding it throw up their hands and plead force majeure. Their only redress is violence. The Russian mafia, which is estimated to have some $19 billion in Cyprus, is probably behind the sudden "suicide" in London of former Russian oligarch Boris Berezovsky. We should expect an increasing number of sudden deaths among money-men around the world. 

There will also be a range of other humungous developments as some $30 trillion in black assets freezes over. The huge Hedge funds that have kept commodity markets soaring through three years of recession in all developed countries will probably be less energetic. Prices of real estate, gold and oil will collapse. So will a great deal of luxury consumption. As recent surges in stock markets indicate, the in-crowd has realized that equities will be the safest haven; valuations can be expected to soar.

The Indian economy is among the best for investors to be in right now for it is driven mainly by domestic demand. This explains David Cameron’s two visits to India in the past year, Finance Minister Chidambaram’s stop-over in London as he returned from Davos, and the strange proposals he included in the 2013 budget.

The fall in commodity prices, especially energy, will be a boon for India, but the sailing will not be easy by any means. There will be an enormous amount of economic volatility -- perhaps hyper-inflation -- as black money seeks every which way to enter the legitimate economy. Without careful handling incoming financial flows could send the value of the Rupee skyrocketing. The Reserve Bank better have contingency plans in place to prevent successive waves of deflation and hyper-inflation from roiling our lives too violently. (This would be the right time for the government to float a new family of infrastructure bonds and turn a blind eye to the source of funds.)

There is also the chance that the British elite, in an apre moi le deluge mood, will use their Taliban/ISI proxies to set off a major crisis. A nuclear attack on India will bring down the whole global order and give the vampires a new lease of life.

If something cataclysmic like that does not happen, we can expect that when the dust settles there will be a new world economic order. The Euro probably will not be around. A handful of national currencies, especially those of the United States, Germany and India, might be the foundations of a new (fixed-rate?) international financial system. Britain, China and Japan could also be players if their heavily internationally dependent economies have not taken too severe a beating.

But before we get to that point it’s going to be a wild ride. Buckle your seat belts!

The Budget That Could Destroy India

If parliament enacts Finance Minister Chidambaram's proposals to liberalize the insurance sector the 2013 Union budget will destroy India.

Entirely ignored by mass media pundits, the proposals are that:

• Insurance companies be allowed to open offices in all Indian cities without prior approval from government; and

• Banks “be permitted to act as insurance brokers so that the entire network of bank branches will be utilized to increase penetration.”

What makes those innocuous proposals deadly to Indian nationhood is a bill tabled earlier that would:

• Allow 49% foreign ownership in Indian insurance companies;

• Let foreign reinsurers open branches in India; and

• Specifically allow Lloyds of London to set up operations in India.

In combination, those provisions mean that foreign companies and individuals, including those at the heart of Britain's enormously corrupt financial industry, will be able to collect and dispense money with no oversight or control anywhere in India. In effect, they will bring the global black market into every Indian town and village.

Insurance companies are unique in that they have access to the private details of every covered person and company. In the wrong hands, that information can be grossly misused, to extort, blackmail and manipulate.

Such manipulation was key to British control of India during the colonial era; to enable them to do the same again is to negate the enormous sacrifices of the struggle for independence. It is a betrayal of blood and honor.

The fear that the British will use increased access to the Indian economy to subvert it is firmly founded. As I detail at some length in 1001 Things Every Indian Should Know, Britain has used every opening offered by economic liberalization to do so.

I trace what happened after IMF pressure pushed India into the first market oriented reforms in the early 1980s. One of the new “investment bankers” who arrived in Mumbai at that time was Mark Bullough, a member of the elite Scots Guards unit of the British Army, the traditional foaling pasture for intelligence operatives.

Fresh from the 1982 war in the Falklands, he came to Mumbai as the representative of Hong Kong-based Jardine Fleming, an investment bank with roots in Jardine Matheson, one of the most prominent opium traders of the 19th Century and a company with a reputation for being neck-deep in spooks. (See here for a fascinating blog item by a BBC staffer.)

All kinds of hell broke loose in India during Bullough’s time in Mumbai (followed by stints in Hong Kong and Singapore). Much of what happened was linked to new flows of funds from abroad to violent groups in the country. A brief resume:

1. In the cataclysmic year 1984 anonymous “rich Sikhs” in Britain, Canada and the United States reportedly funded the drive for an independent Khalistan that pushed Punjab into virtual civil war. In June, the Indian Army dislodged terrorists from the Golden Temple; in October, after a call for Indira Gandhi's murder on a BBC show (officially protested by the Indian government), she was assassinated.

2. A month later, an incredible set of multiple safety-system failures at Union Carbide’s chemical plant at Bhopal caused the “world’s worst industrial accident.” It was a clear case of sabotage, meant to implicate a Sikh staffer and set off another round of attacks on the community but the Rajiv Gandhi government went with the accident-due-to-negligence scenario even though the repercussions killed its bid to attract foreign investment to India.

3. A few months later, in June 1985, “Sikh terrorists” operating out of Canada were blamed for blowing up of Air India Flight 182 over British waters as it made its way from Montreal to Delhi, killing all 329 people on board. Canadian prosecutors are still trying to prove the heavily circumstantial case.

4. In 1986 came the “Bofors scandal” manufactured from whole cloth after the Swedish arms manufacturer beat out Britain's BAE Systems to supply field mortars to the Indian Army. The scandal was pure media hype but it destabilized and helped unseat Rajiv Gandhi; in 1991, weeks before his certain return to power, he was assassinated. (India got the Bofors mortars but only after that company was ruined and taken over by BAE Systems.)

5. In 1992 came Harshad Mehta’s stock market manipulations using misappropriated funds from several Indian and four major foreign banks. He generated an enormous flow of funds just as “rich Hindus abroad” were supposedly sending their hard-earned money to Hindutva extremists, making possible the mobilization that led to the demolition of Babri Masjid and the rise of the BJP to power in Delhi. (Interestingly, National & Grindlays, now Standard Chartered, refused to take legal action to try and retrieve its reported loss of $130 million to Mehta.)

6. Mehta's stock frauds, the demolition of the mosque, communal riots in several cities and the 1993 terrorist bombing of the Bombay Stock Exchange, all projected a deeply negative image of India, again blunting the Narasimha Rao government's push to open up the economy to foreign investment.

7. In 1994, a British national, Peter Bleach, was arrested from an aircraft that dropped crates of AK-47s, rocket launchers and ammunition for use by the Ananda Marg, a violent Hindu cult in West Bengal. During his trial in Calcutta on a charge of waging war against the Indian State, his lawyers argued that MI-6 had organized the flight and that Bleach was only a contract employee; they produced a tape recording of a phone conversation to support that claim. Bleach was convicted and sentenced to life in prison in 2000, but was released in 2004 after persistent representations by the British government culminating in a private chat between Tony Blair and Deputy Prime Minister Advani on the eve of the 2004 Indian general election.

All this underlines that the British cannot be trusted to behave like the normal run of foreign investors in India, especially at a time when a global economic crisis is looming.

Surely, Mr. Chidambaram is aware of all this, so we must interpret his action in one of three ways.

• He could be driven by ambition -- The Economist mentioned him approvingly as a viable Prime Ministerial candidate;

• He (and the Congress leadership) might be fearful of another spate of subversion that could include a nuclear attack by British proxies in Pakistan; or

• He/they are unable to face down London's demands because they have black money abroad.

In those equations the ordinary people of India are viewed as helpless pawns, as indeed, they are. Only a quantum jump in political awareness can change that.

Unless we do something to bring about that change India will have to win its independence all over again.

*********
P.S: Mark Bullough surfaced in Iraq in 2003 as a partner of Aegis Defense Services, a London based company founded by fellow Scots Guards operative Tim Spicer. It got a $293 million contract to create what was then the largest private army in the world. In August 2010, the Basler Zeitung reported that Aegis Defence Services had moved its base to Basle, Switzerland, and that its partners were Spicer, Bullough, the former British Chief of Army Staff Peter Inge, and two former members of the Foreign Office.

 

The Extreme Danger of the NCTC

On 27 February 1933, four weeks after Adolf Hitler was sworn in as Chancellor of Germany, there was a devastating fire in the national Reichstag (parliament) in Berlin.

Firefighters trying to save the building found in it a mentally disabled Danish bricklayer who confessed under questioning to be a communist who had come for "political work" in Germany.

Under the pretext that the nation was under assault by international communism, Hitler then invoked emergency powers to arrest members of the party en masse, including all its representatives in parliament. With their seats empty, the Nazis became the majority party, allowing it to consolidate power and set in motion a new wave of oppressions.

The key to Nazi success in moving from a parliamentary plurality to absolute domination of the German political landscape was an an intelligence apparatus with unaccountable powers of search, seizure and arrest. It allowed Hitler to keep tabs on all opposition figures, to cow them with threats, confiscate their property, arrest and torture at will, and murder those who would not bend.

Indians should consider that history before supporting the National Counter-Terrorism Center the UPA government is pushing again in the wake of the Hyderabad terrorist attack. It too will centralize dangerous power in an unaccountable intelligence operation wide open to political misuse. It too will have powers of search, seizure and arrest outside the existing legal framework.

They should also ask two questions about the renewed push for the NCTC:

• Why did Finance Minister P. Chidambaram, days away from presenting the 2013 Union budget, break from that critically important task to urge action on the NCTC?

• Why have all the Big Business media organizations suddenly become cheerleaders for our incipient SS-Gestapo?

The answer is the same for both questions: India is under great pressure to open its doors to foreign investment. The super-rich investors who turned China into a collection of "cancer villages" with the widest rich-poor gap in the world, are looking for another poor and populous place to put their money. But they are wary of the fractious unpredictability of Indian democracy.

The NCTC will be their control mechanism. It will not just target "terrorists;" it will define who is a terrorist.

Just as the SS-Gestapo widened Nazi targets from communists to political dissidents of all kinds, Jews, Gypsies and other undesirables, the NCTC can tar, contain and eliminate anyone who stands in the way of its masters.

And its masters will not be a free parliament; it will be the fat cats who run the global black market and manage organized crime worldwide.

If Indian democracy is to survive, not only must the bid for the NCTC as currently envisaged be turned down, there should be a popular drive to bring all of India's several intelligence agencies into a constitutional framework that provides oversight and has provisions to enforce accountability.

More, there should be a cabinet minister in charge of Intelligence, answerable to parliament, and a recourse mechanism for Indian citizens victimized by overzealous gumshoes.

If "intelligence professionals" shake their head and threaten inaction against foreign and domestic dangers, perhaps it is time we turned away from the whole idea of a centralized organization with vast powers. A community-based reporting system linked nationally and enabling a real-time flow of information and analysis that will empower local action might prove far more effective. An NCTC without police powers could be the national hub of that system.

My 2011 proposal for a CCTV czar overseeing a national drive would be an essential part of such a system.  

Corruption in India - 1

Does anyone expect the Lokpal to make any real difference?

Suppose Civil Society gets its entire wishlist and we end up with an unaccountable supra-governmental body with wide-ranging powers to accuse, investigate, prosecute and more or less prescribe punishment for the people it decides are corrupt.

In which of the following situations (all in the headlines in the last few days) will it be able to make a dent?

1.      Widespread smuggling and sale of rice meant for distribution to the poor.

2.     “Ghost workers” receiving funds from the National Rural Employment Guarantee scheme.

3.     The hundreds of illegal mining operations under way in a number of states.

4.      The widespread illegal quarrying of rock, with some operations threatening archeological heritage sites.

5.      The widespread illlegal "sand mining"  from beaches and watercourses.

6.      Widespread use of child labour

7.      The resort to gender-related abortions by educated, middleclass people that is causing an increasing tilt in the male/female ratio of the Indian population.

8.      The private theft and public "seizure" of land belonging to the poor in all parts of the country. While private gangsters make no bones about their motive -- profit -- public officials make a grand pretence: the POSCO steel mill on tribal land in Orissa, the nuclear power station on tribal land in Maharashtra, and the Delhi-Agra highway in UP, are all for that distant god, "Development." .

9.      The bribery of voters by political parties. According to the Chief Election Commissioner all political parties tried to corrupt voters during the recent state elections, using  clandestine contributions from corporations.

10.  The thievery of public goods by the wealthy curled darlings of the nation. The government's auditor, the Comptroller and Accountant General (CAG), has just reported that when Murli Deora was Minister for Petroleum, he did all kinds of favours for Mukesh Ambani's Reliance Industries Ltd (RIL), causing massive but unquantifiable losses to the public exchequer. (Younger brother Anil Ambani, is already neck-deep in the 2G auction scam and has two of his senior aides cooling their heels in Tihar Jail.) The CAG noted that the Ministry had allowed Reliance (and Cairn India, the subsidiary of a well connected British firm extracting oil in Rajasthan), to hold onto areas they should have forfeited because of failure to drill. That prevented the government from re-auctioning the areas, depriving it of potentially massive revenues.

11. The $7.2 billion deal Reliance Industries made in February to sell a 30 percent stake in its offshore gas fields (acquired under the abovementioned questionable contract) to BP, the British oil giant. In June, the Home Ministry issued a terse one-page security clearance  necessary for BP to proceed with the purchase. The Ministry noted that BP was already in the Indian market, selling lubricants. Selling grease is significantly different from owning a sizeable chunk of the country's strategically important energy sector, but that didn't seem to count with the biggies at Home. Nor did it seem to matter that BP has the worst safety and environmental records of any of the oil majors. Or even that it has a long history as an imperial arm of the British government, and had a notorious role in destroying Iran's homegrown democracy and manipulating it into its current miseries. (Would the Lokpal be able to take cognizance of the fact that the current Home Minister, P. Chidambaram, was in charge of the Finance Ministry when it cleared the contracts the CAG has faulted? Or that he is a former corporate lawyer who represented Enron in India and sat on the board of Vedanta, the company owned by the predatory Anil Agarwal, a Mumbai scrap metals trader who morphed into a British billionaire with a stinking human rights record?)

12.  The reported oversize loans the State Bank of India made in contravention of ReserveBank rules to Reliance Industries, Indian Oil Company and BHEL.

13.  The reported provision of an entire telephone exchange of unlisted high-speed lines by BSNL Chennai ,to benefit the television station run by the brother of Dayanidhi Maran, who held the Telecommunications portfolio in the central cabinet before A. Raja, who emceed the 2G spectrum auction.

14.  The reported routine use of torture by Police all over the country to extract information from suspects.

15. The brazen daylight murder of a prominent investigative journalist in Mumbai, and the revelation of connections among foreign-controlled gangsters, high level Police officers and Mumbai businessmen.

16.  The rotting of hundreds of thousands of tons of food grains lying exposed to monsoon rains in states across India because storage facilities were inadequate for a bumper crop.

17.  The involvement of some top Army officers in the illegal construction of a multistory residential building on property owned by the Defence Department in Mumbai.

18.  The flow of foreign institutional investment into Indian stock markets primarily from “tax havens” where “shell companies” hide the identity of the real owners of the money. Over 40 per cent of the flow comes from a single source, Mauritius, with which India has a three-decade old treaty preventing double-taxation. Negotiated to encourage bilateral economic ties before Mauritius became a tax haven, the treaty now serves as a cover for “black money” to enter the Indian economy.

19.  The tax avoidance of Vodafone, the British telecommunications giant, which moved funds from a Caribbean tax haven in 2007 to buy the Indian interests of Hong Kong-based Hutchinson Whampoa (then in partnership with the Essar Group in India). Vodafone is contesting the Indian government’s demand for over $2.5 billion in taxes on that deal, arguing that it was between two off shore entities (itself and Hutchinson Whampoa) and thus outside Indian jurisdiction!

20.  The gullibility of millions of people from whom the late lamented “Sathya” Sai Baba extracted the treasure trove he left behind in his private room and in his fabulously wealthy "Trust."  

That list does not include India’s enormous burden of preventable infant and maternal deaths that results from grossly disordered political priorities and multi-layered negligence. It omits the massive toll of misery exacted by discrimination and violence from poor women, the cases of child marriage, payment of dowry, and of blatant and even murderous caste prejudice that are all deep-rooted social corruptions not even acknowledged in the current debate. Even with those exclusions, the list makes clear that “corruption” in India is not a simple phenomenon centred on the culpability of bureaucrats and politicians. It has strong social, economic and political components, and we must understand them in order to take effective action. Without a strategic sense of the nature and origin of corruption in Indian society (to be taken up in the next posting), it is futile to think a watchdog body will make the slightest bit of difference.

(By the way, shouldn't it be Logpal? Lokpal makes it sound as if the institution is out to save the world.)