Tuesday, December 6, 2011
Wednesday, September 21, 2011
Saturday, September 10, 2011
Mamata’s folly
BZ KHASRU
During the Indo-Pak talks in New Delhi on April 8, 1974, the Pakistani delegation leader suggested to the Indians inclusion of aphrase – “on the basis of sovereign equality” – in the agreement they were about to sign, which reiterated the two nations’ resolve to work toward achieving durable peace in the subcontinent.
In marking the proposal, Aziz Ahmed, then Pakistan’s state minister for foreign affairs, pointed out that sovereign equality was the phrase India used repeatedly when it raised the subject of possible discussions between Pakistan and newly-independent Bangladesh.
To Pakistan’s surprise, Kewal Singh, then India’s foreign secretary, brushed off the idea, saying he was “sick” of hearing this phrase. Swaran Singh, then India’s external affairs minister, dismissed it as mere platitude.
Pakistan, which negotiated from a point of weakness just after suffering a crushing defeat in the Bangladesh Liberation War, dropped the subject, not wanting to hinder the adoption of the pact over this one point.
India’s reluctance to include the phrase suggested to the Pakistanis that their giant neighbour considered itself more than equal to Pakistan. This episode continued to trouble Pakistan for quite some time.
West Bengal Chief Minister Mamata Banarjee’s decision to boycott Prime Minister Manmohan Singh’s just-concluded visit to Bangladesh over the Teesta River water sharing might also continue to trouble her neighbour for a long time. Bangladesh might reflect back on this even more acutely, given the Bengalis on both sides of the border share a common heritage.
Mamata’s decision would adversely affect the Bengali mind not just because she wanted more water for her state. Of course, as the chief executive of the state she must protect her people’s interest. What will bother Bangladesh is that she found it prudent to stay away, instead of engaging in talks to resolve the matter to both sides’ satisfaction.
Her decision not only holds the potential to cause wrinkles in Indo-Bangla relations, it has also dealt a blow to the central government’s image, causing a negative perception about its authority to conduct foreign policy in the interest of the entire country — and the region as a whole. India is not merely a country in South Asia, but also a regional superpower and a potential global player. A veto power by a state over its foreign policy is certainly a matter into which the external affairs ministry needs to look closely.
Mamata’s pulling out of the prime minister’s entourage embarrassed Singh. Her dramatic protest dealt a severe blow also to Prime Minister Sheikh Hasina, who had expected India to reciprocate her bold steps in addressing New Delhi’s security concerns and its long-time request for transit through Bangladesh.
The Teesta fiasco also killed two other key potential deals: Sharing of the Feni river water and letting India use Chittagong and Mongla seaports to carry goods through Bangladesh.
To India’s credit, it has tried to reassure its neighbours by being correct and even generous in its official dealings with them. But its specific security considerations, its self-image as the dominant power in South Asia, domestic political pressures and bureaucratic differences within the government continued to create tensions between India and its smaller neighbours.
The largest and most important of these smaller neighbours – Bangladesh – went through ups and downs in its relations with Delhi, thanks to some imprudent steps by India and political upheavals in Bangladesh. As a result, problems left over from the period of confrontation under Pakistan were not proving amenable to a quick solution.
Since 1971 India has sought to reassure its smaller neighbours, Bangladesh included. Indian officials have been visiting, discussing, explaining and giving assistance. Discussions with Bangladesh have been almost continuous.
Singh prudently reinforced India’s policy in Dhaka when he declared: “India will not, I repeat and assure you, India will not take steps that will adversely affect Bangladesh.” It will be sweet music not just for the Bengali ear, but for others as well — far away. It will reassure not only Bangladesh, but also others beyond the Himalayas.
India’s main interest in its smaller neighbours is its security against China. This is particularly true in the case of Nepal, Bangladesh and Bhutan, any of which would provide China with strategic access to the southern side of the Himalayas.
The linkages between India and her smaller neighbours have created groups within India with a special interest in Indian relations with these countries. Despite occasional clashes of interests, some West Bengalis and other Indian businessmen have both real and sentimental interests in forging a beneficial relationship between Kolkata and Dhaka.
Regional differences and bureaucratic inefficiencies play a big role in India’s behaviour to its neighbours. The correct posture represents the position of the external affairs ministry. On important issues, it can usually impose its view on other ministries. But parochial interests come into play and tend to undermine the good intentions of the foreign office. Regional politicians may be well advised to remember they are not just Bengalis or Punjabis, they are also Indians.
BZ Khasru, based in New York, is the author of a bestselling book,
Myths and Facts: Bangladesh Liberation War - How India, U.S., China, and the USSR Shaped the Outcome (Rupa & Co., 2010)
During the Indo-Pak talks in New Delhi on April 8, 1974, the Pakistani delegation leader suggested to the Indians inclusion of aphrase – “on the basis of sovereign equality” – in the agreement they were about to sign, which reiterated the two nations’ resolve to work toward achieving durable peace in the subcontinent.
In marking the proposal, Aziz Ahmed, then Pakistan’s state minister for foreign affairs, pointed out that sovereign equality was the phrase India used repeatedly when it raised the subject of possible discussions between Pakistan and newly-independent Bangladesh.
To Pakistan’s surprise, Kewal Singh, then India’s foreign secretary, brushed off the idea, saying he was “sick” of hearing this phrase. Swaran Singh, then India’s external affairs minister, dismissed it as mere platitude.
Pakistan, which negotiated from a point of weakness just after suffering a crushing defeat in the Bangladesh Liberation War, dropped the subject, not wanting to hinder the adoption of the pact over this one point.
India’s reluctance to include the phrase suggested to the Pakistanis that their giant neighbour considered itself more than equal to Pakistan. This episode continued to trouble Pakistan for quite some time.
West Bengal Chief Minister Mamata Banarjee’s decision to boycott Prime Minister Manmohan Singh’s just-concluded visit to Bangladesh over the Teesta River water sharing might also continue to trouble her neighbour for a long time. Bangladesh might reflect back on this even more acutely, given the Bengalis on both sides of the border share a common heritage.
Mamata’s decision would adversely affect the Bengali mind not just because she wanted more water for her state. Of course, as the chief executive of the state she must protect her people’s interest. What will bother Bangladesh is that she found it prudent to stay away, instead of engaging in talks to resolve the matter to both sides’ satisfaction.
Her decision not only holds the potential to cause wrinkles in Indo-Bangla relations, it has also dealt a blow to the central government’s image, causing a negative perception about its authority to conduct foreign policy in the interest of the entire country — and the region as a whole. India is not merely a country in South Asia, but also a regional superpower and a potential global player. A veto power by a state over its foreign policy is certainly a matter into which the external affairs ministry needs to look closely.
Mamata’s pulling out of the prime minister’s entourage embarrassed Singh. Her dramatic protest dealt a severe blow also to Prime Minister Sheikh Hasina, who had expected India to reciprocate her bold steps in addressing New Delhi’s security concerns and its long-time request for transit through Bangladesh.
The Teesta fiasco also killed two other key potential deals: Sharing of the Feni river water and letting India use Chittagong and Mongla seaports to carry goods through Bangladesh.
To India’s credit, it has tried to reassure its neighbours by being correct and even generous in its official dealings with them. But its specific security considerations, its self-image as the dominant power in South Asia, domestic political pressures and bureaucratic differences within the government continued to create tensions between India and its smaller neighbours.
The largest and most important of these smaller neighbours – Bangladesh – went through ups and downs in its relations with Delhi, thanks to some imprudent steps by India and political upheavals in Bangladesh. As a result, problems left over from the period of confrontation under Pakistan were not proving amenable to a quick solution.
Since 1971 India has sought to reassure its smaller neighbours, Bangladesh included. Indian officials have been visiting, discussing, explaining and giving assistance. Discussions with Bangladesh have been almost continuous.
Singh prudently reinforced India’s policy in Dhaka when he declared: “India will not, I repeat and assure you, India will not take steps that will adversely affect Bangladesh.” It will be sweet music not just for the Bengali ear, but for others as well — far away. It will reassure not only Bangladesh, but also others beyond the Himalayas.
India’s main interest in its smaller neighbours is its security against China. This is particularly true in the case of Nepal, Bangladesh and Bhutan, any of which would provide China with strategic access to the southern side of the Himalayas.
The linkages between India and her smaller neighbours have created groups within India with a special interest in Indian relations with these countries. Despite occasional clashes of interests, some West Bengalis and other Indian businessmen have both real and sentimental interests in forging a beneficial relationship between Kolkata and Dhaka.
Regional differences and bureaucratic inefficiencies play a big role in India’s behaviour to its neighbours. The correct posture represents the position of the external affairs ministry. On important issues, it can usually impose its view on other ministries. But parochial interests come into play and tend to undermine the good intentions of the foreign office. Regional politicians may be well advised to remember they are not just Bengalis or Punjabis, they are also Indians.
BZ Khasru, based in New York, is the author of a bestselling book,
Myths and Facts: Bangladesh Liberation War - How India, U.S., China, and the USSR Shaped the Outcome (Rupa & Co., 2010)
TAX EVASION AS CORRUPTION
From Business Standard September 10, 2011
INDIA’S social fabric has been dented in the past month over the issue of corruption. Corruption has many faces, one of the more important of which is tax evasion. Tax evasion can be unilateral, on account of taxpayers alone, or bilateral, through collusion between taxpayers and the tax collector, thus robbing the state of its due revenue, or multilateral, where a society participates in it through resistance to remedial measures.
Tax evasion leads to inefficient and inequitable outcomes. Because tax evasion erodes tax revenue, the lost revenue is attempted to be made up through high tax rates. An example is real property tax rates in India that range around seven per cent, as opposed to developed countries where it approximates one to two per cent. Note, therefore, that paradoxically, an estimate of tax evasion based on this elevated or artificial or compensating tax rate would yield an exaggerated number. That is, if the tax rate were lower, tax evasion could also be lower. Thus, the consequence of those who get away with it is an extra burden of taxation on those who pay tax. This is an inequitable impact across taxpayers.
The sectors or activities that are amenable to tax evasion will fetch more investment, which would be redirected from other areas. And this reallocation of resources takes place often from more to less productive sectors. Thus, if investment in land is prone to evasion, more resources would go into construction than in the production of rail engines or food. Construction as an activity ends when a building or bridge is completed. Manufacturing and agriculture, by contrast, are more long-term and generate a longer time horizon of employment and supply of the product. Economists call this the outcome of inefficient allocation of resources.
Through time, scholars and governments have attempted to measure tax evasion. Estimation methods have used national accounts or expenditure survey information to assess the size of economic activity and compared it with reported activity. The difference between estimated and reported activity could then be related to the loss of tax revenue associated with it.
In India, tax evasion has not been directly estimated. In Latin America this was carried out widely in the 1980s and 1990s (Aguirre and Shome for Mexico, Serra for Chile, Shome for Colombia, and others). In the case of individual income tax, the following method would apply.
To personal income declared for tax purposes, adjustments should be made for those components of income that are included in the concept of income in the national accounts but are deductible for tax purposes, for example, personal exemptions, deductions, savings incentives. Adjustments need to be made for individual tax brackets if the tax structure is progressive. The resultant series of gross taxable declared income (by income class) should then be compared with gross taxable income from the national accounts to obtain an estimated undeclared income.
Similarly, for corporate income tax, adjustments to national accounts-based income for deductions for the array of tax incentives that are legally applicable, as well as for special conditions for small and medium industry, would have to be made, and then compared with declared taxable income from returns. To simplify the exercise, instead of national accounts, data by the Centre for Monitoring Indian Economy could be used to obtain more reliable conclusions, albeit from a more truncated information base.
For the VAT and CENVAT (or central excise), using an input-output table for the economy would be the ideal option. The widest theoretical VAT base is all purchasable goods and services, or GDP plus imports minus exports. However, given that the VAT base usually has a plethora of exemptions for not just the supply of outputs but also for the inputs of exempted outputs, it is not sufficient to use only GDP data. Instead, one has to go upstream and start with production data against which taxable inputs would have to be credited out since the VAT base is value added, or output minus input.
Tax evasion should be estimated in India. Another matter is how to limit tax dodging (Tanzi and Shome). The first means should be to focus on those taxes that the tax administrator can monitor more cheaply or easily. For example, to begin, it may not be fruitful to spend a lot of administrative resources on monitoring small taxpayers. Thus, the service tax did away with 80 per cent of taxpayers from the bottom. The second is to design taxes intelligently. The VAT has a good design since input tax credit is matched between buyer and seller, and allowed only on the basis of physical invoices. The third is to use third-party information for individual income tax as has been introduced in India through Annual Information Returns (AIR) for third parties such as mutual funds, credit cards, property transactions and others who must report transactions they carry out with customers (using PAN numbers) above stipulated thresholds. However, it is crucial that such information is correctly used and interpreted by the tax administration so that a taxpayer does not suffer from erroneous matching of such information.
A final word. Tax evasion is not the only form of corruption. Corruption has more tentacles. According to Transparency International, India’s Corruption Perception Index (CPI) ranking worsened from 72 in 2007 to 87 in 2010 amongst 180 countries. It is worse than Brazil at 69 and China at 78, but better than Mexico at 98 and Russia at 154. Though CPI does have flaws, it gives an indication of impediments to economic and social growth and equity. A worsening index is detrimental to attracting foreign investment and political stability. On a broader canvas, it is important to investigate what has been motivating and sustaining corruption before designing draconian measures to combat it. If the cart is put before the horse, the outcome may remain shy of success.
References:
Aguirre, Carlos and Partho Shome (1988), “Mexican VAT: Methodology for Calculating the Base”, National Tax Journal, Vol. 41
Serra, Pablo (1991), “Estimación de la Evasión Tributaria en el IVA", Servicio de Impuestos Internos, Publicación No. 91/05/C, Universidad de Chile
Shome, Partho (1995), Colombia: Fundamental Tax Reform, IMF Occasional Paper No. 123
Tanzi, Vito, and Partho Shome (1993), “A Primer on Tax Evasion”, IMF Staff Papers, Vol. 40.
The author is director and chief executive, Icrier. Opinions are exclusively those of the author. His book, Modernising Tax Administration: Championing Analysis and Specialisms, is forthcoming in the autumn
India needs to develop ways to estimate the cost of tax dodging, says PARTHASARATHI SHOME
INDIA’S social fabric has been dented in the past month over the issue of corruption. Corruption has many faces, one of the more important of which is tax evasion. Tax evasion can be unilateral, on account of taxpayers alone, or bilateral, through collusion between taxpayers and the tax collector, thus robbing the state of its due revenue, or multilateral, where a society participates in it through resistance to remedial measures.
Tax evasion leads to inefficient and inequitable outcomes. Because tax evasion erodes tax revenue, the lost revenue is attempted to be made up through high tax rates. An example is real property tax rates in India that range around seven per cent, as opposed to developed countries where it approximates one to two per cent. Note, therefore, that paradoxically, an estimate of tax evasion based on this elevated or artificial or compensating tax rate would yield an exaggerated number. That is, if the tax rate were lower, tax evasion could also be lower. Thus, the consequence of those who get away with it is an extra burden of taxation on those who pay tax. This is an inequitable impact across taxpayers.
The sectors or activities that are amenable to tax evasion will fetch more investment, which would be redirected from other areas. And this reallocation of resources takes place often from more to less productive sectors. Thus, if investment in land is prone to evasion, more resources would go into construction than in the production of rail engines or food. Construction as an activity ends when a building or bridge is completed. Manufacturing and agriculture, by contrast, are more long-term and generate a longer time horizon of employment and supply of the product. Economists call this the outcome of inefficient allocation of resources.
Through time, scholars and governments have attempted to measure tax evasion. Estimation methods have used national accounts or expenditure survey information to assess the size of economic activity and compared it with reported activity. The difference between estimated and reported activity could then be related to the loss of tax revenue associated with it.
In India, tax evasion has not been directly estimated. In Latin America this was carried out widely in the 1980s and 1990s (Aguirre and Shome for Mexico, Serra for Chile, Shome for Colombia, and others). In the case of individual income tax, the following method would apply.
To personal income declared for tax purposes, adjustments should be made for those components of income that are included in the concept of income in the national accounts but are deductible for tax purposes, for example, personal exemptions, deductions, savings incentives. Adjustments need to be made for individual tax brackets if the tax structure is progressive. The resultant series of gross taxable declared income (by income class) should then be compared with gross taxable income from the national accounts to obtain an estimated undeclared income.
Similarly, for corporate income tax, adjustments to national accounts-based income for deductions for the array of tax incentives that are legally applicable, as well as for special conditions for small and medium industry, would have to be made, and then compared with declared taxable income from returns. To simplify the exercise, instead of national accounts, data by the Centre for Monitoring Indian Economy could be used to obtain more reliable conclusions, albeit from a more truncated information base.
For the VAT and CENVAT (or central excise), using an input-output table for the economy would be the ideal option. The widest theoretical VAT base is all purchasable goods and services, or GDP plus imports minus exports. However, given that the VAT base usually has a plethora of exemptions for not just the supply of outputs but also for the inputs of exempted outputs, it is not sufficient to use only GDP data. Instead, one has to go upstream and start with production data against which taxable inputs would have to be credited out since the VAT base is value added, or output minus input.
Tax evasion should be estimated in India. Another matter is how to limit tax dodging (Tanzi and Shome). The first means should be to focus on those taxes that the tax administrator can monitor more cheaply or easily. For example, to begin, it may not be fruitful to spend a lot of administrative resources on monitoring small taxpayers. Thus, the service tax did away with 80 per cent of taxpayers from the bottom. The second is to design taxes intelligently. The VAT has a good design since input tax credit is matched between buyer and seller, and allowed only on the basis of physical invoices. The third is to use third-party information for individual income tax as has been introduced in India through Annual Information Returns (AIR) for third parties such as mutual funds, credit cards, property transactions and others who must report transactions they carry out with customers (using PAN numbers) above stipulated thresholds. However, it is crucial that such information is correctly used and interpreted by the tax administration so that a taxpayer does not suffer from erroneous matching of such information.
A final word. Tax evasion is not the only form of corruption. Corruption has more tentacles. According to Transparency International, India’s Corruption Perception Index (CPI) ranking worsened from 72 in 2007 to 87 in 2010 amongst 180 countries. It is worse than Brazil at 69 and China at 78, but better than Mexico at 98 and Russia at 154. Though CPI does have flaws, it gives an indication of impediments to economic and social growth and equity. A worsening index is detrimental to attracting foreign investment and political stability. On a broader canvas, it is important to investigate what has been motivating and sustaining corruption before designing draconian measures to combat it. If the cart is put before the horse, the outcome may remain shy of success.
References:
Aguirre, Carlos and Partho Shome (1988), “Mexican VAT: Methodology for Calculating the Base”, National Tax Journal, Vol. 41
Serra, Pablo (1991), “Estimación de la Evasión Tributaria en el IVA", Servicio de Impuestos Internos, Publicación No. 91/05/C, Universidad de Chile
Shome, Partho (1995), Colombia: Fundamental Tax Reform, IMF Occasional Paper No. 123
Tanzi, Vito, and Partho Shome (1993), “A Primer on Tax Evasion”, IMF Staff Papers, Vol. 40.
The author is director and chief executive, Icrier. Opinions are exclusively those of the author. His book, Modernising Tax Administration: Championing Analysis and Specialisms, is forthcoming in the autumn
India needs to develop ways to estimate the cost of tax dodging, says PARTHASARATHI SHOME
Thursday, September 8, 2011
Monday, September 5, 2011
The Limping Middle Class - From NYT
September 3, 2011
The Limping Middle Class
By ROBERT B. REICH
Robert B. Reich is the former secretary of labor, a professor at the University of California, Berkeley, and the author of “Aftershock: The Next Economy and America’s Future.”
THE 5 percent of Americans with the highest incomes now account for 37 percent of all consumer purchases, according to the latest research from Moody’s Analytics. That should come as no surprise. Our society has become more and more unequal.
When so much income goes to the top, the middle class doesn’t have enough purchasing power to keep the economy going without sinking ever more deeply into debt — which, as we’ve seen, ends badly. An economy so dependent on the spending of a few is also prone to great booms and busts. The rich splurge and speculate when their savings are doing well. But when the values of their assets tumble, they pull back. That can lead to wild gyrations. Sound familiar?
The economy won’t really bounce back until America’s surge toward inequality is reversed. Even if by some miracle President Obama gets support for a second big stimulus while Ben S. Bernanke’s Fed keeps interest rates near zero, neither will do the trick without a middle class capable of spending. Pump-priming works only when a well contains enough water.
Look back over the last hundred years and you’ll see the pattern. During periods when the very rich took home a much smaller proportion of total income — as in the Great Prosperity between 1947 and 1977 — the nation as a whole grew faster and median wages surged. We created a virtuous cycle in which an ever growing middle class had the ability to consume more goods and services, which created more and better jobs, thereby stoking demand. The rising tide did in fact lift all boats.
During periods when the very rich took home a larger proportion — as between 1918 and 1933, and in the Great Regression from 1981 to the present day — growth slowed, median wages stagnated and we suffered giant downturns. It’s no mere coincidence that over the last century the top earners’ share of the nation’s total income peaked in 1928 and 2007 — the two years just preceding the biggest downturns.
Starting in the late 1970s, the middle class began to weaken. Although productivity continued to grow and the economy continued to expand, wages began flattening in the 1970s because new technologies — container ships, satellite communications, eventually computers and the Internet — started to undermine any American job that could be automated or done more cheaply abroad. The same technologies bestowed ever larger rewards on people who could use them to innovate and solve problems. Some were product entrepreneurs; a growing number were financial entrepreneurs. The pay of graduates of prestigious colleges and M.B.A. programs — the “talent” who reached the pinnacles of power in executive suites and on Wall Street — soared.
The middle class nonetheless continued to spend, at first enabled by the flow of women into the work force. (In the 1960s only 12 percent of married women with young children were working for pay; by the late 1990s, 55 percent were.) When that way of life stopped generating enough income, Americans went deeper into debt. From the late 1990s to 2007, the typical household debt grew by a third. As long as housing values continued to rise it seemed a painless way to get additional money.
Eventually, of course, the bubble burst. That ended the middle class’s remarkable ability to keep spending in the face of near stagnant wages. The puzzle is why so little has been done in the last 40 years to help deal with the subversion of the economic power of the middle class. With the continued gains from economic growth, the nation could have enabled more people to become problem solvers and innovators — through early childhood education, better public schools, expanded access to higher education and more efficient public transportation.
We might have enlarged safety nets — by having unemployment insurance cover part-time work, by giving transition assistance to move to new jobs in new locations, by creating insurance for communities that lost a major employer. And we could have made Medicare available to anyone.
Big companies could have been required to pay severance to American workers they let go and train them for new jobs. The minimum wage could have been pegged at half the median wage, and we could have insisted that the foreign nations we trade with do the same, so that all citizens could share in gains from trade.
We could have raised taxes on the rich and cut them for poorer Americans.
But starting in the late 1970s, and with increasing fervor over the next three decades, government did just the opposite. It deregulated and privatized. It cut spending on infrastructure as a percentage of the national economy and shifted more of the costs of public higher education to families. It shredded safety nets. (Only 27 percent of the unemployed are covered by unemployment insurance.) And it allowed companies to bust unions and threaten employees who tried to organize. Fewer than 8 percent of private-sector workers are unionized.
More generally, it stood by as big American companies became global companies with no more loyalty to the United States than a GPS satellite. Meanwhile, the top income tax rate was halved to 35 percent and many of the nation’s richest were allowed to treat their income as capital gains subject to no more than 15 percent tax. Inheritance taxes that affected only the topmost 1.5 percent of earners were sliced. Yet at the same time sales and payroll taxes — both taking a bigger chunk out of modest paychecks — were increased.
Most telling of all, Washington deregulated Wall Street while insuring it against major losses. In so doing, it allowed finance — which until then had been the servant of American industry — to become its master, demanding short-term profits over long-term growth and raking in an ever larger portion of the nation’s profits. By 2007, financial companies accounted for over 40 percent of American corporate profits and almost as great a percentage of pay, up from 10 percent during the Great Prosperity.
Some say the regressive lurch occurred because Americans lost confidence in government. But this argument has cause and effect backward. The tax revolts that thundered across America starting in the late 1970s were not so much ideological revolts against government — Americans still wanted all the government services they had before, and then some — as against paying more taxes on incomes that had stagnated. Inevitably, government services deteriorated and government deficits exploded, confirming the public’s growing cynicism about government’s doing anything right.
Some say we couldn’t have reversed the consequences of globalization and technological change. Yet the experiences of other nations, like Germany, suggest otherwise. Germany has grown faster than the United States for the last 15 years, and the gains have been more widely spread. While Americans’ average hourly pay has risen only 6 percent since 1985, adjusted for inflation, German workers’ pay has risen almost 30 percent. At the same time, the top 1 percent of German households now take home about 11 percent of all income — about the same as in 1970. And although in the last months Germany has been hit by the debt crisis of its neighbors, its unemployment is still below where it was when the financial crisis started in 2007.
How has Germany done it? Mainly by focusing like a laser on education (German math scores continue to extend their lead over American), and by maintaining strong labor unions.
THE real reason for America’s Great Regression was political. As income and wealth became more concentrated in fewer hands, American politics reverted to what Marriner S. Eccles, a former chairman of the Federal Reserve, described in the 1920s, when people “with great economic power had an undue influence in making the rules of the economic game.” With hefty campaign contributions and platoons of lobbyists and public relations spinners, America’s executive class has gained lower tax rates while resisting reforms that would spread the gains from growth.
Yet the rich are now being bitten by their own success. Those at the top would be better off with a smaller share of a rapidly growing economy than a large share of one that’s almost dead in the water.
The economy cannot possibly get out of its current doldrums without a strategy to revive the purchasing power of America’s vast middle class. The spending of the richest 5 percent alone will not lead to a virtuous cycle of more jobs and higher living standards. Nor can we rely on exports to fill the gap. It is impossible for every large economy, including the United States, to become a net exporter.
Reviving the middle class requires that we reverse the nation’s decades-long trend toward widening inequality. This is possible notwithstanding the political power of the executive class. So many people are now being hit by job losses, sagging incomes and declining home values that Americans could be mobilized.
Moreover, an economy is not a zero-sum game. Even the executive class has an enlightened self-interest in reversing the trend; just as a rising tide lifts all boats, the ebbing tide is now threatening to beach many of the yachts. The question is whether, and when, we will summon the political will. We have summoned it before in even bleaker times.
As the historian James Truslow Adams defined the American Dream when he coined the term at the depths of the Great Depression, what we seek is “a land in which life should be better and richer and fuller for everyone.”
That dream is still within our grasp.
The Limping Middle Class
By ROBERT B. REICH
Robert B. Reich is the former secretary of labor, a professor at the University of California, Berkeley, and the author of “Aftershock: The Next Economy and America’s Future.”
THE 5 percent of Americans with the highest incomes now account for 37 percent of all consumer purchases, according to the latest research from Moody’s Analytics. That should come as no surprise. Our society has become more and more unequal.
When so much income goes to the top, the middle class doesn’t have enough purchasing power to keep the economy going without sinking ever more deeply into debt — which, as we’ve seen, ends badly. An economy so dependent on the spending of a few is also prone to great booms and busts. The rich splurge and speculate when their savings are doing well. But when the values of their assets tumble, they pull back. That can lead to wild gyrations. Sound familiar?
The economy won’t really bounce back until America’s surge toward inequality is reversed. Even if by some miracle President Obama gets support for a second big stimulus while Ben S. Bernanke’s Fed keeps interest rates near zero, neither will do the trick without a middle class capable of spending. Pump-priming works only when a well contains enough water.
Look back over the last hundred years and you’ll see the pattern. During periods when the very rich took home a much smaller proportion of total income — as in the Great Prosperity between 1947 and 1977 — the nation as a whole grew faster and median wages surged. We created a virtuous cycle in which an ever growing middle class had the ability to consume more goods and services, which created more and better jobs, thereby stoking demand. The rising tide did in fact lift all boats.
During periods when the very rich took home a larger proportion — as between 1918 and 1933, and in the Great Regression from 1981 to the present day — growth slowed, median wages stagnated and we suffered giant downturns. It’s no mere coincidence that over the last century the top earners’ share of the nation’s total income peaked in 1928 and 2007 — the two years just preceding the biggest downturns.
Starting in the late 1970s, the middle class began to weaken. Although productivity continued to grow and the economy continued to expand, wages began flattening in the 1970s because new technologies — container ships, satellite communications, eventually computers and the Internet — started to undermine any American job that could be automated or done more cheaply abroad. The same technologies bestowed ever larger rewards on people who could use them to innovate and solve problems. Some were product entrepreneurs; a growing number were financial entrepreneurs. The pay of graduates of prestigious colleges and M.B.A. programs — the “talent” who reached the pinnacles of power in executive suites and on Wall Street — soared.
The middle class nonetheless continued to spend, at first enabled by the flow of women into the work force. (In the 1960s only 12 percent of married women with young children were working for pay; by the late 1990s, 55 percent were.) When that way of life stopped generating enough income, Americans went deeper into debt. From the late 1990s to 2007, the typical household debt grew by a third. As long as housing values continued to rise it seemed a painless way to get additional money.
Eventually, of course, the bubble burst. That ended the middle class’s remarkable ability to keep spending in the face of near stagnant wages. The puzzle is why so little has been done in the last 40 years to help deal with the subversion of the economic power of the middle class. With the continued gains from economic growth, the nation could have enabled more people to become problem solvers and innovators — through early childhood education, better public schools, expanded access to higher education and more efficient public transportation.
We might have enlarged safety nets — by having unemployment insurance cover part-time work, by giving transition assistance to move to new jobs in new locations, by creating insurance for communities that lost a major employer. And we could have made Medicare available to anyone.
Big companies could have been required to pay severance to American workers they let go and train them for new jobs. The minimum wage could have been pegged at half the median wage, and we could have insisted that the foreign nations we trade with do the same, so that all citizens could share in gains from trade.
We could have raised taxes on the rich and cut them for poorer Americans.
But starting in the late 1970s, and with increasing fervor over the next three decades, government did just the opposite. It deregulated and privatized. It cut spending on infrastructure as a percentage of the national economy and shifted more of the costs of public higher education to families. It shredded safety nets. (Only 27 percent of the unemployed are covered by unemployment insurance.) And it allowed companies to bust unions and threaten employees who tried to organize. Fewer than 8 percent of private-sector workers are unionized.
More generally, it stood by as big American companies became global companies with no more loyalty to the United States than a GPS satellite. Meanwhile, the top income tax rate was halved to 35 percent and many of the nation’s richest were allowed to treat their income as capital gains subject to no more than 15 percent tax. Inheritance taxes that affected only the topmost 1.5 percent of earners were sliced. Yet at the same time sales and payroll taxes — both taking a bigger chunk out of modest paychecks — were increased.
Most telling of all, Washington deregulated Wall Street while insuring it against major losses. In so doing, it allowed finance — which until then had been the servant of American industry — to become its master, demanding short-term profits over long-term growth and raking in an ever larger portion of the nation’s profits. By 2007, financial companies accounted for over 40 percent of American corporate profits and almost as great a percentage of pay, up from 10 percent during the Great Prosperity.
Some say the regressive lurch occurred because Americans lost confidence in government. But this argument has cause and effect backward. The tax revolts that thundered across America starting in the late 1970s were not so much ideological revolts against government — Americans still wanted all the government services they had before, and then some — as against paying more taxes on incomes that had stagnated. Inevitably, government services deteriorated and government deficits exploded, confirming the public’s growing cynicism about government’s doing anything right.
Some say we couldn’t have reversed the consequences of globalization and technological change. Yet the experiences of other nations, like Germany, suggest otherwise. Germany has grown faster than the United States for the last 15 years, and the gains have been more widely spread. While Americans’ average hourly pay has risen only 6 percent since 1985, adjusted for inflation, German workers’ pay has risen almost 30 percent. At the same time, the top 1 percent of German households now take home about 11 percent of all income — about the same as in 1970. And although in the last months Germany has been hit by the debt crisis of its neighbors, its unemployment is still below where it was when the financial crisis started in 2007.
How has Germany done it? Mainly by focusing like a laser on education (German math scores continue to extend their lead over American), and by maintaining strong labor unions.
THE real reason for America’s Great Regression was political. As income and wealth became more concentrated in fewer hands, American politics reverted to what Marriner S. Eccles, a former chairman of the Federal Reserve, described in the 1920s, when people “with great economic power had an undue influence in making the rules of the economic game.” With hefty campaign contributions and platoons of lobbyists and public relations spinners, America’s executive class has gained lower tax rates while resisting reforms that would spread the gains from growth.
Yet the rich are now being bitten by their own success. Those at the top would be better off with a smaller share of a rapidly growing economy than a large share of one that’s almost dead in the water.
The economy cannot possibly get out of its current doldrums without a strategy to revive the purchasing power of America’s vast middle class. The spending of the richest 5 percent alone will not lead to a virtuous cycle of more jobs and higher living standards. Nor can we rely on exports to fill the gap. It is impossible for every large economy, including the United States, to become a net exporter.
Reviving the middle class requires that we reverse the nation’s decades-long trend toward widening inequality. This is possible notwithstanding the political power of the executive class. So many people are now being hit by job losses, sagging incomes and declining home values that Americans could be mobilized.
Moreover, an economy is not a zero-sum game. Even the executive class has an enlightened self-interest in reversing the trend; just as a rising tide lifts all boats, the ebbing tide is now threatening to beach many of the yachts. The question is whether, and when, we will summon the political will. We have summoned it before in even bleaker times.
As the historian James Truslow Adams defined the American Dream when he coined the term at the depths of the Great Depression, what we seek is “a land in which life should be better and richer and fuller for everyone.”
That dream is still within our grasp.
Thursday, August 25, 2011
Saturday, April 2, 2011
The millennium's unlikely prophets
B Y N IRANJAN R AJADHYAKSHA niranjan.r@livemint.com
[Click To Enlarge]
Both Karl Marx and John Maynard Keynes seemed to have been permanently banished into the dark shadows of obscurity until the bright boys of Wall Street almost brought the world economy down in a speculative fit. Few economists and pundits emerged from the wreck- age with their reputations intact.
Marx and Keynes came out with enhanced status.
This is a paradox. The North Atlantic financial crisis does not fit quite well with the standard Marxist and Keynesian view of the world. Both had said that a market economy/capitalism was prone to periodic crises because of a fall in the rate of profit in industrial and service companies, and a lack of aggregate demand.
The crisis of 2007 and 2008 did not fit into this neat narrative. The main damage was done in a financial sector stuffed with excess leverage and risk.
Keynes' prophetic disciple Hyman Minsky had a better explanation for what happened in his thesis on financial instability, while the American economist Irving Fisher's theory of debt deflation offered a better explanation of the subsequent demand collapse. Keynes mattered only at the third stage, when governments around the world ran huge budget deficits to keep the demand engines chugging despite the global panic. One could also argue--contra Marxist belief--that it was the users of capital (bankers and derivative traders) rather than the owners of capital (the shareholders of global banks) who were the villains of the piece.
“Keynes had little to say about the accumulation of debt and the possibility of associated financial bubbles,“ writes economist Lance Taylor in Maynard's Revenge: The Collapse of Free Market Macroeconomics, his combative and tightly argued book on the collapse of the recent consensus in economics. Taylor strives to reinstate not just Keynes but an entire school of economics. Though not a book for the popular market--as the recent Keynes biography by Robert Skidelsky is--the tone of the book fluctuates between being clinically academic and sharply polemical, a delightful combination often seen in the writings of Keynes himself.
So Taylor can at one place discuss Gaussian distribution of asset prices (the well-known bell curve), while at another place tartly dismiss Milton Friedman, who along with Robert Lucas was responsible for placing some of the most potent sticks of dynamite under the Keynesian edifice in the 1970s, as someone who merely gave a modern spin to the doctrines of 19th century Swedish economist Knut Wicksell. At another place, Taylor dismisses what is called new classical economics, which arose out of the so- called Lucas critique and is a centre piece of contemporary text- books, as “a restatement of extreme nineteenth-century neoclassical ideas decked out in mathematics borrowed from 1960s rocket science“.
However, the deeper point Taylor makes is that much of modern economics is actually derived from insights provided by economists in previous ages. He powerfully illustrates this in almost every chapter in his book.
The great masters have been for- gotten as the history of economic thought has disappeared from university courses and mathematical elegance has become an end in itself. Economics has suf- fered because it turned its back on its own rich heritage.
How to Change the World by the Marxist historian Eric Hobsbawm is a collection of essays written between 1956 and 2009. The long period it covers ensures that the tone is calm, though always pro- found. Hobsbawm is from a generation of Marxist intellectuals who were rattled by events ranging from the Soviet invasion of Hungary in 1956 to the collapse of communism between 1989 and 1992. Yet he has resolutely stuck to the hope that a better and more humane society is a possibility.
The title of his collection of essays, though it seems a bit presumptuous, is clearly inspired by a famous statement by Marx that philosophers should not just interpret the world but change it.
Though Hobsbawm remained a party animal (as the term was understood in another age), he steered clear of the two extremes that many of his contemporaries embraced: becoming a party hack or settling into world-weary cynicism. Nor did he go down the rabbit hole of postmodernist cultural criticism, which became the sorry refuge of a lost ideology.
Hobsbawm argues in his introduction that “Marx is, once again, very much a thinker for the twenty-first century“ though he also adds later: “The Marx of the twenty-first century will almost certainly be different from the Marx of the twentieth.“ Nor does he shed tears for the Soviet Union and its several clones, uniformly brutal social and economic disasters. For Hobsbawm, the continuing relevance of Marx is three- fold--as a thinker on the econ- omy, about history and human society. One almost gets through the book feeling that Hobsbawm has more hopes for Marx as a thinker than as a guide for political action, which makes the title of his book even more puzzling.
Neither Marx nor Keynes can fully explain what to do about the challenges facing us in the new century, as both Hobsbawm and Taylor freely admit in their books.
Yet they deserve to be read and studied--for their insights into economic cycles, the nature of government, radical uncertainty, the hope of human freedom, and much more. The two books under review offer a window to the worlds of Marx and Keynes.
IN SIX WORDS - Political economy, past and , perhaps future
[Click To Enlarge]
Both Karl Marx and John Maynard Keynes seemed to have been permanently banished into the dark shadows of obscurity until the bright boys of Wall Street almost brought the world economy down in a speculative fit. Few economists and pundits emerged from the wreck- age with their reputations intact.
Marx and Keynes came out with enhanced status.
This is a paradox. The North Atlantic financial crisis does not fit quite well with the standard Marxist and Keynesian view of the world. Both had said that a market economy/capitalism was prone to periodic crises because of a fall in the rate of profit in industrial and service companies, and a lack of aggregate demand.
The crisis of 2007 and 2008 did not fit into this neat narrative. The main damage was done in a financial sector stuffed with excess leverage and risk.
Keynes' prophetic disciple Hyman Minsky had a better explanation for what happened in his thesis on financial instability, while the American economist Irving Fisher's theory of debt deflation offered a better explanation of the subsequent demand collapse. Keynes mattered only at the third stage, when governments around the world ran huge budget deficits to keep the demand engines chugging despite the global panic. One could also argue--contra Marxist belief--that it was the users of capital (bankers and derivative traders) rather than the owners of capital (the shareholders of global banks) who were the villains of the piece.
“Keynes had little to say about the accumulation of debt and the possibility of associated financial bubbles,“ writes economist Lance Taylor in Maynard's Revenge: The Collapse of Free Market Macroeconomics, his combative and tightly argued book on the collapse of the recent consensus in economics. Taylor strives to reinstate not just Keynes but an entire school of economics. Though not a book for the popular market--as the recent Keynes biography by Robert Skidelsky is--the tone of the book fluctuates between being clinically academic and sharply polemical, a delightful combination often seen in the writings of Keynes himself.
So Taylor can at one place discuss Gaussian distribution of asset prices (the well-known bell curve), while at another place tartly dismiss Milton Friedman, who along with Robert Lucas was responsible for placing some of the most potent sticks of dynamite under the Keynesian edifice in the 1970s, as someone who merely gave a modern spin to the doctrines of 19th century Swedish economist Knut Wicksell. At another place, Taylor dismisses what is called new classical economics, which arose out of the so- called Lucas critique and is a centre piece of contemporary text- books, as “a restatement of extreme nineteenth-century neoclassical ideas decked out in mathematics borrowed from 1960s rocket science“.
However, the deeper point Taylor makes is that much of modern economics is actually derived from insights provided by economists in previous ages. He powerfully illustrates this in almost every chapter in his book.
The great masters have been for- gotten as the history of economic thought has disappeared from university courses and mathematical elegance has become an end in itself. Economics has suf- fered because it turned its back on its own rich heritage.
How to Change the World by the Marxist historian Eric Hobsbawm is a collection of essays written between 1956 and 2009. The long period it covers ensures that the tone is calm, though always pro- found. Hobsbawm is from a generation of Marxist intellectuals who were rattled by events ranging from the Soviet invasion of Hungary in 1956 to the collapse of communism between 1989 and 1992. Yet he has resolutely stuck to the hope that a better and more humane society is a possibility.
The title of his collection of essays, though it seems a bit presumptuous, is clearly inspired by a famous statement by Marx that philosophers should not just interpret the world but change it.
Though Hobsbawm remained a party animal (as the term was understood in another age), he steered clear of the two extremes that many of his contemporaries embraced: becoming a party hack or settling into world-weary cynicism. Nor did he go down the rabbit hole of postmodernist cultural criticism, which became the sorry refuge of a lost ideology.
Hobsbawm argues in his introduction that “Marx is, once again, very much a thinker for the twenty-first century“ though he also adds later: “The Marx of the twenty-first century will almost certainly be different from the Marx of the twentieth.“ Nor does he shed tears for the Soviet Union and its several clones, uniformly brutal social and economic disasters. For Hobsbawm, the continuing relevance of Marx is three- fold--as a thinker on the econ- omy, about history and human society. One almost gets through the book feeling that Hobsbawm has more hopes for Marx as a thinker than as a guide for political action, which makes the title of his book even more puzzling.
Neither Marx nor Keynes can fully explain what to do about the challenges facing us in the new century, as both Hobsbawm and Taylor freely admit in their books.
Yet they deserve to be read and studied--for their insights into economic cycles, the nature of government, radical uncertainty, the hope of human freedom, and much more. The two books under review offer a window to the worlds of Marx and Keynes.
IN SIX WORDS - Political economy, past and , perhaps future
Wednesday, March 23, 2011
Dirty Secrets of the Temple - by Stephen Lendman
Curtsy : http://sjlendman.blogspot.com/2006/06/dirty-secrets-of-temple.html
Thursday, June 29, 2006
DIRTY SECRETS OF THE TEMPLE
Dirty Secrets of the Temple - by Stephen Lendman
Years ago I read William Greider's excellent book published in 1987 on how the US Federal Reserve System works. It was detailed and explicit and makes wonderful and informative reading, except for the solution he suggests to a huge problem. His was far too timid. This article proposes a much different one. Greider called his book Secrets of the Temple with a sub-title: How the Federal Reserve Runs the Country. A better sub-title might have been how the Fed (and other key central bankers) runs the world. This article attempts to summarize what it does, how it does it, for whose benefit and at whose expense. For those who don't know, prepare for some stunning information and commentary.
Let's be clear at the outset. The US Federal Reserve, Bank of England, Bank of Japan and the European Central Bank (for the 12 European countries that adopted the single euro currency in 1999) are institutions with enormous power far beyond what most people everywhere can imagine. These most dominant of all central banks, as well as most others, have a powerful influence on the financial conditions in virtually all countries including their own, of course, in an increasingly borderless financial world where a significant economic event in one nation can affect most others for better or worse.
One other powerful bank is also part of today's financial world. It needs mentioning because of its importance, even though it requires a separate article to explain how it works more fully. It's the secretive, inviolable and accountable to no one Bank of International Settlements (BIS) founded in 1930 and based in Basle, Switzerland. This bank most people never heard of is the central banker to its member central banks - a sort of banking "boss of bosses" equivalent to what apparently exists in the shadowy world of Mafia dons. Like most other central banks, including the Federal Reserve (explained below), it's privately owned by its members.
It's believed by some academicians and others who've studied the BIS that the ruling elite of financial capitalism established this bank of banks to be the apex of power to exercise authority over a world financial system owned and controlled by them. It's thought their plan was to use this bank to dominate the political system of every country and control the world economy in a feudalistic fashion. In a word, the thinking goes that these super-elite want to rule the world by controlling its money, and they set up this supranational all-powerful bank of banks to do it. As important as that is, that discussion remains for another time as the intent of this article is to focus solely on the US Federal Reserve.
The dominant central banks and BIS, together with most others, wield their influence in cartel-like alliance with each other to assure they all benefit more than they otherwise would without such a cozy arrangement. With their immense power it's no play on words to say these financial institutions do indeed rule the world. Because they're able to create money, they fund the needs of their governments, their militaries and all business activity that couldn't function without a ready supply of that most needed of all commodities. It's money, not love, that makes the world go round, and central bankers have the power to create or remove from circulation as much or little of it as they choose and for whatever purpose they have in mind. That kind of power can move mountains or destroy them.
No nation's central bank is more powerful today than the US Federal Reserve, but it wasn't always that way, and it now has competition for the top spot it hasn't known since WW II. The Fed, as it's called, has existed since it was first established by an act of Congress in 1913. But the Bank of England has been around since Britannia ruled the waves beginning in 1694 when King William III needed help funding the kind of escapade that takes lots of ready cash - war. Back then it was with France, and the king needed a friendly banker to print it up for him to help him fight it. He also needed financial help to facilitate trade and manage the country's debt that always mounts up when wars are fought. The Bank of England wasn't the first central bank, but it was the modern world's first privately owned one in a powerful country. It was called the Bank of England to keep the public from knowing that it, like our Federal Reserve, was and still is privately owned and not part of the government. It was also the model used in the formation of our own central bank and most others.
The Brits may have had a 219 year head start on the Fed, but central bankers are only as powerful as the countries they represent and their economies. Today the former dominant Brits must settle for a far lesser role as being just one of many junior partners to a US hegemon that emerged post WW II as the world's dominant economic power. It still is today, even though some credible experts believe this country may have seen and past its peak and is now in decline. Some go further and claim our decline has been accelerated by the disastrous policies of the Bush administration that irrationally believes waging war on the world without end is the way to rule it, promote endless economic growth and dominance, and thus preserve the nation's preeminent position as the reigning economic champion.
It's easy to challenge that view and think that champ has climbed into the ring a few times too many, has endless plans for more return engagements, and is likely to meet the same fate many a former human one did who didn't know when to quit and ended up with chronic brain damage known as dementia. The lesson from history is always the same. The price for reckless behavior is high, painful and inevitable. It's true for countries as well as individuals, but too often neither one sees it until it's too late. The biggest difference between the US today and other nations in the past that paid dearly for not yielding when their day had passed is that we have an all-powerful arsenal others never did. Should we decide to use it, there likely wouldn't be much left behind for a successor. Not a pleasant thought, but a very real one.
It All Began in 1910 On Jekll Island
It sounds like the title of a horror movie, but the real life events that happened at this privately owned island off the coast of Georgia in 1910 would have challenged even the Hollywood bad dream factory to come up with.
It was here that seven very rich and powerful men met in secret for nine days and created the Federal Reserve System that came into being three years later on December 23, 1913 by an act of Congress. Since that time, the nation and world would never be the same, but only the rich and powerful were the beneficiaries. That was the whole idea, and it worked as planned.
The Federal Reserve Act that began it all must surely rank as one of the most disastrous and outrageous pieces of legislation to the public welfare ever to come out of any legislative body. It may have also have been and still is illegal according to Article 1, Section 8 of the Constitution which happens to be the inviolable law of the land. The article states that Congress shall have the power to coin (create) money and regulate the value thereof. In 1935, the US Supreme Court ruled the Congress cannot constitutionally delegate its power to another group or body. The Congress thus acted in violation of the Constitution it's sworn to uphold and in so doing created the Federal Reserve System that, as will be explained below, is a private for-profit corporation operating at the expense of the public welfare. By its action, our lawmakers committed fraud against the people of the country and so far have gotten away with it without the public even knowing about the harm done.
The shameful result is that what should have arrived stillborn is now the most dominant institution on earth, and all because of what began on a privately owned island with a scary name. But had the Congress acted responsibly, the act of Fed creation might never have happened. The legislation establishing it was so harmful to the public interest, it likely never would have passed if it hadn't been shepherded through a carefully prepared Congressional Conference Committee meeting scheduled for between 1:30 - 4:30 AM (when most members of Congress were asleep) on December 22, 1913. The Act was then voted on the next day and passed although many members of the body had left for the Christmas holidays and most others who stayed behind hadn't had time to read it or know its contents. Sound familiar? Still it passed (like a thief in the night) and was signed into law by an unwitting or complicit Woodrow Wilson who later admitted he made a terrible mistake saying "I unwittingly ruined my country." But it was too late for postmortems, and the American people have paid dearly ever since. It's about time the public understood that and began to demand an end to over 90 years of damage done.
It almost happened 43 years ago when one president decided to act on behalf of the people who elected him. That man was John Kennedy, who before his death planned to end the Federal Reserve System to eliminate the national debt a central bank creates by printing money and loaning it to the government. That debt has now risen to over $8,400,000,000,000 ($8.4 trillion) which every taxpayer must pay for and has done so in the amount of nearly $174,000,000,000 ($174 billion) in just the first three months of 2006. This debt service is now an annualized amount exceeding two-thirds of a trillion dollars. It's made the bankers rich (which was the whole idea) and the public poorer because we're taxed to pay the tab. It's no exaggeration to call this the greatest financial scam in world history and one that gets greater every day.
The debt was less onerous 40 years ago, but Kennedy understood its danger to the country and the burden it placed on the public. Thus, on June 4, 1963, he issued presidential order EO 11110 giving the president authority to issue currency. He then ordered the US Treasury to print over $4 billion worth of "United States Notes" to replace Federal Reserve Notes. He intended to replace them all when enough of the new currency was in circulation so he could end the Federal Reserve System and the control it gave the international bankers over the US government and the public. Just months after the Kennedy plan went into effect, he was assassinated in Dallas in what was surely a coup d'etat disguised to look otherwise and may well have been carried out at least in part to save the Fed System and concentration of power it created that was so profitable for the powerful bankers in the country. Those benefitting from it had good reason to be involved in the plot to save the special privilege they weren't willing to give up without a fight. It's a plausible explanation that may explain who may have been behind the assassination and for what reason. Whatever the truth is, the banking cartel was only in distress a short time. Once Lyndon Johnson took office, he rescinded Kennedy's presidential order and restored the cartel's former power. It's kept it ever since and is now, of course, more powerful than ever. Even presidents are unable to stop it and those who would try have a lesson from history to give them pause.
The predecessors of the possible Kennedy coup plotters were the men who met on Jekyll Island in 1910. They represented some of the richest and most powerful men in the world - the Morgans, Rockefellers, Rothschilds of Europe (who dominated all European banking by the mid-1800s and became and still may be the wealthiest and most powerful family of all) and others of great influence and power. Included was a US senator, a high ranking Treasury official, the president of the largest bank in the country at the time, a leading Wall Street figure and the man who would later become the first chairman of the Federal Reserve System. It was quite an assemblage, and they came to accomplish one thing. They wanted to change the ideology and course of American business that up to then was based on marketplace competition and replace it with monopoly. They also knew what Baron M.A. Rothschild understood when he once said: "Give me control over a nation's currency and I care not who makes its laws." They knew the wisdom of what's stated in Proverbs 22:7 as well: "The rich rule over the poor, and the borrower is servant to the lender."
This was the dawning of the age of powerful cartels when the seven financial titans meeting secretly in the island's clubhouse decided no longer to compete with each other and wanted the power to arrange it. They were already colluding informally but knew it would all work better under a legally sanctioned cartel. They wanted a banking cartel and got one that flourishes today below the public radar with the tool they wanted most - the ability to control the nation's money supply that gave them almost unlimited power. The cartel now works cooperatively with their governments and all other powerful transnational corporations in a dominant global alliance that allows them to control the world's markets, resources, cheap labor and our lives.
The Federal Reserve System Is Not A Government Agency - It's A Privately Owned Cartel of Powerful Banks Protected By Law
It's commonly but falsely believed the Federal Reserve System is a function of government and subject to its control. False. It's often referred to as a quasi-governmental, decentralized central bank, but that's just cover to disguise what, in fact, it really is: a privately held and operated cartel made to look like the government is in charge. The fact that it's headquartered in Washington in the formidable and impressive-looking Eccles building (named after a former Fed chairman) is just part of the clever subterfuge. Here's how it works:
The Fed is composed of a Board of Governors in Washington and 12 regional banks in major cities throughout the country (including in my own city of Chicago where anyone once but no longer could walk up to a teller's window and buy US Treasury securities). The system also includes many and various member banks including all national banks that are required to be part of the system. Other banks were also allowed to join and many did. The Federal Reserve began operating in November, 1914, almost one year after the Congressional act creating the system the previous year as explained above. It was mandated by law to have the greatest power of any institution in the country - the power to create and control the nation's money supply.
Most people know little or nothing about money and banking, likely never think about it, and have no idea how what the Fed and bankers do affect their lives. Before writing this article, I had little more than the modest knowledge I learned in a required course on the subject and basic accounting as part of my MBA curriculum 46 years ago. Those courses left out the most important parts of the story and never hinted at anything sinister about how the banking system works in fact. But no one should ever imagine banks were established or intended to be run for our benefit. They surely are not, and anyone suggesting they are should read on. They're about as beneficial to the public welfare as was the MX Peacekeeper ICBM (the clever language is impressive) intended to carry nuclear warheads back in the mid-80s that had the power to destroy all life on the planet and one day may do it in its old or updated form.
The Federal Reserve Act of 1913 (the law of the land) stipulates that the Federal Reserve Banks of each region are owned by the member banks in it. These Fed banks are privately owned corporations that make a great effort to hide the fact that they, in fact, own what the public largely thinks is part of the public treasury and government. It's easy to think that as Fed chairmen and seven of the twelve Governors are appointed by the President and approved by the Senate. As such, the FRB is a sort of quasi-government entity, but the fact is the System is a privately owned for profit enterprise just like any other business. It has stockholders like other public corporations that are paid 6% risk free interest every year on their equity holdings. The public doesn't know this, and it likely wouldn't be good PR if it found out. People might be even more upset if they learned some of the owners of our Federal Reserve are powerful foreign investors in the UK, France, Germany, The Netherlands and Italy. They're partners with giant US banks like JP Morgan Chase and Citibank as well as powerful Wall Street firms like Goldman Sachs in a new world order banking cartel that influences and affects business activity everywhere and our lives.
The issue of private ownership of the Federal Reserve Banks has been challenged several times in the federal courts to no avail. Each time the courts upheld the current system under which each Federal Reserve Bank is a separate corporation owned by commercial banks in its region. One such case was Lewis v. United States that was decided by the 9th Circuit Court of Appeals that ruled the Reserve Banks are independent, privately owned and locally controlled corporations.
Our Founding Fathers Had Different Ideas Than the Powerful Men who Met on Jekll Island
Throughout our history, there was disagreement over who should control the power of the nation's money supply and the right to issue it. The Founding Fathers understood that the British Parliament was forced to levy unfair taxes on its American colonies and its own citizens because the Bank of England had run up so much debt the government needed revenue to reduce it. Benjamin Franklin, in fact, believed that was the real cause of the American Revolution. Most of the Founders also understood the danger that could result from bankers' accumulating too much wealth and power. James Madison, the main drafter of our Constitution, called them "Money Changers," referring to the Bible that said Jesus twice drove the Money Changers from the Temple in Jerusalem 2,000 years ago. Madison said:
"History records that the Money Changers have used every form of abuse, intrigue, deceit and violent means possible to maintain their control over governments by controlling money and its issuance."
Thomas Jefferson was just as strong in his condemnation when he said:
"I sincerely believe that banking institutions are more dangerous to our liberties than standing armies. Already they have raised up a money aristocracy that has set the government at defiance. The issuing power should be taken from the banks and restored to the people to whom it properly belongs."
Jefferson and Madison understood the dangers of commercial monopolies of all types and tried to assure they never would exist in the new nation. They, in fact, wanted two additional amendments added to the "Bill of Rights" in the Constitution but never got them. They believed to protect the liberty of the people the nation should have "freedom from monopolies in commerce" (what are now giant corporations including the big international banks and Wall Street investment firms) and "freedom from a permanent military," or standing armies. Try to imagine what the country would be like today if Jefferson and Madison had gotten their way - a country without giant predatory corporations exploiting everyone for profit and without a rampaging military waging war on the world, threatening to destroy it, and doing it so those corporate giants could earn even greater profits.
They never did, of course, and the people have paid dearly ever since including the great harm caused because the government relinquished its right to control the nation's money supply. It gave it away secretly with the public none the wiser, never knowing how greatly it's been harmed. It's been even worse since the 1980s because the power of the Fed grew under a friendly Republican president, and the corporate media led cheerleading for it hid the effect. For them, no public demeaning of it, its giant member banks or Wall Street allies is allowed.
Things were especially out of hand during the tenure of Alan Greenspan - a Fed chairman no one should have found much reason to cheer either before he headed the Fed when he was a presidential advisor or during the time he did. It was only after his economic consulting firm failed that he went into government service likely because he needed a new line of work. There he managed to become a larger than life seer of central banking who was elevated to near sainthood by the business pundits who thought under his tenure the skies were only blue and the few clouds in sight always had silver linings. Now Alan is retired to the greener pastures of lucrative book contracts and speaking engagements, which shows when you do your job well for the rich and powerful (at the expense of the rest of us) who gave it to you, you'll be well rewarded in the end. It's likely the new Fed chairman has taken note and will dutifully try to follow in the tradition that preceded him.
But try imagining a different sort of Fed chairman, one who knew, believed in and practiced the words and wisdom of another American president of some note - Abraham Lincoln. In 1886 Lincoln said the following: "The money powers prey upon the nation in times of peace and conspire against it in times of adversity. It is more despotic than a monarch, more insolent than autocracy and more selfish than a bureaucracy. It denounces, as public enemies, all who question its methods or throw light upon its crimes. I have two great enemies, the Southern Army in front of me and the bankers in the rear. Of the two, the one at the rear is my greatest foe."
Lincoln also appears to have said (although some dispute it): "I see in the near future a crisis approaching that unnerves me and causes me to tremble for the safety of my country.....corporations have been enthroned and an era of corruption in high places will follow, and the money power of the country will endeavor to prolong its reign by working upon the prejudices of the people until all wealth is aggregated in a few hands and the Republic is destroyed." Imagine what Lincoln might say today.
Given Lincoln's sentiment about the bankers and money power of the country, it would seem to beg the obvious question: did it play a role in, or was it the reason for, his untimely death at the hands of John Wilkes Booth? The international bankers clearly disliked Lincoln after he managed to get the Congress to pass the Legal Tender Act in 1862 that empowered the US Treasury to issue paper money called "greenbacks." Lincoln needed this legislation after he declined to pay the bankers the usurious 24 - 36% interest rates they demanded on the loans he needed to fund his war with the South. With the new banking law, Lincoln was then able to print up the millions of dollars he needed which was debt and interest free. Clearly this was not what the greedy bankers wanted as they can only profit when they get their pound of flesh from financial transactions they control. Right after the war ended Lincoln was assassinated, and shortly thereafter the so-called Greenback law was rescinded, a new national banking act was passed, and all money became interesting-bearing again.
How the Federal Reserve System Works
The Federal Reserve System is the result of the Congress and President having agreed to privatize the nation's money system and relinquish the power that should have remained the government's exclusive right. That act was so outrageous the Fed had to be deliberately designed to look like a branch of the federal government to hide the fact that it's really an all-powerful privately owned banking cartel whose member banks (including all the national ones) share in the vast profits earned from having the most important of all franchises governments alone should have - the right to print money in any amount, control its supply and price, and benefit hugely by loaning it out for a profit including to the government itself that must pay interest on the money it should never have to if it simply printed its own. Think of what happened as the government having legalized the right to counterfeit the national currency for private gain. It's no exaggeration to claim this is the greatest ever of all financial scams causing incomprehensible harm with the public none the wiser. Here's how it works in simple terms:
The Fed was given the authority to conduct the nation's monetary policy with the power to control the supply and price of money. It has three ways to do it - through open market operations, the discount rate it charges member banks, and the reserve requirement percentage of member banks assets it requires them to hold and not loan out. The Board of Governors is responsible for handling the discount rate and reserve requirements while the Federal Open Market Committee (FOMC) is in charge of the open market operations of buying or selling bonds explained further below. Using these tools, the Fed is able to influence the supply and demand for money and thus directly control the federal funds short-term rate that's always fixed unless the Fed wishes to raise or lower it. Longer rates are controlled by the powerful institutional traders in the bond market.
The FOMC and How It Works
The Federal Open Market Committee is really key to the whole process of money creation or contraction. It consists of 12 members - seven members of the Board of Fed Governors, the president of the New York Fed Bank (the most important one of all) and four of the remaining 11 Reserve Bank presidents who serve one year terms on a rotating basis. The FOMC holds eight regularly scheduled meetings a year to assess economic conditions and decide how loose or tight it wants monetary policy to be to further its stated goal of sustainable economic growth and price stability.
The FOMC literally has the power to create money out of nothing. It does it in a four step process:
Step 1 - The FOMC first approves the purchase of US government bonds on the open market.
Step 2 - The New York Fed bank buys them from sellers (financial markets always have an equal number of buyers and sellers).
Step 3 - The Fed pays for its purchases with electronic credits to the sellers' banks, which, in turn, credit the sellers' bank accounts. These credits are literally created out of nothing.
Step 4 - The banks receiving the credits can then use them as reserves to enable them to loan out as much as 10 times their amount (if their reserve requirement is 10%) through the magic (only banks have) of fractional reserve banking and, of course, collect interest on all of it. What a business, and it's all legal. Imagine how rich we might all be if we as private individuals could do the same thing. Borrow a million from the Fed and like magic it becomes 10 times as much, and we get to collect interest on all but the 10% of it we must hold in reserve. This is the magic of fractional reserve banking money creation and explains how powerful an economic stimulus it is when the Fed wants to enhance economic growth.
When the Fed wishes to contract the economy by reducing the money supply, it simply reverses the above process. Instead of buying bonds, it sells them so that money moves out of the buyers' bank accounts instead of into them. Bank loans must then be reduced by 10 times if the reserve requirement is 10%.
How the Fed Harms the Public Interest
The Federal Reserve System exists only to serve its owners and member banks and in doing so is hostile to the public interest. That's because it's a banking cartel with the power to restrict competition for greater profits gained at our expense. It goes from our pockets to theirs, and the public loses in at least four ways:
One - Through the invisible tax of inflation that results from the dilution of purchasing power caused by newly created money entering the system reducing the value of dollars already there. The Greenspan Fed was especially expansive, never was held to account for its excess and was able to pass a serious problem it created on to a future Fed chairman and society to deal with. The man we now lionize as a monetary magician began sensibly. From 1982, before he arrived in 1987, until 1992, the money supply increased on average by 8% a year. But from 1992 - 2002, the printing press worked overtime in sync with the deregulation and growth of global markets expanding the currency by more than 12% a year. It became even more extreme post 9/11 and since 2002 grew at a 15% rate. It now has more than doubled in less than a decade. It appears that the new Fed chairman has taken note and has begun reducing the rate of money expansion as he continues raising the federal funds rate to whatever level he has in mind.
Currency traders as well apparently have taken note of the rate of money supply expansion overall. Except for a respite in 2005, it's quite likely the dollar weakness since 2002 is the result of the excess amount of them created for the Bush administration's profligate spending to fund its endless wars and reckless tax cuts for the rich. The problem is further compounded as from 1964 to the present debt service has grown from 9% to 16.5% of the federal budget and rising; the current account deficit has gone from a 1% surplus to an almost 7% deficit; and federal indebtedness has grown by 40% just since 2001 and financed in large part by "the kindness of (foreign) strangers" that may be growing restive. Furthermore, since March, 2006, the Fed stopped publishing the M-3 aggregate of the total amount of dollars in circulation. With that transparency gone, big buyers of US Treasuries now have to calculate the value of the dollar based on speculation and uncertainty rather than hard data - not a way to inspire trust in the financial markets that function best in an atmosphere of openness and clarity.
Two - The public also loses because the banking cartel is able to practice usury - from it's power over a flexible currency to artificially move rates up or down to any level it chooses which many small lenders in a truly free and open market can't do. In addition, the cartel's market dominance forces most borrowers (especially smaller ones less able to issue their own debt instruments) to come to them for loans which it's then able to make using what should be the peoples' money available to them at the lowest possible cost from many highly government regulated small lenders competing for customers.
Three - Through the taxes, we, the public, must pay to cover the interest on the huge national debt (now over $8.4 trillion) accumulated from the money the Fed printed and loaned to the government. As mentioned earlier, that now totals an annualized amount exceeding two-thirds of a trillion dollars and increasing daily. It's made the bankers rich, ordinary people poorer, and the public none the wiser it's been fleeced big time.
Four - Compounding the above abuse, the cartel is able to get the public to bail out the system with more of its tax dollars. It happens whenever any of the too-big-to-fail banks need financial help to survive. The same is true for big corporations like Chrysler or Lockheed, large investment firms or hedge funds like Long-Term Capital Management or even countries like Mexico. It's also true when a single bank goes out of business and depositors must be compensated or more seriously in the wake of a systemic financial meltdown like the one that wiped out many savings and loan banks in the 1980s. Whether it's a single bank or many dozens at a time, public tax dollars are used to save the system or just pick up the tab to repay depositors insured against losses through government insurance protection up to a stipulated amount per account.
How Would Adam Smith Have Reacted to the Federal Reserve System
This concentration of banking cartel wealth and power is the opposite of what Adam Smith, the ideological godfather of free market capitalism, advocated in his writings including his seminal work The Wealth of Nations. Smith wrote about an "invisible hand" that he said worked best in a free market with many small businesses competing locally against each other. He strongly opposed the concentrated mercantilism of his day (what there was of it) which now would be the equivalent of today's giant transnational corporations and the banking cartel with the power to restrict competition, maintain higher prices than otherwise possible and earn greater profits as a result at the public's expense.
The kind of banking cartel that exists today is precisely what Smith would have condemned. But having a central bank is not in itself a bad thing provided the bank is government owned, controlled and operated for the public welfare. There's only a problem when through subterfuge the bank is set up to appear government owned and run but is, in fact, for private profit the way ours is and most others as well. And in the US, to make the arrangement work, a mostly publicly appointed governing authority runs the System acting as a shill for its private for-profit banking cartel members that wanted it in the first place and got a corrupted Congress to give it to them. To work, the cartel needs the cover it gets from its partnership with government, but it's through that arrangement that it harms the public interest for its own private gain.
And that goes to the heart of the problem: that the Congress elected to serve the people instead betrayed them by creating an all-powerful banking cartel and gave it the authority to practice fractional reserve banking with the power to get free money by creating it out of nothing. It then allowed its members a near-monopoly right to set the rates of interest they wish to charge borrowers. The whole process amounts to a legally sanctioned heist by the powerful banks working in league with government for its own gain. It's also part of a more extensive government arranged process to transfer wealth from the people to the pockets of large corporations and the rich and doing it while those being harmed are unaware it's even happening.
Another Way the Federal Reserve System Harms the Public
The Fed harms the public welfare in one other important way, and again most people are none the wiser about it. Supposedly the Federal Reserve System was established to stabilize the economy, smooth out the business cycle, maintain a healthy rate of sustainable growth while holding prices steady and benefitting everyone. So how well has it done its job? Since its creation in 1913, and with them in charge, we had the crashes of 1921 and the most important and remembered one in 1929. That was followed by The Great Depression that lasted until the onset of WW II that noted conservative economist Milton Friedman explained was caused and exacerbated because the Federal Reserve oddly decided to reduce the money supply at a time of economic contraction instead of increasing it. We then had recessions in 1953, 1957, 1969, 1975, 1981, 1990 and 2001. We also had inflation beginning in the 1960s which became quite severe through much of the 1970s and early 1980s. And we had a major banking crisis in the 1980s at which time more banks and savings and loan associations failed than ever before in our history. It happened in the wake of financial market deregulation when banks were allowed to pursue their own interests without government oversight to check their willingness to assume excess risk or stop them from trying to get away with deliberate fraud.
Along with the economic stability the Fed never achieved, we've also had soaring consumer debt; record high federal budget and trade deficits; a high level of personal bankruptcies and rising mortgage loan delinquencies; interest on a mounting national debt that's a large and rising percentage of the federal budget; the loss of our manufacturing base and it's high-paying jobs with good benefits because they're being exported to low wage countries; an economy in which services now account for nearly 80% of all business that provide mostly lower paying, less skilled jobs with few or no benefits; and a widening income and wealth gap that continues to harm lower and middle income earners to benefit the rich and well-off privileged few and a government that encourages it.
Sum it all up and the conclusion is clear. The one thing the Fed failed to accomplish above all else was what it was established to do in the first place. But it's much worse than that if we understand a cartel's real motives. It's not to serve the public interest. It's to abuse it because that's how it benefits most. It's able to do it with its legally sanctioned concentrated power and a friendly government in league with it as partners or facilitators. It's from that cozy hidden from view arrangement that it's able to get away with the grandest of grand thefts.
A Needed Solution to A Huge Problem
From the information presented above, it's clear that the Federal Reserve System was established through stealth and deceit by a handful of corrupted politicians in service to their powerful banking and Wall Street allies. They did it to defraud the public and without them being any the wiser about what, in fact, had been done or how harmful it was to be to their welfare and interests. Those in the Congress and President Wilson (a man trained in the law, one-time practicing attorney, former esteemed academic and president of Princeton University) either knew or should have known that the act he and they approved establishing the Fed was in direct violation of the Constitution they were sworn to uphold. They didn't, they broke the law, and the public paid dearly for their crime ever since to this day.
So what recourse is left, and can people be mobilized to pursue it. There's only one sensible and just solution to undo the damage done to so many for so long - abolish the Federal Reserve System and restore the power it now has to the federal government working for the public welfare. Take it back from the powerful banking cartel working against it and never allow it to be in its hands again. That alone is the only way. The great German poet and playwright Bertolt Brecht would have agreed and once said it was "easier to rob by setting up a bank than by holding up (one)."
Freeing us from the these powerful "Money Changers" would have enormous benefits for everyone. It would establish a prudent policy of money creation that would minimize our most unfair tax - inflation which is caused by private for-profit bankers manipulating the nation's money supply to enhance their profits. It would stabilize the economy and smooth out the extremes in the business cycle exacerbated by the cartel working for its benefit and against ours. It would lower the cost of money for borrowers because it would end the monopoly power the cartel now has to set the rates it chooses by opening the market to more competition. It would reduce the growing and oppressive national debt freed eventually from the extra money supply growth needed to pay it off. It would lower the public's tax burden as less revenue would be needed for debt service. It would be a momentous step toward reducing and hopefully one day eliminating the overwhelming power of all predatory corporate giants preying on us so they can grow and prosper. It might even discourage wars which are only fought for wealth and power - never for glory or to make the world safe for democracy or other false motives. Without a powerful corporate banking cartel and other industry giants that feed on the human misery they create, there would be less of a reason to pursue any. Try to imagine that kind of world and a government working for the public welfare instead of harming it as it now must do in service to capital. That world is possible, and responsible people need to work for it as the one we now have has failed and must be changed before it's too late.
A View of the World Created by the Interests of Capital and Our Government That Supports It
It's the ugly, corrupted world of neoliberal "free market" capitalism controlled by giant corporations; that benefits the privileged few alone causing great human misery and despair; a despotic world that can't endure nor must we allow it to much longer; one with endless wars for power and profit; where people are commodities to be used as needed and discarded like trash when they're not; with no concern for preserving an ecology able to sustain us and won't much longer because we're destroying it and ourselves for profit; where essential human needs don't matter under an economic model only valuing private gain; where democracy is incompatible with predatory capitalism; one no one should want to live in or ever have to; one we must change or perish. In the language of capital, that's the bottom line. Only a mass movement of committed people can change that world. It must or we all will.
Unless we can move from our failed economic model to a better alternative, it will end on its own one day by one means or other. But it may be a denouement no one would wish for - it's own self-destruction taking all else with it either by nuclear holocaust or an environment so inhospitable it won't support our ability to live in it. Our only chance is to work for change while there's still time.
A Vision of A Different Kind of World
History proves a better world is possible when committed people work hard enough for it. It's how slavery was ended; workers won the right to organize and bargain collectively; women gained equal suffrage to men, control of their own bodies, and more rights and status in the work force; blacks and other minorities won important civil rights; and politicians once enacted important social legislation if only out of fear of what might happen if they didn't.
Thomas Jefferson explained the "The price of liberty is eternal vigilance." It's also the price to keep our hard won social gains. For the past generation those gains have eroded while we weren't paying attention and only mass people action can regain them. The goal should be for a world of caring and sharing; where peoples' lives improve because we all work together for it; one at peace and not with endless wars to benefit the rich and powerful at our expense; where all essential human needs are met because governments work for the common good to assure it; with real participatory democracy where the public and elected officials work together to keep it strong and vibrant; with no oppressive corporate giants or banking cartels because the law won't allow any; where ecological nurturing and preservation are central; with clean air, water and soil and food that's fit and safe to eat; a much simpler world, more locally based than today's where notions like globalization aren't even in the vocabulary; one based on social equity and justice for all with government, law enforcement and the courts working to assure it stays that way; one we all want to live in and hope some day we can; one we want to pass on to future generations; one we can't afford not to have because the alternative may be no world at all.
We may now be at a key watershed moment where our fate hangs in the balance. We can either work together for a better, sustainable world or likely become the first species in it ever to destroy itself. If it happens, we'll likely take most others with us and not leave much behind for the few hearty ones that remain. We no longer have the luxury of debate for the kind of world we need to survive. The giant banks and corporations won't give it to us nor will a hostile government allied with them. It's up to us to go for it or likely perish if we fail. A good beginning would be by driving the Federal Reserve "money changers" out of our temple and the corporate giants with them. A better world is possible if we remember and live by political theorist Antonio Gramsci's inspirational words about "the optimism of the will." With it, organized people can find a way to beat organized money.
Stephen Lendman lives in Chicago and can be reached at lendmanstephen@sbcglobal.net. Also visit his blog site at sjlendman.blogspot.com.
Thursday, June 29, 2006
DIRTY SECRETS OF THE TEMPLE
Dirty Secrets of the Temple - by Stephen Lendman
Years ago I read William Greider's excellent book published in 1987 on how the US Federal Reserve System works. It was detailed and explicit and makes wonderful and informative reading, except for the solution he suggests to a huge problem. His was far too timid. This article proposes a much different one. Greider called his book Secrets of the Temple with a sub-title: How the Federal Reserve Runs the Country. A better sub-title might have been how the Fed (and other key central bankers) runs the world. This article attempts to summarize what it does, how it does it, for whose benefit and at whose expense. For those who don't know, prepare for some stunning information and commentary.
Let's be clear at the outset. The US Federal Reserve, Bank of England, Bank of Japan and the European Central Bank (for the 12 European countries that adopted the single euro currency in 1999) are institutions with enormous power far beyond what most people everywhere can imagine. These most dominant of all central banks, as well as most others, have a powerful influence on the financial conditions in virtually all countries including their own, of course, in an increasingly borderless financial world where a significant economic event in one nation can affect most others for better or worse.
One other powerful bank is also part of today's financial world. It needs mentioning because of its importance, even though it requires a separate article to explain how it works more fully. It's the secretive, inviolable and accountable to no one Bank of International Settlements (BIS) founded in 1930 and based in Basle, Switzerland. This bank most people never heard of is the central banker to its member central banks - a sort of banking "boss of bosses" equivalent to what apparently exists in the shadowy world of Mafia dons. Like most other central banks, including the Federal Reserve (explained below), it's privately owned by its members.
It's believed by some academicians and others who've studied the BIS that the ruling elite of financial capitalism established this bank of banks to be the apex of power to exercise authority over a world financial system owned and controlled by them. It's thought their plan was to use this bank to dominate the political system of every country and control the world economy in a feudalistic fashion. In a word, the thinking goes that these super-elite want to rule the world by controlling its money, and they set up this supranational all-powerful bank of banks to do it. As important as that is, that discussion remains for another time as the intent of this article is to focus solely on the US Federal Reserve.
The dominant central banks and BIS, together with most others, wield their influence in cartel-like alliance with each other to assure they all benefit more than they otherwise would without such a cozy arrangement. With their immense power it's no play on words to say these financial institutions do indeed rule the world. Because they're able to create money, they fund the needs of their governments, their militaries and all business activity that couldn't function without a ready supply of that most needed of all commodities. It's money, not love, that makes the world go round, and central bankers have the power to create or remove from circulation as much or little of it as they choose and for whatever purpose they have in mind. That kind of power can move mountains or destroy them.
No nation's central bank is more powerful today than the US Federal Reserve, but it wasn't always that way, and it now has competition for the top spot it hasn't known since WW II. The Fed, as it's called, has existed since it was first established by an act of Congress in 1913. But the Bank of England has been around since Britannia ruled the waves beginning in 1694 when King William III needed help funding the kind of escapade that takes lots of ready cash - war. Back then it was with France, and the king needed a friendly banker to print it up for him to help him fight it. He also needed financial help to facilitate trade and manage the country's debt that always mounts up when wars are fought. The Bank of England wasn't the first central bank, but it was the modern world's first privately owned one in a powerful country. It was called the Bank of England to keep the public from knowing that it, like our Federal Reserve, was and still is privately owned and not part of the government. It was also the model used in the formation of our own central bank and most others.
The Brits may have had a 219 year head start on the Fed, but central bankers are only as powerful as the countries they represent and their economies. Today the former dominant Brits must settle for a far lesser role as being just one of many junior partners to a US hegemon that emerged post WW II as the world's dominant economic power. It still is today, even though some credible experts believe this country may have seen and past its peak and is now in decline. Some go further and claim our decline has been accelerated by the disastrous policies of the Bush administration that irrationally believes waging war on the world without end is the way to rule it, promote endless economic growth and dominance, and thus preserve the nation's preeminent position as the reigning economic champion.
It's easy to challenge that view and think that champ has climbed into the ring a few times too many, has endless plans for more return engagements, and is likely to meet the same fate many a former human one did who didn't know when to quit and ended up with chronic brain damage known as dementia. The lesson from history is always the same. The price for reckless behavior is high, painful and inevitable. It's true for countries as well as individuals, but too often neither one sees it until it's too late. The biggest difference between the US today and other nations in the past that paid dearly for not yielding when their day had passed is that we have an all-powerful arsenal others never did. Should we decide to use it, there likely wouldn't be much left behind for a successor. Not a pleasant thought, but a very real one.
It All Began in 1910 On Jekll Island
It sounds like the title of a horror movie, but the real life events that happened at this privately owned island off the coast of Georgia in 1910 would have challenged even the Hollywood bad dream factory to come up with.
It was here that seven very rich and powerful men met in secret for nine days and created the Federal Reserve System that came into being three years later on December 23, 1913 by an act of Congress. Since that time, the nation and world would never be the same, but only the rich and powerful were the beneficiaries. That was the whole idea, and it worked as planned.
The Federal Reserve Act that began it all must surely rank as one of the most disastrous and outrageous pieces of legislation to the public welfare ever to come out of any legislative body. It may have also have been and still is illegal according to Article 1, Section 8 of the Constitution which happens to be the inviolable law of the land. The article states that Congress shall have the power to coin (create) money and regulate the value thereof. In 1935, the US Supreme Court ruled the Congress cannot constitutionally delegate its power to another group or body. The Congress thus acted in violation of the Constitution it's sworn to uphold and in so doing created the Federal Reserve System that, as will be explained below, is a private for-profit corporation operating at the expense of the public welfare. By its action, our lawmakers committed fraud against the people of the country and so far have gotten away with it without the public even knowing about the harm done.
The shameful result is that what should have arrived stillborn is now the most dominant institution on earth, and all because of what began on a privately owned island with a scary name. But had the Congress acted responsibly, the act of Fed creation might never have happened. The legislation establishing it was so harmful to the public interest, it likely never would have passed if it hadn't been shepherded through a carefully prepared Congressional Conference Committee meeting scheduled for between 1:30 - 4:30 AM (when most members of Congress were asleep) on December 22, 1913. The Act was then voted on the next day and passed although many members of the body had left for the Christmas holidays and most others who stayed behind hadn't had time to read it or know its contents. Sound familiar? Still it passed (like a thief in the night) and was signed into law by an unwitting or complicit Woodrow Wilson who later admitted he made a terrible mistake saying "I unwittingly ruined my country." But it was too late for postmortems, and the American people have paid dearly ever since. It's about time the public understood that and began to demand an end to over 90 years of damage done.
It almost happened 43 years ago when one president decided to act on behalf of the people who elected him. That man was John Kennedy, who before his death planned to end the Federal Reserve System to eliminate the national debt a central bank creates by printing money and loaning it to the government. That debt has now risen to over $8,400,000,000,000 ($8.4 trillion) which every taxpayer must pay for and has done so in the amount of nearly $174,000,000,000 ($174 billion) in just the first three months of 2006. This debt service is now an annualized amount exceeding two-thirds of a trillion dollars. It's made the bankers rich (which was the whole idea) and the public poorer because we're taxed to pay the tab. It's no exaggeration to call this the greatest financial scam in world history and one that gets greater every day.
The debt was less onerous 40 years ago, but Kennedy understood its danger to the country and the burden it placed on the public. Thus, on June 4, 1963, he issued presidential order EO 11110 giving the president authority to issue currency. He then ordered the US Treasury to print over $4 billion worth of "United States Notes" to replace Federal Reserve Notes. He intended to replace them all when enough of the new currency was in circulation so he could end the Federal Reserve System and the control it gave the international bankers over the US government and the public. Just months after the Kennedy plan went into effect, he was assassinated in Dallas in what was surely a coup d'etat disguised to look otherwise and may well have been carried out at least in part to save the Fed System and concentration of power it created that was so profitable for the powerful bankers in the country. Those benefitting from it had good reason to be involved in the plot to save the special privilege they weren't willing to give up without a fight. It's a plausible explanation that may explain who may have been behind the assassination and for what reason. Whatever the truth is, the banking cartel was only in distress a short time. Once Lyndon Johnson took office, he rescinded Kennedy's presidential order and restored the cartel's former power. It's kept it ever since and is now, of course, more powerful than ever. Even presidents are unable to stop it and those who would try have a lesson from history to give them pause.
The predecessors of the possible Kennedy coup plotters were the men who met on Jekyll Island in 1910. They represented some of the richest and most powerful men in the world - the Morgans, Rockefellers, Rothschilds of Europe (who dominated all European banking by the mid-1800s and became and still may be the wealthiest and most powerful family of all) and others of great influence and power. Included was a US senator, a high ranking Treasury official, the president of the largest bank in the country at the time, a leading Wall Street figure and the man who would later become the first chairman of the Federal Reserve System. It was quite an assemblage, and they came to accomplish one thing. They wanted to change the ideology and course of American business that up to then was based on marketplace competition and replace it with monopoly. They also knew what Baron M.A. Rothschild understood when he once said: "Give me control over a nation's currency and I care not who makes its laws." They knew the wisdom of what's stated in Proverbs 22:7 as well: "The rich rule over the poor, and the borrower is servant to the lender."
This was the dawning of the age of powerful cartels when the seven financial titans meeting secretly in the island's clubhouse decided no longer to compete with each other and wanted the power to arrange it. They were already colluding informally but knew it would all work better under a legally sanctioned cartel. They wanted a banking cartel and got one that flourishes today below the public radar with the tool they wanted most - the ability to control the nation's money supply that gave them almost unlimited power. The cartel now works cooperatively with their governments and all other powerful transnational corporations in a dominant global alliance that allows them to control the world's markets, resources, cheap labor and our lives.
The Federal Reserve System Is Not A Government Agency - It's A Privately Owned Cartel of Powerful Banks Protected By Law
It's commonly but falsely believed the Federal Reserve System is a function of government and subject to its control. False. It's often referred to as a quasi-governmental, decentralized central bank, but that's just cover to disguise what, in fact, it really is: a privately held and operated cartel made to look like the government is in charge. The fact that it's headquartered in Washington in the formidable and impressive-looking Eccles building (named after a former Fed chairman) is just part of the clever subterfuge. Here's how it works:
The Fed is composed of a Board of Governors in Washington and 12 regional banks in major cities throughout the country (including in my own city of Chicago where anyone once but no longer could walk up to a teller's window and buy US Treasury securities). The system also includes many and various member banks including all national banks that are required to be part of the system. Other banks were also allowed to join and many did. The Federal Reserve began operating in November, 1914, almost one year after the Congressional act creating the system the previous year as explained above. It was mandated by law to have the greatest power of any institution in the country - the power to create and control the nation's money supply.
Most people know little or nothing about money and banking, likely never think about it, and have no idea how what the Fed and bankers do affect their lives. Before writing this article, I had little more than the modest knowledge I learned in a required course on the subject and basic accounting as part of my MBA curriculum 46 years ago. Those courses left out the most important parts of the story and never hinted at anything sinister about how the banking system works in fact. But no one should ever imagine banks were established or intended to be run for our benefit. They surely are not, and anyone suggesting they are should read on. They're about as beneficial to the public welfare as was the MX Peacekeeper ICBM (the clever language is impressive) intended to carry nuclear warheads back in the mid-80s that had the power to destroy all life on the planet and one day may do it in its old or updated form.
The Federal Reserve Act of 1913 (the law of the land) stipulates that the Federal Reserve Banks of each region are owned by the member banks in it. These Fed banks are privately owned corporations that make a great effort to hide the fact that they, in fact, own what the public largely thinks is part of the public treasury and government. It's easy to think that as Fed chairmen and seven of the twelve Governors are appointed by the President and approved by the Senate. As such, the FRB is a sort of quasi-government entity, but the fact is the System is a privately owned for profit enterprise just like any other business. It has stockholders like other public corporations that are paid 6% risk free interest every year on their equity holdings. The public doesn't know this, and it likely wouldn't be good PR if it found out. People might be even more upset if they learned some of the owners of our Federal Reserve are powerful foreign investors in the UK, France, Germany, The Netherlands and Italy. They're partners with giant US banks like JP Morgan Chase and Citibank as well as powerful Wall Street firms like Goldman Sachs in a new world order banking cartel that influences and affects business activity everywhere and our lives.
The issue of private ownership of the Federal Reserve Banks has been challenged several times in the federal courts to no avail. Each time the courts upheld the current system under which each Federal Reserve Bank is a separate corporation owned by commercial banks in its region. One such case was Lewis v. United States that was decided by the 9th Circuit Court of Appeals that ruled the Reserve Banks are independent, privately owned and locally controlled corporations.
Our Founding Fathers Had Different Ideas Than the Powerful Men who Met on Jekll Island
Throughout our history, there was disagreement over who should control the power of the nation's money supply and the right to issue it. The Founding Fathers understood that the British Parliament was forced to levy unfair taxes on its American colonies and its own citizens because the Bank of England had run up so much debt the government needed revenue to reduce it. Benjamin Franklin, in fact, believed that was the real cause of the American Revolution. Most of the Founders also understood the danger that could result from bankers' accumulating too much wealth and power. James Madison, the main drafter of our Constitution, called them "Money Changers," referring to the Bible that said Jesus twice drove the Money Changers from the Temple in Jerusalem 2,000 years ago. Madison said:
"History records that the Money Changers have used every form of abuse, intrigue, deceit and violent means possible to maintain their control over governments by controlling money and its issuance."
Thomas Jefferson was just as strong in his condemnation when he said:
"I sincerely believe that banking institutions are more dangerous to our liberties than standing armies. Already they have raised up a money aristocracy that has set the government at defiance. The issuing power should be taken from the banks and restored to the people to whom it properly belongs."
Jefferson and Madison understood the dangers of commercial monopolies of all types and tried to assure they never would exist in the new nation. They, in fact, wanted two additional amendments added to the "Bill of Rights" in the Constitution but never got them. They believed to protect the liberty of the people the nation should have "freedom from monopolies in commerce" (what are now giant corporations including the big international banks and Wall Street investment firms) and "freedom from a permanent military," or standing armies. Try to imagine what the country would be like today if Jefferson and Madison had gotten their way - a country without giant predatory corporations exploiting everyone for profit and without a rampaging military waging war on the world, threatening to destroy it, and doing it so those corporate giants could earn even greater profits.
They never did, of course, and the people have paid dearly ever since including the great harm caused because the government relinquished its right to control the nation's money supply. It gave it away secretly with the public none the wiser, never knowing how greatly it's been harmed. It's been even worse since the 1980s because the power of the Fed grew under a friendly Republican president, and the corporate media led cheerleading for it hid the effect. For them, no public demeaning of it, its giant member banks or Wall Street allies is allowed.
Things were especially out of hand during the tenure of Alan Greenspan - a Fed chairman no one should have found much reason to cheer either before he headed the Fed when he was a presidential advisor or during the time he did. It was only after his economic consulting firm failed that he went into government service likely because he needed a new line of work. There he managed to become a larger than life seer of central banking who was elevated to near sainthood by the business pundits who thought under his tenure the skies were only blue and the few clouds in sight always had silver linings. Now Alan is retired to the greener pastures of lucrative book contracts and speaking engagements, which shows when you do your job well for the rich and powerful (at the expense of the rest of us) who gave it to you, you'll be well rewarded in the end. It's likely the new Fed chairman has taken note and will dutifully try to follow in the tradition that preceded him.
But try imagining a different sort of Fed chairman, one who knew, believed in and practiced the words and wisdom of another American president of some note - Abraham Lincoln. In 1886 Lincoln said the following: "The money powers prey upon the nation in times of peace and conspire against it in times of adversity. It is more despotic than a monarch, more insolent than autocracy and more selfish than a bureaucracy. It denounces, as public enemies, all who question its methods or throw light upon its crimes. I have two great enemies, the Southern Army in front of me and the bankers in the rear. Of the two, the one at the rear is my greatest foe."
Lincoln also appears to have said (although some dispute it): "I see in the near future a crisis approaching that unnerves me and causes me to tremble for the safety of my country.....corporations have been enthroned and an era of corruption in high places will follow, and the money power of the country will endeavor to prolong its reign by working upon the prejudices of the people until all wealth is aggregated in a few hands and the Republic is destroyed." Imagine what Lincoln might say today.
Given Lincoln's sentiment about the bankers and money power of the country, it would seem to beg the obvious question: did it play a role in, or was it the reason for, his untimely death at the hands of John Wilkes Booth? The international bankers clearly disliked Lincoln after he managed to get the Congress to pass the Legal Tender Act in 1862 that empowered the US Treasury to issue paper money called "greenbacks." Lincoln needed this legislation after he declined to pay the bankers the usurious 24 - 36% interest rates they demanded on the loans he needed to fund his war with the South. With the new banking law, Lincoln was then able to print up the millions of dollars he needed which was debt and interest free. Clearly this was not what the greedy bankers wanted as they can only profit when they get their pound of flesh from financial transactions they control. Right after the war ended Lincoln was assassinated, and shortly thereafter the so-called Greenback law was rescinded, a new national banking act was passed, and all money became interesting-bearing again.
How the Federal Reserve System Works
The Federal Reserve System is the result of the Congress and President having agreed to privatize the nation's money system and relinquish the power that should have remained the government's exclusive right. That act was so outrageous the Fed had to be deliberately designed to look like a branch of the federal government to hide the fact that it's really an all-powerful privately owned banking cartel whose member banks (including all the national ones) share in the vast profits earned from having the most important of all franchises governments alone should have - the right to print money in any amount, control its supply and price, and benefit hugely by loaning it out for a profit including to the government itself that must pay interest on the money it should never have to if it simply printed its own. Think of what happened as the government having legalized the right to counterfeit the national currency for private gain. It's no exaggeration to claim this is the greatest ever of all financial scams causing incomprehensible harm with the public none the wiser. Here's how it works in simple terms:
The Fed was given the authority to conduct the nation's monetary policy with the power to control the supply and price of money. It has three ways to do it - through open market operations, the discount rate it charges member banks, and the reserve requirement percentage of member banks assets it requires them to hold and not loan out. The Board of Governors is responsible for handling the discount rate and reserve requirements while the Federal Open Market Committee (FOMC) is in charge of the open market operations of buying or selling bonds explained further below. Using these tools, the Fed is able to influence the supply and demand for money and thus directly control the federal funds short-term rate that's always fixed unless the Fed wishes to raise or lower it. Longer rates are controlled by the powerful institutional traders in the bond market.
The FOMC and How It Works
The Federal Open Market Committee is really key to the whole process of money creation or contraction. It consists of 12 members - seven members of the Board of Fed Governors, the president of the New York Fed Bank (the most important one of all) and four of the remaining 11 Reserve Bank presidents who serve one year terms on a rotating basis. The FOMC holds eight regularly scheduled meetings a year to assess economic conditions and decide how loose or tight it wants monetary policy to be to further its stated goal of sustainable economic growth and price stability.
The FOMC literally has the power to create money out of nothing. It does it in a four step process:
Step 1 - The FOMC first approves the purchase of US government bonds on the open market.
Step 2 - The New York Fed bank buys them from sellers (financial markets always have an equal number of buyers and sellers).
Step 3 - The Fed pays for its purchases with electronic credits to the sellers' banks, which, in turn, credit the sellers' bank accounts. These credits are literally created out of nothing.
Step 4 - The banks receiving the credits can then use them as reserves to enable them to loan out as much as 10 times their amount (if their reserve requirement is 10%) through the magic (only banks have) of fractional reserve banking and, of course, collect interest on all of it. What a business, and it's all legal. Imagine how rich we might all be if we as private individuals could do the same thing. Borrow a million from the Fed and like magic it becomes 10 times as much, and we get to collect interest on all but the 10% of it we must hold in reserve. This is the magic of fractional reserve banking money creation and explains how powerful an economic stimulus it is when the Fed wants to enhance economic growth.
When the Fed wishes to contract the economy by reducing the money supply, it simply reverses the above process. Instead of buying bonds, it sells them so that money moves out of the buyers' bank accounts instead of into them. Bank loans must then be reduced by 10 times if the reserve requirement is 10%.
How the Fed Harms the Public Interest
The Federal Reserve System exists only to serve its owners and member banks and in doing so is hostile to the public interest. That's because it's a banking cartel with the power to restrict competition for greater profits gained at our expense. It goes from our pockets to theirs, and the public loses in at least four ways:
One - Through the invisible tax of inflation that results from the dilution of purchasing power caused by newly created money entering the system reducing the value of dollars already there. The Greenspan Fed was especially expansive, never was held to account for its excess and was able to pass a serious problem it created on to a future Fed chairman and society to deal with. The man we now lionize as a monetary magician began sensibly. From 1982, before he arrived in 1987, until 1992, the money supply increased on average by 8% a year. But from 1992 - 2002, the printing press worked overtime in sync with the deregulation and growth of global markets expanding the currency by more than 12% a year. It became even more extreme post 9/11 and since 2002 grew at a 15% rate. It now has more than doubled in less than a decade. It appears that the new Fed chairman has taken note and has begun reducing the rate of money expansion as he continues raising the federal funds rate to whatever level he has in mind.
Currency traders as well apparently have taken note of the rate of money supply expansion overall. Except for a respite in 2005, it's quite likely the dollar weakness since 2002 is the result of the excess amount of them created for the Bush administration's profligate spending to fund its endless wars and reckless tax cuts for the rich. The problem is further compounded as from 1964 to the present debt service has grown from 9% to 16.5% of the federal budget and rising; the current account deficit has gone from a 1% surplus to an almost 7% deficit; and federal indebtedness has grown by 40% just since 2001 and financed in large part by "the kindness of (foreign) strangers" that may be growing restive. Furthermore, since March, 2006, the Fed stopped publishing the M-3 aggregate of the total amount of dollars in circulation. With that transparency gone, big buyers of US Treasuries now have to calculate the value of the dollar based on speculation and uncertainty rather than hard data - not a way to inspire trust in the financial markets that function best in an atmosphere of openness and clarity.
Two - The public also loses because the banking cartel is able to practice usury - from it's power over a flexible currency to artificially move rates up or down to any level it chooses which many small lenders in a truly free and open market can't do. In addition, the cartel's market dominance forces most borrowers (especially smaller ones less able to issue their own debt instruments) to come to them for loans which it's then able to make using what should be the peoples' money available to them at the lowest possible cost from many highly government regulated small lenders competing for customers.
Three - Through the taxes, we, the public, must pay to cover the interest on the huge national debt (now over $8.4 trillion) accumulated from the money the Fed printed and loaned to the government. As mentioned earlier, that now totals an annualized amount exceeding two-thirds of a trillion dollars and increasing daily. It's made the bankers rich, ordinary people poorer, and the public none the wiser it's been fleeced big time.
Four - Compounding the above abuse, the cartel is able to get the public to bail out the system with more of its tax dollars. It happens whenever any of the too-big-to-fail banks need financial help to survive. The same is true for big corporations like Chrysler or Lockheed, large investment firms or hedge funds like Long-Term Capital Management or even countries like Mexico. It's also true when a single bank goes out of business and depositors must be compensated or more seriously in the wake of a systemic financial meltdown like the one that wiped out many savings and loan banks in the 1980s. Whether it's a single bank or many dozens at a time, public tax dollars are used to save the system or just pick up the tab to repay depositors insured against losses through government insurance protection up to a stipulated amount per account.
How Would Adam Smith Have Reacted to the Federal Reserve System
This concentration of banking cartel wealth and power is the opposite of what Adam Smith, the ideological godfather of free market capitalism, advocated in his writings including his seminal work The Wealth of Nations. Smith wrote about an "invisible hand" that he said worked best in a free market with many small businesses competing locally against each other. He strongly opposed the concentrated mercantilism of his day (what there was of it) which now would be the equivalent of today's giant transnational corporations and the banking cartel with the power to restrict competition, maintain higher prices than otherwise possible and earn greater profits as a result at the public's expense.
The kind of banking cartel that exists today is precisely what Smith would have condemned. But having a central bank is not in itself a bad thing provided the bank is government owned, controlled and operated for the public welfare. There's only a problem when through subterfuge the bank is set up to appear government owned and run but is, in fact, for private profit the way ours is and most others as well. And in the US, to make the arrangement work, a mostly publicly appointed governing authority runs the System acting as a shill for its private for-profit banking cartel members that wanted it in the first place and got a corrupted Congress to give it to them. To work, the cartel needs the cover it gets from its partnership with government, but it's through that arrangement that it harms the public interest for its own private gain.
And that goes to the heart of the problem: that the Congress elected to serve the people instead betrayed them by creating an all-powerful banking cartel and gave it the authority to practice fractional reserve banking with the power to get free money by creating it out of nothing. It then allowed its members a near-monopoly right to set the rates of interest they wish to charge borrowers. The whole process amounts to a legally sanctioned heist by the powerful banks working in league with government for its own gain. It's also part of a more extensive government arranged process to transfer wealth from the people to the pockets of large corporations and the rich and doing it while those being harmed are unaware it's even happening.
Another Way the Federal Reserve System Harms the Public
The Fed harms the public welfare in one other important way, and again most people are none the wiser about it. Supposedly the Federal Reserve System was established to stabilize the economy, smooth out the business cycle, maintain a healthy rate of sustainable growth while holding prices steady and benefitting everyone. So how well has it done its job? Since its creation in 1913, and with them in charge, we had the crashes of 1921 and the most important and remembered one in 1929. That was followed by The Great Depression that lasted until the onset of WW II that noted conservative economist Milton Friedman explained was caused and exacerbated because the Federal Reserve oddly decided to reduce the money supply at a time of economic contraction instead of increasing it. We then had recessions in 1953, 1957, 1969, 1975, 1981, 1990 and 2001. We also had inflation beginning in the 1960s which became quite severe through much of the 1970s and early 1980s. And we had a major banking crisis in the 1980s at which time more banks and savings and loan associations failed than ever before in our history. It happened in the wake of financial market deregulation when banks were allowed to pursue their own interests without government oversight to check their willingness to assume excess risk or stop them from trying to get away with deliberate fraud.
Along with the economic stability the Fed never achieved, we've also had soaring consumer debt; record high federal budget and trade deficits; a high level of personal bankruptcies and rising mortgage loan delinquencies; interest on a mounting national debt that's a large and rising percentage of the federal budget; the loss of our manufacturing base and it's high-paying jobs with good benefits because they're being exported to low wage countries; an economy in which services now account for nearly 80% of all business that provide mostly lower paying, less skilled jobs with few or no benefits; and a widening income and wealth gap that continues to harm lower and middle income earners to benefit the rich and well-off privileged few and a government that encourages it.
Sum it all up and the conclusion is clear. The one thing the Fed failed to accomplish above all else was what it was established to do in the first place. But it's much worse than that if we understand a cartel's real motives. It's not to serve the public interest. It's to abuse it because that's how it benefits most. It's able to do it with its legally sanctioned concentrated power and a friendly government in league with it as partners or facilitators. It's from that cozy hidden from view arrangement that it's able to get away with the grandest of grand thefts.
A Needed Solution to A Huge Problem
From the information presented above, it's clear that the Federal Reserve System was established through stealth and deceit by a handful of corrupted politicians in service to their powerful banking and Wall Street allies. They did it to defraud the public and without them being any the wiser about what, in fact, had been done or how harmful it was to be to their welfare and interests. Those in the Congress and President Wilson (a man trained in the law, one-time practicing attorney, former esteemed academic and president of Princeton University) either knew or should have known that the act he and they approved establishing the Fed was in direct violation of the Constitution they were sworn to uphold. They didn't, they broke the law, and the public paid dearly for their crime ever since to this day.
So what recourse is left, and can people be mobilized to pursue it. There's only one sensible and just solution to undo the damage done to so many for so long - abolish the Federal Reserve System and restore the power it now has to the federal government working for the public welfare. Take it back from the powerful banking cartel working against it and never allow it to be in its hands again. That alone is the only way. The great German poet and playwright Bertolt Brecht would have agreed and once said it was "easier to rob by setting up a bank than by holding up (one)."
Freeing us from the these powerful "Money Changers" would have enormous benefits for everyone. It would establish a prudent policy of money creation that would minimize our most unfair tax - inflation which is caused by private for-profit bankers manipulating the nation's money supply to enhance their profits. It would stabilize the economy and smooth out the extremes in the business cycle exacerbated by the cartel working for its benefit and against ours. It would lower the cost of money for borrowers because it would end the monopoly power the cartel now has to set the rates it chooses by opening the market to more competition. It would reduce the growing and oppressive national debt freed eventually from the extra money supply growth needed to pay it off. It would lower the public's tax burden as less revenue would be needed for debt service. It would be a momentous step toward reducing and hopefully one day eliminating the overwhelming power of all predatory corporate giants preying on us so they can grow and prosper. It might even discourage wars which are only fought for wealth and power - never for glory or to make the world safe for democracy or other false motives. Without a powerful corporate banking cartel and other industry giants that feed on the human misery they create, there would be less of a reason to pursue any. Try to imagine that kind of world and a government working for the public welfare instead of harming it as it now must do in service to capital. That world is possible, and responsible people need to work for it as the one we now have has failed and must be changed before it's too late.
A View of the World Created by the Interests of Capital and Our Government That Supports It
It's the ugly, corrupted world of neoliberal "free market" capitalism controlled by giant corporations; that benefits the privileged few alone causing great human misery and despair; a despotic world that can't endure nor must we allow it to much longer; one with endless wars for power and profit; where people are commodities to be used as needed and discarded like trash when they're not; with no concern for preserving an ecology able to sustain us and won't much longer because we're destroying it and ourselves for profit; where essential human needs don't matter under an economic model only valuing private gain; where democracy is incompatible with predatory capitalism; one no one should want to live in or ever have to; one we must change or perish. In the language of capital, that's the bottom line. Only a mass movement of committed people can change that world. It must or we all will.
Unless we can move from our failed economic model to a better alternative, it will end on its own one day by one means or other. But it may be a denouement no one would wish for - it's own self-destruction taking all else with it either by nuclear holocaust or an environment so inhospitable it won't support our ability to live in it. Our only chance is to work for change while there's still time.
A Vision of A Different Kind of World
History proves a better world is possible when committed people work hard enough for it. It's how slavery was ended; workers won the right to organize and bargain collectively; women gained equal suffrage to men, control of their own bodies, and more rights and status in the work force; blacks and other minorities won important civil rights; and politicians once enacted important social legislation if only out of fear of what might happen if they didn't.
Thomas Jefferson explained the "The price of liberty is eternal vigilance." It's also the price to keep our hard won social gains. For the past generation those gains have eroded while we weren't paying attention and only mass people action can regain them. The goal should be for a world of caring and sharing; where peoples' lives improve because we all work together for it; one at peace and not with endless wars to benefit the rich and powerful at our expense; where all essential human needs are met because governments work for the common good to assure it; with real participatory democracy where the public and elected officials work together to keep it strong and vibrant; with no oppressive corporate giants or banking cartels because the law won't allow any; where ecological nurturing and preservation are central; with clean air, water and soil and food that's fit and safe to eat; a much simpler world, more locally based than today's where notions like globalization aren't even in the vocabulary; one based on social equity and justice for all with government, law enforcement and the courts working to assure it stays that way; one we all want to live in and hope some day we can; one we want to pass on to future generations; one we can't afford not to have because the alternative may be no world at all.
We may now be at a key watershed moment where our fate hangs in the balance. We can either work together for a better, sustainable world or likely become the first species in it ever to destroy itself. If it happens, we'll likely take most others with us and not leave much behind for the few hearty ones that remain. We no longer have the luxury of debate for the kind of world we need to survive. The giant banks and corporations won't give it to us nor will a hostile government allied with them. It's up to us to go for it or likely perish if we fail. A good beginning would be by driving the Federal Reserve "money changers" out of our temple and the corporate giants with them. A better world is possible if we remember and live by political theorist Antonio Gramsci's inspirational words about "the optimism of the will." With it, organized people can find a way to beat organized money.
Stephen Lendman lives in Chicago and can be reached at lendmanstephen@sbcglobal.net. Also visit his blog site at sjlendman.blogspot.com.
Tuesday, March 8, 2011
ప్రజలకు సబ్సిడీ భారం పంచే పథకం
బిజినెస్వాచ్ డెస్క్ Mon, 7 Mar 2011, IST
కొండూరి వీరయ్య
అనుభవాజ్ఞుడైన రాజకీయవేత్త ప్రణబ్ ముఖర్జీ ప్రతిపాదించిన బడ్జెట్ ఆర్థిక వ్యవస్థను కూడా రాజకీయ రంగంలాగే సంక్షోభంలోకి నెడుతుందా అన్న సందేహం కలుగుతోంది. బడ్జెట్ రూపకల్పన ఆర్థికరంగంలో ప్రపంచ ప్రఖ్యాతి గాంచిన ఆర్థికవేత్తలు మాంటెక్సింగ్ అహ్లువాలియా, కౌశిక్బసు వంటి వారి పర్యవేక్షణలో జరిగింది. అయినా వాస్తవిక జాతీయ అవసరాలకు తగ్గట్లు బడ్జెట్ ప్రతిపాదనలు లేకపోవటంతో మొత్తంగా బడ్జెట్ ప్రక్రియే ఆందోళనకరంగా మారుతోంది. ఉదాహరణకు ఈ బడ్జెట్లో ప్రతిపాదించిన నగదు సబ్సిడీ పథకం గురించి చూద్దాం.
ఎరువులు, డీజిలు, పెట్రోలియం సబ్సిడీ స్థానంలో దారిద్య్రరేఖకు దిగువన ఉన్న వారికినేరుగా సబ్సిడీ ఫలితాలు అందేలా చూడటానికి సరుకుల స్థానంలో డబ్బులు అందచేయనున్నామని బడ్జెట్ ఉపన్యాసంలో ఆర్థికమంత్రి ప్రకటించారు. సంబంధిత విధి విధానాలు రూపొందించటానికి నందన్ నీలేకని ఆధ్వర్యంలో ఒక టాస్క్ఫోర్స్ను కూడా నియమించారు. ఈ టాస్క్ఫోర్స్ జూన్ నాటికల్లా విధి విధానాలు రూపాదించాలి. ఈ పద్ధతిని అమలు చేయటానికి ఆధార్ పథకాన్ని పునాదిగా చేసుకుంటామని ప్రభుత్వం చెప్పింది. అంటే ఆధార్ పథకం ద్వారా ప్రజలందరికీ బహుముఖ ప్రయోజనకారి అయిన గుర్తింపుకార్డులు ఇచ్చి ఈ గుర్తింపు కార్డులతో సమాచారకేంద్రం ఏర్పాటు చేస్తారు. ఈ సమాచార కేంద్రమంతా ఒక చోట క్రోడీకరించి పథకాల ప్రయోజనాలు సదరు ప్రజలకు అందుతాయో లేదో పర్యవేక్షిస్తున్నారన్నమాట. కాశ్మీర్ నుండి కన్యాకుమారి వరకూ విస్తరించి ఉన్న ఈ దేశంలో లక్షలాది మంది ప్రభుత్వ సిబ్బందిని మూలమూలలా నియమించిన తర్వాత కూడా వివిధ పథకాల అమల్లో లోపాలు జరుగుతున్నాయి. అటువంటిది ఒక కంప్యూటర్ మాస్టర్ స్విచ్ను అదుపు చేస్తూ పథకాలు అమలు చేయటం అన్నది ఎంత వరకు సాధ్యం ?
బడ్జెట్కు ముందు విడుదలైన ఆర్థిక సర్వేలో ప్రణబ్ ముఖర్జీ బడ్జెట్ ప్రకటనకు అవసరమైన వేదికను సిద్ధం చేసింది ప్రభుత్వం. ద్రవ్యోల్బణాన్ని నియంత్రించేందుకు సబ్సిడీల వ్యవస్థను సంస్కరించాలన్నది ఆర్థిక సర్వే ఉపదేశం. ఈ సంస్కరణలో భాగంగానే సరుకుల రూపంలో సబ్సిడీలు ఇవ్వటం మానేసి ఈ సబ్సిడీకి కేటాయించిన మొత్తాన్ని నేరుగా లబ్దిదారులకు చేరేలా చర్యలు చేపట్టాలని కూడా సూచించింది. తద్వారా ప్రజల చేతుల్లో డబ్బులు రావటంతో మార్కెట్లో ఎంత మేర ధరలు పెరిగాయి అన్నదాంతో నిమిత్తం లేకుండా వాళ్లే సరుకులు కొనుగోలు చేస్తారు, దాంతో ధరల సమస్య ఉండదు అన్నది ఆర్థిక సర్వే సిఫారసు సారాంశం. కానీ నిజానికి ఇది ఏమేరకు సాధ్యం, ఈ విధానం అమల్లో ఉన్న పరిమితులు ఏమిటి అన్న విషయంపై ప్రభుత్వం దృష్టి మళ్లించలేదు. ప్రస్తుతం ఉన్న సబ్సిడీ వ్యవస్థ రెండు విధాలుగా ఆర్థిక వ్యవస్థ నిర్వహణకు సహకరిస్తోంది. ప్రభుత్వమే సరుకులు సేకరించి, వాటికి అయ్యే ఖర్చు భరించి మార్కెట్ ఖర్చు కంటే ఎంతో కొంత తక్కువ ధరకు ప్రజలకు సరఫరా చేయటం ఇప్పుడున్న సబ్సిడీ వ్యవస్థ సారాంశం. తొలిదశలో ప్రభుత్వం చమురు ఉత్పత్తులు, ఎరువుల సబ్సిడీ విషయంలో క్యాష్ సబ్సిడీ పథకం అమలుచేయాలని నిర్ణయించింది కాబట్టి ముందుగా ఈ సరుకులు ప్రస్తుత సబ్సిడీ వ్యవస్థలో ఏ విధంగా ప్రజలకు చేరుతున్నాయో పరిశీలిద్దాం.
స్వదేశంలో తయారైన చమురు, విదేశాల నుండి దిగుమతి చేసుకునే చమురు నిల్వలు మొత్తం చమురు శుద్ధి కర్మాగారాలకు వెళ్తాయి. శుద్ధి చేయబడిన తర్వాత సరఫరా కేంద్రాలకు చేరతాయి. ఈ మొత్తానికి అయ్యే ఖర్చును లెక్కించి చమురు కంపెనీలు లీటరు పెట్రోలు, డీజిలు ధర నిర్ణయిస్తాయి. అందులో కొంత భాగాన్ని ప్రభుత్వమే సబ్సిడీ రూపంలో కంపెనీలకు అందచేస్తుంది. ఒక సారి మార్కెట్లోకి వచ్చిన తర్వాత చమురు అందరికీ ఒకే ధరకు అందుబాటులో ఉంటుంది. ఎరువుల సబ్సిడీ కూడా కుడిఎడంగా ఇదేవిధంగా అమలు జరుగుతుంది. ఈ ప్రక్రియలో వినియోగదారులందరూ సబ్సిడీ ఫలాలు అందుకుంటున్నారు. ఒకరకంగా చెప్పాలంటే ఇది సార్వజనిక సబ్సిడీ పథకం. దీని స్థానంలో ఇప్పుడు ప్రభుత్వం ప్రతిపాదించింది ఏమిటి? రానున్న కాలంలో దారిద్య్రరేఖకు దిగువన ఉన్న వారికి మాత్రమే ఎరువులు, చమురు ధరలపై సబ్సిడీ అందుతుంది. అదికూడా నేరుగా డబ్బు రూపంలో అందుతుంది. ఈ డబ్బు, వినియోగదారుడి వద్ద ఉన్న డబ్బు కలిపి ప్రజలు మార్కెట్ ధరకే సరుకులు కొనుక్కోవచ్చు అన్నది ప్రభుత్వం ప్రతిపాదిస్తున్న విధానం.
ఇందులో నష్టం ఏమిటి? ఇప్పుడున్న పద్థతిలో కార్లు, మోటార్సైకిళ్లు వాడేవాళ్లు అందరూ చమురు ధరల సబ్సిడీ ఫలాలు పొందుతున్నారు. పైగా పౌరరవాణా సేవలు ఉపయోగించేవారికి కూడా ఈ సబ్సిడీ అందుతుంది. కానీ నూతన పద్థతిలో వీళ్లందరూ సబ్సిడీ పరిధి నుండి బయటకు పోతారు. పైగా ప్రభుత్వం ప్రతిపాదించిన విధానంలో పౌరరవాణా సేవలు ఉపయోగించే వారికి నగదు సబ్సిడీ ఎలా అందుతుంది? ఇవన్నీ లెక్కేసుకునే ఆర్టీసి, రైల్వే టిక్కెట్ ధర నిర్ణయిస్తాయి. నూతన పథకం ప్రకారం ఇక్కడ కూడా దారిద్య్రరేఖ దిగువన ఉన్న వారికి ఒక టిక్కెట్ ధర, ఎగువన ఉన్న వారికి ఒక టిక్కెట్ ధర నిర్ణయిస్తారా? పైగా ఈ విధంగా నేరుగా చేతికి అందిన సొమ్మును ఫలానా వస్తువు కొనుక్కోవటానికే వినియోగిస్తామన్న హామీ ఏమిటి? ఉన్న ఫళంగా కుటుంబ సభ్యులకు ఆరోగ్యం పాడైతే ఆసుపత్రి ఖర్చులకో, పిల్లల చదువు నిమిత్తమో వాడుకోమని హామీ ఏమిటి? ఇటువంటి పద్ధతిలో క్యాష్ సబ్సిడీ ద్వారా వచ్చిన సొమ్ము వేరే ప్రయోజనం కోసం వినియోగిస్తే ఉత్పత్తి, సరఫరా వలయంపై దాని ప్రభావం ఏమిటి? ఈ విషయాలు ఏమీ అధ్యయనం చేయకుండానే ప్రభుత్వం గుడ్డిగా ఈ పథకాన్ని అమలు చేయబూనుకొంది.
ఇక ప్రజాపంపిణీ వ్యవస్థలో ఈ నూతన సబ్సిడీ ఏ విధంగా అమలు జరుగుతుంతో చూద్దాం. ప్రస్తుతం ప్రభుత్వం రైతులవద్ద ధాన్యం కొని, గోదాముల్లో దాచి దశలవారీగా ప్రజలకు సబ్సిడీమీద అందించటానికి ప్రజాపంపిణీ వ్యవస్థ సాధనంగా ఉంది. నూతన ప్రక్రియలో ఇవేవీ అవసరం లేదు. నేరుగా ప్రజలే ప్రభుత్వం ఇచ్చిన సొమ్ముతో మార్కెట్లో కొనుగోలు చేస్తారు కాబట్టి లెవీ ధాన్యం సేకరించాల్సిన అవసరం ఉండదు. లెవీ ధాన్యం కోసమైనా కనీస మద్దతు ధర అమలు జరుగుతుంది. ఈ ధరకు కాస్త అటూ ఇటూగా మార్కెట్లో ధాన్యం సేకరణ జరుగుతుంది. తాజా పథకంలో అటువంటి అవసరం లేకపోవటంతో రైతాంగానికి గిట్టుబాటు ధర అమలు చేయాల్సిన అవసరం ఏమిటి? పైగా నేరుగా మార్కెట్ సరఫరాపై ఆధారపడ్డాక ఎఫ్సిఐ అవసరం ఏముంటుంది? ఎఫ్సిఐ ప్రైవేటీకరణకు ఈ పథకం రంగం సిద్ధం చేయదా? ప్రభుత్వం ఈ పథకం ద్వారా ప్రజాపంపిణీ వ్యవస్థలో జరుగుతున్న దుర్వినియోగాన్ని అడ్డుకోవచ్చని చెప్తోంది. 1997కు ముందు అందరికీ ఈ పథకం వర్తించేది. తర్వాత లక్షిత ప్రజా పంపిణీ వ్యవస్థ అని ప్రారంభించారు. అంటే నిజంగా సబ్సిడీ ధరకు ఎవరికి అవసరమో వారికే ప్రభుత్వం సరఫరా చేస్తుంది, మిగిలినవారు మార్కెట్లో కొనుక్కోవాలి. అప్పుడే తెల్లకార్డులు, పచ్చ కార్డులు వచ్చాయి. నిజానికి ఈ విధంగా కార్డుల విభజన జరిగిన తర్వాతనే దుర్వినియోగం 27 శాతం నుండి 40 శాతానికి చేరిందని జాతీయ శాంపిల్ సర్వే చెప్తోంది. అదే వాదనలో ఇప్పుడు ముందుకొస్తున్న పథకం ఏ విధంగా దుర్వినియోగాన్ని అడ్డుకోగలదు అన్నది కీలక ప్రశ్న.
అటు ఎరువులు, పెట్రోలు అయినా ఇటు ఆహార ధాన్యాలు అయినా అంతర్జాతీయ మార్కెట్ ఒడిదుడుకులకు లోనుకావల్సిందే. అటువంటపుడు బడ్జెట్లో ఫలానా నిధి క్యాష్ సబ్సిడీ మ్తొతం అని నిర్ధారించిన తర్వాత అంతర్జాతీయ మార్కెట్లో వచ్చే మార్పుల వల్ల ధరలు పెరుగుతాయి. అటువంటప్పుడు ఈ భారాన్ని తట్టుకునేందుకు ప్రభుత్వం ఎటువంటి రక్షణ చర్యలు ప్రతిపాదిస్తుంది? అప్పటికప్పుడు బడ్జెట్లో కేటాయించని అదనపు నిధుల సమీకరణ ఎలా సాధ్యమవుతుంది ? అసలే బడ్జెట్ నియంత్రణ చట్టం ఆదేశం మేరకు ఈ సబ్సిడీలు రద్దు చేసేందుకు సిద్ధమవుతున్న ప్రభుత్వం అంతర్జాతీయంగా ధరలు పెరిగాయని మళ్లీ మధ్యంతర బడ్జెట్ ప్రవేశపెట్టి ఈ పథకానికి అదనపు నిధులు కేటాయిస్తుందా? అలా చేయదు కదా..మరి అంటువంటప్పుడు గత్యంతరం ఏమిటి? గురువారం నాడు ప్రధాన ఆర్థిక సలహాదారు, ఆర్థిక మంత్రి ప్రకటించినట్లు ఈ భారాన్ని ప్రజలు మోయటమే మార్గం. అందువల్ల ఈ పథకం లోతుగా పరిశీలిస్తే - ఏమి వేషం అంటే ఎగ్గొట్టే వేషం - అన్న ముతక సామెత గుర్తు రాక మానదు. ఇది సబ్సిడీ రొక్కం ప్రజలకు చేరవేసే పథకం కాదు. ప్రభుత్వానికి రొక్కం, ప్రజలకు సబ్సిడీ భారం పంచే పథకం.
Friday, March 4, 2011
Thursday, March 3, 2011
కార్పొరేట్ ప్రయోజనాలకే పెద్ద పీట
నేటి వ్యాసం Wed, 2 Mar 2011, IST కె. వీరయ్య
ఆర్థిక మంత్రి ప్రణబ్ ముఖర్జీ సోమవారం నాడు ప్రతిపాదించిన బడ్జెట్ తీరు తెన్నులు పరిశీలిస్తే దేశం ముందున్న రాజకీయ ఆర్థిక సమస్యల పరిష్కారానికి కాక విదేశీ, స్వదేశీ గుత్తపెట్టుబడుల అవసరాలు తీర్చటమే లక్ష్యంగా పెట్టుకున్నట్లు కనిపిస్తోంది. నేడు దేశం ఎదుర్కొంటున్న సమస్య సమానత్వంతో కూడిన అభివృద్ధి, దాన్ని సాధించటానికి అవసరమైన పరిపాలనా సామర్థ్యం. ఈ రెండు లక్షణాలను రుజువు చేసుకోవటానికి ప్రభుత్వాలకు బడ్జెట్ ఒక అవకాశం. యుపిఏ-2 ప్రభుత్వం ఈ సందర్భానికి తగినట్లు వ్యవహరిచలేక పోయిందని బడ్జెట్ దిశ, అందులోని అంకెలు రుజువు చేస్తున్నాయి. బడ్జెట్ ప్రక్రియలో భాగంగా ఫిబ్రవరి మూడో వారంలో ప్రధానమంత్రి ఆర్థిక సలహామండలి జాతీయ ఆర్థిక వ్యవస్థ స్థితిగతుల గురించి ఒక నివేదిక విడుదల చేసింది. ఆ నివేదికలో ఆర్థిక వ్యవస్థ ముందున్న ఐదు సవాళ్ల గురించి ప్రస్తావించింది. అవి ద్రవ్యోల్బణాన్ని నియంత్రించటం, ద్రవ్య వ్యవస్థ స్థిరీకరణ, ఉత్పాదక రంగంలో కదలిక తేవటం, కరెంట్ ఖాతా లోటును తగ్గించుకోవటం. బడ్జెట్ ఈ నాలుగు సమస్యలను పరిష్కరించే దిశలో ఉండాలని హితబోధ చేసింది. కానీ ఈ బడ్జెట్ను పరిశీలిస్తే ఆ హితబోధ ప్రభుత్వానికి ఏమీ ఎక్కినట్లు కనిపించటం లేదు. ఒక్కో లక్ష్యం గురించి బడ్జెట్ ఏమంటుందో పరిశీలిద్దాం.
ద్రవ్యలోటునే తీసుకుందాం. స్థూల జాతీయోత్పత్తిలో ఇది 5.5 శాతం ఉంటుందని 2010-11 బడ్జెట్ అంచనా వేసింది. సవరించిన అంచనాల మేరకు 2010-11లో ఈ ద్రవ్యలోటును 4.6 శాతానికి తగ్గించగలిగామని ప్రణబ్ ముఖర్జీ జబ్బలు చర్చుకున్నాడు. కానీ వాస్తవం ఏమిటి ? ఈ ద్రవ్యలోటు నియంత్రణ ఎలా సాధ్యమైంది? గత సంవత్సరం బడ్జెట్లో పెట్టుబడుల ఉపసంహరణ ద్వారా 40,000 కోట్లు రూపాయలు సంపాదించాలని లక్ష్యంగా పెట్టుకున్నారు. మరో 34 వేల కోట్ల రూపాయలు 3జి స్పెక్ట్రం వేలం ద్వారా సంపాదించాలని లక్ష్యంగా నిర్ణయించుకున్నారు. ఈ రెండు మార్గాల ద్వారా ద్రవ్యలోటు పూడ్చుకోవాలని ప్రభుత్వం నిర్ణయించింది. కానీ స్పెక్ట్రం వేలం ద్వారా లక్ష కోట్ల రూపాయల మేర ఆదాయం సంపాదించటంతో ప్రభుత్వం దగ్గర నిల్వ రొక్కం విషయంలో కాస్తంత వెసులుబాటు వచ్చింది. అయాచితంగా వచ్చిన ఆదాయం ప్రభుత్వ లోటు పూడ్చటానికి ఉపయోగపడింది. ఇది ఒకసారి వచ్చే ఆదాయం మాత్రమే. ఏటా వచ్చే ఆదాయం కాదు. అంటే ఈ సంవత్సరం బడ్జెట్ అంచనాల్లో ఈమేరకు ఆదాయాన్ని తగ్గించి లెక్కవేసుకోవాలి. ఇంతవరకు విశ్లేషకులదంరూ చెప్పారు. కానీ విశ్లేషకుల దృష్టిని ఆకర్షించని మరో మార్గంలో కూడా ప్రభుత్వం లోటు తగ్గించే పనికి పూనుకొంది. అది వివిధ ప్రభుత్వ పథకాలకు కేటాయించిన నిధులు ఖర్చు చేయకుండా ఉండటం. ఉదాహరణకు గ్రామీణ ఉపాధి హామీ పథకం, సర్వశిక్షా అభియాన్, ఇందిరా ఆవాస్ యోజన, యాక్సెలరేటెడ్ ఇరిగేషన్ బెనిఫిట్ ప్రోగ్రాం, గ్రామీణ తాగు నీటి పథకాలకు 2010-11 బడ్జెట్లో 92,510 కోట్లు కేటాయించగా 2010 డిసెంబరు చివరి నాటికి ఖర్చు చేసింది 48,757 కోట్లు మాత్రమే. అంటే కేటాయింపుల్లో దాదాపు సగం మాత్రమే ఖర్చు పెట్టి మిగిలిన సొమ్ము పొదుపు చేయటం ద్వారా ప్రభుత్వ ఖజానాలో ఎక్కువ డబ్బులు ఉండేలా చూసుకుంది. ఇవన్నీ వెరసి ఫిబ్రవరిలో లోటు లెక్కించే సమయానికి లోటును తక్కువ చేసి చూపాయి. 2011-12 ఆర్థిక సంవత్సరంలో ఈ పథకాలకు మరింత తక్కువ కేటాయించారు. పైగా అయిదు రాష్ట్రాల ఎన్నికలను దృష్టిలో పెట్టుకుని ఆహార భద్రతా చట్టాన్ని అమలు చేస్తామని బడ్జెట్ హామీ ఇచ్చింది. కానీ, నూతన పథకానికి బడ్జెట్ పద్దుల్లో స్థానం దక్కలేదు. కాబట్టి ఆహార భద్రత ఈ ఏడాది కూడా హుళక్కే! ఈ విధంగా ప్రజల కడుపు కాల్చి సంపాదించిన సొమ్ముతో లోటు భర్తీ చేసుకొంటోందీ ప్రభుత్వం.
రెండవది, ద్రవ్యోల్బణం. ప్రభుత్వ గణాంకాల్లో, వివరణల్లో ఒక పద్ధతి ఉంటుంది. వాస్తవిక పరిస్థితికి తగ్గట్లు సమాధానం చెప్పలేకపోతే చర్చ ప్రాతిపదికనే మార్చటం ఈ పద్ధతి. ద్రవ్యోల్బణం గురించి ప్రభుత్వం వ్యవహరించిన తీరు ఇలాగే ఉంది. గత రెండేళ్ల పాటు ప్రజలను పీడిస్తున్న ధరాఘాతానికి మూలాలు పంపిణీ వ్యవస్థను ప్రజలకందుబాటులోకి తేలేకపోవటం, అంతర్జాతీయ పరిణామాలు, వాయిదా వ్యాపారాల్లో ఉంటే ఈ విషయాలను నియంత్రించేందుకు, సరిచేసేందుకు బడ్జెట్లో ఎలాంటి చర్యలూ ప్రతిపాదించలేదు. ప్రణబ్ ముఖర్జీ మాటలను బట్టి చూస్తే ప్రభుత్వం ద్రవ్యోల్బణానికి సంస్థాగత కారణాలు గుర్తించి వాటిని పరిష్కరించేందుకు ప్రయత్నిస్తోందట. అది గుర్తించిన కారణాలు నిజంగా సంస్థాగత కారణాలా కాదా అన్నది ఒక చర్చ. ఆర్థిక సర్వేలో సరుకులు ప్రజలకు చేరవేయటంలో లోపం వల్ల ఈ పరిస్థితి తలెత్తిందని అభిప్రాయపడితే బడ్జెట్ మాత్రం పప్పు ధాన్యాలు, ఇతర ఆహారోత్పత్తులు ఉత్పత్తిలో కొరత వల్ల ఈ పరిస్థితి తలెత్తిందని చెప్తోంది. కానీ ఇద్దరూ చెప్పిన పరిష్కారం ఒక్కటే. ఆహారోత్పత్తులను ప్రజలకు చేర్చటానికి మార్కెట్ ఒక్కటే సాధనం అన్నది అటు ఆర్థిక సర్వే, ఇటు బడ్జెట్ సూచిస్తున్న పరిష్కారం. పైగా ప్రజలకు మార్కెట్లో నేరుగా సరుకులు కొనుగోలు చేయటానికి వీలుగా డబ్బులు ఇస్తామని చెప్తోంది. మరోవైపున ద్రవ్యోల్బణం పెరగటానికి మార్కెట్లో అవసరానికి మించిన డబ్బులు చలామణి కావటం కూడా ఒక కారణమని సర్వే చెప్తోంది. ఈ విధంగా ద్రవ్యోల్బణం పరిష్కారం విషయంలో ప్రభుత్వం వైఖరి మోకాలికి, బోడిగుండుకు ముడేసేదిగా ఉంది. పైగా ద్రవ్యోల్బణం అందుపుకోసం అంటూ ప్ర్రతిపాదించిన అనేక చర్యలు నిజానికి ధరల పెరుగుదలకు దారితీయనున్నాయి. ప్రజలు ధరల సమస్యను తీవ్రంగా చూడటం లేదని ప్రణబ్ ముఖర్జీ ఇచ్చిన ఇంటర్వూ ప్రభుత్వం దృక్ఫధానికి అద్దం పడుతుంది. పైగా వస్తువులు, సేవల చట్టం అమలు దిశగా మరో 130 రకాల ఉత్పత్తులను ఎక్సైజు పన్ను పరిధిలోకి తేవటం ద్వారా ధరల పెరుగుదలకు మార్గం సిద్ధం చేసిందీ బడ్జెట్.
మూడవది, ఉత్పాదకరంగంలో కదలిక తీసుకురావటం. ప్రభుత్వం పారిశ్రామికవేత్తలకు ప్రకటించిన అనేక రాయితీలు ఈ లక్ష్యసాధనకోసమే అని చెప్తున్నారు. నిజానికి ఈ రాయితీలు ఉత్పత్తిరంగంలో కదలిక తేవటానికి ఉపయోగపడితే గత సంవత్సరం పారిశ్రామికోత్పత్తి, ప్రత్యేకించి వస్తూత్పత్తి రంగం 8.1 శాతం వృద్ధి రేటు నుండి ఎందుకు పురోగమించలేదన్న ప్రశ్నకు బడ్జెట్లోనూ, ప్రభుత్వం వద్ద సమాధానం లేదు. వస్తూత్పత్తి రంగం వృద్ధి రేటు సాధించటానికి తగిన పరిస్థితులు ఉత్పత్తి వ్యవస్థలోనే కాదు. వాటిని వినియోగించుకునే సామర్థ్యంపై కూడా ఆధారపడి ఉంటాయి. గత రెండేళ్లుగా ఉద్దీపనల పేరుమీద ప్రభుత్వం ప్రకటించిన వరాలు, పన్ను రాయితీలన్నీ రెండో సమస్యను పరిష్కరించలేకపోయాయి. ఈ విషయాన్ని గుర్తించి సరి చేయటానికి బదులు తిరిగి అవే విధానాలు అమలుకు పూనుకుంటూ సంపన్నులకు, పారిశ్రామికవ్తేలకూ మరో 5 లక్షల కోట్ల రూపాయల మేర రాయితీలు అమలు చేస్తోంది. గత మూడేళ్లలో కేవలం సంపన్నులకు ఆదాయపన్ను రూపంలో ఇచ్చిన రాయితీలే రు.3,61,415కోట్లు...
నాల్గవది, కరెంట్ ఖాతా లోటు తగ్గించుకోవటం. కరెంట్ ఖాతా లోటు తగ్గించుకోవాలంటే ఎగుమతులు పెరగాలి. లేదా దిగుమతులు తగ్గాలి. ప్రభుత్వం మౌలికసదుపాయాల కల్పన నిమిత్తం దిగుమతి చేసుకునే వివిథ రకాల యంత్రసామాగ్రికి రాయితీలు ప్రకటించింది, కాబట్టి ఇదే అదనుగా పరిశ్రమలు వీటిని తక్కువ ఖర్చుకు దిగుమతి చేసుకోవటానికి ప్రయత్నిస్తాయి. దాంతో దిగుమతులు తగ్గే అవకాశం లేదు. ఇక ఎగుమతుల విషయానికొస్తే అంతర్జాతీయ ఆర్థిక వ్యవస్థ కోలుకుంటే తప్ప ఈ పరిస్థితిలో మార్పు రాదు. ప్రస్తుతం పశ్చిమాసియా పరిణామాలు, ఉత్తర ఆఫ్రికా పరిణామాలు మొత్తంగా యూరోపియన్ ఆర్థిక వ్యవస్థ పురోగతిని ప్రశ్నార్థకం చేస్తున్నాయి. అమెరికాలో, జపాన్లో ఇంకా పూర్తి స్థాయిలో కోలుకోలేదు. కానీ ఈవిషయాలు పరిగణనలోకి తీసుకోకపోవటం ఆశ్చర్యం కలిగిస్తోంది. కనీసం చమురు ఉత్పత్తుల మార్కెట్లో వస్తున్న మార్పులు ఆర్థిక వ్యవస్థపై ఎటువంటి ప్రతికూల ప్రభావం చూపనున్నాయన్న విషయాన్ని మాటమాత్రంగా కూడా బడ్జెట్లో ప్రస్తావించలేదు. అంతేకాక చమురు ధరల పెంపు సమయంలో ఆ భారం ప్రజలపై పూర్తిగా పడకుండా ఉండటానికి గత సంవత్సరం 35వేల కోట్ల రూపాయలు కేటాయిస్తే ఈ సంవత్సరం 20వేల కోట్ల రూపాయలు మాత్రమే కేటాయించింది. అంటే రానున్న కాలం కనీసం 15 వేల కోట్ల రూపాయల మేర చమురు ధరలు పెరగటం ఖాయం.
బడ్జెట్లో అంచనాలన్నీ ప్రస్తుత ఆర్థిక వ్యవస్థ ఇదే తరహా వృద్ధి రేటు సాధిస్తుందని, ఎటువంటి అవాంతరాలు ఉండవనే దృష్టితో రూపొందించినవి. ఈ అంచనాల్లో తేడాలొస్తే తీసుకోవాల్సిన ప్రత్యామ్నాయ చర్యల గురించిన ప్రస్తావన లేకపోవటంతో 2011-12 ఆర్థిక సంవత్సరం నడక తీరు మార్కెట్ శక్తుల విజృంభణకే ఎక్కువ అవకాశమిచ్చేదిగా వుంది.
ఆర్థిక మంత్రి ప్రణబ్ ముఖర్జీ సోమవారం నాడు ప్రతిపాదించిన బడ్జెట్ తీరు తెన్నులు పరిశీలిస్తే దేశం ముందున్న రాజకీయ ఆర్థిక సమస్యల పరిష్కారానికి కాక విదేశీ, స్వదేశీ గుత్తపెట్టుబడుల అవసరాలు తీర్చటమే లక్ష్యంగా పెట్టుకున్నట్లు కనిపిస్తోంది. నేడు దేశం ఎదుర్కొంటున్న సమస్య సమానత్వంతో కూడిన అభివృద్ధి, దాన్ని సాధించటానికి అవసరమైన పరిపాలనా సామర్థ్యం. ఈ రెండు లక్షణాలను రుజువు చేసుకోవటానికి ప్రభుత్వాలకు బడ్జెట్ ఒక అవకాశం. యుపిఏ-2 ప్రభుత్వం ఈ సందర్భానికి తగినట్లు వ్యవహరిచలేక పోయిందని బడ్జెట్ దిశ, అందులోని అంకెలు రుజువు చేస్తున్నాయి. బడ్జెట్ ప్రక్రియలో భాగంగా ఫిబ్రవరి మూడో వారంలో ప్రధానమంత్రి ఆర్థిక సలహామండలి జాతీయ ఆర్థిక వ్యవస్థ స్థితిగతుల గురించి ఒక నివేదిక విడుదల చేసింది. ఆ నివేదికలో ఆర్థిక వ్యవస్థ ముందున్న ఐదు సవాళ్ల గురించి ప్రస్తావించింది. అవి ద్రవ్యోల్బణాన్ని నియంత్రించటం, ద్రవ్య వ్యవస్థ స్థిరీకరణ, ఉత్పాదక రంగంలో కదలిక తేవటం, కరెంట్ ఖాతా లోటును తగ్గించుకోవటం. బడ్జెట్ ఈ నాలుగు సమస్యలను పరిష్కరించే దిశలో ఉండాలని హితబోధ చేసింది. కానీ ఈ బడ్జెట్ను పరిశీలిస్తే ఆ హితబోధ ప్రభుత్వానికి ఏమీ ఎక్కినట్లు కనిపించటం లేదు. ఒక్కో లక్ష్యం గురించి బడ్జెట్ ఏమంటుందో పరిశీలిద్దాం.
ద్రవ్యలోటునే తీసుకుందాం. స్థూల జాతీయోత్పత్తిలో ఇది 5.5 శాతం ఉంటుందని 2010-11 బడ్జెట్ అంచనా వేసింది. సవరించిన అంచనాల మేరకు 2010-11లో ఈ ద్రవ్యలోటును 4.6 శాతానికి తగ్గించగలిగామని ప్రణబ్ ముఖర్జీ జబ్బలు చర్చుకున్నాడు. కానీ వాస్తవం ఏమిటి ? ఈ ద్రవ్యలోటు నియంత్రణ ఎలా సాధ్యమైంది? గత సంవత్సరం బడ్జెట్లో పెట్టుబడుల ఉపసంహరణ ద్వారా 40,000 కోట్లు రూపాయలు సంపాదించాలని లక్ష్యంగా పెట్టుకున్నారు. మరో 34 వేల కోట్ల రూపాయలు 3జి స్పెక్ట్రం వేలం ద్వారా సంపాదించాలని లక్ష్యంగా నిర్ణయించుకున్నారు. ఈ రెండు మార్గాల ద్వారా ద్రవ్యలోటు పూడ్చుకోవాలని ప్రభుత్వం నిర్ణయించింది. కానీ స్పెక్ట్రం వేలం ద్వారా లక్ష కోట్ల రూపాయల మేర ఆదాయం సంపాదించటంతో ప్రభుత్వం దగ్గర నిల్వ రొక్కం విషయంలో కాస్తంత వెసులుబాటు వచ్చింది. అయాచితంగా వచ్చిన ఆదాయం ప్రభుత్వ లోటు పూడ్చటానికి ఉపయోగపడింది. ఇది ఒకసారి వచ్చే ఆదాయం మాత్రమే. ఏటా వచ్చే ఆదాయం కాదు. అంటే ఈ సంవత్సరం బడ్జెట్ అంచనాల్లో ఈమేరకు ఆదాయాన్ని తగ్గించి లెక్కవేసుకోవాలి. ఇంతవరకు విశ్లేషకులదంరూ చెప్పారు. కానీ విశ్లేషకుల దృష్టిని ఆకర్షించని మరో మార్గంలో కూడా ప్రభుత్వం లోటు తగ్గించే పనికి పూనుకొంది. అది వివిధ ప్రభుత్వ పథకాలకు కేటాయించిన నిధులు ఖర్చు చేయకుండా ఉండటం. ఉదాహరణకు గ్రామీణ ఉపాధి హామీ పథకం, సర్వశిక్షా అభియాన్, ఇందిరా ఆవాస్ యోజన, యాక్సెలరేటెడ్ ఇరిగేషన్ బెనిఫిట్ ప్రోగ్రాం, గ్రామీణ తాగు నీటి పథకాలకు 2010-11 బడ్జెట్లో 92,510 కోట్లు కేటాయించగా 2010 డిసెంబరు చివరి నాటికి ఖర్చు చేసింది 48,757 కోట్లు మాత్రమే. అంటే కేటాయింపుల్లో దాదాపు సగం మాత్రమే ఖర్చు పెట్టి మిగిలిన సొమ్ము పొదుపు చేయటం ద్వారా ప్రభుత్వ ఖజానాలో ఎక్కువ డబ్బులు ఉండేలా చూసుకుంది. ఇవన్నీ వెరసి ఫిబ్రవరిలో లోటు లెక్కించే సమయానికి లోటును తక్కువ చేసి చూపాయి. 2011-12 ఆర్థిక సంవత్సరంలో ఈ పథకాలకు మరింత తక్కువ కేటాయించారు. పైగా అయిదు రాష్ట్రాల ఎన్నికలను దృష్టిలో పెట్టుకుని ఆహార భద్రతా చట్టాన్ని అమలు చేస్తామని బడ్జెట్ హామీ ఇచ్చింది. కానీ, నూతన పథకానికి బడ్జెట్ పద్దుల్లో స్థానం దక్కలేదు. కాబట్టి ఆహార భద్రత ఈ ఏడాది కూడా హుళక్కే! ఈ విధంగా ప్రజల కడుపు కాల్చి సంపాదించిన సొమ్ముతో లోటు భర్తీ చేసుకొంటోందీ ప్రభుత్వం.
రెండవది, ద్రవ్యోల్బణం. ప్రభుత్వ గణాంకాల్లో, వివరణల్లో ఒక పద్ధతి ఉంటుంది. వాస్తవిక పరిస్థితికి తగ్గట్లు సమాధానం చెప్పలేకపోతే చర్చ ప్రాతిపదికనే మార్చటం ఈ పద్ధతి. ద్రవ్యోల్బణం గురించి ప్రభుత్వం వ్యవహరించిన తీరు ఇలాగే ఉంది. గత రెండేళ్ల పాటు ప్రజలను పీడిస్తున్న ధరాఘాతానికి మూలాలు పంపిణీ వ్యవస్థను ప్రజలకందుబాటులోకి తేలేకపోవటం, అంతర్జాతీయ పరిణామాలు, వాయిదా వ్యాపారాల్లో ఉంటే ఈ విషయాలను నియంత్రించేందుకు, సరిచేసేందుకు బడ్జెట్లో ఎలాంటి చర్యలూ ప్రతిపాదించలేదు. ప్రణబ్ ముఖర్జీ మాటలను బట్టి చూస్తే ప్రభుత్వం ద్రవ్యోల్బణానికి సంస్థాగత కారణాలు గుర్తించి వాటిని పరిష్కరించేందుకు ప్రయత్నిస్తోందట. అది గుర్తించిన కారణాలు నిజంగా సంస్థాగత కారణాలా కాదా అన్నది ఒక చర్చ. ఆర్థిక సర్వేలో సరుకులు ప్రజలకు చేరవేయటంలో లోపం వల్ల ఈ పరిస్థితి తలెత్తిందని అభిప్రాయపడితే బడ్జెట్ మాత్రం పప్పు ధాన్యాలు, ఇతర ఆహారోత్పత్తులు ఉత్పత్తిలో కొరత వల్ల ఈ పరిస్థితి తలెత్తిందని చెప్తోంది. కానీ ఇద్దరూ చెప్పిన పరిష్కారం ఒక్కటే. ఆహారోత్పత్తులను ప్రజలకు చేర్చటానికి మార్కెట్ ఒక్కటే సాధనం అన్నది అటు ఆర్థిక సర్వే, ఇటు బడ్జెట్ సూచిస్తున్న పరిష్కారం. పైగా ప్రజలకు మార్కెట్లో నేరుగా సరుకులు కొనుగోలు చేయటానికి వీలుగా డబ్బులు ఇస్తామని చెప్తోంది. మరోవైపున ద్రవ్యోల్బణం పెరగటానికి మార్కెట్లో అవసరానికి మించిన డబ్బులు చలామణి కావటం కూడా ఒక కారణమని సర్వే చెప్తోంది. ఈ విధంగా ద్రవ్యోల్బణం పరిష్కారం విషయంలో ప్రభుత్వం వైఖరి మోకాలికి, బోడిగుండుకు ముడేసేదిగా ఉంది. పైగా ద్రవ్యోల్బణం అందుపుకోసం అంటూ ప్ర్రతిపాదించిన అనేక చర్యలు నిజానికి ధరల పెరుగుదలకు దారితీయనున్నాయి. ప్రజలు ధరల సమస్యను తీవ్రంగా చూడటం లేదని ప్రణబ్ ముఖర్జీ ఇచ్చిన ఇంటర్వూ ప్రభుత్వం దృక్ఫధానికి అద్దం పడుతుంది. పైగా వస్తువులు, సేవల చట్టం అమలు దిశగా మరో 130 రకాల ఉత్పత్తులను ఎక్సైజు పన్ను పరిధిలోకి తేవటం ద్వారా ధరల పెరుగుదలకు మార్గం సిద్ధం చేసిందీ బడ్జెట్.
మూడవది, ఉత్పాదకరంగంలో కదలిక తీసుకురావటం. ప్రభుత్వం పారిశ్రామికవేత్తలకు ప్రకటించిన అనేక రాయితీలు ఈ లక్ష్యసాధనకోసమే అని చెప్తున్నారు. నిజానికి ఈ రాయితీలు ఉత్పత్తిరంగంలో కదలిక తేవటానికి ఉపయోగపడితే గత సంవత్సరం పారిశ్రామికోత్పత్తి, ప్రత్యేకించి వస్తూత్పత్తి రంగం 8.1 శాతం వృద్ధి రేటు నుండి ఎందుకు పురోగమించలేదన్న ప్రశ్నకు బడ్జెట్లోనూ, ప్రభుత్వం వద్ద సమాధానం లేదు. వస్తూత్పత్తి రంగం వృద్ధి రేటు సాధించటానికి తగిన పరిస్థితులు ఉత్పత్తి వ్యవస్థలోనే కాదు. వాటిని వినియోగించుకునే సామర్థ్యంపై కూడా ఆధారపడి ఉంటాయి. గత రెండేళ్లుగా ఉద్దీపనల పేరుమీద ప్రభుత్వం ప్రకటించిన వరాలు, పన్ను రాయితీలన్నీ రెండో సమస్యను పరిష్కరించలేకపోయాయి. ఈ విషయాన్ని గుర్తించి సరి చేయటానికి బదులు తిరిగి అవే విధానాలు అమలుకు పూనుకుంటూ సంపన్నులకు, పారిశ్రామికవ్తేలకూ మరో 5 లక్షల కోట్ల రూపాయల మేర రాయితీలు అమలు చేస్తోంది. గత మూడేళ్లలో కేవలం సంపన్నులకు ఆదాయపన్ను రూపంలో ఇచ్చిన రాయితీలే రు.3,61,415కోట్లు...
నాల్గవది, కరెంట్ ఖాతా లోటు తగ్గించుకోవటం. కరెంట్ ఖాతా లోటు తగ్గించుకోవాలంటే ఎగుమతులు పెరగాలి. లేదా దిగుమతులు తగ్గాలి. ప్రభుత్వం మౌలికసదుపాయాల కల్పన నిమిత్తం దిగుమతి చేసుకునే వివిథ రకాల యంత్రసామాగ్రికి రాయితీలు ప్రకటించింది, కాబట్టి ఇదే అదనుగా పరిశ్రమలు వీటిని తక్కువ ఖర్చుకు దిగుమతి చేసుకోవటానికి ప్రయత్నిస్తాయి. దాంతో దిగుమతులు తగ్గే అవకాశం లేదు. ఇక ఎగుమతుల విషయానికొస్తే అంతర్జాతీయ ఆర్థిక వ్యవస్థ కోలుకుంటే తప్ప ఈ పరిస్థితిలో మార్పు రాదు. ప్రస్తుతం పశ్చిమాసియా పరిణామాలు, ఉత్తర ఆఫ్రికా పరిణామాలు మొత్తంగా యూరోపియన్ ఆర్థిక వ్యవస్థ పురోగతిని ప్రశ్నార్థకం చేస్తున్నాయి. అమెరికాలో, జపాన్లో ఇంకా పూర్తి స్థాయిలో కోలుకోలేదు. కానీ ఈవిషయాలు పరిగణనలోకి తీసుకోకపోవటం ఆశ్చర్యం కలిగిస్తోంది. కనీసం చమురు ఉత్పత్తుల మార్కెట్లో వస్తున్న మార్పులు ఆర్థిక వ్యవస్థపై ఎటువంటి ప్రతికూల ప్రభావం చూపనున్నాయన్న విషయాన్ని మాటమాత్రంగా కూడా బడ్జెట్లో ప్రస్తావించలేదు. అంతేకాక చమురు ధరల పెంపు సమయంలో ఆ భారం ప్రజలపై పూర్తిగా పడకుండా ఉండటానికి గత సంవత్సరం 35వేల కోట్ల రూపాయలు కేటాయిస్తే ఈ సంవత్సరం 20వేల కోట్ల రూపాయలు మాత్రమే కేటాయించింది. అంటే రానున్న కాలం కనీసం 15 వేల కోట్ల రూపాయల మేర చమురు ధరలు పెరగటం ఖాయం.
బడ్జెట్లో అంచనాలన్నీ ప్రస్తుత ఆర్థిక వ్యవస్థ ఇదే తరహా వృద్ధి రేటు సాధిస్తుందని, ఎటువంటి అవాంతరాలు ఉండవనే దృష్టితో రూపొందించినవి. ఈ అంచనాల్లో తేడాలొస్తే తీసుకోవాల్సిన ప్రత్యామ్నాయ చర్యల గురించిన ప్రస్తావన లేకపోవటంతో 2011-12 ఆర్థిక సంవత్సరం నడక తీరు మార్కెట్ శక్తుల విజృంభణకే ఎక్కువ అవకాశమిచ్చేదిగా వుంది.
Wednesday, March 2, 2011
Railway Budget 2011-12 – Journey to No Where – Veeraiah Konduri
Published in Indiacurrentaffair.org
Minister for Railways, popularly known as MR in power corridors of Delhi is proceeding with UN-imagined pace in order to ensure bankruptcy of historical Indian Railway (IR). This is once more evident from the budget presented to Lok Sabha on February 25th 2011. Apart from mismanaging the finances of Indian Railway, the current budget is charting the disastrous course of PPP as well as depending up on Capital markets to fund their infrastructural projects.
On the face of the detailed statement of accounts, it looks as if all is well. But once we digs deep, the skeletons tumbles out of IR coffins. As majority of the analysts commented, the Operating Ratio is an index to gauge the health of Railways. It is going down from 76 % in 2007-2008 Railway Year to 92 % in 2010-2011. This is after Railway board admits that during the last two months of current fiscal, they charged heavily to present a sober picture before the nation. If all depreciation is to be taken in to account, operating ratio will go up until Rs. 115. Means, Railways is spending Rs.115 to earn Rs.100, thus resulting in the net 15 % deficit in Railway budget. The cash reserve ratio is also not as good as it was released to the public. They achieved this cash reserve ratio also after depressing the accounts through lesser appropriation, lesser dividends. After all these mismanagement the Cash reserves goes down to Rs 1328 crores. Presume what would have been the actuals !
The more dangerous aspect is charting the PPP cart. Since last few years, Government is in the process of initiating projects with Public-Private Partnership under the guidance of Planning Commission. During the preparations to the current budget they achived the grand bargain it seems. Mamata Benerjee boasted herself in saying that Grass Budgetary Support to Railways will stood at 57,630 crores. But she did not informed the house of people that out of this proposed GBS, IR is intended to mobilize a huge, 35-40 %, which equals to 20,454 crores from Capital Market operations. Government is also considering the to issue tax free bond to the tune of another 10,000 crores thus leaving around 20,000 to be doled out from General Budget. Here lies the grand bargain. All the news papers flashed photos of Mamata Benerjee coming out of Janapath ( where UPA Chairperson Sonia Gandhi resides) Race Course (the prime ministerial power hose) Planning commission offices before the budget. All the reports that were published informs us that she had gone to convince all those sitting at these places about her plans to dole out more to Bengal in view of upcoming assembly elections. If we ties the knots between the points and consider the speech by the Minister’s yesterday proves that the fact is otherwise. She visited all those places to reach out a policy compromise. It looks like the compromise is that she will present a railway budget to her liking with out asking for more financial backing from union government and in tern she has to allow the Railways to gradually shift its developmental strategy from government funded to market depended. This is the logical conclusion that one can reach after careful consideration of the developments. If this guess is proved right, then nothing will be more disastrous for Railways as well to the nation more than this.
In this change of strategy the situation will be like this. As per the budget documents informs, IR is supposed to raise 20,454 crores from the Capital market, that means it has to divest the shares in Rail PSUs or resort to market borrowings. This will have cascading effect on the over all Capital market. As already the government rolling back the its stimulus as the growth rate is picking up. That implies tightening of credit market which RBI already resorting to in phased manner. Due to this the liquidity is drying up and private enterprises are complaining about the lack of required liquidity to fund their projects. At this if Railways competing for another 20,000 crores from Capital market means, the pressure on liquidity is invariably goes up which will lead to possible scaling up of interest rates with its spiraling effects on the economy. The other step involves in this, divesting the shares from Rail PSUs, which are earning considerable profits as per the Minister’s statement before the house, lead to gradual privatisation of Rail infrastructure in a phased manner. So far despite the country is effected by privatisaion spree over the last three decades, the Railway’s are unaffected by this except in an indirect way such as leasing out city side developments, running of railway canteens, in train services. Moreover, how can private capital come forward to fund an enterprise which is spending Rs. 115 to earn Rs.100, which is against the basic formulation of the business ? In that case, under the plea of no private capital is coming forward, the government is in all likelihood will move for cheaper pricing of its assets in the form of reducing the premium when it resorts to IPO. Already IPO market is a buzz with this likelihood. Here it is pertinent to make note of developments on London Transportation front. The London government, which allowed private capital to build the required infrastructure and maintain London trains, is rolling back after three decades of bitter experiences as it failed comprehensively to serve the nation under private management. At this point in time, the Indian government is looking for private capital to enhance the rail infrastructure in India.
Another problem with this kind of involving private players in building rail infrastructure is also in front of us. During the last budget, the government announced 52 projects under PPP mode. Five years back, the much touted Delhi Mumbai Fright Corridor is also unveiled under in the same manner. As per the original target, DFC is supposed to be completed by 2011-2012 FY, where as we can’t find railway track laying for even a single kilometer under this project despite the fact of floating a special purpose vehicle. The Minister admitted in her budget speech that the IR is vetting and the proposals are undergoing the process of due diligence ! The actual reason is in both ways. Under the influence of on going global financial crisis, all the private players who came forward to become partners under PPP with Indian Railway delayed their decisions. Another important factor is that the IR does not have minimum fund to contribute its share under PPP for all these projects. Due to these two reasons, all the PPP projects are resting in the cupboards of Rail Nilayam, Delhi.
Before considering new promises in Friday’s speech, let us consider the old promises. In the last budget, she announced that by 2020, India is going to build another 25,000 kilometer rail tracks a fresh and also proposed, as part of her grand Vision 2020 for Indian Railways, doubling of 12,000 KM lines, modernizing for another 14,000 Km lines, as well as converting the gauge for another 12,000 Km rail tracks ! Leave out the rest and consider the commitment for the new track of 25,000 Km by 2020. We are standing in 2011. Means another 9 years left. There is no assessment report before the parliament for its scrutiny what had happened since the announcement of Vision 2020. The minister also not took care of informing the House of People, what progress IR has achieved during the last two years since she became the minister for second term. All she could inform in the budget papers is that “ will be done”. There is not even a reference to the time line by which these projects will be completed, how much has already been earmarked, spent and what is the requirement. All these projects are differed to 12th plan period and she announced another grand scheme Prime Minister Rail Vikas Yojana.
According to one assessments, so far there are 400 projects pending under Indian Railways. Some goes back to three decades also. At this stage she announced scores of new projects beginning with a diesel coach factory in Manipur to Bridge factory in Jammu & Kashmir. There is no dearth of new lines, new trains and extension of existing trains. All these will result in the over crowding the age old tracts which at majority of the places in dilapidated conditions due to non-maintenance at regular intervals. Regarding the staff though she announced that they will initiate recruitment process, no one knows how long it will take. There is no information about what all the new trains announced in the last budget and implemented till now for a comparative analysis. With this kind of carelessness, one can’t say any thing except that this is a journey to no where.
Minister for Railways, popularly known as MR in power corridors of Delhi is proceeding with UN-imagined pace in order to ensure bankruptcy of historical Indian Railway (IR). This is once more evident from the budget presented to Lok Sabha on February 25th 2011. Apart from mismanaging the finances of Indian Railway, the current budget is charting the disastrous course of PPP as well as depending up on Capital markets to fund their infrastructural projects.
On the face of the detailed statement of accounts, it looks as if all is well. But once we digs deep, the skeletons tumbles out of IR coffins. As majority of the analysts commented, the Operating Ratio is an index to gauge the health of Railways. It is going down from 76 % in 2007-2008 Railway Year to 92 % in 2010-2011. This is after Railway board admits that during the last two months of current fiscal, they charged heavily to present a sober picture before the nation. If all depreciation is to be taken in to account, operating ratio will go up until Rs. 115. Means, Railways is spending Rs.115 to earn Rs.100, thus resulting in the net 15 % deficit in Railway budget. The cash reserve ratio is also not as good as it was released to the public. They achieved this cash reserve ratio also after depressing the accounts through lesser appropriation, lesser dividends. After all these mismanagement the Cash reserves goes down to Rs 1328 crores. Presume what would have been the actuals !
The more dangerous aspect is charting the PPP cart. Since last few years, Government is in the process of initiating projects with Public-Private Partnership under the guidance of Planning Commission. During the preparations to the current budget they achived the grand bargain it seems. Mamata Benerjee boasted herself in saying that Grass Budgetary Support to Railways will stood at 57,630 crores. But she did not informed the house of people that out of this proposed GBS, IR is intended to mobilize a huge, 35-40 %, which equals to 20,454 crores from Capital Market operations. Government is also considering the to issue tax free bond to the tune of another 10,000 crores thus leaving around 20,000 to be doled out from General Budget. Here lies the grand bargain. All the news papers flashed photos of Mamata Benerjee coming out of Janapath ( where UPA Chairperson Sonia Gandhi resides) Race Course (the prime ministerial power hose) Planning commission offices before the budget. All the reports that were published informs us that she had gone to convince all those sitting at these places about her plans to dole out more to Bengal in view of upcoming assembly elections. If we ties the knots between the points and consider the speech by the Minister’s yesterday proves that the fact is otherwise. She visited all those places to reach out a policy compromise. It looks like the compromise is that she will present a railway budget to her liking with out asking for more financial backing from union government and in tern she has to allow the Railways to gradually shift its developmental strategy from government funded to market depended. This is the logical conclusion that one can reach after careful consideration of the developments. If this guess is proved right, then nothing will be more disastrous for Railways as well to the nation more than this.
In this change of strategy the situation will be like this. As per the budget documents informs, IR is supposed to raise 20,454 crores from the Capital market, that means it has to divest the shares in Rail PSUs or resort to market borrowings. This will have cascading effect on the over all Capital market. As already the government rolling back the its stimulus as the growth rate is picking up. That implies tightening of credit market which RBI already resorting to in phased manner. Due to this the liquidity is drying up and private enterprises are complaining about the lack of required liquidity to fund their projects. At this if Railways competing for another 20,000 crores from Capital market means, the pressure on liquidity is invariably goes up which will lead to possible scaling up of interest rates with its spiraling effects on the economy. The other step involves in this, divesting the shares from Rail PSUs, which are earning considerable profits as per the Minister’s statement before the house, lead to gradual privatisation of Rail infrastructure in a phased manner. So far despite the country is effected by privatisaion spree over the last three decades, the Railway’s are unaffected by this except in an indirect way such as leasing out city side developments, running of railway canteens, in train services. Moreover, how can private capital come forward to fund an enterprise which is spending Rs. 115 to earn Rs.100, which is against the basic formulation of the business ? In that case, under the plea of no private capital is coming forward, the government is in all likelihood will move for cheaper pricing of its assets in the form of reducing the premium when it resorts to IPO. Already IPO market is a buzz with this likelihood. Here it is pertinent to make note of developments on London Transportation front. The London government, which allowed private capital to build the required infrastructure and maintain London trains, is rolling back after three decades of bitter experiences as it failed comprehensively to serve the nation under private management. At this point in time, the Indian government is looking for private capital to enhance the rail infrastructure in India.
Another problem with this kind of involving private players in building rail infrastructure is also in front of us. During the last budget, the government announced 52 projects under PPP mode. Five years back, the much touted Delhi Mumbai Fright Corridor is also unveiled under in the same manner. As per the original target, DFC is supposed to be completed by 2011-2012 FY, where as we can’t find railway track laying for even a single kilometer under this project despite the fact of floating a special purpose vehicle. The Minister admitted in her budget speech that the IR is vetting and the proposals are undergoing the process of due diligence ! The actual reason is in both ways. Under the influence of on going global financial crisis, all the private players who came forward to become partners under PPP with Indian Railway delayed their decisions. Another important factor is that the IR does not have minimum fund to contribute its share under PPP for all these projects. Due to these two reasons, all the PPP projects are resting in the cupboards of Rail Nilayam, Delhi.
Before considering new promises in Friday’s speech, let us consider the old promises. In the last budget, she announced that by 2020, India is going to build another 25,000 kilometer rail tracks a fresh and also proposed, as part of her grand Vision 2020 for Indian Railways, doubling of 12,000 KM lines, modernizing for another 14,000 Km lines, as well as converting the gauge for another 12,000 Km rail tracks ! Leave out the rest and consider the commitment for the new track of 25,000 Km by 2020. We are standing in 2011. Means another 9 years left. There is no assessment report before the parliament for its scrutiny what had happened since the announcement of Vision 2020. The minister also not took care of informing the House of People, what progress IR has achieved during the last two years since she became the minister for second term. All she could inform in the budget papers is that “ will be done”. There is not even a reference to the time line by which these projects will be completed, how much has already been earmarked, spent and what is the requirement. All these projects are differed to 12th plan period and she announced another grand scheme Prime Minister Rail Vikas Yojana.
According to one assessments, so far there are 400 projects pending under Indian Railways. Some goes back to three decades also. At this stage she announced scores of new projects beginning with a diesel coach factory in Manipur to Bridge factory in Jammu & Kashmir. There is no dearth of new lines, new trains and extension of existing trains. All these will result in the over crowding the age old tracts which at majority of the places in dilapidated conditions due to non-maintenance at regular intervals. Regarding the staff though she announced that they will initiate recruitment process, no one knows how long it will take. There is no information about what all the new trains announced in the last budget and implemented till now for a comparative analysis. With this kind of carelessness, one can’t say any thing except that this is a journey to no where.
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