Prof. Michel Chossudovsky: Shutdown Of US Govt & ‘Debt Default’: Dress Rehearsal For Privatization Of Federal State System?


The U.S. Capitol looms in the background of a sign on the National Mall reminding visitors of the closures to all national parks due to the federal government shutdown in Washington October 3, 2013. (Reuters/Kevin Lamarque)

Michel Chossudovsky is an award-winning author, professor of economics, founder and director of the Centre for Research on Globalization, Montreal and editor of the globalresearch.ca website.

Shutdown of US govt & ‘debt default’: Dress rehearsal for privatization of federal state system? (RT, Oct 15, 2013):

By Michel Chossudovsky

The ‘shutdown’ of the US government and the financial climax associated with a deadline date, leading to a possible ‘debt default’ by the federal government, is a money-making undertaking for Wall Street.

Several overlapping political and economic agendas are unfolding. Is the shutdown – implying the furloughing of tens of thousands of public employees – a dress rehearsal for the eventual privatization of important components of the federal state system?

A staged default, bankruptcy and privatization is occurring in Detroit (with the active support of the Obama administration), whereby large corporations become the owners of municipal assets and infrastructure.

The important question: could a process of ‘state bankruptcy’, which is currently afflicting local level governments across the land, realistically occur in the case of the central government of the United States of America?

This is not a hypothetical question. A large number of developing countries under the brunt of  IMF ‘economic medicine’ were ordered by their external creditors to dismantle the state apparatus,  fire millions of public sector workers as well as privatize state assets. The IMF’s Structural Adjustment Program (SAP) has also been applied in several European countries.

Read moreProf. Michel Chossudovsky: Shutdown Of US Govt & ‘Debt Default’: Dress Rehearsal For Privatization Of Federal State System?

Warren Buffett’s Bailout Bonanza

Buffett’s Bailout Bonanza (ZeroHedge, Oct 7, 2013):

In the past we have tried to show the growing divide between the haves and the have-nots in the US. Whether through this morning’s “aggregate” Main Street vs Wall Street chart or various anecdotal indicators of diverging confidence. However, no one signifies the beneficiaries of the status-quo-sustaining government bailouts and stimulus better than Warren Buffett (who now, like Obama, sees stocks are full valued). The following chart shows just how well one can do with a few billion in your pocket and an ear for what the Government will do.

Janet Tavacoli: Why Obama Allowed Bailouts Without Indictments

From the article:

The government’s bailout plan destroyed capitalism. In a capitalist system, those who stood to gain–and already made off with large gains—would have to bear the risk. The bailouts represented a corruption of capitalism. Crony capitalism violates the spirit of democracy established by the Founding Fathers of the republic known as the United States. I expressed these sentiments in a letter to the Financial Times on September 29, 2008.


Why Obama Allowed Bailouts Without Indictments (Tavacoli Structured Finance, Sep 10, 2013):

By Janet Tavacoli

In November 2008, President Obama was elected, and he was sworn in January 2009. The country was promised change and reform. Recently two democrats close to the top of President Obama’s administration made excuses to me for the lack of financial reform in the United States. Their separately related versions were remarkably similar, so similar they seemed scripted:

The administration made a bargain, and I’m not sure it was the right decision. The world was teetering on the edge of collapse. There was a crisis of confidence. There would have been unimaginable consequences. So bad even your imagination can’t handle the truth?

Read moreJanet Tavacoli: Why Obama Allowed Bailouts Without Indictments

Cyprus 37.5% Depositor Haircut Upgraded To 47.5% Brazilian Wax

Cyprus 37.5% Depositor Haircut Upgraded To 47.5% Brazilian Wax (ZeroHedge, July 29, 2013):

Once upon a time (in April), a few weeks after reversing its initial disastrous decision to haircut all deposits (including insured ones) the Troika slammed large Cypriot depositors (read evil Russian oligarchs) with a “bail-in” template, soon coming to all insolvent European nations, that included not only a forced assignment of equity in broke Cypriot banks, but far more importantly a haircut that amounted to 37.5% of deposits over €100,000. Since then a few things have happened in Cyprus, neither of them good, i.e., an a record collapse in bank deposits despite capital controls and a record crash in the local real estate market.The confluence of both these events meant that as bank liabilities shrank (deposits), asset fair values (home mortgages) collapsed even faster. Which, as we warned in March, would entail bigger and more aggressive deposit haircuts, and ultimately: another bailout of Cyprus (something the president floated but promptly denied upon rejection by Merkel ahead of her September elections). Today, we learn that while the inevitable next bailout of Cyprus is still on the table, the deposit “haircut” just upgraded to an aggravated Brazilian wax, as the 37.5% gentle trim initially proposed was revised to 47.5%.

InCyprus reports:

The Finance Ministry and the Troika appeared to be converging on an agreement on the haircut of uninsured deposits over 100,000 euros in the Bank of Cyprus at 47.5%.

Read moreCyprus 37.5% Depositor Haircut Upgraded To 47.5% Brazilian Wax

Obama To Detroit: ‘No Bailout For You’

Related info:

‘I Refused To Let Detroit Go Bankrupt’ – Barack Obama, October 2012 (Video)


Obama To Detroit: “No Bailout For You” (ZeroHedge, July 19, 2013):

While in the past President Obama has been more that willing to throw good money after bad and “refuse to let Detroit go bankrupt,” it seems when push comes to shove – under the intense scrutiny of a nation awash in scandal, a drastically bifurcated congress – that despite the imploring from local congressmen for “moar” already – that the savior of the city will not this time ride to the rescue on his white horse. In a statement, the White House said they “are monitoring the situation in Detroit closely,” with no hint – just as they have made clear for months – of any sort of Federal bailout. As USA Today notes, the federal government provided federal loans to prevent New York City from declaring bankruptcy during the 1970s. But times have changed; the federal government has debt and financial problems of its own, and a Detroit bailout could run into significant opposition in Congress and cause serious damage in the Muni market.

While the GM debacle put pensioners ahead of creditors, it would be unprecedentedly bad for the massive Muni bond market should Obama acquiesce and change the law once again to put pensioners ahead of GOs…

The White House statement on Detroit.

The president and members of the president’s senior team continue to closely monitor the situation in Detroit.

While leaders on the ground in Michigan and the city’s creditors understand that they must find a solution to Detroit’s serious financial challenge, we remain committed to continuing our strong partnership with Detroit as it works to recover and revitalize and maintain its status as one of America’s great cities.”

Translation: “sorry guys, you’re on your own on this one!”

EU: Investors To Pay For Bank Failures

h/t by reader M.G.:

“Just saw this story on Rt.com. The new plan is for investors to rescue the crumbling banks. Brilliant. What a way to get people to stop using banks! It is beyond stupid, it is outright stealing. Here is the link. I am too angry to say any more right now. Damn these thieving bastards!”



Eurogroup President and Dutch Finance Minister Jeroen Dijsselbloem talks to journalists during a joint news conference with Portuguese Finance Minister Vitor Gaspar in Lisbon May 27, 2013.(Reuters)

Investors to pay for bank failures – EU (RT, June 27, 2013):

European Union finance chiefs agreed Thursday investors and wealthy depositors will foot the bill for bank bailouts, in a break with the past convention of burdening taxpayers.

If pursued, bailout strategy, shareholders, bondholders and depositors with more than 100,000 euro will share the financial strain of saving a bank. Deposits under 100,000 will be protected.

Read moreEU: Investors To Pay For Bank Failures

Cyprus Bail-In Blows Up: President Urges Complete Bailout Overhaul (Full Letter)

–  The Cyprus Bail-In Blows Up: President Urges Complete Bailout Overhaul (Full Letter) (ZeroHedge, June 18, 2013):

Cyprus’ President Nicos Anastasiades has realized (as we warned), too late it seems for the thousands of domestic and foreign depositors who were sacrificed at the alter of monetary union, that the TROIKA’s terms are “too onerous.” Anastasiades has asked EU lenders to unwind the complex restructuring and partial merger of its two largest banks leaving EU officials “puzzled”, according to a letter the FT has uncovered, as “essentially, he is asking for a complete reversal of the program.” The EU officials claim that the failure to prepare for the bailout’s impact was partially the fault of Mr Anastasiades’ government, which voted down a first agreed rescue before succumbing to a similar deal nine days later.

The FT goes on to note that although the letter does not request it explicitly, Mr Anastasiades is in effect asking for further eurozone loans on top of the existing EUR10bn sovereign bailout – something specifically ruled out by a German-led group of countries at the time. The return of beggars-can-be-choosers we presume – or just token gestures to recover some populist support as the enemy of my enemy is my friend.

As we noted here (and on the chart below), it seemed pretty obvious where this was going to end – obvious that is to everyone except Europe’s victory-claiming politicians.

It seems the ongoing flood of capital (despite controls) and collapse of the economy that we discussed here is occurring at ever increasing pace – and demanding even more gold be sucked out of their vaults…

“Unless Cyprus implements some controls that truly work, at this pace its entire banking system will be completely deposit-free in under one year. And it will need to sell much more than all its gold to continue keeping the Troika happy and in compliance with all the future (because there will be many more) bailouts.”

Read moreCyprus Bail-In Blows Up: President Urges Complete Bailout Overhaul (Full Letter)

Which Country Will Be Forced To Sell Its Gold Holdings Next ?

Which Country’s Gold Will Be Sold Next? (ZeroHedge, April 15, 2013):

The first time the Status Quo/Troika tried to force a (not so) stealthy gold confiscation on an insolvent European country was back in early 2012, when as part of the most recent Greek bailout MOU, it was disclosed that “Greece’s lenders will have the right to seize the gold reserves in the Bank of Greece under the terms of the new deal.” However, the public outcry was so loud that the Troika had no choice but to shelve its plans and proceed with a full scale bondholder restructuring instead. Fast forward to last week, when Europe’s appetite for physical gold came back with a bang, this time as part of the Cyprus “Debt Sustainability Analysis“, and subsequent comments from Mario Draghi, demanding that tiny Cyprus, whose opposition, already weakened by the confiscation of uninsured deposits would be far less vocal than Greece’s, sell off €400MM, or virtually all of its sovereign gold, over 10 of its 13.9 total tons, to cover the excess costs of its ever ballooning sovereign bailout.

Read moreWhich Country Will Be Forced To Sell Its Gold Holdings Next ?