Libya’s never ending War

Libya has become a country of the West’s experimentation of new military technologies and recycling of old weapons. Itself a crime against humanity. Armed drones, armoured vehicles and pick-up trucks fitted with heavy armaments machine guns, recoilless rifles, mortar and rocket launchers have been recently transferred to Libya by unscrupulous foreign countries with their own selfish interests being their uppermost consideration. […]

The security vacuum created by the conflict in and around Tripoli continues to be exploited by Da’esh in remote areas in the country’s southern and central regions. […]

To search for a consensus Libyan candidate that would be acceptable to both Haftar and Serraj. Rumours abound in Libya that such an acceptable third ‘candidate’ to all sides in the conflict is known. Such third way is being spoken of in both Tripoli and Tobruk as well as London, Washington and Moscow..and, according to some sources, the person stands ready in waiting.

Read the full article by Richard Galustian on the Duran website.

The Duran: Trump gives Huawei some space, US-Chinese talks resume

Alex Christoforou and Alexander Mercouris discuss the G20 Osaka compromise between President Trump and President Xi, to pause the ongoing trade dispute and continue negotiations for a deal between their countries. Trump agreed to allow US companies to sell parts to Huawei, while not excluding the firm from the Government’s blacklist. Trump told reporters that “US companies can sell their equipment to Huawei,” providing that equipment poses no “great national emergency problem.” Trump’s ‘backtracking’ was criticized by the establishment media and many members of Congress.

My Comment: Trump’s [minor] concession to the Chinese was in exchange for Xi’s promise that China will import more food from the US. Trump’s supporters among farmers will no doubt be glad. The President’s decision not to levy higher tariffs on Chinese goods shows just how important trade relations between China and the US are. Even though the US has the know-how and the capital and the land and the skilled labor necessary to be self-sustainable, the short term belt tightening and higher prices required for such a dramatic course of action is – given the present political situation – simply untenable. Chinese goods and Chinese demand for US output aren’t going away any time soon.

A good deal can and will be reached between Xi and Trump, but once signed it has to be maintained – and it will be maintained only if geopolitical tensions won’t escalate. And I’m not referring just to the South China Sea, but to Venezuela and Iran as well.

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UFA instead of UBI

by Serban V.C. Enache

UFA stands for Unconditional Food-stamps for All. For the past few years, while considering pro and contra arguments vis-a-vis UBI [Unconditional Basic Income], I came up with UFA as an alternative program. The logic behind it?

Easier to introduce as a nation-wide pilot test, with fewer complaints from across the [skeptical] political spectrum. UFA would allow citizens to better manage their finances and secure their food basket every month. We have an astronomical overproduction of food relative to effective demand at global scale. About 1.4 billion tons per year of unsold food gets wasted, enough to feed 2 billion people. Given this context, food price inflation should not occur under UFA – at least, not as a result of demand-pull. Note: effective demand means the real intention to purchase by people with the means to pay.

Those who don’t wish to use these ‘unconditional food stamps,’ like the rich and upper middle class, can donate them to charities, or just sit on them [until they expire]. UFA would have a great and swift effect on sector specific economic activity & alleviate poverty [with all the good social and psychological effects that come with it], while allowing previous purchasing power designated for the monthly basket to be redirected somewhere else. Unlike cash, you can’t use these food stamps to gamble, buy drugs or alcohol, video games or what not.

To give the UK as an example of how much the UFA would cost the National Government in money terms, I used numbeo’s minimum amount of money for food per person, which is 171,55 pounds, and multiplied it with 66 million [total UK population from 2017 census]. The cost figure comes down to 11,32 billion pounds per month. Multiplying that to 12 months we get 135,86 billion per year. For the sake of keeping the math simple, this means I categorized 1/4 of the population [being children] as adults. So the true nominal figure will be smaller than 135,86 billion annual.

For those concerned with UBI [unconditional cash payments] causing big and harmful distortions to business planning, to the labor market, and to the general price level, and for those concerned with the size and nature of the spending cuts required to accompany such a program, then the UFA [Unconditional Food-stamps for All] would be far more palatable & easier for activists [on the left, right, and center] to sell it to the public. At least, to test it out nation-wide and see its effects on labor force participation, crime rate, birth rate, school abandonment, hospitalization rate etc. Many people say that the time for UBI hasn’t arrived yet. But I don’t think we can find so many to say that we can’t have enough effective demand to feed every soul, because reality [year after year] says otherwise.


The Cure For Hyperinflation: Weimar and Venezuela

by Serban V.C. Enache

We frequently hear people bemoan the dreaded phenomenon of hyperinflation. We often hear only one explanation for it – the government printed money like crazy. We rarely hear the reasons behind the overuse of the currency press, which are: loss of output capacity [human and material] as a result of natural disasters or loss of a war, unfair war reparations, political instability, brazen corruption, the end of a fixed exchange rate with a strong currency. In this article I’ll focus on the cure for the phenomenon of hyperinflation – and this cure won’t entail brutal fiscal austerity that halts inflation by condemning much land and capital [buildings and machinery] to idleness and a great many souls to involuntary unemployment, poverty, and sickness.

The Weimar Republic. Background.

After WW1, life in Germany became hell. The political and economic burdens the creditors of the Versailles Treaty [Woodrow Wilson especially] imposed on the Germans created the conditions for the hyperinflation which soon followed. These impositions were highly unjust and impossible to meet. Meanwhile, the Ruhr Valley, Germany’s industrial heartland was occupied by the Allies. Workers responded to the occupation by organizing strikes. Crashing economic activity led to falling tax revenues and higher welfare payments. The Government, deprived of gold reserves and output capacity, had no choice but to print money to cover its costs plus the war reparations. Hyperinflation ensued. Farmers and manufacturers more and more refused to sell their output for the increasingly devalued Papiermark. This is the context of the phenomenon. Those interested in the facts will verify them, those interested solely in confirming their preconceived notions will dismiss them.

The Plan To Fix The Problem

Finance Minister Hans Luther, working together with Hjalmar Schacht [later head of the Central Bank], using Karl Helfferich’s idea of a currency backed by real goods, formulated a scheme to contain the rampant inflation of the Papiermark. In 1923, Berlin, the Rentenbank was created. The institution provided credit to agriculture, industry, and commerce.

The term “Rentenbank” stems from “annuity bonds”, fixed-income securities [bearer bonds] issued by the first pension banks during the 19th century. Since the Middle Ages the peasants were forced to provide easements to their landlords – various hand services and the like. In the early 19th century, though, agrarian reforms started in Prussia and other German states aimed to disband these obligations. The effort initially failed owing to a lack of a proper credit system.

To accelerate the agrarian reforms, pension banks were established as state-owned mortgage banks. They gave state-guaranteed, freely tradable and fixed-rate bonds (annuities) as money compensation for the expired privilege of the landlords. On the other hand, the peasants paid fixed income to the pension funds over a long period of time, from which the banks were able to service the principal and interest on the bonds. These reforms and the liberation of the peasants gained traction and agricultural productivity rose dramatically.

Enter the Rentenmark

Returning to the 1920s, November 1923 to be precise, the Rentenbank issued its own currency, the Rentenmark, which was covered by mortgages on the grounds of holdings. Total amount of mortgages and land imposts was valued at over 3.2 billion gold-marks. The Act creating the Rentenmark ensured twice yearly payments on property, due in April and October. In return for the real estate, Rentenbank issued interest-bearing bonds with a value of over 500 gold marks or a multiple thereof. The exchange rate between the Rentenmark and the Papiermark was set at 1:1 trillion, and with the US Dollar at 4.2:1.

The Rentenmark didn’t have legal tender status, so there was no legal obligation for private agents to accept it as a means of payment, however, all public institutions had to accept it. Even without legal tender status, the citizens embraced it right away. The Rentenmark’s value was relatively stable, while its quantity remained fixed, Shacht insisted on it. On August 30th, 1924, the newly-introduced Reichsmark became legal tender and was given equal value to the Rentenmark. It’s very important to note that this exchange rate was applied to two fiat currencies over which the Government had power of authority. It retained the right to alter the exchange rate if it wanted or needed to. The issued Rentenmark nominal remained in circulation up until 1948.

Tight Money Policy

In charge of the Central Bank, Hjalmar Schacht implemented a tight monetary policy, the institution ceased discounting Papiermark bills and, despite political pressures, he kept the volume of Rentenmarks strictly limited. As for fiscal policy, Finance Minister Hans Luther went on the austerity route, the correct choice given the circumstances. He brought forward due dates for taxes, increased prepayments of assessed taxes, raised the sales tax, and readjusted the fiscal burden between the regional governments [Lands] and the Reich [the Central Government]. Spending-wise, Luther shrank the number of Reich bureaucrats by a quarter over four months, froze bonuses and reduced their wages. These measures accompanying the issuance of the ‘land-backed’ Rentenmark succeeded; hyperinflation was brought to an end immediately. People spoke of the ‘miracle of the pension mark.’

Between 1926 and 1929 inflation hovered below 2 percent. In the early 30s, however, in reply to the Great Depression, the Government of Heinrich Bruning imposed harsh austerity measures needlessly [tightening credit, cutting wages, cutting public assistance, and increasing taxes], which exploded unemployment and poverty levels in the country and, in the process, made the once marginal Nazis incredibly popular with the people. The National Socialists opposed Bruning’s Government from the beginning, unlike the other right wing parties. Bruning and his policies became widely hated.

See the graph below.

The reader will rightly ask, why did fiscal austerity work for Schacht and Luther, but not for Bruning’s Government? Schacht and Luther applied counter-cyclical fiscal and monetary policy, while Bruning applied pro-cyclical policy. Excess demand relative to supply is eliminated via taxation [draining income from the private sector]. But during the Great Depression, there was too little demand relative to what was actually on the shelves. Bruning’s reforms collapsed aggregate demand levels even further.

Thoughts On Venezuela

The geopolitical aspect is very important, for it can greatly amplify minor or general problems very fast [See Turkey], or it can spark them. The State Central Bank’s dollars in non-cash form reside in accounts at the Federal Reserve, which are beyond Maduro’s control. The Government can’t access these funds. Recently, the US and the UK stole Venezuelan oil and bank assets worth about 30 billion dollars. More so, the US has imposed an outright embargo against Venezuela [trade sanctions levied since 2013 got harsher and harsher, depriving the country of hundreds of billions of dollars in economic activity]. Lastly, belligerent statements coming from Europe and Latin America [Brazil and Colombia especially] and Washington threatening with ‘all options on the table,’ which includes assassination, sabotage, coup, and invasion.

Footage from supermarkets in the capital, stores filled with produce, reveal that a shortage of goods isn’t the problem, but high prices. If it’s true that Maduro’s Government kept public spending high without re-adjusting it to falling prices of crude, then his policy is a key contributor to the bolivar’s dramatically reduced purchasing power. Currency pegs and indexation of wages and pensions with anticipated inflation feed the vicious loop. The Venezuelan Government announced that it’s accepting payments in Euros. In my opinion, this is a big mistake, because the ECB can pull the same stunt on Venezuela that the FED pulled. Maduro is much better off negotiating an entry into the Petro-Yuan with Beijing. Why? You can purchase virtually anything from China. China has made numerous investments across the developing world without asking for political concessions in exchange, in stark contrast to the likes of the IMF. Beijing doesn’t seek regime change or privatizations in exchange for its money. It does business with whoever is interested and it offers advantageous rates too. Trade-wise the Chinese are interested in two things: securing raw material imports and securing demand for their factories. It’s a win-win for both sides.

In my opinion, Venezuela will become Syria 2.0, because there’s no sign that Washington is going to accept any other outcome. The satanic crowd around Trump, the Deep State, and their servants in the corporate media are all pushing the same old hypocritical, war-mongering narrative. They spew it as if it’s a new dish too, not the same rotten thing, teeming with slime and worms. And before we blame it all on the Republicans, remember that 85 percent of journalists in the US are registered Democrats. Since this issue is bipartisan, we know it’s outright devilry. Bolton, Pence, Trump, and the rest – they want to cover up their failure to dismember Syria and Iran by picking on Venezuela, a more vulnerable target closer to home.

If I were in Maduro’s shoes, I’d escalate things ahead of my rivals. I would invite in Russian and Chinese troops and war-gear. Washington doesn’t like to cooperate or negotiate with sovereign regimes. For many decades now, the logic has been, you do as we say, otherwise we treat you as a rogue state. Against a rival who doesn’t wish to bargain and who has threatened [euphemistically or not] violence and murder, you’ve no choice but to take all measures required. Maduro has to choose the 2nd most extreme of defence options [2nd only to the preemptive strike, which doesn’t apply here] because in this context, it’s the wisest step.

If mainstream commentators are fine with US gangsterism, with countries purchasing protection from Washington and the Military Industrial Complex, then they should be fine with Venezuela purchasing protection from Russia and China. They can’t oppose it without being hypocrites and without being Monroe Doctrine apologists, defenders of imperialism, oppression, and mass-murder; not that that’s gonna stop them. Let’s not be naive, US hegemony is shaking. The 2nd Cold War is on.

Update on Venezuela: a report by CEPR finds that US sanctions against Venezuela, started by Trump in 2017, are responsible for tens of thousands of deaths.

So What’s The Cure, Dammit?

The recipe for a return to price stability is contingent on the factors which spawned the instability. This list of measures will hopefully cover all eventualities: 1) Counter-cyclical fiscal policy [drain excess money in circulation via taxation, while cutting superfluous spending.] 2) Land-value capture to replace taxation of buildings, labor, sales, and enterprise [taxing natural monopolies, the rent of location; the site-value tax carries negative dead weight – it brings efficiency to the marketplace]. 3) Buffer stock policies [the public authority buys seminal commodities during periods of excess production and sells these commodities domestically during times of dearth]. 4) Allow the national currency to float freely according to demand [drop any fixed exchange rate, whether it’s to gold or foreign currencies, and embrace a sovereign fiat regime]. 5) Negotiate with rival political factions to settle differences and produce a national accord that appeases all sides to a reasonable extent. 6) Ration basic resources to ensure no section of the population starves [hands and minds are precious and must be kept alive and functional to create goods and services for another day; there’s no sense in killing off one section of the population to feed another extra rations]. 7) Bring in a second or third great power in your region, in order to decrease the bargaining power of the established one/s and strengthen your own position in the process. 8) Link up the country’s regions through a comprehensive system of infrastructure, high speed rail especially [the points of resource extraction with the manufacturing centers, the latter with the marketplaces]. 9) Restrict bank lending for speculative purposes [do not permit banks to accept financial assets as collateral for loans, or to mark their assets to market prices.] 10) Discourage private and public agents from borrowing in foreign currency [always ensure loans in domestic currency are cheaper than in foreign currency; never subsidize the latter type of loans]. 11) Employ all available labor to achieve maximum output [Depending on the situation, participation in public works programs would be mandatory or voluntary. In case of emergency, working hours could be increased and holidays decreased.] 12) Don’t lose a war [or better said, don’t lose peace negotiations concerning your fate]. 13) War Bonds [While the role of War Bonds is to allegedly fund a war, in practice what they do is drain liquidity from those who purchase them. They can be denominated in foreign currency, domestic currency, or both. That being said, liquid or illiquid purchasing power is still purchasing power. People can still purchase things on credit, contingent on their own financial situation. War Bonds may have a psychological effect on the populace, reminding households that they must tighten their belts, deferring consumption to the future, so more supplies can be allocated to the troops in the now. The promise is that, after the war is won, bond holders get paid at a profit. 14) Retiring the currency and replacing it with another [Brazil did it several times in the last 77 years; the Government announces taxes and fines payable in a different currency. This method involves burning away people’s cash savings. To escape hyperinflation, Zimbabwe gave several foreign currencies legal tender status.]

Money and Progressive Resource Allocation

Procedure, while important, shouldn’t make us oblivious to priorities

by Derek McDaniel

I want to talk about “Progressive resource allocation”. In this case, what I am referring to, has nothing to do with political progressivism, except by coincidence. I am using the word “progressive” simply to describe a sequence of steps or priorities, a “progression”, if you will. Continue reading “Money and Progressive Resource Allocation”