© Jules Joseph LefebvreTruth standing naked and bold holding the mirror.
The 1975 lyrics of Murray Head from Say it ain't so Joe seem appropriate for this stage in the Obama presidency:-
they told us that our hero has played his trump card
he doesn't know how to go on
we're clinging to his charms and determined smile
but the good old days have gone
the image and the empire may be falling apart
the money has gotten scarce
one man's word held the country together
but the truth is getting fierce
The question in our minds is just how fierce does the truth have to get before people wake up and really start questioning how the world works.

Surveying the world economy, the past two weeks saw most non-reserve currencies fall in value, as emerging economies and export-oriented countries are suffering capital flight. In past downturns some regions would experience this and not others, some countries and not others, but now capital flight and, it seems, both real and induced social unrest are widespread.

The beneficiary has been the U.S. dollar, which is surprising given the fact that the Federal Reserve has been "printing" money like crazy and the US government has been borrowing like crazy. "There is nowhere else to go" is the justifying mantra of the times. But what seems to be happening is that those making the bets remain convinced of US global military and economic hegemony. As we have been pointing out, the signs are that military force will be used and the era of "free trade" may be coming to an end. Some are pointing to "currency protectionism."

While politicians rail against protectionism they seem more than happy to see their respective currencies depreciate relative to the US dollar. The British Pound, hammered by the collapse of the UK banking sector is further weakened each time the Bank of England reduces interest rates, now at 0.5%. The Euro suffers similarly with the credibility of the European Central Bank an issue for many commentators including the UK's Financial Times.

What is readily apparent is that while the United States is morally and financially bankrupt it remains unchallenged militarily and economically. It's banking system is insolvent and bankrupt but it seems that everybody has agreed to look the other way and "say it ain't so".

This last week began with a near miss of an asteroid that, had it hit, would have had the power of the Tunguska blast. The bad news continued with falling stock indexes world-wide and soaring unemployment. The official unemployment rate in the United States rose above 8%. The Bureau of Labor Statistics released some numbers of actual unemployed by including those who have stopped looking, who no longer collect unemployment, who are underemployed, or who aren't looking but would accept work if they could find it. This number, called U6, reached a stunning 16% in February 2009. The estimate of job losses in February in the United States is 651,000, the third straight month of losses over 600,000. 8% of all mortgages in the U.S. are delinquent and more than 3% are in foreclosure. The mainstream media increasingly uses the 'D' word, 'depression', to describe what's happening.

The global situation looks no better as the World Bank issued a report saying the "global economy is likely to shrink for the first time since World War II, and trade will decline by the most in 80 years". This contrasts with the IMF which has been predicting global growth of 0.5%. believes both these estimates to be optimistic and expects the global economy, should it even survive the year, to shrink at least 5% and possibly by many times that amount.

Robert Zoellick, the Bush placeman that took over the Presidency of the World Bank after another neocon, Paul Wolfowitz, was forced to step down said, "We need to react in real time to a growing crisis that is hurting people in developing countries. Action is needed by governments and multilateral lenders 'to avoid social and political unrest.'" Such concern is uncharacteristic of Zoellick, another Goldman Sachs man and previously the notorious US Trade Representative whose work in that role contributed to an increase in global suffering due to his promotion of numerous "Free Trade" agreements. He was also deeply involved in the formulation of the Doha Round of trade negotiations at the WTO which were so detrimental to developing nations that they simply couldn't swallow the poison pill. The completion of the stalled Doha Round has become a G20 target in its deliberations to address the financial crisis despite being wholly unrelated to the cause of the crisis.

Zoellick's new found concern is clearly not for the people of the world, as his career amply demonstrates. Rather he is adding to the promotion of social and political unrest which in reality will be a dangerous cocktail of the clamouring of the peoples of the world for change mixed with the brutal jackboot of totalitarian repression.

The World Bank report continued:-
Developing nations will bear the brunt of the contraction. They will face a shortfall of between $270 billion and $700 billion to pay for imports and service debts.....East Asia will be hit the hardest by the decline in global commerce, .... Global industrial production is expected to be as much as 15 percent lower than in 2008.

..... a surge of debt issuance by rich nations risks "crowding out many developing country borrowers, both private and public." Emerging nations that can access capital markets will be forced to pay higher rates of interest.

..... 94 out of 116 developing countries had experienced a slowdown in economic growth, with poverty increasing in 43. The economic crisis will swell the ranks of the poor by 46 million this year....... The result would be growing dependence on foreign aid...
We commented a couple of weeks ago about the immense expense (we conservatively estimated €20,000 per annum) of access to the details of much of what is happening in the financial markets and how this simple economic barrier is such an impediment to the ability to see the true picture. These last two weeks there have been numerous examples of the value of this expensive information which we have only temporary access to.

We have all heard just how difficult it is to get any type of credit these days and how the numerous businesses, particularly small businesses and sole-proprietorships, are disappearing as a result. Here are just a few examples of a rather different story:-
- The total amount of "syndicated loans" issues globally to 5th March this year is $217 billion.

- Sovereign and Supra Sovereign issuers have been busy with Portugal and Ireland raising €4 billion each, the World Bank raising $3 billion and KfW Bankengruppe, the German government owned development bank, raising $4 billion.

- Numerous large corporate borrowers have been signing what are termed "forward start" loan facilities. These facilities typically extend the maturity date of existing loans. Many of these borrowers had loans maturing in 2010 and 2011 and have typically extended the maturity by between 1 and 3 years. The pricing for these extensions has not been cheap which reflects a certain amount of realism among those responsible for corporate financing.

- Vattenfall, the Swedish state owned utility secured €5 billion to back part of its acquisition of Dutch utility Nuon. The sale of 49% of Nuon to Vattenfall is part of the break up and effective privatization of the four largest utility companies in the Netherlands; a process that has, by law, to be completed by the end of 2010.

- Enel, the Italian utility, raised €8 billion to finance the acquisition of a further 25% stake in Spanish utility Endesa in which it already has a 69% controlling stake.

- Roche, the pharmaceuticals group, raised $16.5 billion in the US dollar bond market as part of its funding for a $42 billion takeover of rival pharmaceutical company Geneentech. This is the biggest US dollar corporate bond deal ever.

- Roche then went to the European bond market where they raised a further €12.7 billion.

- JP Morgan have announced that they alone will lend $8.5 billion to Merck to back its $41.1 billion takeover of Schering Plough.
This little list, which doesn't even include any of the share issues that have been going on, is very telling isn't it? There is clearly plenty of money around for takeovers - that much lauded but highly destructive means of consolidating economic and market power in fewer and fewer hands. What the list doesn't show is the huge amount of money coming from the US into these financings; so much that bankers are talking about the US credit market being the focus for issuers in 2009. A quite different story from the one being told on TV screens across the US and being experienced by many millions of people across the world.

Is it notable that the two sectors that stand out are Utilities, upon which we all rely, and Pharmaceuticals whose brazen peddling of disease and quackery is one of the great corporate evils of the modern era. What is in store for us all with this ongoing consolidation in the crucial sectors that supply our power and are meant to address our health needs?

The consolidation in Pharmaceuticals is very worrying; Pfizer unveiled a $68 billion takeover of Wyeth in January and now we have two more takeovers each valued at over $40 billion. The power of "Big Pharma" has been amply demonstrated over the years including the ongoing global lobbying to outlaw those products that really do provide healing and preventative benefits, natural supplements, extracts and herbs; and the burying of evidence that Big Pharma is one of the major killers in western society. In the US, about one million people die each year due to harmful drugs manufactured and sold by these already extremely powerful companies. The further consolidation of economic power in fewer and fewer hands should be setting off alarm bells and anti-trust laws all over the world but no such alarm is being raised and the laws designed to protect against just this activity have been neutralised.

With this in mind the recent distribution of live hybrid flu virus, with the potential to cause a global pandemic, in flu vaccines by a US manufacturer has a whole new context; a context that is very troubling indeed when considering that a contamination of this nature could not be accidental.

What is also highly noteworthy is the presence, as lenders and underwriters, in these transactions of such well known banks as Citigroup, Bank of America and The Royal Bank of Scotland all of which have received huge sums from their respective governments. No doubt the citizens of the US, the UK and other countries whose banks have been bailed out will be delighted to see that these banks are in fact still lending very large sums and for such worth purposes as takeovers in the utility and pharmaceutical sectors.


The markets the last two week (from Feb 23rd to March 8th)

Previous week's close This week's close Change % change
Gold (USD) 994.90 939.50 55.40 5.57%
Gold (EUR) 775.57 742.57 33.00 4.25%
Oil (USD) 39.80 45.67 5.87 14.75%
Oil (EUR) 31.03 36.10 5.07 16.34%
Gold:Oil 25.00 20.57 4.43 17.71%
USD / EUR 0.7796 / 1.2828 0.7904 / 1.2652 0.0108 / 0.0176 1.39% / 1.37%
USD / GBP 0.6929 / 1.4432 0.7096 / 1.4092 0.0167 / 0.0340 2.41% / 2.36%
USD / JPY 93.345/ 0.0107 98.270/ 0.0102 4.925 / 0.0005 5.28% / 4.67%
DOW 7,366 6,627 739 10.03%
FTSE 3,889 3,531 358 9.21%
DAX 4,015 3,666 348 8.67%
NIKKEI 7,416 7,173 243 3.28%
BOVESPA 38,715 37,105 1,610 4.16%
HANG SENG 12,699 11,922 778 6.12%
US Fed Funds 0.15% 0.25% 0.10 n/a
$ 3month 0.27% 0.20% 0.07 n/a
$ 10 year 2.79% 2.87% 0.08 n/a


South Africa is the biggest economy in Africa, and thus finds itself exhibiting the problems of the developed economies as well as the problems of the emerging market economies. Unsurprisingly, its unemployment rate is increasing. The problem is, it is increasing from 23% making it the highest of 61 countries tracked by Bloomberg which had this to say:-
South Africa's economy, the biggest on the continent, contracted for the first time in a decade in the fourth quarter as a global economic recession slashed demand for platinum and steel. This is heavily affecting the very largest corporations. ArcelorMittal South Africa Ltd., Africa's largest steelmaker, cut 1,000 contractor jobs in December, while car manufacturer General Motors Corp. shut its South African plant for most of December.

"The outlook is bleak," said Arthur Kamp, an economist at Cape Town-based Sanlam. "Private sector fixed investment growth has slowed and will probably decline this year. That is going to be a drag on employment. We are seeing job losses in the mining and manufacturing industries now, but that will likely spread to the retail and financial services sectors..."
South Africa's currency, the rand, fell 4.3% against the U.S. dollar last week as Bank of America Merrill Lynch predict the economy will shrink 0.6%
Weaker prices for commodities, which account for 30 percent of South Africa's export earnings, will make it difficult for South Africa to finance the deficit on its current account, a measure of trade in goods and services, according to Natheem Alexander, a bond and currency trader in Cape Town at Peregrine Quant. The shortfall may reach 8.1 percent of gross domestic product in 2008, according to government estimates.

"The scale of this global recession is a lot worse than anyone anticipated," said Alexander. "A slowing global economy does not bode well for emerging markets like South Africa, particularly those with large external deficits."

China continued to signal its willingness to lend and spend. Last week China said it would continue to buy U.S. debt and this week it announced a stimulus package worth a half a trillion dollars.

In South Asia, the Indian currency, the rupee is falling, as are the currencies of most "emerging" economies as people flee to the relative safety of so called "safe haven" currencies like the U.S. dollar.
India's Rupee Slides to Record Low as Funds May Pull Money Out

India's rupee slid to a record low as mounting global stock losses added to concern investors will pull money out of riskier emerging-market assets.

The currency extended a two-week slump on speculation Standard & Poor's will soon cut the nation's debt rating to junk. The rupee also fell on concern the current-account deficit will widen from a record as exports decline amid a deepening global economic slump. ......

The rupee slid 1.3 percent to an all-time low of 51.81 per dollar as of 9:55 a.m. in Mumbai, according to data compiled by Bloomberg.

[ ]

Funds based abroad sold $1.65 billion more Indian equities than they bought this year, adding to 2008's record $13.3 billion in net sales, according to data released by the Securities and Exchange Board of India. The Bombay Stock Exchange's Sensitive Index has dropped 7.8 percent this year, following a record 52 percent slide in 2008.

S&P last week lowered its outlook on India's credit rating to negative from stable, saying government spending plans to shield the economy from the global recession and win voter support in elections were "not sustainable." The company rates India's debt BBB-, the lowest investment grade.
Asian exporting nations have been especially hard hit lately. Japan announced the first current account deficit in 13 years last week due to slumping exports:
Japan Posts First Current-Account Deficit Since 1996

Japan posted its first current account deficit in 13 years in January after exports collapsed amid the global recession.

The deficit stood at 172.8 billion yen ($1.8 billion), the Ministry of Finance said in Tokyo today. The median estimate of 22 economists surveyed by Bloomberg News was for a shortfall of 15.3 billion yen.

Companies from Toyota Motor Corp. to Sharp Corp. are cutting output and firing workers as overseas shipments slump at an unprecedented pace, pushing Japan toward its worst postwar recession...

"Other countries are in recession while Japan is in a depression," said Chua Soon Hock, managing director of Asia Genesis Asset Management Pte, a Singapore-based hedge fund. "Japan is like an old man who developed pneumonia while other younger countries caught the flu."

The Nikkei 225 Stock Average fell 0.8 percent in morning trading in Tokyo, bringing the year's losses to 20 percent. The yen traded at 98.37 per dollar from 97.96 before the report was published. The currency's 23 percent gain against the dollar in 2008 eroded the value of exporters' overseas sales, exacerbating losses at companies including Toyota and Sharp...

Exports tumbled 46.3 percent in January from a year earlier, today's report showed, after declining 35.1 percent in December. Imports slid 31.7 percent, more than a 21.2 percent decline the previous month.

Shipments to the U.S. tumbled an unprecedented 52.9 percent in January from a year earlier, and exports to Asia and Europe also posted the largest-ever declines, according to a separate trade report released last month...

Toyota is expecting its first annual loss in 59 years as vehicle sales plunge in the U.S., Japan and Europe, its biggest markets. Every 1 yen gain against the dollar cuts Toyota's annual operating profit by 40 billion yen.

Sharp, the country's largest maker of liquid-crystal- display televisions, will post its first loss in more than five decades and cut 1,500 temporary jobs because of falling sales.

The current account tracks the flow of goods, services and investment income between Japan and its trading partners. It includes trade not shown in the customs-cleared balance.
Inevitably, despite the oft repeated calls from politicians and the unelected heads of supra-national organizations like the IMF, Asian countries are letting their currencies drop to cheapen their exports.
Currency Defense Drops on Ringgit, Won on Exports

Asian central banks are abandoning a six-month campaign of defending their currencies, reversing course to cheapen exports that are falling the most in a decade.

Policy makers from India to Malaysia to Taiwan are letting their currencies depreciate after South Korea gave companies an edge by allowing the won to weaken 19 percent against the dollar this year. Shipments from South Korea, Indonesia, Taiwan and Malaysia fell 17 percent in January to $79 billion, twice the drop of April 1998, when the Asian financial crisis was wiping out a third of the region's economy, according to data compiled by Bloomberg.

"Export markets have been forced to let their currencies weaken to try and keep up with the competitive depreciation in the won," said Dwyfor Evans, a strategist in Hong Kong at State Street Global Markets LLC, which has $12 trillion under custody.

The won, India's rupee and Taiwan's dollar will decline against the U.S. dollar by 12, 13 and 6 percent, respectively, by the end of June, according to Stephen Jen, a Morgan Stanley currency strategist....

"There will no longer be meaningful interventions to prevent Asia-outside-Japan currencies from falling," Jen said in a March 2 report from London. "There's a genuine change in the currency policies of many Asian economies. A severe contraction in the trade surpluses clearly affects the relative supply and demand for dollars in these countries..."

Weaker currencies alone won't spur recoveries as the global recession deepens, said Mark Dow, a money manager at Pharo Management LLC...

"If you lose your job and buy a flat-screen TV just because it's 70 percent off, I bet your wife won't be happy," said Dow, who is selling currencies of Malaysia, Philippines, Taiwan and South Korea. "Price doesn't matter. It's a mistake for Asia to devalue their currencies. The thinking is wrong, but it's happening."
Australia & New Zealand

Both the Australian and the New Zealand dollars have dropped as investors flee to the "safety" of the U.S. dollar. As we said above, in the bizarre world of economic collapse, the US is seen as the safest haven outside gold. Even gold, having run up to $1,000 is now headed back to $900, despite news that hedge funds regard it as hedge against central banks. The New Zealand dollar hit a 6.5 year low and the Australian dollar fell for the third week in a row.
The Australian dollar has slumped 8.5 percent against the greenback this year, while New Zealand's dollar dropped 15 percent. A weakening outlook for global growth put pressure on commodity prices and prompted the central banks of both countries to lower interest rates.
Latin America

As more and more emerging market nations find themselves cut off from the debt markets they know the lender of last resort is the IMF. However, they also know the true cost to their nations of borrowing from the IMF which will impose the Washington Consensus on them with the resulting further impoverishment of their people. Of course, as history and the present show, the ruling elites of most emerging market nations have no care for their citizens, rather they fear the social and political ramifications of an increasingly impoverished majority; a majority that in Latin America look to Venezuela and ask why they too do not have leaders that at least take real actions to alleviate their poverty.

Argentine President, Cristina Fernandez de Kirchner, is well aware of the ramifications of the financial crisis on her country and that she will in due course need to borrow from the IMF. Argentina's economy was devastated between 1999 and 2002 by the IMF's Washington Consensus policies and the government of the time's attempts to circumvent certain aspects of the policy medicine. This was no doubt in her mind when she called for the IMF and World Bank to issue aid loans with no conditions attached.
Argentina's Fernandez Says Crisis Demands Aid Changes

Argentine President Cristina Fernandez de Kirchner said the global financial crisis should provide momentum to change how international organizations provide aid to emerging market economies.

Fernandez called on the International Monetary Fund and World Bank to extend aid to countries without conditions, a position she said she'll push at the annual meeting of the world's 20 biggest economies in London on April 2. She said developing countries have been punished by a financial system in which regulations "only apply to weak and emerging economies."

"There needs to be reform of the multilateral lending agencies, which have until today operated by forcing restrictions on emerging markets," Fernandez said in Buenos Aires during a 70-minute speech to Congress to kickoff Argentina's legislative session. "The IMF and World Bank need to be changed into instruments of financing without conditionality."

Additional financing for emerging markets could help South America's second-biggest economy overcome slowing growth as auto factories and metal producers slash output and tensions rise with farmers over exports and taxes. Industrial production declined 6.1 percent in January from the previous month and auto sales fell 39 percent from a year earlier.

New tools are needed to help the government "intervene" in the economy to protect jobs and maintain economic growth, Fernandez said, without elaborating. Reports last week that the government may take over the country's grains trade could spark social unrest, farmers said, a year after farm protests paralyzed the country and prompted food shortages.
Such speeches make for fine political fare but will of course have no effect upon the policies or behaviour of the IMF or the World Bank.

One of the few currencies gaining ground against the dollar recently is the Brazilian real which has risen nearly 6% against the dollar in the past three months despite interest rate cuts, a sign of the relative health of the Brazilian economy.

Eastern Europe

The situation in Eastern Europe continues to be dire with nobody realistically expecting any improvements. It is only a matter of time before the banking system in at least one Eastern European country collapses resulting in a domino effect across the regions and into Western Europe which remains heavily exposed to the region. With Bloomberg reporting:-
East Europe is buckling under the weight of the crisis, which slowed demand in key export markets while shutting off investment and credit. Hungary's central bank expects the economy will shrink as much as 3.5 percent this year and the government sought international aid last year.
It is little wonder that consumer sentiment fell to record lows in Hungary.
The consumer confidence index has been plummeting since October, when Hungary secured 20 billion euros ($25.7 billion) in International Monetary Fund-led loans to avert a default. Investors had dumped assets deemed riskier during the global credit crunch.

Sentiment in Hungary has been near all-time lows since 2006 when Gyurcsany raised taxes and lowered subsidies to narrow the budget deficit, the widest in the European Union.

Hungary plunged into its second recession in two years in the fourth quarter. In the three months to December, the economy contracted 1 percent from the previous quarter and shrank 2 percent from a year earlier.
Last week the EU refused to extend an aid plan to Eastern Europe, leaving the region in the clutches of the IMF:-
Euro Slides to One-Week Low as EU Rejects East Europe Aid Call

The euro fell to a one-week low against the dollar after European Union leaders rejected calls to back an aid package for eastern Europe, fueling concern the financial crisis will deepen the region's recession.

Europe's single currency dropped for a second day versus the greenback as EU leaders vetoed Hungary's proposals for 180 billion euros ($227 billion) of loans to ex-communist economies in eastern Europe....
The EU, led by Germany with its concern for fiscal responsibility, rejected loans to Eastern Europe and an auto bailout. Resentment is growing in Eastern Europe but German Chancellor Angela Merkel does not seem to acknowledge the seriousness of the problem. Or, as is more likely for a leader with a personality profile like hers, she does realize the seriousness of the problem but can benefit from the suffering of the Eastern countries which is serving a broader agenda. In an example of the cynicism of the ruling elite of Europe, rather than provide further support to struggling Hungary and Latvia, the EU has called for them to reduce their budget deficits to within the EU ceiling.
EU Spurns Calls for Eastern Aid, Carmaker Bailout

European Union leaders spurned pleas for special aid for eastern Europe and a rescue package for automakers, bowing to German concerns over budget deficits as the economic crisis escalates.

EU leaders vetoed an appeal by Hungary for loans of 180 billion euros ($228 billion) for ex-communist economies in eastern Europe, and told car makers such as General Motors Corp.'s European arm to look to national capitals for help....

The worst economic slump since World War II is devastating eastern Europe, putting at risk EU goals of stitching together a continent-wide free market.

The EU's $17 trillion economy will shrink 1.8 percent in 2009, the European Commission predicts. Latvia, a former Soviet republic that was the bloc's star performer only three years ago, will contract 6.9 percent. Growth in Poland, the biggest eastern economy, will tumble to 2 percent, the slackest pace since 2002.....

Nine eastern leaders met before the summit to warn the West against putting up new walls in Europe, five years after the EU overcame historic divisions by admitting its first eastern members.

European Commission President Jose Barroso said the east doesn't need special treatment, noting that it can draw on 15.4 billion euros in the EU's balance-of-payments assistance fund and will get 7 billion euros from a separate the 11 billion euros in accelerated infrastructure subsidies. "We are one union, not two unions or three unions," Barroso said.

Current EU measures are "like throwing a snowball into the fires of hell," said Fredrik Erixon, director of the European Centre for International Political Economy in Brussels....

Merkel, representing the biggest contributor to the EU budget, said aid for eastern Europe needs to be channeled through institutions like the International Monetary Fund....

As budget deficits mushroom beyond the EU's limit of 3 percent of gross domestic product, Merkel's plea for "a return to solid fiscal management" met with a mixed response....

So far, national stimulus packages, welfare spending and cash from the EU's central budgets have pumped 3.3 percent of EU-wide GDP into the economy, the Brussels-based commission estimates. As a result, it forecasts that the 27-nation EU's overall budget gap will rise to 4.4 percent of GDP in 2009 from 2 percent last year......

French President Nicolas Sarkozy triggered the east-west clash by saying on Feb. 5 that it "isn't justified" for recession-hit French carmakers to operate plants in places like the Czech Republic instead of creating jobs at home. That broadside led Czech Prime Minister Mirek Topolanek, the first head of an ex-Soviet bloc state to hold the EU presidency, to convene the summit to demonstrate European unity against protectionism...
Western Europe

The fascist drift in Europe has reached private banking with France and Germany, backed of course by the US, seeking to blame the financial crisis on the small low tax or no-tax states whose banking system still provides for absolute privacy for their clients. There is no doubt that this privacy has been abused by many but, as with the removal of our other freedoms in the name of illusions, the idea that somehow banking privacy caused the financial crisis is contemptible propaganda.

It has been a busy time as the Bank of England cut UK interest rates to just 0.5% and the European Central Bank cut to 1.5% for the Eurozone amid reports that it is "mulling radical action" akin to the "quantitative easing" under way in the US, UK and Japan.

The Bank of England opted this week for an historic "quantitative easing", announcing that it will pump ₤75 billion into the UK economy. Unfortunately, rather than achieve this through paying for anything real such as wages and infrastructure development the UK government is in essence wasting this money by buying up UK government debt. This serves the interests of the holders of such debt as they can now go shopping for bargain basement acquisitions and other discounted assets. It won't however have any meaningful effect on the real economy and the real people that need work.

In an example of where the UK government's interests lie, it achieved an extraordinary about-turn in relation to the status of subordinated debt issued by Bradford & Bingley, one of the nationalized mortgage lenders. Subordinated debt is intended as a form of capital which will absorb losses, it is treated as capital by regulators for exactly this reason. So when Bradford & Bingley essentially went bust and had to be rescued by the government the subordinated debt investors should have lost their money. The government however, no doubt due to some seriously dubious lobbying, decided that this won't be the case and has even guaranteed the interest payments of the debt. Yet again, citizens' money is being used to bailout financial investors from the risks they knowingly took. It is a shame Monty Python isn't still around as the behaviour of governments moves form the ridiculous to the absurd. Amazingly, the Bradford & Bingley subordinated debt holders still complained about being badly treated!

As if in answer to our cynicism as regards just whose interests the UK government is protecting, the UK police revealed that they are investigating a "spate" of fraudulent investment schemes. The following comments by Richard Alderman the Director of the Serious Fraud Office are interesting:-
"Clearly, in view of our interest in Bernie Madoff and Sir Allen Stanford, people are talking to us about red flags for hedge funds, because as the stories unravel it is very interesting to understand the structure of what happened and what could have been picked up by people through due diligence."

"We are finding that people are talking to us about that and we are learning from them. We are not sharing operational detail but sometimes it is right that we feed back what we learn when we can. There is a lot more we can do on that; what kind of things due diligence could pick up."
So we have the police providing private feedback to the investment industry on these schemes. The police work for the state which is meant to serve the people so if the police are providing feedback on how to spot fraudulent investment schemes shouldn't it be to their ultimate employer, the British public and not on a private basis to those with vested interests?

Meanwhile the British Pound continued its fall against the euro, and every other major currency, in what cynics might suggest looks like competitive devaluation or perhaps the actions of powerful interests with a more nefarious agenda. Whether there is an agenda or not the effect of the collapse in the value of the British Pound is not lost on EU officials:-
European Union officials are concerned that the pound's slide to a record low against the euro could destabilize the British economy, according to a document prepared last month by European Commission and EU finance ministry officials.

The pound's "very rapid" drop "raises questions about the financial stability of the British economy," .... The currency's weakness "is a source of concern for the euro area."

The report contradicts Prime Minister Gordon Brown's argument on Feb. 13 that a weaker currency helps rather than hinders the economy. With the pound down 18 percent against the euro in the past year, it also underscores investors' concern about Britain's fiscal health as the government racks up debt to fund bank bailouts.....

The document signals concern among euro-area policy makers that the pound's slump could push their 16-nation economy deeper into a recession by undermining exports to its biggest trading partner...
Germany has earned a reputation for fiscal prudence and avoidance of excessive debt and risk. But lest one think that the real estate debt excesses of the past decade are limited to the United States and and could not happen in Germany, consider the case of Hypo Real Estate, the country's second largest mortgage lender. Bailouts of the German mortgage firm have by now totaled €100 billion. But the liabilities of the bank may total as much as a trillion euros.

Hypo Real Estate is typical of the position of many banks globally as is the trap into which the German government has fallen. The following article is long but provides an excellent exposé of what is happening inside many banks, including Citigroup, Bank of America, Royal Bank of Scotland and Lloyds to name just four; and what is occurring between those banks and the governments bailing them out:
Bailout of Germany's Hypo Real Estate: A bottomless pit

Hypo Real Estate (HRE) is an international property lender and the second largest mortgage lender in Germany. The firm has repeatedly applied for and received state support and guaranties, which have now reached over 100 billion euros.

An initial bailout-package of over 35 billion euros was authorised at the end of September last year, and this was then topped with a further 50 billion at the beginning of October. Since then, HRE has reported new "holes" in its balance sheet every month, and the German government has repeatedly propped the bank up.

Despite all these measures, the HRE continues to report an urgent need for financial help. According to a report in the Frankfurter Allgemeine Zeitung, further state guaranties in the sum of 20 billion euros will be necessary in the coming week. When the HRE presents its annual statement of accounts on 31st March, it is expected to show the need for a further 10 billion euros just to fulfill the statutory minimum equity capital requirements.

No one seems to be able to say exactly how high HRE's mountain of debt actually is at the moment. While up to now speculation pegged the sum at about 400 billion euros, on Wednesday, the Hannoversche Allgemeine reported insiders and experts from the Federal Parliament's Lower House as saying that the Munich-based concern in reality has credit and derivatives debt amounting to a trillion euros, of which a large part derives from businesses that do not appear in the official balance sheet.

German Finance Minister Peer Steinbrück (Social Democratic Party--SPD) and Chancellor Angela Merkel (Christian Democratic Union--CDU) have justified state help for the HRE by saying that the property lender is a "systemically relevant" institution that cannot be allowed to fail, because its demise would undermine the entire German economy. Any collapse of the HRE would have the equivalent international impact of the bankruptcy last September of Lehman Brothers.

For years securities have been seen as safe investments. For that reason, they often have been used to underpin life insurance and pension funds. With a market share of about 20 percent―an estimated total of 900 billion euros―HRE is one of the leading players in the German securities market. The German government fears that the collapse of HRE could bring the entire securities market crashing down with it, with unforeseeable consequences. However, the Consortium of Securities Bankers deny that such a danger exists.

Steinbrück and Merkel have also emphasised that state assistance for HRE consists solely of securities that would only be used in the case of actual insolvency, and of capital investment, that could perhaps later be sold again at a profit. However, it is becoming more and more obvious that the federal treasury is actually taking on full liability.

To understand the extent of the sums involved one can compare them to Germany's domestic budget. The guaranties that have already been given to HRE represent one third of the annual state expenditure of 290 billion euros. These subsidies are nearly as big as the largest single item of state expenditure - unemployment and social welfare, which amounts to 124 billion euros.

If HRE goes bankrupt, the federal government will be liable for its cash infusions and guarantees. In order to pay off the liability of more than 100 billion euros, it would have to drastically increase government borrowing and at the same time make further cuts in public spending on social support and welfare.

On the other hand, if the government continues to feed HRE with ever-greater sums of money, in order to stop it from going insolvent, it will end up being hostage to the bank. "Unfortunately, no-one knows what is more dangerous: letting the HRE go bust, or keeping it half-alive with constant money transfusions," commented the Süddeutsche Zeitung.

The government is proceeding along the latter path. The Cabinet has put forward an "emergency takeover bill" which will facilitate further cash infusions into HRE. This bill is expected to be approved by the Bundestag (Federal Parliament) and Bundesrat (Federal Assembly) no later than April 3 this year.

Finance Minister Steinbrück justified these measures by saying that the expropriation of the shareholders had nothing to do with nationalisation as such, but with the safeguarding of public funds. "We are guaranteeing a huge sum of money, but we are not taking over a single share. If the government becomes the owner, the bank's refinancing and capital options will considerably improve. They will then profit from the high creditworthiness of the federal government," he said. The aim was to promote a "viable business model", so that the HRE bank could quickly be sold into private hands again. Chancellor Merkel justified the need for such an expropriation by declaring "it is internationally agreed that a bank cannot be allowed to fail if it will bring others down with it."


While every German citizen is now liable for HRE to the tune of 1,200 euros per head, not a single one of the financial speculators, main shareholders or board members of HRE has been held accountable for their corrupt and irresponsible practices.

The HRE business model was based on securing long-term loans with short-term loans. In order to avoid the supervisory control of the financial and treasury inspectors, HRE devolved part of its activities to its daughter firm Depfa in Ireland. The outbreak of the financial crisis shattered these practices. Because of the credit crunch, in which banks have largely ceased lending to each other, HRE can now only survive in the short term and have a chance to refinance itself with the help of billions of euros in guarantees from the German government.

Despite all this, the German government still considers itself obliged to do what the banks and the financial elite command them. Their "emergency takeover" bill proposes to legalise enforced nationalisation by the end of June, if the shareholders do not voluntarily accept the current state takeover deal. The expropriated shareholders would then receive as compensation the average stock market price for their shares from the two weeks prior to the expropriation. Should the bank later be re-privatised, which they expect to happen soon, the deal offers the former shareholders first option to re-purchase the same shares.

The American investor group J.C. Flowers, which is HRE's majority shareholder with 24 percent of all shares, has offered no serious objection to the planned expropriation. In a letter to the federal government, the board of the group declared that they also agree with the government's aim of taking on a majority share in HRE of 75 percent plus one share. Only the amount of compensation for the concerned shareholders was "in our view not acceptable".

In June 2008, J.C. Flowers became majority shareholder when it bought a billion euros' worth of stakes in HRE at the price of 22.50 euros per share. The current value of these shares - €1.60 each - has melted 60 billion euros away from their portfolio's value. Should the bank go bust, the shares would be worth absolutely nothing. So now J.C. Flowers wants the state to make up for their speculative losses.

But investors are trying their luck at pushing the price higher. They are threatening to contest enforced nationalisation with long-drawn-out legal processes and are demanding compensation for the voluntary surrender of their shares―compensation that, at three Euros per share, is double their current stock market value.

The nationalisation envisaged by the German government is nothing more than an effort to rescue the bank at a cost to the German people of billions of euros. But these government actions will neither halt nor solve the financial and economic crisis. They will leave untouched the basic interests of the ruling class, which are rooted in the private ownership of capital and control over the financial system as a whole.
Make no mistake, these so called bank "nationalisations" are not some kind of socialistic takeover of banks by "governments". Rather, they represent the opposite: the final takeover of national governments by banks. They are just one plank of the massive theft being perpetrated on the citizens of the world.

Imagine a casino in which there are numerous high rolling gamblers. These gamblers have day jobs which are useful to society but represent a very small part of what they do as the bulk of their time and all their resources are focused on gambling. It's late in the night and the gamblers have been cleaned out and are massively in debt to the casino. They are terrified because they know the end is near, the casino owners are not known for their gentle ways, and these gamblers are deeply in their debt with no way out. But, just like in the movies, as the final denouement nears, the doors bust open, help has arrived. In strides the government with bags and bags of cash. It settles all the gamblers debts because the gamblers have that tiny little role they play which is crucial to the functioning of society. Some think that at this point the government should chastise the gamblers and tell them to get back to performing that useful function and that useful function alone, but sadly no, as the government leaves the casino the gamblers demand that the government given them back all their original chips. Incredibly, the government agrees and hands over the cash. The gamblers stay in the casino, toast themselves and get back to the tables. In due course it will be the government that is left standing alone in the street in the cold light of dawn wondering just how it got so badly mugged. But like all governments it will shrug its shoulders and wander off, it wasn't its money anyway.

Here is Michael Hudson in a lengthy article that we've excerpted here but is worth reading in full:
What "Nationalize the Banks" and the "Free Market" Really Mean in Today's Looking-Glass World

The Language of Looting

"Banking shares began to plunge Friday morning after Senator Dodd, the Connecticut Democrat who is chairman of the banking committee, said in an interview with Bloomberg Television that he was concerned the government might end up nationalizing some lenders "at least for a short time." Several other prominent policy makers - including Alan Greenspan, the former chairman of the Federal Reserve, and Senator Lindsey Graham of South Carolina - have echoed that view recently."

--Eric Dash, "Growing Worry on Rescue Takes a Toll on Banks," The New York Times, February 20, 2009

How is it that Alan Greenspan, free-market lobbyist for Wall Street, recently announced that he favored nationalization of America's banks - and indeed, mainly the biggest and most powerful? Has the old disciple of Ayn Rand gone Red in the night? Surely not.

The answer is that the rhetoric of "free markets," "nationalization" and even "socialism" (as in "socializing the losses") has been turned into the language of deception to help the financial sector mobilize government power to support its own special privileges. Having undermined the economy at large, Wall Street's public relations think tanks are now dismantling the language itself.

Exactly what does "a free market" mean? Is it what the classical economists advocated - a market free from monopoly power, business fraud, political insider dealing and special privileges for vested interests - a market protected by the rise in public regulation from the Sherman Anti-Trust law of 1890 to the Glass-Steagall Act and other New Deal legislation? Or is it a market free for predators to exploit victims without public regulation or economic policemen - the kind of free-for-all market that the Federal Reserve and Security and Exchange Commission (SEC) have created over the past decade or so? It seems incredible that people should accept today's neoliberal idea of "market freedom" in the sense of neutering government watchdogs, Alan Greenspan-style, letting Angelo Mozilo at Countrywide, Hank Greenberg at AIG, Bernie Madoff, Citibank, Bear Stearns and Lehman Brothers loot without hindrance or sanction, plunge the economy into crisis and then use Treasury bailout money to pay the highest salaries and bonuses in U.S. history.

Terms that are the antithesis of "free market" also are being turned into the opposite of what they historically have meant. Take today's discussions about nationalizing the banks. For over a century nationalization has meant public takeover of monopolies or other sectors to operate them in the public interest rather than leaving them to special interests. But when neoliberals use the word "nationalization" they mean a bailout, a government giveaway to the financial interests.

Doublethink and doubletalk with regard to "nationalizing" or "socializing" the banks and other sectors is a travesty of political and economic discussion from the 17th through mid-20th centuries. Society's basic grammar of thought, the vocabulary to discuss political and economic topics, is being turned inside-out in an effort to ward off discussion of the policy solutions posed by the classical economists and political philosophers that made Western civilization "Western."

Today's clash of civilization is not really with the Orient; it is with our own past, with the Enlightenment itself and its evolution into classical political economy and Progressive Era social reforms aimed at freeing society from the surviving trammels of European feudalism. What we are seeing is propaganda designed to deceive, to distract attention from economic reality so as to promote the property and financial interests from whose predatory grasp classical economists set out to free the world. What is being attempted is nothing less than an attempt to destroy the intellectual and moral edifice of what took Western civilization eight centuries to develop, from the 12th century Schoolmen discussing Just Price through 19th and 20th century classical economic value theory.

Any idea of "socialism from above," in the sense of "socializing the risk," is old-fashioned oligarchy - kleptocratic statism from above. Real nationalization occurs when governments act in the public interest to take over private property. The 19th-century program to nationalize the land (it was the first plank of the Communist Manifesto) did not mean anything remotely like the government taking over estates, paying off their mortgages at public expense and then giving it back to the former landlords free and clear of encumbrances and taxes. It meant taking the land and its rental income into the public domain, and leasing it out at a user fee ranging from actual operating cost to a subsidized rate or even freely as in the case of streets and roads.

Nationalizing the banks along these lines would mean that the government would supply the nation's credit needs. The Treasury would become the source of new money, replacing commercial bank credit. Presumably this credit would be lent out for economically and socially productive purposes, not merely to inflate asset prices while loading down households and business with debt, as has occurred under today's commercial bank lending policies...

The Chicago Boys in Chile realized that markets free for predatory finance and insider privatization could only be imposed at gunpoint. These free-marketers closed down every economics department in Chile, every social science department outside of the Catholic University where the Chicago Boys held sway. Operation Condor arrested, exiled or murdered tens of thousands of academics, intellectuals, labor leaders and artists. Only by totalitarian control over the academic curriculum and public media backed by an active secret police and army could "free markets" neoliberal style be imposed. The resulting privatization at gunpoint became an exercise in what Marx called "primitive accumulation" - seizure of the public domain by political elites backed by force. It is a free market William-the-Conqueror or Yeltsin-kleptocrat style, with property parceled out to the companions of the political or military leader.

All this was just the opposite of the kind of free markets that Adam Smith had in mind when he warned that businessmen rarely get together but to plot ways to fix markets to their advantage. This is not a problem that troubled Mr. Greenspan or the editorial writers of the New York Times and Washington Post. There really is no kinship between their neoliberal ideals and those of the Enlightenment political philosophers. For them to promote an idea of free markets as ones "free" for political insiders to pry away the public domain for themselves is to lower an intellectual Iron Curtain on the history of economic thought


Neoliberal denunciations of public regulation and taxation as "socialism" is really an attack on classical political economy - the "original" liberalism whose ideal was to free society from the parasitic legacy of feudalism. A truly socialized Treasury policy would be for banks to lend for productive purposes that contribute to real economic growth, not merely to increase overhead and inflate asset prices by enough to extract interest charges. Fiscal policy would aim to minimize rather than maximizing the price of home ownership and doing business, by basing the tax system on collecting the rent that is now being paid out as interest. Shifting the tax burden off wages and profits onto rent and interest was the core of classical political economy in the 18th and 19th centuries, as well as the Progressive Era and Social Democratic reform movements in the United States and Europe prior to World War I. But this doctrine and its reform program has been buried by the rhetorical smokescreen organized by financial lobbyists seeking to muddy the ideological waters sufficiently to mute popular opposition to today's power grab by finance capital and monopoly capital. Their alternative to true nationalization and socialization of finance is debt peonage, oligarchy and neo-feudalism. They have called this program "free markets."
United States and Canada

The bad economic news continued in North America last week, as the United States announced a sharp drop in existing home sales and in housing prices for January:-
Purchases fell 5.3 percent to an annual rate of 4.49 million, the fewest since 1997, the National Association of Realtors said today in Washington. The median price dropped 15 percent from a year ago to a six-year low of $170,300. Distressed properties accounted for 45 percent of all sales....

Sales were down 8.6 percent compared with a year earlier.

The number of unsold homes on the market at the end of January represented 9.6 months' worth at the current sales pace, up from 9.4 months at the end of December.

Resales of single-family homes decreased 4.7 percent .....sales of condos and co-ops dropped 10 ......Purchases declined in three of four regions, led by a 15 percent decline in the Northeast. Sales were unchanged in the West.
Venezuelan president Hugo Chavez last week had some advice for US President Obama:-
"It's regrettable the crisis that the U.S. is living through. Millions of workers are being left in the street, thousands of companies are closing, in the U.S. there isn't a single new infrastructure project. Go look for a highway there, the country has gone bust."

"Now President Obama arrived with some announcements, hopefully, but the capitalist model and its perverse values have failed."

"I recommend to Obama -- they're criticizing him because they say he's moving towards socialism -- come Obama, ally with us on the path to socialism, it's the only road."

"Imagine a socialist revolution in the U.S. Nothing is impossible."
The U.S. elite is increasingly worried about any action that is seen to deviate from the extreme free market capitalist dogma that has caused so much suffering and destruction around the world. In rhetoric reminiscent of a worryingly McCarthy-esque creed politicians from all parties including the President are desperate to distance themselves from any action or even statement that is not hardcore neo-liberal. It seems that even the suggestion of an association with "socialism" is wholly unacceptable. Never mind that what the US could do with is a few years of real socialism, not the "reds under your bed" type that most US citizens think of as socialism, but socialism that provides for the weaker and less fortunate, that champions human values over monetary and has a higher creed than naked greed and extreme wealth.
A specter haunts the ruling elite

The specter of socialism is haunting the American ruling elite.

One finds in the media increasing references to the prospect of socialism. The different factions of the bourgeoisie accuse each other of socialistic tendencies, while insisting on their own absolute commitment to the principles of free enterprise.

One of the central topics for discussion on the Sunday talk shows yesterday was Republican charges that Obama's policy is somehow socialistic. On ABC News' "This Week with George Stephanopoulos," the assembled panel of regular columnists - E.J. Dionne, David Brooks, George Will and Cokie Roberts - debated the issue.

On NBC's "Meet the Press," Democratic Senator Charles Schumer and Republican Senator Lindsey Graham discussed the possibility of government ownership of the banks. Schumer and Graham both supported some form of nationalization. However, they both hastened to distinguish between "bad nationalization," where the government actually takes the banks out of the hands of private individuals, and "good nationalization" - which they said would be better called "receivership" - in which the government would clean up the balance sheets of the banks and quickly resell them to private investors.

Of the various references to socialism, perhaps the most extraordinary came from President Barack Obama himself. In an interview with the New York Times on Friday, Obama was asked to respond to charges from sections of the Republican Party that he is a socialist. Obama was taken aback by the question, but laughed it off and responded with a simple, "The answer is no."

Following the interview, Obama and his advisers apparently discussed the issue, and 90 minutes later the president took the unusual measure of calling back Times reporter Jeff Zeleney. Evidently nervous about the implications of the question, Obama elaborated on his opposition to socialism and attempted to reverse the charge. "I think that it's important just to note when you start hearing folks throw these words around that we've actually been operating in a way that is entirely consistent with free market principles and that some of the same folks who are throwing the word socialist around can't say the same," he said.

The prospect of social unrest has become a frequent topic of discussion in the media as well. In the New York Times on Sunday, an opinion piece by Liaquat Ahamed entitled "Subprime Europe" cited the economic collapse of the region, which he compared to the collapse of the Austrian bank Creditanstalt in 1931. That event sparked a financial panic in Europe, setting into motion the Great Depression.

Ahmed wrote that the economic meltdown of Eastern Europe is "provoking social unrest." Warning of the implications for the United States, he noted, "American subprime borrowers who have had their houses foreclosed on are not - at least not yet - rioting in the streets. Workers in Eastern Europe are."

In another comment on the same page in the Times, Frederic Morton drew a comparison with Austria in 1913. He concluded his comment with a quote from Karl Kraus, who called Austria "the laboratory of the apocalypse." Morton asked, "What would he say about America today?"

In a recent appearance on MSNBC, former national security advisor for Jimmy Carter, Zbigniew Brezezinski, worried about the reemergence of "class conflict."

It is ironic that this discussion of socialism is engaging a political and media elite that for decades has promoted anti-communism and anti-socialism as a virtual state religion. No faction of the political establishment is advancing a policy that in any way challenges capitalism or the interests of the financial elite. Nor is there yet a mass socialist movement of the working class.

However, there is growing nervousness within this layer over the implications of the capitalist crisis and the potential for mass social opposition to the policies of the ruling class. Thus far, political discussion in the US has been contained within an extremely narrow framework. The diversity of views in the media and on the talk shows encompasses various shades of opinion within the wealthiest one tenth of one percent of the population.

Yet there is an objective logic to developments. At a certain point - sooner rather than later - discussion of policy will escape their tight grasp. The masses of people who are directly affected by the global depression will become involved.

There is a sense within the ruling class itself of an enormous anger building up, which, if unleashed, will assume the form of mass opposition to capitalism directed against the wealth and privileges of the financial elite. They are worried that socialism will then develop not merely as a specter, but as a living political movement embedded in the consciousness of millions of people. And they are right to be worried.
It is interesting that all countries besides the United States have viable socialist political parties. Why, in the supposed home of political freedom would there be no such option?

Writing of the alarming collapse of General Motors, socialist commentator Jerry White points out what should be obvious:-
The collapse of General Motors is a concentrated expression of the crisis of the profit system as a whole. The global slump has slashed auto sales far more drastically than GM management anticipated in the restructuring plans it submitted to the government. Rejecting any suggestion of a quick economic recovery, the auditors wrote, "There is no assurance that the global automobile market will recover or that it will not suffer a significant further downturn."

In the US - the world's largest auto market - sales have fallen to the lowest level in 30 years. After averaging between 16 and 17 million vehicle sales a year for most of the decade, US auto sales fell to 13 million in 2008 and are expected to plunge to only 9 million this year. Last month, auto sales in China surpassed those in the US for the first time ever.

Throughout the world there is an unprecedented contraction in auto sales affecting Japan, Europe, Latin America and the previously fast-growing Chinese and Indian markets. Global auto giants like Toyota, Nissan and Volkswagen are announcing production cuts, mass layoffs and demands for concessions from their workers. Meanwhile, industry analysts predict a wave of bankruptcies and mergers by auto and auto-related companies to eliminate the so-called "glut" in production capacity - a process that will destroy millions of jobs.

The crisis of GM and the auto industry as a whole underscores the anarchy and irrationality of capitalism. There is no less need for cars and trucks today than there was last year. Nor is there a lack of technology, scientific understanding or available labor to produce safe, environmentally sustainable and affordable cars.

But under capitalism, production is carried out for private profit, not human need. Moreover, the network of production and distribution - global in scope and dominated by transnational corporations - remains trapped within the constricting and economically destructive framework of rival nation states. As a result, millions of workers face the prospect of pauperization as the unsold products of their labor pile up in factory lots, rail yards and shipping ports around the world.

The collapse of GM - the 101-year-old industrial giant which long defined the modern mass-production corporation - is symbolic of the historic decline of American capitalism. It highlights the decades-long transformation of the US economy, which saw the manufacturing base of the country systematically starved of resources and largely dismantled while vast sums of wealth were accumulated in the hands of a financial aristocracy through debt-driven speculation separated from the production of real value.

One set of figures demonstrates this process. In 1950, when GM was producing some 40 percent of the world's cars, manufacturing accounted for 60 percent of all corporate profits in the US and financial operations accounted for 10 percent. By 2004, the ratio had reversed, with the financial sector accounting for 45 percent of corporate profits and manufacturing only 6 percent.

The decline of American capitalism is, in turn, a concentrated expression of the crisis of the global capitalist system, which has reached the point where markets are breaking down, consumer demand is plummeting and huge sections of the world's productive forces are being destroyed.
Many will object that there is no alternative to capitalism, that the best we can hope for is a slightly more humane capitalism. Is that really true?

Many object that socialism is "utopian" that it overestimates human nature. Certainly capitalism generates massive economic growth while allowing, in fact expecting and encouraging, people to be selfish, greedy, egocentric and ultimately immoral. However, if we consider that there are not one but two "human natures," that of psychopaths, people with absolutely no conscience, and that of normal humanity, the vast majority, then the picture becomes different. If psychopaths were identified and their tricks exposed, if children were brought up in healthy environments to be resistant to ponerization, then one could easily imagine a humane socialist alternative, one based on a truer understanding of human nature than that proposed by free market capitalist theory.