CHAPTER III: THE ROOTS OF 9/11: THE GLOBALIZED CRISIS OF THE 1990s
I'm not going to start the Third World War for you.
-- General Sir Michael Jackson to Wesley Clark, June 1999
Contrary to popular belief, the 9/11 events were anything but a bolt out of the blue. They grew out of the severe and increasing global instability of the world and of the United States during the 1990s. These years were marked by repeated trips to the brink of systemic breakdown crisis of the world financial and monetary systems, against a backdrop of recrudescence of the great power tensions among the US, Russia, and China which had supposedly been relegated to the past at the end of the Cold War. The US political system was exhibiting many of the crisis symptoms of Weimar Germany ( 1919- 1933). The common denominator of the tempests of the 1990s was financial globalization as expressed in the form of the Washington Consensus, which proved itself to be an absolutely unworkable way of organizing the economic life of the world.
Within this crisis, there were aggressive, militaristic and lawless networks at work within the United States. One of these was the Dulles Brothers-Lemnitzer-Lansdale network as it had emerged from the Iran-contra years; this was the world of the asteroids, or privatized intelligence community operations. The events of 9/11 should redirect our attention to these lawless networks inside the US government which have periodically asserted themselves, with devastating consequences. This is the network which we can associate with the U-2 crisis, with the Bay of Pigs, the Kennedy assassination, the Gulf of Tonkin incident, the Martin Luther King assassination, the Robert Kennedy assassination, Watergate, Iran-contra, and a score of lesser events. Another aggressive and adventurous network was the neocon network, always calling for new wars to be fought by other people's children.
As Sanguinetti points out, modern states tend to resort to terrorism and violence during their birth, when they are in severe crisis, and in the process of their extinction. In the 9/11 instance, the roots of terrorism are to be sought only marginally in events taking place in the Middle East, and certainly not in any distant cave in Afghanistan. Monocausal explanations embraced by corporate elites, such as the Hubbert "peak oil" thesis, are also unsatisfactory, since we are dealing not with geological events per se, but rather with the breakdown crisis of a political economy.
OLIGARCHICAL MALTHUSIANISM THEN AND NOW
From 9/11 to "peak oil" is a dangerous leap, and from "peak oil" to population reduction is more dangerous still. Because oligarchs have always held humanity in general in contempt, they have from time immemorial exhibited the outlook which has, during the last 200 years, been called Malthusian. Back among the early Greeks, one school of thought explained the Trojan War as necessary to remove the weight of the masses of mankind which were oppressing the breast of Mother Earth. Together with the axiomatic notion of overpopulation has gone a profound hostility to science and technology, especially because of their egalitarian effects. During the time of Thucydides in Athens, the writer called the Old Oligarch complained that the high-tech Athenian navy was helping the plebs to achieve upward mobility, while the equally high-tech long walls between Athens and Piraeus kept the armies of oligarchical Sparta at bay. During the agony of the Roman Empire, the decrees of the Emperor Diocletian in effect banned technological progress by making it illegal to alter the equipment and property of any guild. During the decline of the Venetian Empire, the decadent Giammaria Grtes (1713- 1798) elaborated the notion that the earth had an absolute and unalterable maximum carrying capacity, which he set at 3 billion persons. Ortes was the original from which the English Reverend Thomas Malthus copied. Malthus' well-known contention that population increases geometrically while food supply increases arithmetically stands in contradiction with thousands of years of successful human development. Malthus' real interest, it should be remembered, was to convince capitalists that they had to pay to maintain a numerous state church made up of people like himself, whose consumption would make sure that no crises of overproduction occurred. This was Malthus' notorious slogan, "The church with a capacious maw is best." Malthus was in turn the key to the bankruptcy of Darwin, who based himself on the greedy prelate. There is no doubt about evolution, but Darwin is a completely separate kettle of fish, especially his wayward thesis about the "blind watchmaker," meaning that the universe is a totally random process. The present writer agrees rather with Leibniz's view of a least action universe which has a definite in-built tendency towards greater order, greater energy organization, and greater development.
The fatal flaw of Keynesian economics is that they are based on Malthusian premises: there is a surplus which has to be consumed, and Keynes is unable to distinguish between productive and parasitical ways of doing this. In more recent times, the Malthusian outlook has been promoted with great success by the sinister Club of Rome, founded by Alexander King and Aurelio Peccei. The Club of Rome sponsored that infamous hoax, the 1968 Meadows and Forrester Limits to Growth. This fraudulent study took a snapshot of the then-known reserves of the main industrial commodities, and then simply extrapolated when these would be gone, based on the current rate of consumption. Almost forty years later, not one of these dire predictions has come to pass, and known reserves of many raw materials are greater than they were in 1968.
In 1971-1973, the long period of world economic expansion associated with Franklin D. Roosevelt's Bretton Woods system and postwar economic reconstruction came to an end in a series of monetary crises that destroyed the most successful monetary arrangement the world had ever seen. Since 1971-73, long-term economic growth in the main industrial countries has been cut in half: from about 5% per year to about 2.5% per year. This, plus the later push for deindustrialization, is the main reason why living standards in the US have declined by about 50% over the same period, and the costs of essential services like health care and education have gone into the ionosphere. After 1971-73, we are no longer dealing with a normal economy, but with an increasingly sick one.
THE FAKE OIL SHOCKS OF THE 1970s
Building on the lies of the Club of Rome and the Limits to Growth, Wall Street, the City of London, and the Federal Reserve, backed by the Seven Sisters Anglo-American oil cartel, decided to jack up the price of oil to save the dollar while making western Europe and Japan foot the bill. This cynical maneuver was associated with Henry Kissinger's Kippur War in the Middle East of October 1973. After the hostilities began, the Organization of Petroleum Exporting Countries (OPEC) announced an Arab oil boycott. In late December 1973, the OPEC speeches had become the pretext for a 400% increase in the price of oil carried out by banks and speculators in the commodity trading pits of New York and Chicago. OPEC was blamed, but OPEC was never the real cartel. OPEC was largely a Potemkin cartel. The real cartel were the Seven Sisters. Without the connivance of the Seven Sisters and their Royal Dutch Shell/British Petroleum leadership, none of OPEC's antics could have been made to stick. In reality, there had been no reduction in oil deliveries to the US. In December 1973, oil-bearing supertankers of the leading oil companies were put into a holding pattern on the high seas because storage facilities were already full to bursting with crude. But that did not stop greedy speculators from bidding up the price.
The plan for the entire exercise had been provided by Lord Victor Rothschild, the sometime head of a think tank attached to Royal Dutch Shell, the dominant force within the Seven Sisters oil cartel. The operation had been discussed at a meeting of the self-styled Bilderberger Group of finance oligarchs held at Saltsjobaden, Sweden on May 11-13, 1973. The effect of the oil price hike was to create a massive artificial demand for US dollars, thus effectively saving the greenback from a short-term collapse which would have ended its role as a reserve currency, and would have also ended the ability of US-UK finance to loot the world using this mechanism. In particular, if the posted price of oil were no longer expressed in dollars, then New York and London would no longer exercise de facto control over the oil reserves of the world. The 1973 oil crisis, followed by petrodollar recycling from the OPEC countries to David Rockefeller's Chase Manhattan Bank, kept the dollar in demand and thus prevented it from being dumped. Of course, the world paid the price for all this wizardry in the form of the deepest recession since World War II.
In 1978-79, Carter and Brzezinski, acting in the service of Brzezinski's lunatic thesis that Islamic fundamentalism was the greatest bulwark against Soviet communism, toppled the regime of the Shah of Iran. In line with this project, the U.S. also made sure that the Shah was replaced by Khomeini, who embodied the negation in toto of modern civilization. Having done so well on the fake 1973-74 oil crisis, the New York and London finance oligarchs decided to repeat the operation, this time using the spectre of Khomeini's self-styled Islamic revolution. This time prices went up by another 200%. When 1979 was over, it emerged that world oil production had not fallen, but the prices stayed up anyway. The 1979 doubling had more dramatic economic effects than the 1973 quadrupling, since the world economy was much weaker by 1979.
CHENEY WANTS $100 A BARREL OIL
When we see a book like Paul Roberts' The End of Oil being hyped by Lou Dobbs on CNN, accompanied by a barrage of articles in the controlled corporate media on this same line, we can see that an Anglo-American consensus in favor of $100 per barrel oil is developing. The rationale is not hard to find, and has little to do with geological facts: the US dollar is once again in terminal crisis, and oil at $100 per barrel would create a new wave of artificial demand, making the dollar a little more attractive for oil producers and others, and perhaps staving off for a few more years the end of its reserve currency and posted price status. It is reported that the center of the agitation for $100 a barrel oil is, not surprisingly, the Vice Presidential office of Dick Cheney, managed by the ruthless neocon operative Lewis I. "Scooter" Libby.
As far as the substantive argument about oil reserves is concerned, it is clear that oil should be used less and less as a fuel, and employed rather for petrochemicals. It is also clear that the internal combustion engine is now a technology that is more than 100 years old, and is due to be replaced. However, it is also clear that a growing world population and, hopefully, increased levels of world economic development will require greater energy sources. Every fixed array of human technology in world history has always defined certain components of the biosphere as usable resources, with the inevitable corollary that these resources would one day be exhausted. Under such conditions, the great imperative of human evolution cannot be retrenchment and austerity, but rather innovation, invention, discovery, and progress. If existing energy sources are insufficient, then science will have to find new ones, without ideological preclusions. Solar energy gathered outside the ionosphere in earth orbit might be one future solution. The one thing we must not do is to leap from a rising oil price to coerced population reduction, since that represents the core program of the Malthusian Anglo-American oligarchy, and has been in place as a policy goal since Kissinger's infamous NSSM 200 [2] and the Global 2000/Global Futures campaigns of the Muskie State Department under the disastrous Carter administration.
The pervasive oil and raw material grabs of today's world suggest nothing more than world economic breakdown and imminent world war. In 1941, Japan's main war aim was to secure the oil of the Dutch East Indies. Hitler's panzer divisions in Operation Barbarossa were pointed towards Baku, which was Stalin's oil aorta. Stalin's own attack plan aimed at Ploesti in Romania, Germany's sole source of oil. Each of these plans sought to deny oil to an adversary and procure it for their authors as a means of winning a war. Much the same dynamic is afoot today, partially under the cover of "peak oil."
US OLIGARCHICAL CONSENSUS FOR TERRORISM
During the 1990s, the US oligarchy came to a consensus regarding the need for synthetic terrorism to preserve its system of rule under conditions of increasing economic and financial breakdown. This consensus was elaborated through commissions associated with names like Hart and Rudman, Gillmore, Rumsfeld, and the New York Council on Foreign Relations. Terrorism, the oligarchy concluded, was needed to maintain the cohesion of the hierarchical system, and the legitimacy of irrational domination. This was in line with the Carl Schmitt "enemy image" thesis, as elaborated more recently by Samuel Huntington. Terrorism was also needed as an instrument of maintaining Anglo-American world domination, especially to wage oblique warfare to isolate, weaken, and contain powers like Russia, China, Japan, and some others who were too strong to be openly attacked on the Iraqi model. This type of terrorism was a continuation of the NATO geopolitical terrorism, whose goal was to maintain the Yalta division of the world against the self-asserting and self-liberating tendencies of countries like Germany, Italy, and others. Terrorism would serve as well to prevent threatened defections from the dollar zone, and shore up the battered greenback as the world's residual reserve currency. Terrorism would also help to consolidate US-UK control over oil, strategic metals, and other critical raw materials, in part by weakening and destabilizing economic nationalist or pro-development third world regimes.
9/11 must rather be viewed as a symptom of a perhaps insoluble crisis inside the US political and economic system. Whether or not the crisis of the 1990s represents the first phase of the terminal crisis of the United States as presently constituted remains to be seen; by contrast, there can be little doubt that the post-1945 hegemony of the US dollar as the world's reserve currency is now ending, and that is more than enough to generate the cataclysmic events observed.
Complacent and superficial commentators like David Brooks have attempted to portray the 1990s as a time of idyllic tranquility, when the polyanna US failed to pay attention to the gathering storm of terrorism "out there." In reality, the 1990s were a period of aggravated financial and economic breakdown and of severe if masked tensions among the US, China, the USSR, and other states. The United States devastated Iraq at the beginning of the decade, destroying the civilian infrastructure with the cowardly and duplicitous "bomb now, die later" policy. The US said at the time that coalition aircraft had flown 120,000 sorties over Iraq. If each sortie had killed just one Iraqi, that would already have been 120,000 dead; the reality was probably three or four times greater. The unspeakable suffering in Iraq was made much worse by the US-backed and UN- enforced economic sanctions of 1990-2003, which, in violation of all relevant international law, banned the import of food and medicine completely until certain limited purchases were allowed under the UN oil for food program in the later 1990s. The estimates of the number of Iraqi victims of these murderous sanctions vary widely, but it seems likely that the number of fatalities involved is between 500,000 and 1,000,000, with infants, children, and elderly people -- all non-combatants -- accounting for the majority. Some estimates take the death toll above 2 million Iraqis. When once asked about this policy, Madeleine Albright replied that in her opinion it was "worth it" to contain Iraq. During the 1990s, the present writer warned repeatedly that the economic sanctions were sowing a harvest of hate among Iraqis with which the US would one day have to reckon. The harvesting of that accumulated hate began in 2003, with a vengeance. All this was compounded by the unilateral imposition by the US and UK of no-fly zones in northern and southern Iraq, which involved the almost daily bombing of Iraqi targets during the entire decade of the 1990s. The Gulf crisis of 1990-91 disrupted the regional economy and led to the collapse of Somalia, where the lame duck Bush intervened just after Thanksgiving 1992. This was billed as a humanitarian mission, but US political meddling led to resistance by certain groups, and an orgy of gratuitous killing of black-skinned Arabs resulted.
THE 1990s: DECADE OF US FINANCIAL CRISIS
During these years the US was lurching from one financial crisis to the next. For a full account of this process, see my Surviving the Cataclysm (1999). The entire energy of the system was expended on impossible efforts to shore up the speculative edifices of stocks, bonds, and derivatives, which were always on the brink of panic collapse. The specter of some bankruptcy or panic setting off a systemic crisis, the implosion of the entire world dollar-based system, was a constant threat during the 1990s. US financial policy makers have been caught for decades in an impossible predicament. If they lower interest rates to keep the domestic system solvent, hot money will flee abroad, tending to collapse the overvalued dollar. If they raise interest rates to make the dollar more attractive, domestic bankruptcies begin to multiply. Fed governor Paul Volcker's worst nightmare had been an accelerating dollar collapse which could not be stopped. The stock market crash of 1987 was in reality sandwiched in between two dollar crises which had the potential of sinking the battered and bloated greenback. That same stock market crash of 1987 brought on a collapse of the commercial real estate market in many cities, causing the bankruptcy of real estate firms like Olympia and York in 1992. As the real estate market collapsed, it undermined the main US money center banks. In 1990 the Bank of New England went bankrupt. Just as bankrupt from a technical point of view, but too big to fail because of the economic and political repercussions, were the twin giants of US banking, Chase Manhattan and Citibank. In July 1990, bank analyst Dan Brumbaugh stated on the ABC network program Nightline that not only Citicorp, but also Chase Manhattan, Chemical Bank, Manufacturers Hanover and Bankers Trust were all already insolvent. During September 1990, there was a near electronic panic run on Citibank, while Chase Manhattan, and other New York money center banks were also under increasing pressure. Around Thanksgiving 1990, Citibank was quietly seized by federal regulators who then proceeded to run it for more than a year; the controlled media were silent to prevent panic runs, although they did not wholly succeed. In August 1991, Rep. John Dingell (D-Michigan) observed that Citibank was "technically insolvent" and "struggling to survive." Lloyd's of London also defaulted around this time. In the background, Russia had lost two thirds other productive activity as the result of IMF shock therapy. By the middle of the decade, former Secretary of the Treasury Brady reported that there was $1 trillion per day in currency speculation alone. Much of this was related to a new, parasitical, and highly unstable form of financial vehicle -derivatives. Felix Rohatyn of Lazard Freres admitted in the spring of 1994 that he was nervous about the derivatives crisis "because the genie is out of the bottle and could touch off a financial nuclear chain reaction, spreading around the world with the speed of light." By the end of the year Grange County, California had gone bankrupt because of derivatives dealings, reporting a two-billion dollar loss. But that was peanuts. In January 1995 Mexico went bankrupt, bringing the world banking and financial system to about 48 hours from a total world-wide meltdown; at stake here was implicitly the huge mass of debt owed by the developing countries, which had reached $1.6 trillion. The tequila crisis required a $50 billion bailout which was thrown together in extremis by the Clinton administration. Camdessus of the IMF noted with much alarm on February 2, 1995 that "Mexico was in imminent danger of having to resort to exchange controls. Had that happened, it would have triggered a true world catastrophe." A few weeks later Barings Bank of London, one of the world's oldest financial institutions, went belly up, and contrived to blame the default on a rogue trader.
AUGUST-SEPTEMBER 1998: RUSSIA AND LTCM TAKE WORLD TO BRINK
In 1997 the Asian contagion crisis began in earnest; it was in reality another crisis of the world dollar-based system. This led on August 17, 1998 to the default and state bankruptcy of Russia, with a series of banking panics wiping out the savings of the middle class. Russian economic reform, better known as IMP shock therapy, had been the great international financier project of the first half of the 1990s, and it ended in dust and ashes. Anti-oligarchical Russian economist Tatyana Koryagina observed around this time that "the world economy has reached the point where -- if economic liberalism is a dead- end street, it has hit the concrete wall at the end of the street. This liberalism will explode the entire economy and then there will be global chaos, which will be economic fascism. A 'New World Order' is economic fascism, when a huge number of people are thrown into desperate poverty, and only the speculators make any profit. We are on the verge of a particular sort of anti-financier revolution -a revolution against financial speculators." (Tarpley 1999 chapter 1 )
When Russian blew up, real panic spread around the world. The newspaper that expresses the views of the Swiss financial community noted with consternation: "With the ruble collapse and the de facto state bankruptcy of Russia, the crisis which has been boiling for a year is now threatening to turn into a global GAU" -- Großten aller Unfalle, or worst possible catastrophe, wrote this paper. "Like dominoes, one currency after another, one financial market after another, are falling allover the globe. The specter ofa worldwide recession is spreading." (Neue Zuricher Zeitung, August 29, 1998)
The Russian state bankruptcy in turn provoked the failure of Long Term Capital Management (LTCM), a giant Connecticut hedge fund with close ties to the US Federal Reserve. With LTCM, the world banking system was once more on the brink of systemic meltdown. Only a crony capitalist bailout of LTCM's creditors by Greenspan prevented the immediate collapse of the US money center banks, the US securities markets, and the reeling US dollar. LTCM had posed the immediate danger of a chain-reaction bankruptcy of the entire world banking system, leading to financial and monetary chaos. The New York Fed, in the person of its President William McDonough, -undertook an emergency bailout as lender of last resort for the syndicate of big banks that were scrambling to save themselves by taking over LTCM, which was bankrupt with a reported $1 trillion in derivatives outstanding. Long Term Capital Management was leveraged at 500:1, but what of that? J.P. Morgan was leveraged at over 600:1, with $6.2 trillion in derivatives as against just $11 billion in equity capital. The story was broken by David Faber of CNBC on the afternoon of Wednesday, September 23, 1998. Within a few days, Union Bank of Switzerland announced a $685 million loss, and Dresdner Bank said it was $144 million to the downside. LTCM' s total loss was about $4 billion. If the US banks had gone under, the FDIC would have had to pay depositors, and the taxpayers would soon have had to bailout the FDIC. Between August 29 and October 19, currency in circulation grew at an annual rate of 16.4%, and the M3 money supply grew at 17% annually. Greenspan was using system repurchase agreements, coupon passes, and open market operations to churn out liquidity. The dollar softened and the gold price spiked upward: there were reports that central banks were replenishing their gold stocks in the face of the hurricane. Between late September and early October, the dollar managed to fall ¥ 10 (or, in forex jargon, "ten big figures") in just 10 days. In August and September 1998, the world finance oligarchy had been forced to look into the glowing bowels of Hell. The half- million bankers and fund managers who are the chief beneficiaries of the globaloney system had felt the icy breath of panic on their necks. But their near-death experience had not impelled them to consider any serious reforms.
By the end of 1998, the debt superpower of Brazil was on the brink of default, once more threatening to bring down the banks of Wall Street. George Soros demanded that the banks be protected by a "wall of money," and Greenspan complied. Using the pretext of providing liquidity to cushion the shocks of the transition from 1999 to 2000, when multiple computer breakdowns were feared, Greenspan began to print fresh US dollars at an unprecedented rate. Much of this new cash rushed into the NASDAQ stock market, where it stoked the merging dot com bubble. But by the early months of 2000, it was clear that the dot com companies still had no profits, and their high burn rate of cash on hand spelled the end of the bubble. In a spectacular decline that did not stabilize until the middle of 2002, the NASDAQ lost a breathtaking 75% of its value. Many hedge funds, banks, and insurance companies were on the verge of imploding, but Greenspan kept pumping new dollars to stave off chain reaction bankruptcies. Interest rates reached new historical lows, and oil producers began to consider dumping the dollar in favor of the more stable euro, which was now available as an alternative. A housing bubble and a bond market bubble now emerged in the US. Greenspan's response was to tout the "wealth effect," meaning that the housing bubble was raising the fictitious value of private homes, allowing home owners to take out second mortgages and use the cash to speculate in the stock market. The bond bubble began to falter in the spring of 2004. In the meantime the entire system had been back to the brink in late 2001 and early 2002 with the declaration of a formal debt moratorium -- a payment halt -- by Argentina. Derivative financial instruments were always close to detonating a systemic crisis; there is some evidence that a derivatives disaster of the first magnitude had overtaken Citibank around the middle of 200l, but was papered over by Federal Reserve loans under the cover of 9/11. Citibank was forced to sell Travelers Insurance for $4 billion, apparently to raise cash to plug a considerable hole.
Towards the end of the decade, Eisuke Sakakibara of the Japanese Finance Ministry a well-known official who had earned the nickname of "Mr. Yen" in the world press, had summed up the problems of the US-UK system as follows: "... I think the financial system we have today is inherently unstable. We need to set up a new system to stabilize financial markets. Otherwise, the repetition of crisis after crisis. ..is going to result in a major meltdown of the world financial system." -- (Japanese Finance Ministry, January 22, 1999)
TO THE BRINK OF SYSTEMIC BREAKDOWN: Financial Crises and Panics After 1987
1. October 1987 -- American stock market and futures market crash
2. December 1987- January 1988 -- Greenspan dollar crisis
3. January - February 1990 -- Bankruptcy of Drexel-Burnham-Lambert, RJR-Nabisco default threat, Campeau stores bankruptcy, junk bond collapse
4. 1990-1991 -- Failure of Bank of New England, threatened insolvency of Citibank, Chase, and other US banks
5. September 1992 -- European Rate Mechanism crisis
6. August 1993 -- Second speculative assault on European Rate Mechanism, leading to permanent loosening of fixed parities
7. February 1994- February 1995 -- World bond market crisis, Orange County-Mexico-Barings
8. August - September 1995 -- Japanese banking crisis: $1 trillion in bad loans
9. November 1995 -- Daiwa Bank threatened by insolvency in wake of $1.1 billion bond trading losses
10. June 1996 -- Sumitomo copper futures trading crisis; 31% decline in world copper price
11. July-November 1997 -- Southeast Asia currency and stock market crisis, featuring Thailand, Philippines, Malaysia, Hong Kong, Singapore, Indonesia, South Korea, with world stock market panic
12. November 1997 -- Japanese banking crisis
13. December 1997 -- South Korean insolvency crisis
14. November 1997-April 1998 -- Indonesian crisis
15. May 1998 and July - August 1998 -- Russian monetary stock market, and interbank crisis starting in May 1998. Failure of IMF bailout attempt, July-August 1998. Russian default, August 1998
16. September 23, 1998 -- Long Term Capital Managemen1 insolvency with bailout by New York Federal Reserve. Threat of world banking panic and interbank settlements freeze
17. December 1998- January 1999 -- Brazilian crisis and Soros "wall of money"
18. March 2000- August 2002 -- Collapse of NASDAQ bubble, down 75%
19. Summer 2002 -- J. P. Morgan Chase derivatives monster implodes
20. 2002 ff. -- Argentine crisis with debt default
21. May 2003 -- US dollar in bear market; world dumping of dollar looms