Change Bernanke's drugs? Secret White House G20 notes

[Cees Binkhorst]

REPLY TO: D66 at nic.surfnet.nl

------------------------- Oorspronkelijk bericht -------------------------
Onderwerp: Change Bernanke's drugs? Secret White House G20 notes
Van:       "Greg Palast" <palast at gregpalast.net>
Datum:     Di, 22 september, 2009 17:02
--------------------------------------------------------------------------

TIME TO CHANGE BERNANKE'S MEDICATION?
Secret White House letter to G-20

 by Greg Palast
 Tuesday, September 22, 2009, New York

 For The Huffington Post

 I still get a thrill whenever I get my hands on a confidential memo with
"The White House, Washington" appearing on the letterhead.  Even
when—like the one I'm looking at now—it's about a snoozy
topic: This week's G-20 summit.

 But the letter's content shook me awake, and may keep me up the rest of
the night.

 The 6-page letter from the White House, dated September 3, was sent to
the 20 heads of state that will meet this Thursday in Pittsburgh.  After
some initial diplo-blather, our President's "sherpa" for the summit,
Michael Froman, does a little victory dance, announcing that the
recession has been defeated.  "Global equity markets have risen 35
percent since the end of March," writes Froman.  In other words, the
stock market is up and all's well.

 While acknowledging that this year's economy has gone to hell in a
handbag, Obama's aide and ambassador to the G-20 seems to be parroting
the irrational exuberance of Federal Reserve Chief Ben Bernanke who
declared last week that, "The recession is very likely over."  All that
was missing from Bernanke's statement was a banner, "MISSION
ACCOMPLISHED."

 And the French are furious.  The White House letter to the G-20 leaders
was a response to a confidential diplomatic missive from the chief of the
European Union Fredrik Reinfeldt written a day earlier to "Monsieur le
Président" Obama.

 We have Reinfeldt's confidential note as well.  In it, the EU president
says, despite Bernanke's happy-talk, "la crise n'est pas terminée (the
crisis is not over) and (continuing in translation) the labor market will
continue to suffer the consequences of weak use of capacity and
production in the coming months."  This is diplomatic speak for, What the
hell is Bernanke smoking?

 May I remind you Monsieur le Président, that last month 216,000 Americans
lost their jobs, bringing the total lost since your inauguration to about
seven million.  And rising.

 The Wall Street Journal also has a copy of the White House letter, though
they haven't released it.  (I have:  read it here , with the EU message
and our translation.)  The Journal spins the leak as the White House
would want it:  "Big Changes to Global Economic Policy" to produce
"lasting growth."  Obama takes charge!  What's missing in the Journal
report is that Obama's plan subtly but significantly throttles back
European demands to tighten finance industry regulation and, most
important, deflects the EU's concern about fighting unemployment.

 Europe's leaders are scared witless that the Obama Administration will
prematurely turn off the fiscal and monetary stimulus.  Europe demands
that the US continue pumping the economy under an internationally
coordinated worldwide save-our-butts program.  As the EU's Reinfeldt puts
it in his plea to the White House, "It is essential that the Heads of
State and Government, at this summit, continue to implement the economic
policy measures they have adopted," and not act unilaterally. "Exit
strategies [must] be implemented in a coordinated manner."  Translating
from the diplomatique:  If you in the USA turn off fiscal and monetary
stimulus now, on your own, Europe and the planet sinks, America with it.

 Obama's ambassador says, Non!  Instead, he writes that each nation should
be allowed to "unwind" anti-recession efforts "at a pace appropriate to
the circumstances of each economy."  In other words, "Europe, you're on
your own!" So much for Obama channeling FDR.

 The technical policy conflict between the Obama and EU plans reflects a
deep difference in the answer to a crucial question:  Whose recession is
it, anyway?  To Obama and Bernanke, this is a bankers' recession and so,
as "stresses in financial markets have abated significantly," to use the
words of the White House epistle, then Happy Days Are Here Again. But, if
this recession is about workers the world over losing their jobs and life
savings, the EU view, then it's still Buddy, Can You Spare a Dime.

 If Bernanke and Obama were truly concerned about preserving jobs, they
would have required banks loaded with taxpayer bail-out loot to lend
these funds to consumers and business.  China did so, ordering its banks
to increase credit.  And boy, did they, expanding credit by an
eye-popping 30%, rocketing China's economy out of recession and into
double-digit growth.

 But the Obama Administration has gone the opposite way.  The White House
letter to the G-20 calls for slowly increasing bank reserves, and that
can only cause a tight credit market to tighten further.

 It's not that the White House completely ignores job losses.  The US
letter suggests, "The G-20 should commit to ...income support for the
unemployed."  You can imagine the Europeans, who already have generous
unemployment benefits—most without time limits—turning purple
over that one.  America's stingy unemployment compensation extension
under the Stimulus Plan is already beginning to expire with no live
proposal to continue aid for the jobless victims of this recession.

 The Europeans are so cute when they're angry, when they pound their
little fists.  Obama assumes he can ignore them.  The EU, once the big
player in the G-7, has seen its members' status diluted into the G-20,
where the BRIC powers (Brazil, Russia, India and China) now flex their
muscle.  But Europeans have a thing or two to teach Americans about the
economics of the twilight of empire.

 Maybe the differences are cultural, not economic; that Europeans lack
America's Manifest Destiny can-do optimism.

 So, to give the visitors a taste of the yes-we-can spirit, Obama should
invite Pittsburgh's 93,700 jobless to the G-20 meet to celebrate that 35%
rise in the stock market.

 Or -- my own suggestion -- change Bernanke's medication.

 ********


 For the entirety of the White House-EU exchange, go to GregPalast.com.
 Greg Palast is the author of The Best Democracy Money Can Buy.
 Palast wrote the column, "Inside Corporate America" for the business
section of Britain's Observer newspaper.
 Sign up for Palast's investigative reports at www.GregPalast.com and
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