Playing Ukrainian Dominoes

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Douglas Rediker is Director of the New America Foundation/Global Strategic Finance Initiative. Rediker is a capital markets expert who has been focused on the emergence of “state capitalism” as a key feature of the new international economic order. He has now become a regular contributor to The Washington Note.
Playing Ukrainian Dominoes
dominoes.JPGIt’s not often that I can be found arguing that the US should be looking to Austria for guidance on foreign policy, but Austria’s take on the current situation in Ukraine makes this one of those times.
Last week, Austria’s Finance Minister, Josef Proll, warned of economic and political catastrophe if Ukraine’s rapidly deteriorating economic situation is left unaddressed by the West. As he noted “Ukraine is a very important keystone country and we must avoid a domino effect inside the EU, if there is economic and political catastrophe in such a huge neighboring country.” Actually, he was likely understating what’s at risk.
First, here’s what’s happening in Ukraine – its currency, the hryvna, lost roughly half its value since the economic crisis began. Its main stock market fell 75 percent.
Last week’s data showed industrial output fell by more than a third in January. Three banks have already failed. Credit default swaps – contracts that provide a window into the broad market’s assessment of the likelihood of a default by the sovereign – rose to 3500 basis points. The country’s finance minister resigned, warning that “Ukraine’s economic situation is the worst in the world”.
Meanwhile, the President and Prime Minister throw political barbs at one another, each alleging the other presides over a corrupt system, blames the other for the crisis, and both look warily over their shoulders at their next door neighbor, Russia. Get the picture?
There are two big reasons to be worried about Ukraine.
First, many Western European banks have large exposures to Ukraine. A default by Ukraine means that those banks will take a serious hit to their balance sheets at the time they can least afford it. Should these banks get hit, it is likely that the direct and indirect effects will cascade throughout Central and Eastern Europe, as Western European banks withdraw to their home markets, thereby almost ensuring that the crisis widens and spreads across the region. Financial protectionism may, at that point, become a fait accomplis.
Second, when a country is looking over the cliff, it is likely to turn to anyone it can find to save it from falling over. Witness Iceland’s attempts to save itself last autumn by negotiating with Russia for a bilateral loan. At the time, Iceland’s Prime Minister noted that his emergency pleas to NATO allies had gone unanswered, so when his country did not receive support from its friends, it was forced to look for new friends.
Ukraine, which maintains a $16.5 billion stand-by loan facility with the IMF, came away empty-handed last week when the IMF refused to disburse some $1.84 billion in loans to the crisis-stricken government because it doesn’t approve of its proposed budget for 2009. The Ukrainians have proffered a budget with a 3% deficit, while the IMF apparently insists that its budget be balanced and contain a freeze on social spending.
With disaster looming, Prime Minister Tymoshenko announced that her government had sent letters requesting emergency bilateral assistance to the U.S., EU, China, Japan and Russia. Apparently, Russia is the only one (so far) to have responded favorably to the request, as talks were evidently held in Moscow recently regarding the terms of a potential $5 billion bilateral rescue.
What bothers me most about this situation is that I fear that many in Washington don’t recognize what is at stake here. Should Ukraine’s economy be allowed to fail, it will likely be forced into the arms of its Russian neighbor. All those feel-good stories about elections, democracy and the Orange Revolution will become little more than a historical footnote.
And other countries in Russia’s neighborhood will quickly see the writing on the wall and make note of who they can and can’t count on in their time of need.
I am also concerned about the failure of the IMF – which effectively represents the “Washington Consensus” – to have come to Ukraine’s aid. I am not privy to the negotiations, and I am sure that there are very good reasons for them to have walked away and potentially lose a democratic ally to the warm embrace of the Russian bear, but, if press reports of the reasons why are true, then I believe that they ought to re-think their position immediately.
If it is true that the Ukrainian budget being criticized calls for a deficit of 3%, then all one needs to do is flip to the front page of yesterday’s Washington Post and read about President Obama’s proposed budget, which projects a budget deficit of 8.3% – before the effects of the stimulus package are included in the figures. Read on to find that, White House Budget Director Peter Orszag argues that, if all goes well and spending cuts are tax hikes are implemented, and the economy doesn’t go into a total tailspin, then the hoped for best case for the US is that our own budget deficit will be compressed by 2013 to a “manageable” – you guessed it – 3%.
So, it appears that the US will be allowed to run deficits of historic proportions for years to come, but Ukraine is being told that our best case in four years isn’t good enough to help them out of a very big pinch right now. Something’s not right.
The current global crisis isn’t just economic – it’s also geo-political. Ukraine is a major transit country for Russian gas to Europe and it plays a central role in European-Russian pipeline politics. As recently as a few weeks ago a Russian-Ukrainian dispute effectively cut off supplies of natural gas to many countries in Europe in the dead of winter. Similarly, just this past week, as Ukrainian officials met with their Russian counterparts in Moscow to negotiate the terms of potential emergency financial assistance, NATO defense ministers met in Krakow to discuss how to keep Ukraine on track for ultimate NATO membership in spite of strong Russian opposition.
If the US, EU, IMF and others don’t pay a lot more attention to this crisis soon, then Ukraine’s ultimate choice will likely boil down to either letting its economy collapse and bringing down a lot of European banks and economies, or reluctantly falling four-square into Russia’s sphere of influence – at which point NATO discussions and EU-Russian relations will be changed forever.
As the US considers how to deal with the loss of the Manas airbase on the back of Russian financial assistance to Kyrgyzstan, one can only ask, with Ukraine’s economic future at risk – is anyone paying attention?
— Douglas Rediker

Comments

33 comments on “Playing Ukrainian Dominoes

  1. Alex says:

    Seven ways of stealing from budget
    1. “Make an order”.
    Speed limiters, for instance. Do you know why they appeared recently? And why they are being mounted three or even four in a row? The answer is very simple: capital authorities pay Uah 50000 for mounting the single one, while wholesale cost of it is Uah 300. They earn 100 times including installations maintenance. Sudden replacement of old traffic lights that took place all over Kiev hardly could be explained by sudden care of pedestrians ‘cause no “zebra” markings were refreshed .

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  2. arthurdecco says:

    Tons of insightful commentary and the usual, expected drivel too, but the following stood out for me: “I see the neo liberals wringing their hands about too much state capitalism in the world. But truly, what is needed now is a global reassertion of state power and democratic governance, not further contraction of state power and further expansion of unregulated private greed. And this need calls for a transfer of wealth, one way or another, from the hands of unaccountable private individuals and financial institutions so that it can be put at the disposal of the worlds’ billions of people, who are standing ready to have their productive and creative energies, and capacity for collective action, liberated from the tyranny of the greedy and predatory few.” Posted by Dan Kervick
    Dan, your post dated Feb 23 2009, 10:33PM, from which I took the quote above, is amongst the most reasonable, rational and convincing statements about Anything I’ve had the opportunity to read in some time. It really is as simple as you say.
    A person needs to be really smart to strip things down to their eloquent essence in the way you just did in this post. We need more of you.
    It’s too bad millions of the people you mentioned – those “who are standing ready to have their productive and creative energies, and capacity for collective action, liberated from the tyranny of the greedy and predatory few” are going to die, Die, DIE instead of reaping their earthly rewards the way you envision.
    Because, to keep “unregulated private greed” and its enthusiastic participants in Control, (if no longer in ascendancy), THEY have to die. And the only way for that to happen is to manufacture More strife, More state terror, More unfocused fear in the minds and lives of those who still have the power to change events with their vote if they weren’t so damned functionally illiterate and deliberately-kept ignorant. “Unregulated private greed” is going to win this round hands down.
    For what you want to see happen to happen, Dan, we are going to have to breed a whole new generation of politicians, a new political class of modern-day Gulliver’s rather than renaissance Machiavelli’s – altruistic, generous, compassionate, commonsensical, ethical, eminently fair, reasonable and intelligent. A good list. Not like the majority of those politicians we have now, which a recent British study concluded are most often sociopathic. (Apparently, professional politicians are alarmingly unstable. Who knew?!?)
    At this time, even our Aspiring politicos, (the ones we have waiting in the wings), appear to be assembled from defective parts, corrupted before they’re even elected. They’re incapable of doing the rest of us any good because they’re wired to work not for their constituents but for those who bribe them best. Da sistum, cheee’s broak!
    Our politicians have lost their way, like so many of our other western pillars’ self-proclaimed leaders.
    It’s looking more and more like we’re going to have to spend our own 40 years in the desert waiting for our purposeful-bred political and citizen classes to mature.
    And that’s only if we get with the program today and start selectively breeding their replacements. 😉

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  3. TonyForesta says:

    We are entering a Dawinian dynamic that will shape all our futures. Survival of the fittest in the most extreme terms and applications.
    The fittest are NOT predator class cronies bruting privatization, and robbing and pillaging poor and middle class Americans to feed the superrich, the predator class, – but the innovative, creative, and inventive entrepanuers who will shape the clean grean technologies of the future, of tomorrow.
    The gop is an arch enemy and dire threat to the future of poor and middle class Americans. The gop supports, promotes, and advances the interests of the predator class alone, exclusively, and singularly. Every other American is nothing more than a digit, and integer, to the gop.
    Our policies toward the Urkraine will shape the future of America and the world. Are these policies based on marauding oil and energy resources, or working in positive ways to advance the best interests of America’s and the worlds poor and middle class?
    Russia owns the second largerst oil reserves on the planet, and the first largest natural gas resources. Our European sisters and brothers our dependent on those resourses. Those distribution channels travel through the Ukraine. American hegemony is dead. We need to recognize the realities and facts in the field. We either work in concert with the rest of the world or we will be marginalized, and isolated, and with just cause.
    Amerikan hegemony is dead and rotting in the field. The sooner we collectively recognize and accept these facts and realities, – the better will be the futures of all Americans and the rest of the world.
    America is either a nation of, by, and for the people or a nation of, by, and for, the predator class.
    What are our interests in the Ukraine?
    Who benefits, and how much?
    Who is injured and how severly by our policies?
    What is the objective?
    What will define victory?
    Answering any of these questions will demand that America face up to our challenges and what we are as a nation, and a people.

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  4. Count Cash says:

    Full marks Elizabeth and some interesting additions by JohnH bringing in the correct financial angle. Bottom line here is that there are two tribal groups vying to take the commercial spoils for being king of the hill. Ukraine … are just pawns in the great game between the tribes. Why they can’t get on, simple, they would both have to give up the ambition of being top dog. The writer of the article is just expressing his view as part of his tribe, a Ukraine loss, he sees as weakening his tribe. But then again he probably enjoys putting on the war paint and dancing in his circles.

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  5. Count Cash says:

    Full marks Elizabeth and some interesting additions by JohnH bringing in the correct financial angle. Bottom line here is that there are two tribal groups vying to take the commercial spoils for being king of the hill. Ukraine … are just pawns in the great game between the tribes. Why they can’t get on, simple, they would both have to give up the ambition of being top dog. The writer of the article is just expressing his view as part of his tribe, a Ukraine loss, he sees as weakening his tribe. But then again he probably enjoys putting on the war paint and dancing in his circles.

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  6. ... says:

    many nations are still suffering from the after effects of policies imposed by the american empire, but i guess that is something americans don’t like being reminded of…much easier to see the boogie man out their in others actions…

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  7. WigWag says:

    “Wigwag, your example is only appropriate if you think how the USA was flirting as suitor with Ukraine via its CIA funded bullshit orange revolution..”
    Actually George Soros and his Open Society Institute played a major role in advocating for Ukrainian freedom. The Institute provided millions of dollars in support to pro democracy organizations and George Soros himself visited Ukraine on more than one occasion.
    There are lots of things you can say about George Soros, but he’s never been a darling of the U.S. foreign policy establishment and as far as I know, no one has ever accused him of collaborating with the CIA. That’s because Soros realized how pernicious Soviet influence was.
    Soros spent hundreds of millions of his own money working to build civil societies in former Soviet satellites and republics.
    Many nations in the world are still suffering the after effects of policies imposed by the British Empire. Similarly many nations are still suffering the after effects of policies imposed by the Soviet Empire. Ukraine is one of those nations. Tens of millions of people subjected to Soviet imperialism for decades blame the Russians for it and have no wish to be dominated by Russia.
    Who can blame them?

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  8. JohnH says:

    You got it, Elizabeth. Except that people in think tanks and elite universities are paid gobs of money to propogate noble sounding rationales for whatever boorish behavior is deemed to be in the intentionally undefined national interest. It would be better if they sent the money to high schools like yours instead.

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  9. Elizabeth says:

    So…. it looks like I’m right in assuming that it’s just paranoia, unexamined perceptions, and left-lover BS from fifty years ago? I guess I was hoping there would be more to it than that, but nothing in the above comments leads me to believe so.
    In fact, this all resembles my social life back in high school. Let’s say that Jenny and I fought over something stupid and meaningless back in our freshman year, and are now enemies. (We actually don’t even remember what the argument was about in the first place, but we hate each other.) It’s important for both Jenny and me to get as many people on our sides as possible. I consider it a loss if Amy becomes friends with Jenny instead of me. Am I afraid for my physical well-being? No, I don’t think that Amy and Jenny will team up and actually harm me, although they might spread rumors behind my back and turn even more girls against me. But if I’m mature, I can ignore all of this and go about my business. Because we all want to do well in school, when it really counts, Jenny and I can come together for a school project. Even if Jenny threatens not to at first, or seems like she’s going to miss a group meeting, she always shows up eventually because grades are more important to her.
    Sound familiar?

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  10. ikl says:

    Comments here are more on target than the post.
    Ukraine’s relationship with Russia is complicated. Part of Western
    Ukraine was absorbed (i.e. illlegally annexed) by the Soviet Union
    after WWII. Anti-Russian sentiment there is high. But this is
    only 15%-20% of the population. The rest of the country
    (including most of the wealthier areas) has been part of the
    Russian empire for a long time and is cuturally very close to
    Russia. This includes the Northern part of the country which
    speaks Ukrainian and votes Orange and eastern and southern
    regions which speak Russian (even though most people there
    are ethnic Ukrainians) and vote Blue (Yanakovich). Most people
    in both of these latter two parts of the country want good
    relations with Russia – even if they don’t want to be ruled by the
    thugs from Donetsk that the Russian government supports.
    Part of my wife’s family lives in a Ukrainian speaking area in
    North-Eastern Ukraine. Like most of their neighbors, they
    voted for Yushchenko. However, they ended up pretty unhappy
    with him for being too pro-western / anti-Russian. This is
    probably not untypical – contrary to what you might think if you
    only read US media, most Ukrainians do NOT want to join NATO.
    In fact, opinion polls should there to be only about 25% support
    for this (which I would think is heavily concentrated in Western
    Ukraine – half or less of the Orange coalition).
    There is a lot of room between supporting the (rather
    unpleasant) Blue team in domestic politics and wanting to be on
    the front lines of the new cold war against Russia. In short,
    Ukraine is not at all like Georgia or the Baltics when it comes to
    anti-Russian nationalism. And given its location, Ukrainians are
    pretty reasonable to want strong, positive relations with both
    Russia and the West. If Ukraine gets caught in the middle of a
    conflict between East and West, it wouldn’t be pretty for Ukraine
    which needs help from both East and West. So for this reason, it
    makes no sense to talk about saving Ukraine from Russia. The
    trick is finding an outcome that is good for people in Ukraine
    and that both Russia and the US / Western Europe can live with.
    This is no simple matter. The point here is just that Cold War
    hangover rhetoric isn’t useful and obscures the real situation on
    the ground.
    This is likely to become obvious if Tymoshenko (2nd most
    important leader of the Orange revolution) cuts of deal with
    Moscow and then goes on the win the next election. Certain
    assumptions might have to be rethought at that point.

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  11. ... says:

    john waring and dan kervick – excellent comments.. “nato expansion as building bridges to nowhere”.. i like that!
    wigwag, your example is only appropriate if you think how the usa was flirting as suitor with ukraine via its cia funded bullshit orange revolution.. now the usa is nowhere to be seen, and things are back to square one for ukraine, with the ordinary people being screwed as usual, caught in the middle of this game of control for power.. shades of lukos are still permeating it seems….
    greed is a tough master…

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  12. Dan Kervick says:

    What I’d like to know is how a single Austrian bank is allowed to accumulate a loan exposure to the CEE region amounting to two-thirds of the entire GDP of its home country. Surely this is hyper-capitalist madness!
    We are now seeing the sad and dangerous collapse of the fanatic neoliberal, laissez faire market order, when private enterprises have been allowed to accumulate wealth-power far in excess of the capacity of atrophied governments and their disempowered citizens to control them. There can be no democracy when a nominally democratic government is not really a government at all, but is itself controlled by private capital.
    I see the neoliberals wringing their hands about too much state capitalism in the world. But truly, what is needed now is a global reassertion of state power and democratic governance, not further contraction of state power and further expansion of unregulated private greed. And this need calls for a transfer of wealth, one way or another, from the hands of unaccountable private individuals and financial institutions so that it can be put at the disposal of the worlds’ billions of people, who are standing ready to have their productive and creative energies, and capacity for collective action, liberated from the tyranny of the greedy and predatory few.

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  13. Dan Kervick says:

    It is impossible to know who really “led” the Orange Revolution. Yes, there is no doubt that there is strong native Ukrainian sentiment for political independence from Russia. But the Orange Revolution also saw the participation of a large number of Western non-governmental and quasi-governmental agencies, including outfits like NED and Freedom House that act as shells for the US government. Boris Berzovsky also apparently played some role. So did George Soros.
    There are also several dominant factors in Ukrainian geopolitics that have nothing to do with the struggle of “freedom” vs. “autocracy” or any of the rest, but are just about gas and money and organized crime and graft. The gas shut-down is part of what is just a complex and long-running business dispute between Gazprom, Ukrainian oligarchs, the Ukrainian government and foreign investors. It involves endless accusations and counter-accusations about gas theft, unpaid debts, corruption and murky front companies with mysterious legal responsibilities. Several lawsuits and countersuits are involved.
    Everyone seems to be involved in the game to control the Ukraine and pocket it as a captured geopolitical pice in the new great game. We might hope for Ukraine’s political independence from Russia and its political independence from the US and Europe. Unfortunately, the ordinary people of the Ukraine are caught in the middle of high-level global power games.

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  14. John Waring says:

    Folks, we have to establish priorities and make choices. Sometimes those choices may have hard consequences. Our cup no longer runs over. We have to do a much better job of adjusting the ends we want to accomplish with the means we have available. Would I like to provide financial assistance to the Ukraine? Of course I would. But are US banks exposed, or are European banks exposed? If European banks are exposed, then let the Europeans take that initiative, or not. Such an initiative should be undertaken with Russian assistance, not in defiance of Russian interests.
    We have a financial swamp of our own that needs draining.
    Russia is a Great Power. For several hundred years Russia has been a great power. The only reason they have permitted us to muck about in their near abroad is that they have been flat on their backs the last couple of decades. NATO expansion into the countries of the former Soviet Union is wrong headed, a point George Kennan so ably argued, unfortunately to no avail. He called for economic integration, not for the expansion of a military alliance so obviously aimed at Moscow. I think expanding NATO to the Ukraine and Georgia is tantamount to building bridges to nowhere. Russia will rebuild its national power, and those bridges will dissolve in the face of determined Russian resistance. Just look at the recent events in Georgia. The idea that we could pry Georgia out of the Russian sphere of influence ended when the Russians destroyed the Georgian army as a fighting force, a minor feat the Russians completed in less than a week, the volumetric verbal blasts from last Administration to the contrary notwithstanding.
    Folks, we don’t have the horses, we don’t have the men, and we certainly don’t have the cash to act like our vital interests are at stake in every corner of the globe. I think we need the Russians to help us prevent the Iranians from building the bomb. We also need the Russians to help us build a supply line to our expanding presence in Afghanistan, if that’s what we have determined to do. I think, in return, we need to take a back seat with the Ukraine, and let the Europeans and the Russians take the front seat. We have to make trade offs, painful though they may be.
    I am heartened to observe that Hilary Clinton has shown, in her trip to China, her quick mastery of the game. I am dismayed at the announced expansion of our presence in Afghanistan. In that hell hole, an additional 17,000 troops is a drop in the proverbial bucket. Exactly what are they supposed to do? How are they going to be supplied, particularly since our dear friends in the area are about to shutdown that big airbase? I think we should consider leaving Afghanistan to those with centuries of experience dealing with irrepressible Afghan wildcats, namely, the Russians, the Chinese, the Pakistanis, and the Iranians. I am having a hard time resisting the impression that we do not know what we are doing there.

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  15. WigWag says:

    To put it more colloquially, the situation between Russia and Ukraine resembles nothing so much as a starving, battered wife having no where else to turn for financial support than to her ex husband who has been beating her for 50 years. While we can be glad that the woman doesn’t starve to death we don’t look on her situation with anything other than pity and regret.
    Wasn’t it just last month that Russia turned off the gas supply to Ukraine?

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  16. Dan Kervick says:

    erichwwk, Bob Kuttner’s op-ed contains a much better discussion than Greider’s article. Thanks for the link.

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  17. Dan Kervick says:

    A disappointing exchange between Greider and Walker, erichwwk. It starts off well, but in his brief rejoinder, Greider in effect runs away from the debate and leaves Walker’s main arguments hanging out there without effective rebuttal.
    Better arguments from lefties please!

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  18. WigWag says:

    “Why do we care whether the Ukraine gets money from Russia (especially) if we’re not willing to give money ourselves? What does it even mean to be in Russia’s “influence?” Do we think they’re going to team up and nuke us?”
    I partially disagree with Dan Kervick and erichwwk about this. I think they’re right that the Bush Administration treated Russia very disrespectfully; more as if they were a third world banana republic than a major world power. Kervick is also right that U.S. and NATO unwillingness to consider Russian sentiments in what happens in Russia’s “near abroad” is wrong headed.
    On the other hand former Russian satellites and many (but not all) former Soviet Republics have an intense dislike of Russia and want to do everything they can to escape from Russia’s sphere of influence. Russia oppressed Ukraine, Georgia, Latvia (which has also seen an economic collapse just last week) Poland and Czechoslovakia for almost 50 years.
    Just 4 years ago the Ukrainian “Orange Revolution” succeeded in throwing out an ossified Soviet style leadership. The movement was led by students; it resembled nothing so much as the student led revolution in France of 1968.
    The Russians were so intent on preventing a Western oriented leadership in Ukraine that the KGB (or the new Russian version of it) poisoned the Ukrainian opposition leader, Viktor Yushchenko. While he wasn’t killed, he was disfigured. Despite the bungled assassination attempt Yurchenko prevailed when Ukrainians conducted mass protests and refused to accept an election that the Russians rigged in favor of the Stalinist candidate.
    The idea that the Ukrainians may have no one else to depend on for their economic survival than a nation that oppressed them for decades and that many Ukrainians despise is very sad.
    I think Bush made a tragic mistake in pushing so aggressively for NATO expansion. The idea that Georgia or Ukraine should ever be admitted to NATO is ridiculous.
    On the other hand the idea that Ukraine has no where else to turn for financial help than to Russia is truly a national tragedy. Only the most hard hearted person could fail to have anything but immense sympathy for the Ukraine’s terrible predicament.

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  19. erichwwk says:

    Todays Kuttner WP article:
    http://tinyurl.com/cgohz5
    The effort of conservative Democrats and Republicans to move forward with the establishment of the Peterson Plan to establish a commission to exploit the current financial fears is dead and backdoor a stealth dismantlement of entitlements is dead.
    Can we find our way out of this mess without giving up dogma and misrepresentation of facts?
    Are Republicans really willing to hold the rights to unearned wealth hostage to a complete economic meltdown?
    Kudos to Obama for how he is handling this.

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  20. erichwwk says:

    To make the Greider articles easy to find, along with the exchange between him and David Walker, President and CEO of the Peter Peterson Foundation they are here:
    http://tinyurl.com/b584np
    In it he outlines the magnitude and scope of this propaganda blitz, and the New America Foundation involvement. It is indeed frightening, and with the current financial crisis being falsely used as the “mushroom cloud” to blow smoke and use mirrors to obfuscate, and exploit the current climate of economic fear.
    Early reports are this effort will not be successful, but due to the funding and the importance to the financial elite of dismantling existing safety nets to allow them to keep their trillions of unearned income, this effort will not go away.

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  21. erichwwk says:

    Elizabeth:
    You are lucky to have escaped the ideological propaganda wars that still infect our older politicians. As many have noted, the best solution for that is to just have patience until these older folk pass away. There is more than enough ideological dogma to shed w/o that.
    The cold war and the Russian fear was mostly manufactured, to keep the public in line so as not to question the “commander in chief” concept, state secrets, and the military industrial complex that has funded our incumbent politicians. The best summaries of this contrived fear are two articles in the Bulletin of the Atomic Scientists, one by Dr. Anne Cahn who was on the disarmament committee and was finally successful in her suit t0 release what happened under the FOIA in 1993. If you are interested, some good articles of all this, inc. two by Thom Hartman can be found @ http://en.wikipedia.org/wiki/Team_B (Team B was a mid 1970’s effort).
    Unfortunately this effort to preserve the nuclear weapons dinosaur, due to the dollars involved, is still an ongoing fraud. For the last two years the House has killed the RRW, the current marketing effort, calling it the fraud it is, but the Senate, representing the financial Lords of the USA, always puts it back in. For the last two years the House has prevailed in committee, and the indications are that Obama is doing what he can to support the House position. But due to the corporate welfare dollars involved (Trillions) (the last atomic audit showed more wasted on nuclear weapons that had spent on Medicare, and if one includes the interest on monies stolen from the Social Security Trust fund, also more than had been spent on Social Security)it is hard to put this cash cow down permanently.
    That is why I am so disappointed at the New American Foundation hosting of Peter Peterson’s Concord Coalition, the corporate effort to bamboozle the American public with “creative and misleading” accounting, to try to obfuscate on the causes of the budget deficits.
    It will be interesting to see the result of today’s “Fiscal Budget Summit” in terms of who was invited (secret so far), what the agenda was, and the transparency with which these issues were discussed. William Greider had a good recent article called “Looting Social Security” on the nation.com, and there was also an excellent article by Robert Kuttner in today’s (Mon 2-23)Washington Post entitled “The Deficit Hawks” Attack on Our Entitlements”

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  22. ... says:

    financial dominoes is what it is…
    Douglas Rediker’s quote…looking to Austria for guidance on foreign policy…
    “European banks have a financial engagement of some €1.1 trillion in the region, but Vienna’s financial institutions are particularly exposed, being owed €220 billion – equivalent to around three quarters of the country’s GDP – that they fear may not be able to be paid back. Italy, Sweden, the Netherlands, France and Belgium are also among western Europe’s big lenders to the east.”
    one can see what the folks in austria are a wee bit more concerned, not just with ukraine though…..
    keep on lending indiscriminately hoping someone (hint- taxpayers) will bail you out later… that is straight from the banking playbook.. when will folks wake up to see this kind of stuff for what it is?
    get a ‘fiat’ currency that is based on something real.. central bankers have let go their own integrity, along with paper monies..

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  23. TonyForesta says:

    Is not the IMF, basical us, – America? The rubric of international monetary stabilization – is more accurately the application of American oliragch political and economic hegemony. Urkraine is the economic and cultural and maybe strategic gateway to Europe.
    We are entering an age of that will define a application of Darwins the survival of the fittest in the most brutal and savage terms. The entire world is realigning. The political and economic tectonics of the past and recent past are being ripped aparted, subducted, or colliding with opposing tectonic forces.
    It’s all about the oil.
    Until we move to future energy solutions, – it’s all about the oil.
    Soros pegged and warned about the Credit Default Swap horrorshow early last year, and no one paid attention. The simple horrifying math is that the total exposure of the Credit Default Swap markets far exceeds the total value, or networth of every bank and financial institution on earth. The total exposure of the alphabet soup of collateralized irredeemable debt products, or collateralized debt instraments (socalled toxic assets) far exceeds the combined GDP’s of every nation on earth. – Hense the depression comparisons and dread concerns with th great unwinding, or the great unravelling. Trillions of dollars of wealth must simply vanish into the myst from whense it came and burn, or be replaced with more fabricated imaginings and conjurings of elevated speculative ponzi scheme paper wealth.
    Tumult and pain are certainties. How those tumults, and that pain are distributed globally and in terms of each governments determinations on class, culture, cread, or political persuasion will define and frame the structure of the early 21st century newworldorder. The oldworldorder is dead and rotting in the field. The oldworldorder kings, despots, tyrants, predators, and royal families are ruthlessly reluctant to accept the unpleasant fact and truth that much of their imponderable wealth will be unwound, or deleveraged, or – well it’s gone, – but simple math and global tectonics prove the oldworldorder is a failed, rotting, stinking, putrid corpse of greed, obdurance, and supremist delusions. The sooner the oldworldorder is buried or set to flame – the better for all our futures.
    Just as Reagan and America failed to provide any economic support to, or only exploited the people of Russia after the fall of the Soviet Union, and “perastroika”, and note where we are today – so now the Ukraine is teetering on the brink of collapse and again America walks away (because of our own dire economic crisis and grotesque mismanagement) and leaves a nation we pretended to support and ruthlessly exploited since the Orange Revolution stranded, abandoned on the rocks battered by the monsterous crashing waves of an economic Tsunami cause America’s misuse of power. It’s mythical.
    Russia gaining any ground in the Ukraine will put the final nail in the rotting coffin that is pimped as democracy. Democracy failed just as horribly as Communisim, or Monarchy, or Totalitarianism. In the end no matter what version of ‘…ism’ or ‘…archy’ is applied to the system of government, every government ultimately devolves into oligarchy and the aristocrats, or holy prophets, or divine kings, or masters of the universe – or the predator class ALWAYS usurping control and power of the mechanics of the government. The oligarchies work to betray and corrupt the government and the people; and cement the oligachy and the oligarchs as Olympian supremist and dominant.
    The strongest and fittest Olympians will not only survive thenewworldorder, – they will dominate by force and without mercy. Gaza is a good example.
    It’s all about the oil, and who controls the oil.
    Until we move to future energy solutions – it’s all about the oil and who controls the oil.

    Reply

  24. muddy paws says:

    Yes.
    Cuba is a “rilly” big deal at the moment. Holding my breath.
    Whereas I’m totally at ease about our Afpak policy. Don’t worry: Eye-rack will go just fine!
    But just think of all those poor-pooky right-wing Cuban exile/grandkids…just waiting to take back the lands their grandpa’s owned…not to mention those ‘guys’ from Chicago who used to run Cuba before Castro… ;o
    Steve, these are your true constituents on this issue. Not to mention the Texans who want to drill off the Cuban coast.
    THEY’RE WA…ITING…..!!!! 🙂

    Reply

  25. daCascadian says:

    Elizabeth >”…Why do we care…and nuke us?
    Stuff left over from the 19th Century & the colonial period.
    The Powers That Be (TPTB) have boogeymen images inside their heads so that if they can’t be in complete control of everything then things will be in the hands of Satan etc, etc, etc.
    Of course it is absurd but then that’s the way things are when mental midgets are in positions of power.
    “…it’s the end ofthe world as we know it and I feel fine…”- REM

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  26. Elizabeth says:

    I am young; I didn’t live through the Cold War, and it was not taught (well or at all) to me in school. But I guess I just don’t get the underlying reasoning beneath fear of Russia and its “influence.”
    Why do we care whether the Ukraine gets money from Russia (especially) if we’re not willing to give money ourselves? What does it even mean to be in Russia’s “influence?” Do we think they’re going to team up and nuke us?

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  27. erichwwk says:

    While no fan of the IMF and its usually misguided policies, the US and EU ability to help is not unlimited and one cannot solve all problems by just throwing more money at them. Perhaps there is finally a wake up call that the US may not be able to save its own economy from collapse, and to maintain a Ukraine puppet regime goes far beyond their current financial deficit, just as to “save” current ownership of the major US banks goes far beyond initial capital injections.
    As the article notes:
    “European banks have a financial engagement of some €1.1 trillion in the region, but Vienna’s financial institutions are particularly exposed, being owed €220 billion – equivalent to around three quarters of the country’s GDP”
    So Austria has the largest incentive in Ukrainian solvency, and ask others to help protect what is disproportionate Austrian interests.
    Also, I would question the extent to which Russian aid to Kyrgyzstan plays in the decision not to renew the US lease at Manas when it expires. After all this is THEIR backyard, and they are offering alternative routes. Isn’t this more an issue of US unilateralism, and an effort to run NATO w/o acknowledging Russian interests?

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  28. Dan Kervick says:

    “Who can be surprised at the destructive role played by the IMF? Not one of the developed countries who run the IMF will have a deficit as small as 3 percent of GDP before this crisis is over. The second largest economy in the world, Japan has a debt to GDP ratio that would make the IMF blanch.”
    Again, I’m not one to defend the IMF. And I am in quite over my head when it comes to global finance. But I do know that the theory goes that in the positive correlation of deficits and currency value that works for big governments doesn’t always work for smaller governments. When big governments like the US run a budget deficit, they attract demand for their currency by those who want to finance this debt, and it raises the value of the currency. Not so with smaller governments who usually see their currency value decline. If the Ukraine’s currency has fallen 50% in value, maybe its not so good for it to be running a big deficit.

    Reply

  29. WigWag says:

    This is an extremely interesting post. Rediker says,
    “Credit default swaps – contracts that provide a window into the broad market’s assessment of the likelihood of a default by the sovereign – rose to 3500 basis points.”
    There is some argument about whether or not CDS spreads provide a good surrogate marker for the health of an economy, but assuming they do, the Ukraine is not the only country in terrible jeopardy. Ireland, Spain and Portugal are also at serious risk of financial implosion. Last week, CDS spreads written on 5 year Irish soverign debt increased to 500 basis points; a record. This is amazing and disturbing considering that just a few years ago Ireland was one of the fastest growing economies in the world,
    Rediker may be right that the Austrians are the good guys here but their neighbors, the Germans are the bad guys. They’ve done everything they could to prevent Europe from adopting the expansive monetary and fiscal policies that this crisis calls for. The Ukraine could be the proverbial “canary in the coal mine;” if it collapses it may foreshadow the collapse of other supposedly more advanced economies.
    Who can be surprised at the destructive role played by the IMF? Not one of the developed countries who run the IMF will have a deficit as small as 3 percent of GDP before this crisis is over. The second largest economy in the world, Japan has a debt to GDP ratio that would make the IMF blanch.
    In fact, calling for a 3 percent budget deficit or less for Ukraine is precisely the wrong prescription for Ukraine and for the rest of the world. We need concerted world-wide counter cyclical expansion programs. This means budget deficits not balanced budgets.
    Hasn’t the IMF heard of John Maynard Keynes? Could someone buy the “General Theory of Employment, Interest and Money” for IMF Chief Dominique Strauss-Kahn? Maybe when he finishes with it she could pass it along to Jean-Claude Trichet, Peer Steinbrück and Angela Merkel.
    I hope someone other than Russia saves the Ukraine. Shouldn’t Obama, Clinton and Geithner be on top of this?

    Reply

  30. Dan Kervick says:

    What can be done Mr. Rediker? We currently seem to live in a world full of economic fires to put out, and there are only so many fiscal and monetary fire trucks go around. What is your suggestion?
    Not to defend the IMF, since the Washington Consensus and the extreme global economic Americanization it promotes have caused a number of global problems, but if the Ukraine runs a large budget deficit, won’t that put further downward pressure on its collapsing currency?
    And if something is to be done, wouldn’t it be best for the Americans, Europeans and the Russians to agree on some joint plan of action? I’m not sure all of those increasingly desperate Ukrainians are so keen to have their livelihoods held hostage to neo-Cold War geopolitics. It sounds like ordinary Ukrainians are in quite a bit of trouble. Great power side squabbles about whether it is NATO or the Russians who will eventually = succeed in engineering a corporate takeover of their country seem distinctly secondary, and callously high-handed.
    Maybe its time for the NATO and the Russians to come to some new meeting of the minds on the geopolitical imperial game-playing in Russia’s near abroad. This shouldn’t be about dominoes; it should be about people.

    Reply

  31. read scott martin says:

    Given Russia’s position, can it be only collapsing energy prices can
    save Ukraine now?

    Reply

  32. rawdawg says:

    obama has his hands full with Putin

    Reply

  33. JohnH says:

    I fail to understand what US interests are at stake here. Clearly, Western Europe has a lot at stake (gas, banks). Shouldn’t they be the ones who it behooves to take the lead along with Russia and Ukraine to arrive at a mutually acceptable solution? Is it really reasonable to ask that a bankrupt US government borrow even more money from China to stick its nose into somebody else’s business?

    Reply

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