The present crisis is not yet over and yet we are already overdue for the next.

In Part One I suggested that not only are the 1% well aware of this but that while they have been telling us how we must ‘save’ the present system and assuring us that any radical break with the policies of the past will result in catastrophe, they have in fact been working hard to engineer very radical changes. We have all seen the decline in living standards and are all acutely aware of the changes which directly effect us. But I wonder if the true significance of the changes, when taken together, has largely gone unnoticed? Certainly the Over Class has not made clear their real intentions. Why would they? I believe the 1% know that to protect their wealth and power next time will require radical political dismantling of what is left of our democracy. Necessarily much of what follows is speculative. But the speculation is, I think, rooted in and extrapolated from what we can already see happening today.

Some things about the present system must be maintained, others expanded and some new ones added. Taken together the changes, I think, amount to the beginnings of a Manifesto for the 1%. So here are some of the things, I think, our global Over Class would like to achieve and how they intend to achieve them.

As I have been writing this article it has grown, each section getting longer. I’m afraid I sometimes find it difficult to know where the sweet point is between, on the one hand – being too dense, and on the other – over explaining. So here is a outline of the sections so that you can see where I’m going and skip the sections that seem obvious.

Outline.

1) The Over Class must retain and consolidate their control over the global system of debt.

2) The power to regulate must be taken from nations and effectively controlled by corporations.

3) Professionalize governance. Democracy can be and must be neutered, and an effective way of doing this is to insist that amateur, elected officials MUST take the advice of professional (read corporate) advisors. Expand current law to enforce this.

4) The financial system badly needs un-encumbered ‘assets’ to feed the debt issuing system. A new way must be found to prise sovereign assets from public ownership. Such a new way is suggested.

5) In order to facilitate the political changes necessary, the public mind-set must be changed. National Treasures such as the NHS in Britain must be re-branded as evil State Monopolies.

6) Effective ways must be found to convince people that democratic rule is no longer sufficient to protect them.

7) An alternative to Democracy must be introduced and praised. That alternative must be the Rule of International Law as written and controlled by the lawyers of the 1%. People must be told that this is all that stands between them and an increasingly hostile and anarchic world. But that it can only keep them safe if it has absolute authority over democracy. People must voluntarily bow to it out of fear and its decisions must be as absolute and unquestionable.

In conclusion, I suggest that this amounts to a dystopian version of the old environmentalist idea of Spaceship Earth. A corporate version where we are just passengers who must pay our passage in a ship someone else owns. No longer inhabitants or citizens with the same inalienable right to be there and be heard as anyone else.

And yet, dark as all this may seem, victory for the 1% depends on no one understanding what is happening. If we are already beginning to see the outlines of what the Over Class wants, then their victory is not assured. If our ignorance is their bliss, then our understanding is like sunlight on a vampire’s skin.

All is not lost, not by a bloody long way.

Towards a Manifesto for the supremacy of the 1%

1) Control of debt.

The 1%, through their ownership of the private banking system, must continue to issue and handle the majority of debt and have legal control over the payment of those debts. Power over the system of debt is critical to the 1% and one thing is paramount – there must be no democratic, nor public, control of it. That old saying, “give me control over a nation’s currency…” should now read, give me control over a nation’s debt. Debt trumps currency. Which in turn means the 1% must maintain custodial power over the money used to pay those debts.

At the moment, the largest custodial banks are those on Wall Street. Which means any dispute over what happens to that money gets settled in the Southern District Court of Manhattan. And that court has consistently interpreted international law in ways that have elevated the rights of private banks and bond holders over the rights of nations and entire peoples. Two recent decisions in the US Supreme Court, which upheld the Southern District rulings regarding the Vulture funds Elliott Associates, NML Capital and others, forced the Wall Street custodial banks holding Argentina’s money, not only to freeze all payments but also to reveal all confidential information regarding Argentina’s assets. It is no exaggeration to say that these rulings favoured the Vulture Capitalists so decisively that it has changed the balance of power between private bond holders and entire peoples, in favour of the former. Even the UN wrote that the rulings were so sweeping that they,

…set legal precedents which could have profound consequences for the international financial system…

and which,

… will erode sovereign immunity.

Such is the power that the present arrangements give to the global 1% and their banks, that no group of emerging nations must be allowed to create rival custodial banks under a different court. Such would not only rival the mighty custodians of Wall Street but would stop the trend of enforcing US corporate law as de facto global law. If ever sovereign nations did not fund themselves by issuing debt, and if ever the 1% did not control where that debt and the ‘money’ to pay it was stored, and if ever the true sovereignty of nations was re-asserted against Vulture capitalism, then a great deal of the 1%’s power would evaporate. So none of that can be allowed to happen.

It is perhaps THE most important point of any for-profit, debt-based, currency or system (debt doesn’t HAVE to involve interest) that that debt must increase. Not because it is a law of physics nor even that it benefits the 99% (largely it doesn’t) – it happens because it benefits the 1% to whom the interest is owed and more fundamentally because the entire value of the 1%’s debt-based, paper wealth depends upon there being a constant increase in debt. If debt didn’t increase then their wealth would become, first unstable, and then burn to ash. If that seems like I plucked this claim out of thin air I suggest that our present crisis and many others before it are the abundant proof. When the expansion of the global bubble of debt began to slow in 2007 it made the value of all the existing debt-based wealth first uncertain and then implode. Everything done since has been for the sole purpose of reflating the bubble of debt so that debt-based wealth could be said to have value. The 1% will never give up the power they currently enjoy to issue and control the inflation of debt, because their wealth would evaporate if they did.

2) Regulatory power.

One of the areas of power remaining to nations which act as an unwelcome hindrance to global corporate power is the power to regulate. This must be curbed and proposals are already on the table to do so. Such an effort is now enshrined in the multilateral trade agreements currently being agreed behind closed doors: the TPP, TTIP and the one which will remove finance from national control, TISA. These agreements all contain a new approach to regulation which we could summarize as “Our experts, Our data, Our regulations.” In a paper submited to the TTIP negotiations jointly by the US Chamber of Commerce and Businesseurope we find a proposal to adopt what they call “Regulatory Cooperation”. Which the paper says will,

“…put stakeholders [the corporations] at the table with regulators to essentially co-write regulation.” P. 4

The new philosophy, despite its coy claim to being about ‘cooperation’, puts corporations firmly in charge of setting the regulations for themselves and their products on the grounds that only they have the necessary experts, who have the necessary access to the data which is otherwise “confidential”. Or, to appropriate a phrase from the American revolution and use it for demanding more rights for corporations, “No Regulation without Consultation.”

The policy already being written in to the Trade Agreements and given specific teeth by their Investor State Dispute Settlement (ISDS) clauses, is not simply about who regulates what, it is the leading edge of a broad concern to remove any important decisions from democratic control. The ISDS, in case you are not familiar with the jargon, is the clause first used in Bilateral Trade Agreements, now being incorporated into all Trade agreements, which gives corporations the right to take nations to privately run arbitration at which they can sue the nations … and almost always win. And this, for me, is the key point. Disastrous as the Trade Agreements will be in and of themselves, they are a leading edge of this much more profound attack (see below) which I think we will see gathering pace in the next few years.

3) Neuter Democracy by Professionalizing Governance.

The Global do not like democracy. In their less guarded comments this is beginning to show. Here is the EU Trade Commissioner, Karel De Gucht, quoted in a piece over at The Automatic Earth talking about the Scottish independence vote,

“A Europe driven by self-determination of peoples … is ungovernable … ”

One of the main ways the 1% can most effectively neuter democratic power (in a way that they can claim it is not their intent at all) – and the regulatory attack contained in the Trade Agreements is just one example – is to advocate professionalizing governance. This has the advantage of sounding good on the surface. Who wouldn’t want professionals giving advice? In practice it will mean that although anyone can still be elected (that can be left in place) there will be a new insistence that they MUST – not ‘can’, but MUST, take the advice of professionals – corporate professionals. And as noted above a good step towards this has already been proposed for trade regulations in the corporate submissions to the TTIP negotiations.

The 1% and their media outlets will argue that Amateurism is no longer good enough. After all would you want an amateur heart surgeon, or an amateur nuclear engineer? No of course not. So why would you want amateurs to make decisions in any other sphere of governance? Elected officials are amateur. The experts whose ‘advice’ they, till now, “could” take, they from now on MUST take. And luckily there is precedence for this. Already when it comes to government ‘regulation’ of financial enterprises they use, retain, rely upon (you chose the phrase you like the sound of) the big 4 accountancy firms to do it for them. KPMG, not the government, inspects the books and signs to say that everything is tickety-boo and all the corporate bosses and their political friends then have to do is smile for the cameras. And it worked ‘really well’ in 2008 – in the sense that ‘The Regulator’ said whatever the 1% needed them to say at the time, until it was too late for anyone to do anything about it. That is precisely the kind of ‘regulation’ the overclass need going forwards. Thereby, “No regulation without consultation” gets expanded to “No laws without consultation”. And of course that ISDS system of arbitration could be easily expanded to other spheres of government and used to stop any laws or changes to laws taken without or against ‘professional’ advice.

If any of this is put in place then it has the wonderful effect of leaving the politicians effectively powerless, but still in place so as to be the focus of blame. The 1% will hold the real power but the politicians will always take the blame. Any time things go wrong it will be because they made a mistake or did not follow advice as well or as fully as they should. Nothing will ever be the fault of the advice or the advisors.

As long as the 1% make sure the politicians are well taken care of after office, then there will be plenty of takers for the jobs. How utterly empty would the pantomime of our democracy be then?

So far this has been about taking from us. What about giving to them? Let’s not forget they have needs too.

4) From bail-out-cash to assets-for-pledging.

We all know banks would have died if it were not for the Trillions (yes, it is now counted in trillions) in public cash we have pumped in to them since 2007, to replace the flow of cash their brilliant loans should have been bringing in but of course weren’t and never will. And that flow of public cash in to the private banks continues. Despite yet more empty lies about the banks being fine and fixed, as I said above we are not fixing them we are feeding them. The latest feeding will be when the ECB gives them another third of a trillion in TLTRO (Targeted Long Term Refunding Operation) which replaces the sad, plain old LTRO of the last few years which gave the banks a trillion or so and was supposed (both times) to be the definitive fix. Of course since the LTRO ‘fixed’ things two major european banks still had the ungrateful effrontery to collapse – Banco Espirto Santo in Portugal and Monte dei Paschi bank in Italy. Right now all the other European, ‘not-in-need-of-any-help-being-perfectly-fixed and fine-thank-you-according-to-several-official-and-therefore-absolutely-trustworthy-stress-tests’ banks are lining up to take another third of a trillion. This, we are told will not only fix them…again…not that they need it, but will also encourage them to lend in to the ‘real’ economy. Which, oddly, we were assured the previous half dozen fixes were also going to do. But necessary as this sort of direct cash bail out still is, there is another pressing need which the bail-outs do not address. And that is the on-going but now rather accute need for assets which can be pledged as collateral for loans.

The reason assets are in many ways more important than cash is that although cash keeps imminent death at bay, assets, pledgeable ones, are the key to profit.

Banks want assets. The kind they are looking for are physical assets which produce wealth – like factories, or frackable land, or electricity grids, or ports, or telecoms systems. Assets that, unlike money, cannot be so easily withdrawn, tapered or ‘tightened’. The kind of assets a nation might have, funnily enough. The banks don’t want these assets in order to use them to produce wealth directly, but rather to use them as collateral for creating more credit and debt. To think of the value of an asset in terms of the wealth or profit it can produce by its productive nature, is to be so very last century. It’s akin to thinking the value of a stock or share is to hold it and watch it go up in price. The real value of the stock or share is in trading it up and down as fast as possible. Let some slow-poke sit and just watch it. Similarly the value of an asset is vastly greater when thought of as the means for expanding the system of credit and debt. In the real world of making stuff, an asset like an electricity grid or a factory only makes the profit it makes. But in the world of credit and debt the same asset can be pledged over and over to create more and more credit. I pledge it to you and get a loan. You pledge it to someone else and you get a loan. The system has grown twice. Have a factory and you get the profit it makes from its widgets. Use the title to that factory as collateral to get a loan or extend a loan (if you are a bank) and you and the rest of us in the system can use the same asset over and over. You can create a loan based on its collateral value. Or you could hypothecate your claim on the asset to another bank who can re-hypothecate the same asset and so on. And everyone else can write derivatives based on its value going up or down. Till we are all rich in paper credit and debt.

Of course we all know that if the music should ever stop, it’s the factory itself and the slow old boring profit it makes from selling widgets that survives while the paper turns to ash. Which would make you think that the smart people would play the credit and debt game for a little while but then cash out and buy up the real stuff before the music stopped. And that is, of course what they all tell themselves they will do. The problem is that as soon as you get out of the endless creation of paper debt and credit and buy real stuff you are in effect leaving the fast lane and driving back in the slow lane. Those who stay in the fast lane a little longer will do better that quarter and make you look like a loser. No one in the financial world can survive long as a loser. So there is a terrible pressure to stay in the fast lane just a little longer. Which means they all do. No one wants to be the first to lose his nerve and get out too soon. This is the nature of bubble growth. It is always better to stay playing the bubble. It is the nature of a bubble that even the smart players, who know it is a bubble, will want to hold and trade bubble assets rather than the boring, low growth real ones it is all ultimately based on. And that is why they always, without fail, get caught holding them in the end. And then demand we bail them out. Which is how assets beget debts which beget the crash which beget the demand for a bail out so it can all start afresh.

The question is how to get your hands on those assets for a good price? The old fashioned way would be to invest wisely and buy it. The new way is to try to buy them at fire sale prices from a debt burdened or defaulting sovereign who you are ‘advising’ on how to cut its debt or pay its bonds by selling state assets. Of course the obstinate problem is that sometimes people don’t want their governments to sell off their nation’s treasures and assets. As long a some tattered shreds of democracy remain, this can hinder the process of looting.

At the moment nations can still default and force bond holders to accept a ‘hair cut’ – meaning a loss on their loan. This is always portrayed by our loyal media as some sort of crime against nature and an evil plot by crooked politicians. Despite the fact that when you lend money (and buying a bond is just that) you do so knowing you are taking a risk which is precisely why you are paid interest on your loan. So the risk of a loss is known and agreed at the start. And let’s remember most of the money made on bonds is, in fact, from the buying and selling of the risk of default. The trade in CDS (Credit Default Swaps) wouldn’t exist without it.

Of course if a corporation should act unwisely, go bankrupt and force losses on their bond holders – pick your example – Chrysler, AIG, GM, the S&L’s there’s an endless number – this is seen as a perfectly normal, if unfortunate. But it is clear that there is a push to put a stop to nations being afforded the same right.

At the moment the major victory, which I mentioned above, is by the latest Supreme Court rulings in the US in favour of the Vulture funds against Argentina making it harder for any government ( I am thinking or Ireland in particular) to put the good of its people above the good of the bond holders. The rulings make it now very likely that more and more bond holders will refuse to engage in any sort of voluntary agreement to restructure sovereign debts. The problem is, this route, the Vulture route, can take a long time and requires specialist lawyers. Not every bond holder has that expertise. They, the majority, need another quicker, easier route to getting their hands on national assets.

Here is one way I think they could do it. If I am right, and if this is a viable way, then they will have thought of it already and should be busy working out the legal fine print and preparing the politicians to agree to it.

In a nut-shell, I think nations will be urged to issue a new kind of sovereign bond which would be the equivalent of a corporate Covered Bond or, as they are sometimes known, a Pfandbrief. Don’t be put off by the jargon it’s quite simple. Should the borrower default or go bankrupt, a normal bond gives you a claim on the general pool of the borrowers’ remaining assets. But all the other bond holders have the same claim. So you must all wait for the auditors to sort out what assets there are to be shared out and who gets how much back. Then you all form an orderly line with those holding the most senior bonds at the front and those with more junior bonds at the back. If the pool of assets runs out before you get to the front of the line, then you go away empty handed. I’m simplifying but that is the general way it works. Except for one group of bond holders – those who have Covered Bonds or Pfandbreif, because those bonds not only have general claim on the pool of assets but have a unique claim, written in when the bond was issued, on assets that were ring-fenced as the specified collateral for those bonds ONLY. Those bonds have their value ‘covered’ by a specified group of assets.

Now at the moment when a company goes bankrupt what we mean by ‘assets’ is everything: Cash, investments and any and all physical assets, which means buildings, land mines, oil fields, and equipment, from machinery to paper-clips. However, nations are not considered as companies (YET). The 1% has encouraged the talk of UK Plc but it is not YET a legal reality. Which means when a nation defaults it does so because it says it does not have the cash (from financial holdings and tax flow) to pay the bond which is due for repayment. Till a few months ago no one had the right to claim for themselves a nation’s assets in payment of a debt. Nor had they any legal authority to force a nation to sell assets to get cash to pay a debt.

But over the years this presumption has been eroded. The privatization programmes of Thatcher were a major step in governments claiming the power to dispose of the assets of the people, as that government of the day saw fit. The recent rulings in favour of the Vulture funds have been another important step in giving the corporations new rights – under US law only so far – to seize sovereign assets wherever they could. Which, in effect, means. if they could get their hands on them without the use of an army – such as seizing assets held in a third party bank or another country which would comply with the order. Thus a private custodial bank might agree to give the contents of a sovereign nation’s accounts to a Vulture fund. Or a country in which, for example, Argentina had moored a state ship might agree to impound that ship till the Vultures could swing by and pick it up.

BUT a Covered Bond would make life so very much simpler for the bond holders. If a nation was induced to issue a Covered Bond then it could be written in to the agreement at the start, which national assets – a train system or oil and gas fields – were the specified and pledged as collateral for this particular bond. The government in charge when the default happened could then say to its electorate, “We’re terribly sorry but its right here in the small print – you – via your government agreed to forfeit these assets if you failed to pay. This is international law which we must obey.” And THAT last phrase is the key which opens the door to the future the 1% want. A future were International Law is held up as the new supreme, and completely non-democratic arbiter of right and wrong. International law would be the new god. And like god would be above the whims and breezes of merely popular wants and desires. People already see the law as somehow above democracy, forgetting that democratic governments wrote the laws and have the power to unwrite them if the people so direct them. This last point is the one will be overlayed and suppressed. I will come back to this.

But back to Covered Bonds. It would be a simple matter for a compliant government – an ably advised one of course – to issue such bonds in the people’s name. Will nations be stupid enough to go for it? Well the ‘nation’ might well object but that’s precisely what politicians are for. Elected politicians would be willing to do it today – except for the fact they know they would be thrown out of office immediately. So what is needed is a major media campaign complete with paid-for experts and pundits all saying how the way forward for nations who are presently unable to access the bond markets is for them to issue Covered Bonds. Get experts from Germany to talk about the long history and success of the German Pfandbrief. Have them talk about how banks that have issued such bonds are considered among the safest. Link together in the popular mind the issuing of Covered Bonds with the general idea of safety and prosperity. Never mind the one doesn’t cause the other. Don’t mention what enormous rights they would be giving the corporations nor what a huge part of their sovereignty they would have signed away. Don’t let these things be mentioned. Then move on to suggest that issuing such covered bonds would lead to greater investment even for nations that are not having trouble issuing bonds. As soon as you have made this link between issuing these kind of bonds and ‘greater inward investment’ the job is almost done. It is this link to attracting greater inward investment which is being used to sell the Trade Agreements, Bilateral Investment Treaties and the Investor State Dispute Settlement mechanism, saying that it is only those nations who agree to them, who will benefit by attracting more investment. It isn’t true, (there have been several studies the first in 2002 by the World bank concluding it isn’t true) but as long as we keep saying it is, who will argue? And people will eventually come to think it must be a good idea.

In the Covered Bond future a hideous inversion will take place. Once upon a time bonds were issued so that a nation could build up a wealth of essential infrastructure such as hospitals and roads, and to develop natural resources for the benefit of the entire nation. In the Covered Bond future those resources and national treasures would be pledged for nothing more than raising more debt and would, after another financial crisis and the deluge of new bail-out demands it would bring, undoubtedly hand over their ownership to the bond holders. And it would all happen without a Vulture having to stir from its perch and where any murmur of discontent would be met with righteous sermons about the sanctity of international law.

5) From National Treasures to State Monopolies.

Of course it will not be quite that straight forward to prize a nation’s assets and wealth from its people’s ownership. Other ideas will have to be changed as well. National Assets must be re-named as State Monopolies. Instead of talking about, for example, how efficient a national health system is, or what good care it provides per capita expenditure it must be referred to, darkly, as a State Monopoly and all the talk must be about how bad monopolies are. No attention must be paid, no reference ever allowed to studies by the WHO or this one by the Commonwealth Fund that have consistently found,

The United States health care system is the most expensive in the world, but…the U.S. fails to achieve better health outcomes than the other countries, and … is last or near last on dimensions of access, efficiency, and equity.

No mention of such studies must be made. Instead all talk must simply concentrate on how restrictive state monopolies must be and how they must limit ‘choice’ and allow inefficient and greedy public workers to burden everyone else. And wouldn’t you know it, the effort is already under way. Here is a paper from the Fraser Institute in Canada calling state education a State Monopoly. The Fraser Institute is resolutely free-market and is funded by the likes of ExxonMobil and the Koch brothers.

The paper doesn’t claim, because it hasn’t any evidence to support any such claim, that the State school system educates badly or that for-profit schools are a better way to educate a nation. Instead it simply says how bad monopolies are. How they restrict choice.

Canadians rightly complain about protected industries – whether it’s dairy products, telecoms, banking, or transport – and the consequences in the form of less choice, poorer service, and/or higher prices….

The paper then begins to talk about education as if it were a ‘protected’ industry. Allowing it to elide the harm done by monopolies in the market, with free education.

When government is the sole supplier of services, the options for consumers are extremely limited.

Of course in the case of the NHS in the UK where the government is the sole supplier and it is, therefore, a State Monopoly the result has, for several generations, been a health care system that is cheaper and better than the US free-market version in almost every single way. You may hate the conclusion on ideological grounds but, in fact, all the actual evidence is on my side.

But evidence has never been the concern of the global overclass, has it?. Fear and greed is more their currency. And so the assets of every nation are to be denigrated along with those who work in them, as inefficient and staffed by greedy, lazy state-worker parasites bent on restricting everyone’s ‘choice’. If enough people can be taught to hate the teachers who teach their children and the doctors and nurses who care for their parents and if a general culture of hate-thy-neighbor can be engendered, then the Over-class will be significantly closer to asset stripping your nation – with your help. You might imagine an Orwellian slogan of “Give up ownership/Get more Choice!” Believe it at your peril.

This is speculation, of course, but papers like the Fraser institute’s make it not so much ‘groundless speculation’ but more ‘extrapolation from what already is’. There already is a firm intent to privatize education in those countries where state education is good, and a huge desire to privatize all the state health systems that DO WORK and DO deliver fantastic services, like the NHS in the UK, because they would be priceless assets to strip. And every nation has natural resources which, like the common land of centuries ago, the over-class would like to enclose using exactly the same argument they used to clear the Highlands and enclose the Common Lands of England – “Oh they’ll be so much more valuable and productive when accumulated in our private hands than if we leave them distributed among the unworthy commoners.

It warmed for them a few hundred years ago. They are hoping it will work for them again. We must stop them and not only do I belive we can, so do they.

Which is why discrediting democracy itself, above all else, must be the urgent task of the Over Class.

At the risk of your ire I am pausing again here. I hope that the argument so far has provided sufficient to disagree with, comment upon, refine and improve so that you will forgive me for holding back the last few sections. It seemed to me better to get this much published, and give people a chance to comment rather than deliver it as one enormous lump. Anyway the last part will be finished soon and will follow shortly. Promise.