The classified cable from the Public Library of US Diplomacy published by WikiLeaks exposes Rothschild Bank “advising” a “secret and corrupt” billion dollar transaction in order to create a “massive money laundering scheme” in Senegal and crash the struggling nation’s economy.
The secretive Rothchilds are rarely in the news and never publicly rebuked by governments, however the classified cable discovered by Your News Wire reveals that a US diplomatic official clearly referred to the actions of Rothschild Bank as “corrupt” and the transaction as “indefensible.”
The Rothschild-driven deal involved the Senegalese state selling off Sonatel, the national telecommunications company and most profitable public resource, in return for $1.2 billion.
The US government were led to believe the sale was corrupt and the funds would be used to create a “massive money laundering scheme” to benefit the Senegalese elite – specifically former President Abdoullah Wade’s son Karim Wade – and Rothschilds Bank.
The cable was written by the US diplomat Jay Smith, the chargé d’affaires heading the Dakar embassy in the absence of an ambassador. From the cable:
The cable shows the US government were aware of the illegal deal and were petitioning the Senegalese government against completing it. No such petition was attempted with Rothschild Bank however, even though the London merchant bank was the “advising” body with the “decision” of who would gain access to the shares.
“According to Diarisso, with the DGMP’s waiver, the government can now conclude an exclusive deal with the investment bank Rothschild (which was also noted in the press articles) to act as the advisor and sole agent for the sale, including “deciding” who gets the opportunity to buy the shares.”
The cable stated openly that the Rothschild Bank – an infamous British multinational investment bank founded in 1811 and controlled by the Rothschild family to this day – was operating illegally:
The information was confidentially shared with the US diplomat by senior Senegalese and International Monetary Fund (IMF) officials.
The full classified cable can be viewed here.
The sale of the profitable national company was expected to have disastrous financial consequences for the fragile Senegalese economy. The only beneficiaries of the sale were to be the country’s ruling family and the Rothschild Bank. According to the cable:
“The IMF, World Bank, and senior officials at the Ministry of Finance are deeply concerned about the deal’s short- and long-term consequences for Senegal’s public finances. As Diarisso recently told the Econ Counselor, “it’s much worse than serious.”
The corrupt sale of the national company was expected to have particularly dire consequences for the nation’s pensions:
“The journal [Nouvel Horizon] reported that Rothschild Bank would again be granted the right to organize the divestiture as a private transaction, and that the goal was again to facilitate money laundering. At this time, we have no further information on this proposal, but if true, the impact could be even more staggering and widespread, given that IPRES is the retirement lifeline for thousands of non-government employees.”
“Cool and corrupt $15 million”
“There is consensus among observers of the government’s actions that the primary purpose of this divestiture is to help Karim Wade and his associates launder huge sums of cash that they have collected in recent years through “contributions,” “donations,” kickbacks, and the sale of illegally acquired assets, much of which was generated in the preparations summit of the Organization of Islamic Conference (OIC) held in March in Dakar.“
Our interlocutors are convinced that Senegal’s high-level corruption could have easily generated level of receipts equal to the value of the Sonatel shares; however, the scale of this scheme is audacious by Senegalese standards. As Diarisso noted, “the country can accept Karim’s frequent efforts to launder CFA one billion or 5 billion (USD 2-10 million), but this is beyond acceptable.” Holding these assets for steady dividend income or selling these directly back into Dakar’s regional stock exchange in a routine and unsuspicious manner will, in theory, “wash” the money to the point of plausible deniability.
Adding to the fiscal irresponsibility of this scheme, the arrangement with Rothschild’s reportedly includes paying the bank a 1.5 percent commission on the value of the shares, for a cool and corrupt USD 15 million.
We cannot refute the government’s claim that it has the right to sell its own assets. But it is a difficult case to make fiscally, since Sonatel is the country’s best performing company and one of the few stable sources of significant revenue for Senegal’s national budget. For the government to do so solely to facilitate corruption and launder money on behalf of Karim Wade and his circle, would be indefensible.”
If the Economy were a car, productivity would be the engine. Heated seats, on-demand 4-wheel drive and light-sensitive tinted windshields, are all very nice. But they mean little if the engine doesn’t turn and the car just sits in the driveway. The latest productivity data from the Commerce Department confirms that our economic engine is sputtering.
If you strip away all the bells and whistles of economic analysis, the simple truth is that the increased living standards that have taken us from the stone age to the digital age happened because we increased our productivity. Better plows, windmills, bulldozers, factories and, more recently, better software, technology, and automation have allowed economies to produce more output with less human effort. This means there are more goods and services for more people to share and workers can work less to acquire those goodies. When productivity stops increasing, no amount of financial gimmickry can compensate.
With this in mind, the latest batch of productivity data should have significantly changed the conversation. But like other pieces of evidence that point to a weakening economy, the news made scarcely a ripple. The fact that few opinions about our economic health changed, as a result, confirms just how big our blinders have become.
Most of the economic prognosticators were fairly confident about the Second Quarter numbers. After all, productivity had unexpectedly declined for the prior two-quarters, and given the optimism that is ingrained on Wall Street and Washington, a big snap back was expected. The consensus was for an increase of .5%. Instead we got a .5% contraction. That’s a huge miss. The contraction resulted in three consecutive declines, something that hasn’t happened since the late 1970’s, an era often referred to as the “Malaise Days” of the Carter presidency. That time, which spawned such concepts as “stagflation” and “the misery index,” was widely regarded as one of the low points of U.S. economic history. Well, break out your roller disco skates, everything old is new again.
But it gets worse. Productivity declined by .4% from a year earlier, marking the first annual decline in three years. According to data from the Bureau of Labor Statistics, the total magnitude of the three-quarter drop was the largest decline in productivity since 1993. The last three-quarters mark a significant decline from the already abysmal productivity growth we have since the Financial Crisis of 2008. According to the Wall Street Journal, during the 8 years between 2007 and 2015 productivity growth averaged just 1.3% annually, which was less than half the pace that was seen in the seven-year period between 2000 and 2007.
The talking heads on TV can’t seem to offer any real reason why productivity has gone missing. Some feebly suggest that globalization is the problem, or that automation has moved so fast that the benefits usually offered by technological improvements have lost their power. But it would be hard to come up with a reason why trade, which has universally benefited local, regional, and international economies through comparative advantage and specialization, has suddenly become a problem. Similarly, when does greater efficiency become a problem rather than a solution? So they are stumped.
But these economists ignore the major change that has befallen the world over the last eight years, a change that has coincided neatly with the global collapse in productivity. The Financial Crisis of 2008 ushered in an age of central bank activism the likes of which we have never before seen. All the worlds’ leading central banks, most notably the Federal Reserve in Washington, have unleashed ever bolder experiments in monetary stimulus designed to reflate financial markets, push up asset prices, stimulate demand, and create economic growth. And while there is little evidence that these policies have produced any of the promised benefits, there is every reason to believe that the scale of these experiments will just get larger if the global economy doesn’t improve.
But very few brain cells have been expended about the unintended consequences that these policies may be creating. But let’s be clear, there is nothing natural or logical about a set of policies that result in an “investor” paying a borrower for the privilege of lending them money. So in this strange new world, we should expect some collateral damage. Productivity is a primary casualty. Here’s why.
Another set of statistics that has accompanied the decline in productivity is the severe multi-year drop in business investment and spending. Traditionally, businesses have set aside good chunks of their profits to invest in new plant and equipment, research and development, worker training, and other investments that could lead to the breakthroughs and better business practices. The investments can lead to greater productivity.
But the business investment numbers have been dismal. But it’s not because corporate profits are down. They aren’t. Companies have the cash, they just aren’t using it to invest in the future. Instead, they are following the money provided by the central banks.
Ultra-low-interest rates have encouraged businesses to borrow money to spend on share buybacks, debt refinancing, and dividends. They have also encouraged financial speculation in the stock market, the bond market, and in real estate. Investors may believe that central bankers will not allow any of those markets to fall as such declines could tip the already teetering global economies into recession. The Fed, the Bank of England, the Bank of Japan, and the European Central Bank have already telegraphed that they will be the lenders and buyers of last resort. These commitments have turned many investments into “no lose” propositions. Why take a chance on R&D when you can buy a risk-free bond?
Higher interest rates are actually healthy for an economy. They encourage real savings, with lenders actually concerned about the safety of their loans. Without the backstop of central banks, speculators could not out bid legitimate borrowers who make capital investments that produce real returns. But with central banks conjuring cheap credit out of thin air, supplanting the normal market-based credit allocation process; the result is speculative asset bubbles, decreasing productivity, anemic growth, and falling real wages. Welcome to the new normal.
If the cost of money is high, people think carefully about where they want to put their money. They select only the best investments. This helps everyone. When money is cheap, they throw darts against a wall. This is not the best use of societies’ scarce resources. Is it any wonder productivity is down?
Many economists are now saying that the Fed won’t be able to raise rates until productivity improves. But productivity will never improve as long as rates stay this low. This is the paradox of the of the new economy.
When will central bankers conclude that it’s their own medicine that is actually making the economy sick? They will not make that connection until they succeed in killing the patient…and even then they may continue to administer the same toxic medicine to a corpse. The political pressure is just too great to ever admit their mistakes, so they repeat them indefinitely.
Trump’s policy views regarding the financial industry have been making headlines. Trump, apparently, wants to break up big banks, an idea often presented by U.S. Senator and 2016 Democratic candidate, Bernie Sanders and out of line with the historical lean of the Republican Party. Specifically, Trump wants to reinstate the Glass-Steagall Act and repeal the Dodd-Frank Act, both of which were born out of financial crises, and both of which regulate financial institutions.
The Glass-Steagall Act, which usually refers to four provisions of the Banking Act of 1933, forced the separation of investment banking and commercial banking. It was signed by President Franklin Delano Roosevelt (famously a Democrat, unlike his older cousin: President Theodore Roosevelt) days after Roosevelt took office in 1933. Reeling from the Great Depression, the U.S. government recognized the need for banking reform and, subsequently, made the Glass-Steagall Act law. In 1999, The Gramm-Leach-Bliley Act, signed by President Bill Clinton, repealed part of the Glass-Steagall Act.
After the Gramm-Leach-Bliley Act was signed, the recent financial crisis, known as the Great Recession, brought banking regulation to the forefront of American politics once again. In 2010, President Barack Obama signed the Dodd-Frank Act into law. The Dodd-Frank act regulates the financial industry in several ways, including the establishment of the Financial Stability Oversight Council (FSOC), which monitors risks that could affect the entire financial industry. The Act, among other things, also requires banks to have plans in place for a shutdown in the event of insolvency.
Despite the apparent confusion of wanting to increase regulation and repeal it, Trump’s views are still incredibly important, even if it is highly unlikely that the Glass-Steagall act will be reenacted, or the Dodd-Frank Act repealed. This importance lies in the fact that the reinstatement of the Act is included in both the Republican and Democratic Party platforms. It seems strange, but it’s true; Donald Trump, the Republican Party, and the Democratic Party all want the same thing. The only person who isn’t on board is Hillary Clinton, who believes the Act does not have the reach needed to regulate Wall Street, which now consists of more than just banks.