Wednesday, April 29, 2009

Critical Alert: The Swine Flu Pandemic – Fact or Fiction? (AA) highly respected DR MERCOLA!

Critical Alert: The Swine Flu Pandemic – Fact or Fiction? (AA)

By Dr. Mercola

American health officials declared a public health emergency as cases of swine flu were confirmed in the U.S. Health officials across the world fear this could be the leading edge of a global pandemic emerging from Mexico, where seven people are confirmed dead as a result of the new virus.

On Monday April 27th, the World Health Organization (WHO) raised its pandemic alert level to four on its six-level threat scale,1 which means they've determined that the virus is capable of human-to-human transmission.

swine fluThe number of fatalities, and suspected and confirmed cases across the world change depending on the source, so your best bet -- if you want the latest numbers -- is to use Google Maps' Swine Flu Tracker.

Several nations have imposed travel bans, or made plans to quarantine air travelers2 that present symptoms of the swine flu, such as:

  • Fever of more than 100
  • Coughing
  • Runny nose and/or sore throat
  • Joint aches
  • Severe headache
  • Vomiting and/or diarrhea
  • Lethargy
  • Lack of appetite

Top global flu experts are trying to predict how dangerous the new swine flu strain will be, as it became clear that they had little information about Mexico's outbreak. It is as yet unclear how many cases occurred in the month or so before the outbreak was detected. It's also unknown whether the virus was mutating to be more lethal, or less.

Is This the Pandemic Health Officials Have Been Waiting for?

Folks, you can expect to see a lot of panic over this in the near future. But I wouldn't be too hasty -- this isn't the first time the public has been warned about swine flu. The last time was in 1976, right before I entered medical school and I remember it very clearly. It resulted in the massive swine flu vaccine campaign.

Do you happen to recall the result of this massive campaign?

Within a few months, claims totaling $1.3 billion had been filed by victims who had suffered paralysis from the vaccine. The vaccine was also blamed for 25 deaths.

However, several hundred people developed crippling Guillain-Barré Syndrome after they were injected with the swine flu vaccine. Even healthy 20-year-olds ended up as paraplegics.

And the swine flu pandemic itself? It never materialized.

More People Died From the Swine Flu Vaccine than Swine Flu!

It is very difficult to forecast a pandemic, and a rash response can be extremely damaging.

As of Monday April 27, the worldwide total number of confirmed cases was 82, according to WHO, which included 40 cases in the U.S., confirmed by the Centers for Disease Control. But does that truly warrant the feverish news headlines?

To put things into perspective, malaria kills 3,000 people EVERY DAY, and it's considered "a health problem"... But of course, there are no fancy vaccines for malaria that can rake in billions of dollars in a short amount of time.

One Australian news source,3 for example, states that even a mild swine flu epidemic could lead to the deaths of 1.4 million people and would reduce economic growth by nearly $5 trillion dollars.

Give me a break, if this doesn't sound like the outlandish cries of the pandemic bird-flu I don't know what does. Do you remember when President Bush said two million Americans would die as a result of the bird flu?

In 2005, in 2006, 2007, and again in 2008, those fears were exposed as little more than a cruel hoax, designed to instill fear, and line the pocketbooks of various individuals and industry. I became so convinced by the evidence AGAINST the possibility of a bird flu pandemic that I wrote a New York Times bestselling book, The Bird Flu Hoax, all about the massive fraud involved with the epidemic that never happened..

swine fluWhat is the Swine Flu?

Regular swine flu is a contagious respiratory disease, caused by a type-A influenza virus that affects pigs. The current strain, A(H1N1), is a new variation of an H1N1 virus -- which causes seasonal flu outbreaks in humans -- that also contains genetic material of bird and pig versions of the flu.

Interestingly enough, this version has never before been seen in neither human nor animal, which I will discuss a bit later.

This does sound bad. But not so fast. There are a few reasons to not rush to conclusions that this is the deadly pandemic we've been told would occur in the near future (as if anyone could predict it without having some sort of inside knowledge).

Why a True Bird- or Swine Flu Pandemic is Highly Unlikely

You may not know this, but all H1N1 flu's are descendants of the 1918 pandemic strain. The reason why the flu shot may or may not work, however, from year to year, is due to mutations. Therefore, there's no vaccine available for this current hybrid flu strain, and naturally, this is feeding the fear that millions of people will die before a vaccine can be made.

However, let me remind you of one very important fact here.

Just a couple of months ago, scientists concluded that the 1918 flu pandemic that killed between 50-100 million people worldwide in a matter of 18 months -- which all these worst case scenarios are built upon -- was NOT due to the flu itself!4

Instead, they discovered the real culprit was strep infections.

People with influenza often get what is known as a "superinfection" with a bacterial agent. In 1918 it appears to have been Streptococcus pneumoniae.

Since strep is much easier to treat than the flu using modern medicine, a new pandemic would likely be much less dire than it was in the early 20th century, the researchers concluded.

Others, such as evolutionary biologist Paul Ewald,5 claim that a pandemic of this sort simply cannot happen, because in order for it to occur, the world has to change. Not the virus itself, but the world.

In a previous interview for Esquire magazine, in which he discusses the possibility of a bird flu pandemic, he states:

"They think that if a virus mutates, it's an evolutionary event. Well, the virus is mutating because that is what viruses and other pathogens do. But evolution is not just random mutation. It is random mutation coupled with natural selection; it is a battle for competitive advantage among different strains generated by random mutation.

For bird flu to evolve into a human pandemic, the strain that finds a home in humanity has to be a strain that is both highly virulent and highly transmissible. Deadliness has to translate somehow into popularity; H5N1 has to find a way to kill or immobilize its human hosts, and still find other hosts to infect. Usually that doesn't happen."

Ewald goes on to explain that evolution in general is all about trade-offs, and in the evolution of infections the trade-off is between virulence and transmissibility.

What this means is that in order for a "bird flu" or "swine flu" to turn into a human pandemic, it has to find an environment that favors both deadly virulence and ease of transmission.

People living in squalor on the Western Front at the end of World War I generated such an environment, from which the epidemic of 1918 could arise.

Likewise, crowded chicken farms, slaughterhouses, and jam-packed markets of eastern Asia provide another such environment, and that environment gave rise to the bird flu -- a pathogen that both kills and spreads, in birds, but not in humans.

Says Ewald:

"We know that H5N1 is well adapted to birds. We also know that it has a hard time becoming a virus that can move from person to person. It has a hard time without our doing anything. But we can make it harder. We can make sure it has no human population in which to evolve transmissibility. There is no need to rely on the mass extermination of chickens. There is no need to stockpile vaccines for everyone.

By vaccinating just the people most at risk -- the people who work with chickens and the caregivers -- we can prevent it from becoming transmissible among humans. Then it doesn't matter what it does in chickens."

Please remember that, despite the fantastic headlines and projections of MILLIONS of deaths, the H5N1 bird flu virus killed a mere 257 people worldwide since late 2003. As unfortunate as those deaths are, 257 deaths worldwide from any disease, over the course of five years, simply does not constitute an emergency worthy of much attention, let alone fear!

Honestly, your risk of being killed by a lightning strike in the last five years was about 2,300 percent higher than your risk of contracting and dying from the bird flu.6 I'm not kidding! In just one year (2004), more than 1,170 people died from lighting strikes, worldwide.7

So please, as the numbers of confirmed swine flu cases are released, keep a level head and don't let fear run away with your brains.

So is the Swine Flu Getting More or Less Dangerous?

On Sunday, April 26, The Independent reported that more than 1,000 people had contracted the swine flu virus in Mexico, 8 but by the afternoon that same day, Mexican President Calderon declared that more than two-thirds of the 1,300 thought to have contracted the disease had been given a clean bill of health and sent home.9

Additionally, the number of actual confirmed cases appears to be far lower than reported in many media outlets, leading me to believe that many reporters are interchanging the terms "suspected cases" and "confirmed cases." According to the World Health Organization's Epidemic and Pandemic Alert and Response site; as of April 27, there are:

  • 40 laboratory confirmed cases of A(H1N1) in the U.S. -- 0 deaths
  • 26 confirmed cases in Mexico -- 7 deaths
  • 6 confirmed cases in Canada -- 0 deaths
  • 1 confirmed case in Spain -- 0 deaths

Additionally, nearly all suspected new cases have been reported as mild.

Personally, I am highly skeptical. It simply doesn't add up to a real pandemic.

But it does raise serious questions about where this brand new, never before seen virus came from, especially since it cannot be contracted from eating pork products, and has never before been seen in pigs, and contain traits from the bird flu -- and which, so far, only seems to respond to Tamiflu. Are we just that lucky, or... what?

Your Fear Will Make Some People VERY Rich in Today's Crumbling Economy

swine flu According to the Associated Press at least one financial analyst estimates up to $388 million worth of Tamiflu sales in the near future10 -- and that's without a pandemic outbreak.

More than half a dozen pharmaceutical companies, including Gilead Sciences Inc., Roche, GlaxoSmithKline and other companies with a stake in flu treatments and detection, have seen a rise in their shares in a matter of days, and will likely see revenue boosts if the swine flu outbreak continues to spread.

As soon as Homeland Security declared a health emergency, 25 percent -- about 12 million doses -- of Tamiflu and Relenza treatment courses were released from the nation's stockpile. However, beware that the declaration also allows unapproved tests and drugs to be administered to children. Many health- and government officials are more than willing to take that chance with your life, and the life of your child. But are you?

Remember, Tamiflu went through some rough times not too long ago, as the dangers of this drug came to light when, in 2007, the FDA finally began investigating some 1,800 adverse event reports related to the drug. Common side effects of Tamiflu include:

  • Nausea
  • Vomiting
  • Diarrhea
  • Headache
  • Dizziness
  • Fatigue
  • Cough

All in all, the very symptoms you're trying to avoid.

More serious symptoms included convulsions, delirium or delusions, and 14 deaths in children and teens as a result of neuropsychiatric problems and brain infections (which led Japan to ban Tamiflu for children in 2007). And that's for a drug that, when used as directed, only reduces the duration of influenza symptoms by 1 to 1 ½ days, according to the official data.

But making matters worse, some patients with influenza are at HIGHER risk for secondary bacterial infections when on Tamiflu. And secondary bacterial infections, as I mentioned earlier, was likely the REAL cause of the mass fatalities during the 1918 pandemic!

Where did This Mysterious New Animal-Human Flu Strain Come From?

Alongside the fear-mongering headlines, I've also seen increasing numbers of reports questioning the true nature of this virus. And rightfully so.
Could a mixed animal-human mutant like this occur naturally? And if not, who made it, and how was it released?

Not one to dabble too deep in conspiracy theories, I don't have to strain very hard to find actual facts to support the notion that this may not be a natural mutation, and that those who stand to gain have the wherewithal to pull off such a stunt.

Just last month I reported on the story that the American pharmaceutical company Baxter was under investigation for distributing the deadly avian flu virus to 18 different countries as part of a seasonal flu vaccine shipment. Czech reporters were probing to see if it may have been part of a deliberate attempt to start a pandemic; as such a "mistake" would be virtually impossible under the security protocols of that virus.

The H5N1 virus on its own is not very airborne. However, when combined with seasonal flu viruses, which are more easily spread, the effect could be a potent, airborne, deadly biological weapon. If this batch of live bird flu and seasonal flu viruses had reached the public, it could have resulted in dire consequences.

There is a name for this mixing of viruses; it's called "reassortment," and it is one of two ways pandemic viruses are created in the lab. Some scientists say the most recent global outbreak -- the 1977 Russian flu -- was started by a virus created and leaked from a laboratory.

Another example of the less sterling integrity of Big Pharma is the case of Bayer, who sold millions of dollars worth of an injectable blood-clotting medicine to Asian, Latin American, and some European countries in the mid-1980s, even though they knew it was tainted with the AIDS virus.

So while it is morally unthinkable that a drug company would knowingly contaminate flu vaccines with a deadly flu virus such as the bird- or swine flu, it is certainly not impossible. It has already happened more than once.

But there seems to be no repercussions or hard feelings when industry oversteps the boundaries of morality and integrity and enters the arena of obscenity. Because, lo and behold, which company has been chosen to head up efforts, along with WHO, to produce a vaccine against the Mexican swine flu?

Baxter!11 Despite the fact that ink has barely dried on the investigative reports from their should-be-criminal "mistake" against humanity.

According to other sources,12 a top scientist for the United Nations, who has examined the outbreak of the deadly Ebola virus in Africa, as well as HIV/AIDS victims, has concluded that the current swine flu virus possesses certain transmission "vectors" that suggest the new strain has been genetically-manufactured as a military biological warfare weapon.

The UN expert believes that Ebola, HIV/AIDS, and the current A-H1N1 swine flu virus are biological warfare agents.

In addition, Army criminal investigators are looking into the possibility that disease samples are missing from biolabs at Fort Detrick -- the same Army research lab from which the 2001 anthrax strain was released, according to a recent article in the Fredrick News Post.13 In February, the top biodefense lab halted all its research into Ebola, anthrax, plague, and other diseases known as "select agents," after they discovered virus samples that weren't listed in its inventory and might have been switched with something else.

Should You Accept a Flu Vaccine -- Just to be Safe?

As stated in the New York Times14 and elsewhere, flu experts have no idea whether the current seasonal flu vaccine would offer any protection whatsoever against this exotic mutant, and it will take months to create a new one.

But let me tell you, getting vaccinated now would not only offer no protection and potentially cause great harm, it would most likely be loaded with toxic mercury which is used as a preservative in most flu vaccines..

I've written extensively about the numerous dangers (and ineffectiveness) of flu vaccines, and why I do not recommend them to anyone. So no matter what you hear -- even if it comes from your doctor -- don't get a regular flu shot. They rarely work against seasonal flu...and certainly can't offer protection against a never-before- seen strain.

Currently, the antiviral drugs Tamiflu and Relenza are the only drugs that appear effective against the (human flu) H1N1 virus, and I strongly believe taking Tamiflu to protect yourself against this new virus could be a serious mistake -- for all the reasons I already mentioned above.

But in addition to the dangerous side effects of Tamiflu, there is also growing evidence of resistance against the drug. In February, the pre-publication and preliminary findings journal called Nature Precedings published a paper on this concern, stating15:

The dramatic rise of oseltamivir [Tamiflu] resistance in the H1N1 serotype in the 2007/2008 season and the fixing of H274Y in the 2008/2009 season has raised concerns regarding individuals at risk for seasonal influenza, as well as development of similar resistance in the H5N1 serotype [bird flu].

Previously, oseltamivir resistance produced changes in H1N1 and H3N2 at multiple positions in treated patients. In contrast, the recently reported resistance involved patients who had not recently taken oseltamivir.

It's one more reason not to bother with this potentially dangerous drug.

And, once a specific swine flu drug is created, you can be sure that it has not had the time to be tested in clinical trials to determine safety and effectiveness, which puts us right back where I started this article -- with a potential repeat of the last dangerous swine flu vaccine, which destroyed the lives of hundreds of people.

Topping the whole mess off, of course, is the fact that if the new vaccine turns out to be a killer, the pharmaceutical companies responsible are immune from lawsuits -- something I've also warned about before on numerous occasions.

Unfortunately, those prospects won't stop the governments of the world from mandating the vaccine -- a scenario I hope we can all avoid.

How to Protect Yourself Without Dangerous Drugs and Vaccinations

For now, my point is that there are always going to be threats of flu pandemics, real or created, and there will always be potentially toxic vaccines that are peddled as the solution. But you can break free of that whole drug-solution trap by following some natural health principles.

I have not caught a flu in over two decades, and you can avoid it too, without getting vaccinated, by following these simple guidelines, which will keep your immune system in optimal working order so that you're far less likely to acquire the infection to begin with.

This is probably the single most important and least expensive action you can take. I would STRONGLY urge you to have your vitamin D level monitored /sites/articles/archive/2002/02/23/vitamin-d-deficiency-part-one.aspx to confirm your levels are therapeutic at 50-70 and done by a reliable vitamin D lab like Lab Corp.

If you are coming down with flu like symptoms and have not been on vitamin D you can take doses of 50,000 units a day for three days to treat the acute infection. Some researchers like Dr. Cannell, believe the dose could even be as high as 1000 units per pound of body weight for three days.

  • Avoid Sugar and Processed Foods. Sugar decreases the function of your immune system almost immediately, and as you likely know, a strong immune system is key to fighting off viruses and other illness. Be aware that sugar is present in foods you may not suspect, like ketchup and fruit juice.

  • Get Enough Rest. Just like it becomes harder for you to get your daily tasks done if you're tired, if your body is overly fatigued it will be harder for it to fight the flu. Be sure to check out my article Guide to a Good Night's Sleep for some great tips to help you get quality rest.

  • Have Effective Tools to Address Stress . We all face some stress every day, but if stress becomes overwhelming then your body will be less able to fight off the flu and other illness.

    If you feel that stress is taking a toll on your health, consider using an energy psychology tool such as the Emotional Freedom Technique (EFT), which is remarkably effective in relieving stress associated with all kinds of events, from work to family to trauma. You can check out my free, 25-page EFT manual for some guidelines on how to perform EFT.

  • Exercise. When you exercise, you increase your circulation and your blood flow throughout your body. The components of your immune system are also better circulated, which means your immune system has a better chance of finding an illness before it spreads. You can review my exercise guidelines for some great tips on how to get started.

  • Take a good source of animal based omega-3 fats like Krill Oil. Increase your intake of healthy and essential fats like the omega-3 found in krill oil, which is crucial for maintaining health. It is also vitally important to avoid damaged omega-6 oils that are trans fats and in processed foods as it will seriously damage your immune response.

  • Wash Your Hands. Washing your hands will decrease your likelihood of spreading a virus to your nose, mouth or other people. Be sure you don't use antibacterial soap for this -- antibacterial soaps are completely unnecessary, and they cause far more harm than good. Instead, identify a simple chemical-free soap that you can switch your family to.

  • Eat Garlic Regularly. Garlic works like a broad-spectrum antibiotic against bacteria, virus, and protozoa in the body. And unlike with antibiotics, no resistance can be built up so it is an absolutely safe product to use. However, if you are allergic or don't enjoy garlic it would be best to avoid as it will likely cause more harm than good.

In this particular case, I'd also recommend you stay away from hospitals unless you're having an emergency, as hospitals are prime breeding grounds for infections of all kinds, and could be one of the likeliest places you could be exposed to this new bug.

Thursday, April 9, 2009


Not much substantive news was expected to come out of the G-20 meetings
that ended on April 2 in London – certainly no good news was even
suggested. Europe, China and the United States had too deeply distinct
interests. American diplomats wanted to lock foreign countries into further
dependency on paper dollars. The rest of the world sought a way to avoid
giving up real output and ownership of their resources and enterprises for
yet more hot-potato dollars. In such cases one expects a parade of smiling
faces and statements of mutual respect for each others’ position – so
much respect that they have agreed to set up a “study group” or two to
kick the diplomatic ball down the road.

The least irrelevant news was not good at all: The attendees agreed to
quadruple IMF funding to $1 trillion. Anything that bolsters IMF authority
cannot be good for countries forced to submit to its austerity plans. They
are designed to squeeze out more money to pay the world’s most predatory
creditors. So in practice this G-20 agreement means that the world’s
leading governments are responding to today’s financial crisis with
“planned shrinkage” for debtors – a 10 per cent cut in wage payments
in hapless Latvia, Hungary put on rations, and permanent debt peonage for
Iceland for starters. This is quite a contrast with the United States,
which is responding to the downturn with a giant Keynesian deficit spending
program, despite its glaringly unpayable $4 trillion debt to foreign
central banks.

So the international financial system’s double standard remains alive and
kicking – at least, kicking countries that are down or are falling.
Debtor countries must borrow a trillion from the IMF not to revive their
own faltering economies, not to pursue counter-cyclical policies to restore
market demand (that is only for creditor nations), but to pass on the IMF
“aid” to the poisonous banks that have made the irresponsible toxic
loans. (If these are toxic, who put in the toxin? To claim that it was all
the “natural” workings of the marketplace is to say that free markets
curdle and sicken. Is this what is happening?)

In Ukraine, a physical fight broke out in Parliament when the Party of
Regions blocked an agreement with the IMF calling for government budget
cutbacks. And rightly so! The IMF’s operating philosophy is the
destructive (indeed, toxic) belief that imposing a deeper depression with
more unemployment will reduce wage levels and living standards by enough to
pay debts already at unsustainable levels, thanks to the kleptocracy’s
tax “avoidance” and capital flight. The IMF trillion-dollar bailout is
actually for these large international banks, so that they will be able to
take their money and run. The problem is all being blamed on labor. That is
the neo-Malthusian spirit of today’s neoliberalism.

The main beneficiaries of IMF lending to Latvia, for example, have been the
Swedish banks that have spent the last decade funding that country’s real
estate bubble while doing nothing to help develop an industrial potential.
Latvia has paid for its imports by exporting its male labor of prime
working age, acting as a vehicle for Russian capital flight – and
borrowing mortgage purchase-money in foreign currency. To pay these debts
rather than default, Latvia will have to lower wages in its public sector
by 10 per cent -- and this with an economy already depressed and that the
government expects to shrink by 12 percent this year!

To save the banks from losing on their toxic mortgages, the IMF is bailing
them out, and directing the Latvian government to squeeze labor all the
more – and to charge for education rather than providing it freely. The
idea is for families to take a lifetime of debt not only to live inside
rather than on the sidewalk, but to get an education. Alcoholism rates are
rising, as they did in Russia under similar circumstances in Yeltsin’s
“Harvard Boys” kleptocracy after 1996.

The insolvency problem of the post-Soviet economies is not entirely the
IMF’s fault, to be sure. The European Community deserves a great deal of
blame. Instead of viewing the post-Soviet economies as wards to be brought
up to speed with Western Europe, the last thing the EU wanted was to
develop potential rivals. It wanted customers – not only for its exports,
but most of all for its loans. The Baltic States passed into the
Scandinavian sphere, while Austrian banks carved out financial spheres of
influence in Hungary (and lost their shirt on real estate loans, much as
the Habsburgs and Rothschilds did in times past). Iceland was
neoliberalized, largely in ripoffs organized by German banks and British
financial sharpies.

In fact, Iceland ( where I’m writing these lines) looks like a controlled
experiment – a very cruel one – as to how deeply an economy can be
“financialized” and how long its population will submit voluntarily to
predatory financial behavior. If the attack were military, it would spur a
more alert response. The trick is to keep the population from understanding
the financial dynamics at work and the underlying fraudulent character of
the debts with which it has been saddled – with the complicit aid of its
own local oligarchy.

In today’s world, the easiest way to obtain wealth by old-fashioned
“primitive accumulation” is by financial manipulation. This is the
essence of the Washington Consensus that the G-20 support, using the IMF in
its usual role as enforcer. The G-20’s announcement continues the U.S.
Treasury and Federal Reserve bank bailout over the past half-year. In a
nutshell, the solution to a debt crisis is to be yet more debt. If debtors
can’t pay out of what they are able to earn, lend them enough to keep
current on their carrying charges. Collateralize this with their property,
their public domain, their political autonomy – their democracy itself.
The aim is to keep the debt overhead in place. This can be done only by
keeping the volume of debts growing exponentially as they accrue interest,
which is added onto the loan. This is the “magic of compound interest.”
It is what turns entire economies into Ponzi schemes (or Madoff schemes as
they are now called).

This is “equilibrium”, neoliberal style. In addition to paying an
exorbitant basic interest rate, homeowners must pay a special 18 per cent
indexation charge on their debts to reflect the inflation rate (the
consumer price index) so that creditors will not lose the purchasing power
over consumer goods. Labor’s wages are not indexed, so defaults are
spreading and the country is being torn apart with bankruptcy, causing the
highest unemployment rate since the Great Depression. The IMF approves,
announcing that it can find no reason why homeowners cannot bear this

Meanwhile, democracy is being torn apart by a financial oligarchy, whose
interests have become increasingly cosmopolitan, looking at the economy as
prey to be looted. A new term is emerging: “codfish republic” (known
further south as banana republics). Many of Iceland’s billionaires these
days are choosing to join their Russian counterparts living in London –
and the Russian gangsters are reciprocating by visiting Iceland even in the
dead of winter, ostensibly merely to enjoy its warm volcanic Blue Lagoon,
or so the press is told.

The alternative is for debtor countries to suffer the same kind of economic
sanctions as Iran, Cuba and pre-invasion Iraq. Perhaps soon there will be
enough such economies to establish a common trading area among themselves,
possibly along with Venezuela, Colombia and Brazil. But as far as the G-20
is concerned, aid to Iceland and “doing the right thing” is simply a
bargaining chip in the international diplomatic game. Russia offered $4
billion aid to Iceland, but retracted it – presumably when Britain gave
it a plum as a tradeoff.

The IMF’s $1 trillion won’t help the post-Soviet and Third World debtor
countries pay their foreign debts, especially their real estate mortgages
denominated in foreign currency. This practice has violated the First Law
of national fiscal prudence: Only permit debts to be taken on that are in
the same currency as the income that is expected to be earned to pay them
off. If central bankers really sought to protect currency stability, they
would insist on this rule. Instead, they act as shills for the
international banks, as disloyal to the actual economic welfare of their
countries as expatriate oligarchs.

If you are going to recommend more of this consensus, then the only way to
sell it is to do what British Prime Minister Gordon Brown did at the
meetings: announce that “The Washington Consensus is dead.” (He might
have saved matters by saying “deadly,” but used the adjective instead
of the adverb.) But the G-20’s IMF bailout belies this claim. As Turkey
was closing out its loan last year, the IMF faced a world with no
customers. Nobody wanted to submit to its destructive
“conditionalities,” anti-labor policies designed to shrink the domestic
market in the false assumption that this “frees” more output for export
rather than being consumed at home. In reality, the effect of austerity is
to discourage domestic investment, and hence employment. Economies
submitting to the IMF’s “Washington Consensus” become more and more
dependent on their foreign creditors and suppliers.

The United States and Britain would never follow such conditionalities.
That is why the United States has not permitted an IMF advisory team to
write up its prescription for U.S. “stability.” The Washington
Consensus is only for export. (“Do as we say, not as we do.”) Mr.
Obama’s stimulus program is Keynesian, not an austerity plan, despite the
fact that the United States is the world’s largest debtor.

Here’s why the situation is unsustainable. What has enabled the Baltics
and other post-Soviet countries to cover the foreign-exchange costs of
their trade dependency and capital flight has been their real estate
bubble. The neoliberal idea of financial “equilibrium” has been to
watch “market forces” shorten lifespans, demolish what industrial
potential they had, increase emigration and disease, and run up an enormous
foreign debt with no visible way of earning the money to pay it off. This
real estate bubble credit was extractive and parasitic, not productive. Yet
the World Bank applauds the Baltics as a success story, ranking them near
the top of nations in terms of “ease of doing business.”

One practical fact trumps all the junk economics at work from the IMF and
G-20: Debts that can’t be paid, won’t be. Adam Smith observed in The
Wealth of Nations that no government in history had ever repaid its
national debt. Today, the same may be said of the public sector as well.
This poses a problem of just how these debtor countries are not going to
pay their foreign and domestic debts. How will they frame and politicize
their non-payment?

Creditors know that these debts can’t be paid. (I say this as former
balance-of-payments analyst of Third World debt for nearly fifty years,
from Chase Manhattan in the 1960s through the United Nations Institute for
Training and Research [UNITAR] in the 1970s, to Scudder Stevens & Clark in
1990, where I started the first Third World sovereign debt fund.) From the
creditor’s vantage point, knowing that the Great Neoliberal Bubble is
over, the trick is to deter debtor countries from acting to resolve its
collapse in a way that benefits themselves. The aim is to take as much as
possible – and to get the IMF and central banks to bail out the poisonous
banks that have loaded these countries down with toxic debt. Grab what you
can while the grabbing is good. And demand that debtors do what Latin
American and other third World countries have been doing since the 1980s:
sell off their public domain and public enterprises at distress prices.
That way, the international banks not only will get paid, they will get new
business lending to the buyers of the assets being privatized – on the
usual highly debt-leveraged terms!

The preferred tactic do deter debtor countries from acting in their
self-interest is to pound on the old morality, “A debt is a debt, and
must be paid.” That is what Herbert Hoover said of the Inter-Ally debts
owed by Britain, France and other allies of the United States in World War
I. These debts led to the Great Depression. “We loaned them the money,
didn’t we?” he said curtly.

Let’s look more closely at the moral argument. Living in New York, I find
an excellent model in that state’s Law of Fraudulent Conveyance. Enacted
when the state was still a colony, it was enacted in response British
speculators making loans to upstate farmers, and demanding payment just
before the harvest was in, when the debtors could not pay. The sharpies
then foreclosed, getting the land on the cheap. So New York’s Fraudulent
Conveyance law responded by establishing the legal principle that if a
creditor makes a loan without having a clear and reasonable understanding
of how the debtor can repay the money in the normal course of doing
business, the loan is deemed to be predatory and therefore null and void.

Just like the post-Soviet economies, Iceland was sold a neoliberal bill of
goods: a self-destructive Junk Economics. Just how moral a responsibility
– and perhaps even more important, how large a legal liability –should
fall on the IMF and World Bank, the U.S. Treasury and Bank of England whose
economies and banks benefited from this toxic Washington Consensus junk

For me, the moral principle is that no country should be subjected to debt
peonage. That is the opposite of democratic self-determination, after all
– and of Enlightenment moral philosophy that economic policies should
encourage economic growth, not shrinkage. They should promote greater
economic equality, not polarization between wealthy creditors and
impoverished debtors.

At issue is just what a “free market” is. It’s supposed to be one of
choice. Indebted countries lose discretionary choice over their economic
future. Their economic surplus is pledged abroad as financial tribute.
Without the overhead costs of a military occupation, they are relinquishing
their policy making from democratically elected political representatives
to bureaucratic financial managers, often foreign – the new Central
Planners in today’s neoliberal world. The best they can do, knowing the
game is over, is to hope that the other side doesn’t realize it – and
to do everything you can to confuse debtor countries while extracting as
much as they can as fast as they can.

Will the trick work? Maybe not. While the G-20 meetings were taking place,
Korea was refusing to let itself be victimized by the junk derivatives
contracts that foreign banks sold. Korea is claiming that bankers have a
fiduciary responsibility to their customers to recommend loans that help
them, not strip them of money. There is a tacit understanding (one that the
financial sector spends millions of dollars in public relations efforts to
undermine) that banking is a public utility. It is supposed to be a
handmaiden to growth – industrial and agricultural growth and
self-sufficiency – not predatory, extractive and hence anti-social. So
Korean victims of junk derivatives are suing the banks. As New York Times
commentator Floyd Norris described last week, the legal situation doesn’t
look good for the international banks. The home court always has an
advantage, and every nation is sovereign, able to pass whatever laws it
wants. (And as America’s case abundantly illustrates, judges need not be

The post-Soviet economies as well as Latin America must be watching
attentively the path that Korea is clearing through international courts.
The nightmare of international bankers is that these countries may bring
the equivalent of a class action suit against the international diplomatic
coercion mounted against these countries to lead them down the path of
financial and economic suicide. “The Seoul Central District Court
justified its decision [to admit the lawsuit] on the kind of logic that
would apply in the United States to a lawsuit involving an unsophisticated
individual investor and a fast-taking broker. The court pointed to
questions of whether the contract was a suitable investment for the
company, and to whether the risks were fully disclosed. The judgment also
referred to the legal concept of “changed circumstances,” concluding
that the parties had expected the exchange rate to remain stable, that the
change in circumstances was unforeseeable and that the losses would be too
great for the company to bear.”

As a second cause of action, Korea is claiming that the banks provided
creditor for other financial institutions to bet against the very contracts
the banks were selling Korea to “protect” its interests. So the banks
knew that what they were selling was a time bomb, and therefore seem guilty
of conflict of interest. Banks claim that they merely were selling goods
with no warranty to “informed individuals.” But the Korean parties in
question were no more informed than were Iceland’s debtors. If a bank
seeks to mislead and does not provide full disclosure, its victim cannot be
said to be “informed.” The proper English word is misinformed (viz.
Speaking of disinformation, an important issue concerns the extent to which
the big international banks may have conspired with domestic bankers and
corporate managers to loot their companies. This is what corporate raiders
have done for their junk-bond holders since the high tide of Drexel Burnham
and Michael Milken in the 1980s. This would make the banks partners in
crime. There needs to be an investigation of the lending pattern that these
banks engaged in – including their aid in organizing offshore money
laundering and tax evasion to their customers. No wonder the IMF and
British bankers are demanding that Iceland make up its mind in a hurry, and
commit itself to pay astronomical debts without taking the time to ask just
how they are to pay – and investigating the creditor banks’ overall
lending pattern!

Bearing the above in mind, I suppose I can tell Icelandic politicians that
I have good news regarding the fate of their country’s foreign and
domestic debt: No nation ever has paid its debts. As I noted above, this
means that the real question is not whether or not they will be paid, but
how not to pay these debts. How will the game play out – in the political
sphere, in popular ideology, and in the courts at home and abroad?

The question is whether Iceland will let bankruptcy tear apart its economy
slowly, transferring property from debtors to creditors, from Icelandic
citizens to foreigners, and from the public domain and national taxing
power to the international financial class. Or, will Iceland see where the
inherent mathematics of debt are leading, and draw the line? At what point
will it say “We won’t pay. These debts are immoral, uneconomic and
anti-democratic.” Do they want to continue the fight by Enlightenment and
Progressive Era social democracy, or the alternative – a lapse back into
neofeudal debt peonage?

This is the choice must be made. And it is largely a question of timing.
That’s what the financial sector plays for – time enough to transfer as
much property as it can into the hands of the banks and other investors.
That’s what the IMF advises debtor countries to do – except of course
for the United States as largest debtor of all. This is the underlying
lawless character of today’s post-bubble debts.

Michael Hudson is a former Wall Street economist. A Distinguished Research
Professor at University of Missouri, Kansas City (UMKC), he is the author
of many books, including Super Imperialism: The Economic Strategy of
American Empire (new ed., Pluto Press, 2002) He can be reached at