Today's Stories

September 20 / 21, 2008

Michael Hudson
America's Own Kleptocracy

Pam Martens
The Wall Street Model: Unintelligent Design

Lila Rajiva
Putting Lipstick on an AIG

Richard Rhames
A Bailout to Nowhere

Bill and Kathleen Christison
The Making of Recent U.S. Middle East Policies: a New Study of Neocon Influence

Robert Fantina
Republicans and Subpoenas: Never the Twain Shall Meet

Heidi Walters
Hung Up on Route 36: an 18-Wheeler and a Nuclear Cask

Anthony Papa
Imprisoned Voters and the Elections

Dave Zirin
Leave Josh Howard Alone

September 19, 2008

Steven T. Banko
McCain's Passion Play

Mike Whitney
The Point of No Return

Michael Hudson
The Dow Jones' Wonderfully Cheesy Addition

William Kaufman
Shattering the Glass-Steagall Act: the Bi-Partisan Origins of the Financial Crisis

Brenda Norrell
The Fall of Lehman Bros.: Blowback for Black Mesa?

Keeanga-Yamatta Taylor
The New Rhetoric of Racism: Why Won't Obama Call It Out?

Clifton Ross
Bolivia: Cleaning Up the Bull Ring

Dave Lindorff
Hang On to Your Wallets: the Government's About to Rescue Us!

Cynthia McKinney
Seize the Time!

Susan Hurlich
Storm Survivors: a Dispatch from Cuba

Michael Donnelly
Let's Hand It All Over to the Democrats (They Helped Create This Mess)

Website of the Day
The Crisis Explained

September 18, 2008

Benjamin Dangl
The Machine Gun and the Meeting Table

Harvey Wasserman
The Senate's Drill, Drill, Drill Scam

Susan Abulhawa
The Lobby Has Spoken: Biden and Israel

Robert Weissman
After the Fall: the Financial Re-Regulatory Agenda

Anne-Marie McManus
McCain's Cinderella: the Fetishization of Sarah Palin

Corey D. B. Walker
The Poverty of 21st Century Progressivism

William S. Lind
Senator O'Bush: Why Obama is Wrong on Iran and Afghanistan

Ron Jacobs
Washington's False Logic of Torture

Dave Lindorff
American and China: Joined at the Hip

Binoy Kampmark
How Damien Hirst Got Away With It

Website of the Day
An Invisible Army

September 17, 2008

Stephen Conn
Palin and the Politics of Big Oil

Forrest Hylton
Reactionary Rampage in Bolivia

Patrick Cockburn
Petraeus Leaves Iraq

Gregory Elich
Inside North Korea

Ralph Nader
How the U.S. Auto Industry Wrecked Itself

Franklin Lamb
The Palestinians of Shabra-Shatila

Pam Martens
The Gang's All Here: Bush, McCain and the Old Iran/Contra Team

Dave Lindorff
The End of the Blue Chip Economy

Peter Morici
The Damage Deepens

Stanley Heller
The Killing of Count Folke Bernadotte

Douglas Valentine
Rambling David Foster Wallace

Website of the Day
Free Cindy McCain!

September 16, 2008

Paul Craig Roberts
US Economy: Rudderless and Reeling from Direct Hits

Tiphaine Dickson
Citizen Palin: Why Sarah Palin Quoted Westbrook Pegler

Stan Goff
America is Now Rome: an Open Letter to Christian Troops in Iraq and Afghanistan

Uri Avnery
Tzipi's Choice

Michael Winship
Lipstick on Polar Bears

Jeff Halper
Warehousing Palestinians

Patrick Irelan
Bolivia Versus the Empire

Oscar Gonzalez
Who's Dumber? Ike's Refugees or Wall Street's?

Binoy Kampmark
Cheney and His Records

Fatemeh Keshavarz
Muslims are at Peace with You

Sen. Russ Feingold
Restoring the Rule of Law

Website of the Day
The Next Great Rock Band?

September 15, 2008

Mike Whitney
The Tumbrils Roll at Dawn

Peter Morici
Toxic Lehman

Patrick Cockburn
Take Another Look at the Surge

Charles R. Larson
The Maverick Has No Clothes

Jonathan Cook
The Expulsion of Palestinians from Jaffa

Nikolas Kozloff
Racist Rhetoric in Bolivia

Roger Burbach
Morales Confronts the Insurrection: Bolivia and the Echoes of Allende

Helen Redmond
Where's the Health Care Bailout?

David Michael Green
The Democrats Do Poland

David Macaray
The Boeing Strike

Ralph Nader
Remembering Peter Camejo

Website of the Day
The Ballad of Sarah Palin

September 13 / 14, 2008

Alexander Cockburn
Panic!

Jeffrey St. Clair
Inside Dirk Kempthorne's Closet

Wajahat Ali
Playing with the Constitution

Robert Fantina
Cheney Scales New Heights of Hypocrisy

Marcus Rediker
Notes on a Visit to the Favelas of Medellín, Colombia

Richard Neville
The Baby Killers

Ed Gaffney
Breaking the Siege of Gaza

Carla Blank
Neglecting a Grand Old Lady

P. Sainath
The Almighty and the U.S. Elections

Lee Sustar
Working Harder; Falling Further Behind

Joshua Frank
Liberalism and Its Bounds

M. Junaid Levesque-Alam
The Guantanamoized Age

Dennis Loo
Shock and Awe Comes Home to Roost

Zach Zill
Squeezed Out in New York City

Omar Barghouti
So You Think You Can Dance? Israeli Profiling of African-American Dancers

Bill Quigley
Social Justice Quiz, 2008

Andy Worthington
Bush's Bitter Legacy

Stephen Dunifer
Free Radio: Liberating the Commons

Seth Sandronsky
Bailing Out Big Auto

David Yearsley
Portabella's Bach: Grim, Trite and Incredibly Boring

Patrick B. Barr
Obama's Punchless Campaign

Rannie Amiri
Tasting Ramadan

Niranjan Ramakrishnan
The Flight Not Taken

Richard Rhames
What, Me Reason?

Manuel Garcia, Jr.
The Large Hadron Collider Powers Up

Poets' Basement
Deer Cloud and Buknatski

Website of the Weekend
Wasilla Valley PTA?

September 12, 2008

Nikolas Kozloff
The Next Cuban Missile Crisis?

Michael Hudson
More Dangerous Than the A-Bomb? The Chicago School's Record of Infamy

Lloyd Miller
Palin and Alaskan Native and Tribal Rights: a Dismal Record

Steve Breyman
Georgia in NATO?

Maria Rivera
Cuba After Gustav and Ike: an Eyewitness Account

Jonathan Cook
Israel and the Dark Arts

Ayesha Ijaz Khan
U.S. Designs on Pakistan

M. Shahid Alam
The Mendacity of Missed Opportunities

Robert Weissman
Executive Pay and the "Market Economy"

Tanya Golash-Boza / David Brunsma
Immigration Raids Must Be Stopped

Website of the Day
Know Your Rights

September 11, 2008

Noam Chomsky
Towards a Second Cold War?

Sharon Smith
Afghanistan: You Call This a Good War?

Ron Jacobs
Palinomics: She Ain't No Working Class Hero

Marjorie Cohn
God, Guns and Oil: A Palin Theocracy?

Mike Whitney
Cheney in the Caucasus

Jeffery R. Webber
Bolivia: a Coup in the Making?

Paul Cantor
The Other 9/11

Peter Morici
The Surging Trade Deficit

Ray McGovern
Iran's Road Less Traveled to Nukes

Linn Washington, Jr.
Screening Mumia: The Suppression of Dissent in America

Website of the Day
Palin (Michael) for President!

September 10, 2008

Paul Craig Roberts
A Temporary Respite from Permanent Decline

Conn Hallinan
The Return of U.S. Death Squads

Ralph Nader
Who Needs Regulations When You've Got a Golden Parachute?

Peter Morici
Can the Bailout Work?

Joanne Mariner
The Horrendous Case of Aafia Siddiqui

Laura Tate Kagel /
Jen Marlowe
The Pending Execution of Troy Davis: a Case for Clemency

Chuck Spinney
Incestuous Amplification and the Madness of King George

Dave Lindorff
Lazy Thinking and Prejudice

Scott Campbell
Where Now for Oaxaca's Social Movement?

Paul Farmer
Haiti and the Hurricanes

Anne Kilkenny
Letters from Wasilla: the Sarah Palin I Know

Website of the Day
Democrats and Zombies

September 9, 2008

Michael Colby
The Obama Poll Drop

Chellis Glendinning
Retorno a 1968: From Berkeley to Mexico City

Vijay Prashad
Losing Game

Jeffery R. Webber/
George Ciccariello-Maher
Venezuela From Below

David Michael Green
Country Last

Brian J. Foley
The New Face of Republican Power

John Ross
Mexican Flag Wrap

Pierre M. Sprey /
Winslow T. Wheeler
Joint Strike Fighter: Another Defense Acquisition Disaster

Nicole Colson
Sami Al-Arian's Long Road to Freedom

Marc Gardner
California's Anti-Homosexual Laws are Alive and Unwell

William S. Lind
The Baltic States and Russia: Toy Armies or Accomodation?

Website of the Day
All Hope Rests with Piper Palin

September 8, 2008

Mike Whitney
An Interview with Michael Hudson on the Worsening Debt Crisis

Tariq Ali
The Godfather as President

Pam Martens
The Man Who Vetted Palin

Bill Quigley
The Weary Road Home: Displaced Poor Continue to Return to New Orleans

Malini Johar Schueller /
Ed White
Not About Me: Obamamania, Racial Porn-fest and Palinama

Robert Jensen
Pop Music and 9/11

Uri Avnery
Lonely Rider

Win McCormack
Palin Family Values

Howard Lisnoff
How Far From a Police State?

Maria C. Khoury
Taybeh Oktoberfest in Palestine

Website of the Day
Scaring Students from Voting in Virginia

September 6 / 7, 2008

Alexander Cockburn
Sarah Palin and the Good Book

Jeffrey St. Clair
That Dam Senator: A River Ran Through Him

Linn Washington, Jr.
The GOP Excluded Black-Owned Businesses from Contracts at St. Paul Convention

Patrick Cockburn
Did Bush Spies Monitor Iraqi Allies?

Gary Leupp
The September 3 Attack on Pakistan: a Precursor to More War Crimes?

Nancy Kurshan
CHI-town Lowdown: Memories of 1968

William Blum
Has Obama Already Lost?

Michael Winship
The St. Paul Police vs. the Independent Media

Fred Gardner
Joe Biden, Drug Warrior

Nikolas Kozloff
Sarah Palin and the Wal-Mart Moms: the Cultural Packaging of VP Candidates

Wajahat Ali
The Cryptkeeper and His Pitbull: the Past and Future of the GOP

Robert Fantina
Change Agents?

Karyn Strickler
Palin by Comparison: Sarah and the Hillary Voters

David Yearsley
What Their Fanfares Told Us About the Candidates

Richard Rhames
Bad Campaign Moon Rising

James L. Secor
Bandwagon Politics

Missy Beattie
Missy for Vice POTUS

Eric Patton
Baseless in Obamaland

Ben Terrall
Haiti and the Washington Consensus

Thom Rutledge
Mr. Magoo and the Kind Stranger: a Serious Political Problem

Dan Bacher
Arnold and the Manufactured Drought

David Macaray
Is Union Democracy at Risk?

Jane Stillwater
The Admiral's Child: a Psychological Reason for McCain's Flip Flops

Grady Harper
Should Hunting Really be High on Our Priority List?

Poets' Basement
Wolff, Payne and Holt

Website of the Weekend
We'll See Your Sarah Palin and Raise You With Maria McKee

September 5, 2008

Elizabeth Walters
Old Fears, New Worries in Louisiana

Bill Quigley
Gustav's Path of Destruction

Alan Farago
Nothing Means Anything: The Fantasy of John and Sarah

Dave Lindorff
The Things They Left Behind (Including McCain's First Wife)

Ira Glunts
A Lesson Before Lying: How Republicans Solved Sarah Palin's Jewish Problem

Peter Morici
The Big Slump

Deepak Tripathi
Politics, Morality and the GOP: John McCain as John Major?

Manuel Garcia, Jr.
The Energy of a Hurricane

Michael Donnelly
Change. God. POW.: a Summary of McCain's Big Speech

Martha Rosenberg
Free to Good Home, SUVs

Website of the Day
Sarah Palin's Air War: On Wolves and Bears

September 4, 2008

Jeffrey St. Clair
The Real McCain

Paul Craig Roberts
Who is Wrecking America?

Ron Jacobs
The Perishing Republicans, the RNC 9 and the Twin Cities Cops

M. Junaid Levesque-Alam
The Soft Surge

Andy Worthington
Rendered to Egypt for Torture

Osama Dawoud
How I Lost My Fulbright Scholarship

Stephen Lendman
Katrina Redux: the Militarization of New Orleans

Fidel Castro
Hurricane as Nuclear Strike

Website of the Day
Is McCain Palin's Bitch?

September 3, 2008

Patrick Cockburn
The Fake U.S. Victory in Iraq

Sen. Mike Gravel
Good Luck, Sarah!

Vijay Prashad
The Indian Left and the Indo-US Nuclear Deal

Nikolas Kozloff
Palin, Hunting and the American Psyche

Ralph Nader
Repeal Taft-Hartley

Howard Lisnoff
Forty Years in the Streets (And They're Still Beating Up Journalists)

Steve Early / Cal Winslow
Can SEIU Members Exorcize the Purple Shades of Jackie Presser?

Shepherd Bliss
A Field Report From Slow Food Nation

Bill Quigley
Living in the Car After Gustav

Website of the Day
Growing Up Okie: an Interview with Roxanne Dunbar-Ortiz

September 2, 2008

Marjorie Cohn
Raiding Democracy in St. Paul

Jonathan Cook
Palestinian Village Faces Army Reign of Terror

Robert Weitzel
Biden and Israel

Corey D. B. Walker
Where Do We Go From Here?

John Ross
The Kidnapping Boom in Mexico

Eric Walberg
Wag the Dog in Georgia

Judith Scherr
No Day in Court for Ronald Dauphin

Richard Morse
Haiti, 2008

B. R. Gowani
What If the Israel Lobby was the African-American Lobby?

Michael Greenberg
Loofah Day in Cleveland

Website of the Day
Thanks for the Memories!

September 1, 2008

Nikolas Kozloff
Making a Killing in Iraq: McCain and the Telecoms

C. G. Estabrook
The War Will Go On

Manuel Garcia, Jr.
Will a Russo-American Nuclear War Happen (Soon)?

David Macaray
An Elegy for Labor Day

B. R. Gowani
The Lobby as Juggernaut

Saul Landau
Real Gold Winners

Charles Orloski
Going Down to Hell's Cul-de-Sac

Gloria La Riva
Profit and Disaster in New Orleans

Website of the Day
Springsteen: Factory

August 30 / 31, 2008

Alexander Cockburn
Obama's Speech; McCain's Palinomy

Bill Quigley
Gustav is Coming

Jeffrey St. Clair
Valley Boy: The Rise and Fall of Richard Pombo

Andy Worthington
Shining a Light on the Dark Prison

Deepak Tripathi
The Race for the White House: Notes From a European Observer

Stanley Howard
A Prisoner's Tale of Abuse

Dave Lindorff
Troopergate in Alaska

Wajahat Ali
Palin on the Prowl: a Cougar for the PUMAs?

Robert Fantina
McCain and Palin

Josh Schlossberg
A Bias for Life: the Role of the Environmentalist

Benjamin Dangl
Beyond Voting

Missy Beattie
Stars, Stripes, War and Shame

Howard Lisnoff
Better Cuba Than Florida?

Suzan Mazur
Rethinking Evolution with Stuart Newman

Rev. Jim Rigby
What Would Jesus Ride to the Conventions?

David Yearsely
Katy Perry Meets Mozart

Serge Quadruppani
Italy's Years of Lead

B.R. Gowani
What If the Israeli Lobby Was the Islamic Lobby?

Richard Rhames
Empty Political Calories

Poets' Basement
Holt, Davies, Corsale and Landau

Website of the Day
Return of the Druids

August 29, 2008

Mike Whitney
How the Chicago Boys Wrecked the Economy

Brian Cloughley
Resurgent Russia

David Ker Thomson
Jacko and Me: Dispatches From Fifty

Joanne Mariner
A UK Window on CIA Abuses

Neve Gordon
The Ordeal of Sahar Vardi, Refusenik

Chris Genovali
Of Whales and Off-Shore Drilling

Ron Jacobs
What's a Godfearing Country to Do?

Michael Donnelly
Honest Abe in Denver?

August 28, 2008

Judy Gumbo Albert
The Battle of Chicago

Paul Cantor
Who Killed Victor Jara?

Saul Landau /
Farrah Hassen
Axis of Evil Defeats Neocons

Andy Worthington
Clearing Out Guantánamo

Ben Terrall
Return to Port-au-Prince

Leonard Peltier
Message to Obama: Symbolism Alone Will Not Bring Change

Niranjan Ramakrishnan
The Miasma of Bi-Partisanship

Donna J. Volatile
The Obama Construct

Website of the Day
Ishmael Reed, Alice Walker and Maya Angelou on the Meaning of Obama

August 27, 2008

Anthony DiMaggio
The Myths of Joe Biden

Jordan Flaherty
Three Years After Katrina

Ralph Nader
The Politics of Avoidance

Melissa Checker
Carbon Offsets, More Harm Than Good?

Bob Sommer
Blaming the Sixties

Cynthia McKinney
How the Democrats Helped Bush Hijack the Country

Ali Khan
Pakistan's Flawed Presidency

M. Junaid Levesque-Alam
The Only Good Muslim is the Anti-Muslim

Dave Lindorff
Strip-Search Nation

David Macaray
Labor's Hard Lessons

Website of the Day
Stagnant Income in an Eroding Economy

August 26, 2008

Patrick Cockburn
The Big Questions About Iraq

Michael D. Yates
Obama and the Working Class

Paul Craig Roberts
Is War With Russia on the Agenda?

Andy Worthington
The Guantánamo Suicide Report

Rev. Jesse L. Jackson
Obama's Promised Land?

Huwaida Arraf
Sailing into Gaza

Joseph Grosso
Back to the Future: New York's Housing Crisis

Sheldon Richman
What About the Ossetians?

Binoy Kampmark
Impasse at Singur

Website of the Day
Taser Bait in Denver

August 25, 2008

Patrick Cockburn
US Out of Iraq by "2011"

Bill Quigley
Katrina, the Pain Index

Jonathan Cook
Israeli Outposts Seal Death of Palestinian State

James McEnteer
Death by Paranoia

Uri Avnery
The Devil's Hoof

Will Potter
The State Deparment's Green Scare Wing

Robert Jensen
Technological Fundamentalism

Stephen Lendman
Reinventing the Evil Empire

Wajahat Ali
Biden His Time

Carl Finamore
The Future of Trade Unions in China

Website of the Day
Don't Blow Up the Mountain, Boys

August 23 / 4, 2008

Alexander Cockburn
"Change," "Hope"...Why They Must be Talking About Joe Biden!

Jeffrey St. Clair
Killing Salmon with Paul O'Neill: Power, Profits and the Future of the Columbia River

Patty O'Grady
John McCain in a New Context: Why the Senator is No War Hero

Nicole Colson
Obama and Big Corn

Steve Conn
Obama and the Mining Cartel

Deepak Trapathi
Pakistan in Uncertain Times

Robert Fantina
Once Upon a Time in America: a McCain Administration

Jonathan M. Feldman
Obamanomics: Does the Left Have Anything to Say?

Joshua Frank
Targeting Pelosi (and the War Machine): an Interview with Cindy Sheehan

Osama Qashoo
Sailing to Gaza

Howard Lisnoff
The Long Silence: American Jews and the Palestinians

David Michael Green
Sen. McShame and the Wreckage: John McCain Discovers America

Dave Lindorff
Why Not Let the Republicans Deal With This Mess?

Christopher Brauchli
A Banner Month for Passports

Alan Farago
Who Crippled the Government?

Michael Winship
Cash Register Conventions

Richard Rhames
Vlad the Derailer: Can Putin Save America From Itself?

David Rosen
The Culture Wars Are Over: But Culture Warriors Are Still Terrorizing America

Patrick B. Barr
Don't Try to Tame the Lightning Bolt

Jamie Newlin
Western Turf Wars: the Politics of Public Lands Ranching

Poets' Basement
Glendinning, McEnteer and Bonner

Website of the Weekend
Cafe Reconcile, New Orleans

August 22, 2008

Boris Kagarlitsky
Fallout from the Georgian War

Laura Carlsen
Obama and Latin America: Change or Continuity?

Bob Barr
No War for Georgia

Marwan Bishara
From Russia with Love: Putin Hits Georgia, Bloodies Bush

Peter Morici
Is the Fed Still a Central Bank?

Manuel Garcia, Jr.
The Big Heat

Charles Mostoller
The Battle for the Amazon

Sumbul Ali-Karamali
Obama is Not a Muslim: But Would It Be So Terrible If He Were?

Keith Rosenthal
Standing Up to Union-Bashing

John F. Miglio
The Devolution of the Baby Boom Generation

Website of the Day
Fire Sale in the Markets!

August 21, 2008

Allan J. Lichtman
Is Georgia 2008 a Repeat of Hungary 1956?

Dave Lindorff Loserville: How Obama Blew It

Ralph Nader
The Problem with Problem Banks

Joanne Mariner
The Military Commissions, So Far

Wajahat Ali
Descent Into Chaos: an Interview with Ahmed Rashid on Pakistan, Afghanistan and the Taliban

Ron Jacobs
Georgia and Historical Farce

Rostam Purzal
The Left and Iran

Anthony Papa
Unlocking the Power of Art to Counter Injustice

Website of the Day
Rocky Mountain Way

August 20, 2008

Michael Neumann
Russia and Georgia: Proportion and Distortion

Ray McGovern
Musharraf Out Like Nixon

Eric Walberg
Georgia's Ossetian Debacle

Fidaa Abed
Blocking a Gazan's Path to San Diego

Daniel Haack
The Pentagon's Most Prolific Pundit

Mike Whitney
Greenback Surges, Euro Shrivels

Website of the Day
Hands Off South Africa's Centre for Civil Society

August 19, 2008

Paul Craig Roberts
Are You Ready for Nuclear War?

Deepak Tripathi
A New Age of Torture

Marwan Bishara
The Politics of Evil in the US Elections

Saul Landau
Baseball Diplomacy or Just Baseball?

William S. Lind
Leave Georgia Alone, George

Martha Rosenberg
Whole Foods and Other Food Offenders

James Brittain
The Road to Tyranny in Colombia

Pratyush Chandra
Krugman's Great Illusion

David Macaray
AFSCME's Strike Against the University of California

Website of the Day
McCain Plagiarizing Solzhenitsyn

Weekend Edition
September 20 / 21, 2008

The Market and the Terminator Machines

America's Own Kleptocracy

By MICHAEL HUDSON

Nobody expected industrial capitalism to end up like this. Nobody even saw it evolving in this direction. I’m afraid this failing is not unusual among futurists: The natural tendency is to think about how economies can best grow and evolve, not how it can be untracked. But an unforeseen road always seems to appear, and there goes society goes off on a tangent.

What a two weeks! On Sunday, September 7, the Treasury took on the $5.3 trillion mortgage exposure of Fannie Mae and Freddie Mac, whose heads already had been removed for accounting fraud. On Monday, September 15, Lehman Brothers went bankrupt, when prospective Wall Street buyers couldn’t gain any sense of reality from its financial books. On Wednesday the Federal Reserve agreed to make good for at least $85 billion in the just-pretend “insured” winnings owed to financial gamblers who bet on computer-driven trades in junk mortgages and bought counter-party coverage from the A.I.G. (the American International Group, whose head Maurice Greenberg already had been removed a few years back for accounting fraud). But it is Friday, September 19, that will go down as a turning point in American history. The White House committed at least half a trillion dollars more to re-inflate real estate prices in an attempt to support the market value junk mortgages – mortgages issued far beyond the ability of debtors to pay and far above the going market price of the collateral being pledged.

These billions of dollars were devoted to keeping a dream alive – the accounting fictions written down by companies that had entered an unreal world based on false accounting that nearly everyone in the financial sector knew to be fake. But they played along with buying and selling packaged mortgage junk because that was where the money was. Even after markets collapse, fund managers who steered clear were blamed for not playing the game while it was going. I have friends on Wall Street who were fired for not matching the returns that their compatriots were making. And the biggest returns were to be made in trading in the economy’s largest financial asset – mortgage debt. The mortgages packaged, owned or guaranteed by Fannie and Freddie alone exceeded the entire U.S. national debt – the cumulative deficits run up by the American Government since the nation won the Revolutionary War!

This gives an idea of just how large the bailout has been – and where the government’s (or at least the Republicans’) priorities lie! Instead of waking up the economy to reality, the government has thrown all its resources to promote the unreal dream that debts can be paid – if not by the debtors themselves, then by the government – “taxpayers,” as the euphemism goes.

Overnight, the U.S. Treasury and Federal Reserve have radically changed the character of American capitalism. It is nothing less than a coup d’êtat for the class that FDR called “banksters.” What has happened in the past two weeks threatens to change the coming century – irreversibly, if they can get away with it. This is the largest and most inequitable transfer of wealth since the land giveaways to the railroad barons during the Civil War era.

Even so, there seems little sign that it even may end the free-market patter talk by financial insiders who have managed to avert public oversight by appointing non-regulators to the major regulatory agencies – and thus created the mess that Treasury Secretary Henry Paulson now says threatens the bank deposits and jobs of all Americans. What he really means, of course, are simply the largest Republican campaign contributors (and to be fair, also the largest contributors to Democratic candidates on key financial committees).

A kleptocratic class has taken over the economy to replace industrial capitalism. Franklin Roosevelt’s term “banksters” says it all in a nutshell. The economy has been captured – by an alien power, but not the usual suspects. Not socialism, workers or “big government,” nor by industrial monopolists or even by the great banking families. Certainly not by Freemasons and Illuminati. (It would be wonderful if there were indeed some group operating with centuries of wisdom behind them, so at least someone had a plan.) Rather, the banksters have made a compact with an alien power –not Communists, Russians, Asians or Arabs. Not humans at all. The group’s cadre is a new breed of machine. It may sound like the Terminator movies, but computerized Machines have indeed taken over the world – at least, the White House’s world.

Here is how they did it. A.I.G. wrote insurance policies of all sorts of that people and businesses need: home and property insurance, livestock insurance, even aircraft leasing. These highly profitable businesses were not the problem. (They therefore will probably be sold off to pay the company’s bad gambles.) A.I.G.’s downfall came from the $450 billion – almost half a trillion – dollars it was on the hook for as a result of guaranteeing hedge-fund counterparty insurance. In other words, if two parties played the zero-sum game of betting against each other as to whether the dollar would rise or fall against sterling or the euro, or if they insured a mortgage portfolio of junk mortgages to make sure that they would get paid, they would pay a teeny tiny commission to A.I.G. for a policy promising to pay if, say, the $11 trillion U.S. mortgage market should “stumble” or if losers placing trillions of dollars in bets on foreign exchange derivatives, stock or bond derivatives should somehow find themselves in a position that so many Las Vegas patrons are in, and be unable to come up with the cash to cover their losses.

A.I.G. collected billions of dollars on such policies. And thanks to the fact that insurance companies are a Milton Friedman paradise – not regulated by the Federal Reserve or any other nation-wide agency, and hence able to get the proverbial free lunch without government oversight – writing such policies was done by computer printouts, and the company collected massive fees and commissions without putting in much capital of its own. This is what is called “self-regulation.” It is how the Invisible Hand is supposed to work.

It turned out, inevitably, that some of the financial institutions that made billion-dollar gambles – usually in the form of a thousand million-dollar gambles in the course of a few minutes or so, to be precise – couldn’t pay up. These gambles all occur in microseconds, at strokes of a keyboard almost without human interference. In that sense it is not unlike alien pod people taking over. But in this case they are robot-like machines, hence the analogy I drew above with the Terminators.

Their sudden rise to dominance is as unforeseen as an invasion from Mars. The nearest analogy is the invasion of the Harvard Boys, World Bank and U.S.A.I.D. to Russia and other post-Soviet economies after the Soviet Union was dissolved, pressing free-market giveaways to create national kleptocracies. It should be a worrying sign to Americans that these kleptocrats have become the Founding Fortunes of their respective countries. We should bear in mind Aristotle’s observation that democracy is the political stage immediately preceding oligarchy.

The financial machines that placed the trades that bankrupted A.I.G. were programmed by financial managers to act with the speed of light in conducting electronic trades often lasting only a few seconds each, millions of times a day. Only a machine could calculate mathematical probabilities factored in regarding the squiggles up and down of interest rates, exchange rates and stock and bonds prices – and prices for packaged mortgages. And the latter packages increasingly took the form of junk mortgages, pretending to be payable debts but in reality empty flak.

The machines employed by hedge funds in particular have given a new meaning to Casino Capitalism. That was long applied to speculators playing the stock market. It meant making cross bets, lose some and win some – and getting the government to bail out the non-payers. The twist in the past two weeks’ turmoil is that the winners cannot collect on their bets unless the government pays the debts that the losers are unable to cover with their own money.

One would have thought that this requires some degree of control over the government. The activity probably never should have been licensed. In fact, it never was licensed, and hence nor regulated. But there seemed to be a good reason: Investors in hedge funds had to sign a paper saying that they were rich enough to afford to lose their money on this financial gambling. Your average mom and pop investors were not permitted to participate. Despite the high rewards that millions of tiny trades generated, they were deemed too risky for the uninitiated lacking trust funds to play with.

A hedge fund does not make money by producing goods and services. It does not advance funds to buy real assets or even lend money. It borrows huge sums to leverage its bet with nearly free credit. Its managers are not industrial engineers but mathematicians who program computers to make cross-bets or “straddles” on which way interest rates, currency exchange rates, stock or bond prices may move – or the prices for packaged bank mortgages. The packaged loans may be sound or they may be junk. It doesn’t matter. All that matters is making money in a marketplace where most trades last only a few seconds. What creates the gains is the price fibrillation – volatility.

This kind of transaction may make fortunes, but it is not “wealth creation” in the form that most people recognize. Before the Black-Scholes mathematical formula for calculating the value of hedge bets, this kind of put and call option was too costly to provide much profit to anyone except the brokerage houses. But the combination of powerful computers and the “innovation” of almost free credit and free access to the financial gambling tables has made possible a frenetic back-and-forth maneuvering.

So why has the Treasury found it necessary to enter this picture at all? Why should these gamblers be bailed out, if they had enough to lose without having to become public wards by going on welfare? Hedge fund trading was limited to the very rich, for investment banks and other institutional investors. But it became one of the easiest ways to make money, loaning funds at interest for people to pay out of their computer-driven cross-trades. And almost as fast as it was made, this revenue was paid out in commissions, salaries and annual bonuses reminiscent of America’s Gilded Age in the years prior to World War I – years before the income tax was introduced in 1913. The remarkable thing about all this money was that its recipients didn’t even have to pay normal income tax on it. The government let them call it “capital gains,” which meant that the money was taxed at only a fraction of the rate that incomes were taxed.

The pretense, of course, is that all this frenetic trading creates real “capital.” It certainly does not do so in the classical 19th-century concept of capital. The term has been decoupled from producing goods and services, hiring wage labor or from financing innovation. It is as much “capital” as the right to conduct a lottery and collect the winnings from the hopes of the losers. But then, casinos from Las Vegas to riverboats have become a major “growth industry,” muddying the language of capital, growth and wealth itself.

For the gaming tables to be closed and the money paid out, the losers must be bailed out – Fannie Mae, Freddie Mac, A.I.G. and who knows what to come? This is the only way to solve the problem of how companies that already have paid out their revenue to their managers and stockholders instead of putting it in reserves are to collect their winnings from insolvent debtors and insurance companies. These losers also have paid out their income to their financial managers and insiders (along with the usual patriotic contributions to the political candidates on the key committees in charge of deciding the nation’s financial structuring).

This has to be orchestrated well in advance. It is necessary to buy politicians and give them a plausible cover story (or at least a well-crafted set of poll-tested euphemisms) to explain to voters just why it was in the public interest to bail out gamblers. Good rhetoric is needed to explain why the government should let them go into a casino and let them keep all their winnings while using public funds to make good on the losses of their counterparties.

What happened on September 18-19 took years of preparation, capped by a faux ideology crafted by public-relations think tanks to be broadcast under emergency conditions to panic Congress – and voters – right before the presidential election. This seems to be our September election surprise. Under staged crisis conditions, Pres. Bush and Treasury Secretary Paulson are now calling for the country to come together in a War on Defaulting Homeowners. This is said to be the only hope to “save the system.” (What system is this? Not industrial capitalism, or even banking as we know it.) The largest transformation of America’s financial system since the Great Depression has been compressed into just two weeks, starting with the doubling of America’s national debt on September 7 with the nationalization of Fannie Mae and Freddie Mac. (My computer’s spellchecker will not permit me to use the euphemism “conservatorship” that Mr. Paulson applied to bailing out the Fannie Mae and Freddie Mac fraudsters.)

Economic theory used to explain that profits and interest were a return for calculated risk. But today, the name of the game is capital gains and computerized gambling on the direction of interest rates, foreign currencies and stock prices – and when bad bets are made, bailouts are the calculated economic return for campaign contributions. But this is not supposed to be the time to talk of such things. “We must act now to protect our nation’s economic health from serious risk,” intoned Pres. Bush on September 19. What he meant was that the White House must make the Republican Party’s largest group of campaign contributors whole – Wall Street, that is – by bailing out their bad gambles. “There will be ample opportunity to debate the origins of this problem. Now is the time to solve it.” In other words, don’t make this an election issue. “In our nation’s history there have been moments that require us to come together across party lines to address major challenges. This is such a moment.” Right before the presidential election! The same guff was heard earlier on Friday morning from Sec. Paulson: “Our economic health requires that we work together for prompt, bipartisan action.” The broadcasters said that half a trillion dollars was discussed for this day’s maneuverings.

Much of the blame should go to the Clinton Administration for leading the call to repeal Glass-Steagall in  1999, letting the banks merge with casinos. Or rather, the casinos have absorbed the banks. That is what has put the savings of Americans at risk.

But does this really mean that the only solution is to re-inflate the real estate market? The Paulson-Bernanke plan is to enable the banks to sell off the homes of five million home mortgage debtors faced with default or foreclosure this year! Homeowners with “exploding adjustable-rate mortgages” will lose their homes, but the Fed will pump enough credit into the mortgage-lending agencies to enable new buyers to go deeply enough into debt to take the junk mortgages off the hands of the gamblers who presently own them. Time for another financial and real estate bubble to bail out the junk mortgage lenders and packagers.

America has entered into a new war – a War to Save Computerized Derivative Traders. Like the Iraq war, it is based largely on fictions and entered into under seeming emergency conditions – to which the solution has little relation to the underlying cause of the problems. On financial security grounds the government is to make good on the collateralized debt obligations packaged (CDOs) that Warren Buffett has called “weapons of mass financial destruction.”

Hardly by surprise, this giveaway of public money is being handled by the same group that warned the country so piously about weapons of mass destruction in Iraq. Pres. Bush and Treasury Secretary Paulson have piously announced that this is no time for partisan disagreements over this shift of public policy to favor creditors rather than debtors. There is no time to make the biggest bailout in election history an election issue. Not an appropriate time to debate whether it is a good thing to re-inflate housing prices to a level that will continue to oblige new home buyers to go so deeply into debt that they must pay some 40 percent of their take-home pay on housing.

Remember when President Bush and Alan Greenspan informed the American people that there was no money left to pay Social Security (not to mention Medicare) because at some future date (a decade from now? 20 years? 40 years?) the system might run a deficit of what now seems to be merely a trivial trillion dollars spread over many, many years. The moral was that if we can’t figure out how to pay, let’s plow the program under right now.

Mr. Bush and Greenspan did have a helpful solution, of course. The Treasury could turn Social Security and medical insurance money over to Bear Stearns, Lehman Brothers and their brethren to invest at the “magic of compound interest.”

What would have happened to U.S. Social Security had this been done? Perhaps we should view the past two weeks’ events as having assigned to Wall Street gamblers all the money that has been set aside since the Greenspan Commission in 1983 shifted the tax burden onto FICA wage withholding. It is not retirees who are being rescued, but the Wall Street investors who signed papers saying that they could afford to lose their money. The Republican slogan this November should be “Gambling insurance, not health insurance.”

This is not how the much-vaunted Road to Serfdom was mapped out to be. Frederick Hayek and his Chicago Boys insisted that serfdom would come from government planning and regulation. This view turned upside down the classical and Progressive Era reformers who depicted government as acting as society’s brain, its steering mechanism to shape markets – and free them from income without playing a necessary role in production. The theory of democracy rested on the assumption that voters would act in their self-interest. Market reformers made a kindred happy assumption that consumers, savers and investors would promote economic growth by acting with full knowledge and understanding of the dynamics at work. But the Invisible Hand turned out to be accounting fraud, junk mortgage lending, insider dealing and a failure to relate the soaring debt overhead to the ability of debtors to pay – all of this mess seemingly legitimized by computerized trading models, and now blessed by the Treasury.

Michael Hudson is a former Wall Street economist specializing in the balance of payments and real estate at the Chase Manhattan Bank (now JPMorgan Chase & Co.), Arthur Anderson, and later at the Hudson Institute (no relation). In 1990 he helped established the world’s first sovereign debt fund for Scudder Stevens & Clark. Dr. Hudson was Dennis Kucinich’s Chief Economic Advisor in the recent Democratic primary presidential campaign, and has advised the U.S., Canadian, Mexican and Latvian governments, as well as the United Nations Institute for Training and Research (UNITAR). 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 via his website, mh@michael-hudson.com

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