Bloody Monday September 15, 2008
Bloody Monday, September 15, 2008. The Dow Jones industrial average
(DJIA) declined by 504 points (4.4%), its largest drop since Sept.
17, 2001, when trading resumed after the 9/11 attacks.
The financial slide proceeded unabated, leading to an 800 point
decline of the Dow Jones in less than a week. The World's stock
markets are interconnected "around the clock" through instant
computer link-up. Volatile trading on Wall Street immediately "spills
over" into the European and Asian stock markets thereby rapidly
permeating the entire financial system.
The Most Serious Financial Crisis since the 1929 Wall Street Crash
When viewed in a global context, taking into account the instability
generated by speculative trade, the implications of this crisis are
The crisis, however, has by no means reached its climax. It could
potentially disrupt the very foundations of the international
monetary system. The repercussions on people's lives in America and
around the world are dramatic.
The crisis is not limited to the meltdown of financial markets, the
real economy at the national and international levels, its
institutions, its productive structures are also in jeopardy.
As stock values collapse, lifelong household savings are eroded, not
to mention pension funds.
The financial meltdown inevitably backlashes on consumer markets,
the housing market, and more broadly on the process of investment in
the production of goods and services.
The War on Lebanon and the Battle for Oil
War and the Economic Crisis
What is of utmost significance is that this plunge in stock market
values occurs at the crossroads of a major military adventure. The
global financial crisis is intimately related to the war.
A spiraling defense budget backlashes on the civilian sectors of
economic activity. The war economy has a direct bearing on fiscal
and monetary policy. Defense expenditure is in excess of $500
billion. A separate $70 billion is earmarked "to cover war costs
into the early months of a new administration. Those amounts
combined would represent the highest level of military spending
since the end of World War II (adjusted for inflation)." (Csmonitor.com
February 06, 2008).
"War is Good for Business": The powerful financial groups which
routinely manipulate stock markets, currency and commodity markets,
are also promoting the continuation and escalation of the Middle
East war. The financial crisis is related to the structure of US
public investment in the war economy versus the funding, through tax
dollars, of civilian social programs. "More broadly, this also
raises the issue of the role of the US Treasury and the US monetary
system, in relentlessly financing the military industrial complex
and the Middle East war at the expense of most sectors of civilian
economic activity." (See Michel Chossudovsky, The
Democrats endorse the "Global War on Terrorism": Obama "goes after"
Osama, Global Research, August 29, 2008)
The war is profit driven, financed through the massive Worldwide
expansion of dollar denominated debt. War and Globalization go hand
in hand. Wall Street, the oil companies and the defense contractors
have concurrent and overlapping interests. The oil companies are
behind the speculative surge in crude oil prices on the London
In turn, resulting from the military agenda, the US civilian
economy is in crisis as the nation's resources including tax dollars
are diverted into funding a multibillion Middle East war.
The Speculative Onslaught
The Worldwide scramble to appropriate wealth through "financial
manipulation" is the driving force behind this crisis. It is the
source of economic turmoil and social devastation.
What are the underlying causes? What prevails is a totally
deregulated financial environment characterized by extensive
The history of deregulation goes back to the beginnings of the
In the wake of the 1987 stock market meltdown, the US Treasury was
advised by Wall Street not to meddle in financial markets. Free of
government encroachment, the New York and Chicago exchanges were
invited to establish their own regulatory procedures.
The authority to regulate the market no longer rests with the State
but with stock market officials who directly serve the interests of
the institutional speculators.
The crisis on Wall Street is part of a process of financial
Since the 1987 crisis, a new era of intense financial rivalry has
Financial deregulation in the US has created an environment which
favors an unprecedented concentration of global financial power.
What we are dealing with is a major clash between competing
The financial meltdown is intimately related to the unregulated
growth of highly leveraged speculative operations.
Read: Euroasian corridor
The Hedge Funds
The hedge funds play a key role in this process of restructuring.
These speculative transactions (the panoply of derivatives, options,
futures, index funds, etc) often transacted through hedge funds
overshadow the workings of stock market transactions, and their
relationship to real economic activity.
The hedge funds are private investment funds, which manage the
pooled funds of wealthy investors. While they are often linked to
major financial institutions, they are totally unregulated. They
operate with a large pool of money capital, which is used to
undertake highly leveraged speculative transactions. The latter have
the characteristic that profits can be reaped when the market goes
up, but also when the market goes down.
A stock market meltdown can be highly profitable operation. With
foreknowledge and inside information, a collapse in market values
constitutes (through short-selling) a lucrative and money-spinning
opportunity, for a select category of powerful speculators who have
the ability to manipulate the market in the appropriate direction at
the appropriate time.
There are indications of a carefully engineered conspiracy to
trigger the collapse of several major financial institutions through
"Short selling" as well as the spreading of false rumors were used
as a strategy to trigger the collapse of selected stocks on Wall
Street including Lehman, Morgan Stanley and Goldman Sachs.
"Short sellers aim to profit from share declines, usually by
borrowing a stock, selling it and buying it back after its price has
decreased. In abusive “naked” short selling, the seller does not
borrow the stock and fails to deliver it to the buyer.
Some market participants say abusive short sellers have
contributed to the fall of companies such as Lehman Brothers by
forcing down share prices
John Mack, chief executive of Morgan Stanley, told employees in an
internal memo Wednesday: “What’s happening out there? It’s very
clear to me – we’re in the midst of a market controlled by fear and
rumours, and short sellers are driving our stock down.”' (Financial
Times, September 17, 2008)
Regulators have acknowledged that the collapse of Bear Stearns last March
was attributable to short selling. "Regulators have been looking
into a combination of short-sales and false rumors are part of the
Street Journal, September 18, 2008)
Merrill Lynch is bought, Lehman Brothers is pushed into bankruptcy. These
are not haphazard occurrences. They are the result of manipulation
by powerful rival financial institutions, using highly leveraged
speculative operations to achieve their objective, which consists in
either displacing or acquiring control over a rival financial
The current financial meltdown has nothing to do with market forces:
it is characterized by financial warfare between competing
The Market for Crude Oil
Leveraged speculative trade has pushed the price of crude oil to
exceedingly high levels, reaching a peak in July 2008. A turning
point was reached and the direction of speculative trade was rapidly
reversed, leading to a dramatic plunge in prices of crude oil (See
Those financial institutions and/or investors who have the ability
to manipulate the movement of crude oil prices, and had prior
knowledge and the ability to determine the timeline of the
speculative surge and subsequent collapse, were able to reap large
money profits both during the upward and downward movement of the
price of crude oil.
"The movement in global prices on the New York and Chicago
mercantile exchanges bears no relationship to the costs of producing
oil. The spiraling price of crude oil is not the result of a
shortage of oil. It is estimated that the cost of a barrel of oil in
the Middle East does not exceed 15 dollars. The costs of a barrel of
oil extracted from the tar sands of Alberta, Canada, is of the order
of $30." (For further details see, Michel
Chossudovsky, The Global Crisis: Food, Water and Fuel. Three
Fundamental Necessities of Life in Jeopardy, Global Research, July
Global Economic Restructuring
This economic crisis is the outcome of a process of macroeconomic
and financial restructuring initiated in the early 1980s. It is the
result of a policy framework: trade and financial sector reforms
under WTO auspices not to mention the imposition of the IMF deadly
macroeconomic reforms, commonly referred to as the structural
adjustment program. It is accompanied by the concurrent
impoverishment of large sectors of the world population.
The debt crisis of the early 1980s unleashed a wave of corporate
mergers, buy-outs and bankruptcies. These changes in turn paved the
way for the consolidation of a new generation of financiers
clustered around the large merchant banks, the institutional
investors, stock brokerage firms, large insurance companies, etc. In
this process, commercial banking functions have coalesced with those
of the investment banks and stock brokers leading to the
consolidation of a handful of global financial conglomerates.
The unregulated use of complex speculative instruments has provided
Wall Street with the means to extend its global financial empire.
The main thrust of this process does not consist in overseeing the
stock market per se. Rather it resides in controlling the lucrative
markets for speculative instruments --derivatives, options, futures,
hedges, etc.-- where the scope for manipulation and insider trade is
Criminalization of the State: ...
Wall Street's financial dominance was to be achieved through its
institutional control over the channels of speculative trade. This
control also provided, as in the case of the Asian crisis, the basis
for weakening the role of central banks, taking control over the
reigns of monetary policy, stock markets and currency markets. In
the 1997 Asian crisis alone, more than 100 billion dollars were
confiscated in a matter of months from the vaults of Asia's central
banks; similar speculative assaults were carried out in Russia in
1998 and in Brazil in 1999.
These events were followed by the dramatic bubble and bust of the
dot.com stocks, when the NASDAQ Composite index peaked at more than
5,000 in March 2000 and subsequently collapsed, triggering a chain
of panic selling. (see below)
NASDAQ (1994-2008). Dot.com peak
in March 2000
The 1999 Financial Services Modernization Act. 
In 1999, The
Financial Services Modernization Act (Gramm-Leach Bliley Act), was
adopted by the US Congress. In
the wake of lengthy negotiations, all regulatory restraints on Wall
Street's powerful banking conglomerates were revoked "with a stroke
of the pen".
Under the new rules ratified by the US Senate and approved by
President Clinton, commercial banks, brokerage firms, institutional
investors and insurance companies could freely invest in each others
businesses as well as fully integrate their financial operations.
The legislation repealed the Glass-Steagall Act of 1933, a pillar of
President Roosevelt's "New Deal" which was put in place in response
to the climate of corruption, financial manipulation and "insider
trading" which resulted in more than 5,000 bank failures in the
years following the 1929 Wall Street crash. (See Martin McLaughlin,
Clinton Republicans agree to deregulation of US banking system,
World Socialist Website, 1 November 1999).
The Merger Frenzy
Several mammoth bank mergers (including NationalBank Corp with Bank
America and Citibank with Travelers Group) were carried out and
approved by the Federal Reserve Board (in blatant violation of the
existing legislation) prior to the passage of the 1999 Financial
In the years prior to the inauguration of the Bush administration, a
process of intense financial rivalry had unfolded. The New World
Order largely under the dominion of American finance capital was
intent on dwarfing rival banking conglomerates in Western Europe and
Japan as well as sealing strategic alliances with a "select club" of
German and British banking giants.
The Shape of Things to Come
The bank mergers (carried out prior to the 1999 legislation in
violation of the Glass Steagall Act) were but "the tip of the
iceberg", the shape of things to come. The repeal of the Glass-Steagall
Act had created an environment which favored an unprecedented
concentration of global financial power.
Effective control over the entire US financial services industry had
been transferred to a handful of financial conglomerates.
What prevails today is a de
facto system of
private regulation. The evolving "global financial supermarket" is
to be overseen by the Wall Street giants. State level banks across
America were displaced or swallowed up by the financial giants,
leading to a deadly string of bank failures.
In turn, the supervisory powers of the Federal Reserve Board,
increasingly under the direct dominion of Wall Street, were
significantly weakened. The financial giants have the ability to
strangle local level businesses in the US and overshadow the real
economy. In fact, due to the lack of competition, the 1999
legislation, which was an initiative of Senator Phil Gramm, also
entitled the financial services giants (bypassing the Federal
Reserve Board and acting in tacit collusion with one another) to set
the structure of interest rates as they please:
"Despite impending danger signals, the 1999 legislation seems to
totally disregard the history of stock market failures since the
onset of the "Asian crisis" in mid-1997. The economic and social
repercussions in an integrated Worldwide financial system, --not
to mention the risks of a global financial meltdown resulting
from the absence of financial regulation-- are far more serious
today  than during the years following the 1929 Wall
Street crash. (Michel Chossudovsky, unpublished notes on the
1999 Financial Services Modernization Act, Legislation, November
Global Financial Architecture
The Financial Services Modernization Act should not be viewed in
isolation as a domestic procedure, limited to the US financial
The impacts of the legislation extended well beyond the borders of
the US financial system. The institutional changes which it brought
about, including the concentration and centralization of power in
the hands of a small number of financial giants, largely contributed
to Wall Street's unswerving quest for global financial domination.
The Worldwide scramble to appropriate wealth through "financial
manipulation" was the driving force behind this restructuring of the
global financial architecture of which the 1999 US legislation was
an integral part, setting the pattern of financial reform in
different parts of the World.
While the 1999 Legislation does not in itself break down the
barriers to capital movements, in practice it empowers Wall Street's
key players to enter the financial services markets of developing
countries and consolidate a hegemonic position in global banking,
overshadowing and ultimately destabilizing financial systems in
Asia, Latin America and Eastern Europe...
The International Monetary Fund (IMF) and The World Trade
Google Chrome, Google’s Browser Project
Financial deregulation in the US exerted a decisive influence in "setting
the pace" of global financial reform under the auspices of the IMF
and the World Trade Organization (WTO). The 1999 Legislation was
part of a global financial agenda, consisting in deregulating
capital movements, liberalizing domestic banking and capital markets
Worldwide under WTO auspices and opening up national financial
services markets to the global financial conglomerates
The legislation was implemented alongside the concurrent reshaping
of the global trade and financial architecture under the WTO agenda.
Under the GATS, developing countries have committed themselves to
full liberalization of financial services. In other words, national
governments, which are already controlled by their external
creditors, would be unable to deflect the Wall Street giants from
entering and swallowing up national banks and financial institutions.
In conjunction with the provisions of the Financial Services
Agreement and the GATS, the 1999 banking legislation adopted in the
US empowered a handful of banking conglomerates with the ability of
destabilizing the domestic financial landscape of developing
The sweeping deregulation of US banking imparted unprecedented
powers to Wall Street's financial conglomerates to acquire and take
over banking institutions all over the World.
The tendency was towards a Worldwide financial supermarket
controlled by a handful of global financial institutions which
penetrate and permeate the fabric of national economies.
Two major agreements (negotiated under the WTO) contributed to "entrenching
the rights" of the global banks" in international law, tantamount (according
to critics) to granting "fundamental rights" to the banks which
override those contained in national constitutions. The provisions
of both the General Agreement on Trade in Services (GATS) and the
Financial Services Agreement (FTA) formally break down remaining
impediments to the movement of capital meaning that Bank of America
or Citigroup can go wherever they please, triggering the bankruptcy
of national banks and financial institutions.
Moreover, with the support of the IMF, the Wall Street conglomerates
and their European and Japanese partners reinforced and consolidated
their role as the World's major creditor institutions, routinely
underwriting the public debt, overseeing the conduct of State
budgetary policy, issuing syndicated loans to troubled industrial
corporations, overseeing the privatization of State corporations
which have been put on the auction block in the context of an IMF
bailout agreement, etc.
Financial Warfare: The Powers of Deception
The weapons used on Wall Street are prior
knowledge and inside
information, the ability
to manipulate with the capacity to predict results, the spreading of
misleading or false information on economic occurrences and market
trends. These various
procedures are best described as the "powers
of deception", which financial institutions routinely use to
The art of deception is also directed against their banking
competitors, who are betting in the derivatives and futures markets,
in stocks, currencies and commodities.
Those who have access to privileged information (political,
intelligence, military, scientific, etc.) will invariably have the
upper hand in the conduct of these highly leveraged speculative
transactions, which are the source of tremendous financial gains.
The CIA has its own financial institutions on Wall Street.
In turn the corridors of private banking and offshore banking,
enable financial institutions to transfer their profits at ease,
from one location to another. This procedure is also used as a
safety net which protects the interests of key financial actors
including CEOs, major shareholders, etc of troubled financial
institutions. Large amounts of money can be moved out at an
opportune moment, prior to the company's demise on the stock market.
(e.g. Lehman, Merrill Lynch and AIG).
The Federal Reserve Bank of New York and its powerful stakeholders
have "inside information" on the conduct of US monetary policy. They
are thereby in a position to predict outcomes and hedge their bets
in highly leveraged operations on the futures and derivatives
markets. They are in an obvious conflict of interest because their
prior knowledge of particular decisions by the Federal Reserve Board
enables them as private banking institutions to make multibillion
Links to US intelligence, to the CIA, Homeland Security, to the
Pentagon are crucial in the conduct of speculative trade, since it
allows the speculators to predict events, through prior knowledge of
foreign policy and/or national security decisions which directly
affect financial markets. An example: the put options on airline
stocks in the days preceding the 9/11 attacks.
An internal war within the financial system is unfolding.
Lehman Bros goes bankrupt, Merrill Lynch is bought up...
Mortgage giants Fannie Mae and Freddie Mac are taken over by the
Bear Stearns collapses, America's largest insurance company AIG's
share collapse from $22.19 on September 9, to less than $4.00 at the
close of trading on September 16, a decline of more than 80 percent
of its value.
Goldman Sachs together with JP Morgan Chase are negotiating with
the Treasury to arrange for a $85 billion secured loan to AIG, which
would be financed by the Federal Reserve Bank of New York.
Who picks up the pieces? What lies ahead?
The process of mergers and acquisitions is likely to proceed to new
heights leading to an unprecedented centralization of financial
power, with Bank of America, JP Morgan Chase and the Federal Reserve
Bank of New York playing a dominant role.
The meltdown will be conducive to the demise of numerous banking
and financial institutions, which will either be driven out of the
financial landscape altogether or acquired by the financial giants.
Bank of America is slated to purchase Merrill Lynch, leading to the
formation of the world's largest financial institution, clashing
with Citigroup and JP Morgan Chase. It should be noted that while
Citigroup and JP Morgan Chase are competing institutions, they are
nonetheless entwined through intermarriage between the Rockefeller
and Stillman families.
Bank of America in the last two decades has developed into a
financial giant through a series of mergers and acquisitions. In
2004, Bank of America acquired FleetBoston Financial, in 2005 it
purchases credit card giant MBNA and in 2007 it acquires LaSalle
Bank Corporation and Corporate Finance from the Dutch bank ABN AMRO.
And on September 14, 2008, Bank of America announced its intention
to acquire Merrill Lynch for $50 billion.
What we are dealing with is a clash between a handful of major
financial institutions, which have developed through mergers and
acquisitions into Worldwide financial giants.
The financial meltdown on Wall Street largely benefits Bank
of America and JP
Morgan Chase, which is part of the Rockefeller empire, at the
expense of Lehman Brothers, Merrill Lynch, Goldman Sachs and Morgan
Stanley. Lehman Brothers filed for Chapter 11 bankruptcy on Bloody
Monday, September 15. Lehman's assets are of the order of $639
Citigroup Inc., declined 15 percent to $15.24 for the
steepest drop since July 2002. [Sept 15]
American Express Co., the biggest U.S. credit card
company by purchases, fell 8.9 percent to $35.48. [Sept 15]
Goldman Sachs fell 12 percent, the most since April
2000, to $135.50. The decline was the result of short
Morgan Stanley, the
biggest U.S. securities firm other than Goldman Sachs, fell
14 percent to $32.19." The decline was the result of short
selling. [Sept 15]
(See Bloomberg, Sept 16, 2008)
In 2000, J.P. Morgan merged with Chase Manhattan, leading to the
integration of J.P. Morgan, Chase, Chemical and Manufacturers
Hanover into a single financial entity. Bear Stearns was acquired in
2008 by JP Morgan Chase following its collapse. This banking empire
controlled by the Rockefeller family has assets of more than 1.6
With assets of $1.7 trillion, Citigroup's future remains undecided.
It is facing serious financial difficulties which could lead it into
bankruptcy. Citigroup share prices have in recent months collapsed
alongside those of Fannie Mae. The Lehman debacle has precipitated a
further decline of Citigroup stock prices.
It is the trustee "for unsecured creditors who are owed some $155
billion by Lehman Brothers", but according to Citgroup statements
they "have little or no exposure to the failed investment bank."
What this means is that the collapse of Lehman will lead to massive
loan default in relation to the portfolios of Citigroup and NY
Mellon clients, namely client banking institutions as well as
1. This section relied on a series of unpublished notes, on the 1999
Financial Services Modernization Act, Legislation, which I wrote in
United States' Largest Banks
(in millions of U.S. dollars)
Name (city, state)
Citigroup (New York, N.Y.)
Bank of America Corp. (Charlotte, N.C.)
J. P. Morgan Chase & Company (Columbus,
Wachovia Corp. (Charlotte, N.C.)
Taunus Corp. (New York, N.Y.)
Wells Fargo & Company (San Fransisco,
HSBC North America Inc. (Prospect Heights,
U.S. Bancorp (Minneapolis, Minn.)
Bank of the New York Mellon Corp. (New
Suntrust, Inc. (Atlanta, Ga.)
Citizens Financial Group, Inc. (Providence,
National City Bank (Cleveland, Ohio)
State Street Corp. (Boston, MA)
Capital One Financial Corp. (McLean, Va.)
Regions Financial Corp. (Birmingham,
PNC Financial Services Group, Inc.
BB&T Corp. (Winston-Salem, N.C.)
TD Bank North, INC. (Portland, Maine)
Fifth Third Bankcorp (Cincinatti, Ohio)
Keycorp (Cleveland, Ohio)
Northern Trust Corp. (Chicago, Ill.)
Bancwest Corp. (Honolulu, Hawaii)
Harris Financial Corp. (Wilmington, Del.)
Comerica Incorporated (Dallas, Tex.)
M&T Bank Corp. (Buffalo, N.Y.)
Marshall & Ilsley Corp. (Milwaukee, Wis.)
BBVA USA Bancshares, Inc. (The Woodlands,
Unionbancal Corporation (San Fransisco,
Huntington Bancshares, Inc. (Columbus,
Zions Bancorporation (Salt Lake City,
NOTE: As of May 30, 2008.
Reserve System, National Information Center.
The Globalization of Poverty and the New World Order -
by Michel Chossudovsky
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this expanded edition of Chossudovsky’s international best-seller,
the author outlines the contours of a New World Order which feeds on
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Michel Chossudovsky is
Professor of Economics at the University of Ottawa and Director of
the Centre for Research on Globalization (CRG), which hosts the
critically acclaimed website www.globalresearch.ca .
He is a contributor to the Encyclopedia Britannica. His writings
have been translated into more than 20 languages.
Published in 12 languages. More than 100,000 copies sold Worldwide.
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