Friday, December 30, 2011
Thursday, December 29, 2011
By William Davis, MD LE Magazine September 2007
Cholesterol is Not Everything
Judging from the constant onslaught of drug company advertising, you’d think that a cure for coronary heart disease has been discovered, and that the cure is cholesterol-lowering statin drugs. Existing data show that this is clearly not the case. Risk for heart attack is certainly reduced, usually by about 25–30%, but not eliminated. Thus, statin drugs could only prevent about one in every three heart attacks.39
This is because there are many other causes for heart disease beyond LDL: low HDL, increased triglycerides, diabetes, inflammation, and hidden causes of heart disease like lipoprotein(a). But how about vitamin D? The scientific information so far is hugely promising.
“I foresee an increasing number of studies linking vitamin D deficiency to most of the diseases of modern civilization. Furthermore, I foresee a backlash by many in organized medicine who simply cannot accept the possibility that such a simple and cheap compound can have such health benefits. I foresee lawsuits against practicing physicians who don’t accept the importance of vitamin D. For example, researchers at Harvard just announced that the five year survival for patients with early stage, non-small cell carcinoma of the lung was almost three times better in those with evidence of the highest vitamin D levels compared to those with the lowest. Five-year survival for those with the highest levels approached 80%! I predict similar claims will be filed against cardiologists for letting heart disease patients die vitamin D-deficient as the evidence mounts that vitamin D prevents and treats heart disease.”
—Dr. John Cannell The Vitamin D Council www.vitamindcouncil.com
Optimizing Vitamin D Levels
Given the vast benefits of vitamin D for cardiovascular and whole-body health, ensuring optimal vitamin D status is an essential part of every wellness program. The best way to know your vitamin D status is to have your doctor measure the blood level of 25-hydroxyvitamin D (not to be confused with 1,25-dihydroxyvitamin D). The minimum level of 25-hydroxyvitamin D required for health is controversial, and can also vary by the method used for measurement. However, most authorities have argued that a rock-bottom minimum 25-hydroxyvitamin D level of 30 ng/mL, or 75 nmol/L, is the point at which phenomena associated with deficiency begin to be corrected.40 Noted vitamin D authority Dr. Reinhold Vieth of the University of Toronto has argued that a blood level of 40 ng/mL (100 nmol/L) should be achieved.7 Dr. Michael Holick of the University of Boston proposes that serum level of 25-hydroxyvitamin D is in the range of 30-50 ng/mL (75-125 nmol/L).34Another study showed that elderly men and women were at an increased risk of bone loss when their levels of 25-hydroxyvitamin D fell below 45 ng/mL (110 nmol/L), suggesting that maintaining 25-hydroxyvitamin D above 45 ng/mL may be crucial for all aging adults.41 If vitamin D levels are low, consider supplementation to help reverse a vitamin D deficiency. Re-checking your vitamin D status after several months of supplementation is prudent to ensure that a deficiency has been averted.
New studies are showing that the dose required to achieve a healthy blood level of vitamin D is somewhere in the neighborhood of 1,000–4,000 IU per day in the absence of sun exposure.42 That’s more than five times the Institute of Medicine’s recommended adequate intake, though still less than obtained through several minutes of midday sun exposure. Vitamin D toxicity does not usually develop unless vitamin D intake exceeds 10,000 units per day or blood levels exceed 80 ng/mL (200 nmol/L).1,7 In fact, some scientists believe that the tolerable upper intake level of vitamin D intake should be revised from 2,000 IU/day to 10,000 IU/day.43
DOES VITAMIN D REVERSE CORONARY DISEASE?
While the scientific community is still debating whether vitamin D can help reverse coronary disease, my clinical experience indicates that vitamin D is a crucial part of a coronary plaque reversal program.
My clinic’s program of reversing heart disease involves a multi-faceted approach. First, we document the quantity of coronary atherosclerotic plaque through a CT heart scan. Then, we achieve the following goals:
My clinic’s program of reversing heart disease involves a multi-faceted approach. First, we document the quantity of coronary atherosclerotic plaque through a CT heart scan. Then, we achieve the following goals:
- Low density lipoprotein (LDL): 60 mg/dL or less (but not less than 40 mg/dL)
- High-density lipoprotein (HDL): 60 mg/dL or greater
- Triglycerides: 60 mg/dL or less Normal blood pressure: (<130/80 mmHg)
- Normal blood sugar: (<100 mg/dL)
My clinic also advises that patients consume fish oil at a minimum dose of 4000 mg/day (containing 1200 mg of eicosapentenic acid and docosahexaenoic acid), along with L-arginine (3000–6000 mg twice per day) to support endothelial health.
Lastly, we raise blood levels of 25-hydroxyvitamin D to 50 ng/mL (125 nmol/L) using vitamin D supplementation. Most people (in the northern Midwest) require 2000–4000 IU per day in winter, and half that dose in summer. Some require as much as 8000 IU per day, while a rare person requires only 1000 IU per day. Using this approach, we now have an impressive track record of reducing CT heart scan scores. Reductions of 20-30% in the first year are not uncommon.
If you live in the northern US (states like Massachusetts, New York, Pennsylvania, Wisconsin, Michigan, the Dakotas, etc.), Canada, or northern Europe, there’s a high likelihood that you’re deficient. If you’re like most Americans, you get sun sporadically during summer weekends, and virtually none from September to April. Dark-skinned individuals are at even greater risk of vitamin D deficiency, since melanin pigment in skin acts as a natural sunscreen. Dark-skinned individuals require around five times longer sun exposure to obtain the same amount of vitamin D as fair-skinned persons. African-Americans, for this reason, are among the most vitamin D deficient of all.
Ten minutes of sun exposure in midday, wearing shorts and t-shirt to expose skin surface area, will provide most Caucasians plentiful vitamin D during the summer. This limited time minimizes the risk of skin cancer. (If you are especially fair-skinned, you might do fine with somewhat less.) If you are in the sun any longer than this, you should apply a sunscreen (which blocks both sunlight as well as vitamin D activation in the skin).
However, if sun exposure is sporadic, supplementation is crucial to obtain the full benefit of vitamin D’s panel of biologic effects. Vitamin D3 (cholecalciferol) is preferable to vitamin D2 (ergocalciferol), as it is absorbed 70% better than D2 and it more effectively increases blood levels.44 Many vitamin D supplements contain only 400 IU per capsule or tablet. More and more manufacturers are producing 1,000 and 5,000 IU capsules to suit the growing demand for higher dose vitamin D supplements. In northern climates or sun-deprived lifestyles, 1,000 IU per day is a reasonable starting dose. You may wish to consult your physician and check your blood level of vitamin D to determine if even higher doses of vitamin D are appropriate for you.
To obtain a dose of 1,000–2,000 IU or more per day, a specific vitamin D supplement will be required, rather than a combination supplement with calcium or other nutrients. Note the quantity of vitamin D (if any) included with your other supplements, such as calcium and multivitamins (usually 200–400 IU), and reduce the amount of specific vitamin D accordingly (to equal your total desired dose).
Supplementing with very high doses of vitamin D over an extended period of time can lead to elevated blood calcium levels, which can adversely affect nerve and muscle function, and can contribute to kidney stones.45-48 Individuals using large doses of vitamin D should be carefully monitored for signs and symptoms of vitamin D toxicity such as poor appetite, constipation, weakness, heart arrhythmias, and elevated blood levels of cholesterol, calcium, or liver enzymes.49 Individuals with hypercalcemia (high blood calcium levels) should not take vitamin D.49 If you have kidney disease or if you use digoxin or other cardiac glycoside drugs, consult a physician before using supplemental vitamin D.4
“Personally, I take 5,000 units in the late fall, winter, and early spring, and then I vary doses the rest of the time depending on sun exposure. I also have my 25-hydroxyvitamin D level checked twice a year, once in the early spring and again in the early fall. My 10-year old daughter takes 2,000 units a day in the winter months, and my three year old takes 1,000 units a day in the winter.”
—Dr. John Cannell The Vitamin D Council www.vitamindcouncil.com
The understanding of vitamin D is rapidly evolving. Compelling and substantial evidence suggests that most people—particularly those living in northern climates or with limited sun exposure—are substantially deficient. Replenishing vitamin D can help normalize blood pressure, support healthy blood sugar, improve insulin resistance, and dampen inflammation—all processes that contribute to heart disease. Growing evidence is adding support to the idea that vitamin D deficiency contributes to coronary risk, and that replacement of vitamin D can reduce risk. The vitamin D in dairy products and foods fails to provide sufficient quantities for the majority of Americans. In the absence of substantial sun exposure every day, vitamin D replacement is required in order to achieve adequate blood levels of this essential nutrient.
Dr. William Davis is an author and cardiologist practicing in Milwaukee, Wisconsin. He is author of the book, Track your Plaque:
The only heart disease prevention program that shows you how touse the new heart scans to detect, track, and control coronary plaque. He can be contacted through www.trackyourplaque.com.
If you have any questions or wish to discuss any aspect of this article, please call one of our Health Advisors at 1-800 226-2370.
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6. Wortsman J, Matsuoka LY, Chen TC, Lu Z, Holick MF. Decreased bioavailability of vitamin D in obesity. Am J Clin Nutr. 2000 Sep;72(3):690-3.
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8. Heaney RP, Davies KM, Chen TC, Holick MF, Barger-Lux MJ. Human serum 25-hydroxycholecalciferol response to extended oral dosing with cholecalciferol. Am J Clin Nutr. 2003 Jan;77(1):204-10.
9. Holick MF, Siris ES, Binkley N, et al. Prevalence of Vitamin D inadequacy among postmenopausal North American women receiving osteoporosis therapy. J Clin Endocrinol Metab. 2005 Jun;90(6):3215-24.
10. Webb AR, Kline L, Holick MF. Influence of season and latitude on the cutaneous synthesis of vitamin D3: exposure to winter sunlight in Boston and Edmonton will not promote vitamin D3 synthesis in human skin. J Clin Endocrinol Metab. 1988 Aug;67(2):373-8.
11. Grimes DS, Hindle E, Dyer T. Sunlight, cholesterol and coronary heart disease. QJM. 1996 Aug;89(8):579-89.
12. Scragg R, Jackson R, Holdaway IM, Lim T, Beaglehole R. Myocardial infarction is inversely associated with plasma 25-hydroxyvitamin D3 levels: a community-based study. Int J Epidemiol. 1990 Sep;19(3):559-63.
13. Spencer FA, Goldberg RJ, Becker RC, Gore JM. Seasonal distribution of acute myocardial infarction in the second National Registry of Myocardial Infarction. J Am Coll Cardiol. 1998 May;31(6):1226-33.
14. Ku CS, Yang CY, Lee WJ, et al. Absence of a seasonal variation in myocardial infarction onset in a region without temperature extremes. Cardiology. 1998 May;89(4):277-82.
15. Pfeifer M, Begerow B, Minne HW, Nachtigall D, Hansen C. Effects of a short-term vitamin D(3) and calcium supplementation on blood pressure and parathyroid hormone levels in elderly women. J Clin Endocrinol Metab. 2001 Apr;86(4):1633-7.
16. Lind L, Hanni A, Lithell H, et al. Vitamin D is related to blood pressure and other cardiovascular risk factors in middle-aged men. Am J Hypertens. 1995 Sep;8(9):894-901.
17. Timms PM, Mannan N, Hitman GA, et al. Circulating MMP9, vitamin D and variation in the TIMP-1 response with VDR genotype: mechanisms for inflammatory damage in chronic disorders? QJM. 2002 Dec;95(12):787-96.
18. Zittermann A. Vitamin D and disease prevention with special reference to cardiovascular disease. Prog Biophys Mol Biol. 2006 Sep;92(1):39-48.
19. Achinger SG, Ayus JC. The role of vitamin D in left ventricular hypertrophy and cardiac function. Kidney Int Suppl. 2005 Jun;(95):S37-S42.
20. London GM, Guerin AP, Verbeke FH, et al. Mineral metabolism and arterial functions in end-stage renal disease: potential role of 25-hydroxyvitamin D deficiency. J Am Soc Nephrol. 2007 Feb;18(2):613-20.
21. Zittermann A, Schleithoff SS, Tenderich G, Berthold HK, Korfer R, Stehle P. Low vitamin D status: a contributing factor in the pathogenesis of congestive heart failure? J Am Coll Cardiol. 2003 Jan 1;41(1):105–12.
22. Martins D, Wolf M, Pan D, et al. Prevalence of cardiovascular risk factors and the serum levels of 25-hydroxyvitamin d in the United States: data from the third national health and nutrition examination survey. Arch Intern Med. 2007 Jun 11;167(11):1159-65.
23. Kuller LH, Matthews KA, Meilahn EN. Estrogens and women’s health: interrelation of coronary heart disease, breast cancer and osteoporosis. J Steroid Biochem Mol Biol. 2000 Nov 30;74(5):297-309.
24. Tankó LB, Christiansen C, Cox DA, Geiger MJ, McNabb MA, Cummings SR. Relationship between osteoporosis and cardiovascular disease in postmenopausal women. J Bone Miner Res. 2005 Nov;20(11):1912-20.
25 Barengolts EI, Berman M, Kukreja SC, et al. Osteoporosis and coronary atherosclerosis in asymptomatic postmenopausal women. Calcif Tissue Int. 1998 Mar;62(3):209-13.
26. Watson KE, Abrolat ML, Malone LL, et al. Active serum vitamin D levels are inversely correlated with coronary calcification. Circulation. 1997 Sep 16;96(6):1755-60.
27. Zittermann A, Schleithoff SS, Koerfer R. Vitamin D and vascular calcification. Curr Opin Lipidol. 2007 Feb;18(1):41-6.
28. Targher G, Bertolini L, Padovani R, et al. Serum 25-hydroxyvitamin D3 concentrations and carotid artery intima-media thickness among type 2 diabetic patients. Clin Endocrinol (Oxf). 2006 Nov;65(5):593-7.
29. Levin A, Li YC. Vitamin D and its analogues: do they protect against cardiovascular disease in patients with kidney disease? Kidney Int. 2005 Nov;68(5):1973-81.
30. Taskapan H, Ersoy FF, Passadakis PS, et al. Severe vitamin D deficiency in chronic renal failure patients on peritoneal dialysis. Clin Nephrol. 2006 Oct;66(4):247-55.
31. Shoji T, Shinohara K, Kimoto E, et al. Lower risk for cardiovascular mortality in oral 1alpha-hydroxy vitamin D3 users in a haemodialysis population. Nephrol Dial Transplant. 2004 Jan;19(1):179-84.
32. Li YC. Vitamin D regulation of the renin-angiotensin system. J Cell Biochem. 2003 Feb 1;88(2):327-31.
33. Lappe JM, Travers-Gustafson D, Davies KM, Recker RR, Heaney RP. Vitamin D and calcium supplementation reduces cancer risk: results of a randomized trial. Am J Clin Nutr. 2007 Jun;85(6):1586-91.
34. Holick MF. The role of vitamin D for bone health and fracture prevention. Curr Osteoporos Rep. 2006 Sep;4(3):96-102.
35. Bischoff-Ferrari HA. The 25-hydroxyvitamin D threshold for better health. J Steroid Biochem Mol Biol. 2007 Mar;103(3-5):614-9.
36. Ruohola JP, Laaksi I, Ylikomi T, et al. Association between serum 25(OH)D concentrations and bone stress fractures in Finnish young men. J Bone Miner Res. 2006 Sep;21(9):1483-8.
37. Hayes CE, Cantorna MT, DeLuca HF. Vitamin D and multiple sclerosis. Proc Soc Exp Biol Med. 1997 Oct;216(1):21-7.
38. Cannell JJ, Vieth R, Umhau JC, et al. Epidemic influenza and vitamin D. Epidemiol Infect. 2006 Dec;134(6):1129-40.
39. Davidson MH. Reducing residual risk for patients on statin therapy: the potential role of combination therapy. Am J Cardiol. 2005 Nov 7;96(9A):3K-13K.
40. Zittermann A. Vitamin D in preventive medicine: are we ignoring the evidence? Br J Nutr. 2003 May;89(5):552-72.
41. Dawson-Hughes B, Harris SS, Dallal GE. Plasma calcidiol, season, and serum parathyroid hormone concentrations in healthy elderly men and women. Am J Clin Nutr. 1997 Jan;65(1):67-71.
42. Vieth R, Chan PC, MacFarlane GD. Efficacy and safety of vitamin D3 intake exceeding the lowest observed adverse effect level. Am J Clin Nutr. 2001 Feb;73(2):288-94.
43. Hathcock JN, Shao A, Vieth R, Heaney R. Risk assessment for vitamin D. Am J Clin Nutr. 2007 Jan;85(1):6-18.
44. Trang HM, Cole DE, Rubin LA, et al. Evidence that vitamin D3 increases serum 25-hydroxyvitamin D more efficiently than does vitamin D2. Am J Clin Nutr. 1998 Oct;68(4):854-8.
45. Adams JS, Fernandez M, Gacad MA, et al. Vitamin D metabolite-mediated hypercalcemia and hypercalciuria patients with AIDS- and non-AIDS-associated lymphoma. Blood. 1989 Jan;73(1):235-9.
46. Beer TM, Myrthue A. Calcitriol in the treatment of prostate cancer. Anticancer Res. 2006 Jul;26(4A):2647-51.
47. Tonner DR, Schlechte JA. Neurologic complications of thyroid and parathyroid disease. Med Clin North Am. 1993 Jan;77(1):251-63.
48. Grases F, Costa-Bauza A, Prieto RM. Renal lithiasis and nutrition. Nutr J. 2006;5:23.
49. Available at: http://www.pdrhealth.com/drug_info/nmdrugprofiles/nutsupdrugs/vit_0265.shtml. Accessed June 19, 2007.
PLEASE NOTE THIS ARTICLE IS FROM Life Extension Magazine
Friday, December 16, 2011
Welcome to a new era of polarization as financial oligarchy replaces democratic government and reduces populations to debt peonage
by MICHAEL HUDSON
The easiest way to understand Europe’s financial crisis is to look at the solutions being proposed to resolve it. They are a banker’s dream, a grab bag of giveaways that few voters would be likely to approve in a democratic referendum. Bank strategists learned not to risk submitting their plans to democratic vote after Icelanders twice refused in 2010-11 to approve their government’s capitulation to pay Britain and the Netherlands for losses run up by badly regulated Icelandic banks operating abroad. Lacking such a referendum, mass demonstrations were the only way for Greek voters to register their opposition to the €50 billion in privatization sell-offs demanded by the European Central Bank (ECB) in autumn 2011.
The problem is that Greece lacks the ready money to redeem its debts and pay the interest charges. The ECB is demanding that it sell off public assets – land, water and sewer systems, ports and other assets in the public domain, and also cut back pensions and other payments to its population. The bottom 99% understandably are angry to be informed that the wealthiest layer of the population is largely responsible for the budget shortfall by stashing away a reported €45 billion of funds stashed away in Swiss banks alone. The idea of normal wage-earners being obliged to forfeit their pensions to pay for tax evaders – and for the general un-taxing of wealth since the regime of the colonels – makes most people understandably angry. For the ECB, EU and IMF “troika” to say that whatever the wealthy take, steal or evade paying must be made up by the population at large is not a politically neutral position. It comes down hard on the side of wealth that has been unfairly taken.
A democratic tax policy would reinstate progressive taxation on income and property, and would enforce its collection – with penalties for evasion. Ever since the 19th century, democratic reformers have sought to free economies from waste, corruption and “unearned income.” But the ECB troika is imposing a regressive tax – one that can be imposed only by turning government policy-making over to a set of unelected technocrats.
To call the administrators of so anti-democratic a policy “technocrats” seems to be a cynical scientific-sounding euphemism for financial lobbyists or bureaucrats deemed suitably tunnel-visioned to act as useful idiots on behalf of their sponsors. Their ideology is the same austerity philosophy that the IMF imposed on Third World debtors from the 1960s through the 1980s. Claiming to stabilize the balance of payments while introducing free markets, these officials sold off export sectors and basic infrastructure to creditor-nation buyers. The effect was to drive austerity-ridden economies even deeper into debt – to foreign bankers and their own domestic oligarchies.
This is the treadmill on which Eurozone social democracies are now being placed. Under the political umbrella of financial emergency, wages and living standards are to be scaled back and political power shifted from elected government to technocrats governing on behalf of large banks and financial institutions. Public-sector labor is to be privatized – and de-unionized, while Social Security, pension plans and health insurance are scaled back.
This is the basic playbook that corporate raiders follow when they empty out corporate pension plans to pay their financial backers in leveraged buyouts. It also is how the former Soviet Union’s economy was privatized after 1991, transferring public assets into the hands of kleptocrats, who worked with Western investment bankers to make the Russian and other stock exchanges the darlings of the global financial markets. Property taxes were scaled back while flat taxes were imposed on wages (a cumulative 59 percent in Latvia). Industry was dismantled as land and mineral rights were transferred to foreigners, economies driven into debt and skilled and unskilled labor alike was obliged to emigrate to find work.
Pretending to be committed to price stability and free markets, bankers inflated a real estate bubble on credit. Rental income was capitalized into bank loans and paid out as interest. This was enormously profitable for bankers, but it left the Baltics and much of Central Europe debt strapped and in negative equity by 2008. Neoliberals applaud their plunging wage levels and shrinking GDP as a success story, because these countries shifted the tax burden onto employment rather than property or finance. Governments bailed out banks at taxpayer expense.
It is axiomatic that the solution to any major social problem tends to create even larger problems – not always unintended! From the financial sector’s vantage point, the “solution” to the Eurozone crisis is to reverse the aims of the Progressive Era a century ago – what in 1936 John Maynard Keynes hopefully termed “euthanasia of the rentier”. The idea was to subordinate the banking system to serve the economy rather than the other way around. Instead, finance has become the new mode of warfare – less ostensibly bloody, but with the same objectives as the Viking invasions over a thousand years ago, and Europe’s subsequent colonial conquests: appropriation of land and natural resources, infrastructure and whatever other assets can provide a revenue stream. It was to capitalize and estimate such values, for instance, that William the Conqueror compiled the Domesday Book after 1066, a model of ECB and IMF-style calculations today.
This appropriation of the economic surplus to pay bankers is turning the traditional values of most Europeans upside down. Imposition of economic austerity, dismantling social spending, sell-offs of public assets, de-unionization of labor, falling wage levels, scaled-back pension plans and health care in countries subject to democratic rules requires convincing voters that there is no alternative. It is claimed that without a profitable banking sector (no matter how predatory) the economy will break down as bank losses on bad loans and gambles pull down the payments system. No regulatory agencies can help, no better tax policy, nothing except to turn over control to lobbyists to save banks from losing the financial claims they have built up.
What banks want is for the economic surplus to be paid out as interest, not used for rising living standards, public social spending or even for new capital investment. Research and development takes too long. Finance lives in the short run. This short-termism is self-defeating, yet it is presented as science. The alternative, voters are told, is the road to serfdom: interfering with the “free market” by financial regulation and even progressive taxation.
There is an alternative, of course. It is what European civilization from the 13th-century Schoolmen through the Enlightenment and the flowering of classical political economy sought to create: an economy free of unearned income, free of vested interests using special privileges for “rent extraction.” At the hands of the neoliberals, by contrast, a free market is one free for a tax-favored rentier class to extract interest, economic rent and monopoly prices.
Rentier interests present their behavior as efficient “wealth creation.” Business schools teach privatizers how to arrange bank loans and bond financing by pledging whatever they can charge for the public infrastructure services being sold by governments. The idea is to pay this revenue to banks and bondholders as interest, and then make a capital gain by raising access fees for roads and ports, water and sewer usage and other basic services. Governments are told that economies can be run more efficiently by dismantling public programs and selling off assets.
Never has the gap between pretended aim and actual effect been more hypocritical. Making interest payments (and even capital gains) tax-exempt deprives governments of revenue from the user fees they are relinquishing, increasing their budget deficits. And instead of promoting price stability (the ECB’s ostensible priority), privatization increases prices for infrastructure, housing and other costs of living and doing business by building in interest charges and other financial overhead – and much higher salaries for management. So it is merely a knee-jerk ideological claim that this policy is more efficient simply because privatizers do the borrowing rather than government.
There is no technological or economic need for Europe’s financial managers to impose depression on much of its population. But there is a great opportunity to gain for the banks that have gained control of ECB economic policy. Since the 1960s, balance-of-payments crises have provided opportunities for bankers and liquid investors to seize control of fiscal policy – to shift the tax burden onto labor and dismantle social spending in favor of subsidizing foreign investors and the financial sector. They gain from austerity policies that lower living standards and scale back social spending. A debt crisis enables the domestic financial elite and foreign bankers to indebt the rest of society, using their privilege of credit (or savings built up as a result of less progressive tax policies) as a lever to grab assets and reduce populations to a state of debt dependency.
The kind of warfare now engulfing Europe is thus more than just economic in scope. It threatens to become a historic dividing line between the past half-century’s epoch of hope and technological potential to a new era of polarization as a financial oligarchy replaces democratic governments and reduces populations to debt peonage.
For so bold an asset and power grab to succeed, it needs a crisis to suspend the normal political and democratic legislative processes that would oppose it. Political panic and anarchy create a vacuum into which grabbers can move quickly, using the rhetoric of financial deception and a junk economics to rationalize self-serving solutions by a false view of economic history – and in the case of today’s ECB, German history in particular.
* * *
Governments do not need to borrow from commercial bankers or other lenders. Ever since the Bank of England was founded in 1694, central banks have printed money to finance public spending. Bankers also create credit freely – when they make a loan and credit the customer’s account, in exchange for a promissory note bearing interest. Today, these banks can borrow reserves from the government’s central bank at a low annual interest rate (0.25% in the United States) and lend it out at a higher rate. So banks are glad to see the government’s central bank create credit to lend to them. But when it comes to governments creating money to finance their budget deficits for spending in the rest of the economy, banks would prefer to have this market and its interest return for themselves.
European commercial banks are especially adamant that the European Central Bank should not finance government budget deficits. But private credit creation is not necessarily less inflationary than governments monetizing their deficits (simply by printing the money needed). Most commercial bank loans are made against real estate, stocks and bonds – providing credit that is used to bid up housing prices, and prices for financial securities (as in loans for leveraged buyouts).
It is mainly government that spends credit on the “real” economy, to the extent that public budget deficits employ labor or are spent on goods and services. Governments avoid paying interest by having their central banks printing money on their own computer keyboards rather than borrowing from banks that do the same thing on their own keyboards. (Abraham Lincoln simply printed currency when he financed the U.S. Civil War with “greenbacks.”)
Banks would like to use their credit-creating privilege to obtain interest for lending to governments to finance public budget deficits. So they have a self-interest in limiting the government’s “public option” to monetize its budget deficits. To secure a monopoly on their credit-creating privilege, banks have mounted a vast character assassination on government spending, and indeed on government authority in general – which happens to be the only authority with sufficient power to control their power or provide an alternative public financial option, as Post Office savings banks do in Japan, Russia and other countries. This competition between banks and government explains the false accusations made that government credit creation is more inflationary than when commercial banks do it.
The reality is made clear by comparing the ways in which the United States, Britain and Europe handle their public financing. The U.S. Treasury is by far the world’s largest debtor, and its largest banks seem to be in negative equity, liable to their depositors and to other financial institutions for much larger sums that can be paid by their portfolio of loans, investments and assorted financial gambles. Yet as global financial turmoil escalates, institutional investors are putting their money into U.S. Treasury bonds – so much that these bonds now yield less than 1%. By contrast, a quarter of U.S. real estate is in negative equity, American states and cities are facing insolvency and must scale back spending. Large companies are going bankrupt, pension plans are falling deeper into arrears, yet the U.S. economy remains a magnet for global savings.
Britain’s economy also is staggering, yet its government is paying just 2% interest. But European governments are now paying over 7%. The reason for this disparity is that they lack a “public option” in money creation. Having a Federal Reserve Bank or Bank of England that can print the money to pay interest or roll over existing debts is what makes the United States and Britain different from Europe. Nobody expects these two nations to be forced to sell off their public lands and other assets to raise the money to pay (although they may do this as a policy choice). Given that the U.S. Treasury and Federal Reserve can create new money, it follows that as long as government debts are denominated in dollars, they can print enough IOUs on their computer keyboards so that the only risk that holders of Treasury bonds bear is the dollar’s exchange rate vis-à-vis other currencies.
By contrast, the Eurozone has a central bank, but Article 123 of the Lisbon treaty forbids the ECB from doing what central banks were created to do: create the money to finance government budget deficits or roll over their debt falling due. Future historians no doubt will find it remarkable that there actually is a rationale behind this policy – or at least the pretense of a cover story. It is so flimsy that any student of history can see how distorted it is. The claim is that if a central bank creates credit, this threatens price stability. Only government spending is deemed to be inflationary, not private credit!
The Clinton Administration balanced the U.S. Government budget in the late 1990s, yet the Bubble Economy was exploding. On the other hand, the Federal Reserve and Treasury flooded the economy with $13 trillion in credit to the banking system credit after September 2008, and $800 billion more last summer in the Federal Reserve’s Quantitative Easing program (QE2). Yet consumer and commodity prices are not rising. Not even real estate or stock market prices are being bid up. So the idea that more money will bid up prices (MV=PT) is not operating today.
Commercial banks create debt. That is their product. This debt leveraging was used for more than a decade to bid up prices – making housing and buying a retirement income more expensive for Americans – but today’s economy is suffering from debt deflation as personal income, business and tax revenue is diverted to pay debt service rather than to spend on goods or invest or hire labor.
Much more striking is the travesty of German history that is being repeated again and again, as if repetition somehow will stop people from remembering what actually happened in the 20th century. To hear ECB officials tell the story, it would be reckless for a central bank to lend to government, because of the danger of hyperinflation. Memories are conjured up of the Weimar inflation in Germany in the 1920s. But upon examination, this turns out to be what psychiatrists call an implanted memory – a condition in which a patient is convinced that they have suffered a trauma that seems real, but which did not exist in reality.
What happened back in 1921 was not a case of governments borrowing from central banks to finance domestic spending such as social programs, pensions or health care as today. Rather, Germany’s obligation to pay reparations led the Reichsbank to flood the foreign exchange markets with deutsche marks to obtain the currency to buy pounds sterling, French francs and other currency to pay the Allies – which used the money to pay their Inter-Ally arms debts to the United States. The nation’s hyperinflation stemmed from its obligation to pay reparations in foreign currency. No amount of domestic taxation could have raised the foreign exchange that was scheduled to be paid.
By the 1930s this was a well-understood phenomenon, explained by Keynes and others who analyzed the structural limits on the ability to pay foreign debt imposed without regard for the ability to pay out of current domestic-currency budgets. From Salomon Flink’s The Reichsbank and Economic Germany (1931) to studies of the Chilean and other Third World hyperinflations, economists have found a common causality at work, based on the balance of payments. First comes a fall in the exchange rate. This raises the price of imports, and hence the domestic price level. More money is then needed to transact purchases at the higher price level. The statistical sequence and line of causation leads from balance-of-payments deficits to currency depreciation raising import costs, and from these price increases to the money supply, not the other way around.
Today’s “free marketers” writing in the Chicago monetarist tradition (basically that of David Ricardo) leave the foreign and domestic debt dimensions out of account. It is as if “money” and “credit” are assets to be bartered against goods. But a bank account or other form of credit means debt on the opposite side of the balance sheet. One party’s debt is another party’s saving – and most savings today are lent out at interest, absorbing money from the non-financial sectors of the economy. The discussion is stripped down to a simplistic relationship between the money supply and price level – and indeed, only consumer prices, not asset prices. In their eagerness to oppose government spending – and indeed to dismantle government and replace it with financial planners – neoliberal monetarists neglect the debt burden being imposed today from Latvia and Iceland to Ireland and Greece, Italy, Spain and Portugal.
If the euro breaks up, it is because of the obligation of governments to pay bankers in money that must be borrowed rather than created through their own central bank. Unlike the United States and Britain which can create central bank credit on their own computer keyboards to keep their economy from shrinking or becoming insolvent, the German constitution and the Lisbon Treaty prevent the central bank from doing this.
The effect is to oblige governments to borrow from commercial banks at interest. This gives bankers the ability to create a crisis – threatening to drive economies out of the Eurozone if they do not submit to “conditionalities” being imposed in what quickly is becoming a new class war of finance against labor.
Disabling Europe’s central bank to deprive governments of the power to create money
One of the three defining characteristics of a nation-state is the power to create money. A second characteristic is the power to levy taxes. Both of these powers are being transferred out of the hands of democratically elected representatives to the financial sector, as a result of tying the hands of government.
The third characteristic of a nation-state is the power to declare war. What is happening today is the equivalent of warfare – but against the power of government! It is above all a financial mode of warfare – and the aims of this financial appropriation are the same as those of military conquest: first, the land and subsoil riches on which to charge rents as tribute; second, public infrastructure to extract rent as access fees; and third, any other enterprises or assets in the public domain.
In this new financialized warfare, governments are being directed to act as enforcement agents on behalf of the financial conquerors against their own domestic populations. This is not new, to be sure. We have seen the IMF and World Bank impose austerity on Latin American dictatorships, African military chiefdoms and other client oligarchies from the 1960s through the 1980s. Ireland and Greece, Spain and Portugal are now to be subjected to similar asset stripping as public policy making is shifted into the hands of supra-governmental financial agencies acting on behalf of bankers – and thereby for the top 1% of the population.
When debts cannot be paid or rolled over, foreclosure time arrives. For governments, this means privatization selloffs to pay creditors. In addition to being a property grab, privatization aims at replacing public sector labor with a non-union work force having fewer pension rights, health care or voice in working conditions. The old class war is thus back in business – with a financial twist. By shrinking the economy, debt deflation helps break the power of labor to resist.
It also gives creditors control of fiscal policy. In the absence of a pan-European Parliament empowered to set tax rules, fiscal policy passes to the ECB. Acting on behalf of banks, the ECB seems to favor reversing the 20th century’s drive for progressive taxation. And as U.S. financial lobbyists have made clear, the creditor demand is for governments to re-classify public social obligations as “user fees,” to be financed by wage withholding turned over to banks to manage (or mismanage, as the case may be). Shifting the tax burden off real estate and finance onto labor and the “real” economy thus threatens to become a fiscal grab coming on top of the privatization grab.
This is self-destructive short-termism. The irony is that the PIIGS budget deficits stem largely from un-taxing property, and a further tax shift will worsen rather than help stabilize government budgets. But bankers are looking only at what they can take in the short run. They know that whatever revenue the tax collector relinquishes from real estate and business is “free” for buyers to pledge to the banks as interest. So Greece and other oligarchic economies are told to “pay their way” by slashing government social spending (but not military spending for the purchase of German and French arms) and shifting taxes onto labor and industry, and onto consumers in the form of higher user fees for public services not yet privatized.
In Britain, Prime Minister Cameron claims that scaling back government even more along Thatcherite-Blairite lines will leave more labor and resources available for private business to hire. Fiscal cutbacks will indeed throw labor out of work, or at least oblige it to find lower-paid jobs with fewer rights. But cutting back public spending will shrink the business sector as well, worsening the fiscal and debt problems by pushing economies deeper into recession.
If governments cut back their spending to reduce the size of their budget deficits – or if they raise taxes on the economy at large, to run a surplus – then these surpluses will suck money out of the economy, leaving less to be spent on goods and services. The result can only be unemployment, further debt defaults and bankruptcies. We may look to Iceland and Latvia as canaries in this financial coalmine. Their recent experience shows that debt deflation leads to emigration, shorter life spans, lower birth rates, marriages and family formation – but provides great opportunities for vulture funds to suck wealth upward to the top of the financial pyramid.
Today’s economic crisis is a matter of policy choice, not necessity. As President Obama’s chief of staff Rahm Emanuel quipped: “A crisis is too good an opportunity to let go to waste.” In such cases the most logical explanation is that some special interest must be benefiting. Depressions increase unemployment, helping to break the power of unionized as well as non-union labor. The United States is seeing a state and local budget squeeze (as bankruptcies begin to be announced), with the first cutbacks coming in the sphere of pension defaults. High finance is being paid – by not paying the working population for savings and promises made as part of labor contracts and employee retirement plans. Big fish are eating little fish.
This seems to be the financial sector’s idea of good economic planning. But it is worse than a zero-sum plan, in which one party’s gain is another’s loss. Economies as a whole will shrink – and change their shape, polarizing between creditors and debtors. Economic democracy will give way to financial oligarchy, reversing the trend of the past few centuries.
Is Europe really ready to take this step? Do its voters recognize that stripping the government of the public option of money creation will hand the privilege over to banks as a monopoly? How many observers have traced the almost inevitable result: shifting economic planning and credit allocation to the banks?
Even if governments provide a “public option,” creating their own money to finance their budget deficits and supplying the economy with productive credit to rebuild infrastructure, a serious problem remains: how to dispose of the existing debt overhead now acting as a deadweight on the economy. Bankers and the politicians they back are refusing to write down debts to reflect the ability to pay. Lawmakers have not prepared society with a legal procedure for debt write-downs – except for New York State’s Fraudulent Conveyance Law, calling for debts to be annulled if lenders made loans without first assuring themselves of the debtor’s ability to pay.
Bankers do not want to take responsibility for bad loans. This poses the financial problem of just what policy-makers should do when banks have been so irresponsible in allocating credit. But somebody has to take a loss. Should it be society at large, or the bankers?
It is not a problem that bankers are prepared to solve. They want to turn the problem over to governments – and define the problem as how governments can “make them whole.” What they call a “solution” to the bad-debt problem is for the government to give them good bonds for bad loans (“cash for trash”) – to be paid in full by taxpayers. Having engineered an enormous increase in wealth for themselves, bankers now want to take the money and run – leaving economies debt ridden. The revenue that debtors cannot pay will now be spread over the entire economy to pay – vastly increasing everyone’s cost of living and doing business.
Why should they be “made whole,” at the cost of shrinking the rest of the economy? The bankers’ answer is that debts are owed to labor’s pension funds, to consumers with bank deposits, and the whole system will come crashing down if governments miss a bond payment. When pressed, bankers admit that they have taken out risk insurance – collateralized debt obligations and other risk swaps. But the insurers are largely U.S. banks, and the U.S. Government is pressuring Europe not to default and thereby hurt the U.S. banking system. So the debt tangle has become politicized internationally.
So for bankers, the line of least resistance is to foster an illusion that there is no need for them to accept defaults on the unpayably high debts they have encouraged. Creditors always insist that the debt overhead can be maintained – if governments simply will reduce other expenditures, while raising taxes on individuals and non-financial business.
The reason why this won’t work is that trying to collect today’s magnitude of debt will injure the underlying “real” economy, making it even less able to pay its debts. What started as a financial problem (bad debts) will now be turned into a fiscal problem (bad taxes). Taxes are a cost of doing business just as paying debt service is a cost. Both costs must be reflected in product prices. When taxpayers are saddled with taxes and debts, they have less revenue free to spend on consumption. So markets shrink, putting further pressure on the profitability of domestic enterprises. The combination makes any country following such policy a high-cost producer and hence less competitive in global markets.
This kind of financial planning – and its parallel fiscal tax shift – leads toward de-industrialization. Creating ECB or IMF inter-government fiat money leaves the debts in place, while preserving wealth and economic control in the hands of the financial sector. Banks can receive debt payments on overly mortgaged properties only if debtors are relieved of some real estate taxes. Debt-strapped industrial companies can pay their debts only by scaling back pension obligations, health care and wages to their employees – or tax payments to the government. In practice, “honoring debts” turns out to mean debt deflation and general economic shrinkage.
This is the financiers’ business plan. But to leave tax policy and centralized planning in the hands of bankers turns out to be the opposite of what the past few centuries of free market economics have been all about. The classical objective was to minimize the debt overhead, to tax land and natural resource rents, and to keep monopoly prices in line with actual costs of production (“value”). Bankers have lent increasingly against the same revenues that free market economists believed should be the natural tax base.
So something has to give. Will it be the past few centuries of liberal free-market economic philosophy, relinquishing planning the economic surplus to bankers? Or will society re-assert classical economic philosophy and Progressive Era principles, and re-assert social shaping of financial markets to promote long-term growth with minimum costs of living and doing business?
At least in the most badly indebted countries, European voters are waking up to an oligarchic coup in which taxation and government budgetary planning and control is passing into the hands of executives nominated by the international bankers’ cartel. This result is the opposite of what the past few centuries of free market economics has been all about.
This was first published in the Frankfurter Allgemeine Zeitung on December 3, 2011, as “Der Krieg der Banken gegen das Volk.”
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 is a contributor to Hopeless: Barack Obama and the Politics of Illusion, forthcoming from AK Press.
He can be reached via his website, email@example.com
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