Do Spies Run the World?

by Israel Shamir

The Unz Review (May 21 2019)

Jeeves, the excellent valet of Mr Wooster, had an ace up his sleeve: if going was tough, he had used his access to the records of the Junior Ganymede club {1}, and there he could find embarrassing stuff against anybody who had ever employed a valet or a butler, for these gentleman’s gentlemen were obliged to inscribe in the club’s book all imprudent exploits of their masters. Thanks to this inside knowledge, Jeeves had saved his meek master, Mr Bertie Wooster from the bully.

Jeeves was a modest man, and feudally loyal to his hare-brained master; so were other members of the Junior Ganymede. They didn’t try to turn the club book into a tool to wrench control over England from the Buckingham Palace. However, we live in the age of great ambitions, unhindered by excessive loyalty. The valets, butlers, and bodyguards pooled their forces and decided to run the world.

Conspiratorially-minded writers envisaged the Shadow World Government as a board of evil sages surrounded by the financiers and cinema moguls. That would be bad enough; in infinitely worse reality, our world is run by the Junior Ganymede that went berserk. It is not a government, but a network, like freemasonry of old, and it consists chiefly of treacherous spies and pens-for-hire, two kinds of service personnel, that collected a lot of data and tools of influence, and instead of serving their masters loyally, had decided to lead the world in the direction they prefer.

German Admiral Wilhelm Canaris, the last head of the Abwehr, Hitler’s Military Intelligence, had been such a spy with political ambitions. He supported Hitler as the mighty enemy of Communism; on a certain stage, he came to conclude that the US will do the job better and switched to the Anglo-American side. He was uncovered and executed for treason. His colleague General Reinhard Gehlen also betrayed his Fuhrer and had switched to the American side. After the war, he continued his war against Soviet Russia, this time for CIA instead of Abwehr.

The spies are treacherous by their nature. They contact people who betrayed their countries; they work undercover, pretending to be somebody else; for them, the switch of loyalty is as usual and normal as the gender change operation for a Moroccan doctor who is doing that eight to five every day. They mix with foreign spies, they kill people with impunity; they break every law, human or divine. They are extremely dangerous if they do it for their own country. They are infinitely more dangerous if they work for themselves and still keep their institutional capabilities and international network.

Recently we had a painful reminding of their treacherous nature. Venezuela’s top spy, the former director of the Bolivarian National Intelligence Service (Sebin), Manuel Cristopher Figuera, had switched sides during the last coup attempt and escaped abroad as the coup failed. He discovered that his membership on the Junior Ganymede of the spooks is more important for him than his duty to his country and its constitution.

Within America, the alphabet agencies from NSA to CIA to FBI had betrayed their country as obviously as Figuera did, though they didn’t run away, yet. Our colleagues Mike Whitney {2} and Philip Giraldi {3} described the conspiracy organised by John Brennan of CIA with the active participation of FBI’s James Comey, to regime-change the US. In the conspiracy, foreign intelligence agencies, primarily the British GCHQ, played an important role. As by law, these spies aren’t allowed to operate on their home ground, they go into a you-scratch-my-back-I’ll-scratch-your-back routine. The CIA spies in England and passes the results to British Intelligence. MI6 spies in the US and passes the results to the CIA. They became integrated to an unbelievable extent in the worldwide network of spies.

It is not the Deep State anymore; it is world spooks who had united against their legitimate masters. Instead of staying loyal to their country, the spooks betrayed their countries. They are not only strictly-for-cash – they think they know better what is good for you. In a way, they are a new incarnation of the Cecil Rhodes Society {4}. Democratically-elected politicians and statesmen have to obey them or meet their displeasure, as Corbyn and Trump did.

Everywhere, in the US, the UK, and Russia, the spooks became too powerful to handle. The CIA stood behind the assassination of JFK and tried to take down Trump. The British Intelligence undermined Jeremy Corbyn, after assisting the CIA in pushing for the Iraq war. They created the Steele Dossier, invented the Skripal hoax, and had brought Russia and the West to the brink of nuclear war.

Russian spooks are in a special relations mode with the global network – for many years. In Russia, persistent rumours claim the perilous Perestroika of Mikhail Gorbachev had been designed and initiated by the KGB chief (1967~1982) Yuri Andropov. He and his appointees dismantled the socialist state and prepared the takeover of 1991 in the interests of the One World project.

Andropov (who had stepped into Brezhnev’s shoes in 1982 and died in 1984) had advanced Gorbachev and his architect of glasnost, Alexander Yakovlev. Andropov also promoted the arch-traitor KGB General Oleg Kalugin to head its counter-intelligence. Later, Kalugin betrayed his country, escaped to the US, and delivered all Russian spies he knew of to the FBI hands.

In the late 1980s and early 1990s, the KGB, originally the guarding dog of the Russian working class, had betrayed its Communist masters and switched to work for the Network. But for their betrayal, Gorbachev would not be able to destroy his country so fast: the KGB neutralised or misinformed the Communist leadership.

They allowed Chernobyl to explode; they permitted a German pilot to land on the Red Square – this was used by Gorbachev as an excuse to sack the whole lot of patriotic generals. The KGB people were active in subverting other socialist states, too. They executed the Romanian leader Ceausescu and his wife; they brought down the GDR in socialist Germany; they plotted with Yeltsin against Gorbachev and with Gorbachev against Romanov. As a result of their plotting, the USSR fell apart.

The KGB plotters of 1991 had thought that post-Communist Russia would be treated by the West like the prodigal son, with a fattened calf being slaughtered for the welcome feast. To their disappointment, the stupid bastards discovered that their country was to play the part of the fattened calf at the feast, and they were turned from unseen rulers into billionaires’ bodyguards. Years later, Vladimir Putin came to power in Russia with the blessing of the world spooks and bankers, but being too independent a man to submit, he took his country into its present nationalist course, trying to regain some lost ground. The dissatisfied spooks supported him.

Only recently Putin began to trim the wild growth of his own intelligence service, the FSB. It is possible the cautious president had been alerted by the surprising insistence of the Western media that the alleged attempt on Skripal and other visible cases had been attributed to the GRU, the relatively small Russian Military Intelligence, while the much bigger FSB had been forgotten. The head of FSB cybercrime department had been arrested and sentenced for a lengthy term of imprisonment, and two FSB colonels had been arrested as the search of their premises revealed immense amounts of cash, both Russian and foreign currency. Such piles of roubles and dollars could be assembled only for an attempt to change the regime, as it was demanded by the Network.

In Ukraine, the heads of their state security, SBU had plotted against the last legitimate president Mr Victor Yanukovych. They helped to organise and run the Maidan 2014 manifestations and misled their President until he was forced to escape abroad. The Maidan manifestations could be compared with the Yellow Vests movement; however, Macron, an appointee of the Network, had the support of his spies, and stayed in power, while Yanukovych had been betrayed and overthrown.

In the US, the spooks allowed Donald Trump to become the leading Republican candidate, for they thought he would certainly lose to Mme Clinton. Surprisingly, he had won, and since then, this man who was advanced as an easy prey, as a buffoon, had been hunted by the spooks-and-scribes freemasonry.

You’d ask me, were they so stupid that they believed their own propaganda of inevitable Clinton’s victory? Yes, they were and are stupid. They are no sages, evil or benevolent. My main objection to the conspiracy theorists is that they usually view the plotters as omniscient and all-powerful. They are too greedy to be all-powerful, and they are too silly to be omniscient.

Their knowledge of official leaders’ faults gives them their feeling of power, but this knowledge can be translated into actual control only for weak-minded men. Strong leaders do not submit easily. Putin has had his quota of imprudent or outright criminal acts in his past, but he never allowed the blackmailers to dictate him their agenda. Netanyahu, another strong man of modern politics, also had managed to survive blackmail. Meanwhile, Trump defeated all attempts to unseat him, though his enemies had used his alleged lack of delicacy in relation to women, blacks, and Jews to its utmost. He waded through the deep pond of Russiagate like Gulliver. But he has to purge the alphabet agencies to reach safety.

In Russia, the problem is acute. Many Russian spooks and ex-spooks feel more proximity to their enemies and colleagues in other countries than to their fellow citizens. There is a Freemasonic quality in their camaraderie. Such a quality could be commendable in soldiers after the war is over, but here the war is going on. Russian spooks are particularly besotted with their declared enemies; apparently, it is the Christian quality of the Russian soul, but a very annoying one.

When Snowden reached Moscow after his daring escape from Hong Kong, the Russian TV screened a discussion that I participated in, among journalists, members of parliament, and ex-spies. The Russian spooks said that Snowden is a traitor; a person who betrayed his agency can’t be trusted and should be sent to the US in shackles. They felt they belong to the Spy World, with its inner bond, while their loyalty to Russia was a distant second.

During a recent visit of Mike Pompeo to Sochi, the head of SVR, the Russian Foreign Intelligence Service, Mr Sergey Naryshkin proposed the State Secretary Mike Pompeo, the ex-CIA director, to expand contacts between Russian and US special services at a higher level. He clarified that he actively interacted with Pompeo during the period when he was the head of the CIA. Why would he need contacts with his adversary? It would be much better to avoid contacts altogether.

Even president Putin, who is, first of all, a Russian nationalist (or a patriot, as they say), who has granted Snowden asylum in Moscow at a high price of seriously worsening relations with Obama’s administration, even Putin has told Stone that Snowden shouldn’t have leaked the documents the way he did. “If he didn’t like anything at his work he should have simply resigned, but he went further”, a response proving he didn’t completely free himself from the spooks’ freemasonry.

While the spooks plot, the scribes justify their plots. Media is also a weapon, and a mighty one. In Richard Wagner’s opera Lohengrin, the protagonist is defeated by the smear campaign in the media. Despite his miraculous arrival, despite his glorious victory, the evil witch succeeds to poison minds of the hero’s wife and of the court. The pen can counter the sword. When the two are integrated, as in the union of spooks and scribes, it is too dangerous a tool to leave intact.

In many countries of Europe, editorial international policies had been outsourced to the spooky Atlantic Council, the Washington-based think tank. The Atlantic Council is strongly connected with Nato alliance and with Brussels bureaucracy, the tools of control over Europe. Another tool is The Integrity Initiative {5}, where the difference between spies and journalists is blurred. And so is the difference between the left and the right. The left and the right-wing media use different arguments, surprisingly leading to the same bottom line, because both are tools of warfare for the same Network.

In the 1930s, they were divided. The German and the British agents pulled and pushed in the opposite directions. The Russian military became so friendly with the Germans, that at a certain time, Hitler believed the Russian generals would side with him against their own leader. The Russian spooks were befriended by the Brits and had tried to push Russia to confront Hitler. The cautious Marshal Stalin had purged the Red Army’s pro-German Generals, and the NKVD’s pro-British spooks, and delayed the outbreak of hostilities as much as he could. Now, however, the secret services’ cohesion and integration increased to the next level, making it difficult to deal with them.

If they are so powerful, integrated, and united, shouldn’t we throw a towel in the ring and surrender? Hell, no! Their success is their undoing. They plot, but Allah is the best plotter, – our Muslim friends say. Indeed, when they succeed to suborn a party, the people vote with their feet. The Brexit is the case to consider. The Network wanted to undermine the Brexit; so they neutralised Corbyn by the antisemitism pursuit while May had made all she could to sabotage the Brexit while calling for it in public. Awfully clever of them – but the British voter responded with dropping both established parties. So their clever plot misfired.

People are fickle and not always know what is good for them; there are many demagogues to mislead the crowd. And still, elected legitimate officials should have precedence in governing, while non-elected ones should obey – and it means the Network spooks and media men should know their place.

Selected Links:







Israel Shamir can be reached at

No, Mr President: China Didn’t Steal Our Jobs

Corporate America Gave Them Away

Trump’s trade war points the finger in the wrong direction. China behaved normally; corporate CEOs betrayed us

by Cody Cain (May 27 2019)

This photo taken on October 17 2018 shows workers sewing shoes at a factory in Qingdao in China’s eastern Shandong province (STR/AFP/Getty)

China is not “stealing” American jobs.

President Trump loves to blame China for the job losses that have devastated American workers under globalization. But the truth is that Trump is blaming the wrong party. Trump’s reckless trade war against China is misguided and amounts to a colossal charade that will not solve the actual problem.

Yes, it is true that numerous American manufacturing jobs have been shipped overseas to China, thereby leaving American workers jobless and suffering. But China did not steal these jobs.

No. These jobs were given to China. It was all legal and legitimate. China merely accepted the gift.

What would anyone expect China to do? Accepting these jobs was a perfectly rational course of action.

China was an underdeveloped nation with a large population of poor people willing to work for a fraction of the hourly wages of American workers. And then corporations came along and presented China with an attractive offer: We would like to build manufacturing plants in China and hire droves of your unemployed people to work there. What was China supposed to do? Naturally, China said yes.

This is hardly stealing.

It is true that these new jobs in China were intended to displace American workers. But does that concern belong to China? Does China have the responsibility to care for the well-being of American workers? Is China supposed to prioritize American workers over its own workers?

Of course not.

China is supposed to look out for itself and for its own workers, not for American workers. Thus it was perfectly proper for China to allow the manufacturing plants to be built in China and employ Chinese workers. China did not steal these jobs.

So if China is not at fault, then who is to blame for the devastation caused to American workers?

The answer is plain to see, and it lies within our own shores. The fault belongs squarely with corporate America.

It was corporate America that made these decisions. Corporate America decided to close their American plants and open new plants in China. Corporate America decided to lay off multitudes of American workers and ruin entire American communities.

And who profited from the destruction to American workers? It was the wealthy executives and shareholders of American corporations. They earned millions of dollars for themselves by cutting the costs of their workforce.

This is part of the larger trend of economic inequality that is eroding the entire middle class in America. Wealth is being shifted away from the workers down below and transferred up into the hands of the wealthy executives and shareholders at the top.

Trump blaming China is nonsense. China is not at fault. To be sure, China is hardly an angel and indeed engages in improper trade practices. But even if China agreed to whatever bone-headed demands Trump is seeking, the problem still would not be solved. The truth is that America cannot possibly compete against China on labor costs. The standard of living is much lower in China and thus Chinese workers are willing to accept wages far below living wages in America. So corporate America will continue to transfer more and more jobs to China and elsewhere. If we do not address this fundamental economic reality, then we will never solve the problem.

Trump blaming China has an insidious aspect to it as well. Focusing all the ire upon China is a grand misdirection that conceals the true culprit, namely, the super-rich corporate executives and shareholders in America.

This is part of Trump’s standard playbook. Trump falsely proclaims to be fighting for blue-collar workers, when in truth, Trump acts entirely in favor of the rich at the top.

Surprisingly, this seems to work. Some of the hard-working Americans who are being crushed by Trump’s idiotic trade war and who should be denouncing Trump, nonetheless praise him for standing up to China, believing that Trump is fighting for blue-collar jobs. It is painful to witness such good people falling victim to Trump’s despicable con job.

In order to actually save the middle class, we need to focus on the true cause of the problem. We must direct our great powers of reform where they belong – upon the wealthy executives and shareholders of corporate America who caused this problem in the first place.

The nature of the problem is that corporate America has no incentive to protect American workers. In fact, corporate America has every incentive to harm American workers by shifting their jobs overseas.

So the financial incentives must be reconfigured. If corporate America is going to ship American jobs overseas, it must not be permitted to pocket all the profits themselves and leave their displaced workers with nothing. Instead, corporations that send jobs offshore must be required to sufficiently compensate their displaced American workers. Executives and shareholders must not be permitted to enrich themselves unless and until their workers are financially secure.

Our society must favor people over profits, not profits over people.

Something to Think About on Memorial Day

Something to Think About on Memorial Day

by Paul Craig Roberts (May 27 2019)



Smedley Butler on Interventionism

Excerpt from a speech delivered in 1933

by Major General Smedley Butler, USMC


War is just a racket. A racket is best described, I believe, as something that is not what it seems to the majority of people. Only a small inside group knows what it is about. It is conducted for the benefit of the very few at the expense of the masses.

I believe in adequate defense at the coastline and nothing else. If a nation comes over here to fight, then we’ll fight. The trouble with America is that when the dollar only earns six percent over here, then it gets restless and goes overseas to get 100 percent. Then the flag follows the dollar and the soldiers follow the flag.

I wouldn’t go to war again as I have done to protect some lousy investment of the bankers. There are only two things we should fight for. One is the defense of our homes and the other is the Bill of Rights. War for any other reason is simply a racket. There isn’t a trick in the racketeering bag that the military gang is blind to. It has its “finger men” to point out enemies, its “muscle men” to destroy enemies, its “brain men” to plan war preparations, and a “Big Boss” Super-Nationalistic-Capitalism.

It may seem odd for me, a military man to adopt such a comparison. Truthfulness compels me to. I spent thirty-three years and four months in active military service as a member of this country’s most agile military force, the Marine Corps. I served in all commissioned ranks from Second Lieutenant to Major-General. And during that period, I spent most of my time being a high-class muscle-man for Big Business, for Wall Street and for the Bankers. In short, I was a racketeer, a gangster for capitalism.

I suspected I was just part of a racket at the time. Now I am sure of it. Like all the members of the military profession, I never had a thought of my own until I left the service. My mental faculties remained in suspended animation while I obeyed the orders of higher-ups. This is typical with everyone in the military service.

I helped make Mexico, especially Tampico, safe for American oil interests in 1914. I helped make Haiti and Cuba a decent place for the National City Bank boys to collect revenues in. I helped in the raping of half a dozen Central American republics for the benefits of Wall Street. The record of racketeering is long. I helped purify Nicaragua for the international banking house of Brown Brothers in 1909~1912 (where have I heard that name before?). I brought light to the Dominican Republic for American sugar interests in 1916. In China, I helped to see to it that Standard Oil went its way unmolested. During those years, I had, as the boys in the back room would say, a swell racket. Looking back on it, I feel that I could have given Al Capone a few hints. The best he could do was to operate his racket in three districts. I operated on three continents.

Copyright (c) 2016 All rights reserved.

MMT Primer – Blog #6 Responses

Sovereign Currency, Medium of Exchange, and Sectoral Balances

by L Randall Wray (July 14 2011)

Note to commentators: We’ve got a techie problem so my response did not get up last night and we have been unable to post it so far today. Should be up later today. Meanwhile, I will paste it in here, but be assured it will be properly formatted and posted later.

Thanks for comments. As you may have noticed, I kept the blog shorter this week so that we could focus on a smaller range of topics. That seems to have helped – the comments this week are also well-focused. I think I can hit the main concerns by addressing three topics. Due to space limitations, these will be in the next three comments.

1. The relation between the sovereign currency and the medium of exchange: We first introduced the money of account: the Dollar in the US and the Pound in the UK. This is a unit of account, a measuring unit like the “inch”, “foot”, and “yard”. It does not exist even as an electronic entry; not even a bloodhound could sniff it out. It is representational, something only a human could imagine. Next, we introduced the concept of “money things” – denominated in the money of account. (Similarly, our unit used to measure length cannot be sniffed by dog, but it does have physical things that can be sniffed and measured: the inchworm is an inch in length, my foot is a foot – more or less, and the football field is 100 times the distance from Henry the first’s nose to thumb. Probably more, actually, as we know those kings exaggerated the size of their anatomical features, like rap stars today.) This can include paper, notes, and electronic entries. We’ll say a lot more about the nature of those things that get measured by the money of account. This week we introduced the sovereign currency – the national money of account adopted by a sovereign government. While a money of account could – in theory – be created and adopted by private entities, the sovereign currency is adopted by the sovereign government; and the sovereign currency is usually at least the primary money of account if not the only money of account used within a sovereign nation. The word “currency” is frequently used to designate not only the money of account adopted by sovereign government, but also to designate a money thing issued by the sovereign government and denominated in the money of account. In the US it is the coin issued by the Treasury and the note issued by the Federal Reserve (Fed). In other words, we use the term “Dollar” to indicate both the sovereign currency (money of account) and the money thing (paper note or coin) issued by the US government. We have not yet got to the “medium of exchange”. Most textbooks begin with the medium of exchange (Crusoe and Friday look about for handy seashells to function as convenient media of exchange). I reject that story and purposely wait to introduce the concept. But to jump ahead a bit, yes the “money thing” currency issued by government generally functions as a medium of exchange. Other privately issued money things also frequently function as media of exchange. That is a function of money things, and really does not help us to understand much about the nature of money. When you walk into a relatively new diner or any other “mom and pop” firm, there usually is a frame hanging on the wall, with a Dollar bill and some sort of statement like “the first dollar we ever earned”. Here, money functions as a momento – reflecting the pride of the owner of the establishment. Two decades ago, there were lots of stories of Wall Street traders using hundred Dollar bills functioning as cocaine delivery devices. I don’t think it is useful to put undue emphasis on the various functions of money. Let us at least first try to understand its nature.

2. That leads us to the question about “bank money”. Again, we will get into this in detail in the coming weeks. However, to break the suspense, banks (and other institutions as well as individuals) can issue IOUs denominated in the money of account. We do not call these “currency”. They are not issued by sovereign government. They are “money things”. Yes, some are more “special” than others: the IOU of the Bank of America (a private bank – not Uncle Sam’s bank) is more “special” than the IOU that you issue. Yes, it can function as a medium of exchange. The reasons for the “specialness” will be examined later. But an obvious one is that to some degree Uncle Sam stands behind the Bank of America (BofA) – for example, he guarantees demand deposits (your checking account). So, yes I do understand the worry that Uncle Sam has essentially licensed BofA to “counterfeit” Dollars – if the bank goes bust, Uncle Sam will pay out nice new Dollar bills to depositors. This raises many issues of concern, and some of those are directly relevant to the global financial crisis we are going through – in which Uncle Sam has effectively done just that. But for right now, that really would take us too far afield. Please be patient.

3. Currencies and balances. Recall that we have discussed (briefly) unsold inventories. Suppose it is the end of the year 1974 and we are Ford motor company and we produce 1000 Ford Pintos (remember those – the ones with exploding gas tanks?) that we cannot sell. Unsold inventory gets counted as investment. Ford carries the inventory at its market price – let us say, the average price of Pintos that it actually did sell in 1974. Assume it cannot sell them in 1975, either (deep recession, bad publicity about the tanks, and so on). How to value them? All things equal, Ford would prefer not to book a loss of value – it carries them at original value, otherwise, the value of its inventory declines impacting 1975 profits and net worth. Now in 2011, it is still carrying those Pintos in inventory. You see the problem. We have to assign a dollar value to them. Now let’s address the problem of dual currencies. Suppose Ford produces cars in America but sells them in America and Japan. It imports all the electronic components from Japan. It can keep two sets of books – one for Dollars and one for Yen. It has income and outgo in each currency. Clearly, it could run a deficit in one and a surplus in the other (or surpluses in both, or deficits in both, et cetera – you get the picture). All other firms, households, and levels of government can do the same in Dollars and Yen. Adding up all the sectors, we get to our three balances in each of the currencies. But Ford’s shareholders do not want to know that it has a surplus in Dollars of one billion and a deficit in Yen of one trillion – it wants the overall balance for Ford’s income. Just as we have to convert Pintos to Dollars, we have to convert those Yen to Dollars. We need an exchange rate. Yen and Dollars float – changing every day in relative value. It is going to make a huge difference what exchange rate we use.

So, yes I am sympathetic to “Tobinesque’s” comments. The cleanest way is to keep the accounts separate and there will be sectoral balances in each currency that do balance. But, yes, a government, as well as a firm, needs a budget in one currency (generally it is going to be the domestic currency) and so if income and outgo occur in more than one, exchange rates must be used to get everything into that currency of denomination. This is true even if the government/firm/household actually has bank accounts denominated in the foreign currency. This complicates matters because now the sectoral balances will not balance (exactly) unless everyone uses the same exchange rate all the time – which would happen if we pegged. This issue has come up before – there are variations in estimates of the three balances. One reader pointed out that one of the graphs I used showing – say – the private deficit during the Clinton years differed a bit from a later one I showed here on the MMP. The reason was due to updated data and different sources (the older one came from Wynne Godley and the later one from Scott Fullwiler). As they say, economics is not an exact science! More seriously, you should not think that aggregate economic data like GDP or the CPI (consumer price index), or the sectoral balance are measured precisely. These are estimates, using data that is constructed. What is important is consistency. I know this always shocks students the first time they hear it. But the CPI does not come from heaven. It is constructed, it is revised, and it is subject to great debate among wonky people with thick glasses. And believe it or not, it does matter exactly how these data are constructed. But do not get misled by that. Certainly, at the level of logic, the three balances do balance. If we could measure things exactly, they would balance in practice. Knowing that they should balance, the statistician who puts them together ensures they do balance – by construction. This is not easy; a “statistical discrepancy” is added to ensure they do – and if you need a big one of those, that is not good. And, yes, dealing with valuing those inventories is a big headache – I can remember when Wynne Godley used to fret over that, and I didn’t understand why. Now I do.

Wray: MMT Primer – Blog #6

What is a Sovereign Currency?

by L Randall Wray (July 11 2011)

In recent weeks we have examined in some detail the three balances approach developed largely by Wynne Godley. In some sense, all of that is preliminary to examining the nature of modern money. Further, as many of you have no doubt already recognized, a key distinguishing characteristic of MMT is its view on how government really spends. Beginning with this blog we will begin to develop our theory of sovereign currency.

So in coming weeks, we examine spending by government that issues its own domestic currency. We first present general principles that are applicable to any issuer of domestic currency. These principles apply to both developed and developing nations, and regardless of exchange rate regime. We later move on to analysis of special considerations that apply to developing nations. Finally, we will discuss implications of the analysis for different currency regimes.

In this blog, we examine the concept of a sovereign currency.

Domestic Currency. We first introduce the concept of the money of account – the Australian dollar, the US dollar, the Japanese Yen, the British Pound, and the European Euro are all examples of a money of account. The first four of these monies of account are each associated with a single nation. By contrast, the Euro is a money of account adopted by a number of countries that have joined the European Monetary Union. Throughout history, the usual situation has been “one nation, one currency”, although there have been a number of exceptions to this rule, including the modern Euro. Most of the discussion that follows will be focused on the more common case in which a nation adopts its own money of account, and in which the government issues a currency denominated in that unit of account. When we address the exceptional cases, such as the European Monetary Union, we will carefully identify the differences that arise when a currency is divorced from the nation.

Note that most developing nations adopt their own domestic currency. However, some of these peg their currencies, hence, surrender a degree of domestic policy space, as will be discussed below. However, since they do issue their own currencies, the analysis here of the money of account does apply to them.

Note also, following the discussion at the end of Blog 4, we recognize that individual households and firms (and even governments) can use foreign currencies even within their domestic economy. For example, within Kazakhstan (and many other developing nations) some transactions can occur in US Dollars, while others take the form of Tenge. And individuals can accumulate net wealth denominated in Dollars or in Tenge. However, the accounting principles that apply to a money of account will still apply (separately) to each of these currencies.

One nation, one currency. The overwhelmingly dominant practice is for a nation to adopt its own unique money of account – the US Dollar (US$) in America; the Australian Dollar (A$) in Australia; the Kazakhstan Tenge. The government of the nation issues a currency (usually consisting of metal coins and paper notes of various denominations) denominated in its money of account. Spending by the government as well as tax liabilities, fees, and fines owed to the government are denominated in the same money of account. The court system assesses damages in civil cases using the same money of account.

For example, wages are counted in the nation’s money of account and in the event that an employer fails to pay wages due, the courts will enforce the labor contract and assess monetary damages on the employer to be paid to the employee.

A government might also use a foreign currency for some of its purchases and might accept a foreign currency in payment. It might also borrow – issuing IOUs – in a foreign currency. Usually, this is done when the government is making purchases of imports or when it is trying to accumulate foreign currency reserves (for example when it pegs its currency). While important, this does not change the accounting of the domestic currency. That is, if the Kazakhstan government spends more Tenge than it collects in Tenge taxes, it runs a budget deficit in Tenge that exactly equals the nongovernment sector’s accumulation of Tenge through its budget surplus (assuming a balanced foreign sector it will be the domestic private sector that accumulates the Tenge).

We will argue that the government has much more leeway (called “domestic policy space”) when it spends and taxes in its own currency than when it spends or taxes in a foreign currency. For the Kazakhstan government to run a budget deficit in US Dollars, it would have to get hold of the extra Dollars by borrowing them. This is more difficult than simply spending by issuing Tenge to a domestic private sector that wants to accumulate some net saving in Tenge.

It is also important to note that in many nations there are private contracts that are written in foreign monies of account. For example, in some Latin American countries as well as some other developing nations around the world it is common to write some kinds of contracts in terms of the US Dollar. It is also common in many nations to use US currency in payment in private transactions. According to some estimates, the total value of US currency circulating outside America exceeds the value of US currency used at home. Thus, one or more foreign monies of account as well as foreign currencies might be used in addition to the domestic money of account and the domestic currency denominated in that unit.

Sometimes this is explicitly recognized by and permitted by, the authorities while other times it is part of the underground economy that tries to avoid detection by using foreign currency. It might be surprising to learn that in the United States foreign currencies circulated alongside the US dollar well into the nineteenth century; indeed, the US Treasury even accepted payment of taxes in foreign currency until the middle of the nineteenth century.

However, such practices are now extremely rare in the developed nations that issue their own currencies (with the exception of the Euro nations – each of which uses the Euro that is effectively a “foreign” currency from the perspective of the individual nation). Still, it is not uncommon in developing nations for foreign currencies to circulate alongside domestic currency, and sometimes their governments willingly accept foreign currencies. In some cases, sellers even prefer foreign currencies over domestic currencies.

This has implications for policy, as discussed later.

Sovereignty and the currency. The national currency is often referred to as a “sovereign currency”, that is, the currency issued by the sovereign government. The sovereign government retains for itself a variety of powers that are not given to private individuals or institutions. Here, we are only concerned with those powers associated with money.

The sovereign government, alone, has the power to determine which money of account it will recognize for official accounts (as discussed, it might choose to accept a foreign currency for some payments – but that is the sovereign’s prerogative). Further, modern sovereign governments, alone, are invested with the power to issue the currency denominated in its money of account.

If any entity other than the government tried to issue domestic currency (unless explicitly permitted to do so by government) it would be prosecuted as a counterfeiter, with severe penalties resulting.

Further, the sovereign government imposes tax liabilities (as well as fines and fees) in its money of account, and decides how these liabilities can be paid – that is, it decides what it will accept in payment so that taxpayers can fulfil their obligations.

Finally, the sovereign government also decides how it will make its own payments – what it will deliver to purchase goods or services, or to meet its own obligations (such as payments it must make to retirees). Most modern sovereign governments make payments in their own currency, and require tax payments in the same currency.

Next week we will continue this discussion, investigating “what backs up” modern money.

Why Capturing Huawei is No Victory in Tech War

Chinese firm is a queen on tech chessboard, but Beijing will just tell its whiz-kids to reach the next level

by Pepe Escobar (May 21 2019)

Technological rivalry between the US and China over 5G and other sectors is ramping up. Image: iStock

It’s geopolitical, geoeconomic war. Cold, so far, but now about to descend to deep freeze. The US National Security Strategy unmistakably spells it out. China is a strategic competitor and must be contained, no holds barred, on all fronts: economic, military, and most of all, technological.

Enter the current, concerted offensive across the spectrum, from 5G and AI to moves attempting to prevent the coming of globalization 2.0. Add to it maximum pressure all over the world to prevent nations from joining the New Silk Roads, or Belt and Road Initiative (BRI), the organizing foreign policy concept for China in the foreseeable future and the strategic road map for Eurasian integration up to 2049.

It’s all interconnected; the Trump administration’s trade war, Google blocking Huawei from the enhanced Android OS, the demonization of Belt and Road. It’s all about control of global supply chains and technological infrastructure.

Huawei is not a pawn but the Queen in the tech-war chessboard. In an environment where Chinese IT companies are fast climbing the ranks in terms of registering scientific patents, Huawei is already first among equals. From techno-scientific knowledge to applied research and creative market solutions, China tech is posing a concerted “threat” to American tech. This is the heart of the geopolitical and geoeconomic clash between the hegemon and the aspiring superpower.

Pressure over Germany, UK, and Italy, for instance, based on a fuzzy “economic aggression” concept, won’t force these industrialized nations to discard Huawei, because they can profit from Huawei’s leadership on 5G to create their own “smart” or safe cities.

Fragmenting global supply chains – as the Trump administration is aiming at – also does not cut it, as interdependence still rules. Some 22% of Huawei products carry US components, and the Snapdragon chip from American Qualcomm is featured in most Chinese smartphones.

What matters most is how Made in China is coming up with creative total packages, privileging added value for business, as it targets a mass of global customers, private and corporate. This process is at the heart of Made in China 2025, which aims to sever dependence on Western technology and configure China as a global leader in AI, cloud services, the Internet of Things (IoT), industrial automation 4.0, biotechnology, aerospace. Goodbye low-cost mass manufacturing. Hello to a cloud of emerging technologies.

“Asianomics” is the Way to Go

In AI Superpowers: China, Silicon Valley, and the New World Order (2018), venture capitalist Kai-Fu Lee, with decades of experience on both sides of the tech pond, conclusively shows how technology “will drive a wedge between the AI superpowers and the rest of the world, and may divide society along class lines” miming “dystopian science fiction”/

The US and China are already AI superpowers because, apart from top talent and research labs, they can count on “a large base of users and a vibrant entrepreneurial and venture-capital ecosystem”.

Across Eurasia, following the BRI footprint, China is bound to rule, on 5G and AI, from Southeast Asia to Southwest Asia and all the way to Africa.

That leaves Western Europe as the key geoeconomic battleground, on internet and internet services, to be conquered by Huawei and other Chinese tech companies. It’s always important to remember that a great majority of so-called US “allies” – especially in Asia but also in vast swathes of Europe – now do more trade or investment with China than with the US.

5G will establish a new techno paradigm in robotics applied to industrial production, remote control surgery, new AI-driven transportation solutions, the logistics of distribution, and scores of other specialized fields. Think, for instance, shipping containers engaged in autonomous communication – in a high-speed free flow of interconnection.

In this new environment, Huawei is leaner, meaner, cheaper, more innovative, and their products consume less energy. Add to it that Chinese companies are keen to experiment with telecom operators, for instance investing in research centers and labs in Europe, such as the Huawei Transparency and Cyber Security Center in Brussels.

Not only China, but Asia as a whole is becoming the privileged 21st-century tech development engine. Welcome, thus, to “Asianomics”.

This means that Huawei, even under attack by the US government and spurned by Google, will have no problems finding other Chinese and Asian suppliers. In fact, count on Beijing to forcefully rally all China tech majors to develop all component technologies that China still lacks. Precedents abound. Let’s take a look at one of the most important.

Innovate or Die

In September 2014, Premier Li Keqiang addressed the Chinese “Summer Davos” in Tianjin to explain how technological innovation was essential in creating growth and modernizing the Chinese economy.

These speeches usually consist of a somnolent litany of jargons and exhortations. But this time Li came up with a new, unheard of, slogan: “Mass entrepreneurship and mass innovation”. And that soon became the rallying cry for a government-driven process of fostering startup ecosystems and supporting technological innovation.

In July 2015, China’s State Council – which comes up with all the big policies that matter – issued a major directive; from now on everybody should join the “mass entrepreneurship and innovation” bandwagon. The aim was to create thousands of technology incubators, entrepreneurship zones and “guiding funds”, backed by Beijing, to seduce more private venture capital, in parallel to sexy tax policies and streamlined government permits necessary to start a business.

This is how it works in China. The central government may lay down the main goals. But implementation is totally local – as in thousands of mayors and local officials. These people only get promoted inside the vast bureaucracy through performance. And the examiners are of course big wigs in the Chinese Communist Party’s human resources department. So it’s easy to imagine the frenzy when Beijing sets clear goals and targets. Go for it – or disappear into career oblivion.

That’s exactly what’s going to happen next. Beijing will tell China tech to reach the next level. Anyone who’s been to frantic tech-experiment-hub Shenzhen knows what this means. The US crackdown on Huawei will inevitably backfire.

Huawei has now accelerated the commercial implementation of its own operating system, which will be thoroughly adapted for global markets. Their Plan B is now Plan A – with a vengeance. Never underestimate the power of unintended consequences; Huawei breaking Google’s de facto monopoly may be just around the (tech) corner.

The China Hoax

Is China Being Framed?

by Godfree Roberts

The Unz Review (April 17 2019)



Propaganda is to a democracy what the bludgeon is to a totalitarian state.

– Noam Chomsky


I was researching Chinese censorship when – irony of ironies – I fell afoul of American censorship, providing an opportunity to update you on the state of the art under both regimes, starting at home, with the recent attempt to frame the President for crimes he did not commit.

Like many attempts to frame people, events and nations – Vietnam, Iraq, 9/11, JFK, Bin Laden – it was a State hoax, a falsehood deliberately fabricated to masquerade as truth. An atrocity story sustained by artful censorship and loud, proud, bold, and brassy propaganda. An expensive, in-your-face, preposterous conspiracy, sustained for two years at great financial and reputational cost to the nation. Wildly ambitious, batshit crazy, and so self-destructive as to boggle the mind, it was one of many propaganda-driven frame-ups, another of which in progress as you read these lines.

It checks all the boxes: big, bold, loud and proud, expensive, in-your-face, a preposterous hoax, daringly ambitious and utterly self-destructive.

The China Hoax frames China’s Confucian politics and economics as if they were – or should be – Roman. It explains why thousands of predictions of China’s collapse have been one hundred percent wrong for seventy years and why we keep repeating them, and why we think of China’s government as oppressively authoritarian when ninety-five percent of Chinese think it’s super. It also helps us see how the narrative is sustained by an almost totalitarian censorship regime.

It is well known that our censors – for that’s what they are – have silenced hundreds of thousands of Americans with National Security Letters {1} and, whenever those prove inadequate, have permanent authority to take control {2} of all American communications and information. If undesirable communications persist they can kidnap, imprison, or execute the communicators {3} without fear of court trial or media criticism. Since China emerged as a threat to our hegemony six months ago they have tightened their control noticeably.



* * * * *


I bumped into them following a clue in Ann Lee’s {4} story about



A reporter and friend of Michael Massing {5}, who worked at the Beijing office of The Wall Street Journal, who told Massing that the editors in Washington regularly changed material information and opinions in his articles. Given the twelve-hour time difference, by the time his stories went to press in the West, the editors had replaced all the Chinese interviews with statements from American talking heads who work at think tanks promoting anti-China perspectives.


Congressional testimony from the CIA’s Victor Marchetti {6} revealed the source of the talking heads’ funding: he told Congress that the Agency provided two hundred fifty million dollars {7} annually, “To The Asia Foundation for anti-communist academicians to disseminate a negative vision of mainland China”, and paid journalists and publishers worldwide {8} to do likewise.

I had always assumed that the government manipulates the news somehow and had I thought a little deeper I would have realized that, after spending billions on framing China, censors would eventually tire of pipsqueak consumers like me questioning their narrative.

Until two weeks ago my comments on China in mainstream media attracted thousands of responses (one-third angry) from millions of readers and provided priceless exposure for my upcoming book, I hoped. My readership stats climbed steadily until I received an email from Patrice Greanville of the socialist Greanville Post on April 4 with a warning from Google:

Patrice told me that, since Google downrated his site as part of its fake news campaign, the Post had become almost invisible in their searches.

The next day I received a message from the Financial Times (to which I subscribed) informing me that my comments would be blocked thenceforth and, lo! they were:

I told another China-friendly FT commenter and he replied, “I was blocked last week”. When I checked the comment sections of China stories I found that positive comments had disappeared. One comment from a virulent China-basher, caught my eye, “Where are the wumao {9}? Have the fifty-centers given up?”

Three days later the leading comment plugin Disqus, which supports 750,000 websites and 35 million users, blocked me from a broad range of publications:

I was also blocked from several university-run China sites and two established China news services, Sinocism and SupChina (to which I also subscribe), whose mission is to publish negative stories about China. Yet uncensored fora like Unz Review, Greanville Post, and Quora demonstrate that there is high and growing interest in fact-based China news – and growing suspicion of a frame-up. There is also – as we see daily in these pages – a growing awareness of our own censorship regime, though a lack of knowledge about its makeup and authority.

We know that less than half of us trust our media and we know that, despite a Constitutional prohibition, we are censored. But we don’t know who our censors are, their goals, or where to seek redress. Neither Congress, the Administration nor the courts are willing to admit the problem, which suggests that they are party to it.

Every year Reporters Without Borders {10} asks Western media experts to rank the world’s media freedom based on pluralism, independence, environment, self-censorship, legislation, and transparency. In 2018, they ranked America’s media freedom a respectable forty-first, Singapore’s government-regulated media 154th, and China’s ten times less free than leader Norway, at 176th.

Every year Edelman {11} surveys the world’s media consumers, asking how much they trust their media. Forty-two percent of Americans, fifty-two percent of Singaporeans, and seventy-one percent of Chinese trust their national media.

Singapore’s Lee Kwan Yew {12}, whose relationship to media is both notorious and enlightening, told the American Society of Newspaper Editors why this is so.



The Philippines press enjoys all the freedoms of the US system but fails the people: a wildly partisan press helped Philippines politicians flood the marketplace of ideas with junk and confuse and befuddle the people so that they could not see what their vital interests were in a developing country. And, because vital issues like economic growth and equitable distribution were seldom discussed, they were never tackled and the democratic system malfunctioned. Look at Taiwan and South Korea: their free press runs rampant and corruption runs riot. The critic itself is corrupt yet the theory is, if you have a free press, corruption disappears. Now I’m telling you, that’s not true. Freedom of the press, freedom of news critics, must be subordinated to the overriding needs of the integrity of Singapore and to the primacy of purpose of an elected government.




* * * * *


Politicians must use only such language as is proper for public speech and only speak of what is practical and proper to effect.

– Confucius, Analects 13.3


The censorship scene in China could hardly be more different.

For two thousand years the Chief Censor has been a public intellectual and the incumbent, Wang Huning, is typical. He’s the most famous intellectual in a nation of intellectual-worshippers. His Master’s thesis, From Bodin to Maritain: On Sovereignty Theories Developed by the Western Bourgeoisie, won wide acclaim and millions watched him twice lead Fudan University to victory in the international Intercollegiate Debating Championships. After his PhD thesis, Comparative Political Analysis, became a famous book (one of twelve he’s authored) he became the youngest professor in Fudan’s history and headed its Law School until former President Jiang Zemin, quoting verbatim passages from his book, persuaded Wang to turn speechwriter. Jiang’s successor promoted him to the 25-man Politburo and his successor, President Xi, invited Wang to join his six-man cabinet and his band of travelling companions. That makes three successive presidents who have esteemed him more than their predecessors.

Everyone knows Wang’s bio, his job description, and the constitutional source of his authority: “Once a policy has been widely discussed, voted on, and legislated, discussion is suspended while everyone unites to implement it”.

His online rules are commonsensical: no infringing, fake accounts, libel, disclosing trade secrets, or invading privacy; no sending porn to attract users; no torture, violence, killing people or animals; no selling lethal weapons; no gambling, phishing, scamming, or spreading viruses; no organizing crime, counterfeiting, false advertising, empty promises, or bullying; no lotteries, rumor-mongering, promoting superstitions. No opposing the basic principles of the Constitution or national unity, sovereignty, and territorial integrity and, of course, no divulging State secrets or endangering national security.

Wang’s part of a feedback loop helping to keep the leadership honest and his responsibilities are bidirectional: he must market leadership’s ideas to the citizenry and market their complaints to his colleagues.

As an intellectual he encourages free expression, says Harvard’s Gary King,


Contrary to much research and commentary, the purpose of the censorship program is not to suppress criticism of the State or the Communist Party. Indeed, despite widespread censorship of social critics, we find that when Chinese people write scathing criticisms of their government and its leaders the probability that their post will be censored does not increase. Instead, censored tweets were equally likely to be against the state, for the state, irrelevant, or factual reports about events. Negative, even vitriolic criticism of the state, its leaders and its policies are not more likely to be censored.


Even investigative journalists {13}, though as embattled in China as elsewhere, publish front-page exposes in mainstream media with strong public support.

The Chinese are not naive about censorship. It’s is an honored public service, constitutionally and legislatively delimited, that operates in the glare of public scrutiny. Wang is often asked to explain his decisions {14} and I have yet to find accurate, useful, or professional information blocked.

Deborah Fallows {15} found that over eighty percent of Chinese want their media regulated and eighty-five percent of those who do want the government doing it, as do most people in the world. Everyone everywhere trusts state outlets like the BBC twice as much as private media and seventy percent of Chinese trust their media – right in line with Singaporeans and their famously regulated media. If we want to find out what is really going on in our own country and abroad we must find ways to create trustworthy media, otherwise we’re fumbling in the dark.

For example, we’re told China steals our intellectual property (IP) when there is zero evidence of theft and abundant evidence that they outspend us four to one on R&D.

That’s mad. If we don’t know that underinvestment in research cost us the 5G race, or that Chinese scientists do half of our domestic research, how can we respond effectively – or at all?

The China Hoax is a cruel joke and the joke’s on us.


{1} National Security Letters are administrative subpoenas with gag orders enjoining recipients from divulging to anyone that they’ve been served.

{2} Executive Order 10995: Assigning Telecommunications Management Functions and EO 12472: Assignment of National Security and Emergency Preparedness Communications Functions Act.

{3} In 2011 President Obama ordered the execution of Anwar al Awlaki, an American citizen, for preaching Wahabbism and separately executed his sixteen-year-old son and eight-year-old daughter, all without trial.

{4} What the US Can Learn from China, Ann Lee. 2012

{5} Former Executive Editor of The Columbia Journalism Review.

{6} The CIA and the Cult of Intelligence, by V Marchetti. 1976. The first book an American government censored prior to publication

{7} In 2019 US dollars

{8} English Translation of Udo Ulfkotte’s “Bought Journalists” Suppressed?

{9} An epithet flung at commenters who explain or justify Chinese policies. FP itself explains, “Wumao means ‘fifty cents’ in Chinese and is slang for web users who reliably take the government’s side. How to Spot a State-Funded Chinese Internet Troll. Foreign Policy, June 17 2015.


{11} 2018 Edelman Trust Barometer, January, 2018.

{12} A Third World Perspective on the Press. RH Lee Kwan Yew, Prime Minister of Singapore. C-SPAN, APRIL 14 1988

{13} Media Politics in China: Improvising Power under Authoritarianism by Maria Repnikova, CUP, July 15 2017.

{14} To complaints that he censored a viral essay, Beijing Has 20 Million People Pretending to Live Here, about the city being overrun by outsiders, he explained, “It polarizes relations between prosperous Beijingers and inflames ill feeling towards the vulnerable immigrants who sweep their streets”.

{15} Most Chinese Say They Approve of Government Internet Control, by Deborah Fallows, Senior Research Fellow, Pew Internet & American Life Project March 27 2008