Jay's Daily News

Iran to drop dollar from forex reserves

October 17, 2009
Tehran Times Economic Desk

TEHRAN -- The Trade Promotion Organization of Iran (TPOI) announced this week that it plans to exclude the U.S. dollar from Iran’s foreign exchange reserves.

In line with this plan, Iran has informed Japan that it should use the yen instead of dollars to pay for the oil it buys from the Islamic Republic.

In addition, Iran has decided to open a bourse for oil and gas transactions in currencies other than the U.S. dollar, especially the euro.

Although the opening of the new bourse has been postponed several times, the plan shows the country’s determination to replace the dollar in its oil and gas transactions.

The TPOI has also announced that since October 2007 Iran has sold 85 percent of its oil exports in currencies other than the U.S. dollar and is determined to sell the remaining 15 percent in other currencies such as the UAE dirham.

During his first term, Iranian President Mahmoud Ahmadinejad ordered that the dollar should be replaced by the euro in the transactions of Iran’s currency reserve fund.

Saturday, October 17, 2009

Russia and Iran Now OFFICIALLY Talking of Dumping Dollar for International Trade



After the Independent reported that Middle Eastern oil producers, plus China, Japan and France have all agreed to start trading oil using a basket of currencies - instead of the dollar - starting in 9 years, spokesmen for those governments denied it.
The Independent's reporter explained why the governments were denying the rumor.

But now the governments themselves are starting to admit that they are switching out of the dollar.
For example, Russian Prime Minister Vladimir Putin said Wednesday that Russia is ready to consider using the Russian and Chinese national currencies instead of the dollar in bilateral oil and gas dealings. As Russia's newspaper RIA Novosti writes:

Russia is ready to consider using the Russian and Chinese national currencies instead of the dollar in bilateral oil and gas dealings, Prime Minister Vladimir Putin said on Wednesday.
The premier, currently on a visit to Beijing, said a final decision on the issue can only be made after a thorough expert analysis.
"Yesterday, energy companies, in particular Gazprom, raised the question of using the national currency. We are ready to examine the possibility of selling energy resources for rubles, but our Chinese partners need rubles for that. We are also ready to sell for yuans," Putin said.

And Iran's Press TV reports that Iran wants to completely drop the dollar from its foreign exchange:

Since October 2007, Iran has received 85 percent of its oil revenues in currencies other than the US dollar and Tehran is determined to find a substitute for the US dollar for the rest of its 15 percent of oil revenues, the report added.

This story is confirmed by the Tehran Times, which notes:

In line with this plan, Iran has informed Japan that it should use the yen instead of dollars to pay for the oil it buys from the Islamic Republic.

In addition, Iran has decided to open a bourse for oil and gas transactions in currencies other than the U.S. dollar, especially the euro.

As I have repeatedly noted, many countries have been moving out of the dollar for years. The process is simply accelerating.

Monday, October 19, 2009
Allen L Roland

WALL STREET PONZI SCHEME CONTINUES UNABATED


The Dow is at 10,000, the Federal deficit isbreaking records, unemployment is skyrocketing and money is cheap ~ so let's inflate the same debt bubble, continue Wall Street's derivative Ponzi scheme and let Main Street take the risk while Wall Street takes the profit: Allen L Roland

As Henry Kissinger once said ~ " It's not a matter of what is true that counts but a matter of what is perceived to be true " and, believe me, the recent rally of the Dow Jones to 10,000 is a manipulated Wall Street Ponzi scheme to draw Main Street into the market to reinflate the same credit bubble that just burst ~ while bailing out the financial elite, who are mainly sellers, in the process.
When Robert Reich says " Watch Your Wallet even with the Dow at 10,000 " ~ you had better listen because the real truth of our present financial disaster is just beginning to emerge from the darkness.

Reich goes on to explain why the Dow Jones broke 10,000 while the rest of the economy is barely breathing ~ " Corporate earnings are up ~ mainly because companies have been cutting costs. Payrolls comprise 70 percent of most companies' costs, which means companies have been slashing jobs ...... Unsophisticated Investors of all stripes want to get in early and ride the wave. Pension funds, mutual funds, and other institutional investors figure the bull market has more oomph in it because, well, other investors will jump in. Think Ponzi scheme.Nice for now, but watch out if you're one of the last in....In other words, this is all temporary fluff, folks.... Anyone who hasn't learned by now that there's almost no relationship between the Dow and the real economy deserves to lose his or her shirt in the Wall Street casino."
http://www.salon.com/opinion/feature...rce=newsletter

Of course, at the center of all of these financial shenanigans is Goldman Sachs whose surging profits will probably enable it to dispense $23 billion in bonuses this year. Matt Taibbi, Rolling Stone, rightfully described Goldman as a “great vampire squid wrapped around the face of humanity, relentlessly jamming its blood funnel into anything that smells like money.”

Reviewing Danny Schechter's The Crime of Our Time

October 14th, 2009 9:17 AM
by Stephen Lendman


Danny Schechter is a media activist, critic, independent filmmaker, and TV producer as well as an author of 10 books and lecturer on media issues. Some call him "The News Dissector," and that's the name of his popular blog on media issues. He's also the co-founder of Media Channel.org that covers the "political, cultural and social impacts of the media," and provides information unavailable in the mainstream.

Schechter's books include The More You Watch The Less You Know, Plunder: Investigating Our Economic Calamity and the Subprime Scandal, and his newest and subject of this review, The Crime of Our Time: Was the Economic Collapse "Indeed, Criminal?"

http://www.thepeoplesvoice.org/TPV3/...s-the-crime-of

Warren Buffett Explains How The Bailout Is Crushing Healthy Companies
Warren BuffettOctober 10th, 2009
Clayton’s lending operations, though not damaged by the performance of its borrowers is nevertheless threatened by an element of the credit crisis. Funders that have access to any sort of government guarantee — banks with FDIC-insured deposits, large entities with commercial paper backed by the Federal Reserve, and others who are using imaginitive methods (or lobbying skills) to come under the government’s umbrella — have money costs that are minimal. Conversely, highly-rated companies, such as Berkshire, are experiencing borrowing costs that, in relation to treasury rates, are at record levels. Moreover, funds are abundant for the government-guaranteed borrower, but often scarce for others no matter how creditworthy they are.

http://www.pearl-invest.net/warren-b...thy-companies/

International Forecaster October 2009 (#5) - Gold, Silver, Economy + More

By: Bob Chapman, The International Forecaster




-- Posted Sunday, 18 October 2009 | Digg This Article | Share this article | Source: GoldSeek.com


The following are some snippets from the most recent issue of the International Forecaster. For the full 26 page issue, please see subscription information below.

US MARKETS

Some of Treasury Secretary Timothy Geithner’s closest aides, none of whom faced Senate confirmation, earned millions of dollars a year working for Goldman Sachs Group Inc., Citigroup Inc. and other Wall Street firms, according to financial disclosure forms.

The advisers include Gene Sperling, who last year took in $887,727 from Goldman Sachs and $158,000 for speeches mostly to financial companies, including the firm run by accused Ponzi scheme mastermind R. Allen Stanford. Another top aide, Lee Sachs, reported more than $3 million in salary and partnership income from Mariner Investment Group, a New York hedge fund.

http://news.goldseek.com/Internation...1255883260.php

Dethroning the Dollar

by Michael S. Rozeff

America is down. Is she out? America is capable of putting her house in order. She has great strengths lodged in her people. It is not too late to resuscitate the American economy and revive its vitality. Will the proper policies and radical system changes be instituted to accomplish that challenge? Unfortunately, there are no current signals to that effect being given off by America’s ruling elite. We are seeing the very opposite. Foreign leaders can read these negative signals as well as we can. They are acting accordingly. They are starting to dethrone the dollar.

More Details on Bernanke’s Meddling
October 20, 2009|Posted By Adam Sharp

From Bloomberg:

Bank of America Corp. signed off on its government-assisted purchase of Merrill Lynch & Co. after U.S. regulators said the deal might boost the shares, e-mails from two executives showed. Instead, the stock collapsed.

"The chairman of the Federal Reserve indicated it would be structured in a manner such that BAC stock should go up when announced,” Chief Financial Officer Joe Price said in a Dec. 29 e-mail to executives of the Charlotte, North Carolina-based bank, including Chief Executive Officer Kenneth D. Lewis.

I take two things from this. First, it was Bank of America’s greed that drove them to accept the deal. Second, Bernanke is willing to do whatever, and I mean whatever, it takes to prop up the markets. They gave BofA $20b and guaranteed $118b in debt as part of the Merrill deal. It’s insane. And Bernanke thought it would boost BAC stock, and that was perfectly dandy.

Moral hazard, anyone? The fact that BAC ended up crashing is immaterial to me. BofA thought they were getting a sweetheart deal.

Unless somebody checks the Fed’s power, they will print as much as it takes to get out of this. When the current program ends, and everything starts deteriorating, what do you think they’re gonna do? Extend, expand, and print. They will say they didn’t see this downturn coming, that the economy was looking good (and why not, when they’re pumping trillions?). See Flaws in the Deflation Case for more on the general concept, though it is a little dated.

I can’t pass up the opportunity to post this picture by Jesse, even if Lewis may not have been under as much pressure as we thought at the time.

http://www.bearishnews.com/wp-conten...errill-boa.jpg

Not news but an article on Japan's current fiscal condition.

Rising Debt a Threat to Japanese Economy

http://www.nytimes.com/2009/10/21/bu...1&ref=business

I enjoyed it because I share the same views

106 Banks Down the Tube

Friday, October 23, 2009 6:28 PM


With the 100th bank failure in the rearview mirror, a Georgia bank and two more in Florida (in Naples and Bradenton) go down as 101-103, at a combined estimated cost to the Deposit Insurance Fund of $148M. Updated 7:15 p.m.: Banks in Wisconsin and Minnesota make 105 failures total, another $120M from the DIF. 8:36 p.m.: No. 106, in Illinois.

OCTOBER 31, 2009, 6:14 A.M. ET

Obama Cites Good Signs on Economy

By JUDITH BURNS

WASHINGTON -- U.S. President Barack Obama said the nation's economy seems to be moving in the right direction, helped by a $787 billion stimulus package he signed into law early this year.

The Commerce Department announced this week that the U.S. economy grew 3.5% in the third quarter, after a year of contraction. In his weekly radio address, the president called the results "a good sign," and evidence that steps taken by his administration are "blunting the worst of this recession and helping to bring about its conclusion."

A new report on the economic stimulus act, also issued this week, shows it created and saved more than one million jobs, the president added. However, he cautioned that despite signs of a turnaround, the U.S. has a long way to go before it returns to prosperity and likely will see further job losses ahead.

"As I've said many times, it took years to dig our way into the crisis we've faced. It will take more than a few months to dig our way out. But make no mistake: that's exactly what we will do," the president said.

House Republican Leader John Boehner, R-Ohio, who delivered the Republican response, focused his remarks on efforts to overhaul U.S. health care. Boehner assailed legislation unveiled this week by House Democrats, saying it would empower bureaucrats to make medical decisions that could mean the difference between life and death.

Mr. Boehner also predicted that the Democrats' proposal would raise the cost of health insurance premiums, cut Medicare benefits for senior citizens, reduce jobs due to tax hikes and be too costly for taxpayers.

"We now have a choice: we can come together to implement smart, fiscally responsible reforms to improve Americans' health care or we can recklessly pursue this government takeover that creates far more problems than it solves," Mr. Boehner said.

Another View At Goldman's Trading Perfection And Statistical Improbabilities


Submitted by Tyler Durden on 11/04/2009 11:03 -0500


When a firm's trading performance challenges not only all preconceptions of realistic trading, but also of statistical distributions, one can merely stand back and watch in awe. Attached is a graphic of what a rigged, backstopped and manipulated market is all about. The chart demonstrates Goldman's YTD trading track record: out of 194 trading days in 2009, the firm has made over $100 million on 116 occasions! This alone accounts for $11.6 billion in revenue (and is likely much more as Goldman could have easily had a $1 billion trading day in the rightmost bracket as it is open ended). Assuming midline averages for any given bucket and multiplying by the amount of days that the firm traded within these, Goldman Sachs has made $15 billion courtesy of the skewed and very highly improbable (but not impossible, thank you taxpayers and Ben Bernanke) chart.
http://www.zerohedge.com/sites/defau...%20P%26L_0.jpg
And a more granular read, demonstrates that as the year has progressed, Goldman has become much better at extracting larger wins and minimizing losses. The firm lost money on just 3 days in the last two quarters. Is this a ponzi scheme? We surely don't know absent additional information (which will never be forthcoming, despite that GS is a public company). Is this comparable to the returns generated by a ponzi scheme? Absofuckinlutely.
http://www.zerohedge.com/sites/defau...by%20Qtr_0.jpg

This is quite interesting if in any way true

http://www.marketoracle.co.uk/Article14996.html

Hiding Debt Just a Juggling Trick



November 16, 2009
Scott A. Beaulier, Peter J. Boettke
East Valley Tribune


The Treasury Department—whose mission has ostensibly expanded to include management of government finances, the promotion of economic growth and stability, and the provision of safety, soundness, and security in financial systems—will hit its debt ceiling (yet again) by year’s end.

In the final chapter of The Wealth of Nations, Adam Smith argued that once national debts have accumulated to a certain degree, they are rarely paid. Government officials, he argues, are both unwilling and unable to get serious about debt. They don’t want to lose popularity by raising taxes and they will never cut spending enough. Instead, they employ “juggling tricks” to push the debt problem into the future and hide the full costs.

The most improper “trick” Smith forecasted was currency debasement, “by which a real public bankruptcy [is] disguised under the appearance of a pretended payment.” President Obama and his team of economic advisors would do well to revisit Smith’s timeless discussion of “juggling tricks,” because despite the president’s “exit strategies” rhetoric, further debasement seems to be the inevitable policy path.

Indeed, the current administration inherited a mess from former President Bush, but in his first nine months in office, President Obama has done nothing to curtail the vicious cycle of economic ruin. Instead, he has accelerated it. The tricks being played by Obama, such as his effort to distract voters from historically unprecedented deficits by talking about “halving the deficit” and shifting attention away from fiscal crisis by focusing on the environment and health care, are similar to Bush’s tactics. They are tried and true schemes employed by both parties because they conceal the real costs of government excess from voters.

Our modern-day debasement has come, in part, because it is impossible to keep the Fed and Treasury separate, a problem that has grown more severe since the 2008 financial crisis. But as many 20th century economists warned us—so long as these institutions exist—they will remain entangled. For example, the 1974 Nobel Prize winner in economics, F. A. Hayek, often warned of the monetary policy dance becoming an exercise of “holding a tiger by the tail.” James Buchanan, the 1986 Nobel Prize winning economist, warned of the political legacy of Keynesian economics as producing “democracy in deficit.” Economists like Smith, Hayek, and Buchanan have been consistent in arguing for government restraints because a government unable to constrain itself threatens to destroy the economic future of its citizens.

An alternative to such tricks exists. If truly implemented, debt repudiation could prevent people from being fooled again and again in the future. Rather than incur painful, gradual inflation taxes, we would prefer to see politicians come clean. Debts will be erased once and for all, and the legitimacy of the State will, in one fell swoop, be called into question. Rather than erode debt obligations through inflation, the debt could be repudiated through bankruptcy proceedings. Like individual bankruptcy cases, the United States government would admit that they are unable to pay off existing debts. The repudiation forces future politicians to credibly commit to sounder economic policies and, perhaps, would help to avoid future cycles of deficits, debt, and debasement.

Of course, our call for debt repudiation is not a new one. Like many good ideas in economics, Adam Smith was there long before us. “When it becomes necessary for a state to declare itself bankrupt...a fair, open, and avowed bankruptcy...is both least dishonourable to the debtor, and least hurtful to the creditor,” he argued. In other words, when the financial storm arrives—and it will—the juggling tricks must stop.


Scott A. Beaulier is Research Fellow at the Independent Institute’s Center for Entrepreneurial Innovation and BB&T distinguished professor of capitalism. He is the department chair of economics at Mercer University. He performed field research in Botswana in 2004.

Peter J. Boettke is Research Fellow at The Independent Institute and BB&T distinguished professor of capitalism. He is also Professor of Economics at George Mason University.

The Truth Behind China's Currency Peg

By Peter Schiff
Published 11/21/09

During President Obama's high profile visit to China this week, the most frequently discussed, yet least understood, topic was how currency valuations are affecting the economic relationship between the United States and China. The focal problem is the Chinese government's policy of fixing the value of the renminbi against the U.S. dollar. While many correctly perceive that this 'peg' has contributed greatly to the current global imbalances, few fully comprehend the ramifications should that peg be discarded.

The common understanding is both incomplete and naive. Most analysts simply see the peg as China's principal weapon in an economic struggle for global ascendancy. The peg, they argue, offers China a competitive advantage by making its products cheaper in U.S. markets, thus allowing Chinese firms to gobble up market share and steal jobs from U.S. manufacturers. The thought is that were China to allow its currency to rise, American manufactures would regain their lost edge, and both manufacturing firms and the jobs formerly associated with them would return. In this narrative, the struggle centers on the United States' diminishing leverage in persuading the Chinese to lay down their unfair weaponry. It's a sympathetic picture, but it tells the wrong story.

While the peg certainly is responsible for much of the world's problems, its abandonment would cause severe hardship in the United States. In fact, for the U.S., de-pegging would cause the economic equivalent of cardiac arrest. Our economy is currently on life support provided by an endless flow of debt financing from China. These purchases are the means by which China maintains the relative value of its currency against the dollar. As the dollar comes under even more downward pressure, China's purchases must increase to keep the renminbi from rising. By maintaining the peg, China enables our politicians and citizens to continue spending more than they have and avoiding the hard choices necessary to restore our long-term economic health.

Contrary to the conventional wisdom, when China drops the peg, the immediate benefits will flow to the Chinese, not to Americans. Yes, prices for Chinese goods will rise in the United States â€" but so will prices for domestic goods. As a corollary, the Chinese will see falling prices across the board. As anyone who has ever been shopping can explain, low prices are a good thing.

In addition, credit will expand in China while it contracts here. When China abandons the peg, it will no longer need to swell its currency reserves by buying Treasuries or other dollar-denominated debt instruments. Other nations will no longer feel the pressure to keep their currencies from rising, so they too could throttle down on their onerous dollar purchases.

As demand falls for both dollars and Treasuries, prices and interest rates in the United States will rise. Rising rates will restrict the flow of credit that is currently financing government and consumer spending. This change will finally force a long overdue decline in borrowing. So, not only will Americans lose access to the consumer credit that funds their current spending, but the things they buy will also get more expensive.

Our short-term loss will be in sharp contrast to the gain felt by foreigners, who will be rewarded with falling consumer prices and a more abundant supply of investment capital. In other words, the American standard of living will fall while that of our trading partners will rise.

However, this does not mean that I want the Chinese to maintain the status quo. In the long run, the U.S. economy will benefit from the abandonment of a system that guarantees our dependency and inevitable downfall. De-pegging will force the hand of U.S. politicians toward pursuing realistic policies. The Chinese will come to their senses eventually because it is in their interest to do so. Meanwhile, the longer the peg is maintained, the more indebted we become, the more out of balance our economy grows, and the more our industrial base shrivels. In short, the longer they wait, the steeper our fall.

A weaker dollar will price many imported products beyond the reach of most Americas, giving our hollowed out manufacturing sector the opportunity to rebound. However, if our industry has any chance of getting off the mat, we must reduce taxes, repeal regulations, reform our cumbersome legal system, and, most importantly, replenish our savings to finance the necessary capital investment.

If we position ourselves to deal with the consequences, tough love from China will provide a path back to genuine economic growth. However, if our politicians continue to misread the problem and push us deeper in the red, the inevitable 'rebalancing' could be truly ruinous.


Copyright 2009 Euro Pacific Capital

Shareholders demand Goldman bonuses

Investment bank under fire again as investors protest at record bonuses of $717,000 each


Elena Moya
guardian.co.uk

Friday 20 November 2009 19.38 GMT



Goldman Sachs has had to defend itself from angry taxpayers, regulators, the government – and now its own shareholders.

Some of the US investment bank's largest investors are furious about the New York-based firm paying record bonuses to its staff – bonuses are estimated to be $717,000 (£435,000) each for 2009, the biggest payout in the firm's 140 years.

Investors claim that now profits are back, rewards should go first to shareholders because they suffered the cost of the credit crunch more than anybody else.

"Most of the losses were for equity shareholders," said a fund manager at a large investment firm. "If they had cared about the preservation of equity value, the crisis wouldn't have been nearly as bad as it was. It would be in everybody's interest, the taxpayer and of banks themselves, if management's interests were more aligned with shareholders."

Critics claim that banks' high-paying bonus culture encouraged a short-term vision that pushed institutions into over-lending and taking more risks than they could afford. In October last year, Goldman Sachs received $10bn from the US government to shore up its books – the bank was one of nine recipients of federal aid. Goldman, which repaid the money earlier this year, is still benefiting from government assistance as it can borrow funds direct from the Federal Reserve.

But after the collapse of rivals such as Lehman Brothers and Bear Stearns, Goldman's earnings, as well as those of other banks, have soared to record highs, helped by booming stock, credit and commodity markets.

Goldman has earmarked about $16.7bn so far this year for its staff bonus pool - or 47% of net revenues, along the lines of a 2000-2008 average of 46.7%, according to the firm. That compares with 66% at Merrill Lynch, 47% at Morgan Stanley and 41% at JP Morgan – one of the banks least affected by the crisis.

"Our investors have consistently told us that they expect the firm to set compensation at a level which produces attractive returns to shareholders while maintaining the strength of our franchise, which is the basis for generating returns for the long term," Goldman Sachs said.

Investors, however, complain that bankers' high bonuses did not save Lehman or Bear Stearns. "They were paid a lot and they didn't create value for shareholders," the fund manager said.

Banks often find they are not challenged by their investors when deciding pay structures – if shareholders do not agree with management policies they just sell the stock, instead of instigating change. Only two investors hold more than 5% of Goldman Sachs shares, according to Bloomberg data. "Investors are a dispersed group, the only thing to do to solve this is to get the regulator involved," the fund manager said.

Financial authorities in Britain and Europe are pushing for new regulations to cap bankers' pay.

Some investors, however, say banks should pay its staff as much as possible to retain them. "We want firms to make as much profit as possible, what they have to pay their employees is appropriate," said a fund manager at a hedge fund that holds a stake in Goldman. Another hedge fund manager said that the partially nationalised Royal Bank of Scotland had "lost credibility as an employer" as they cannot pay bonuses following the government's intervention in the bank.

Goldman's chairman, Lloyd Blankfein, publicly apologised this week for the role of his bank in the credit crunch. The bank also said it would donate $500m (or 3% of what it has set aside to pay its employees this year) to help thousands of small businesses recover from the recession.

Sunday, November 22, 2009

Herman Van Rompuy: Europe's first president to push for 'Euro tax'

Herman Van Rompuy, Europe's first president, is to join forces with the European Commission to push for sweeping new tax raising powers for Brussels.
http://2.bp.blogspot.com/_YQoI-WNO8e...Jos/s400/1.JPGVan Rompuy: Mr Van Rompuy, 62, who was appointed to the newly-created £320,000-a-year post at last week's special EU summit, set out his stall on direct Euro-taxes during a private speech

Within days of taking office in January, the former Belgian prime minister will put his weight behind controversial proposals already floated by the commission's head, José Manuel Barroso, for a new "Euro tax".

He will add credence to Mr Barroso's plans, to be formally tabled in the New Year, by arguing for a Euro-version of a "Tobin Tax" – a levy on financial transactions already floated by Gordon Brown as a solution to the international banking crisis. It would result in a stream of income direct to Brussels coffers, funding budgets that critics say are already rife with waste and overspending.


Mr Van Rompuy, 62, who was appointed to the newly-created £320,000-a-year post at last week's special EU summit, set out his stall on direct Euro-taxes during a private speech at a recent meeting of the Bilderberg group of top politicians, bankers and businessmen. The group officially meets in secret, but when selected details of his remarks leaked out, his office was forced to issue a public statement on his behalf.

"The financing of the welfare state, irrespective of the social reform we implement, will require new resources," he said. "The possibility of financial levies at European level needs to be seriously reviewed."

Mr Barroso, whose commission acts as the European Union's executive arm and civil service, has set out alternative plans for a Euro tax that would involve Brussels taking directly a fixed percentage of VAT and fuel duties. While these taxes already help to fund EU spending – set at £121 billion next year – they are currently gathered by the treasuries of individual nation states, from which varying sums are paid into EU coffers.

A new Euro tax could appear on all shopping and petrol station receipts, showing the amount of VAT or fuel duty creamed off directly to Brussels. Supporters say it would take a fixed proportion of the existing tax revenue rather than increase it overall, and make the cost to taxpayers of running the EU more transparent. Critics argue this could backfire by increasing anti-Brussels sentiment.

Mr Van Rompuy has not set out in detail exactly which tax raising mechanisms he favours most, but after the Bilderberg meeting his spokesman said he would look favourably on either green taxes or a version of the Tobin Tax, originally proposed in 1972 by the US economist James Tobin as a tax on currency speculation.

Mr Brown floated this earlier this month as a way of financing future bail outs of the banking system, although he meant it for global rather than purely European purposes.

But whichever revenue-raising mechanism was used, the backing of two of Europe's most senior apparatchiks for the idea in principle will give it extra momentum.

Opponents of the idea could also underestimate Mr Van Rompuy's determination to get his own way. Ostensibly chosen for his new job because of his skill as a consensus-builder, he is also known as a skilled and ruthless political operator, who is happy to play rough as well as smooth. Last year he ordered the locks to be changed on a chamber in the Belgian parliament in order to prevent deputies holding a politically disruptive debate. According to Belgian newspaper De Morgen, van Rompuy told colleagues a few weeks ago that to achieve a top EU function you must "not ask for high office, but become a grey mouse, and offers will come."

Mr Barroso, meanwhile, has just been reappointed to his post by member states for a second five year term, freeing him to push his tax agenda in bolder fashion than before. Any move towards Euro taxes, however, will encounter bitter opposition from British Conservatives.

"Any kind of harmonised tax system will remove control over our national tax systems," said Timothy Kirkhope, leader of the Britain's Conservative MEPs. "Competition in Europe depends on member states being allowed to have competitive tax regimes."

In opposing any Euro-tax plans, the Tories will find an unlikely ally in Mr Van Rompuy's sister Christine, 54, a left-wing nurse who joined the Marxist Belgian Workers' Party after witnessing the Belgian government's privatisation of the health service. She is now one of her brother's staunchest political critics, and the brochure used by her party features a picture of her brother dressed as a clown.

"I disagree with my brother's ideas for a green tax," she said. "Any new taxes would be paid by the poor. We need to tax the rich."

Meet the President of Europe

From the desk of Paul Belien
Fri, 2009-11-20 09:32

Herman Van Rompuy. Get used to the name. He is the first President of the European Union, which with the ratification of the Treaty of Lisbon by all the 27 EU member states in early November was transformed into a genuine United States of Europe.The President of Europe has not been elected; he was appointed in a secret meeting of the heads of government of the 27 EU member states. They chose one of their own. Herman Van Rompuy was the Prime Minister of Belgium. I knew him when he was just setting out, reluctantly, on his political career.

To understand Herman, one must know something about Belgium, a tiny country in Western Europe, and the prototype of the EU. Belgians do not exist as a nation. Belgium is an artificial state, constructed by the international powers in 1830 as a political compromise and experiment. The country consists of 6 million Dutch, living in Flanders, the northern half of the country, and 4 million French, living in Wallonia, the southern half. The Belgian Dutch, called Flemings, would have preferred to stay part of the Netherlands, as they were until 1830, while the Belgian French, called Walloons, would have preferred to join France. Instead, they were forced to live together in one state.

Belgians do not like their state. They despise it. They say it represents nothing. There are no Belgian patriots, because no-one is willing to die for a flag which does not represent anything. Because Belgium represents nothing, multicultural ideologues love Belgium. They say that without patriotism, there would be no wars and the world would be a better place. As John Lennon sang “Imagine there’s no countries, it isn’t hard to do, nothing to kill or die for, and no religion too."

In 1957, Belgian politicians stood at the cradle of the European Union. Their aim was to turn the whole of Europe into a Greater Belgium, so that wars between the nations of Europe would no longer be possible as there would no longer be nations, the latter all having been incorporated into an artificial superstate.

A closer look at Belgium, the laboratory of Europe, shows, however, that the country lacks more than patriotism. It also lacks democracy, respect for the rule of law, and political morality. In 1985, in his book De Afwezige Meerderheid (The Absent Majority) the late Flemish philosopher Lode Claes (1913-1997) argued that without identity and a sense of genuine nationhood, there can also be no democracy and no morality.

One of the people who were deeply influenced by Dr. Claes’s thesis was a young politician named Herman Van Rompuy. In the mid-1980s, Van Rompuy, a conservative Catholic, born in 1947, was active in the youth section of the Flemish Christian-Democrat Party. He wrote books and articles about the importance of traditional values, the role of religion, the protection of the unborn life, the Christian roots of Europe and the need to preserve them. The undemocratic and immoral nature of Belgian politics repulsed him and led to a sort of crisis of conscience. Lode Claes, who was near to retiring, offered Herman the opportunity of succeeding him as the director of Trends, a Belgian financial-economic weekly magazine. It is in this context that I made Herman’s acquaintance. He invited me for lunch one day to ask whether, if he accepted the offer to enter journalism, I would be willing to join him. It was then that he told me that he was considering leaving politics and was weighing the options for the professional life he would pursue.

I am not sure what happened next, however. Maybe word had reached the leadership of the Christian Democrat Party that Herman, a brilliant economist and intellectual, was considering leaving politics; perhaps they made him an offer he could not refuse. Herman remained in politics. He was made a Senator and entered government as a junior minister. In 1988, he became the party leader of the governing Christian-Democrats.

Our paths crossed at intervals until 1990, when the Belgian Parliament voted a very liberal abortion bill. The Belgian King Baudouin (1930-1993), a devout Catholic who suffered from the fact that he and his wife could not have any children, had told friends that he would “rather abdicate than sign the bill.” The Belgian politicians, convinced that the King was bluffing, did not want the Belgian people to know about the King’s objections to the bill. I wrote about this on the op-ed pages of The Wall Street Journal and was subsequently reprimanded by the Belgian newspaper I worked for, following an angry telephone call from the then Belgian Prime Minister, a Christian-Democrat, to my editor, who was this Prime Minister’s former spokesman. I was no longer allowed to write about Belgian affairs for foreign newspapers.

In April 1990, the King did in fact abdicate over the abortion issue, and the Christian-Democrat Party, led by Herman Van Rompuy, who had always prided himself on being a good Catholic, had one of Europe’s most liberal abortion bills signed by the college of ministers, a procedure provided by the Belgian Constitution for situations when there is no King. Then they had the King voted back on the throne the following day. I wrote about the whole affair in a critical follow-up article for The Wall Street Journal and was subsequently fired by my newspaper “for grievous misconduct”. A few weeks later, I met Herman at the wedding of a mutual friend. I approached him for a chat. I could see he felt very uncomfortable. He avoided eye contact and broke off the conversation as soon as he could. We have not spoken since.

Herman’s political career continued. He became Belgium’s Budget Minister and Deputy Prime Minister, Speaker of the Chamber of Representatives and finally Prime Minister. He kept publishing intellectual and intelligent books, but instead of defending the concept of the good, he now defended the concept of “the lesser evil.” And he began to write haiku.

Two years ago, Belgium faced its deepest political crisis ever. The country was on the verge of collapse following a 2003 ruling by its Supreme Court that the existing electoral district of Brussels-Halle-Vilvoorde (BHV), encompassing both the bilingual capital Brussels and the surrounding Dutch-speaking countryside of Halle-Vilvoorde, was unconstitutional and that Parliament should remedy the situation. The ruling came in response to a complaint that the BHV district was unconstitutional and should be divided into a bilingual electoral district Brussels and a Dutch-language electoral district Halle-Vilvoorde. This complaint had been lodged by… Herman Van Rompuy, a Flemish inhabitant of the Halle-Vilvoorde district.

In 2003, however, the Christian-Democrats were not in government and Herman was a leader of the opposition. His complaint was intended to cause political problems for Belgium’s Liberal government, which refused to divide the BHV district because the French-speaking parties in the government refused to accept the verdict of the Supreme Court. The Flemish Christian-Democrats went to the June 2007 general elections with as their major theme the promise that, once in government, they would split BHV. Herman campaigned on the issue, his party won the elections and became Flanders’ largest party.

Belgium’s political crisis dragged on from June until December 2007 because it proved impossible to put together a government consisting of sufficient Dutch-speaking (Flemish) and French-speaking (Walloon) politicians. The Flemings demanded that BHV be split, as instructed by the Supreme Court; the Walloons refused to do so. Ultimately, the Flemish Christian-Democrats gave in, reneged on their promise to their voters, and agreed to join a government without BHV being split. Worse still, the new government has more French-speaking than Dutch-speaking ministers, and does not have the support of the majority of the Flemings in Parliament, although the Flemings make up a 60% majority of the Belgian population. Herman became the Speaker of the Parliament. In this position he had to prevent Parliament, and the Flemish representatives there, from voting a bill to split BHV. He succeeded in this, by using all kinds of tricks. One day he even had the locks of the plenary meeting room changed so that Parliament could not convene to vote on the issue. On another occasion, he did not show up in his office for a whole week to avoid opening a letter demanding him to table the matter. His tactics worked. In December 2008, when the Belgian Prime Minister had to resign in the wake of a financial scandal, Herman became the new leader of the predominantly French-speaking government which does not represent the majority of Belgium’s ethnic majority group. During the past 11 months, he has skillfully managed to postpone any parliamentary vote on the BHV matter, thereby prolonging a situation which the Supreme Court, responding to Herman's own complaint in 2003, has ruled to be unconstitutional.

Now, Herman has moved on to lead Europe. Like Belgium, the European Union is an undemocratic institution, which needs shrewd leaders who are capable of renouncing everything they once believed in and who know how to impose decisions on the people against the will of the people. Never mind democracy, morality or the rule of law, our betters know what is good for us more than we do. And Herman is now one of our betters. He has come a long way since the days when he was disgusted with Belgian-style politics.

Herman is like Saruman, the wise wizard in Tolkien’s Lord of the Rings, who went over to the other side. He used to care about the things we cared about. But no longer. He has built himself a high tower from where he rules over all of us.

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