Transcript: Interview with Analyst and Former U.S. Assistant Secretary of the Treasury Paul Craig Roberts

paulcraigroberts1The transcript of Dialogos Radio’s interview with economist, analyst, author, and former United States undersecretary of the treasury Paul Craig Roberts. This interview aired on our broadcasts for the week of March 3-9, 2016. Find the podcast of this interview here.

MN: Joining us today on Dialogos Radio and the Dialogos Interview Series is economist, author, and columnist Paul Craig Roberts. Dr. Roberts is a former Assistant Secretary of the Treasury for the United States, a former editor for the Wall Street Journal, and is a contributor to a number of other publications. He has written over 20 peer-reviewed articles and over a dozen books, with his most recent book titled “The Neoconservative Threat to World Order: Washington’s Perilous War for Hegemony.” Dr. Roberts, thank you for being with us today.

PCR: Pleased to be with you.

MN: Let’s look first at the topic of Greece and everything that has been happening to the country in recent years. You have written that Greece is under foreign occupation. Explain to our listeners why you believe this is the case.

PCR: Well, Greece is being looted like a colony of the private banks, which is what it is. Previous Greek governments accepted bribes to indebt Greece to private banks. For example, someone would come from Germany and say “let us make you this nice loan so you can buy German submarines, and here’s a bag full of money for agreeing.” This is the way much of the Greek debt was built up.

Now, normally in the past, when people found they had excessive debt or governments had excessive debt that they can’t service, the debt is written down to an amount that can be serviced. For example, when Mexico couldn’t pay in the 1980s, the debt was written down, the U.S. government came up with Brady bonds, which was a way of writing down the debt. But now that looting is completely unleashed, the rule is that if a government can’t pay, the Greek people have to pay, and the way they have to pay is to accept cuts in their public pensions, cuts in employment, lower wages, cuts in social services, and they have to sell off their municipal water companies, their ports, the state lottery, their protected national islands. All of this money is then used to pay the private bankers that lent the Greek governments money that did not really did not really benefit the Greek people very much, but benefitted the foreign recipients of the loans, such as the purchase of German submarines.

So this is a looting process, it’s the way that the colonialists looted the colonies in Africa and Asia, and now what we see is that the West is looting itself, as it did in Ireland, as it tried to do in Iceland but failed, and now it’s looted Greece; Italy and Spain are on the list, Portugal has been looted, and this all happens because the people accept it. Even when they protest, they don’t go far enough. For example, when the Greek people elected, barely, by some very small amount, a government that promised to resist this looting, the Greek people didn’t give that government enough of a vote that it had any real clout dealing with the European Central Bank and Germany and the private banks. Furthermore, the polls showed that the Greek people wanted to remain in the EU and to retain the euro. That then took all negotiating power away from the government they had elected, and so the government was powerless.

So we have here a situation where the Greek people don’t even understand what they have to do to save themselves and to be independent. They’re so brainwashed into accepting EU domination, which means you have no national sovereignty. If you’re a member of the EU and you use the euro, you have no national sovereignty, you have no financial independence.

MN:  Let’s tackle these issues…what do you make of the actions of the supposedly left-wing SYRIZA government in Greece, particularly its actions following the referendum of last July?

PCR: Well, it’s powerless, and it’s powerless because of the Greek people. If they had elected that government with, say, 60 or 70 percent of the vote, it would have a lot of clout dealing with Greece’s creditors. Or, if the people had said right off the bat, upfront, “look, let’s get out of this EU organization which sets us up to be looted, we don’t want to be in that, we don’t want the euro, we want our national sovereignty back”—you don’t have national sovereignty if you don’t have your own central bank that can create money to lend to the government— they didn’t do any of that, and so the government is powerless. It can’t do anything. It’s subject to blackmail and it collapsed.

MN: The current Greek government is continuing the actions of its predecessors and moving forward with the wholesale privatization of key public assets, including major airports and harbors. You have written a lot about privatization and how it is used as a strategy to destabilize or weaken countries, as in the case of Russia. How are privatizations used as a weapon and what is their impact on struggling economies

PCR: Well, when a national resource is privatized, the revenues from that resource pass outside the hands of the government, to private parties. So it depletes the government of revenues. For example, if the Greek national lottery is privatized, then those profits from the lottery go to the private owners. They’re no longer feeding into the government’s budget. Now, if these private owners are foreigners, as will be the case for almost all the Greek privatizations, the revenues not only leave the government budget, they leave the country. And so, privatization is a way of diverting Greek revenue sources into foreign, private hands. To agree to this is to accept being a colony, essentially a slave state, which is what Greece now is, it’s a slave state of the northern European banks.

MN: We are speaking with author, columnist, and former assistant secretary of the United States Treasury Paul Craig Roberts here on Dialogos Radio, and Dr. Roberts, we hear a lot about Greece’s debt…in your view is Greece’s debt sustainable or even legitimate, and how do the IMF and Western powers use debt as a means to loot these countries?

PCR: Governments are given debt, often with bribes and false promises. There’s a very famous book by John Perkins titled “Confessions of an Economic Hit Man,” and in this book, he describes the process, as he was part of it. You take a development plan, for example, to a foreign government and say, “look, let us lend you all of this money, and you can electrify the country, and this electrification will cause so much business activity that the taxes from the profits of this business activity will allow you to pay off the loan and to raise the living standard of the people and the economic development of the country.” These promises are always grossly overstated. The purpose is to get the government in debt.

So, the government falls for the development scheme, contracts the debt, and when this game doesn’t succeed in servicing the debt, the private banks say “well look, you owe us this money, you’ve got to pay it,” the government says “we really can’t,” and so the International Monetary Fund comes along and says “look, we’ll protect your credit rating by lending you the money to pay off the private banks.” This is often described as aid, but it’s not aid, it’s simply the International Monetary Fund taking over the private debts and leaving the government indebted to the IMF. Then, the IMF says “oh well, now you have to have these austerity programs, such as the ones imposed on Greece, so you can pay us back, and also, you will have to supplement these austerity programs by selling off your national assets.” If it’s oil, then it’s oil. If it’s copper, then it’s copper. Whatever the country has passes into foreign hands, the revenue streams associated with those assets pass to foreigners, and it leaves the country more impoverished.

Often, [these countries] still can’t pay the debt, and part of the deal is, “well, you have to accept American military bases, you have to vote with us in the UN.” All sorts of political conditions are also put on the loan, and all of it is done in the name of protecting the country’s credit rating so that it can continue to borrow. Well of course it can’t borrow anyhow, it’s already over its head in debt, and yet, government after government continues to fall for this, or are bribed into it. As John Perkins points out in his book, “Confessions of an Economic Hit Man,” if it so happens that a government has a leader that can’t be bought off with bribes, Washington overthrows him or assassinates him. And it’s entirely possible that the Greek government faced this type of threat.

MN: You mentioned your belief that Greece, and in particular the Greek people, should demand an exit from the Eurozone and the European Union. In your view, would Greece have any chance of recovery remaining within the framework of the Eurozone and the European Union, as the Greek government and economists like Yanis Varoufakis have insisted?

PCR: By remaining in the EU and using the euro, there is no prospect whatsoever of Greece recovering. In fact, they have given up so much now that probably they can never recover, even if they left the EU. They had an opportunity to leave and they should have seized it, and the Russians offered to finance them, but either the government had no vision, or was intimidated by threats, or felt that it did not have the public support. So I think now Greece is history. It’s a colony of the northern banks, northern European banks.

MN: How could Greece, or any other Eurozone member for that matter, manage an exit from the euro if they finally made the decision to depart?

PCR: They just have their own currency! Every government that joined the euro gave up their financial sovereignty, because they no longer had a central bank that could create money to finance the government. So they became dependent on private banks. These are looting mechanisms. So the minute Greece joined the euro, it gave up its sovereignty. The only way it can get its sovereignty back is to leave the euro and to bring back its own currency and use its own central bank to provide the country’s money, and not rely on German and Dutch banks or on Goldman Sachs. That’s the only way you can be an independent, sovereign country. There is no such thing as an independent, sovereign country that cannot create its own money.

MN: We are speaking with author, columnist, and former assistant secretary of the United States Treasury Paul Craig Roberts here on Dialogos Radio, and Dr. Roberts, moving on beyond the case of Greece, let’s look at the tensions between Russia and the United States, as well as U.S. allies such as Turkey. You have predicted that we are heading towards World War III. What do you believe we will see unfold in the Middle East and Russia in the coming year?

PCR: When the Soviet Union collapsed, the neoconservatives in Washington concluded that history had chosen the United States to exercise hegemony over the world, and that the United States was the indispensable country, the exceptional people. This placed the United States above the law of other countries, and its own law. The conflict with Russia occurred because Putin reestablished the sovereignty of Russia, by pursing an independent foreign policy. The Yeltsin government had been an American puppet state. But when the neoconservatives so focused in the Middle East—you may remember it was supposed to be a six-week war and its turned out to be a fifteen year war that’s not over—this distraction allowed Putin to reestablish the independence of Russian foreign policy, to rebuild the country, its military, its economy, and all of a sudden the neoconservatives in Washington found that Russia was a check on their power.

For example, the Obama regime was all set to invade Syria. They had framed up Assad on fake charges that he had used chemical weapons. This was the “red line” that Obama had drawn and now we were prepared to attack Syria, but the Russians said no. The Russians also spoiled Washington’s plan to attack Iran, over the fake issue of nuclear weapons. Again, the Russians said no. So, Washington said “okay, we’ve made a mistake, we’ve let Russia rise, our policy called for preventing the rise of any country that could serve as a check on our power, we didn’t pay enough attention and now Russia’s there, we’ve got to do something about it…where can we attack them? Ah, the Ukraine.” So Washington engineered a coup in the Ukraine, it caused all kinds of ongoing trouble, but actually, they were outsmarted by Putin. The effort of Washington to grab the Russian Black Sea naval base in Crimea was frustrated, and now the Ukraine’s going down the tubes, and the Europeans are not as interested in pursing this issue. This allowed Putin to go into Syria, because the Russians are afraid that if the Islamic State of Iraq and Syria is established, all of this conflict will be exported into Muslim territories of the Russian Federation and will be used to destabilize Russia. So the Russian government made a decision that they would go in to Syria, invited of course by the government legally, and dispose of ISIS before this Islamic State could be established and start exporting the troubles into Russia. This caught Washington off guard.

The government in Washington is now spilt: some people are saying we’ve pushed this too far, others are saying this is now a chance to start a conflict in Russia, if we send enough troops there we can engineer a conflict with the Russians and start a war there. Which group prevails remains to be seen, I cannot predict that. The neoconservatives want war, but the older foreign policy establishment has been somewhat rejuvenated by the massive failures of the neoconservatives. One miscalculation after another, chaos after chaos, we now have chaos in Libya, chaos in Iraq, chaos in Syria, chaos in Yemen and Somalia. This has given influence back to the old foreign policy establishment, which was more cautions than the neoconservatives. And now, we have a further check on the neoconservatives, and that is in the policy making establishment in Washington itself. How this plays out remains to be seen, because the neoconservatives are very well tied in to the black ops, black operations part of the security services, they can cause false flag attacks, they still dominate the American media and indeed the Western media, so I can’t predict what the outcome will be. Putin intends the outcome to be the defeat of the Islamic State and stability restored into Syria.

MN: We are on the air with author, columnist, and former assistant secretary of the United States Treasury Paul Craig Roberts here on Dialogos Radio, and Dr. Roberts, Now, back in the United States, you have insisted that the economic figures being provided by the U.S. government and the Obama administration are phony, specifically referencing the country’s payroll figures and unemployment rate. Why do you argue this is the case and what do the real economic figures show?

PCR: Well, it’s a known fact. First of all, let’s take the consumer price level, that measures inflation. Over time, the way the government has measured inflation has fundamentally been altered. Formerly there was a fixed basket of goods, items in the basket were weighted according to an estimate of their percentage of consumer expenditures, and so if an item went up, then the index would go up by the weight of that item in the basket of goods, so that you had a measure of a constant standard of living.

Now, what they did was, they introduced what they call the “substitution effect.” They argued that when the price of something goes up, consumers substitute a less expensive alternative. And so, what they started doing, when the price of something went up, they just threw it out of the index and stuck something in there that was less expensive. For example, if the price of a superior cut of meat, a superior steak, goes up, they take that out and they put in a lower grade cut of meat, and in that way, they have changed the index from measuring a constant standard of living to one that measures a declining standard of living. They do this in order to avoid having to pay cost of living adjustments on the social security pensions. So that is one way they understate the inflation.

The other way they understate the inflation is, they say “well, not all price rises are price rises, some are quality improvements.” That’s of course true. Sometimes the price of something goes up because of an improvement in the quality. On the other hand, it’s still a price rise. The consumer is still faced with a price rise, and therefore it does cut in to the consumer’s real income. Furthermore, once you start this, once you say that it’s not a price increase, it’s a quality improvement, you can spread it to everything. All of a sudden every price increase becomes a “quality improvement,” and this is the other way they understate the inflation. So the inflation measures no longer measure inflation. For example, we’re told we have zero, even negative inflation, but if you measure the inflation the way the U.S. government previously measured it, before the so-called reforms, the current rate of inflation in the United States is between 8 and 9 percent yearly. So you see a rapid deterioration year over year in the real incomes of the American people, so that you see the inability of the economy to maintain a growth in aggregate demand.

By the way, if you understate the measured inflation, when you adjust the nominal gross domestic product for inflation, you can produce real growth simply because you undercount inflation. So inflation becomes a source of real growth, and that is how they show that the economy is growing 2 and 3 percent. It’s really growing not at all, it actually probably is declining, it probably has been since the downturn in December of 2007.

Now, how do they measure employment? We now have, according to the government, a 4.9 percent rate of unemployment. This rate of unemployment does not count any discouraged workers. Suppose you’ve been out of employment for months and months and you can’t find a job. You know, a search for a job is expensive, it’s not free, it has a cost. You’re out of income, you’ve searched and searched, there’s no jobs to be found. You give up. You’re no longer counted as unemployment. So all discouraged workers who are not currently searching for jobs are no longer counted in the 5 percent unemployment figure.

The government has a second measure of unemployment that is never reported in the headline news or emphasized in the financial press. This second measure, known as U6, counts short-term discouraged workers, and if you add the short-term discouraged workers—and short-term means less than one year—so if you have been discouraged for less than one year, you’re counted as part of this second measure of unemployment U6, and that measure of unemployment is double the reported rate, it’s 10 percent. Now, if you add in the long-term discouraged workers, which no longer does any government measure, if you add them, the current rate of unemployment in the United States, right now, is 23 percent. This is a multiple of the headline-reported number of 4.9 percent. How do we know this? We know this because John Williams of continues to measure long-term unemployment according the methodology that the U.S. government used to measure it before it abandoned it. And so, those are the ways that they create the image of economic success when really there is serious economic deterioration.

We can see other signs of this economic deterioration, for example, recently the Federal Reserve itself reported that 50 percent, that is one-half, of all Americans who are 25 years old currently live at home with their parents. Now, at 25 year old person is a person who would normally be in the workforce, living an independent existence. But they can’t find jobs sufficient in pay to support an independent existence, so we now have the youth of America, half of the youth, this includes university-educated people, who cannot establish independent households, which means they can’t get married, they can’t take a mortgage and buy a home, they can’t buy home furnishings and appliances. They have to live at home in their childhood rooms. So that also is inconsistent with a 4.9 percent unemployment rate.

Also inconsistent is the decline in the labor force participation rate. It has been plummeting ever since the so-called “recovery.” Now, as every economist knows, when you have an economic recovery, the labor force participation rate rises, because more people enter the labor force looking for the good jobs. It’s literally impossible to have an economic recovery when the participation in the labor force is declining. And yet, that’s what the data shows, it shows the labor force participation rate, for example in 2006 it was 66 or 67 percent, now it’s something like 62.7 percent. So this is the first alleged economic “recovery” in history in which the participation of the labor force is declining.

MN: Now, with the presidential election coming up in the United States, what do you make of the candidates that are out there, and do you believe any of them offer any hope for a change of political, economic, or foreign policy direction?

PCR: No, not really. Two of the candidates have the possible potential of that. For example, Bernie Sanders, the Democrat, he’s different, he’s not exactly a member of the establishment, I think he realizes there are a lot of problems and I think he’s more inclined to represent the people than the powerful economic interest groups. On the Republican side, this character Donald Trump is also very different, he’s not a member of the political establishment either, and people like him because when he says outrageous things he doesn’t apologize, he comes across as strong and forceful and against Washington, and so he’s popular.

Now, I don’t think either can be elected because the establishments would not accept them. So you will have the Democratic establishment conspiring against Bernie Sanders and you will have the Republicans conspiring against Trump, and they will use the media against them and all kinds of other dirty tricks. So it would be very difficult for the people to put in office someone that the establishments of the two political parties don’t want.

Even if they were to be elected, I don’t think they could change anything, and the reason is that neither is a product of a movement. There’s not a movement behind Trump or a movement behind Bernie Sanders. There’s not a body of people that either knows to draw on to staff the government, to bring about change. If, for example, Trump represented a movement that had been going on for years and he was aware of policy and he knew what needed to be done and he knew the people that he could appoint that would do that and he was able to get the Senate to confirm them in office, then you could have some change. Same for Sanders, if he had a movement behind him, knew who he could trust to implement the policies. But neither of them have this, so when they get there, who do they appoint? The government is not run by presidents. It’s run by several hundred assistant secretaries, and they have nominal bosses called cabinet secretaries. Who are these people, where do they come from? Trump doesn’t know. Bernie Sanders doesn’t know. And so, they would be staffed up with the usual Washington crowd, and when you get elected, you’re excited and you want to get going and you’ve got to get all of these appointees through the Senate. So you end up having to appoint the people the Senate’s going to confirm. Otherwise you never have a government. So unless the revolution also changed the Senate, such as they were to say “yes, yes, let’s appoint all of these people who will bring change, and undermine all of our relationships with the power structure, the people who give the political contributions to keep us in office, let’s wreck all that and appoint somebody who’s going to make change,” that’s not going to happen!

So, as far as I’m concerned, it’s impossible for democracy in the United States to bring any change, because there’s really not any democracy. There’s an oligarchy. The United States is governed by Wall Street, and the big banks, by the military-security complex, the Pentagon, the intelligence agencies, the deep state, the black ops part, by the Israel lobby, by the extracting industries, which is oil, timber, mining, and by agri-business. These are the powerful interest groups that provide the campaign contributions that elect the House, the Senate, and the president.

Recently, scholars produced a study in which they concluded that the American people had zero input into the policies of the United States government. And that is actually a fact. So, for change to come to the United States politics, I think it will come from failure and collapse. It will come from outside the system. It will come from the system’s failures, from a deep and long-lasting depression, from a massive military defeat or a massive foreign policy failure that cannot be disguised, such as the neoconservatives may be creating for themselves with the conflict that they are trying to bring to Russia and China. The United States is not a match for an alliance between Russia and China. So this is a conflict that could cause the type of failure in Washington that would bring change, and an economic collapse can cause the sort of failure that would bring change in Washington. But, it’s not going to happen from domestic politics or from the rise of an indigenous leader. First of all, the deep state wouldn’t permit a rise of such a leader. He’d simply be assassinated, and they would blame some kook.

MN: Well Dr. Roberts, thank you very much for joining us today on Dialogos Radio and the Dialogos Interview Series, and for sharing your insights and analysis with us today.

PCR: Yes, well, thank you for your interest.

Please excuse any typos or errors which may exist within this transcript.

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