Zaid Hamid: BrassTacks policy papers on global economy and financial crisis_the simplest and most...

7/31/2019 Zaid Hamid: BrassTacks policy papers on global economy and financial crisis_the simplest and most time tested solutions.

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On Economic Terrorism,

Currency Wars & Gold Standar


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Contents

The Economic Battleeld

Return to the Golden Age

Currency Wars

Financial Terrorism

Class Warfare Blowback

Edition: 1st, 2012Authors: Khawaja Asad Saeed ([email protected])

Shahzad Masood Roomi ([email protected])Title Design :Waqar Ahmed SiddiquiDesigning : Shahzad Masood RoomiPDF version for mass distribution

All Rights are reserved. No part of this publication can be repro-

duced without the prior written premission from Brsstacks.

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2012 Brasstacks - All rights reserved

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Economic Battleeld1

Shahzad Masood

Exploring New Frontiers

Pakistan is in a state of war, being attacked on every axis of national security in a ruthless and overeration war. In this war, Pakistan is being targeted according to the Yugoslavia doctrine, with the d

aim of imploding the country by destroying its internal cohesion, social fabric, military strength and backbone, as it had been done with for mer Yugoslavia in the last decade of the 20th century.

Like all other fronts, Pakistans economic edice is also facing a destructive onslaught; primarily due tthat the articially installed and the most corr upt democratic rulers in our history are shamelessly

rauding and plundering the national wealth with impunity. All major government run corporations bankruptcy and are draining the national economy due to massive corruption and bad governance. ernment is imposing heavy indirect taxes on almost weekly basis in the desperation to generate revis then siphoned off to overseas accounts. Internal and external debts have been raised to record hbut still hundreds of billions of rupees in loans have been written off. The IMF runs the nationalwhile the Government acting merely as a fund manager, continues to impose new back breaking tasecretively agreed terms.

This systematic onslaught is creating extreme economic frustration and social unrest. The masses enraged due to the unchecked price hike of daily commodities and a clear and present threat of social anarchy and bloody revolt is looming in the wings. The economic meltdown is occurring in anment where Pak army and other law enforcement agencies (LEAs) are confronted with multiple int

external insurgencies, terrorism has ravaged the law and order situation in the urban centers, Pakistern front is facing a real security threat for the rst time in its history and our arch rival, India is busher Cold Start war doctrine, specically perfected against Pakistan.

Nothing could be more disturbing than the fact that the countrys political, economic and security are ignoring this economic meltdown in a bid to save the system while Pakistans national soveralready been compromised to a great extent due to foreign dependence on the economic front. Thpromises are proving catastrophic as they have promoted the direct and open foreign meddling in P


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BrassTacksPolicyPapers governnce, security and political affairs. This external meddling will continue to prevail unless state economy

is prioritized as a vital national security front, accorded as much signicance as the countrys nuclear and stra-tegic program.

Pakistans judiciary has also failed in effectively combating corruption and mismanagement as well as in pre-venting unchecked plundering of national wealth by the ruling elite. Despite some brave attempts by theSupreme Court, the government remains deant and the cancerous corruption has metastasized manifold.Media is compromised and often acts as fth columnist; instead of generating public pressure on governmenton corruption and plundering, sensationalizing the sensitive issues remains the only business for the media.

Pakistans current security outlook has been thus mutilated because all the efforts to combat the 4th genera-tion war remain focused only on the military axis ignoring the fact that information, judicial, political andeconomic aspects are as critical as the militar y strategy. Politicians are too busy begging, borrowing and steal-ing while the countrys economy remains on the mercy of international monetary institutions. There is norealization of the critical point that economic demise is not an isolated phenomenon rather it is an integralpart of the ruthless surrogate war Pakistan is confronted with.

The Soviet Union and Yugoslavia were once powerful countries but their collapse was ignited by their failedeconomies and now they cease to exist as nations on the world map. Zimbabwe was a stable economy, during1980s and 1990s, but painted a horrible picture of economic meltdown caused by hyperination during 2003to 2009.

The collapse of the Soviet Union had signaled the demise of the communist model of economy as well. Nowthe impending collapse of the dollar and the Federal Reserve banking system as well as the threats of hyperin-ation of paper currency and the desire of the global central banks to abandon the dollar as peg currency andto hedge their bets against gold and real wealth are signaling the death of Capitalism as well. There is a globalscramble for gold, silver and real wealth assets, as paper currency based economic models become unstableand their collapse is imminent.

These are desperate times for the global capitalist economy and the collapsing system has no internal rem-edies to prevent a meltdown. The solution is not within the system but outside of it. Conventional economicwisdom, responsible for creating this false paper currency based banking system, which is fractional reservedependant and not pegged to any real wealth, does not have the capacity, vision, knowledge or the will to ndany alternate real wealth based, historically sustainable and natural economic solution.

Pakistans economic meltdown has been caused due to two critical factors:

Massive corruption and hemorrhage of national wealth.

Finding the solutions in the fake paper currency and fractional reserve based economic model, whichhas caused the economic crisis in the rst place.

The rst factor is an administrative and legal crisis only which demands strong leadership and ruthless applica-tion of anti-corruption laws. This is the simpler part.

The real challenge for the leadership today is to get rid of the collapsing and conventionally appliedeconomic policies in order to nd truly daring, independent, visionary, ground breaking and sustainnomic model and means to create a real wealth based natural economy solidly grounded in our envgeography, history and resources.

The challenge of nding the al ternate, honorable and independent economic strategy is indeed sbut the rewards are equally magnicent. It is a must-do mission for us and under the present global meltdown, it becomes even more critical for Pakistan to abandon the economic imperialism of theadopt policies that are homegrown and respond to the requirements of national security and sover

The State of National Economy

Today, Pakistans economic situation and governance continues to deteriorate. Following are som

economic indicators:

From being the 42nd most corrupt country, Pakistan has declined to the 34th position onof disgrace. Almost 1000 billion rupees of national wealth have been stolen in 2010 alone accordinful estimates. The entire national leadership, possessing billions of dollars, is under scrutiny on ccharges with cases registered against them for massive embezzlement and swindling. The President, Minister as well as a majority of federal ministers have their names in this ignominious list.

Pakistans total debt (internal and external) has reached a record 10 trillion rupees (US$117 bthe government has violated every limit on borrowing imposed in the Fiscal Responsibility and Detion Act. If this situation is not alarming it is certainly disturbing. In 2008, the per capita debt (debcitizen) in Pakistan was PKR 22,000, which has staggered to PKR 57,000 (an increase of 159%) withThis is a colossal burden considering that 40% of the countrys population is living below the pove

Ination and nancial mismanagement has reached a dangerous level and it can iname a supheaval. Ination in Pakistan has reached an alarming 15% (January 2011 gure).

More than US$ 330 billion (PKR. 28 trillion) of national wealth has been stolen over thedeposited in foreign accounts. The volume of Non Performing Loans (NPL) is growing at a distre

as borrowed money is being transferred abroad.

Industrial infrastructure is being systematically targeted through articially created energy crmining Pakistans exports and local jobs of millions of workers. IMF loans, direct and indirect taxes ashameless begging from every corner of the world are the three basic vortexes of the governmentgenerating policy, which is leading the economy to nosedive into an abysmal chasm.

At present, Pakistans primary expenditure is debt servicing. More than 35% of the budge

spent on returning the loans but the g overnment keeps on borrowing from every available internal ancreditor. The countrys debt servicing obligations have been constricting the nancial resources for tor development while 70% of the population, particularly in r ural areas, lives in the most deprived camidst the lowest economic development level.

National transportation and energy infrastructure, particularly Pakistan Railways and PIA, ha


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BrassTacksPolicyPapers been shattered due to corruption and mismanagement.

Industries are crumbling in the face of severe energy crisis. The textile industry is taking a direct hitdue to articially created gas and power shortages. Similarly, engineering rms in Gujranwala and Gujarat arefacing energy shortages. Millions of workers have been rendered jobless in the last few months.

Pakistans Debt to GDP ratio has crossed 61% and World Bank has announced that Pakistan will de-fault on its obligations if the countrys debt-to-GDP ratio exceeds 80%.

Flight of capital (money outow from Pakistan) has been accelerated due to corruption, bad govern-ance and law and order situation.

Government Corporations (Railways, PIA, PSO, PEPCO) are running with Rs. 300 billion decitevery year. Circular debt in government corporations exceeds Rs. 300 billion.

Economy is under extra pressure due to continued counter insurgency operations in FATA and theresulting terrorism in the mainland. Pakistan is forced to spend much more on defense requirements, conse-quently hampering the armed forces modernization program as well.

The government is relying heavily on printing bank notes to the staggering tune of almost 2 billionrupees per day in order to meet daily expenses, thus devaluating the currency and hyper inating the economy.

Social polarization is getting radical. The middle class and salaried category has almost been crushedto extinction, with only the rich ruling upper class and the struggling lower class appearing as the social andeconomic classes in the country. Fixed-income, urban, salaried middle class is nding it extremely difcult tosurvive under massive direct and indirect taxes as well as ination. The haves and the have nots phenom-enon is clearly visible.

The state ofcers and ofces remain most lavish with expenditures, devoid of all sense of responsibil-ity towards austerity or economy. The State exchequer remains the personal property of the ruling elite withno accountability and shame.

Despite being a food surplus country in grains, dairies, fruits and vegetables, articial food shortages,

cartelization and hoarding of basic commodities keep the prices at hyper inationary levels makinprots for the powerful ruling elite.

Despite having the capacity to produce surplus electricity, the nation suffers endless hours ooutages daily, wreaking havoc on industry, trade and education.

Impact of Economic Plight

After examining the economic conditions, it would be prudent to discuss the impact of the

downslide particularly from the strategic point of view.

Clear and present threat of a bloody revolt: There is a clear threat of total anarchy and bloody stlution due to ination, price hikes and indirect taxes. Millions of workers in Faisalabad and Gujranlost their jobs due to the g overnments utter failure in coping with the prevailing energy crisis in thThese millions are already protesting on the streets due to loss of jobs. As energy and scal crisis is dit is only a matter of time when these people will start a march towards Islamabad. Pakistan can turnext Egypt or Libya. Such probable aspects of protests have deteriorated the situation further for thgovernment. Apart from these factory workers, the jobless and the xed income people are the biggeof the present price hikes and ination.

Income tax is nothing less than daylight robbery. Pakistans working middle class is depleting quicthe nuisance of direct and indirect taxes. The real catch is that all these taxes, being collected in thedevelopment, never serve their purpose and are being stolen by the ruling feudal elite, who themsepay the taxes.

Wrangling between provinces for resources: Provincial disharmony has reached dangerous aing levels during the current regime. Distribution of water remains the source of contention aprovinces but now the distribution of gashas also added to this crisis. Apart fromcreating energy shortfall, it is creating se-rious inghting among the provinces par-ticularly between Punjab and Baluchistan.This energy crisis has devastated the indus-trial base in Punjab, which is consequentlyrendering more people jobless. The same istrue for wheat and grains, where the priceof a roti is often up to ve times higher inBaluchistan than in Punjab due to hoardingand cartelization of the staple food crop by

various power brokers.

FDI has vanished: This is the most detri-

mental impact of current economic crisisthat has brought national development to ahalt. Apart from the deteriorating law and


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BrassTacksPolicyPapers

order situation, the state of corruption and bribery as well as poor infrastructure and energy crisis, are majorimpedances to FDI in the country. The crisis has been aggravated to such an extent that businessmen areshifting settled businesses to other countries due to non-conducive business environment in Pakistan.

Rise of street crimes: Massive joblessness has created severe problems of street crimes in urban centers. Onthe surface it may look like a minor factor but keeping Pakistans current restive environment in sight, everyjobless person on the street is a potential asset of countless terrorist outts waging a callous asymmetric warwithin Pakistani cities. Karachi is one such violent city where political turf wars, gang wars, sectarian battlesand street crimes take heavy toll on human lives and property every day, crippling the city and its economy.

Vicious cycle of circular debts: As borrowing and begging remain the only options for the rulers, internaland external debt is increasing at an alar ming rate. Loans taken in the name of development are being wasteddue to corruption and kickbacks. The government had to pay PKR 900 billion on debt servicing during thescal year 2010-11, which is 5 times more than the total development budget. Government Corporations areunable to make payments to their corporate government suppliers resulting in a circular debt. The presentcircular debt problem faced by PSO is the clearest manifestation of this fact.

Reasons Behind Economic Meltdown

A brief comparison between Pakistans existing economic potential and the core reasons behind the currenteconomic downslide must sufce to establish that Pakistans economic encirclement is in progress.

Corruption and looting of national wealth: As there is no existing vision or strategy for revenue genera-tion, the current rulers are relying on their strategy of begging, borrowing and stealing. In 2010, directors ofSwiss Bank quoted that some US$330 dollars (PKR 28 trillion) of looted money have been deposited in theSwiss banks. With this amount of money, Pakistan can have a tax free budget for the next 60 years, every

Pakistani can be paid PKR 20,000/month as nancial aid for consecutive 60 years, provide 60 million jobs allover Pakistan, construct 4 lane roads from any village to Islamabad, ensure indenite supplies to more than500 social projects, disbanding the need of World Bank and IMF loans.

Due to corruption and mismanagement, the difference between national revenue and expenditure has reacheda whopping 490 billion rupees, with total income remaining at 989.6 billion rupees while total expenditure

stands at 1.48 trillion r upees, within the rst six months of the current nancial year. This certainlyyear-end budget decit target of 4.7% of GDP impossible. The menace of top level corruption birth to business cartels in the country that are controlling the prices without any checks and balan

Law and Order: Its the biggest reason behind ight of capital and low FDI. Insurgencies and tePakistan remain the ultimate hindrance in attracting any foreign investors. Now it has reached suchthat many textile units are being shifted to Bangladesh. Flight of capital to foreign banks is also anof the devastating law and order situation.

Fractional Reserve Banking System: Banks make money out of thin ai r through fractional rese

ing which resultantly is depleting the value of the currency, causing massive ination and price hikare pushing and lending more and more make-believe, nonexistent money in the market just to get share in the form of interest paid against every loan transaction. Fractional reserve banking is one ofsinister, dubious, economically devastating and almost satanic banking practice, which is least undersby the economists themselves and has the most profound contribution in creating economic anarcsociety.

This system of banking only helps the banks to grow phenomenally but it cannot help or save an and history of fractional reserve banking proves this fact! As the banks are the functionaries, which cat money through ledger entries only and take interest on it, so any interest-free economy with r(gold and silver) would purge their need, their rationale to exist and the fake money that they create.ing every economy dependent on the money they create remains the most important task for theworld economies today.

For decades, US dollar was the global reserve currency for almost all Central Banks of every nati

other nation except the US had to maintain their foreign currency reserves in US dollars for tradechases and imports while the US Federal Reserve Bank could simply print as many dollars as it waloan them to the US government. This is how America has maintained its global economic hegemo

being the biggest debtor nation of the world, with an obligating of 81.2 trillion dollars to the Federand other banks making them more sovereign than the US government.

But hyperination caused due to the uncontrolled printing of trillions of dollars is now comingroost. US dollar is now collapsing as global reserve currency and many nations are abandoning thetional trade in dollars and keeping their forex reserves in a basket of currencies or in real wealth i.e. Silver. China and Russia have recently abandoned bilateral trade in dollars. Iran is working on an oil which would deal in Euro making it possible for other nations to abandon the dollar as well whichkept as reserve currency to buy oil. The graph below illustrates why the dollar will soon be replacworlds reserve currency.

This system of banking only helps the banks to grow phenomenally but it cannot help or save an and history of fractional reserve banking proves this fact! As the banks are the functionaries, which cat money through ledger entries only and take interest on it, so any interest-free economy with r(gold and silver) would purge their need, their rationale to exist and the fake money that they create.ing every economy dependent on the money they create remains the most important task for theworld economies today.


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Fractional Reserve Banking

When money is borrowed from a bank, the bank actually creates new money or credit out of nothing. It credits a loan

account it has set up on its books with a deposit that can be used by the borrower. Since banks must pay out deposits

on demand, the deposit is a liability for the bank that is entered on the debit side of its ledger. On the credit side of

the ledger, because the bank charges usury (interest) on this created money, the money borrowed is an asset for the bankearning its income. This is all accomplished by moving some gures from one account to another.

For decades, US dollar was the global reserve currency for almost all Central Banks of every nation. Everyother nation except the US had to maintain their foreign currency reserves in US dollars for trade, oil pur-chases and imports while the US Federal Reserve Bank could simply print as many dollars as it wanted andloan them to the US government. This is how America has maintained its global economic hegemony despitebeing the biggest debtor nation of the world, with an obligating of 81.2 trillion dollars to the Federal Reserveand other banks making them more sovereign than the US government.

But hyperination caused due to the uncontrolled printing of trillions of dollars is now coming home toroost. US dollar is now collapsing as global reser ve currency and many nations are abandoning their interna-tional trade in dollars and keeping their forex reserves in a basket of currencies or in real wealth i.e. Gold andSilver. China and Russia have recently abandoned bilateral trade in dollars. Iran is working on an oil exchange

which would deal in Euro making it possible for other nations to abandon the dollar as well which they hadkept as reserve currency to buy oil. The graph below illustrates why the dollar will soon be replaced as theworlds reserve currency.

Value of $1 Federal Reserve Note in 1913 Dollars

(Source: US Bureau of Labor Statics)

Pakistani Rupee per USD Monthly Average Exchange Rate


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BrassTacksPolicyPapers In Pakistan, Pak Rupee is getting devalued just like the dollar as State Bank of Pakistan continues to print

rupees at a staggering 2 billion per day. The exchange rate of Pak rupee has been raised against the US dollarat an exceptional rate during the last three years as Central Bank continues to pump billions of newly printed

at bank notes in the money market.

It must be noted that the actual devaluation of rupee, against the real wealth, is much more than what isshown in the documents where Pak rupee devaluation is shown against the US dollar, which itself is deplet-ing against the real wealth (gold and silver). It means that the real depletion of rupee against gold and otherprecious metals is many times more than what meets the eye. Overwhelming price hikes of gold and othercommodities in Pakistan manifest this fact clearly.

Floating Currency & Hyperination Red ag for Pakistan!

The international banking cartel introduced the concept of oating currencies in the world where they can control the

exchange rate of any currency by increasing or decreasing the supply of dollars. Between 1870 and 1914, the worldcurrencies were backed by gold and the exchange rate was also xed to gold. Gold standard allowed unrestricted capital

mobility as well as global stability in cur rencies and trade. In 1914, the gold standard was abandoned. After World

War II in 1945, Bretton Woods conference decided to peg the currencies again but this time to the US dollar, which in

turn was pegged to gold at US$35 per ounce. This was the beginning of a systematic campaign for establishing the US

economic hegemony, which was gained in 1971 when the dollar peg to gold was abandoned and dollar was established asthe standard for oating exchange rate; it ultimately allowed the US banks to create money out of thin air. Now the

US was able to print as many dollars as she desired while the rest of the world had to earn that money for international

transactions. A masterpiece of economic manipulation indeed! Years before that, the US had won the case for dollar to

be accepted as the global reserve currency.

In the following years, this acceptance of the US dollar as global trading and foreign reserve curr ency enabled the US tomanipulate economies by controlling the supply of the dollar. Ination is the most poisonous byproduct of this economic

model which is caused mainly due to excessive printing of money which in turn deates the local currenc y. In econom-ics, hyperination is ination that is very high or out of control. While the real values of the specic economic items

generally stay the same in terms of relatively stable foreign cur rencies, in hyperinationary conditions the general price

level within a specic economy increases rapidly as the functional or internal currency, as opposed to a foreign currency,

loses its real value very quickly, normally at an accelerating rate. Under hyperination the general price level could rise

by 5 or 10% or even much more ever y day.

A vicious circle is cre ated in which more and more ination is created with each iteration of the ever-increasing money

printing cycle. Hyperination becomes visible when there is an unchecked increase in the money supply usually accom-panied by a widespread unwillingness on the part of the local population to hold the hyperinationary money for more

than the time needed to trade it for something non-monetary to avoid further loss of real value. Hyperination is oftenassociated with wars (or their aftermath), currency meltdowns like in Zimbabwe, and political or social upheavals, plus

an aggressive bidding against the money on currency exchanges.

Below is a brief description of currency meltdown in Yugoslavia and Zimbabwe which led to economic meltdown

countries eventually dismembering Yugoslavia. Pakistani currency is also losing its worth due to excessive mon

and the situation can run into hyperination in case the current trend of money printing continues.

Yugoslavia (January 1994)

500,000,000,000 Yugoslav dinar banknote

Yugoslavia went through a period of hyperination and subsequent currency reforms from 1989-1994.

denomination in 1988 was 50,000 dinars. By 1989 it was 2,000,000 dinars. In the 1990 currency refor

dinar was exchanged for 10,000 old dinars. In the 1992 cur rency reform, 1 new dinar was exchanged for 10

The highest denomination in 1992 was 50,000 dinars. By 1993, it was 10,000,000,000 dinars. In the 199

reform, 1 new dinar was exchanged for 1,000,000 old dinars. However, before the year was over, the highesttion was 500,000,000,000 dinars. Yugoslavias rate of ination hit 5 1015 percent cumulative ination ov

period 1 October 1993 and 24 January 1994.

Zimbabwe (November 2008)

Zimbabwe $100 trillion

Hyperination in Zimbabwe began in the early 2000s, shortly after Zimbabwes conscation of white-owned f

and its repudiation of debts to the International Monetary Fund, and persisted through till 2009. Figures fvember 2008 estimated Zimbabwes annual ination rate at 89.7 sextillion (1021) percent. In April 2009, Z

abandoned printing of the Zimbabwean dollar, and the South African rand and US dollar became the stan

rencies for exchange. As of 2011 the currency has not been reintroduced yet.


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BrassTacksPolicyPapers Mismanagement and Ill-Planning: Poor planning is one of the bigg est problems for slow development

and scal mismanagement in Pakistan. Many major development programs and departments are being politi-cally run, failing to contribute to national progress and prosperity. Gawadar seaport is a classic example. Worthof a seaport is associated with its inland connections via road, rail and air. It was connected to another seaport,located in its east (Karachi) through road link instead of connecting it with the northern parts of the country.

Government corporations like Railways are under severe nancial strain due to political intervention andmismanagement. Railways are the most used medium of travel in the world for the working classes but inPakistan, its infrastructure could not be developed on modern basis because this critical medium remainscriminally neglected. Every year the government pours billions in this organization but it all goes into the ac-

counts of corr upt ministers and bureaucrats.

Agriculture is Pakistans biggest economic potential and its national lifeline. Over 20 million Pakistanis aredirectly associated with agriculture. This sectors income contributes to 21% of the total national budget butthe total allocation for agriculture has not increased even by 1% in the federal budget for the scal year 2010-11. Not a single new agricultural project was announced or any strategic plans devised for food security in thecountry as global weather changes and water shortages threaten the very core of Pakistani society.

Absence of transparent accountability: Complete failure and collapse of the judicial system has encour-aged the most corrupt elements to plunder with impunity. Most of the highly corrupt occupy the highestofces of the land and consider themselves as the untouchables by law. Due to the inability of the SupremeCourt to enforce and implement its own judgments against corruption and apply articles 62 and 63 of theconstitution, the plunderers remain free. On the other hand, the accountability institutions in Pakistan havebeen politicized and have failed spectacularly in coping with the corrupt and the criminals. The failure of thenancial accountability is so stunning that not a single corrupt politician has been disqualied or convicted on

the basis of corruption. The current prowling of national wealth would continue if this corrupt regime staysin power and the judiciary continues to delay invoking and implementing the constitution in letter and spirit.

Lack of economic vision: Despite holding diverse economic potential and resources, there has been nostrategic vision on the economic development and progress ever since independence. Pakistans true poten-tial is its vast natural resources and minerals. Pakistan also never tapped its potential to become an industrialpowerhouse. On the other hand, during the 1960s, Pakistan made huge strides in agricultural developmentbut the long-term strategic vision remained shallow and no real effort was made for sustained agriculturedevelopment.

The worlds focus shifted from agriculture to industrial development but Pakistan could not compete withother economies due to lack of planning. After the dismemberment of the Soviet Empire, Pakistans geogra-phy emerged as the most vital natural potential but again the opportunity to become a trade and energy cor-ridor in the region was missed due to political corruption and lack of vision.

Today, mineral resources are Pakistans biggest assets yet we are unable to exploit them to their fullest due tocorruption and compromised governments with vested interests. Treacherous mining agreements with cor-rupt foreign companies have led to a tremendous loss for Pakistan. To date, we have been unable to prioritizethe development of our potential for agricultural, industrial, mineral and g eographical purposes. It could be

started in any order but alas Pakistans economic vision remains completely directionless

Transforming Pakistans Economy (Strategy / Suggestions/ Way Forwar

Pakistan is among the worlds richest countries. Its biggest resource is its youth, equipped with diverskills. Given the right environment with favorable policies, this young lot of energetic Pakistanis decisive role in bringing about an economic miracle. More than 50% of the Pakistani population cpeople aging from 18-35 years.

Pakistan is uniquely placed on the world map with massive land, water and climatic resources due it can produce various kinds of crops in all weathers. Pakistani soil is amongst the most fertile lan

world.

For rapid progress, mineral resources of Pakistan have tremendous potential. Thar coal reserves havlion tons of coal, which in terms of energy production are equivalent to 618 billion barrels of crudeis four times the energy potential of the total Saudi Arabian oil. Similarly Riko Diq copper-gold among the worlds most precious mineral resources with an initial estimated worth of US$ 500 billionon the surface of the earth without the need for deep pit mining.

Pakistan can create an economic miracle in the s hortest possible periodwithout any foreign dependence, exploiting its own natural, mineral,human and agricultural potential, provided some ruthless and harshmeasures are taken to attack the centre of g ravity of the economiccrisis.

Regime change remains the rst and most critical element in this strat-egy. The present lot is too decadent, compromised and corrupt to rise

to this gigantic challenge. Once a patriotic and competent governmentis put in place, we can charge ahead with the major and radical eco-nomic reform strategy. The election process cannot bring the clean tothe parliament and the country has no more time to waste on such afutile process. For once, there has to be a selection to bring the n-est to the power. Then these patriots would move in with some severe,iron-clad measures to transform the economy

Eradicate corruption with an iron hand: We will have to be truly ruthless here. Getting rid oelements from the government and public ofces is the fundamental prerequisite for Pakistans revival. Despite all the propaganda of difculties in tracking and tracing white collar nancial crimepossible to eradicate corruption with a strong political and j udicial will. Corruption should be madeoffence, the trials must be swift and justice must be seen when dispensed. The corrupt are not brato face the gallows with courage. Making a horrible example of the few at the top would send the rigto all quarters, right down to the bottom to refrain from corruption, embezzlement, kickbacks, comand bribery. In China, they send the corrupt to the ring squad and then charge the family for tconsumed. Corruption has now become an existential threat for the nation and must be treated attreason, terrorism and espionage, without mercy or delay in trial.

A rock from Riko Deq, with

gold deposits


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BrassTacksPolicyPapers Bring back the looted wealth: Pakistani courts, media and the military will have to do everything in their

power to bring back the looted wealth. This staggering amount alone can sustain the national budget for yearsto come without taxing the nation, directly or indirectly. Billions of dollars of national wealth is stashed inoverseas accounts and outed shamelessly with impunity without fear by the rulers and the elite.

Within the country also, there are hundreds of billions of rupees of looted wealth, defaulted loans, and em-bezzled funds by the ruling elite who cannot justify their sources nor have ever declared those assets or paidtaxes. Bringing back the looted wealth is an integral and critical axis of the strategy to resuscitate the nationaleconomy. This returned wealth must be reected in the national budget and used for national developmentand to give tax relief to the citizens.

Defer IMF debt servicing for 3 years: There are spaces in international laws, resolutions and protocols thatcan be invoked as legal justication to refuse the external debt and demand cancellation. One of these justi-cations is called the rule of State of Necessity. This rule is characterized by a situation that jeopardizes theeconomic or political survival of a country such as the situations which create the factor of impossibility offullling the very basic needs of the population (health, education, food, water, housing etc). The State ofNecessity justies the repudiating of debt, since it implies the establishing priorities among different obliga -tions of the State.

We have a number of precedents in history when democratically elected governments in debtor countriesrefuse debt payments on account of State of Necessity. Latin American countries, including Argentina,Burkina Faso, Peru, Mexico, Paraguay, and Ecuador took such positions in the past.

Argentina had almost a $100 bn loan of IMF at almost 30% interest, paying almost $30 bn in annual inter-est repayments. On the advice of Malaysian prime Minister Mahathir Mohammed, Argentina defaulted for 3

years and diverted the huge debt payment installments towards national economic rebuilding, makinturnaround for the national economy.

Under this law Pakistan is justied to cancel all external debt payments since it jeopardizes the econpolitical survival of a country. Recent earthquake and ood disasters as well as the permanent state oto insurgencies and terrorism, provide ample justication to invoke this law.

One of the resolutions adopted by the UN Human Rights Commission in 1999 asserts, The exercise rights of the people of the debtor countries to food, housing, clothing, employment, education, health services and a heal

ment cannot be subordinated to the implementation of the structural adjustment policies, growth programs and econom

Another resolution of the UN commission on International Law 1980, states, A state cannot be expeits schools, hospitals and universities, abandon public services to point of chaos, simply to have money to repay its for

Pakistan must defer debt servicing to IMF and other international monetary/nancial institutions iget a breather and carry out recommended economic reforms. Today, more than 30% of the nation

goes into debt servicing. Pakistans economy would kick start with the diversion of funds and can reindustrial, mineral and agricultural infrastructure.

Restore law and order: The prevailing law and order situation in the country is one of the biggest domestic economic development and attracting FDI (direct foreign investment) in Pakistan. Traditioof infrastructure was blamed as the major impedance to FDI but after 9/11, terrorism and insurgnot only discouraging foreign investors but local investors are also shifting their businesses to other

Here also ruthless and harsh measures would be needed to bring sanity on the streets. Right now, t

fear of law among the terrorists who are ravaging the state and society. Military courts will have to bto try and execute all insurgents and ter rorists mercilessly as the civil judiciary has totally collapsed agthreat. The Afghan policy will also have to be redened as all terrorism and drug related, illegal moninto Pakistan from Afghanistan.

Eliminate all un-Islamic taxes: Pakistan is an Islamic country and as per its constitution, no law canin contradiction to the Quran and Sunnah. But unfortunately, its nancial system is interest based tices brutal fractional reserve banking. Pakistans economic and taxation system is not only unjust an

the Islamic Laws but is also in direct contradiction of the national constitution. The present capitalissystem is brutally cruel and is crushing the middle class, directly and indirectly taxing the poorest sdestroying the social fabric ruthlessly igniting the class wars in the society. Conventional economisthink of an economic model where taxes are non-existent or reduced to the minimum but as per Islano tax can be imposed on income or sales (except on agriculture) rather taxes are imposed on savin

Pakistani masses are victims of direct and indirect taxes like income tax and the more treacherous

This dual taxation system is the biggest hurdle in the socio-economic progress of the poor and midof the society. Indirect taxation is a curse of the present economic system where a common man htaxes at every transaction for consumable commodities. Only the poor are taxed while wealthy anrupt are immune from this economic impact. Income and sales tax are the most cruel and unnaturataxation and must be abolished immediately.


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BrassTacksPolicyPapers It is a misfortune that despite having provisions of Islamic taxes like Zakat and Usher in the constitution,

Pakistani people are being taxed multiple times at staggering rates as per the Western economic model.

It is time for the restructuring of national economy on the basis of Islamic taxation system. All revenue col-lected through income and sales taxes can be generated many times over if the Islamic taxation system is im-plemented, corruption is blocked and looted wealth is brought back into the system. It has never been tried,hence considered impossible by the capitalist economists to have a system where there are no income andsales taxes. In reality, this is being done in S audi Arabia even today where state wealth is so surplus that thesedirect and indirect taxes are not applied. The same strategy can be further polished and applied in Pakistan aswell. With return of looted wealth as an integral part of revenue generation, these harsh taxes can be elimi-

nated without causing any stress on the national revenue.

Disinformation propaganda by the compromised economic managers projects that Pakistan would implodewithout foreign aid, fractional reserve banking and current taxation system. This is classical rubbish. For 1400years, the greatest of Muslim civilizations that ruled the world thrived on Islamic system of economics, with-out paper currency or interest based lending or i ncome and sales taxes.

The Muslim empire stretched over 2.2 million square miles at the time of Hazrat Umar (R.A), yet even at that

time, ingenious methods were devised to collect Zakat from each and every individual. The Ottoman Empirewas stretched almost 23 million Square kilometers during its zenith. They also applied the Islamic economicmodels and were the most prosperous and wealthy civilization on earth in their times. It is only when the Ot-tomans adopted the western banking practices and adopted paper currency and started to tax their citizens topay the lenders that their downfall began. The capitalist system is collapsing globally. The solution does not liein adopting its failed policies but in abandoning them in favor of Islamic and most sustainable nancial andeconomic practices.

Existing economic and taxation system is in complete contradiction to Zakat and usher in its very nature.The existing Zakat system implemented in the country is a practical joke with Islamic laws and has neitherthe capacity nor the transparency to cater for Zakat collection and has to be overhauled on the model ofKhilafat-e-Rashida using every available means and resource. A properly deployed Zakat and Usher collectionsystem has the capacity to generate state revenues in far greater amounts than the existing income and salestax regimes. Also, a strict implementation of Usher would also remove the controversy of Agri tax so bitterlydebated on in the country.

Reverting to Gold standards and Elimination of Fractional Reserve Banking: The Constitution of Pa-

kistan as well as the last speech of QUAID-E-AZAM at the inauguration of State Bank of Pakistan, categori-cally state that interest based economic system will not operate in Pakistan. However, Pakistan has operatedunder the western laws of banking and nance, which is interest based and for mulates fractional reserve asthe basis for lending. In an unending debt creation cycle, State Bank of Pakistan is printing an excess of Rs2 billion per month. This results in the devaluation of Rupee causing ination and destruction of Pakistans

economy.

Fractional Reserve Banking (FRB) along with at paper currency creates ination and devaluation of cur-rency. The solution lies in eliminating FRB and introducing real wealth based currency, either paper currencybacked by gold or real gold and silver coins as is being practiced in Kulantan state of Malaysia where Islamic

Gold Dinar and Islamic Silver Dirhams are the legal tenders. The US state of Utah is also consideriing to Gold coins as US dollar becomes fake and worthless paper with each passing day. Pakistan h$500 bn dollars worth of real gold reserve in Reko Deq, a God gifted reserve and opportunity togold standard without any foreign help or loan.

Diversify the Foreign Currency Reserves into Gold: All foreign reserves must immediately be c

into gold and silver and trade between countries should be encouraged in gold. Trade decit settlelater be adjusted by exchanging gold at the end of the year. This arrangement for trade purposeMuslim countries was also suggested by former Malaysian PM Mahathir Muhememd. Paper currenreserves should rst be diversied into a basket of currencies and then a Gold reserve should be buil

state reserve. All major central banks of the world are now making their reserves in Gold. Many natia hurry to convert their reserves into Gold including China, Germany, India, Japan and Russia to na

Currently the US dollar is Pakistans foreign reserve currency but under the global health of the d oa dangerous and risky proposition. The dollars devaluation is eating into Pakistans forex reserves bof dollars per month. China has recently announced adopting Yuan as the trading currency by t2011. The Chinese President has recently declared, the dollar as reserve currency is a product of

In her bilateral trade with China, Russia has also vowed to abandon dollar. China and European Ualready adopted Euro. Dollar is not accepted on many of the currency exchange shops in Europe, listerdam. In Germany special ATM machines with gold bars have been installed for the people whoto convert their savings from paper currency to gold bars.

Gold is re-entering in trade as well in many parts of the world. Gold coins are becoming acceptable o

across the globe with a greater realization about the ultimate fate of any paper currency backed byreserve banking system.


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Trading with gold and silver coins

Many global economies are reverting to real wealth base system. One such example is the state of Kelantan, a north-eastern state of Malaysia. On 12th August 2010, Kelantan became the rst state to introduce the gold dinar and silver

dirham as its ofcial currency. The exchange rate for the gold and silver coins to the Ringgit paper money are; 1 dinar

= RM581, 1 dirham = RM13.

Introduction of real wealth currenc y is taking place for the rst time in a 100 years, since the fall of the Caliphate.

Muslim nations were divided into small states with national considerations. Since then, four generations of Muslims

have not seen Gold Dinar and Silver Dirham. The introduction of Gold Dinar and Silver Dirham in the state of

Kelantan is a radical step but essentially it is not a new experiment by any means, it is a return to the medium of

exchange that has been known for 1400 years throughout the Islamic civilization as Money of Shariah taking its leg-islation from Allahs Revelation and Rasuls (sm) Sunnah.

Kelantans gold and silver dinar and Dirham

It is time for Pakistan to immediately abandon the dollar as foreign reserve and Pakistani masses must startto purchase gold and silver at their own strength to bring about an inux of gold and silver into the country.Buying gold would be certainly not possible f or everyone but there exists a better alternate: Silver.

Historically, in case of hyperination, silver always proves a better investment and the present situation in thisregard is no different.

Under todays circumstances, the parity between gold and silver is 1 to 53 which is decreasing fast. As a result

silver prices are rising sharply compared to gold to close the huge parity difference. As the gold prices riseagainst dollar, silver prices increase manifolds respectively. Purchasing gold and silver at the masses level is theone thing that can ease the collapse of dollar and give our economy a soft landing. But before that, Pakistanmust make sure that it abandons the US dollar as her reserve currency!

Ensuring food Security: Pakistan must embark on a major program on war footings to secure its food sup-ply, as water has become a commodity over which nations would go to war. Pakistan and India are locked in abitter water dispute and it is expected that in future, both countries may actually go to war over water.

Pakistan is located in a region of seasonal drought and natural calamities, therefore, securing food supplies in

any kind of circumstances in critical, an aspect that has been criminally overlooked. Pakistan has vavated land area in Baluchistan with underground water at the depth of few meters. This water is indof our river and canal systems and hence would not be a source of dispute between provinces nharm the existing crops. No government has ever tried to utilize these vast lands for corporate fathat Pakistan can secure food supplies not only for her own needs but to cater to the needs of othercountries as well. A strict ban must be imposed on staple food exports and proper storage spaces constructed to secure surplus corps.

To solve the issue of investments required in order to bring vast lands of Baluchistan under cultivkistan can opt for joint ventures with brotherly countries on crop sharing basis, where they will n

projects and share the produce. Many countries, including India are leasing large territories of lands countries to grow their food supplies. Arab countries including Saudi Arabia are also seeking landstheir crops. These joint ventures can be benecial to Muslim countries.

Similar projects can also be initiated in livestock, which is another ignored eld. Earning foreign remeat export is a real possibility for Pakistan. Baluchistan is the region, which holds the key to progr

dimension as well. Vast dairy and cattle farms can be established by inviting foreign investors. Paktrepreneurs can also learn from their experience. Any such joint venture or foreign investment woubringing down meat prices in the local market as well.

National mineral and fuel wealth to be exploited: It is due to corruption, mismanagement ansponsored insurgencies that Pakistan has failed to exploit its own fuel and mineral resources. Evenkistan has the potential to rely on local gas and fuel reserves, reducing its dependence upon impoPresently, Pakistans major imports include oil and petrochemical to meet the energy requirements. an unfortunate and bitter fact that despite having massive potential of power generation from w

coal, wind and solar energy Pakistan is still relying on imported oil which is putting a tremendous bPakistans foreign exchequer.

Pakistan can earn from Thar coal and Riko Diq mines. Excavation license must be given in such aany foreign investor would pay 40% of allowed excavation as upfront. Even the license cost for sexcavation can bring in hundreds of billions of rupees as FDI in no time.

China, Russia, India and even US fully exploit their coal reserves to generate energy, sometimes up

of national power and energy requirements are fullled. In Pakistan, we dont even use 1% of cowe possess in billions of tons. The same is true for gas and local petrol which we do not exploit animport furnace oil for power generation. These are pure and deliberate acts of treason by the corruand energy cartels.

Sample Budget Breakdown

For decades, IMF, the World Bank and their paid cronies in State Bank, Finance Ministry and CBR hextensive propaganda in Pakistan that the economy of Pakistan cannot survive without the capitalibased banking system, foreign debts, taxes and fractional reserve system. Every discussion on theof implementing an Islamic economic model met with severe criticism by national economic manbankers. Even now, the case regarding interest free banking is pending in the Supreme Court and t


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BrassTacksPolicyPapers Shariat court since the last 25 years.

It is always said by these IMF paid cronies that Pakistan would not able to design its annual budget withoutthe current western economic model and the terms given by the IMF. It is said that Zakat based tax free eco-nomic model is not possible and would cause an economic collapse. Pakistans budget, designed by the IMFand their cronies, states no provision to bring back the looted wealth or to nd alternate means to direct and

indirect taxes which break the back of the poorest and the middle classes. The budget is always a jugglery ofcomplex terms but is meant to maintain the status quo, which suits the corrupt and the exploitative ruling eliteand their foreign paymasters.

To blow this myth once and for all times to come, a breakdown of federal budget is given below in a wellresearched hypothetical scenario, where the volume of the budget is assumed at Rs. 3,000 billion.

The following breakdown assumes that all the above recommended reforms have been made. All gures arean estimation based on the existing budget.

For decades, IMF, the World Bank and their paid cronies in State Bank, Finance Ministry and CBR have doneextensive propaganda in Pakistan that the economy of Pakistan cannot survive without the capitalist interestbased banking system, foreign debts, taxes and fractional reserve system. Every discussion on the prospectof implementing an Islamic economic model met with severe criticism by national economic managers andbankers. Even now, the case regarding interest free banking is pending in the Supreme Court and the federalShariat court since the last 25 years.

It is always said by these IMF paid cronies that Pakistan would not able to design its annual budget withoutthe current western economic model and the terms given by the IMF. It is said that Zakat based tax free eco-

nomic model is not possible and would cause an economic collapse. Pakistans budget, designed by the IMFand their cronies, states no provision to bring back the looted wealth or to nd alternate means to direct andindirect taxes which break the back of the poorest and the middle classes. The budget is always a jugglery ofcomplex terms but is meant to maintain the status quo, which suits the corrupt and the exploitative ruling eliteand their foreign paymasters.

To blow this myth once and for all times to come, a breakdown of federal budget is given below in a wellresearched hypothetical scenario, where the volume of the budget is assumed at Rs. 3,000 billion.

The following breakdown assumes that all the above recommended reforms have been made. All gures arean estimation based on the existing budget.

The breakdown, shown on next page, assumes the following:

1. Replacement of corrupt g overnment with an honest one.

2. Usher collection has been added to f ederal list of subjects. Currently provinces are responsible to collectUsher.

3.The looted wealth is also being recovered from the corrupt and returned to the national treasury.

Total Expenditure: Rs. 3,000 Billion

Income Resources:

Source Estimated Receipt (in billion PZakat 250

Usher 350

Natural Resources (oil & gas) 500

Government earnings 200

Import duties (20% of current import bill of $20

billion)

400

Corruption recovery 700

FDI 500

Cut in excessive govt. spending (V.VIPs protocols,personal security, lavish ofces)

100

Total 3,000 billion

It can be seen that this is a model in which there are no income and sales taxes, which would give a dito the common people in all spheres of life. With no taxes, the fuel cost would also be drastically rethe transport system, bringing the entire cost of production and transportation to extreme lower lfuel and gas produced in the country does not have to be sold at the cost of the imported oil but thgovernments and the cartels do not pass that relief to the nation. In fact, the prot of the locally prois not even shown in the budget gures.

The Pakistani Diaspora of nearly 10 million globally is ercely patriotic and has the capacity to fun

of dollars of development projects every year in the country, provided they have faith in the governare given the respect they deserve. We have had many such examples in the past where billions of investment by expat Pakistanis was blocked and refused because the ruling elite demanded bribes ain the projects.

Conclusion: The bottom line is that Pakistan can be turned into an economic powerhouse, literally owithin the existing resources and wealth it possesses, provided we have daring, patriotic, visionary aleadership! The leaders will have to be ruthless to eliminate corruption and terrorism the two cahave brought Pakistan to the brink of economic precipice. These are desperate times and demanerce and desperate measures. Pakistan is on the verge of losing its freedom, sovereignty and dignthe economic collapse, which is by all standards self inicted and deliberately orchestrated. Pakistanthe Supreme Court do not have too much time to correct the dangerous imbalance in national poeconomic meltdown is simply too momentous.

The current fragile economic situation and dependence on foreign aid and begging from the internnancial institutions is the weakest and the most humiliating link in Pakistans national s overeignty. Thof economic slavery have to be broken if Pakistan has to rise to reclaim its rightful place as the lead

Muslim world and to act as the key player in the regional and global geo-politics.


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BrassTacksPolicyPapers A great destiny awaits Pakistan. Pakistan has waited a long time to nd the right breed of people to realize that

fascinating destiny. It is within our grasp now and we have the means, capacity, resources and the ideology tomake it happen. All we need is the will and the courage to dare to achieve what the others consider impossible.InshAllah, it will be d one.

Pakistan Zindabaad!

***********************************

Return to the Golden Age2

Khawaja Asad

With massive scal imbalances on all at money based balance sheets around the world, Europe atof default, condence in the US dollar at an all time low, prices around the world skyrocketing, whathe new form of money or lets say currency which could stabilize the nancial systems once againout all toxic debt and assets from around the world?! The developments may surprise a few, the evshock many, but the solution has no argument against it, whatsoever!

China Proposes To Cut Two Thirds of Its $3 Trillion In USD Holdings

Latest data shows that the Chinese foreign exchange reserves increased by $197.4 billion (US) in the months of 2011 to $3.04 trillion. A member of the monetary policy committee of the central bankrecently said that $1 trillion would be enough and that the rest should be invested more strategic

mentioned they should use the rest to acquire resource and technology needed for the real econo

On the private sector front, chairman of China Everbright Group, TangShuangning, also recently took his take on this issue. Not surprisingly,he mentioned that China should diversity its foreign exchange reservesthus reducing her holdings in US dollars. According to him, the currentreserve amount is too high and that the foreign exchange reserves shouldbe restricted within the range of $800 to $1.3 trillion.

Bottom line: Condence in US dollars is at an all time low. The largestcreditor nation in the world, China, is about to dump a large chunk of

US dollars and move into real assets like gold, silver and national welfareimproving assets like investing in education, health, overseas investmentsand strategic resources. This is a message to the world that the US dollaris not a viable investment and the domino effect is just around the corner.


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BrassTacksPolicyPapers That was in May, 2011. Reports coming out early June from the US Treasury show that China has divested

97% of her US Treasury holdings, decreasing its ownership of the short-term U.S. government securitiesfrom a peak of $210.4 billion in May 2009 to $5.69 billion in March 2011, the most recent month reported bythe U.S. Treasury. Short term Treasury bills are securities that mature in one year or less that are sold by theU.S. Treasury Department to fund the countrys debt. So the fate is sealed now. The only buyer left f or the UStreasuries is the Federal Reserve Bank which prints money out of thin air and then buys the US treasuries andthen the US government taxes the public to pay them back. The never ending debt spiral is set to implode inthe next few years. The situation has become so dire that the credit rating agencies like Moodys, Fitch Ratingsand Standard & Poor, which are usually in bed with the US banks creating a massive moral hazard, have been

forced to warn the US that her credit ratings will be sl ashed if the US chooses to default on her loans, even

temporarily. Hence, the Republicans and Democrats in Washington are ghting over cuts in scal spending orraising the debt ceiling. The case is clear. The debt is so l arge that the US cannot pay it back in todays money.So the only path they will follow is print even more money and devalue the dollar so as to pay back in dollarswhich are worth less and less. This is how it looks like for the United States.:

IMF bombshell: Age of America Nears End

Finally, the IMF has accepted the fact that the Age of America will end. How long will it take? 2050? 2040?2030? 2020?! NO! Mark it down in your calendar, its 2016! This is the year when the international organizationestimates Chinas economy will surpass, in real terms, that of America. This is just 5 years from now!

Data Source : IMF, April 2011

So in ve years, the Chinese economy will be the largest in the world. But a closer look at their analysis unveilsa aw in their methodology. Gross Domestic Product (GDP) of the two countries is being compared butby using current exchange rates and that is a very misleading comparison in real terms. As Pakistanis knowbetter, exchange rates change quickly, and Chinese exchange rates are far from being fully priced. They areactually phony. The Chinese have articially under valued its currency, the Renminbi or Yuan, through hugeintervention in the markets.

Under the current analysis, the Chinese economy will increase from $11.2 trillion this year to $19 trillion in2016 while the US economy will increase from $15.2 trillion to $18.8 trillion. This means the Chinese shareof the world output would rise to $18+ trillion and Americas would go down to 17.7%, the lowest in modern

times. What is mindboggling in this case is that just about 10 years ago, The U.S. economy was three

size of Chinas!

When the Chinese nally decide to let their currency oat a bit more freely, it will send the Renmiand the cost of Chinese goods to the Americans sky high! The result would be hyper ination iFurthermore, if the Chinese let their currency oat and it doubles in value because of their ever iexports, the Chinese economy would double over night! To present a doomsday scenario for the Ahere, gold, silver and oil are sky-rocketing signaling a declining value of the US dollar. Less purchasand loss of the international reserve currency set up will send the U.S. back many decades in purchasterms. The case in point is what will replace the U.S. dollar as the international reserve currency? Nat

world should revert to the gold standard with silver in the mix. However, recent events have shed lianother sinister plan by the western bankers, but they are failing miserably now.

Bretton Woods II - The Last Ditch Effort to Enslave Mankind!

When Amscel Rotchschild said, Give me the power of the money and it will not matter anymore who is comhe expressed the true nature of international or global nance. The new front man for Bretton Woods II is none ot

famous international investor, George Soros. This is the same person who, in The Alchemy of Finance wrote, To pu

I fancied myself as some kind of god or an economic reformer like Keynes As I made my way in the world, reality

enough to my fantasy to allow me to admit my secret, at least to myself.

The Bretton Woods II conference was sponsored by INET, The Institute for New Economic Some of the attendees and speakers at the INET conference included:

Paul Volcker, former Chairman of the Federal Reserve and chairman of the current PresidUnited States of Americas Economic Advisory Board.

Gordon Brown, former U.K. Prime Minister.

Economist Jeffrey Sachs, Director of The Earth Institute.

Joseph E. Stiglitz, former Senior Vice President and Chief Economist for the World Bank.

INET Executive Director Rob Johnson, former Managing Director at (George) Soros Fundment

Jeffrey Sachs, Columbia University Professor who was written about by Aaron Klein in WNis, a special advisor to the U.N. Secretary-General Ban Ki-moon, is founder and co-president of the Soros-funded M

Promise Alliance. He has a been a World Bank consultant who formerly directed Harvards Institute for Internation

ment, which he turned into a major conduit advocating for World Bank and International Monetary Funds use fo

adjustment program in the Third World and beyond.

"A Millennium goal called for a "currency transfer tax," a "tax on the rental value of land and natural resources,

on worldwide fossil energy projection oil, natural gas, coal," "fees for the commercial use of the oceans, fees for a

of the skies, fees for use of the electromagnetic spectrum, fees on foreign exchange transactions, and a tax on the carb

of fuels."


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BrassTacksPolicyPapers All the so called elite have joined in for a

last ditch effort to f urther enslave mankind.For this to become reality, a one-worldcurrency will be required, implementedthrough what they are calling now a SuperIMF! No Wonder IMF is working day andnight to collateralize resources everywherefrom the United States to Europe to Africato Asia when loans are offered. This wouldbe a dream come true for the International

Bankers. However, it should be noted thatalthough, these rich elite do make moneyof fractional reserve banking, they alwayshold onto and increase their holdings ofgold and silver which is real wealth. So ineither case, the Special Drawing Right Unitthat the Super IMF plans to issue and use as reserve currency for international settlements, it will need goldand silver in the mix, which brings us to the point of who has seen through this game and started buying goldand silver at an aggressive rate?! The answer should not surprise you.

World Gold Council Bombshell

The World Gold Council just announced that China has surpassed every nation in the world in purchases ofGold. Now China is not only the largest producer but also the largest consumer of gold. What else?! TheChinese banned the exports of silver in late 2009 and encouraged their population to start saving in gold and

silver by opening bullion shops and silver and gold accounts. Where she used to export 100 million ounces onaverage, the imports are now north of 200 million ounces every year! Add local mining and buying throughthe SCO camp which is not reported. The Chinese saw the coming ination and saved their publics purchas-ing power which also helps in inationary times which are already here. The public has not panicked andstayed calm as ination ar rived, unlike the Middle Eastern countries. The purchasing power was left intact for

the Chinese public. It is an open secret now that China wants to own more Gold than every otherin the world. She is desperate to mine more gold and buy as much as she can. (Hello Reko Diq in PThe Chinese are the largest producer and consumer of gold. Do we still need western expertise?!

fall in paper currencies goes parabolic, China could start oating her currency (which is pegged to thlar) and that may play a big role in international trade. So to avoid speculative attacks, which Pakistan

aware of, the Chinese will HAVE to back her currency by a good chunk of gold and silver and thatwhat they are planning. Is someone else also?

The Curious Case of Zimbabwe

We are all familiar with how Zimbabwe recently went through hyperination in the past few years. Thwas devastated as it printed and printed to pay off .. you guessed it! DEBT! (Federal Reserve and Unof America anyone?!). A lot of people still think that the country still trades in their Zimbabwe dolactually use gold and US dollars now! But the Central Bank of Zimbabwe just announced that they bUS dollar is no longer stable. So they are now considering selling their diamonds for g old, so they hgold-backed currency. This is what the Central Bank there has proposed in their most recent paper

A country totally devastated with hyperination will now probably have the soundest currency in th

the plan is approved and implemented. Imagine the capital inows into the country. Look for Chinrocket her trade with Zimbabwe if this happens.

The European countries are totally devastated. As we write this article, riots have broken out in Greis no far away, Portugal has sold her soul to the IMF at the tune of $35 billion and Italy is panicking


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BrassTacksPolicyPapers the bond payments arrive. British Pound is on its death bed. The Euro is doomed. As we showed in the previ-

ous article, the west just cannot pay off her debt anymore. So, to instill discipline in the system again, there isfor sure going to be a gold standard implemented in this decade which means gold and silver will be revaluedagainst paper currencies. If that happens against the dollar, gold will have to go up to $15,000/oz. and silverto $500. Currently, they are at $1530/oz and $36/oz. Thats appreciation in value of a 1000% in gold whichhas already appreciated by 500% in the last decade and a 1400% appreciation in silver, which has already ap-preciated by 1000% in the previous decade. Thats multiple thousands in the making!

What of Pakistan?

The important question is where Pakistan is in this mix?! We have arguably the largest gold mines in the worldand so much silver can be extracted from them. It is important to bring to our readers attention that only30% of the silver supply of the world comes from purely silver mines and 70% is a by-product of gold and

copper mining. Pakistan has the 4th largest copper belt in the world and as mentioned, probably one of thelargest gold mines. What are we waiting for?! The Central Bank needs to start accumulating gold and silverat an aggressive pace. We do not have much time. We need to diversify our foreign reserves into real wealth.Our banks need to start accumulating gold and silver to account for the loans they have issued. It should startright now! As silver and gold prices sky rocket, so will our foreign reserves and our banks will become themost protable around with no need to charge interest to make money. We will easily break the shackles offractional reserve banking and the interest based banking system. Every Pakistani banker wants this in theirheart. They are sick and tired of this interest based set up. They can see how people are suffering becauseof it and they just cannot take it anymore. In a few years, we will be a debt free nation! It is as simple as that!We are at the tipping point of a nancial disaster. The nancial markets are crumbling while gold and silverstay rock solid! There is no argument left, none whatsoever against gold and silver anywhere! The time isNOW! NOW OR NEVER!

Currency WarsReal Wealth vs Fait Money

3

Khawaja Asad

All the criminal money printing around the world by Central Banks, including the State Bank of

(SBP) is leading the world into massive ination. If the current rate is not high for you yet, then bracSome countries have gone into turmoil because of rapid hyperination and more will follow. This concept of paper money printing without any backing of real assets is one of the key factors in dnizing the socio-economic fabric of the society particularly the middle-class. Pakistan has experienination in the last few years and it is about to g o into overdrive in the second half this year. Are tfor Pakistanis to protect themselves in such an event? Can the government do anything about it? Sdefault on our loans? Should we just keep printing money? What is the way forward? The analysis here takes everything into perspective and provides a practical way to ght and even do well in the cthat lie ahead both on an individual and collective level.

There is no doubt in any nance experts mind that the second decade of the 21st century is going start of arguably the greatest transfer of wealth from the West to the East. However, the world hobserved this shift and the trend is expected to increase and going to conclude in this decade resultrising of the East. Economists and national economic policy makers are trying to gain vested shorterests and ignoring the larger gains for their respective countries and entities they represent as a resshift of wealth from West to East. To get a clear picture of where the world is heading in the cominwe analyzed the case of debtor vs. creditor nations.

The Case of Debtor vs. Creditor Nations

In general, people think that the world, as we know it, started at the turn of the 19th and 20th centu

of us think the world was languishing in the dark ages and no real trade existed before then. It wasing and painful to do business back then, when you only did barter to survive and make transactionthink that the concept and implication of modern central banks came to the rescue of the world anformal and regulated nancial institutions, medium to transact in shape of at money (paper currthe nancial & derivative markets. So we are now supposedly rich because of these innovations


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BrassTacksPolicyPapers money, paper currency, assisting the local and international trade swiftly. We have credit cards, smart consumer

and corporate products facilitating every type of complex business proposition, fractional reserve bankingsystem and interest rates which are advertised as prots when you inquire about their philosophy.

We have established the case for a doomsday scenario for the paper currency in general and US dollar in par-ticular in our previous months article. The question that takes centre stage is what can replace the US dollarfor trade when the Euros future is also leading for a nose dive and at much faster pace than US dollar (theEU is printing as many Euros as it can to bail out her debtor nations). A lot of people do not accept the factthat the US dollar or the Euro will be worthless one day, possibly not far from today (historically, every singlecurrency which was not backed by some commodity or a precious metal has gone to zero). But in order to

clearly understand the depth of this topic, we will use the following chart that shows some interesting factsabout the western nations, especially the one that is bantered repeatedly in Pakistan, and that is GDP/(exter-nal)debt ratio.

GDP is how much you produce in goods and services within a country. That is how much income you gener-ate. If you borrow money, you should use it to produce something so you can pay it all back. In the 1970s,developed western nations were generally the creditor nations and the debtor side of the globe was mainlyin the east. Then, slowly and gradually, the western nations got hooked onto consumption, without limits.Whatever they borrowed, they consumed and started out sourcing productive capacity to the so-called under

developed or developing nations where labor was apparently, cheap. When we went into the 21st century, forevery $1 a US resident borrowed, he/she spent $5. Talk about stag gering amounts of debt, since the borrowedmoney was used for consumption, you couldnt return it as you did not generate any income from it. So howdo they keep going? They borrow more money to pay off the previously borrowed money. Then they gotanother credit card to keep up with the payments of the previous one. The never ending debt spiral beginsand it brings along the BOOM and BUST theory, when the economies seem to be growing at a rapid paceand suddenly implode and cause a huge recession. Pakistan went through the same phase during 2000-2007.

To applied economists, this should sound familiar. This is exactly what the policy makers in Washington andWall Street have done in the past half century. They borrowed and consumed while the production capacityof the world has shifted to China. But before we get there, let us examine the state of the United States andUK. Both are the largest debtor nations in the world with a GDP/debt ratio of estimated 100% and 428.8%

No. Country

Externaldebt (as% ofGDP)

GrossExternalDebt

2009 GDP est.External GDPper capita

ForeignReserves

FR(GED

1 Ireland 1,305% $2.25 trillion $172.5 billion $535,529 $2.1 billion 0

2 UK 428.8% $9.12 trillion $2.128 trillion $149,281 $107 billion 1

3 Switzerland 378.6% $1.2 trillion $314.7 billion $156,694 $271 billion 2

4 Netherlands 369.6% $2.44 trillion $660 billion $145,928 $46 billion 15 Belgium 326.7% $1.25 trillion $383.4 billion $120,267 $27 billion 2

6 Denmark 307.3% $607.8 billion $197.8 billion $110,502 $77 billion 1

7 Sweden 269.7% $893.9 billion $331.4 billion $98,664 $48 billion 5

8 Austria 251.4% $809.2 billion $321.8 billion $98,554 $22 billion 2

9 France 244.3% $5.23 trillion $2.09 trillion $79,982 $166 billion 3

10 Portugal 231.2% $537.8 billion $232.6 billion $50,230 $21 billion 3

11 Hong Kong 224 .7% $678.3 bi ll ion $301.8 bi ll ion $96 ,142 $269 b il lion 3

12 Finland 215% $383.7 billion $178.8 billion $73,082 $9.6 billion 2

13 Norway 208.8% $558.4 billion $267.4 billion $119,805 $46 billion 8

14 Spain 176.9% $2.40 trillion $1.36 trillion $59,459 $32 billion 1

15 Germany 176.8% $4.97 trillion $2.81 trillion $60,357 $217 billion 4

16 Greece 167.2% $557.4 billion $333.4 billion $51,916 $6 billion 1

17 Italy 141.3% $2.45 trillion $1.74 trillion $42,267 $159 billion 6

18 Australia 121.9% $1.03 trillion $851.1 billion $48,787 $42 billion 4

19 Hungary 120.6% $224.3 billion $186 billion $22,650 $45 billion 2

20 United Sta te s 98.4% $13 .9 t ri ll ion $14 .14 t ri ll ion $45 ,302 $134 b il lion 9

Source: Consumer News and Business Channel (CNBC) & IMF data on

current foreign exchange reserves of reporting countries

respectively. They are also in an ever increasing recession. Once admirable economies, US & UK hato pay back this amount other than by printing money which will lead to the devaluation of their cand a complete shutdown of their economies in near future. However, they can surely use their foreigto pay some of it off. Thats why the data compiled here has Foreign Reserve/Gross External Dedo justice with the case at hand. This particular ratio for UK is 1.17%, it means for every dollar UK

external debt, it has 0.0117 pennies in to pay it back. For the US, the same ratio stands at 9.6% andat a rapid pace. The chart below is a list of the top 20 debtor nations in the world. Barring Hong Khas the highest reserves compared to the western nations. These nations cannot keep up with their to their creditors. Neither do they have the productive capacity anymore, nor do they have any ablleft to sell. Ireland g ot a bailout a f ew months ago because it couldnt make her bond payment to intcreditors. Bailout is a fancy name for central banks to print money and give it to the debtor. They creout of thin air, but you have to pay it back in real wealth, for example if you cant pay paper monIreland wont because it has no productive capacity, they have to sell their national assets.


20/34


39

Country Sovereign Debt Default Period

Venezuela $270 million - domestic currency bonds July 1998

Russia $72 billion Treasury obligations, foreign

currency obligations, MINFIN III foreigncurrency bonds

August, 1998

Ukraine $1.27 billion September 1998

Ecuador $6.6 billion August 1999

Ukraine $1.06 billion DM-denominated Eu-robonds & USD denominated bonds

January 2000

Peru $4.87 billion September 2000

Argentina $82.21 billion November 2001

Moldova $145 million June 2002

Uruguay $5.7 billion May 2003

Dominican Republic $1.62 billion April 2005

Belize $242 million December 2006

Ecuador $3.2 billion December 2008

Note: there were other sovereign debt defaults that occurred during this period, including Ivory Conada and Seychelles, but these countries did not have Moody's ratings on their sovereign bond obligthe time. Also note that default does not always mean that you refuse to pay the debt. It can also mare deferring payment for a few years.

It was also mentioned in the previous months article that Pakistan should default on its external dyears and divert the funds towards nation building. The advice was supported by a resolution of UNRights Commission in 1999 and another of UNs commission on International Law 1980. It shoulnow that other countries have successfully defaulted or rescheduled their loans and done well for th

So why cant we?

Measuring the Strength of a Currency vs. Real Wealth

In fact, the more a country is to delay rescheduling or the default, the more money is being printis highly inationary for the economy and devalues the currencies further and hence the standardSuch is the case with the European countries and especially, the US. The best way to measure the sta currency is to measure it against real assets like gold and silver. Unlike paper money, gold and silvbe printed at will. As a result, they hold their value and in the case of depreciating paper money, appvalue. The following chart shows that before the advent of Federal Reserve, dollar was backed by and hence its value remained the same, while after Federal Reserve was created, the value decreasedthat an item that used to incur a cost of $1 in 1913 was incurring the cost of $27 in 2009:

From 1774-1913, there was on average, zero ination. Back then, we used real money and inatioout to be zero. Since the advent of the Federal Reserve and money printing at will of national poli(either in shape of politicians, civil servants or private entities of inuence like Federal Reserve), a

went for $1 now goes for more than $27. Thats an increase of 2700%. This is the answer to the t

your head that why do our parents dont have any stories of their parents and grandparents of ramption to tell. It is indeed a very f rightening picture of whats about to unfold in the near future. Pludollar has depreciated massively since 1913, the year Federal Reserve came into existence. Massive injust around the world. A lot of it is already happening, but more is on the way. So how can Pakistanthemselves from this scenario on an individual and on a collective basis? There are things that rise in

Among the countries listed in the table above, Greece went rst. It could not keep up with the bond paymentterms so Greeks have to accept a joint bailout package from the EU and IMF, which enforced strict austeritymeasures in the new budget. This also means less potential for productive capacity and savings of the com-mon men simply vanished. Greece will probably need more money as her debt is stag geringly huge. The groupof failing states is emerged as PIIGS (Portugal, Ireland, Italy, Greece & Spain), with massive debt problems,empty pockets and sovereign debts maturing within next 12 months. These debts are so huge that they cannotbe recovered through bailout and more loans. Ireland has a debt of 1305% of GDP while its foreign reservesare only 0.0933% of GDP. We can expect Portugal to ask for a bailout as soon as the bond payments and newbudget approaches. All the countries mentioned above are doomed if they select not to declare insolvency andif they do, expect the Euro to break apart and the currency to go into a freefall.

The Case For a Default & Restructure of External Loans

We are used to listening and reading stories in international and Pakistani media about economic meltdownof Pakistan and rumors about it being a failed state. Let us rst categorically correct these misguided state-

ments that going bankrupt and being a failed state are not mutually inclusive. In fact, if we look at historymany countries have declared bankruptcy or default on their liabilities and star ted over again. It may come as asurprise to the naysayers and the so called foreign trained economists that Argentina, Mexico and Venezueladefaulted in 1982. The following year, Brazil and Chile defaulted. Furthermore, Costa Rica, Ecuador, Panama,Peru, Uruguay and the Dominican Republic defaulte

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