Authorities in the dark over key area of financial system, IMF report shows

Nick Beams

Since the eruption of the global financial crisis in 2008 and the ongoing financial storms, the latest in March when two US banks collapsed and the globally significant bank Credit Suisse had to be wound up in a forced takeover, two fundamental features of the global financial system have become ever more apparent.

International Monetary Fund (IMF) Director of the Research Department Pierre-Olivier Gourinchas accompanied by IMF Deputy Director of the Research Department Petya Koeva Brooks in Washington, Tuesday, April 11, 2023. [AP Photo/Jose Luis Magana]

First, that measures undertaken by central banks to stave off a crisis at one point by pouring money into the financial system only create the conditions for its eruption at another.

Second, that the authorities supposedly in charge of the system have no real idea of the workings of the financial monster they have created, much less any coherent plan for its regulation.

Anyone who may have had some doubts about the validity of these assertions need only consult the International Monetary Fund’s Global Financial Stability Report issued this week at the IMF-World Bank spring meeting in Washington.

It now widely acknowledged that the central banks’ program of quantitative easing, spearheaded by the US Fed after 2008 and then accelerated after the crisis of March 2020, created conditions where a series of financial institutions, including banks, would be vulnerable to the rapid rise in interest rates over the past year.

However, such was the faith of the Fed in the efficacy of its policies that, while it devised a series of stress tests to measure the strength of the banks, it failed to include their ability to cope with a sharp rise in interest rates.

This is only one expression of a far broader process, which emerges with particular clarity from a reading of Chapter 2 of the report dealing with the rise of nonbank financial institutions. These have come to play an ever more prominent and dangerous role in the operation of all financial markets.

The chapter begins as follows: “Nonbank and market-based finance has experienced spectacular growth since the global financial crisis. During this period, the share of global financial assets held by nonbank financial intermediaries (NBFIs) has grown from about 40 to nearly 50 percent of the total.”

This rapid rise was in part due to regulations introduced after 2008 to try to control some of the more speculative activities of the banks which led to the 2008 financial crash. According to the report, while these regulations made the banking system “more resilient,” they “effectively pushed activities to other parts of the financial system.”

In other words, like water, which always manages to find gaps and weaknesses in a plumbing system, predatory finance capital found ways to continue the very same speculative activities that led to the crash.

The report notes that NBFIs have come to play a key role in core financial markets, such as government and corporate bonds, and are a crucial driver of capital flows to emerging markets and developing economies.

“At the same time, vulnerabilities related to financial leverage, liquidity and interconnectedness have built up in certain segments of the NBFI ecosystem. Particularly dangerous is the interaction of poor liquidity with financial leverage.”

In other words, NBFIs have raised large amounts of money, much of it through debt, often short-term, which is invested in risky assets, which become impossible to unload (illiquid) during a period of financial turbulence, meaning there is difficulty in repaying investors and lenders when they seek to withdraw their money.

The most striking feature of the chapter is that financial authorities are totally in the dark about many areas of the system they are supposed to control. This is set out throughout the report. The instances of ignorance are too numerous to list in full, but some glaring examples provide a picture.

“Very low rates and asset price volatility since the global financial crisis have incentivized investors and institutions to use financial leverage (debt) to boost expected returns. However, vulnerabilities from leverage can sometimes be unknown to both authorities and market participants because they are difficult to measure or because the leverage is hidden.”

The report notes that liquidity stress in the NBFI sector can spill over to the broader financial sectors as took place in the March 2020 “dash for cash” when the $22 trillion US Treasury market, the basis of the global financial system, froze at the start of the pandemic.

However, financial authorities have no real idea of the interconnectedness of NBFIs with the broader financial system. As the IMF report notes, while there is some data, “large gaps remain” with “roughly half of aggregate NBFI domestic funding sources unaccounted for.”

It said regulatory data gaps for NBFIs are “significant” in inhibiting the ability of regulators to monitor systemic risks.

“Significant data gaps exist for monitoring the liquidity vulnerabilities of investment, money market, and hedge funds.”

Data gaps are a “key hindrance” for leverage analysis of investments funds, and leverage disclosures for investment funds that are not hedge funds “are often not detailed enough to allow for assessments of the extent of leverage that is visible to regulators.”

Data gaps loom even larger for unregulated or even unregistered types of NBFIs, such as family offices like Archegos Capital, the demise of which in 2021 played a role in the eventual demise of Credit Suisse. And the list goes on.

At the press conference on the report, Tobias Adrian, the director of the IMF’s Monetary and Market Capital Markets Department, sought to brush away concerns about the stability of the financial system.

Asked whether central banks could raise interest rates in their so-called fight against inflation while maintaining financial stability, he acknowledged that the March crisis had revealed “vulnerabilities” and there were “other vulnerabilities out there.”

There were vulnerabilities but there were also policy tools and they had “deployed in a very effective manner.” The so-called policy tools consisted of nothing more than the deployment of billions of dollars to bailout uninsured depositors holding more than $250,000, at the failed SVB and Signature Bank, some of them with tens of millions of dollars in their accounts, as the Fed provided additional liquidity to the banking system.

Adrian sought to present these actions as a smooth operation, proceeding as if according to a plan. In fact, as various accounts have made clear, it was nothing of the sort and involved a series of crisis meetings, including Treasury Secretary Janet Yellen, Fed chair Jerome Powell and the head of the Federal Deposit Insurance Corporation, Martin Gruenberg, among others.

He continued to promote the claim that SVB was an “outlier” with no lasting significance for the banking system. He did not explain, nor did any of the assembled journalists ask him, if that were the case, why authorities had to invoke the threat of a “systemic crisis” in order to organise the rescue operation.

Adrian’s responses recalled that of European Commission president Jean Claude Juncker who said during the euro crisis in 2011 that “when things get serious, you have to know how to lie.”

Biden visits Ireland to mark 25th anniversary of Good Friday Agreement, snubs UK government

Thomas Scripps

US President Joe Biden begins a five-day visit to Ireland on Tuesday to mark the 25th anniversary of the Good Friday Agreement establishing Nationalist-Unionist power sharing in Northern Ireland and ending armed conflict between the Irish Republican Army and British and Loyalist forces.

Biden will arrive in Belfast in the evening greeted by UK Prime Minister Rishi Sunak but will spend fewer than 24 hours in Northern Ireland, travelling to Dublin Wednesday afternoon.

President Joe Biden attends an event to support legislation that would encourage domestic manufacturing and strengthen supply chains for computer chips in the South Court Auditorium on the White House campus, March 9, 2022, in Washington. [AP Photo/Patrick Semansky]

Despite all protestations to the contrary, the perfunctory visit is a snub to the UK’s Conservative government, which hoped to use Biden’s visit as a victory lap proving its Windsor Framework agreement with the European Union over Northern Ireland a success and that Anglo-American tensions over Brexit have been put to bed.

This proved impossible as neither proposition is true. The UK-EU agreement has still left Northern Ireland without a government, with the Democratic Unionist Party (DUP) opposed and refusing to constitute a new Assembly, jeopardising the Good Friday Agreement in which the US is heavily politically and economically invested.

While in Belfast, Biden will give a speech at Ulster University, address business and civic leaders and, according to the BBC, “may speak to political parties.” But he cannot address the Northern Ireland Assembly, created in 1998 in accordance with Good Friday Agreement, because it has been suspended since February 3, 2022—as it was for three years between January 2017 and January 2020.

The Assembly was collapsed last February by the DUP to protest the Northern Ireland Protocol regulating the passage of British goods through Northern Ireland. The open land border with European Union member state, the Republic of Ireland, enshrined in the 1998 Agreement, has led the EU to seek assurances that its laws and standards will be upheld by the UK, meaning inspections on goods travelling between Britain and Northern Ireland. This is seen by unionists as an unacceptable step toward a united Ireland.

Elections to the Assembly in May 2022 made the Irish nationalist Sinn Féin the largest party. The DUP has since refused to nominate a deputy speaker as required by the power-sharing agreement, meaning the Assembly cannot function.

While Boris Johnson, and briefly Liz Truss, were prime minister this was lent under-the-table support while the UK government took a belligerent stance to negotiations with the EU, threatening to unilaterally overwrite its own Brexit agreement.

Sunak has attempted to normalise relations, agreeing revisions to the Protocol this February with the EU—the Windsor Framework. The deal was approved by parliament, with 22 Tory MPs aligned with Johnson voting against and 47 abstaining. All six DUP members also voted against, with its leader in the House of Commons Jeffrey Donaldson saying the agreement “harms our place in the internal market of the United Kingdom.”

UK Prime Minister Rishi Sunak welcomes the President of the European Commission Ursula von der Leyen to Windsor to discuss the Northern Ireland talks. [Photo by Simon Walker/No 10 Downing Street/Flickr / CC BY 2.0]

Sunak’s move to secure an agreement with the EU was substantially driven by pressure from the United States, whose corporations have major financial interests in the Republic of Ireland which is used as a low tax investment platform for accessing the European Single Market. The Irish-American lobby is also a significant force in Democratic Party politics.

Biden praised the Windsor Framework as an “essential step to ensuring that the hard-earned peace and progress” of the Good Friday Agreement was “preserved and strengthened”. But he warned that Stormont should be restored: “Those institutions embody the principle of devolved, power-sharing, representative government at the core of the Good Friday Agreement.”

But it is the sectarian framework of the agreement gridlocking Stormont, with the domination of unionist and nationalist parties ensured and both given the power to shut down the Assembly.

When the Good Friday Agreement was signed in 1998, the World Socialist Web Site Editorial Board wrote, in a statement republished today: “the new agreement does not lay the basis for ending the sectarian conflicts that have been cultivated by British imperialism for centuries. It upholds the conception that the fundamental divisions in Ireland are those of religion and national identity…

“An agreement that perpetuates social inequality and economic insecurity cannot provide the foundations for overcoming the reactionary legacy of religious and communal divisions.”

This is now so clear that the BBC published an extensive piece Monday by its Northern Ireland political editor Enda McClafferty asking, “does the peace deal still work?” The article noted, “For nine of the 25 years since the Good Friday Agreement was signed Stormont has been shut down…

“[F]ar from shoring up the gains of the Good Friday Agreement the Stormont safeguards have held back political progress.

“They have led to stop-start government and hindered long-term efforts to deal with deep-seated problems in health and education.

“Beyond Stormont many believe the vetoes have only served to cement further polarisation in Northern Ireland.

“Repeated surveys show public confidence in Northern Ireland’s political institutions remains consistently low.”

Biden’s visit this week has therefore been carefully choregraphed to warn the UK government to get its house in order, while avoiding an inflammatory rift which would pile more pressure on the already creaking structures of the Agreement. Though Biden will spend more time in the Republic of Ireland, including meetings with President Michael Higgins and Taoiseach Leo Varadkar, much of it will be focused on personal visits to distant cousins in counties Mayo and Louth. The Dail (parliament) is not being reconvened to be addressed by him.

On Monday, Sunak issued his statement praising the Good Friday Agreement and welcoming Biden’s visit, imploring the DUP without naming them to “get on with the business of governance.”

In an interview with BBC Good Morning Ulster, Northern Ireland Minister Steve Baker did not exclude the possibility of a return to direct rule of Northern Ireland by Westminster, saying, “We would very much prefer to restore local ministers to their place but clearly we cannot allow things to go on very much longer with the current arrangements because it is not a sustainable basis to be asking officials to take difficult decisions without ministers in place.”

He continued, “But equally we are very well aware that direct rule would be a very serious step.”

Such a decision would intensify the conflict with the DUP, which still has substantial influence within the Tory Party, and provoke a clash with Sinn Féin if Westminster refused to involve the Republic of Ireland. Party vice-president Michelle O’Neil warned last October, “We’re not going back to the days of London ruling our affairs here.

“There’s very much a role for joint partnership between London and Dublin, that’s where we’re headed in the event of things not being up and running.”

The working class north and south of the border cannot advance their interests and secure their democratic rights through this rotten framework of British Unionism and Irish nationalism, and the contending imperialist interests represented by Westminster, Washington and Dublin.

Profit hikes, not wages the key driver of inflation

Nick Beams

Like its international counterparts, the European Central Bank (ECB) continually cites a “tight” labour market as a key reason for interest rate hikes in its so-called fight against inflation, the real aim of which is to suppress workers’ wage demands as they seek to counter the fastest escalation in prices in four decades.

But it knows full well that profit gouging by major corporations is playing the main role in the inflationary spiral. This fact is not widely publicised lest it expose the real agenda of the central bank’s program, but it is acknowledged in an ECB blog post, based on official data, at the end of last month.

Christine Lagarde, president of the ECB, speaking at the European Parliament earlier this year. [AP Photo/Jean-François Badias]

Noting that domestic price pressures had increased strongly since the second half 2021—well before the Russian invasion of Ukraine, so often cited as a major cause—it said profits had increased by 9.4 percent in the fourth quarter of 2022 and “contributed more than half the domestic price pressures in that quarter.”

Higher input prices for energy made it “easier for firms to increase their profit margins, because they make it harder to tell whether higher prices are caused by higher costs or higher margins” and the inflationary environment enabled corporations to recoup real income losses.

The ECB said analysis of developments since the start of the pandemic showed that “in the euro area as a whole unit profits have increased faster than unit labour costs since the start of 2022, in some cases since the end of 2019.”

In what it called a sectoral analysis, the ECB found that profits had grown “much more than labour costs” in a range of industries including: the agricultural sector; energy and utilities; construction; manufacturing and “contact-intensive” services sectors.

In short, what can only termed profit gouging extended across the board. Its extent was indicated by a historical analysis.

According to the blog: “If we compare the relative contribution of unit profits and unit labour costs to domestic price pressures over a longer horizon we see that, most recently, the effect of profits on domestic price pressures has been exceptional from a historical perspective. While, on average, from 1999 to 2022 unit profits contributed around one-third to the GDP deflator (the gauge of inflation), over 2022 they contributed an average of two-thirds.”

The blog concluded that the ECB would continue to monitor developments and take policy decisions to ensure that interest rates dampen demand, in other words slow the economy to suppress wage claims.

A recent article in the New York Times (NYT) also reported on the effect of profit gouging, particularly in food which comprises a major component of the cost-of-living pressures on lower income and working-class families.

It noted that while energy prices had started to fall back somewhat, food prices were continuing to rise. They were up by 15 percent in the year to March in the euro zone and increased by more than 10 percent in the US in the 12 months to February. This was in spite of the fact that in world commodity markets, which set the prices received by farmers, food prices have been falling since April last year.

According to Claus Vistesen, an economist at Pantheon Macroeconomics: “The only way to explain this in relation to what we’ve seen in some of the commodity indices for food is that margins are being expanded.”

The profiteering has become so blatant it has attracted critical comment from members of the ECB’s governing body with Fabio Panetta, a member of its executive board, warning of a “profit-price spiral.”

Clearly concerned about the anger this will fuel in the working class, he said in a speech last month that “opportunistic behaviour by firms could also delay the fall in core inflation.”

The NYT article pointed out that since March 2022, when it reached its peak, a United Nations index of food prices including cereals, meat, vegetable oils, and dairy products had fallen over the past year but “the prices paid for food in both the US and the European Union [EU] have kept rising.”

It cited research by the ING Bank that the hike in profit margins by food suppliers went back to the start of the pandemic, with margins in the German agricultural sector (which excludes manufacturers of packaged food and retailers) rising by 63 percent between the end of 2019 and of 2022, almost entirely due to higher profits rather than higher wages.

In a note to clients, economists at the bank said: “The rise in price margins in the agricultural sector, the construction sector, and in the trade, transportation, and hospitality sector can be mainly explained by an increase in profits, and thus is not due to higher energy and commodity prices.”

According to the EU’s statistics agency, the share of the operating surplus accounted for by profits was 42 percent in the final quarter of 2022, the highest level since 2007, while the share of wages fell.

The NYT article cited comments by Bank of England chief economist Huw Pill which indicated the increased accumulation of profits could embed higher inflation.

“Persistent deviations of inflation from target, even if stemming from what are fundamentally a series of transitory inflationary shocks, might prompt changes in behaviour that generate more long-lasting inflationary dynamics,” he said in a speech last week.

The findings for Europe and the US on the effect of profit margin increases lend support to an analysis by economists at the Australia Institute in February that a profit-price spiral was the main driver of inflation. It reported that “excess corporate profits,” amounting to $160 billion, were responsible for 69 percent of additional inflation above the Reserve Bank of Australia’s target range of around 2.5 percent.

Real wages in Australia fell by 4.5 percent in 2022, the largest decline on record and, on the basis of the RBA’s own policy framework, back-to-back interest rate rises would have been unlikely “without excess profits without excess of profits and prices,” according to the study.

This claim is based on the position that the aim of the RBA and other central banks is inflation and the focus on wages is some kind of mistake because they are not the cause.

But the central bankers’ program is not misguided. It is a conscious policy directed at the working class, seeking to make it pay for the deepening crisis of the global capitalist system, of which profit gouging by corporations is a component part.

UK government hires barge to intern asylum seekers

Steve James

The UK Home Office has announced it intends to house up to 500 isolated and vulnerable male asylum seekers in a 47-year-old “hotel barge”, the Bibby Stockholm. The vessel has previously been used to house offshore oil field and windfarm workers, and refugees seeking asylum in Germany and the Netherlands. It will be moored in Portland Harbour in Dorset.

A Home Office press release said it would “provide basic and functional accommodation” with “24/7 security in place on board”. Its 500 occupants will be held in just 222 rooms, in what a Dutch watchdog previously labeled an “oppressive environment,” notwithstanding the owners’ claims to have “refurbished”.

Bibby Stockholm moored in Hamburg [Photo by GNU Free Documentation License / CC BY-SA 3.0]

Portland Harbour has previously hosted a prison vessel, HM Prison Weare, between 1997 and 2005, holding as many as 400 prisoners. In 2004, the introduction to a report from the Chief Inspector of Prisons, Anne Owers, condemned the facility for depriving prisoners of fresh air and natural light and offering no space for training, exercise or education.

Owers noted that as most of the inmates were from London and the South East, the location was “particularly inaccessible” with prisoners released at a “considerable distance from home.” Even if the necessary cash was spent to keep the vessel seaworthy, if would remain “in the wrong place, with limited facilities and in a constricted environment.”

Writing for his own selfish interests to push for the barge to be relocated away from his constituency, Tory MP for South Dorset Richard Drax admitted, “There are a lot of ‘don’t knows’. Who is looking after them, what are they going to do, what are their health provisions, what happens if there’s trouble onboard?”

He added that residents would only be “allowed out on a bus every so often but in effect will be incarcerated for quite a lot of the time.” The Home Office states in a Factsheet, “If an asylum seeker were not back on site by 11pm the team would make a call to the individual,” supposedly, “to check on their welfare.”

Human rights and refugee groups have roundly condemned the announcement. Amnesty International spokesman Steve Valdez-Symonds said, “People who have escaped terror and torture, endured criminal exploitation and traumatic journeys should be treated with basic human dignity, not corralled on barges or other grossly inadequate and isolated accommodation.”

Refugee Council CEO attacked the “completely inadequate” plans to house “vulnerable people who have come to our country in search of safety, having fled beatings and death threats.”

Christina Marriot of the Red Cross told the Guardian, “Docked barges, which are isolated from the wider community, do not offer the supportive environment that people coping with the trauma of having to flee their homes need.”

These criticisms are made to implore the government to “fix” the asylum processing system, with Valdez-Symonds calling for claims to be “properly and consistently processed” and Solomon arguing, “There would be no need to use barges and former military bases if cases were dealt with in a timely and efficient manner.”

But the government has no intention of establishing a functioning asylum system for the thousands of desperate people forced to risk their lives crossing the English Channel. Its policy is designed to demonise, terrorise, imprison and block refugees attempting to claim their democratic right to asylum. Prime Minister Rishi Sunak underscored the point when asked about the barge, stating “I’m determined to stop the boats and will do everything I can to deliver on that.”

In doing so, the Tories are linking arms with the fascistic right, referring to “waves” and “swarms” of migrants “invading” the UK and focusing their fire on the use of hotel accommodation, at a cost of £6 million a day, to house asylum seekers—the main topic of far-right protests in the UK.

The Home Office statement announcing the use of the barge made sure to include the dog-whistle phrases that it would “minimise the disruption to local communities,” be “more manageable and orderly” and “reduce costs,” with current accommodation of asylum seekers in hotels “now exceeding £6 million a day”.

Immigration Minister Robert Jenrick picked up the thread, ranting, “The Home Secretary and I have been clear that the use of expensive hotels to house those making unnecessary and dangerous journeys must stop. We will not elevate the interests of illegal migrants over the British people we are elected to serve.”

If Jenrick were really so concerned about the interests of the British people, he might give up two of his own three homes. The reality is that the ruling class cares as little for the working class in Britain as it does for migrants. According to Dorset Council’s own statistics, 10 of 11 areas of deprivation in the region are in the Portland and Weymouth area where the barge will be kept, which is also in the 10 percent of most deprived areas in the UK on the basis of income, employment, education, health, crime, housing services and environmental indicators.

Using the criminality of mainland’s Europe’s governments to justify his own, Jenrick continued, “We have to use alternative accommodation options, as our European neighbours are doing—including the use of barges and ferries to save the British taxpayer money and to prevent the UK becoming a magnet for asylum shoppers in Europe” [italics added].

The government has repeatedly claimed that the vast majority who arrive in Britain are “economic migrants” seeking better life chances and so under the current law do not have a legitimate asylum claim. But a Freedom of Information request responded to this March revealed it has absolutely no data to back this up. The Home Office’s own statistics show at least 60 percent of those who arrived in 2022 have a “legitimate” claim.

Sophie McCann, migration advocacy officer at charity Doctors Without Borders UK, told the Guardian: “The government has failed to provide any evidence to support claims that the majority of those trying to reach the UK are so-called economic migrants. These kinds of statements are deployed to demonise and dehumanise people seeking safety here, stirring up divisions, with real and dangerous consequences.”

The announcement of the Bibby Stockholm confirms the World Socialist Web Site’s warning that with its Illegal Migration Bill, currently making its way through Westminster, the UK government is creating a network of land based and floating internment camps.

Plans are already underway to establish camps at former military sites in Scampton, Lincolnshire and Wethersfield, Essexto hold 3,700 people. Another camp is being established in Bexhill, East Sussex to hold a further 1,200 people.

Formally designed to hold arriving asylum seekers prior to deportation to a notional “safe third country,” the lack of any such destination bar Rwanda—with limited capacity and with deportations held up in the courts—means thousands will be held indefinitely in these hellholes.

The policy recalls some of the most brutal episodes in the history of British imperialism.

There are parallels between the Bibby Stockholm and the HMS Maidstone, a former submarine depot vessel refitted and used to house British troops deployed to Belfast, Northern Ireland in 1969 as part of the British operation to prop up the Unionist Northern Ireland government. In 1971, during Operation Demetrius, the British Army’s mass internment operation which rounded up hundreds of young men without trial, the Maidstone served as a prison for 122 internees who were held in cruel and overcrowded conditions.

Labour continue to back the Tories’ anti-democratic, anti-migrant policies to the hilt, only criticising the effectiveness of their implementation. Shadow Home Secretary Yvette Cooper complained, “Until the Government takes serious action to clear the backlog [Labour has promised it will deport more quickly] this problem is going to keep getting worse with more people in costly accommodation, not less.”

Shadow Minister For Domestic Violence Jess Phillips described the barge as “another ridiculous gimmick… excuse the pun—a tiny drop in the ocean,” which “isn’t instead of the hotels; it’s as well as the hotels.”

Leaked documents show massive US involvement in Ukraine war

Andre Damon

Last week, dozens of secret documents from the Pentagon and US intelligence agencies related to US involvement in the Ukraine war began to circulate on social media platforms. Over the weekend, US officials confirmed the veracity of the documents in statements to major media outlets.

The leaked documents make clear that the US and NATO are the main driving forces of the war, with the Ukrainian military serving as a mercenary proxy force. They show that NATO has deployed over 150 military personnel to Ukraine and demonstrate the degree to which NATO funds, arms, trains and directly commands the Ukrainian military.

In this photo taken on Nov. 19, 2021, Attache of the Land Forces at the US Embassy in Ukraine Colonel Brandon Presley looks at the map during the visit by a delegation of the US Embassy in Ukraine to the Joint Forces operation area in the war-hit Donetsk region, Ukraine(Ukrainian Joint Forces Operation Press Service via AP) [AP Photo]

They substantiate the fact that the war is the creation of NATO, which has spent billions of dollars to hijack the Ukrainian political system and turn its population into cannon fodder for a devastating war that has led to hundreds of thousands of Russian and Ukrainian casualties.

In other words, the documents expose the entire narrative of the war promoted by the Biden White House as a lie.

In May 2022, White House spokesperson Jen Psaki was asked whether the war in Ukraine was a “NATO proxy war.” Psaki replied, “I know that is the Russian talking point on this, but it is not a proxy war… This is a war between Russia and Ukraine. NATO is not involved.”

The documents have exposed this statement as a complete falsehood. And they have exposed the US media, which has systematically promoted the Biden administration’s lie that NATO is not involved in the war, as nothing more than the propaganda arm of US imperialism.

The documents substantiate in concrete detail what the World Socialist Web Site has previously reported.

The main revelations from the documents are:

• 97 NATO Special Operations troops are currently deployed inside Ukraine.
• A total of 100 US personnel are deployed inside Ukraine, including 71 US military personnel.
• The US military sees the training of the Ukrainian military, NATO deployments in Europe and US military deployments inside Ukraine as being interoperable, and reports all of them on a single page.
• The US has drawn up detailed maps for a planned offensive operation aimed at cutting off Crimea from Russian-occupied Ukrainian territory, with “favorable” conditions for the offensive beginning in mid-May.
• The US and its NATO allies are training, funding and arming three quarters of the forces that are going to be thrown into combat as part of this offensive. One of the documents declares that “12 combat credible [brigades] can be generated for the spring Counteroffensive: 3 internationally by Ukraine, and 9 are US, Allied & Partner trained and equipped.”

The documents point to a massive disparity between the US’s public and internal presentation of the level of Russian casualties. On February 2, the New York Times reported, citing US officials, that “The number of Russian troops killed and wounded in Ukraine is approaching 200,000.” By contrast, the internal documents pointed to between 35,000 and 43,000 Russian soldiers killed in action.

The New York Times emphasized that the documents show “how deeply the United States has burrowed into Russia’s security and intelligence services, allowing Washington to warn Ukraine about planned strikes and gain insights into the strength of Moscow’s war machine.” But this only demonstrates the fact that the US would have been perfectly aware that its efforts to bring Ukraine into the NATO alliance would provoke a military response from Russia with catastrophic consequences for the Ukrainian people.

Other portions of the documents reveal the extent of US spying on its “allies and partners” around the world. The Washington Post wrote that “in a reminder that the United States also spies on its allies, another document reports that South Korea’s National Security Council in early March ‘grappled’ with a U.S. request that the country provide artillery ammunition to Ukraine.”  The documents, the Post wrote, “appear to reveal where the CIA has recruited human agents privy to the closed-door conversations of world leaders.”  The Wall Street Journal reported, “The documents also appear to include intelligence on internal matters in a variety of nations, including allies Israel, South Korea and the U.K.”

Media reports have downplayed the most explosive component of the documents: The fact that US and NATO troops are on the ground in Ukraine, and that the US is leading and coordinating the planned Ukrainian offensive.

Instead, they have focused on tracking down the supposed source of the leak and the efforts by the Pentagon to find them.

The entire US media has engaged in systematic self-censorship. They have refused to publish the documents, or even excerpts of them, despite the fact that they show massive lying and criminality by the Biden administration in waging an illegal and undeclared war.

This is entirely in keeping with the role of the US print and broadcast media, which has over the past year unleashed a torrent of war propaganda, at the same time calling for ever-greater US involvement while concealing the massive role US and NATO are playing in the war.

In other words, the world has been led to the brink of nuclear war, on the basis of complete fabrications by the government and the media.

While the release of the documents may have been motivated by dissatisfaction within the US military over the conduct of the war, the case could be made that a deeper intention in releasing the documents is to build support for a military escalation.

Already, the US media is hard at work turning the leaks into an argument for even greater US military intervention. “Leaked Documents Suggest Ukrainian Air Defense Is in Peril if Not Reinforced,” writes the New York Times. “A huge influx of munitions is needed to keep Russia’s air force from changing the course of the war.”

The leaked documents appear as the US is preparing an even deeper involvement in the conflict. Whether or not the plans for a spring offensive outlined in the documents materialize, the US and NATO are planning a massive deployment of forces to the NATO states bordering Russia following the accession of Finland into the alliance.

On March 18, Politico reported, “In the coming months, the alliance will accelerate efforts to stockpile equipment along the alliance’s eastern edge and designate tens of thousands of forces that can rush to allies’ aid on short notice… The numbers will be large, with officials floating the idea of up to 300,000 NATO forces.”

Ultimately, the systematic lies by the government and media about the war are aimed at misleading the “enemy at home,” the working class, which is being dragged into a bloodbath.

These documents show that a US war against Russia has been initiated entirely behind the backs of the public. The obvious conclusion is that, if the US decides it is necessary to send NATO troops directly into Ukraine, it will do so using the same methods it has deployed so far: A systematic campaign of media lies and manipulation.

Canadian grocery executive gets $3 million raise as inflation eats up workers’ wages

Niles Niemuth

As food costs have soared, eating into the wages of millions of workers across Canada, the billionaire executive of the country’s largest grocery retailer saw his salary rise by CA$3 million last year.

Galen Weston Jr. (family net worth US$7 billion as of 2020), drew in a total compensation of CA$8.4 million in 2022 as president and chairman of Loblaw Companies Limited, up from CA$5.4 million in 2021. Weston and his family draw their wealth from the controlling stake they hold in Loblaw and Choice Properties, the largest real estate investment trust in Canada, through George Weston Ltd. As chairman and CEO of George Weston Ltd., Weston pulled in another CA$3 million last year, bringing his overall income for the year to CA$11.8 million.

Galen Weston Jr. [Photo by Jason Paris / CC BY 2.0]

Loblaw is the largest of three companies that dominate the supermarket grocery market across Canada, operating an array of franchises, including Loblaws, No Frills, Provigo, Real Canadian Superstore, Shoppers Drug Mart, T&T Supermarkets and Zehrs Markets. The company also provides financial services and insurance through President’s Choice Financial.

Testifying before a parliamentary committee alongside other grocery executives in March, a defensive Weston claimed that his company, which operates a virtual monopoly, had no control over prices and that it was already operating with slim profit margins. “[T]he claim that Canadian grocers can correct food price inflation is simply wrong,” the millionaire executive told the assembled MPs. He further claimed that “reasonable profitability” was needed for opening new stores and hiring more employees.

Loblaw saw its bottom line rise by 2.5 percent in 2022 to CA$1.9 billion out of total revenue which exceeded CA$56.5 billion. Far from focusing its profit on investing in its stores and employees, the company instead spent CA$1.3 billion on stock buybacks in 2022, rewarding its wealthy shareholders.

According to Indeed, the average cashier at a Loblaw store earned the poverty wage of CA$15 an hour, which is equivalent to the federal minimum wage prior to April 1. Loblaw cashiers are not subject to the federal minimum wage, but to the provincial minimum wage in the province where they work. Even with the recent increase in minimum wage to CA$16.65, a full time cashier will earn less than CA$32,000 per year, with average rent taking 75 percent of their income.

The poverty wages which confront Loblaw workers, and fuel the company’s profits, have been enacted with the complicity of the unions, including the United Food and Commercial Workers (UFCW), which sold out demands for a strike by thousands of Superstore workers in Alberta in 2021 and British Columbia in 2022. The UFCW and other unions, including Unifor, have been critical partners of the big corporations in suppressing the class struggle and enacting major concessions.

The unions kept workers on the job in grocery stores, slaughterhouses and auto factories even as they were getting sick and dying. Most infamously, Canada’s three largest grocery chains—Loblaw, Empire and Metro—clawed back a CA$2 per hour “hero” bonus just three months into the pandemic in June 2020.

While Weston raked in millions, Canadians have weathered what Dr. Sylvain Charlebois, director of the Agri-Food Analytics Lab at Dalhousie University, has described as a “food inflation storm,” with prices rising at rates not seen in more than 40 years, shredding any nominal income gains workers have received in recent years. The Agri-Food Analytics Lab’s latest food price report predicts that the cost of groceries will continue to rise overall by 5 to 7 percent in 2023, with the highest increases in vegetables, dairy and meat.

Average hourly wage growth was consistently below the rate of inflation in 2022, meaning that most Canadians have seen a real wage cut. According to Statistics Canada, consumer prices rose 7.6 percent between July 2021 and July 2022, while wages rose just 5.2 percent.

The Agri-Food report noted that the dramatically rising cost of living is being driven by the escalating US-NATO war against Russia in Ukraine and disruptions caused by the pandemic. “The uncertainty from the ongoing Ukraine war shows no signs of ceasing,” Dr. Stuart Smyth, University of Saskatchewan campus lead, noted. “Labour shortages in key sectors, such as crop harvesting, food processing and transportation, lower supply and drive-up prices.”

As food prices soar, so has the demand for the services of food banks as many find they can no longer afford the basics. Toronto’s Daily Bread Food Bank reported this week that visits have quadrupled since the onset of the COVID-19 pandemic in 2020. The food bank saw 270,000 visits in March, the most ever in 40 years of operations. According to CityNews, Daily Bread CEO Neil Hetherington reported at a news conference Tuesday that it was spending CA$1.8 million per month, compared to CA$1.5 million per year before the pandemic.

The charity reports that the share of those with part-time and full-time employment seeking food aid in the city is growing, doubling in the last year from 16 percent to 33 percent.

A survey by Second Harvest, a food rescue charity, found that more than 5 million people across Canada relied on food banks or other food-related programs every month last year and the number is expected to rise to exceed 8 million per month this year, nearly quadrupling the pre-pandemic demand.

Growing popular outrage among workers over being fleeced at the grocery store has prompted empty populist posturing by the three major parties.

At the parliamentary hearing in March, New Democratic Party (NDP) leader Jagmeet Singh postured against “greedflation,” demanding of Weston “Is there no limit to how much profit you can make on the backs of Canadians that are struggling because they can’t afford their groceries?” Singh has proposed to tax Weston’s raise and send it to food banks.

Amid Singh’s posturing, the NDP has propped up Justin Trudeau’s Liberal government, which is spending billions on waging war in Ukraine and imposing ruthless austerity on social spending.

Conservative leader Pierre Poilievre has repeatedly denounced “Justinflation,” blaming supposed overspending by the Liberals for rising costs, while declaring that inflation can be fought through “fiscal sanity,” by which he means slashing social programs.

The Liberal government has promised in its latest budget to spend CA$2.5 billion on a “grocery rebate” program which would provide a one time payment of up to CA$467 to a family of four earning less than CA$38,000 annually. This is a mere pittance when it is expected that the average family of four will spend more than CA$16,000 on food, an CA$1,100 increase over last year.

Meanwhile the Liberal government has spent more than CA$1 billion on military equipment for Ukraine since February 2022 in the pursuit of “regime change” in Moscow and has committed to spending an additional CA$14 billion on military equipment to prepare for open war against Russia and China. Canada spent more than CA$26 billion on its military in 2021, a nearly 14 percent increase over 2020.

Netanyahu attacks Lebanon and Gaza, with full support of Israel’s opposition leaders

Jean Shaoul

Israeli fighter planes pounded targets in southern Lebanon and Gaza early Friday morning, following rocket attacks blamed on the militant clerical group Hamas that controls the besieged Palestinian enclave of Gaza.

Lebanese check a small bridge that was destroyed by an Israeli airstrike, in Maaliya village, south Lebanon, Friday, April 7, 2023. Israel launched strikes in southern Lebanon early Friday and pressed on with bombing targets in the Gaza Strip, marking a widening escalation in the region. [AP Photo/Mohammed Zaatari]

The rockets, many of which were intercepted by Israel’s Iron Dome defence system, caused little damage and minor injuries.

Israel’s furious bombardment takes place amid escalating tensions following the police’s deliberately provocative attacks on tens of thousands of Palestinian worshippers at the al-Aqsa Mosque in East Jerusalem this week.

It is bound up with Prime Minister Benjamin Netanyahu’s determination to whip up war-fever by attacking Israel’s enemies—the Palestinians, Iran and its allies, Lebanon’s Hezbollah, Hamas and Palestinian Islamic Jihad—as a means of suppressing opposition to his government’s plans to assume dictatorial powers. The protest movement, now entering its fourth month, is the largest and most significant in Israel’s 75-year history. His aim is to manufacture some kind of national “unity” based on militarism to deflect the country’s profound social and political tensions outwards.

To this end, Netanyahu was quick to blame Hamas for the rocket attacks from both Gaza and Lebanon, possibly to avoid sparking a war with Lebanon, with whom Israel fought an inconclusive war in 2006 and which is backed by Iran. Nevertheless, Israel Defence Forces (IDF) spokesperson Daniel Hagari declared, “The state of Lebanon is considered responsible for everything that happens in its territory, including the firing of rockets by Hamas. We will not allow Hamas to operate from Lebanon.”

On Thursday evening, after Netanyahu had convened his security cabinet made up of his fascistic partners, he issued a brief statement saying, “Israel’s response, tonight and beyond, will extract a heavy price from our enemies.”

On Friday, IDF Chief of Staff Herzi Halevi ordered a call-up of reserve troops, saying the military would enhance its readiness to conduct aerial-related operations. The call up would focus on air defence units and the “air attack arrays”—a reference to fighter jet pilots and attack drone operators, as well as other aircrew. Halevi instructed the IDF to strengthen its forces in the West Bank after two sisters were killed and their mother seriously injured in a shooting attack near the settlement of Efrat in the Jordan Valley Friday.

Israel’s Police Commissioner Kobi Shabtai stoked the flames, blaming the Palestinians for the escalating tensions and calling on licensed gun owners to carry their weapons. “The motivation to disturb the peace has risen in recent days and is a result of unrelenting incitement.”

In East Jerusalem, the police deployed 2,300 officers in and around the Old City, ahead of early afternoon prayers and arrested 15 worshippers in the Al-Aqsa Mosque compound for waving Palestinian flags which they branded as 'terrorist flags' and an “incitement.” This followed the breakup before dawn of a gathering of thousands near an entrance to the Mosque.

Netanyahu’s provocations against the Palestinians have the full support of the Biden administration. Vedant Patel, the US State Department’s spokesperson, while expressing his “concern” about Israel’s storming of the al-Aqsa Mosque during Ramadan, refused to condemn Israel’s actions. He did however condemn the launching of rockets from Lebanon and earlier strikes from Gaza and reiterated Washington’s longstanding justification for Israel’s criminality, saying “Our commitment to Israel’s security is ironclad and we recognize that Israel has the legitimate right to defend itself against all forms of aggression.” According to an Israeli official, the Biden administration also blocked a UN Security Council statement to the press criticizing Israel for the raids.

Netanyahu could also count on the full-throated backing of the self-proclaimed leaders of the opposition movement, National Unity chairman and former defence minister Benny Gantz and Yesh Atid leader and former Prime Minister Yair Lapid. On Thursday evening, Gantz declared that the opposition stood united with the government on its response to the rockets fired from Lebanon. 'Facing terror that threatens our citizens, facing shooting on the houses of our citizens, there is no coalition and opposition – we are all united around the IDF and all of the security organization.'

Gantz accused the government of damaging Israel's resiliency and defence establishment and threatening the country with an internal rift. He declared his support for defence minister Yoav Gallant, a leading member of Netanyahu’s Likud Party who faced the sack for calling a halt to the judicial overhaul and called on Netanyahu to reinstate him. Gallant, who had cited statements from thousands of reservists saying they would refuse their regular call-ups because they did not want to serve under a government that was destroying democracy, now leads the war drive that includes a call up of air force reservists.

Gantz also backed the police’s brutal storming of the al-Aqsa Mosque compound on two successive nights. Flatly contradicting all the evidence to the contrary, he declared, 'Israel maintained and continues to maintain a freedom of worship and even increased recently the entry of worshipers to the site but will not allow mosques to turn into nests of terror.'

Lapid assured the government it could count on cross-party support following the rocket attacks, saying, 'Israel today is at conflict on four fronts: the northern border, Gaza border area, Judea and Samaria [the occupied West Bank] and in {occupied East] Jerusalem.' He added, “When it comes to security, in Israel there is no coalition and opposition. We will stand united against any enemy. The opposition will give the government full support for a harsh response by the IDF and security forces.'

Gantz and Lapid’s support for Netanyahu’s fascistic onslaught against the Palestinians and bellicosity against Hezbollah, Syria and Iran, confirms that the official opposition in no way represents a progressive alternative to dictatorship and authoritarianism, much less to war against the Palestinians, Iran and its allies. As committed defenders of the Zionist state, their opposition stems from their fear that Netanyahu and his fascist coalition partners are undermining Israel’s thin democratic veneer and risking splintering an already deeply polarised society to the point of precipitating a civil war.

Under their leadership, the mass opposition movement has largely failed to embrace the struggles of the Palestinian people or mobilise support from Israeli Arabs, much less the Palestinians in the occupied territories.