11 Apr 2024

German government slashes support for children to fund its war drive

Marianne Arens


Two decisions taken in the last few days highlight the political direction in which the German government is marching. Germany is permanently stationing 5,000 heavily armed soldiers and their families on the Russian border in Lithuania. At the same time, it has declared that the creation of 5,000 jobs to combat child poverty would be too costly.

Students eating lunch at school. [Photo by Pixnio]

The funds would go to the Kindergrundsicherung (Basic Child Protection program), i.e., government support to protect children in Germany’s poorest families. According to Federal Minister for Family Affairs Lisa Paus (Greens), administering the program would require the hiring of some 5,000 people to staff a “family service.” Although the plan had been approved as part of the coalition agreement between the Social Democrats (SPD), Liberal Democrats (FDP) and Greens, the FDP and to some extent the SPD and sections of the Greens are now up in arms against it.

In the most recent budget, Paus had already agreed to reduce the 12 billion euros originally budgeted for Kindergrundsicherung to two billion. When she raised the need to create 5,000 new jobs, which would cost an estimated 250 million euros a year, the proposal sparked a storm of indignation.

Politicians who have never had to suffer a day’s hardship in their lives are raising a hue and cry. “Monster bureaucracy!” rants the FDP. The plan is “absurd,” says Johannes Vogel, parliamentary secretary of the FDP. In response to the uproar, Chancellor Olaf Scholz (SPD) convened the cabinet for an internal discussion on Wednesday.

The majority of the Christian Democratic (CDU-CSU) opposition parliamentary group opposes Kindergrundsicherung, and CDU (Christian Democratic Union) leader Friedrich Merz wants to abolish the Citizen’s Allowance, another form of support for the poor.

“We can no longer afford 40 billion euros for the so-called Citizen’s Allowance at a time like this,” Merz said in the Bundestag (parliament).

Nor is Lisa Paus insisting on the additional jobs. She and the Greens have once again retreated. “There won’t be 5,000 new jobs,” the co-chair of the Greens, Ricarda Lang, told broadcaster ARD.

Meanwhile, child poverty is rampant. It is a consequence of social cuts to finance the government’s pro-war policies.

The war offensive against Russia stands at the centre of the coalition government’s policies. After the US, Germany is the next largest funder of both the war in Ukraine and the Israeli genocide in Gaza. Over the past two years, Berlin has provided Ukraine with 32 billion euros in financial and military aid, according to the German government’s own figures. The total value of authorised German arms exports to Israel has increased tenfold in the past year, making Germany responsible for 47 percent of all Israeli arms imports.

The working class pays the bill in the form of social cuts, wage-cutting, increased exploitation, unemployment and poverty. The rise in child poverty is the inevitable consequence of this.

This is confirmed by the annual Joint Poverty Report 2024, which was published on March 26. It does not include the more recent figures from last year, which reflect war-related inflation. However, the statistics for 2022 already paint a devastating picture.

In 2022, 16.8 percent of Germany’s population—14.2 million people—were income poor. One fifth of the poor are children, and of all children living in Germany significantly more than one in five (21.8 percent) are now affected by poverty.

The poverty report defines a household as poor if its income is below 60 percent of median income. In 2022, this poverty threshold was €1,186 per month for a single person, €1,779 for a couple without children and €1,540 for single parents with a child under the age of 14. As the figures for 2022 show, single parents are disproportionately affected (43 percent of all single parents are poor), while large families, the unemployed and people without a German passport are also often poor.

In such households, it is the children, in particular, who suffer—from new-borns to adolescents. They are disadvantaged by poverty in many ways.

This ranges from health problems caused by malnutrition to developmental lags and psychological problems, to educational deficits, social exclusion and a lack of future prospects. Child poverty often sets in motion a cycle from which the victims can no longer escape in adulthood. According to the poverty report, this potentially affects 2.9 million children who are poor or at risk of poverty in Germany.

This vicious cycle was supposed to be counteracted by the Kindergrundsicherung, as the parties that formed the coalition government agreed before taking office. The project originally envisaged bundling together all benefits for children from January 1, 2025 and proactively allocating them to the families concerned.

“We want to turn the citizens’ obligation to pay taxes into a service obligation on the part of the state,” Minister Paus grandly announced on her ministry’s website.

Of course, the entire project was inadequate from the outset, as only existing benefits—the child benefit and supplement, the child support element of the Citizen’s Allowance, the child allowance, etc.—were to be combined. Today, these benefits comprise pitifully small sums on which no child can realistically live. For example, the support rate for a child in the Citizen’s Allowance is €350 per month. This is linked to the claim that one can feed a child on €4 a day.

According to Ulrich Schneider, head of the charity umbrella organisation Der Paritätische, which publishes the poverty report, much more money would be needed to seriously tackle child poverty. At least 4 to 5 billion euros would be needed just to fund the Citizen’s Allowance in a reasonable manner.

“The truth lies in the parents’ wallets,” Schneider told broadcaster Deutschlandfunk. He emphasised that parental poverty was responsible for child poverty: unemployment as a result of job cuts, low wages, a minimum wage that is far too low—these are all poverty factors.

In 2022, an additional 100,000 people were considered poor compared to the previous year. Compared to 2019, before the coronavirus pandemic, there were almost one million more people in poverty. Almost two thirds of the adult poor were either working or retired, a clear indication of the precarious situation of the working class as a whole.

The handouts provided so far do not reach all the families who are entitled to them. As a result, several million children should already be receiving significantly more money than they are today. According to the minister for family affairs, up to 70 percent of all those entitled to benefits do not actually manage to claim them.

This is because applications for the child benefit and the child supplement have to be made at the Family Benefits Office, applications for the Citizen’s Allowance are made at the job centre, applications for social assistance at the Social Welfare Office, and for the child tax allowance—at the tax office. Not everyone can do all this straight away, and where can help be found? Originally, the proposal that is now being vilified as a “bureaucratic monster” was intended to provide a way out of this jungle of bureaucracy.

However, the coalition government designed its project for a basic child protection scheme primarily as a public relations manoeuvre rather than a substantive social reform. It is concentrating its efforts on arming the Bundeswehr (Armed Forces) and its planned war against Russia. Since an overwhelming majority of the population does not want this, war policy abroad inevitably goes hand in hand with intensified class war at home.

This political tendency can be seen in the government’s Kindergrundsicherung project. From the outset it excluded refugees and asylum seekers. Refugee children are already more disadvantaged than everyone else in almost every respect, and do not even receive the child benefit. This is in line with the government’s attempt to divide and thus weaken the working class.

Meanwhile, the heated dispute over 5,000 new jobs shows that the government is prepared to ditch the entire Kindergrundsicherung scheme, as meagre as it is.

On this point, too, the coalition is increasingly adopting the policy of the far-right Alternative for Germany (AfD), which rejects the Kindergrundsicherung scheme because it fosters a “social parasite mentality.”

The “large group of people who benefit are those who make use of our social system without ever having paid a cent into it,” rails Martin Reichardt, family policy spokesperson for the AfD parliamentary group in the Bundestag.

Amid cover-up of whistleblower John Barnett’s “suicide,” new Boeing whistleblower exposes safety violations in manufacture of 787 Dreamliner

Kevin Reed




Boeing employees walk a Boeing 787-10 Dreamliner down towards the delivery ramp area at the company's facility after conducting its first test flight at Charleston International Airport, Friday, March 31, 2017, in North Charleston, South Carolina. [AP Photo/Mic Smith]

The Federal Aviation Administration (FAA) confirmed Tuesday that it is investigating assertions by a Boeing whistleblower that components of the 787 Dreamliner are improperly put together and “could break apart mid-flight after thousands of trips,” according to a report in the New York Times.

Engineer Sam Salehpour, who has worked for Boeing for more than a decade, including working on the Dreamliner, gave details of his claims to the Times in a series of interviews and in documents he sent to the FAA. While an FAA representative acknowledged its investigation into the complaints, it would not comment to the Times on specifics.

Salehpour said that changes in how the sections of the 787 Dreamliner fuselage, which come from different suppliers, are “fitted and fastened together” on the assembly line have compromised the integrity of the aircraft. He charged that shortcuts being taken by Boeing “resulted in excessive force being applied to narrow unwanted gaps in the assembly connecting pieces of the Dreamliner’s fuselage,” the Times wrote.

The engineer said the force used led to the deformation of the composite material out of which the jetliner components are made. This deformation, he said, “could increase the effects of fatigue and lead to premature failure of the composite.”

The Boeing 787 Dreamliner is a wide-body jet that can carry between 210 and 330 passengers, depending on the configuration. It is the first plane with an airframe made primarily of composite materials, which are lighter than metal and make the Dreamliner more fuel-efficient than other jets.

At the same time, composites, made by combining materials, such as carbon and glass fiber, are comparatively newer materials. Less is known about how they hold up under the long-term stresses of flight. Engineers call those stresses “fatigue,” which can compromise safety if it causes the material to fail.

The new whistleblower complaints at Boeing have emerged just one month after former quality manager John Barnett, who also worked on the 787 Dreamliner at the company’s manufacturing facility in North Charleston, South Carolina, was found dead in his car from a purported self-inflicted gunshot wound.

John Barnett in the 2022 Netflix documentary "Downfall: The Case Against Boeing." [Photo: Netflix]

Barnett was scheduled to continue giving deposition testimony in a civil suit he filed against Boeing for retaliating against him after he spoke out against practices that undermined airline safety. Although his death in the parking lot of a Holiday Inn was ruled a suicide by the county coroner, Charleston law enforcement is still investigating it.

According to a local news report at the time, police said Barnett had a silver handgun in his right hand with his finger still on the trigger when he was found by a hotel employee. The police said there was a white piece of paper “resembling a note” on the passenger seat of his car but did not specify the contents of the note.

Barnett’s attorneys have questioned the suicide narrative and maintained that, prior to his death, John was happy to be finally telling his side of the story after seven years of court delays.

In its report on Tuesday, the New York Times mentioned John Barnett only in passing, calling him a “prominent whistle-blower who raised concerns about manufacturing practices” at Boeing, adding that he was found dead last month with “what appeared to be a self-inflicted gunshot wound.” 

Like Barnett, Salehpour told the Times he had been repeatedly retaliated against for bringing up his concerns about the shortcut methods employed by Boeing on Dreamliner jets. The engineer’s attorney, Debra S. Katz, said that when Salehpour approached his supervisors with his concerns or tried to bring them up at safety meetings, he was silenced and transferred to another product line, the 777.

Responding to the revelation of a new FAA probe, Boeing representative Paul Lewis said there was “no impact on durability or safe longevity of the airframe.” Lewis also claimed that Boeing had extensively tested the Dreamliner, and that the concerns raised by Salehpour were determined to be “not an immediate safety of flight issue.”

In another official Boeing statement, the company said it was “fully confident in the 787 Dreamliner,” adding that “these claims about the structural integrity of the 787 are inaccurate and do not represent the comprehensive work Boeing has done to ensure the quality and long-term safety of the aircraft.”

Given the string of recent, in some cases near-fatal, equipment failures, as well as the nose-dive crashes of 737 Max 8 planes in Indonesia in 2018 and Ethiopia in 2019 that killed a total of 346 people, these reassurances from Boeing are not credible.

In this March 11, 2019, file photo, Boeing 737 Max wreckage is piled at the crash scene of Ethiopian Airlines flight ET302 near Bishoftu, Ethiopia. [AP Photo/Mulugeta Ayene]

As recently as 2021, Boeing acknowledged that some Dreamliner planes had shims—the thin piece of material used to fill gaps in manufacturing—that were not the proper size, and some aircraft had areas that did not meet skin-flatness specifications.

Just last Sunday, a Southwest Airlines flight had to return to its departure point in Denver when an engine cover on a 737 fell off during takeoff and struck the wing flap. Flight 3695 was on its way to Houston when, at around 8:15 a.m., the crew reported the engine cowling had fallen off. The FAA said it would investigate the incident, in which the plane, with 135 passengers and five crew members on board, had to be towed back to the gate after its emergency landing.

The Southwest Airlines engine cowling failure occurred three months after a door plug on a Boeing 737 MAX 9 plane flown by Alaska Airlines blew out shortly after takeoff, at 15,000 feet. Although no one was killed or seriously injured, the preliminary findings of the National Transportation Safety Board (NTSB) investigation showed that Boeing failed to replace four critical bolts holding the door plug into place before the plane was delivered to Southwest.  

Behind these failures are a series of interconnected processes, including shortcuts, lack of quality inspection, failure to follow FAA procedures and outsourcing of subcomponent assembly. The culture of unsafe practices is driven by corporate requirements that products be rushed to market and costs reduced to drive up Boeing’s profitability and improve its stock market performance.

According to a report in the Wall Street Journal on Monday, Boeing is facing an enormous financial crisis stemming in part from its accidents and product failures, and more broadly from changes in the airline industry. Boeing has not made a profit since 2018. It lost $2.24 billion in 2023 and $5.05 billion in 2022.

The largest US aircraft manufacturer had $52.31 billion in debt last year, which is double the debt in 2019, and $12.69 billion in cash and cash equivalents last year, which is down from $14.61 billion in 2022.

Meanwhile, Boeing’s credit rating was downgraded by Moody’s on March 26 to Baa2, which is two notches above junk status. Since January, when the door plug blowout occurred, Boeing’s stock value has fallen from $249 per share to $175 per share, a decline of 30 percent.

This has not prevented the company’s top executives from awarding themselves multi-million-dollar pay packages. CEO David Calhoun, who recently announced that he will step down at the end of this year, had a total compensation of $32.8 million in 2023, up from $22.6 million in 2022.

Boeing CEO Dave Calhoun speaks with reporters at the Capitol in Washington on January 24, 2024. [AP Photo/J. Scott Applewhite]

Boeing is not only the second largest producer of commercial aircraft in the world, behind Europe-based Airbus, it is the world’s largest aerospace company, producing military aircraft and space systems which are critical to the US war machine.

These are the factors behind the systematic cover-up of the corporation’s criminal negligence by the government, both political parties, the regulatory agencies, the courts and the corporate-controlled media. Not a single Boeing executive has been held criminally liable for unsafe practices that led to the deaths of hundreds in the two crashes of 2018 and 2019 and the recent string of near-disasters. The virtual silence on the highly suspicious death of John Barnett is the most sinister aspect of the cover-up.

10 Apr 2024

UNESCO/Poland Co-Sponsored Fellowships In Engineering 2024/2025

Application Deadline: 10th May 2024

To be taken at (country): Poland

About the UNESCO/Poland Co-Sponsored Fellowships: The Programme started in 2012 and aims to promote capacity building and research activities in UNESCO’s Member States in the field of science and engineering. Beneficiaries of these fellowships are given the opportunity to undertake an individual research programme in the field of Science, Technology and Engineering at the AGH University of Science and Technology in Krakow for six (6) months duration starting on 1st October.

Type: Research

Eligibility: Applicants must hold the Bachelor’s or M.Sc. degrees. Applicants from outside the home country will often need to meet specific English language/other language requirements in order to be able to study there.

  • Candidates should have a Bachelor of Eng (B.Eng) or a Master of Engineering (M.Eng) degree,
  • Be proficient in reading and writing in English
  • No more than 40 year-old

Eligible Countries:

AFRICA (32 Member States) • Angola • Benin • Botswana • Burkina Faso • Cameroon • Cape Verde • Chad • Côte d’Ivoire • Democratic Republic of the Congo • Eritrea • Ethiopia • Gabon • Gambia • Ghana • Kenya • Lesotho • Madagascar • Malawi • Mali • Mauritius • Mozambique • Namibia • Niger • Nigeria • Rwanda • Senegal • South Africa • Togo • Uganda • United Republic of Tanzania • Zambia • Zimbabwe

ARAB STATES (2 Member States) • Iraq • Syrian Arab Republic (the)

ASIA AND THE PACIFIC (22 Member States) • Bangladesh • Bhutan • Brunei Darussalam • Cambodia • Fiji • India • Indonesia • Kazakhstan • Kyrgyzstan • Lao People’s Democratic Republic • Malaysia • Mongolia • Nepal • Pakistan • Papua New Guinea • Philippines • Sri Lanka • Tajikistan • Thailand • Turkmenistan • Uzbekistan • Viet Nam

LATIN AMERICA AND THE CARIBBEAN (15 Member States) • Argentina • Bolivia (Plurinational State of) • Brazil • Chile • Colombia • Cuba • Dominican Republic • Ecuador • El Salvador • Haiti • Jamaica • Mexico • Panama • Peru • Trinidad and Tobago

Number and Duration of Awards: The fellowship will last for 6 months and take place at the AGH University of Krakow, UNESCO AGH Chair (A. Mickiewicza Ave 30, PL 30-059 Krakow, Poland).

Value of UNESCO/Poland Co-Sponsored Fellowships: 

Facilities offered by Polish Authorities:

  • Free tuition and access to the university facilities
  • Accommodation at the AGH UST Student Campus in Kraków
  • Monthly allowance of 1600 PLN

Facilities offered by UNESCO:

  • International travel expenses from the beneficiary’s country to and from Poland;
  • Health insurance

How to Apply: Before you start your application, please check Annex I (List of Invited Member States) and Annex IV to make sure your country (nationality) is eligible for your intended project/field of research.

Step 1:
Read carefully Annex II (Terms and Conditions) and Annex III (List of fields of researches & projects and their respective criteria) for the 2024 edition of UNESCO/Poland Co-Sponsored Fellowships in Engineering) to understand the requirements for eligible candidatures and the procedures for application submission.

Step 2:
Contact the National Commission for UNESCO of your country to enquire the application procedures at national level. Click here for the contact information of the National Commissions for UNESCO.

Step 3:
Prepare your application, including the following supporting documents to the National Commissions of your country of Origin as mentioned in the Annex II:

  1. UNESCO fellowships application form, including medical certificate, All 4 pages duly completed in English using capital letter (illegible documents will be eliminated from the evaluation procedure, and hand writing form must be written in capital letters only);
  2. A copy of the identity photo of the applicant;
  3. Certified copies (in English) of Bachelor’s or Master’s Degree/ PhD obtained (candidates should have completed and obtained the degrees before applying for this fellowships programme, and the presented degrees shall meet the requirements and regulations of European Union);
  4. UNESCO certificate of language knowledge, duly completed by a relevant authority, if the mother tongue of the candidate is not English; and
  5. Two letters of recommendation from someone related to the candidate’s work, as well confirming the candidate’s qualifications. 

Step 4:
Submit your application with all the supporting documents mentioned above to the National Commission for UNESCO of your country.

NOTE: As National Commission for UNESCO of the invited countries will select and transmit the applications of nominated candidates to UNESCO Paris Headquarter by 10 May 2024 at the latest, applicants are advised to submit their application to the National Commissions as early as possible.

Step 5:
As soon as you are informed by the National Commission for UNESCO of your country that you are endorsed and nominated as a candidate for this programme, you should submit your application by email to to agh.poland@unesco.org (with unesco24@agh.edu.pl and j.markiewicz@unesco.pl in copy) and then complete and submit the online information sheet at this link

Note: Only applications endorsed  by the National Commission will be accepted by UNESCO. It is mandatory for each endorsed candidate to submit his/er information sheet by Friday 10 May 2024, 12pm Paris time at the latest

Visit Fellowship Webpage for details

Spies and Their Lies: the Trials and Tribulations at Guantanamo

Melvin A. Goodman




A watchtower at the Guantanamo Bay prison camp. Photograph Source: Gino Reyes – Public Domain.

“And ye shall know the truth and the truth shall set you free.”

The biblical quotation engraved on the marble walls of the lobby of the Central Intelligence Agency’s headquarters in McLean, Virginia.

Nearly 25 years ago, a group of suicide bombers attacked the U.S.S. Cole off Aden, Yemen, with the loss of 17 U.S. sailors.  A Saudi, Abd al-Rahim al-Nashiri, believed to be the mastermind of the attack, was captured in 2002, and was officially charged in 2011 with leading the attack.  He has become the longest-running capital murder case at Guantanamo, where his trial is expected to take place next year.

A major reason for the delay is that al-Nashiri, like so many captives at Guantanamo, was subjected to secret imprisonment by the CIA as well as waterboarding, rectal abuse, and prolonged sleep deprivation.  A previous judge at Guantanamo excluded the confessions of al-Nashiri and others because of CIA’s torture and abuse.  U.S. prosecutors have asked the Court of Military Commissions to reinstate the confessions, and the rest of this year will be taken up with this issue at the U.S. Court of Appeals for the District of Columbia.  The new judge, Colonel Matthew Fitzgerald, is the fourth to preside in this case, and he was still in law school when the U.S.S. Cole was attacked and 9/11 took place.

The al-Nashiri case was particularly egregious because his interrogators found him to be compliant, but a senior CIA official ordered the reinstatement of torture and abuse to include waterboarding.  The official also ordered the field operatives not to make “sweeping statements” in their cable traffic regarding compliance, which pointed to an effort at CIA headquarters to cover-up its misdeeds.

The CIA has always maintained that secret memoranda of George W. Bush’s Department of Justice permitted the use of “enhanced interrogation techniques” to include waterboarding in order to break the will of the captives.  The CIA also had the support of psychologists and the American Psychological Association  (APA) in conducting the coercive interrogation of terror suspects in Guantanamo and its secret prisons in East Europe and Southeast Asia.  Two former military psychologists developed the CIA’s sadistic techniques,   which were based on Chinese efforts to obtain false confessions from American prisoners in the 1950s.

Ten years ago, the CIA published a series of essays (“Rebuttal: The CIA Responds to the Senate Intelligence Committee’s Study of Its Detention and Interrogation Program”) to state that the interrogation techniques were “implemented in a manner consistent with the U.S. laws, the Constitution, and international treaty obligations.”  This was a lie!  The essays also argued that CIA officials, despite the legal approval of the Department of Justice, “seriously debated the moral and ethnical dilemmas posed by the program.”  This was also a lie, and it is noteworthy that former CIA directors and deputy directors, such as Porter Goss, George Tenet, John McLaughlin, John Brennan, General Michael Hayden, and Michael Morell either wrote essays for the CIA publication or sat in on meetings where torture and abuse was discussed without objecting to the interrogation techniques.

Brennan never should have been appointed CIA director in the first place.  During the Tenet era, he was the chief of staff and deputy executive director, and provided no opposition to decisions to conduct torture and abuse, and—even worse—to render suspected individuals to foreign intelligence services that conducted their own torture.  Brennan was also an active defender of the program of warrantless eavesdropping, implemented at the National Security Agency under the leadership of one of Tenet’s successors, General Hayden, then NSA director.

President Barack Obama stated that the CIA’s torture program was not representative of “our values,” but he did nothing to make sure that “our values” would not be compromised again.  He failed to rein in the CIA during the Global War on Terror, and failed to fire Brennan in 2014 when the CIA director lied to the chairwoman of the Senate Intelligence Committee and tried to block the committee’s report.

It was Tenet who told President Bush that it would be a “slam dunk” to provide the intelligence to make the case for war against Iraq, and it was McLaughlin who gave the “slam dunk” briefing at the White House.  McLaughlin also provided false intelligence to Secretary of State Colin Powell that was part of the secretary’s deceitful speech at the United Nations in February 2003 to further the case for war.  Tenet also lied to Vice President Dick Cheney and Attorney General John Ashcroft about the extent of the torture and abuse program.

In February, Jean Maria Arrigo, a whistleblower who exposed the role of the American Psychological Association in obscuring the role of psychologists in the torture program, died at the age of 79.  She revealed the immoral involvement of APA psychologists in the sadistic program, but it was nearly a decade before an independent investigation documented the “collusion” between the APA and the CIA and the Pentagon.  The investigation concluded that the APA suppressed Arrigo’s charges in an “intentional effort to curb dissent.”

One of the many lessons of Arrigo’s experience should be the need for an independent investigation of the Israeli killing of the World Central Kitchen workers instead of relying on the Israeli Defense Forces to investigate themselves.  If the aid workers had been Palestinian instead of an international group, then there presumably would have been no investigation of any kind.

It is important that the ethical issues that arise from national security decision making be an essential part of the foreign policy debate.  If not for Ms. Arrigo, perhaps the APA would have continued to collaborate covertly with the CIA and the Pentagon.  Ms. Arrigo’s legacy addresses the importance of dissent and whistleblowing.

IMF warning over growing private credit market

Nick Beams


Financial markets ponder the question of when the US Federal Reserve might start to cut interest rates and go back and forth, on an almost weekly basis, over the question of the timing, frequency and size of the reductions. At the same time, however, potential sources of turbulence within the financial system are building up.

International Monetary Fund Managing Director Kristalina Georgieva at the Annual Meeting of World Economic Forum in Davos, Switzerland, Wednesday, Jan. 17, 2024 [AP Photo/ Markus Schreiber]

One area of concern is the $2.1 trillion private credit market, which has rapidly expanded since the global financial crisis of 2008, rising six-fold. It was the subject of analysis in one of the chapters of the International Monetary Fund’s Global Financial Stability Report prepared for its spring meeting next week.

There are three methods by which corporations, industrial and financial, can obtain finance. The traditional method is to secure a loan from a bank. Another, if the corporation is large enough, is to issue bonds, which are then traded on the market.

The third, and most rapidly expanding, is private funding by financial institutions which has proved to be attractive because of the higher rate of return that can be obtained.

The first two methods are subject to some scrutiny, either through bank regulation or, in the case of bonds, by activity in the market.

But the private credit market is very opaque and would-be regulators and authorities responsible for maintaining the stability of the financial system have little idea what is going in this area.

The conclusions of the analysis on this market contained in the report were summarised by its authors in a blog post yesterday.

After noting its rapid expansion—in the US its market share is almost equal to that of syndicated loans and high-yield bonds—they pointed out that pension funds and insurance companies had eagerly made investments that, though illiquid, offered higher returns.

The lack of liquidity, that is the ability to rapidly turn assets into cash, is not a problem under conditions of stability. But that can quickly change if there is volatility and a rush to get into cash.

Private corporate credit had created significant economic benefits for corporations seeking long-term financing, the authors said.

“However,” they continued, “the migration of this lending from regulated banks and more transparent public markets to the more opaque world of private credit creates potential risks. Valuation is infrequent, credit quality isn’t always clear or easy to assess, and it’s hard to understand how systemic risks may be building given the less than clear interconnections between private credit funds, private equity firms commercial banks, and investors.”

In other words, the supposed guardians of the financial system are largely in the dark as far this rapidly expanding, and increasingly important area of the market is concerned.

They concluded that immediate financial risks appear to be limited. But then, as if aware that such statements are often made on the eve of a crisis, added a rider.

“[G]iven that this ecosystem is opaque and highly interconnected, and if fast growth continues with limited oversight, existing vulnerabilities could become a systemic risk for the broader financial system.”

They indicated some of what they termed “fragilities.” Companies that tapped the private credit market tended to be smaller than companies that took out loans or bonds and this made them “more vulnerable to rising interest rates and economic downturns.”

The rise in interest rates by the Fed is already having an effect, with the IMF’s analysis showing that in this market “more than one-third of borrowers now have interest rate costs exceeding their current earnings.”

Furthermore, a kind of risk-increasing spiral has been set in motion.

“The rapid growth of private credit has recently spurred increased competition from banks on large transactions. This in turn has put pressure on private credit providers to deploy capital, leading to weaker underwriting standards and looser loan covenants —some signs of which have been noted by supervisory authorities.”

Such vulnerabilities did not yet pose a risk to the broader financial sector, the report’s authors said. But they could if they continue to build and come to the surface in a severe downturn in which “credit quality could deteriorate sharply, spurring defaults and significant losses” that would be hard to assess because of opacity.

Regulators may find themselves trying to play catch up when a crisis develops because “severe data gaps make monitoring these vulnerabilities across financial markets more difficult and may delay proper risk assessment by policymakers and investors.”

A column by financial analyst Mohamed El-Eiran in the Financial Times (FT) this week, approached the issue of financial instability from another angle.

When he started his career in investment management, he wrote, he was taught to design investment portfolios with a solid foundation “with a much smaller and opportunistic and tactical top”—a reference to more speculative and short-term operations.

“In other words, construct a durable structure that could mostly resist unsettling market volatility and navigate economic and geopolitical shakes.”

But today this “once reassuring construction” appears to have become completely inverted as a “shrunken and secular and structural base now has to support a larger and opportunistic tactical top.”

El-Erian pointed to a situation where speculation and the placing of large bets on the “next big thing,” in the present situation artificial intelligence, allows markets to power ahead.

“Momentum is now well recognised as a factor that allows investors to ride remunerative waves that will break at some point, but not just yet.”

Higher growth rates in the US, at least above the stagnation in Germany, Japan and the UK, as well as dovish signals from the Federal Reserve on interest rates, “have enabled markets to brush aside a host of worries be they political or geopolitical.”

However, as he noted: “Unlike the pyramids of Giza, this narrow-base/ broad-top construction is unstable.”

Another sign of financial instability is the rapid increase in the price of gold. After trading for many months at around $2,000 per ounce, it underwent a major spike in March, rising by 19 percent, with indications that it will continue as it reached another record high yesterday closing at near $2,400.

The surge has left analysts scratching their heads as to the proximate cause with possible factors such as the anticipation of interest rate cuts by the Fed and rising geopolitical tensions being cited.

But the overall sentiment has been one of mystification. As an article in the FT put it in March, when the surge began “longtime market watchers [have been] struggling to explain what has been one of the yellow metal’s most curious rallies.”

In the past when there has been a significant rise in the price, there has been some significant risk event, but on this occasion, there has been “no significant shift in current events.”

An article published in Bloomberg this week was no clearer, offering a range of possible explanations including central bank worries about the use of the dollar as an economic weapon, bets that an interest rate cut by the Fed is imminent, traders drawn to gold because it is going up, or fears of continued inflation or a hard landing for the economy.

All of these factors may be playing a role. But gold is not simply another commodity whose rise and fall can be explained by immediate market factors. In the final analysis under capitalism it is the money commodity, the ultimate store of value.

For a long period, since US president Nixon removed the gold backing from the US dollar in August 1971, the world has operated on the basis of the dollar as a fiat currency. Unlike gold, the dollar does not have intrinsic value and has only been able to function as world money because it is regarded as being backed by the economic power of the US state.

This has provided the US with considerable advantages, enabling it to run up debts to finance domestic spending and its endless wars and bloated military spending in a way not possible for any other country.

However, the US debt mountain has expanded at an increasing rate in the past several years, is now virtually equivalent to its GDP and is predicted to rise even further in coming years. It is increasingly being recognised as unsustainable, leading two credit rating agencies to downgrade its rating.

In the final analysis, the surge in the gold price, which has been fueled not least by central bank buying by China, but other central banks as well, could well be sign that the long developing debt crisis in the US, on top of all the other vulnerabilities in financial markets, is coming to a head.

“Army of the Future”: Germany restructures its military for total war

Johannes Stern


At the end of January, German Defence Minister Boris Pistorius (Social Democratic Party, SPD) stated in several interviews that Germany had to prepare for a direct war with the nuclear power Russia. He cited “the next three to five years” as a period that had to be “used intensively” to “arm ourselves” and make Germany “fit for war” again.

German Defense Minister Boris Pistorius speaks during a press conference at Exercise Griffin Storm 2023, held last June in Lithuania. [AP Photo/Mindaugas Kulbis]

With the new structure of the Bundeswehr (Armed Forces), which Pistorius announced last Thursday, these insane war plans are being realised. In presenting the plans, Pistorius made no secret of what was at stake: The transformation of the Bundeswehr from a formation primarily geared toward global missions abroad into a military force able to conduct total war.

His letter to the parliamentary group leaders of the parties in the Bundestag (German parliament) states:

The entire Bundeswehr will position itself according to guiding principles that can be derived from the overarching goal of war capability: Growth capability, scalability, dynamic robustness, digitalisation (future technology, operational command) information superiority, war supply.

The central measures, which are detailed in a 34-page document entitled “Bundeswehr of the Future,” include the creation of a standardised central command structure for “national operational planning and command of missions.” To this end, the existing Territorial Command (for domestic operations) and the Operational Command (for operations abroad) will be merged into a joint Operational Command of the Bundeswehr.

This measure means the de facto reestablishment of a general staff, which was banned in the Potsdam Agreement of 1945 following the criminal role played by the German military leadership in the two world wars. Now it is being tacitly reintroduced. Civilian control over the Bundeswehr, which was enshrined in West Germany’s post-war constitution, is being removed with the return of the old war and great-power ambitions of German imperialism.

“Compared to the status quo, the new target structure of the armed forces is significantly less top-heavy and clearly focused on operational planning and command in an emergency,” the document states. The aim is “to establish a single-source command capable of fighting a war and to create the conditions for consistently strengthening the troops.”

In addition, the “Bundeswehr of the future” must enhance the role of the branches of the armed forces “in order to fulfil the requirement of war capability.” In addition to the traditional military forces of the army, air force and navy, the existing area of cyber/information space (CIR) will be established as a fourth armed force. The CIR will play a key role not only in the digitalisation of the armed forces, but also in “identifying hybrid tactics of actors who threaten security... as early as possible in order to be able to react to them.”

In other words, the Bundeswehr is preparing to take the lead in the field of drone warfare and the use of artificial intelligence (AI). The potential for mass murder using these technologies is currently becoming apparent in the genocide in Gaza. The emphasis on AI and CIR is also about suppressing the growing opposition to war and massively expanding attacks on democratic rights and control of the internet under the guise of the fight against Russia’s “hybrid warfare.”

As in the past, the policy of war abroad requires the establishment of a total military state at home. It is not only the regionally deployed homeland security forces, which were previously managed by the various federal state commands, that are being “transferred to the army proper in accordance with the ‘organise as you fight’ principle.” The civilian organisational areas are also to be directly aligned in accordance with this principle. This applies above all to the creation of structures for the comprehensive mobilisation of the reserve and the planned reintroduction of compulsory military service (conscription).

These moves leave no doubt that the German ruling class has decided once again to recruit masses of young people as cannon fodder for its wars. Thus the document states, “irrespective of the political decision to be made about compulsory military service or compulsory civilian service, including in peacetime, a consistent orientation of the structures of the personnel sector towards an emergency situation also includes the preparation and examination of conscription and enlistment processes.”

What this means concretely can be seen in Ukraine. At the behest of NATO, the Zelensky regime has already sacrificed hundreds of thousands on the front lines and is currently preparing a law to mobilise half a million more soldiers. Just a few days ago, the official age limit for reservists to be called up was lowered from 27 to 25. At the same time, there are reports about the criminal methods used to forcibly recruit men.

Significantly, Pistorius announced the structural reform on the same day that NATO celebrated its 75th anniversary and used its meeting in Brussels for a massive escalation of the war against Russia. The Bundeswehr is currently preparing the permanent stationing of 5,000 combat troops in Lithuania. On Monday, Herr Pistorius saw off the first advance detachment.

The “Bundeswehr of the Future” document also identifies Russia as the main adversary. For the Bundeswehr, “The turning point in security policy” means that “the primary focus of its actions today is once again the ability to deter and defend against state attacks.” Today, this means “resolutely opposing attacks by states such as Russia that trample on the international legal order.”

The propaganda of “defence” against an “attack” by Russia turns reality on its head and ties in directly with earlier German war lies. The German wars of aggression in the two world wars of the 20th century—including the war of annihilation against the Soviet Union, which cost the lives of 30 million Soviet citizens—were justified by the ruling class in the German Empire and under Hitler with the same arguments.