The Real Destabilizer in the Middle East is Not Iran But Trump

Patrick Cockburn

As President Trump withdraws certification of the nuclear agreement with Iran, commentators across the world struggled for words to adequately convey their outrage and contempt. A favourite term to describe Trump is as “a wrecking ball”, but the phrase suggests a sense of direction and capacity to strike a target which Trump does not possess.

The instant that Trump decertifies the deal struck by President Obama in 2015, the US becomes a lesser power and Iran a greater one, because he will confirm the belief that America is led by an egoist motivated by ignorant prejudice. Accusations of mental derangement have always been part of common currency of political abuse, but there is a growing belief among international leaders that in Trump’s case there might be something to it, though they have few ideas about what they should do about this.

Their bemusement is understandable given that the situation is so bizarre. In the past, highly neurotic individuals were most like to gain power as hereditary monarchs, Kaiser Wilhelm II of Germany being a prime example. Full blown psychoses are less common, though madness of Charles VI of France and Henry VI of England in the late Middle Ages precipitate both countries into civil wars. What is extraordinary about Trump’s all-consuming egomania, or what some call “malignant narcissism”, is that it did not prevent his rise to power.

Iranian leaders may calculate that, short of all-out war, they come out the winner: the US-led coalition of states that once isolated Iran has disintegrating and today it is the US that risks isolation. Germany, Britain, France, Russia and China and the UN nuclear watchdog all say that Iran has abided by the terms of the agreement. The ability of the US to line up all the other big powers in support of a deal brokered by itself was proof that the US was a superpower; its abandonment will have the opposite effect. As if this was not damaging enough to the US, turning over the whole mess to a dysfunctional Congress only highlights the implosion of US influence in the world.

Suggestions in western capitals that they might paper over the breach with America by disagreeing with Washington over the nuclear deal but supporting US allegations that Iran is trying to destabilise the Middle East do not really work. This demonisation of Iran as the sinister hidden hand in the Middle East is just as misleading and simple-minded as Trump’s views on the nuclear weapons deal. Much of what he and his administration says is regurgitation of Saudi and Israeli propaganda which may not even be believed in Riyadh and Tel Aviv.

The relationship between Iran and the US has always been a complex mixture of hostility and cooperation. The antagonism dates from the overthrow of the Shah in 1979, the seizure of US diplomats and embassy in Tehran, and the Iran-Iraq war. But this has also been accompanied by a high degree of de facto – and often covert – cooperation: since Saddam Hussein’s invasion of Kuwait in in 1990, Washington and Tehran have often found themselves sharing the same enemies. Tehran benefited as a regional power in 2001 when the US overthrew the Taliban in Afghanistan and again in 2003 with the fall of Saddam Hussein. Iran and the US had a similar interest in preventing Isis and al-Qaeda winning in Syria or Iraq after Isis captured Mosul in 2014.

The US and its allies were always circumspect, when they were not being dishonest, about their cooperation with Tehran in Iraq. After Nouri al-Maliki was chosen as Iraqi PM in 2006, an Iraqi official called me to say that “the Great Satan”, the Iranian term for the US, and “the Axis of Evil”, the US term for Iran, had “come together to give us our new leader.” His successor, Haider al-Abadi, also required endorsement from both Washington and Tehran.

One of the many negative consequences of the election of Trump is that his failings are so glaring that they obscure those of the rest of his administration and other US and international leaders. Hillary Clinton’s grasp of the likely consequences of US actions in Iraq, Syria and Libya was always limited. David Cameron and Nicholas Sarkozy happily led the way for Nato to overthrow Muammar Gaddafi with no sensible thoughts about the aftermath. Secretary of State Rex Tillerson won some credit by reportedly calling Trump “a moron”, but he quite untruthfully told the Iranian Foreign Minister Muhammad Javid Zarif that the US-Iranian “relationship has been defined by violence – against us”.

In reality, Iranian strength in the Middle East depends on its position as the leading Shia power and its influence is largely confined to countries with significant Shia communities: Iraq, Syria, Lebanon, Afghanistan and Yemen. The US, Saudi and Israeli picture of Iran, as permanently plotting to destabilise the Middle East, misstates Iranian ambitions and exaggerates their capacity.

So much of what Trump says turns out to be the soon-to-be forgotten tweet of the day, that the impact of decertification is impossible to predict. He denounced President Obama’s weakness in Iraq and Syria, but changed US policy has changed very little because the Pentagon largely calls the shots and he does not know what else to do. A summary of his new approach says the new policy will in future focus “on neutralising the government of Iran’s destabilising influence and constraining its aggression, particularly its support for terrorism and militants”. This could mean that in the future the US will regard anyone opposing Saudi Arabia or its allies as a terrorist or it could mean nothing at all.

The current crisis in the Middle East consists of multiple crises that cross-infect each other. The biggest crisis is with Isis which is facing defeat in Iraq and Syria, but is not quite eliminated. It has lost the war in both countries because it has been under attack from a range of enemies from the US air force to Hezbollah, Syrian Kurds, Iraqi Shia paramilitaries, Syrian army and Russians. These countries and movements may not like each other and may not coordinate their attacks on Isis, but cumulatively they have worn down the jihadis. Isis commanders will hope that the new Trump policy will open up divisions among its numerous enemies enabling it to survive and regenerate itself.

The Iranians are sensibly saying very little, presumably calculating that nothing they do will be quite so damaging to US interests as what Trump is doing. The true destabiliser in the Middle East is not Iran but Trump himself.

The Real Reasons Trump Is Quitting UNESCO

Jonathan Cook

Nazareth: At first glance, the decision last week by the Trump administration, followed immediately by Israel, to quit the United Nation’s cultural agency seems strange. Why penalise a body that promotes clean water, literacy, heritage preservation and women’s rights?

Washington’s claim that the UN’s Educational, Scientific and Cultural Organisation (Unesco) is biased against Israel obscures the real crimes the agency has committed in US eyes.

The first is that in 2011 Unesco became the first UN agency to accept Palestine as a member. That set the Palestinians on the path to upgrading their status at the General Assembly a year later.

It should be recalled that in 1993, as Israel and the Palestinians signed the Oslo accords on the White House lawn, the watching world assumed the aim was to create a Palestinian state.

But it seems most US politicians never received that memo. Under pressure from Israel’s powerful lobbyists, the US Congress hurriedly passed legislation to pre-empt the peace process. One such law compels the United States to cancel funding to any UN body that admits the Palestinians.

Six years on, the US is $550 million in arrears and without voting rights at Unesco. Its departure is little more than a formality.

The agency’s second crime relates to its role selecting world heritage sites. That power has proved more than an irritant to Israel and the US.

The occupied territories, supposedly the locus of a future Palestinian state, are packed with such sites. Hellenistic, Roman, Jewish, Christian and Muslim relics promise not only the economic rewards of tourism but also the chance to control the historic narrative.

Israeli archaeologists, effectively the occupation’s scientific wing, are chiefly interested in excavating, preserving and highlighting Jewish layers of the Holy Land’s past. Those ties have then been used to justify driving out Palestinians and building Jewish settlements.

Unesco, by contrast, values all of the region’s heritage, and aims to protect the rights of living Palestinians, not just the ruins of long-dead civilisations.

Nowhere has the difference in agendas proved starker than in occupied Hebron, where tens of thousands of Palestinians live under the boot of a few hundred Jewish settlers and the soldiers who watch over them. In July, Unesco enraged Israel and the US by listing Hebron as one of a handful of world heritage sites “in danger”. Israel called the resolution “fake history”.

The third crime is the priority Unesco gives to the Palestinian names of heritage sites under belligerent occupation.

Much hangs on how sites are identified, as Israel understands. Names influence the collective memory, giving meaning and significance to places.

The Israeli historian Ilan Pappe has coined the term “memoricide” for Israel’s erasure of most traces of the Palestinians’ past after it dispossessed them of four-fifths of their homeland in 1948 – what Palestinians term their Nakba, or Catastrophe.

Israel did more than just raze 500 Palestinian towns and villages. In their place it planted new Jewish communities with Hebracaised names intended to usurp the former Arabic names. Saffuriya became Tzipori; Hittin was supplanted by Hittim; Muyjadil was transformed into Migdal.

A similar process of what Israel calls “Judaisation” is under way in the occupied territories. The settlers of Beitar Ilit threaten the Palestinians of Battir. Nearby, the Palestinians of Sussiya have been dislodged by a Jewish settlement of exactly the same name.

The stakes are highest in Jerusalem. The vast Western Wall plaza below Al Aqsa mosque was created in 1967 after more than 1,000 Palestinians were evicted and their quarter demolished. Millions of visitors each year amble across the plaza, oblivious to this act of ethnic cleansing.

Settlers, aided by the Israeli state, continue to encircle Christian and Muslim sites in the hope of taking them over.

That is the context for recent Unesco reports highlighting the threats to Jerusalem’s Old City, including Israel’s denial for most Palestinians of the right to worship at Al Aqsa.

Israel has lobbied to have Jerusalem removed from the list of endangered heritage sites. Alongside the US, it has whipped up a frenzy of moral outrage, berating Unesco for failing to prioritise the Hebrew names used by the occupation authorities.

Unesco’s responsibility, however, is not to safeguard the occupation or bolster Israel’s efforts at Judaisation. It is there to uphold international law and prevent Palestinians from being disappeared by Israel.

Trump’s decision to quit Unesco is far from his alone. His predecessors have been scuffling with the agency since the 1970s, often over its refusal to cave in to Israeli pressure.

Now, Washington has a pressing additional reason to punish Unesco for allowing Palestine to become a member. It needs to make an example of the cultural body to dissuade other agencies from following suit.

Trump’s confected indignation at Unesco, and his shrugging off of its vital global programmes, serve as a reminder that the US is not an “honest broker” of a Middle East peace. Rather it is the biggest obstacle to its realisation.

Neutron star merger observed through gravitational waves and light

Don Barrett

A series of papers published and presented Monday announced a new milestone in the era of gravitational wave astronomy: the first detection of two merging neutron stars and the first observation of an astronomical event using both gravitational waves (ripples in space and time), and electromagnetic radiation, including visible light, infrared light, radio waves, microwaves, X-rays and gamma rays.

The announcement occurred barely two weeks after the Nobel prize in physics was awarded for the first direct detection of gravitational waves on September 14, 2015. These detections now establish gravity wave astronomy as an enduring addition to science, a triumph of technology and social labor.

The merger signal was first detected by the LIGO and Virgo gravitational wave observatories on August 17, 2017. Within six minutes of the burst, automated systems had alerted astronomers to the arrival of gravitational waves and, moreover, that the frequency of the ripples induced by these gravitational waves had a higher pitch than the preceding detections, an indication of less massive objects orbiting more tightly. The masses suggested the merging objects were not black holes, but rather another type of compact exotic object, neutron stars.

Artist's rendition of two merging neutron stars showing both the rippling in spacetime and the beams of gamma rays shot out seconds after the gravitational waves. Credit: NSF/LIGO/Sonoma State University/A. Simonnet

When stars at least 10 times the mass of our Sun reach the end of their lives, an instability in their internal structure develops: the outward pressure caused by the continuous generation of energy in their cores is overwhelmed by the core’s own gravity and the core implodes in on itself. The paroxysm within the star ignites remaining fuel in the outer layers in an explosion seen as a “supernova,” one of the most violent and energetic events in the known Universe.

Inside the core, the pressures reach such a degree that the empty space within all atoms is filled in by the crowding atomic nuclei until they touch. If the core contains more than three times the mass of the Sun, spacetime itself is collapsed to a singularity, forming a black hole. But cores that weigh less than that live on as neutron stars.

Neutron stars are more complex objects than black holes, which essentially retain only the mass and spin of the core from which they were born. The substance of neutron stars is incredibly dense: toward the center, a teaspoonful of their matter would equal the mass of Mount Everest. They are suspected to have an internal structure, possibly layers of increasingly dense and exotic matter. In a diameter of only a dozen miles, they pack the mass of several Suns.

The location of the latest gravitational wave was narrowed down using a combination of the LIGO and Virgo observatories as well as NASA's orbiting Fermi and INTEGRAL gamma ray telescopes. Credit: LIGO/Virgo/NASA/Leo Singer (Milky Way image: Axel Mellinger)

As such, a merger of neutron stars involves distortion of and then contact between material objects themselves, with disruption of the stars and eventual consolidation of most of the matter into a more massive remnant, generally a black hole. And unlike black hole mergers, the neutron star mergers have been predicted to eject large quantities of extremely energetic ordinary matter, making them astronomical beacons of not just gravitational waves, but also of electromagnetic radiation.

NASA’s space-based Fermi telescope is one instrument that is used to look for the optical signatures of neutron star mergers. On August 17 at 12:41:06 UTC, just 1.7 seconds after the LIGO and Virgo gravitational wave detection, Fermi detected a short surge of highly energetic radiation known as a gamma ray burst. Thanks to communications channels that had already been established for precisely these types of events, researchers from all three collaborations realized almost immediately that the two events were likely from the same source. The next half hour was devoted to confirming that each instrument was functioning properly and narrowing down the region of the sky where the burst likely occurred.

Forty minutes after the initial detection, alerts went out to a worldwide network of observatories both on Earth and in orbit to find a transient brightening in the search area that had been narrowed down to 50 candidate galaxies. Eleven hours after the burst, the first identification of a bright new object within the galaxy NGC 4993 was made by a telescope in Chile. Five other teams quickly made this discovery independently, before a bulletin announced the target to others. In the first 48 hours, 130 separate sets of observations were made with over 30 different ground-based and space-based instruments.

This map shows the location of the nearly 70 light-based observatories that detected the gamma ray burst released just after the gravitational waves. Credit: LIGO-Virgo

Over the following two weeks, a wide range of detections were made in ultraviolet, infrared, X-ray, and finally radio wavelengths to observe the aftermath of the explosion as it propagates through space and interacts with the dust and gas of its parent galaxy. To date, the observations of the neutron star merger and its aftermath have involved 3,554 authors from 952 institutions across all seven continents. This represents one-third of the world’s active astronomers.

With the complexity of neutron star mergers and only two months of analysis since the event, the first generation of papers represent only an initial stage of scientific inquiry. What is known is that the two merging objects weigh together about 2.8 times that of the Sun, and that the detection of a fireball in other telescopes indicates that at least one and probably both were neutron stars.

The short gamma ray burst, of a kind with several dozen seen before, was expected to originate from these types of mergers, but the gravity wave signature provides the first proof. Follow-up observations have shown evidence of neutron-rich elements in the cooling fireball ejected from the merger. A significant proportion (by no means all, as has largely been reported) of elements heavier than iron found in the contemporary Universe originate from these merger-ejections, which have come to be known in the last few years as “kilonovae.” The result of the merger was probably a black hole, but the signature is unclear, and the physics of neutron stars are uncertain enough that we do not know and may never know the fate of this particular object.

A variety of other measurements were made using these data. The expansion rate of the universe was measured for the first time using gravitational waves, and radio observations have observed the merger’s shockwave as it collides with the gas and dust of its host galaxy. Astronomers even used the slight time delay between the gravitational and electromagnetic signal, which is predicted for neutron star mergers, to show that gravitational waves do indeed travel at the speed of light, or extremely close to it.

Within a year, new upgrades to gravitational observatories should increase the detection rates by a factor of 10, ushering in an era of new exploration. Regular detections of neutron star mergers in gravitational radiation will begin to probe not just their external properties like mass and spin, but their internal structure itself, about which many questions remain. The mastery and potential demonstrated through the organized scientific thought and labor of this tiny fraction of the world’s population stands in stark relief to the chaos of human organization elsewhere. Immense achievements like the successful probing of nature through gravitational waves illuminate the possibilities for when scientific knowledge and collective labor can be brought more broadly to address the social needs of humanity.

US ambassador intervenes in New Zealand’s political crisis

Tom Peters

Since the inconclusive New Zealand election result on September 23, US ambassador Scott Brown has given three extraordinary media interviews. He defended President Donald Trump’s threats to wage war on North Korea and sought to pressure the next New Zealand government to more openly align and integrate with Washington.

A government has yet to be formed. The incumbent National Party and opposition Labour Party, which both failed to gain a majority, have held secretive coalition negotiations with New Zealand First, which received just 7.2 percent of the votes. NZ First, a right-wing nationalist and anti-Chinese party, says it will decide by the end of the week which party it will support.

The reckless actions of the US, under Barack Obama and Trump, have brought the world to the brink of war. Days before New Zealand’s election, in a fascistic speech to the United Nations, Trump threatened to “totally destroy” North Korea. The American ruling elite is attempting to reverse its economic decline by using its overwhelming military strength to dominate the Asia-Pacific region, above all at the expense of China. Washington is demanding the support of all its allies, including Australia, Japan, South Korea and New Zealand.

New Zealand’s ruling class faces a fraught dilemma. It has significant economic links with Australia and the US, and relies on the US alliance to protect its own neo-colonial interests in the Pacific region, including in Samoa, Niue, Kiribati and Tonga. The National Party government, like the 1999-2008 Labour government, strengthened military and intelligence ties with the US and sent troops to Iraq and Afghanistan.

However, National also cultivated close business ties with China, New Zealand’s second largest trading partner. It has been reluctant to explicitly endorse the US military build-up and threats of trade war against Beijing. Labour and NZ First have called for greater military spending and attacked the government for encouraging Chinese investment and immigration.

Brown’s role is to ensure that the next government ends any wavering and fully aligns with the US war drive. A former Republican Senator for Massachusetts, he was appointed ambassador by Trump and arrived in June. He spent 35 years in the Army National Guard and is known for supporting waterboarding and other forms of torture. He has also spoken of his admiration for Trump’s fascist ex-advisor Steve Bannon, describing him as “a patriot.”

In a TVNZ interview on October 15, Brown rebuked Prime Minister Bill English for failing to fully endorse Trump’s threats against North Korea. In August, English said he would “consider” supporting a US war against North Korea, but offered no definite commitment and described Trump’s threat to rain “fire and fury” on the impoverished country as “not helpful.”

Brown told TVNZ: “With respect to the prime minister... the president’s policy, after years of basically languishing, are (sic) actually working.” He pointed to the crippling UN sanctions imposed on North Korea, which are heightening the danger of war. With breathtaking hypocrisy, the ambassador declared that North Korean leader Kim Jong-un was the one “threatening to wipe out and kill people.”

TVNZ journalist Corin Dann asked Brown if the US was “concerned ... that New Zealand is becoming too aligned, particularly economically, with China.” Brown replied that trade was “up to the Kiwi government” but declared that China was “destroying coral reefs and militarising islands and changing the law of the air and sea.”

So far, the National government has been wary of openly criticising China’s construction on disputed islands in the South China Sea, which the US has used as a pretext for its own militarisation of the region, including provocative naval exercises.

On September 27, Brown was asked by Newshub if Washington expected New Zealand to “join some kind of fight against North Korea.” He replied: “That’s completely and totally up to your government, whichever government it is.” However, he added: “I would hope that New Zealand would do whatever it can do to protect its environmental interests, its fishing interests, its territorial interests... China is ... building and militarising islands. That has a direct effect. And then their trade with North Korea, that’s important, we have to stop that.”

In his interviews, Brown stressed New Zealand’s importance as a partner in the US-led Five Eyes intelligence network. He told Fairfax Media on October 2 that New Zealanders “should be really proud of that fact.” NZ’s Government Communications Security Bureau plays a major part in war preparations by spying on China and other countries, in collaboration with the US National Security Agency.

Brown’s statements coincide with an intensifying anti-Chinese campaign by sections of the New Zealand media, working with the Washington-based think tanks, the Wilson Center and the Jamestown Foundation. A widely-publicised report by the Wilson Center’s Anne-Marie Brady, published days before the election, claimed the government was beholden to Chinese business interests and alleged, without any evidence, that National Party MP Jian Yang and Labour MP Raymound Huo were “agents” of the Chinese Communist Party. Brady called for the NZ Security Intelligence Service to carry out a sweeping investigation of Chinese “influence” in New Zealand politics.

NZ First echoed Brady’s demands and called for Yang to step down while an “inquiry” is conducted. Labour leader Jacinda Ardern also indicated she would consider empowering the spy agency to investigate Chinese “influence,” as Australia’s intelligence agency is now doing.

None of the parliamentary parties has commented publicly on Brown’s extraordinary post-election statements, which undoubtedly have been discussed behind the backs of the population as part of the coalition negotiations with NZ First.

All the parties, including the Greens, support the alliance with US imperialism and are extremely concerned about the widespread anti-war sentiment in the working class. This is why the immense danger of war was barely discussed during the election campaign.

The Daily Blog, funded by several trade unions and supported by the pseudo-left Socialist Aotearoa and the Communist Workers Group, is playing a key role in whipping up anti-Chinese xenophobia. After the election it declared Chinese influence in the National Party was “the major issue” facing the country. The blog, which is pushing for a Labour-Green-NZ First government, endorsed Brady’s report and has published racialist articles opposing Asian immigration.

Washington’s intervention into the political crisis is an indication of the immense dangers facing the working class. The next government, whichever party leads it, will intensify the attacks on immigrants, whip up nationalism and xenophobia, and accelerate the preparations to drag the country into war.

Kenyan government bans demonstrations ahead of October 26 election re-run

Eddie Haywood 

On Thursday the government of Kenya, attempting to quell days of mass unrest ahead of the October 26 election re-run, issued a ban on protests in the cities of Nairobi, Mombasa, and Kisumu. Continuing for an indefinite duration, the ban specifically bars demonstrations in the central business districts of the three cities.

The proscription on demonstrations is the latest action from a government mired in crisis, coming after the Kenyan Supreme Court nullified the August 8 election which had declared that incumbent Uhuru Kenyatta defeated opposition candidate Raila Odinga for the presidency. In its ruling, the court cited that it found the vote tally was “tainted by irregularities and illegalities,” and ordered a new election to take place within 60 days.

The news of the protest ban sparked widespread outrage and thousands poured into the streets in defiance of the government edict. During the past two weeks Odinga’s National Super Alliance party (NASA) have called regular demonstrations to protest changes to the country’s election laws that would block the Supreme Court from overturning future election results.

The issuing of the protest ban displays a clear shift toward police state methods of rule by the government. The government’s violent crackdown on demonstrations and its enacting of the Electoral Amendment law constitute an attack on the democratic rights of the Kenyan population, reflecting the fear within the ruling elite of the growth of mass opposition to its rule.

In the Western town of Siaya on Friday, police fired live rounds into a crowd of 2,000 demonstrators, killing two and wounding three more. Demonstrators in the western city of Kisumu blocked streets and burned tires, and threw rocks at police who fired tear gas.

Concurrently, Nairobi police fired tear gas and live rounds at thousands of protesters marching towards the city center, and the police in Mombasa deployed tear gas and beat demonstrators.

In the weeks after the August 8 poll declaring Kenyatta the winner in the hotly contested election, frequent demonstrations and unrest have occurred in the three major Kenyan cities, with police responding violently, killing at least 45, including a number of children caught in police crossfire, according to a joint Amnesty International/Human Rights Watch report.

The two organizations documented that the victims of police violence were largely the poor residents of slum districts of urban centers, including Mathare, Kibera, and Kawangware in Nairobi, as well as scores of victims in Kisumu.

Witnesses recounted to researchers that police fired randomly at protesters, and when protesters attempted to flee the volley of bullets they were chased down and beaten or shot to death.

When questioned by the media regarding the report’s allegations, Kenya’s police chief Joseph Boinnet denied the police carried out the killings and said the report was “totally misleading and based on falsehoods.” Boinnet claimed the police were only aware of 12 deaths, which are still under investigation.

Odinga called for the daily protests to push the government to enact reforms of the Independent Electoral and Boundaries Commission (IEBC). Amid a series of suspicious circumstances which occurred during the August 8 poll, Odinga accused the IEBC of not fulfilling its obligation to ensure a free and fair election.

The opposition candidate officially withdrew his participation in the October 26 re-run last week in protest of proposed election law changes being pushed by Kenyatta. The following day the government rammed through parliament the anti-democratic Electoral Amendments Law, which curbs future nullifications of elections by the Supreme Court.

The crackdown on demonstrations is motivated by fears within the Kenyan ruling elite of falling bank and corporate profits and a decline in foreign investments as a consequence of uncertainty caused by the continued unrest.

Interior Minister Fred Matiangi in announcing the protest ban told the media, “Due to the clear, present and imminent danger of breach of peace, the government notifies the public that, for the time being, we will not allow demonstrations within the central business districts of Nairobi, Mombasa and Kisumu.” He went on to deride demonstrators as criminals who were taking advantage of the chaos to loot businesses.

Significantly, Matiangi met with the Kenyan Private Sector Alliance (KEPSA), an organization comprised of Kenyan and Western capitalists, hours before issuing the ban. Matiangi afterward stated to the press that he had “received complaints from the business community about the negative effects the protests were having on their businesses.”

Since the beginning of the election crisis, Kenyan stocks have suffered a fall and yields on its Eurobonds have soared. According to Bloomberg, growth in East Africa’s top economy could fall short of the 5.5 percent previously projected.

Kenyan Central Bank governor Patrick Njorege, in Washington on Saturday to attend the annual gatherings of the International Monetary Fund and World Bank, stated, “The growth rate won’t be as strong as we expected, but I don’t think we can say that we’ve gone over the precipice.” Njorege also spoke of the historic famine affecting Kenya, which is damaging profits in the agricultural sector with markets anticipating lower crop yields.

In a press statement last Wednesday to the media, KEPSA attempted to soothe the jittery nerves of international markets by insisting that despite the election crisis, Kenya was still an attractive investing destination. “To all investors, Kenyan and international: Kenya remains an attractive investment destination. Our noisy, colorful and very long election will, in fact, result in the country becoming an even more attractive investment destination, as dispute resolution institutions and mechanisms, and other guarantors of the rule of law, become further entrenched as they pass through this institution ‘character building’ election period."

For its part, Washington is concerned that its imperialist projects in Kenya and East Africa are not derailed by the chaos erupting due to massive unrest. Kenya has forces conducting a US-backed war in neighboring Somalia to stabilize its puppet government in Mogadishu.

Thousands continue to suffer in the wake of Mexico’s earthquakes

Don Knowland 

On Friday, the death toll from the September 7 and 19 earthquakes that devastated southern Mexico and Mexico City had officially reached 471. That same day another earthquake, 5.5 in magnitude, struck Mexico off the coast of the state of Oaxaca, near the epicenter of the huge 8.1 September 7 temblor.

Speaking from the National Palace on Friday—the International Day for Disaster Reduction—Mexican President Enrique Peña Nieto said that due to the loss of human lives and damage from the September temblors, “Mexico is now a much stronger country, with greater social awareness and a sense of community.” He called on Mexicans to “recognize and put above” the damage and suffering the “unity of Mexicans, their solidarity” and the “love for Mexico [that] is the passion of all Mexicans … and the great strength of Mexico.”

Peña Nieto claimed that “at this moment we have the integrity, the full capacity, the institutional strength to face this challenge and to support the population that was damaged”; that Mexico today has “a society with greater awareness of civil protection and [earthquake] prevention … with greater capacity of the institutions of the Mexican State at all its levels … to work at preventive tasks.”

In the same vein, Interior Minister Miguel Ángel Osorio Chong added that the earthquake disasters gave Mexicans the “opportunity to realize the potential that we have when we work together, the opportunity to meet again in the solidarity that distinguishes us.”

What empty blather, smuggled in under the guise of an imaginary classless national interest! The reality of Mexico is that of a divided, horribly unequal society in which a small layer at the top lords over the mass of the population. This is the capitalist reality that precludes working together on a mass scale to meet critical human needs.

The truth is that the corrupt Mexican government, which operates as the instrument of international capital and the Mexican oligarchy, had more than ample “opportunity,” especially in the wake of the 1985 earthquake that killed tens of thousands and displaced hundreds of thousands, to anticipate or take serious measures to reduce the extent of the damage. It failed miserably to do so. Nor has the government made serious efforts to aid those devastated by the September earthquakes.

It was instead the immediate efforts of the Mexican working class—those thousands of civilians who volunteered long hours to help those affected—that for the first couple of weeks provided the critical response in terms of food, water, supplies, equipment, medical aid, psychological counseling, and searching for victims in collapsed buildings.

Peña Nieto had to acknowledge the efforts of those civilian volunteers, but cynically used them to push his fairy tale that all Mexicans had learned from the earthquakes to work together regardless of their status or circumstances. He heaped praise on the Mexican Army, the Navy and the Federal Police, forces that, as usual, were slow to respond with emergency relief, and focused their immediate concerns on forestalling any threat of civil unrest.

On Friday, Oxfam Mexico also issued a statement of its findings as to the response to the earthquakes, presenting the real state of affairs.

Government failure to prepare for earthquakes

The emergency caused by the September earthquakes, it reported, showed the authorities’ “ignorance about the mechanisms and rules for responding to a humanitarian crisis, both those established by the country and international minimum standards.”

The statement went on: “In the three entities mentioned, problems of coordination between the government, civil society and affected people were detected. The response of civil society surpassed the capacity of government institutions to channel the donated aid.”

Another important shortcoming, according to Alejandra d’Hyver, coordinator of the Reduction of Risks of Disasters and humanitarian aid for the charitable organization, was that “the authorities have not made an adequate census of the damage and of the people affected, and the limited information available is not disaggregated by sex or age group, which makes it difficult to address the specific needs of children, women, the elderly and people with disabilities.” D’Hyver noted that the evaluation of the Oxfam Mexico field team showed that the most affected population is comprised of low-income people, and especially women, a much higher percentage of whom work from home, and who have seen increased workloads in terms of care (in part due to school closings), lost income and jobs.

That is, once again, the working class and poor have borne the brunt of the damage from the failure of the government to adequately prepare and plan for major earthquakes.

As to replacement shelters, “although shelters were set up, many people only come to receive help (water, food, sanitation and hygiene), but refuse to stay because the facilities do not have adequate physical conditions or for fear of belongings they have left in their homes being stolen, which indicates the urgent need for housing reconstruction.”

“We must combat the structural vulnerabilities evidenced by recent earthquakes and prevent them from reproducing during the recovery, rehabilitation and reconstruction stages, in order to prevent loss of lives and livelihoods in future earthquakes,” concluded d’Hyver.

These findings made a mockery of Peña Nieto’s claim on Friday that “the most important” effort of the government at the moment “is to ensure that families who lost their homes may very soon have a new space to return to live.”

Urgent housing need

About 40 buildings in Mexico City completely collapsed during the 7.1 magnitude September 19 earthquake. But upwards of 4,000 were so badly damaged that the structures have been or will be deemed uninhabitable. Many housed hundreds of residents, so those without lodging number in the thousands.

An example is a building that collapsed in the Tlaplan delegation (borough) in southern Mexico City that was the subject of dramatic television coverage, as teams of rescuers pulled nine bodies from the rubble of the collapsed six-story structure, as well as 18 who survived. That building was one of 10 damaged in a complex that housed 500 apartments and more than 1,500 people.

Residents of the complex provided a snapshot of the city’s working and lower “middle” classes, including teachers, small businessmen, pensioners, public-sector employees and office workers. Many are now without housing, shelter or significant financial resources. As for some who were able to purchase apartments through social security subsidies, that was their only significant asset.

Many of those displaced by the earthquakes lived on fixed incomes such as small pensions, and most lacked insurance. Many are forced to double up with relatives, friends or in public shelters. Others must resort to temporary structures to find refuge.

Many await word from inspectors as to whether their buildings will be safe enough to return to. As one retired employee with a wife and two children from the Tlapan complex told the Los Angele s Times last week, “No one tells us anything. We don’t know when we can go back to our homes. It could be months.”

Doctors Without Borders reported last week, based on assessments made by teams in the field, that there are also “high levels of anxiety, fear, and hyperalertness” among those displaced.

Miguel Ángel Mancera Espinosa, the mayor of Mexico City, warned at a Friday press conference that his government will not permit improvised housing. The mayor cited a group in the Iztapalapa delegation that tried to convince neighbors to settle in camps of structures made with poles and sheets. Mancera Espinosa emphasized that such “people’s camps,” camps that lasted “forever” following the 1985 earthquake, would be dismantled, but his government thus far has not taken serious steps to provide alternative shelter.

His government only recently started a program to cover interim rent payments and provide low-interest housing loans and grants. This Mexico City Rebuilding, Recovery and Transformation Plan adopted at the end of September allocates the paltry sum of $2.8 million to restore over 10,000 buildings affected by the earthquake.

People are rightly skeptical as they fill out the aid forms. The government does not say when it is going to provide aid, and the amount surely will not be enough to resettle.

On Friday, Mancera Espinosa directed most of his attention to new building regulations he said would be in place within three weeks, which would focus on rules for new buildings and a regulatory framework for restructuring the buildings that were severely damaged by the September 19 earthquake.

This is an old and discredited song. After the 1985 earthquake, regulations were adopted as to new building, and reinforcement of existing damaged structures. The regulations were either inadequate or largely unenforced.

A high number of the buildings that suffered substantial damage in the September 19 earthquake were new or recently remodeled buildings. Many were the subject of citizen complaints about safety, according to an investigation and report by the Guardian newspaper.

Thousands of construction violations

Since 2012, Mexico City residents lodged on the order of 6,000 complaints about construction project violations. In 2016 alone, residents filed 1,271 complaints with the Environmental and Zoning Prosecutor’s Office as to violations of zoning or land use ordinances. Residents and advocacy organizations say the city government did not act on the vast majority of complaints, which were often made in response to visual damage following earthquakes, or that there is no public record of a response. When city reviews were done as to what repairs were required, they often were not communicated. When complaints were reviewed and passed on to the City Urban Development and Housing Secretariat (Seduvi) to act on, usually nothing happened.

Developers easily circumvented the regulations due to lax city enforcement, or outright corruption.

“I have not seen a single sanction,” Josefina MacGregor of Suma Urbana, a group of neighborhood associations in Mexico City, told the Guardian. “Facing pressure from citizens, the government will sometimes say that they are going to sanction the developers [for building violations]. But it’s not true.”

After the 1985 earthquake many residents abandoned Mexico City’s center. But city government incentives led to massive development over the last decade. Despite warnings from civil engineers that tall new developments were shifting and drying out soil, increasing earthquake risks, and of massive construction projects weakening the foundations of neighboring buildings, such development in the city’s center proceeded at a breakneck pace.

A reform after the 1985 earthquake required hiring a licensed “Director Responsible for Construction” (DRO in Spanish) to oversee meeting compliance with earthquake prevention requirements as to new building construction. DROs were routinely bribed. Yet in 2016, Mancera Espinosa’s office suspended legislation that permitted city departments to sanction DROs.

The law required that the city conduct a review of the structures of schools, hospitals and housing built following the massive 8.1 September 7 Oaxaca earthquake, which was felt in Mexico City. None was performed.

Despite massive casualties and damage from the 1985 earthquake, during the ensuing three decades the entire Mexico City development regime served the interests of developers and their profits, not the safety of its residents. The results are there for all to see. Nothing the Mexican president or government officials say about preparedness and solidarity can paper over this naked reality.

Iraqi forces seize back more Kurdish-held territory

James Cogan

The US-backed Iraqi government of Prime Minister Haider al-Abadi is expanding military operations to take back territory being held by US- and German-trained and armed “peshmerga” militia loyal to the autonomous Kurdish Regional Government (KRG). Washington, Germany and other powers are applying immense diplomatic pressure on the KRG to submit.

Since early Monday morning, Iraqi government army, police and militia units have dislodged Kurdish forces from much of Kirkuk province, including the city of Kirkuk itself, its airport, nearby towns and, most significantly, some of northern Iraq’s largest oilfields.

Kurdish General Command issued a statement declaring Baghdad’s actions a “clear declaration of war against the people of the Kurdistan Region.” Apart from isolated incidents, however, reports indicate that the peshmerga have generally withdrawn without offering resistance.

Throughout yesterday, Iraqi forces in Nineveh province moved from the provincial capital Mosul into areas they did not control. A government-backed ethnic Yazadi-based militia occupied the strategic town of Sinjar on the Iraq-Syria border.

Reports indicate that as government troops advance, peshmerga are retreating from Khanaqin, a district in Diyala province that borders Iran to the south of the three provinces that formally comprise the KRG.

The KRG has long claimed that the areas now coming back under Baghdad’s control should be incorporated into its territory. KRG president and nationalist leader Masoud Barzani seized the opportunity to order peshmerga to occupy the disputed regions after the June 2014 offensive by Islamic State (ISIS) and the wholesale retreat of government forces from Mosul and large swathes of northern Iraq.

The KRG hailed the peshmerga taking of Kirkuk as a milestone for the Kurdish nationalist movement. The province sits above substantial oil reserves and is considered crucial to the economic viability of any separate Kurdish state. Much of its Kurdish population was driven out by the former Baathist regime of Saddam Hussein, leaving a legacy of ethnic tensions and animosities.

The status of the KRG, along with Kirkuk and other disputed territory, was never resolved under the post-2003 US occupation regime and its puppet government—in which the Kurdish nationalists played a particularly venal role. As a pay-off for Kurdish support, Washington pressured the Arab-based parties in Baghdad to agree to hold a referendum on Kurdish independence in 2007, but it was repeatedly postponed and ultimately never conducted.

Since the ISIS uprising, the US-backed factions in Iraq have been preoccupied with seeking to recapture the country’s north. With ISIS now largely destroyed, however, control of the disputed territories, and especially the oilfields of Kirkuk, has emerged as the focus of bitter conflict between the rival ruling cliques in Baghdad and the KRG.

The deployment of government forces was prompted by a September 25 independence referendum in the KRG and the disputed territory under its control.

The Baghdad government declared the referendum illegal. The vote was furiously opposed by Turkey, which has spent decades brutally suppressing separatist movements among its own large Kurdish population. Iran, which exerts major influence over the Shiite-based parties that dominate the Iraqi government, also denounced the ballot.

The Trump administration backed Baghdad and opposed the referendum. Germany, which has used financial and military backing for the KRG to establish a political foothold in the Middle East, condemned the vote as provocative and destabilising.

The referendum also brought to the surface longstanding tensions between the main bourgeois nationalist parties in Iraq’s Kurdish region—the Kurdistan Democratic Party (KDP) headed by Barzani, and the Patriotic Union of Kurdistan (PUK) previously headed by the recently deceased Jalal Talibani. The two factions fought a bloody civil war in the 1990s, with the KDP collaborating with Saddam Hussein’s regime against the Iranian-backed PUK.

The opposition of the imperialist powers and regional powers led the PUK to publicly call for the referendum’s postponement. Barzani refused to do so. The vote reportedly resulted in a 93 percent majority in favour of independence.

The Trump administration gave the green light for the Iraqi military operations against the Kurdish nationalists. On September 30, Secretary of State Rex Tillerson declared that the referendum and its result “lack legitimacy” and the US supported a unified Iraq. Two weeks later, columns of tanks and troops converged on Kirkuk.

Barzani and the KDP have accused the PUK-linked peshmerga of assisting the Iraqi forces by withdrawing and allowing them to occupy key facilities. Barzani asserted yesterday that Kirkuk was lost only because of “certain individuals in certain parties.” A KDP military commander accused the PUK of “treason.” The PUK denied the allegations and insisted its fighters were the only ones to suffer casualties.

A hospital in Suleimaniyah, the PUK’s stronghold in the KRG, told Associated Press it received the bodies of 25 peshmerga killed in Kirkuk and is treating another 44 wounded.

US Army spokesperson Colonel Ryan Dillon told journalists in Washington the only casualties were the result of a “miscommunication” early Monday morning and there had been “no further reports of armed combat or conflict between the two groups.” He alleged that the entry of government forces was “supposed to be a coordinated movement” and a “peaceful handover of areas around Kirkuk.”

Unconfirmed reports, denied by the Iraqi government and the US military, indicate that sectarian Shiite-based militias and Iranian advisors are accompanying army and police units. In Kirkuk, Kurdish flags have been torn down and images of Barzani defaced. The KDP-linked Rudaw news agency alleged there was looting, homes burned and peshmerga fighters captured and beheaded.

Thousands of ethnic Kurd civilians initially fled the city, fearing violence. Reports indicate many are already returning to their homes.

In highly charged and confused conditions, major clashes may yet break out between Iraqi and Kurdish forces, or between the rival Kurdish factions.

In Baghdad, Abadi gloated yesterday that the retaking of Kirkuk and the disputed territories meant the referendum on Kurdish separation was “finished and has become a thing of the past.” Barzani responded by declaring the vote “would not be in vain” and he would continue to pursue “the independence of Kurdistan.”

The conspiracy to censor the Internet

Andre Damon & Joseph Kishore

The political representatives of the American ruling class are engaged in a conspiracy to suppress free speech. Under the guise of combating “trolls” and “fake news” supposedly controlled by Russia, the most basic constitutional rights enumerated in the First Amendment are under direct attack.

The leading political force in this campaign is the Democratic Party, working in collaboration with sections of the Republican Party, the mass media and the military-intelligence establishment.

The Trump administration is threatening nuclear war against North Korea, escalating the assault on health care, demanding new tax cuts for the rich, waging war on immigrant workers, and eviscerating corporate and environmental regulations. This reactionary agenda is not, however, the focus of the Democratic Party. It is concentrating instead on increasingly hysterical claims that Russia is “sowing divisions” within the United States.

In the media, one report follows another, each more ludicrous than the last. The claim that Russia shifted the US election by means of $100,000 in advertisements on Facebook and Twitter has been followed by breathless reports of the Putin government’s manipulation of other forms of communication.

An “exclusive” report from CNN last week proclaimed that one organization, “Don’t Shoot Us,” which it alleges without substantiation is connected to Russia, sought to “exploit racial tensions and sow discord” on Instagram, Twitter, YouTube, Tumblr and even Pokémon Go, a reality game played on cell phones.

Another report in CNN on Monday asserted that a Russian “troll factory” was involved in posting comments critical of Hillary Clinton as “part of President Vladimir Putin’s campaign to influence the 2016 election.” All of the negative commentary in news media and other publications directed at Clinton, it implied, were the product of Russian agents or people duped by Russian agents.

As during the period of Cold War McCarthyism, the absurdity of the charges goes unchallenged. They are picked up and repeated by other media outlets and by politicians to demonstrate just how far-reaching the actions of the nefarious “foreign enemy” really are.

While one aim has been to continue and escalate an anti-Russia foreign policy, the more basic purpose is emerging ever more clearly: to criminalize political dissent within the United States.

The most direct expression to date of this conspiracy against free speech was given by the anticommunist ideologue Anne Applebaum in a column published Monday in the Washington Pos t, “If Russia can create fake ‘Black Lives Matter’ accounts, who will next?”

Her answer: the American people. “I can imagine multiple groups, many of them proudly American, who might well want to manipulate a range of fake accounts during a riot or disaster to increase anxiety or fear,” she writes. She warns that “political groups—on the left, the right, you name it—will quickly figure out” how to use social media to spread “disinformation” and “demoralization.”

Applebaum rails against all those who seek to hide their identity online. “There is a better case than ever against anonymity, at least against anonymity in the public forums of social media and comment sections,” she writes. She continues: “The right to free speech is something that is granted to humans, not bits of computer code.” Her target, however, is not “bots” operating “fake accounts,” but anyone who seeks, fearing state repression or unjust punishment by his or her employer, to make an anonymous statement online. And that is only the opening shot in a drive to silence political dissent.

Applebaum is closely connected to the highest echelons of the capitalist state. She is a member of key foreign policy think tanks and sits on the board of directors of the CIA-linked National Endowment for Democracy. Married to the former foreign minister of Poland, she is a ferocious war hawk. Following the Russian annexation of Crimea, she authored a column in the Washington Postin which she called for “total war” against nuclear-armed Russia. She embodies the connection between militarism and political repression.

The implications of Applebaum’s arguments are made clear in an extraordinary article published on the front page of Tuesday’s New York Times, “As US Confronts Internet’s Disruptions, China Feels Vindicated,” which takes a favorable view of China’s aggressive censorship of the Internet and implies that the United States is moving toward just such a regime.

“For years, the United States and others saw” China’s “heavy-handed censorship as a sign of political vulnerability and a barrier to China’s economic development,” the Times writes. “But as countries in the West discuss potential Internet restrictions and wring their hands over fake news, hacking and foreign meddling, some in China see a powerful affirmation of the country’s vision for the internet.”

The article goes on to assert that while “few would argue that China’s Internet control serves as a model for democratic societies… At the same time, China anticipated many of the questions now flummoxing governments from the United States to Germany to Indonesia.”

Glaringly absent from the Times article, Applebaum’s commentary and all of the endless demands for a crackdown on social media is any reference to democratic rights, free speech or the First Amendment.

The First Amendment, which asserts that “Congress shall make no law…abridging the freedom of speech,” is the broadest amendment in the US Constitution. Contrary to Applebaum, there is no caveat exempting anonymous speech from Constitutional protection. It is a historical fact that leaders of the American Revolution and drafters of the Constitution wrote articles under pseudonyms to avoid repression by the British authorities.

The Constitution does not give the government or powerful corporations the right to proclaim what is “fake” and what is not, what is a “conspiracy theory” and what is “authoritative.” The same arguments now being employed to crack down on social media could just as well have been used to suppress books and mass circulation newspapers that emerged with the development of the printing press.

The drive toward Internet censorship in the United States is already far advanced. Since Google announced plans to bury “alternative viewpoints” in search results earlier this year, leading left-wing sites have seen their search traffic plunge by more than 50 percent. The World Socialist Web Site’s search traffic from Google has fallen by 75 percent.

Facebook, Twitter and other social media platforms have introduced similar measures. The campaign being whipped up over Russian online activity will be used to justify even more far-reaching measures.

This is taking place as universities implement policies to give police the authority to vet campus events. There are ongoing efforts to abolish “net neutrality” so as to give giant corporations the ability to regulate Internet traffic. The intelligence agencies have demanded the ability to circumvent encryption after having been exposed for illegally monitoring the phone communications and Internet activity of the entire population.

In one “democratic” country after another governments are turning to police-state forms of rule, from France, with its permanent state of emergency, to Germany, which last month shut down a subsidiary of the left-wing political site Indymedia, to Spain, with its violent crackdown on the separatist referendum in Catalonia and arrest of separatist leaders.

The destruction of democratic rights is the political response of the corporate and financial aristocracy to the growth of working-class discontent bound up with record levels of social inequality. It is intimately linked to preparations for a major escalation of imperialist violence around the world. The greatest concern of the ruling elite is the emergence of an independent movement of the working class, and the state is taking actions to prevent it.

Australian bank hearing reveals growing danger of interest-only housing loans

Nick Beams

Disturbing evidence of the vulnerability of the Australian housing market and its major banks to a sudden shift in financial conditions and any rise in interest rates emerged in the hearings before a parliamentary committee last week.

Testimony given by Westpac chief executive Brian Hartzer revealed that half the bank’s $400 billion of outstanding home loans consists of interest-only mortgages. The figure for other three of the “big four” of Australian banks—ANZ, NAB and CBA—is 40 percent interest-only.

In an article for The Conversation, reposted by the Australian ABC, University of New South Wales economics professor Richard Holden wrote that while he was not normally a fan of parliament hauling in private sector executives and asking them questions, last Wednesday’s proceedings were “both useful and instructive.”

“And, to be perfectly frank, terrifying,” he added. Commenting on what he called the “startling level” of interest-only loans—that is, loans in which the borrower does not pay back any principal for a period up to five years—Holden noted what he called the “banal response” of the Westpac chief.

Questioned on the figure, Hartzer had told the House of Representatives standing committee on economics: “We don’t lend money to people who can’t pay it back. It doesn’t make sense for us to do so.”

But as Holden remarked: “Did it make sense for all those American mortgage lenders to lend to people on adjustable rates, low-doc loans, no-doc loans etc. before the global financial crisis?”

Holden also made a scathing comment on the testimony of the ANZ CEO, Shayne Elliott, who took the same line as his Westpac counterpart, insisting that ANZ did not lend money to people who could not repay.

Holden commented: “Recall this is the man who on ABC’s ‘Four Corners’ said that home loans weren’t risky because they were all uncorrelated risks (the chances that one loan defaults does not affect the chances of others defaulting). That is a comment that is either staggeringly stupid or completely disingenuous.”

The point is that while home loan defaults may be uncorrelated, the same factors that cause one mortgagee to default—a rise in interest rates or a significant downturn in the economy causing unemployment to rise or some other factor—will impact on others in the same way.

Hartzer and Elliott “must all take us for suckers,” Holden wrote. He estimated there are about $1 trillion of interest-only loans on the books of Australian banks, under conditions where, according to the Reserve Bank of Australia, about one-third of borrowers do not have a month’s repayment buffer.

The crunch would come when interest rates began to rise, recalling the US mortgage meltdown when borrowers had to refinance. “When the market couldn’t bear that refinancing, defaults went up,” Holden wrote. “Then the collapse of US investment bank Bear Stearns, then Lehman, then Armageddon.”

Holden warned that Australia’s large proportion of interest-only loans, “turbo-charged” by an “out-of-control” negative-gearing regime (in which investor-borrowers can write-off interest payments against tax), “looks spookily similar.”

“It’s one thing for borrowers to do silly things. When it becomes dangerous is when lenders not only facilitate that stupidity, but encourage it. That seems to be happening in Australia.”

Last April, the Australian Prudential Regulatory Authority (APRA) stipulated that interest-only loans should comprise only 30 percent of any bank’s mortgage holdings. But Holden warned that may be “far too little, way too late.”

Questioning by committee members on Westpac’s compliance with the APRA stipulation centred mainly not on the level of systemic risk posed by the high proportion of interest-only loans but how the bank sought to take the most profitable route to bring down the proportion.

Rather than simply refuse new applications once the 30 percent limit on new borrowings was reached, Westpac sought to change the mix of its holdings through what Hartzer called the “pricing mechanism.” The bank raised rates on interest-only loans and reduced them slightly on loans requiring the repayment of principal—the most beneficial approach for its bottom line.

Hartzer insisted that the changes were a response to the APRA requirement. But the committee’s chair, Liberal MP David Coleman, noted: “It does appear that what you have described as a response to the regulator had, from your perspective, the happy coincidence of a meaningful increase in your earnings.”

While the exchanges during the committee hearing on this question revealed the absolute concern for the banks to gouge every last cent of profit, the overriding issue is the stability of financial system as a whole given the banks’ dependence on housing.

Nationals MP Kevin Hogan asked Hartzer why Westpac’s “lending to housing, in relative terms to small business, has become completely skewed? Why has lending to housing taken over and dominated your lending relative to small business?”

Hartzer replied that the demand for housing was high, interest rates were falling and the price of houses was rising. This had pushed up the demand for housing lending to meet the price. He could have shortened his answer by stating simply: “Because that’s where the money is.”

At the same time, Holden said the bank did not constrain its lending to small business—a claim that many businesses, facing tightening financial constrictions, would no doubt dispute.

A key feature of the Australian banking system is its dependence on the flow of foreign funds to finance essentially parasitic activities, under conditions where the creation of an inflated housing market has led the International Monetary Fund and other international organisations to warn of a bubble.

In September 2008, the Australian banks were not directly affected through the purchase of “toxic assets” issued by US finance houses because they are borrowers from, rather than investors in, global markets. But after the world financial crisis broke, they were rapidly impacted because loans to fund their activities dried up virtually overnight in October. Had the situation continued, they would have suffered a major liquidity crisis and potentially bankruptcy, a breakdown averted only when the Rudd Labor government stepped in as their guarantor.

Since the 2008 crisis, the banks have lessened their dependence somewhat on volatile international short-term funding. But they still rely on the flow of money from global markets.

In January this year, a Morgan Stanley analysis found that while new regulations had forced the banks to increase their use of customers’ deposits, the banks also had increased the issuance of longer-term bonds.

Last year the big four issued $148 billion in long-term debt, up from $109 billion in 2015, with a further $142 billion to be issued this year.

Low interest rates in international markets have created favourable conditions for such borrowing, but Morgan Stanley warned the situation could change. One of the key issues will be further interest rate rises by the US Fed.

On the one hand, the Reserve Bank of Australia would need to lift interest rates in order to keep funds flowing into the Australian banking and financial system. On the other, rising interest rates could impact on the interest-only loans of investors and on homebuyers whose finances have been stretched to the limit by soaring house prices.

A survey conducted by global banking giant UBS last month found that of the people who took out a home loan in 2017, only 67 percent gave a “completely and factual” account to the bank of their financial situation, down from 72 percent from last year. UBS said the survey, which involved 900 people, would tend to underestimate the level of mortgage misrepresentation because people would be reluctant to admit it, even anonymously.

UBS has estimated that about $500 billion of the $1.7 trillion of mortgages outstanding in Australia could contain misstatements about incomes, assets, existing debts and expenses.

So far the international low-interest rate regime has allowed the housing bubble to continue, with ordinary homebuyers and investors still able to meet their debts. Only a small shift, however, would rapidly bring to the surface a major social and financial crisis, reaching into the banking system itself.