Giant Chinese property developer Evergrande given stay of execution

Nick Beams

The ultimate fate of the bankrupt Chinese property developer Evergrande continues to hang in the balance after a Hong Kong judge granted the company a stay of execution on a move by one of its creditors to liquidate it.

On Monday Judge Linda Chan said liquidation proceedings would be held over until January 29 next year to give the failed company more time to come up with a restructuring plan that met the agreement of creditors.

Residential buildings developed by Evergrande in Yuanyang [Photo by Windmemories/Wikimedia Commons / CC BY-SA 4.0]

The suspension of proceedings, which came as a surprise to other creditors many of whom would have opposed it, came as the company that brought the liquidation petition, Top Shine Global, said it would not oppose the move.

Evergrande’s lawyers said in court the company was considering a deal that involved giving “certificates” to creditors which would “neither be a share nor a bond but a right to distribution based on certain assets.”

The certificates would allow creditors to be repaid money when some of Evergrande’s assets were sold.

One of the lawyers representing other creditors, Neil McDonald, said the adjournment had come as a “surprise.” He had been expecting that the company would have been wound up at Monday’s hearing and only heard about the change 15 minutes before it began.

Judge Chan’s decision clearly reflects fears in legal and financial circles about the liquidation of Evergrande which has $300 billion in debts. In a liquidation process there is always a scramble by creditors to grab what they can with the possibility of legal suits and counter suits with unknown consequences in a collapse of this colossal size.

Judge Chan indicated that there was still a way to go before a deal might be agreed to.

She said “crucial details” of the new plan were missing and Evergrande should have “direct discussion with relevant authorities” to make sure it was “doable.” Evergrande’s lawyer said: “We will try our best.”

Chan was referring to the situation which developed in September when a deal with offshore creditors collapsed when the company’s founder, chairman and chief shareholder Hui Ka Yan was detained by Chinese authorities because of as yet unspecified financial irregularities.

According to company filings, Hui has paid himself and his wife more than $7 billion in dividends since the company went public in 2009.

The deal had been more than a year in the making, involving a series of complex negotiations. After the detention of the company chief, however, Evergrande said it could not go ahead because of new regulations which prevented it from issuing notes that would facilitate the restructuring.

The liquidation of Evergrande, which seems at this stage to be the most likely outcome, would bring little or no return for its creditors. Analysts have said they anticipate a recovery rate of below 5 percent on its debts.

While domestic creditors will get little, the Chinese government will be anxious to insure than foreign creditors can agree to some kind of restructuring because liquidation will cast a pall over the raising of credit by Chinese companies in international markets.

The government will also be concerned about the political consequences. There are an estimated 1.5 million homebuyers who have paid the company for their still unfinished apartments. When Evergrande’s problems first surfaced there were angry protests outside its offices that rang alarms bells in Beijing which is acutely sensitive to signs of social protest and discontent.

There are concerns that an Evergrande liquidation could call into question the position of other highly indebted real estate developers.

Among those is Country Garden which was touted as an exemplary real estate firm, but it too has defaulted on loans. The group has said it will not be able to meet all its overseas debt repayment obligations. It has total liabilities of around $200 billion of which some $11 billion are international debts.

It has been reported that most of the top ten real estate developers in China have been experiencing sharply falling sales.

According to estimates by Bloomberg, more than half of the biggest 50 developers in 2020 have defaulted. It has said that Chinese developers have defaulted on around $115 billion of $175 billion of outstanding offshore loans since 2021.

There are also significant domestic financial ramifications involving the so-called shadow banking system, estimated to be around $3 trillion, and which is exposed to the crisis in the property sector.

In a letter to investors last month, Zhongzhi, one of the larger companies in the system, revealed that it confronted a shortfall as high as $34.6 billion and was “severely insolvent.”

Its problems first came to light back in August when it missed payments on several products. It blamed its problems on the 2021 death of its founder and the departure of “multiple senior executives” after which it said “internal management ran wild.”

“The group’s investment products have defaulted one after the other, and we deeply apologise to investors,” it stated. Most of those investors are high-wealth individuals so it is considered very unlikely that there will be state intervention. The amount involved is large but is small relative to the entire trust industry. But it is nonetheless a warning as to how quickly events can turn and companies that had seemed to be secure turn out to be a house of cards.

The crisis in real estate development and associated financial interests is bound up with the boarder structural shift which the Xi Jinping regime is trying to effect in the Chinese economy.

The real estate boom began in the aftermath of the 2008 financial crisis when the government initiated a massive infrastructure and real estate development program based on stimulus spending, estimated to be around $500 billion and an expansion of credit.

The result was that real estate and construction, together with its associated industries, is estimated to account for between 25 and 30 percent of the Chinese economy.

The troubles for the real estate sector began in mid-2020 when the government introduced new regulations, dubbed the “three red lines,” which restricted access to credit. It was aimed at lessening the dependence on real estate and infrastructure development.

The result has been a marked slowdown in growth, which has been reflected in the rise of unemployment, particularly among youth aged 16 to 24 years old where it is running at more than 20 percent. As a result, the government has halted the publication of youth unemployment figures.

Worse may still be to come. In a speech to bankers in Hong Kong last week, the governor of the central bank, Pan Gongsheng, warned that the economy was on a “long and difficult journey” away from its reliance on property and infrastructure investment.

In a sign of the political sensitivity of the government to the prospect of lower growth, the Chinese transcript of Pan’s speech omitted the phrase “long and difficult.”

The official growth target for this year is just 5 percent, one of the lowest levels in decades. After the lifting of COVID restrictions at the start of the year there was increase in consumer spending. But since then, consumer confidence has fallen, investment is down, and export earnings have been described as “disappointing.”

Minor measures have been introduced to try to stabilise the property market but there is no stimulus package in sight and the focus will be on what growth target the government sets for 2024 and how it intends to achieve it.

Yellow bankruptcy auction raises $1.9 billion for Wall Street

Alex Findijs

Yellow Corp. trailers at a YRC Freight facility on July 28, 2023, in Richfield, Ohio. [AP Photo/Sue Ogrocki]

The bankruptcy auction of freight company Yellow was completed on Monday, with what formerly had been the third-largest less-than-truckload carrier in the US selling its real estate assets for nearly $2 billion. This sale has generated significantly more revenue than required to pay back Yellow’s extensive debt, which totaled nearly $1.6 billion, including a $700 million loan from the United States government.

According to industry publication Freight Waves, several rival freight companies snatched up large swathes of Yellow’s 170 terminals across the country. XPO purchased 28 terminals for $870 million; Estes Express, which had offered $1.525 billion for all of Yellow’s terminals, purchased 24 for $248.7 million; Saia purchased a further 17 for $235.7 million; and Knight-Swift purchased 13 for $51.3 million, while several other companies purchased a handful of terminals each.

XPO is seeking $585 million in senior unsecured shares and a further $400 million in senior secured debt to finance the purchase and to refinance existing debts. Saia saw a significant increase in volume, up 18 percent over last year in quarter four, after Yellow’s bankruptcy as it absorbed much of Yellow’s volume. It has increased its workforce by 1,000 to 13,000 along with its bid for Yellow’s terminals to meet this new demand.

Court documents show that Yellow still retains 46 terminals that remain to be sold. Objections to auction sales may be made through this Friday and the bankruptcy court is expected to hold a hearing to finalize the sale of terminals on December 12.

In addition to Yellow’s terminals, it also owns 12,000 tractors and 35,000 trailers that will be sold in separate auctions through auction houses Nations Capital, Ritchie Brothers and IronPlanet. Liquidating Yellow’s rolling stock is expected to take up to six months and could generate millions in additional funds.

The auction of Yellow’s terminals comes after a bidding war between Estes Express and Old Dominion, which had both offered at least $1.5 billion to take over all of Yellow’s terminals. Estes Express’s most recent bid of $1.525 billion was accepted as a “stalking horse bid” which meant that it set the floor for all additional bids.

Yellow’s management will be pleased with their decision to auction their terminals separately, however, as they have raised substantially more money than Estes offered. With $1.9 billion raised, and with additional terminals and assets up for sale, Yellow will not only be able to pay off its immediate debt obligations, it will be able to consider payments to unsecured creditors.

The largest of these unsecured creditors is the Teamsters Central States Pension Fund. Tom Nyhan, executive director of the Central States, Southeast and Southwest Areas Pension Fund, said he believes they are owed almost $5 billion because Yellow withdrew from the fund prematurely. Yellow’s sale is incapable of raising enough funds to pay the pension fund what it is owed, and it is unclear how the Teamsters might seek legal action over the outstanding funds.

Yellow’s auction also disrupts a last minute offer by auto shipping company Jack Cooper to purchase Yellow and revive the company. Jack Cooper, whose main customers are Ford, General Motors and Stellantis, offered nearly $2 billion to purchase Yellow, repay its debts and fund the resumption of its operations, potentially rehiring thousands of the 22,000 Teamsters whose jobs were eliminated by Yellow’s bankruptcy.

Jack Cooper’s offer received support from the Teamsters and from several US senators, including Elizabeth Warren and Bernie Sanders. In a letter authored by Democratic Senator from Ohio Sherrod Brown, the senators argued that, “At the end of the day, there are thousands of American families that want to see the company’s doors reopen. Treasury needs to be clear-eyed that union families and the strength of our economy rely on jobs like the ones that were lost.”

A major obstacle to the plan was the request by Jack Cooper for the US Treasury to extend the due date of a $700 million Cares Act loan by two years to 2026. The US Treasury was reportedly reluctant to do so. According to a report by the Wall Street Journal, Treasury officials argued that Congress would have to vote to extend the loan.

Yellow’s demise and dismemberment has been, and will continue to be, a massive payday for Wall Street at the expense of the livelihoods of its 30,000 employees. Major creditors MFN, a Boston-based hedge fund that purchased a significant stake in the company as it was declaring bankruptcy, and Citadel, a private equity firm that purchased $500 million of Yellow’s debt from Apollo Global Management, will reap a healthy payout from the auction. The two investment firms made a joint offer to take over as “debtor-in-possession,” meaning they would fund Yellow’s final operations as it prepared for auction in exchange for oversight of the liquidation process. They and other creditors will take home a sizable cut of Yellow’s sale, recouping not just their investments but the interest on their loans.

Blame for Yellow’s bankruptcy has been placed on corporate management for their inability to manage the company’s massive debt. But blame also lies with the Teamsters, who gave billions of dollars in concessions to Yellow and refused to mount any resistance to the elimination of the jobs for 22,000 of its members. Yellow ultimately declared bankruptcy because it could not meet the demands of Wall Street that it force workers to pay for its debt. Wall Street investors, as well as the United States government which held a 30 percent stake in the company, decided that it was more financially beneficial to allow the company to perish than to make any effort to save the jobs lost. Even months after Yellow declared bankruptcy, former Yellow workers have found it difficult to find work elsewhere.

The bankruptcy of Yellow is a warning to the working class globally that the capitalist class is willing to put thousands of jobs to the sword to maintain the flow of profit. Tens of thousands of jobs were sacrificed to generate profit for Wall Street, with billions of dollars generated to satiate the demands of finance capital that the working class pay for its profits.

Spain: Trade unions support Telefónica’s scheme to lay off a third of its workforce

Santiago Guillen

Last week, Spanish multinational telecommunications company Telefónica announced its intention to layoff over 5,000 workers across Spain. This represents a third of its 16,000 staff.

These layoffs come after 11,300 workers were made redundant in 2015, 2019 and 2021, on top of 6,830 redundancies between 2011 and 2013. In 12 years, Telefónica has destroyed more than half its workforce. In 1992, 74,437 people worked at Telefónica, 60,000 more than those employed three decades later.

Telefónica headquarters in Madrid, Spain [Photo by Luis García / CC BY-SA 3.0]

Telefónica is the fifth largest telecommunications company in the world and the second largest in Europe, behind only Vodafone, with operations across Europe and Latin America. In Spain, it is the fourth largest corporation by revenue and market presence, behind textile company Inditex (Zara, Bershka, Massimo Dutti, Pull&Bear and Lefties) led by billionaire Amancio Ortega, and banks Santander and BBVA.

Unlike the last three rounds of layoffs in 2015, 2019 and 2021, implemented through so-called voluntary resignations and early retirements, Telefónica will return to the redundancy scheme it used in 2011, known by its Spanish acronym ERE (Expediente de Regulación de Empleo). This enables companies to carry out collective dismissals based on so-called “objective” reasons, such as economic downturns, technical innovations, organisational changes and productivity increases.

It allows companies to slash severance pay and saves them money by not having to continue paying for health insurance and pension plans. And, unlike voluntary resignations, workers cannot refuse their dismissal.

The announced job destruction has little to do with the company’s economic results between 2013 and 2022. Throughout this period, Telefónica has achieved profits of 32 billion euros. Meanwhile, the average salary per employee has decreased in this period by 2,000 euros.

Last June, Telefónica announced accelerated growth during the second quarter of the year reaching a net income of €462 million, 44.5 percent more compared to the same period in 2022. This ERE will allow Telefónica to save between 200 and 400 million euros in wages.

Telefónica claims that the ERE seeks to resolve a “functional surplus” of workers who are no longer necessary, either due to technical improvements or due to the disappearance of services such as copper-based telephone wiring. However, this process must be placed in the context of the drive for profit by telecommunications companies throughout Europe, where up to 100,000 layoffs are expected in the coming years.

This is a sector with fierce competition between companies, especially due to the appearance of low-cost operators. One result is a bidding war to lower prices for customers and increase market share. To this must be added multimillion-dollar investments by companies into fibre optics and 5G.

The announced layoffs seek to put all these costs on the backs of the workers, by reducing the workforce and wages, and increasing precarious work conditions. This is the reason why Telefónica prefers to make redundancies rather than retrain workers in other positions. In this way, companies such as Telefonica plan to expand their profits.

Telefónica’s announcement is part of a global offensive against telecommunications workers. British company BT Group (the former British Telecom) has announced it will cut its workforce by between 40,000 and 55,000 employees this decade, slashing between 30 percent and 42 percent of its workforce. Finnish company Nokia will lay off 14,000 people and British Vodafone will make 11,000 layoffs, 10 percent of its workforce. The Swedish Ericsson will lay off 8,500, Virgin Media 02 (Telefónica's subsidiary in the United Kingdom) will lay off 2,000, whilst Deutsche Telekom and the Swedish Telia have announced 1,650 and 1,500 job losses, respectively.

The global character of the capitalist offensive against workers shows that jobs and living conditions can be defended only through an internationally coordinated struggle by telecommunication workers across all companies to oppose the race to the bottom. But the pro-capitalist trade unions are opposed to any such global struggle.

In Spain in recent decades they have refused to organise any fight against Telefónica’s mass dismissals or against the more than 4,000 jobs destroyed by Vodafone and Orange, two of the largest operators in Spain.

Two of Spain’s main trade unions, the Sumar-linked Workers Commissions (CCOO) and the social-democratic General Union of Workers (UGT), have made clear they have no intention of challenging Telefónica's ERE. As of writing, they have called no protests or any other significant action. Instead, they have made clear they accept the savage redundancy scheme.

UGT, the largest trade union within Telefónica, has stated that “any redundancy plan will be linked to the signing of a new Agreement... with a minimum duration of 3 years that protects the workforce and their working and economic conditions”. In other words, UGT accepts the ERE in exchange for some symbolical concessions which will not prevent new dismissals from being repeated in the future.

From CCOO, the person responsible for Union Action in the telecommunications sector, Ramona Pineros, assessed the layoffs positively. He agreed with the company’s claims by stating that “it is true that...there are a lot of jobs that have stopped having activity”.

Rejecting any alternative or protest, he summed up perfectly the role of the unions. Their role is not to defend jobs, but to work with companies to slash them. He said that “our job, in this case, will be to achieve the best conditions for the people who take advantage of the dismissal.”

The unions have also whipped up a nationalist frenzy, seeking to minimize attacks against “their own” workers, favouring attacks against those of other countries. This doomed perspective serves to divide workers along national lines, giving the companies a free hand to implement their corporate agenda.

When Vodafone announced 11,000 layoffs in May, the aforementioned Ramona Pinero of CCOO described the news as a “probe balloon” saying that “the explanation they give has given some peace of mind.” The Spanish unions claimed to have received guarantees that no layoffs would be made in Spain among the 11,000 the company intends to carry out worldwide, ensuring that these would be imposed in the United Kingdom, Italy, Germany, India, Egypt and Hungary.

If unions act in practice as a sub-department of human resource management, specialising in policing the workforce, the role of the pseudo-left Sumar embodied by its leader and Minister of Labor Yolanda Díaz is not very different.

Minister of Labor Yolanda Díaz [Photo by U.S. Department of Labor / CC BY 2.0]

In an interview with La Sexta on Monday, Díaz said, “When I have the ERE on my table, I’m going to evaluate it and meet with the parties to learn about it”. Díaz knows fine well that her ministry has no veto power over an ERE, thanks to the right-wing Popular Party’s labour reform in 2012, that she herself expanded last year. This year, 25,000  collective dismissals took place through EREs compared to 24,215 last year, without either Díaz or Sumar opposing the measures.

Venezuela claims oil-rich territory controlled by Guyana as Pentagon carries out flight operations

Andrea Lobo

In a speech on Tuesday, Venezuelan President Nicolás Maduro presented new official maps of the country including the Essequibo, an area the size of Greece that represents two-thirds of the territory claimed by neighboring Guyana. He announced “immediate” plans to exploit the region’s large oil, gas and mineral deposits.

Essequibo River highlighted [Photo: WikiCommons]

The speech took place after a referendum Sunday in which, according to Venezuelan authorities, more than 95 percent voted for turning the territory into a new Venezuelan state, rejecting a contested 1899 arbitration in Paris that drew the existing border, and opposing the jurisdiction of the International Court of Justice. 

“Now we really are going to recover Venezuela’s historic rights in Guayana Esequiba,” proclaimed Maduro.

Ahead of the vote, the UN-administered ICJ had ordered Venezuela to refrain from taking any actions until it rules on the border dispute, which could reportedly take years. 

For centuries the border dispute was driven by ambitions by the British colonial authorities in British Guiana to control gold deposits found in what was the Spanish Viceroyalty of New Granada, and Gran Colombia after that. 

At the end of the 19th century, as the new imperial power in the region, the US administration of Grover Cleveland backed the Venezuelan claim against Britain ahead of the 1899 international arbitration, which ruled in favor of Britain amid evidence of pro-British complicity of the judges.

After a series of coups and conspiracies by the MI5 and CIA against the bourgeois nationalist Cheddi Jagan and his People’s Progressive Party—at the time oriented to the Stalinist and Castroite leaderships—Guyana was granted “independence” in 1966. 

Today, oil deposits found only in 2015 off the shore of the Essequibo and a global context marked by preparations for a new redivision of the world through war have reignited the border dispute over the sparsely populated and remote jungles west of the Essequibo River, which Venezuela considers the natural border. 

The Biden administration responded initially to the referendum by posing as a peaceful bystander, with the US State Department calling for “a peaceful resolution of their dispute,” while also hypocritically calling on Venezuela to respect the 1899 ruling.

Since its birth, however, Guyana has been treated by US imperialism as an enclave ruled by puppets of transnational corporations, as evidenced by the hated agreement in 2019 to let a consortium led by US conglomerate ExxonMobil keep 50 percent of the proceeds from its Shabroek offshore oil block. 

US imperialism has been the main player stoking tensions in recent years, by building up the tiny and largely volunteer Guyanese military, and chiefly by frequent deployments of US troops to Guyana and Caribbean waters claimed by Venezuela, ostensibly for “exercises.” 

The Obama, Trump and now Biden administrations, meanwhile, imposed a devastating sanctions regime aimed at provoking a military overthrow of the Maduro government. Combined with a fall in oil prices, corruption and mismanagement, the sanctions plunged Venezuela into a crisis that shrank the economy by over 80 percent and triggered an exodus of over 7 million Venezuelans. 

In the most provocative move yet, the US Southern Command conducted flight operations over Guyana on Thursday, while posting a statement claiming to uphold “its commitment as Guyana’s trusted security partner.” 

This took place shortly after Guyanese President Irfaan Ali denounced Maduro for attempting to annex the territory and calling on the US to help “deter” Venezuela. 

Even as Washington supports and arms Israel’s ethnic cleansing of Palestine, US Secretary of State Antony Blinken insisted in a call with Ali on Thursday that he could count on the United States’ “unwavering support for Guyana’s sovereignty.”

Amid its proxy war against Russia in Ukraine and support for Israel as part of plans for a broader war in the Middle East, the Biden administration is eager to secure the Stabroek block, which is producing 600,000 barrels per day (bpd) of oil, and is expected to double this amount by 2027. By comparison, Venezuela has been producing less than 800,000 bpd. 

More broadly, US imperialism seeks to keep key resources in the region, particularly the world’s largest oil deposits in Venezuela’s Orinoco Belt, out of the hands of its main geopolitical rivals—China and Russia. 

As summarized in October by US Southern Command chief Laura Richardson, a few weeks after a visit to Guyana: 

“I worry about the extraction of these resources from these reserves of heavy crude oil, light sweet crude that was discovered off the shores of Guyana, the largest growing economy, 25 percent GDP growth anticipated for Guyana over the next 25 years. You have 60 percent of the world´s lithium in the lithium triangle, Argentina, Bolivia, Chile, and copper, gold. We have the Amazon. So the resources are so rich. And when you look at the strategic competition globally but then also in this hemisphere you want to make sure that adversaries and strategic competitors aren´t trying to go there for nefarious reasons to extract. This hemisphere has the potential to feed and fuel the world.

For its part, the Maduro administration is responding to both growing social opposition from below, amid a deepening economic and humanitarian crisis, and the intensified pressures from US imperialism. 

The Maduro and Biden administrations reached a deal in October for a license allowing Venezuela to sell oil, gas and gold in return for freeing so-called “political prisoners” and allowing the US-backed opposition candidates to run in general elections in 2024. While Washington said Maduro had until late November to fulfill these conditions, the US State Department declared this week that conditions have not been met but the licenses remain valid, suggesting ongoing talks.

Behind the nationalist rhetoric to be defending the “Fatherland” and the calls for “national unity,” the Maduro regime speaks for a section of the Venezuelan ruling class hoping to reach a new agreement with US imperialism on how to divide the profits from the exploitation of Venezuelan workers. It seeks to use its ties to China and Russia as leverage for this, as demonstrated by plans by Maduro to visit Moscow later this month, and the fact that Venezuela had continued exporting most of its oil to China despite US sanctions.

In this process, however, Maduro is following the same reactionary path as the Putin government when invading Ukraine in 2022 or the Iraqi Hussein government when invading Kuwait in 1990, which US imperialism exploited to carry out long-planned military operations against its targets. 

Despite the threats from the Pentagon, the Venezuelan Bolivarian Armed Forces have begun explicit preparations for a military takeover of the territory, including building roads and bridges on the northern end of the border, while Maduro said corporations operating in Essequibo have three months to leave. On Thursday, the Venezuelan Minister of Defense Vladimir Padrino announced the designation of generals who will be in charge of the “Operational Zone for the Integral Defense of Guyana Esequiba.” 

Notably, the Lula da Silva government in Brazil has carried out its own military buildup along its borders with Venezuela and Guyana. Representing the regional power ambitions of the Brazilian oligarchy, Lula is effectively warning Caracas that it needs its permission to act. 

As demonstrated by the history of Guyana and similar disputes across South America since colonial times, it is through borders and nation states that imperialism exploits the workers and peasants and controls the resources, with the help of the local ruling elites.

Exposing the Pan-South-American pretensions of Hugo Chavez and his Bolivarianism, which were once combined with limited social reforms, the dead end of all bourgeois nationalist movements is being clearly revealed by the development of the crisis of global capitalism, with Latin America being increasingly dragged into a third world war.

Australian government rams through detention and citizenship-stripping laws

Mike Head

Scenes in the Australian parliament on Wednesday made a farce of any pretence of democracy. In fact, the real face of parliament was on display, spearheaded by a Labor government in imposing deeply reactionary laws.

Intent on proving itself more draconian than the Liberal-National Coalition, the Labor government again joined hands with the Coalition to push through two sweeping detention and citizenship-cancellation bills, overturning fundamental legal and democratic rights, without hardly a semblance of debate.

Both bills are blatant efforts to flout rulings by the country’s highest court that it is unconstitutional, even under Australia’s colonial-era 1901 Constitution, to punish people by executive decree without a judicial process, whether it be to detain them or strip them of citizenship.

Asylum seekers protesting at the Villawood detention centre in Sydney, 2011. [Photo by Adam.J.W.C. / CC BY-ND 2.5]

One bill, to impose a new regime of potentially indefinite “preventative detention” on immigration detainees, was rammed through the lower house, the House of Representatives, in less than 20 minutes late on Wednesday night. Despite objections, the government prevented any debate at all, including by abruptly adjourning the assembly just before 10 p.m.

That was after Labor and the Coalition had teamed up in the Senate to push the bill through that house on Tuesday in about three hours. These moves prevented any examination of the government’s 70 pages of amendments to enact the new detention powers, accompanied by an “explanatory memorandum” of nearly 150 pages.

All the more extraordinary was that Prime Minister Anthony Albanese’s government had issued ultimatums demanding that both bills be passed by Thursday. It threatened to keep parliament sitting, beyond yesterday’s holiday shutdown, unless and until that was done.

Members of the House of Representatives were then suddenly told on Tuesday that the bill would be dealt with on Wednesday night, leaving some MPs unable to get back to Canberra in time for the unexpected session.

Under the bill, an unknown number of the 150 or so immigration detainees that the government was forced to release from indefinite detention by a November 8 High Court ruling can be locked way again.

All that is required is for them to have been previously convicted, in either a foreign or domestic court, of what is classified as a “serious violent or sexual offence” and for the immigration minister and a court to decide that there is just “a high degree of probability” that “the offender poses an unacceptable risk of seriously harming the community by committing” such an offence.

This amounts to punishment for a thought crime, based on an accusation of what the person might do in the future, not on what they have actually done. On this basis, people can be re-detained for three years at a time, possibly for the rest of their lives.

Even the information being used to justify their detention can be kept secret from them, shielded by a government claim of “public interest immunity.” That would doubtless cover dubious accusations by police or intelligence agencies.

Such “preventative detention” powers were introduced in 2005 by the previous Coalition government, with Labor’s total backing, for use against people convicted of vaguely-defined terrorism-related offences.

As the WSWS has warned throughout the “war on terrorism” proclaimed by US President George W. Bush in 2001 to justify the invasions of Afghanistan and Iraq, such unprecedented measures, introduced on the false pretext of combatting terrorism, are being extended to cover much wider offences.

The bill also introduces stronger police powers and harsher imprisonment terms, of up to five years, for breaching any of the many electronic shackling, curfew and other restrictions imposed on released detainees by the legislation that Labor and the Coalition rushed through parliament last month.

Further, the bill provides the government and a judge to alternatively place someone under a “community safety supervision order.” That is a potentially even harsher regime of constant ankle bracelet monitoring, curfew and house arrest than in the initial shackling bill.

Labor’s new citizenship-stripping bill was likewise pushed through the Senate in just three hours on Wednesday, a day before the government’s deadline.

This bipartisan bill hands amorphous and politically-loaded powers to judges to revoke citizenships, thus depriving people of basic civil and democratic rights. Acting on a government application, they can rule that a person’s “serious offences” have “repudiated their allegiance” to Australia by rejecting “Australian values.”

The bill describes these values as consisting of “values, democratic beliefs, rights and liberties that underpin Australian society.” Yet, the bill itself overrides “democratic beliefs, rights and liberties.”

The “serious offences” listed in the bill include terrorism-related acts, advocating mutiny, treason, espionage, foreign interference and foreign incursion.

Because of the broad legal definition of terrorism, a person could lose their citizenship for supporting the right of people in Gaza to resist the ongoing Israeli genocide. Likewise, the extensive “foreign interference” offences could cover anti-war and anti-government activists.

So far, citizenship-stripping legislation has been restricted to dual citizens—those holding citizenship of another country. But that covers millions of Australians in an increasingly diverse population. Moreover, the High Court rulings striking down the previous legislation do not prevent any extension to sole citizens.

On both fronts, successive Coalition and Labor governments fought tooth and nail, all the way to the High Court, to defend their previous arbitrary powers to detain people or revoke their citizenships. Now the two ruling parties have teamed up to restore such powers, despite both bills likely to be challenged as unconstitutional as well, according to legal experts.

This entire bipartisan political operation over the past month has been accompanied by a foul witch hunt by the Labor government, the Coalition and the media against formerly indefinitely detained refugees and immigrants, effectively depicting them all as murderers and rapists.

Some of the most vulnerable members of society, brutalised by years in detention, often after fleeing wars or persecution, are being vilified and victimised by the government and the complicit media in order to justify police-state measures.

Five ex-detainees have been arrested already, amid a hue and cry by the media and political establishment alleging that they have committed crimes since being released, but without any proven evidence, let alone convictions by a court of law. The principle of innocent until proven guilty has been thrown out the window!

For example, one of those arrested and promptly demonised by media headlines is a 45-year-old Sudanese refugee, accused by the Australian Federal Police of allegedly failing to comply with a curfew and stealing luggage at an airport. No details have been reported.

In court, a magistrate was told that the refugee is “a diagnosed schizophrenic, requires medication for HIV and suffers from diabetes, high cholesterol and high blood pressure.” No doubt, being incarcerated indefinitely would have contributed to those mental and physical health problems.

There is a chilling connection between this witch hunt-inflamed operation and the same bipartisan line-up to back the Israeli genocide in Gaza. Both bills set precedents that can pave the way for broader use against the deepening opposition to this barbaric agenda and the other US-led or supported wars being waged or prepared against Russia and China.

There is mounting working-class hostility toward the government and the ruling class as a whole, fueled by a mounting cost-of-living crisis and the resurgence of the unchecked COVID-19 pandemic.

Under these conditions, the Labor government and the Coalition are lurching further and further toward authoritarian methods of rule, as is occurring in the US, the UK, across Europe and in Argentina. This week’s proceedings in parliament must be taken as a warning of that.

Question mark raised over the world’s most important financial market

Nick Beams

The current edition of the Economist, one of the world’s leading financial magazines, carries an extraordinary headline.

It poses the question: “Is the world’s most important asset market broken?”

US Treasury Department Building, Washington, D.C. [Photo: Carol M. Highsmith Archive, Library of Congress, Prints and Photographs Division]

The article deals with significant problems in the $25 trillion US Treasury market where government debt is bought and sold, and which forms the key foundation for the entire global financial system.

Those problems have surfaced in a series of crises in recent years. In 2019 there was turmoil in the repo market where holders of financial assets use them as collateral to obtain cash short-term, sometimes overnight, as part of their daily operations.

Interest rates in these usually routine transactions, which grease the wheels of the financial system, rose to unprecedented heights, as much as 10 percent at one point, before the Federal Reserve intervened to stabilise the situation.

Then came the market freeze in March 2020 at the start of the pandemic when, in a so-called “dash for cash,” no buyers could be found for US government debt, supposedly the safest financial asset in the world, for several days.

The Fed intervened injecting $4 trillion into the financial system—at one point it was said to be spending a million dollars a second—and became the backstop not only for US Treasury bonds but many other forms of debt.

The intervention not only stabilised the situation but created the conditions where financial oligarchs were able to rake in hundreds of billions of dollars during the worst period of the pandemic.

Since then, there have been problems with the issuing of new government debt. The Treasury modified its last issue of debt earlier this year somewhat away from the longer end of the market in order to mitigate against turbulence.

Last month a cyber-attack on ICBC, a Chinese bank, disrupted settlements in the Treasury market for several days.

The Economist article describes the Treasury market as “a network of mind-bending complexity” which touches almost every financial institution.

“Short-term bills and long-term bonds… are issued by Treasury. They are sold to ‘primary dealers’ (banks and broker dealers) in auctions. Dealers then sell them to customers: foreign investors, hedge funds, pension funds, firms and purveyors of money-market funds. Many buyers raise money to buy Treasuries using the overnight repo market, where bonds can be swapped for cash. In secondary markets high-frequency traders often match buyers and sellers using algorithms. Participants, in particular large asset managers, often prefer to buy Treasury futures—contracts that pay the holder the value of a specific Treasury on an agreed date—since it requires less cash up front than buying a bond outright. Each link in the chain is a potential vulnerability.”

As a result of the recent crises, regulators are seeking to impose new controls under conditions where the debt market has grown by leaps and bounds and the conflict in Congress over the “debt ceiling” continually threatens to push the US into a debt default.

Government debt is now equivalent to around 100 percent of GDP, up from 71 percent a decade ago. Servicing it now comes to a fifth of all government spending and is one of the fastest growing categories.

On the regulatory front some minor changes have been introduced by the Treasury, the Economist characterises them as “fiddles,” which provide greater data, with the main push coming from the Securities and Exchange Commission (SEC).

The SEC has directed attention to the so-called basis trade which links the market for Treasuries to the futures market. Because there is a very slight difference in price there is the opportunity for profit and it has been eagerly seized on.

Hedge funds can go short by selling a futures contract and then buying the Treasury bond in the market when the contract becomes due at a marginally lower price. They can then go to the repo market to obtain more cash to finance more basis trades. Because the price differences are so small, this requires a large amount of borrowed money to make it profitable.

As long as everything goes smoothly, there are large profits to be made. But in times of turbulence, futures exchanges will make margin call—that is demand that borrowers put up more cash. This is believed to be one of the reasons for the “dash for cash” in 2020, which led to the Treasury market freeze.

The SEC is proposing that the hedge funds that are most active in the market are designated as broker dealers meaning they are subject to stricter regulations. It is also considering rules that would limit the amount they can receive from banks to finance their operations.

As could be expected, the hedge funds are having none of it, with Ken Griffin, the head of Citadel, one of the largest and most profitable funds, saying the SEC was “searching for a problem.”

The hedge funds developed their highly profitable operations under conditions where interest rates were at an historic low and they could count on the Fed to come in as the backstop to the market if trouble developed.

But these conditions have changed with the lifting of interest rates since March 2022. On top of this, there is a question of how far the Fed can go in continually bailing out the financial markets when there is growing concern about its stability.

This is reflected in the rising price of gold in recent days as the question is increasingly raised: how long can the US go on just issuing new dollars at the press of a computer button to finance itself? This is inherently unsustainable and that being the case then, as the old saying in financial circles has it, being unsustainable means at some point it must stop.

The increase in interest rates is having an impact in the broader economy—an issue which was the subject of analysis by Bloomberg financial columnist John Authers this week.

He began by noting that there had been a strange non-event in that the widely anticipated wave of corporate defaults because of rising interest rates had not eventuated, at least not yet.

But there have been two of major significance. The recent bankruptcy of WeWork was the largest by a US company since the global financial crisis (GFC) while the demise of the Austrian real estate group Signa was Europe’s biggest post-GFC insolvency.

Both these major developments proceeded “relatively quietly.”

However, the calm may not last as Authers cited research on the worsening debt position of US corporations in the higher interest rate environment.

According to one metric devised by New York University academic Edward Altman, in the last century more than half of all American companies were strong and healthy.

“That number had now dropped to below 10 percent for the first time on record,” Authers wrote, adding that “the number of companies that are imminent risks for bankruptcy has been rising consistently, and has reached a new high.”

In the era of low interest rates, companies had become “more and more accustomed to taking risks with their financial health and getting away with it.”

He also cited other findings on so-called “zombie firms,” that is companies that do not produce enough profits to cover their interest expenses.

The research found that over a three-year period, “slightly more than a fifth of US companies” fell into this category.

On the surface the capitalist economic engine may appear to be running smoothly as finance capital rubs its hands at the prospect of rate cuts. But lift the hood and from the Treasury market to the gold market and the corporate world, there are growing signs of a major malfunction.

Growing tensions between Ukrainian President and army leadership as staggering death toll comes into view

Jason Melanovski

Zelensky on August 22, 2022 [Photo: Ukraine Presidential Archive]

Following the catastrophic failure of the “counteroffensive” the Zelensky regime is facing a disastrous political situation amid growing popular opposition to his government, and escalating conflicts with the military leadership.

A recent article in the Economist citing internal Ukrainian government polling data revealed that support for President Volodymyr Zelensky has crashed to just 32 percent, following the failure of the country’s counteroffensive over the summer and the outbreak of open political struggle with the military led by General Valery Zaluzhnyi. The Economist went on to characterize the relationship between Zelensky and Zaluzhnyi as “terrible.”

Conversely, support for Zaluzhnyi stood at 70 percent. Even the head of Military Intelligence Kirill Budanov polled better than Zelensky with an approval rating of 45 percent.

So far Zelensky and his entourage have responded to such reports by blaming “Russian propaganda.” However, on Monday, Ukraine’s major online newspaper Ukrainska Pravda, released a report documenting the growing rift between Zelensky and the military, and his fears of Zaluzhnyi’s entry into politics.

According to the article titled, “War vs. Politics: What is really going on Between Zelensky and Zaluzhnyi,” Zelensky and his cabinet first began to view Zaluzhnyi as a problem in spring of last year as government polling continued to show rising support for the military and Zaluzhnyi specifically. 

Unnamed “Western” organizations cited in the article have clearly been following the decline of Zelensky and rise of Zaluzhnyi. “Some foreign organizations recently conducted focus groups in Ukraine to see for themselves what political niches have now appeared in our country,” an unspecified Ukrainian high-ranking official told Ukrainska Pravda, who asked the influential outlet not to specify either his name or his position.

In April, the relationship drastically turned for the worse when Zaluzhnyi attempted to create his own charity to support the war effort, raising the ire of the head of the President’s Office, Andriy Ermak. The outlet detailed Zelensky’s meddling in military decisions and his attempts to undermine Zaluzhnyi by creating “parallel tracks” of communication with other rival military officials such as Alexander Syrsky, commander of the ground forces, and Air Force Commander Nikolay Oleshchuk.

Tensions between Zelensky and the army leadership further grew when, earlier in August, Zelensky dismissed the country’s regional draft commanders following a corruption scandal in which military officials were reportedly accepting bribes of up to $10,000 to avoid conscription. Since then, there has been a sharp drop in conscription and staffing levels, deepening what is already a severe shortage of man power at the front.

Now, Ukraine is reportedly considering a new mobilization plan that will include the conscription of teenagers, elderly men, women and the forced return of Ukrainian men of military age across Europe, who fled the country to avoid fighting in the bloody NATO-backed war.

In October, Zaluzhnyi came out with an essay and a major interview with the Economist, admitting that Ukraine was in a disastrous military situation and that the war had reached a “stalemate.”

Shortly thereafter, Zelensky and his entourage decided to cancel the presidential elections due to be held next year. In an open endorsement of dictatorial forms of rule, Zelensky stated at the time, “And if we need to put an end to a political dispute and continue to work in unity, there are structures in the state that are capable of putting an end to it and giving society all the necessary answers.”

The same day that Zelensky announced that the elections were cancelled, one of Zaluzhnyi’s closest assistant and friend blew himself up with a hand grenade that had been delivered to his home as a “birthday gift” by someone in the military. Zelensky also initiated another purge of the military. 

The political crisis of the Zelensky regime is a symptom of a much broader crisis of the entire Ukrainian ruling class and the disastrous war, waged by the imperialist powers in the country, against Russia. The first signs of growing opposition to the war have emerged with protesters across the country demanding that a time limit be set for deployment to the front. With virtually every household affected and the staggering human toll of the war, the widespread and growing reluctance to fight within the Ukrainian population are becoming all but impossible to deny. 

Last week, Zelensky’s former political advisor Alexey Arestovich revealed that between 200,000 and 300,000 Ukrainian soldiers had been killed in the war, while discussing the failure of a proposed peace agreement reached in Istanbul in Spring 2022. An agreement that was subsequently squashed by UK Prime minister Boris Johnson. Arestovich stated that NATO is unlikely to offer Ukraine a full membership anytime soon while Ukraine suffers the burden of fighting and dying. “Where is NATO? Does it accept us or not? And will it accept us? ... Then the 200 thousand [Ukrainian servicemen] or whatever, 300 thousand, would still be alive.”

Never before has someone so close to the Zelensky regime as Arestovich even admitted to the massive losses of life suffered by Ukrainian forces in the war. The numbers appear to confirm the figures cited by the Kremlin, which claims that over 125,000 soldiers have lost their lives since the start of the counteroffensive in June alone. Ukraine’s pre-war population stood at around 40 million, 300,000 deaths constitute 0.75 percent of the total population; many more are wounded and permanently crippled. 

Arestovich further suggested that 4.5 million Ukrainian men, nearly half of the Ukrainian male population, had fled abroad to avoid military service and that 30 to 70 percent of military units consist of “refuseniks” who have gone AWOL. A woman in Ukraine told the WSWS that some front units have only two to three, instead of the required 30 soldiers fighting. 

Earlier in October, the Centre for Economic Policy Research in Europe released a report titled, “The impact of the war on human capital and productivity in Ukraine,” detailing the huge socioeconomic losses as a result of the war from which Ukrainian society may never recover. 

The report stated, “Rebuilding damaged and destroyed physical infrastructures is estimated to reach 130% to 330% of Ukraine’s pre-Covid GDP .… It may take even longer and prove more difficult to offset the negative consequences of the war on Ukraine’s human capital.” The report continued “For Ukraine, losses in human capital are estimated to peak between now and 2035 at around 3.6% (0.9% due to learning losses and 2.7% due to skill losses of workers). The effect will last around 35 years and will diminish until the last cohort affected retires from the labour force at the age of 65 in 2085.” 

These figures are all the more staggering since they were calculated without knowledge of the true casualty toll, which is a closely guarded secret within the Ukrainian ruling class. Figures such as those cited by Arestovich, who is cynically attempting to build his  own political brand in opposition to the increasingly unpopular Zelensky regime, give only an inkling of the true death toll of the conflict. 

Nevertheless, Arestovich’s claims, combined with a devastating report this week from the Washington Post detailing the failure of the summer counteroffensive, are clear evidence of the disastrous military situation and the criminality of the imperialist war pursued by NATO against Russia in Ukraine.