Vulture economy


After the fall of the Soviet Union, the elites of City of London and Washington D.C. as well as corporate leaders of the newly unified Federal Republic of Germany planned to make profit and preserve influence in the countries that were undergoing political and economic transformation. This process was facilitated by new charitable foundations and agencies as well as political parties which were set up by former communist agents and old intelligence networks. In the early 1990s, most of the former communist parties in Central and Eastern Europe transformed into new socialist parties and continued to exert influence on national politics. Their ability to survive was down to their consolidated leadership bound by personal and economic ties and fear of prosecution; the strong organisation of the Party; the abundant financial resources that came from various criminal activity and successful strategy of presenting the Party as defender of “socially weak”, marginalised and disadvantaged, who feared the emergence of capitalist forces. In many countries, including Poland, compromises made by the members of the opposition groups with the communist government meant that the ex-communists were not held to account and still occupied key positions in the public administration, army, security apparatus, as well as courts and tribunals. In view of the inevitable political transformation, large part of the communist establishment, civil and military, aimed to preserve their influence by taking control of the state economy. These operations had often been carried out with the assistance of the “economy experts” from the City of London and Washington D.C. such as George Soros or Jeffrey Sachs.

The sell out of national states assets, which occurred under slogan of privatisations, was a field in which N M Rothschild & Sons based in the City of London had participated for decades. In the 1980s, the firm advised British government of Margaret Thatcher on major programme of privatisation of British state assets that meant to reverse the nationalisation policies of the previous Labour governments. An early champion of the policy was Nigel Lawson, son of wealthy Jewish parents, who did a considerable journalistic career in the 1970s with the Financial Times, the Sunday Telegraph, and as the editor of right-wing political weekly, the Spectator.436 In 1979, he was appointed financial secretary to the Treasury, then in 1981 Secretary of State for Energy and in 1983 Chancellor of Exchequer, becoming a key proponent of Thatcher's policies of privatisation of several key industries and deregulation of the City of London financial markets. The Rothschilds assisted in his endeavours. In 1984, N M Rothschild & Sons advised the Conservatives on the sale of the first tranche of British Telecom shares and in 1986 it co-ordinated the privatisation of British Gas.437 The intense promotional campaign in 1986 featured TV adverts in which characters urged each other to "Tell Sid" about the chance to buy shares at 'affordable' prices. This was a deliberate strategy aimed at encouraging individuals to become shareholders, expanding share ownership to create, in the words of Prime Minister Margaret Thatcher, a "share-owning democracy". 'Sid' meant to represent the man on the street but in reality it was a name of one of the Rothschild's post-room clerks at New Court, in the City of London. In late 1980 and early 1990s, N M Rothschild & Sons assisted the British conservative government in the sale of remaining 37 government holding in British Petroleum, privatisation of British Steel, sale of ten UK Water Authorities and the twelve electricity distribution boards, privatisation of British Coal and British Telecom.438 Margaret Thatcher explained that she saw privatisation “fundamental to improving Britain’s economic performance”,439 yet her policies, assisted by the Rothschilds, resulted in many of the strategic British industries falling into foreign hands.

The Rothschilds had cooperated with a number of firms and individuals that worked in accordance with the same principles that dominated the City of London – to make money at the expense of state assets and acquire control of the emerging markets in Central and Eastern Europe. The Rothschilds' associate George Soros excelled in this field. George Soros was a Hungarian Jew who emigrated to London in 1947 and graduated from London School of Economics, an educational establishment which was set up by the British socialists from the Fabian Society who held positive views on the Soviet regime. According to George Soros' memoirs one of the books he read during that period was Karl Popper's The Open Society and its enemies, which advocated principle of an open multicultural society where everybody could express their opinions. Soros admits: “I was greatly influenced by Popper's philosophy”.440 After working at various merchant banks and investment firms in the City of London, Soros established in 1970 a hedge fund – Quantum Fund - that bet on macroeconomic trends. The original concept of a “hedge fund” came from Alfred Winslow Jones, son of Arthur Winslow Jones, an executive of General Electric, one of many American companies which financed Hitler's rise to power. After graduating from Harvard University, Alfred Jones became vice consul at the U.S. Embassy in Berlin during Hitler's rise to power. In Germany, he married a left-wing anti-Nazi activist Anna Block, the daughter of a Jewish banking family and became captivated by Marxism. When he returned to the US, he started doing market analysis for Fortune magazine. He then established an investment partnership, A.W. Jones & Co., that would exploit new style of investing. Jones' concept was simple: create a "hedge" by shorting stocks he thought would drop in value while going long, sometimes using leverage, on stocks he thought would go up. To short meant to bet that a stock price will drop, while using leverage meant using borrowed money to boost bets.441 Jones' strategy did phenomenally well. He made lots of money for his clients and his strategy became basics strategy of all future hedge funds. George Soros' major bet was about to take place during times of political and economic transformation in Europe. On October 5, 1990, after years of internal squabbling, and in view of extreme rise in inflation, Chancellor of the Exchequer John Major, who succeeded Nigel Lawson, finally persuaded Margaret Thatcher, despite her strong objections, to take Britain into the European Exchange Rate Mechanism (ERM), that was used by European states to reduce exchange rate variability by hitching their currency to the German currency, Deutsche Mark. Each participating ERM country was required to keep their exchange rate balanced somewhere between "bands" (limits) designated specifically for each currency. In the early 1990s, the U.S. dollar fell gradually due to a stagnant economy which hurt the U.K. in particular because it relied heavily on exports priced in dollars. Then in 1992, Germany's prime rate increased. Several countries scrambled to keep their currencies within their designated exchange rate limits but the U.K. struggled the hardest. Seeing the British were struggling, on September 15, 1992, Soros began selling off pounds in massive amounts to cause further devaluation of pound sterling. As market opened on the next day, September 16, 1992, later known as Britain's "Black Wednesday”, the Bank of England began purchasing large amounts of pounds sterling to prop its currency back but to no avail. The British currency lost 15 per cent of its value, forcing Britain out of the E.R.M. Soros pocketed $1 billion as a result of his speculation, at Britain's expense, and cemented his reputation as the premier currency speculator in the world.442

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436 'Nigel Lawson: Energy', The Glasgow Herald, 15 September 1981,2862012&dq=mrsthatcher-once-described-nigel-lawson&hl=en »

437 'Rothschild Timeline', Rothschild Archives »

438 Exhibition – If you see Sid tell him', 'Privatisation', The Rothschild Archives »

439 Alistair Osborne, “Margaret Thatcher: one policy that led to more than 50 companies being sold or privatised”, The Telegraph, 8 April 2013 »

440 George Soros, The New Paradigm for Financial Markets: The Credit Crisis of 2008 and What It Meant (London: Public Affairs Ltd, 2008) »

441 Rachael Levy, “The amazing story behind the world's first hedge fund”, Business Insider UK, 22 August 2016 »

442 Abby Higgs, “How Did George Soros Break The Bank of England”, Money Morning, 10 June 2010 »