Muslims at “Occupy Wall Street” Protest

October 25, 2011 by · Leave a Comment 

Keith Olbermann Covers Wall Street Occupation

October 6, 2011 by · Leave a Comment 

Senate Gives “Audit the Fed” a Unanimous Victory

May 13, 2010 by · Leave a Comment 

By John Nichols

“The Fed can no longer operate in virtual secrecy,” declared Vermont independent Bernie Sanders Tuesday after the Senate voted 96-0 to add his “Audit the Fed” amendment to the financial regulatory reform bill.

The Senate amendment is not as muscular as the bipartisan legislation backed by the House, which was sponsored by Florida Congressman Alan Grayson, an aggressive progressive, and Texas Congressman Ron Paul, an equally aggressive conservative with libertarian leanings. The Grayson-Paul bill authorizes audits by the Government Accountability Office of every item on the Federal Reserve’s balance sheet, including all credit facilities and all securities purchase programs; there would be exemption only for unreleased transcripts, minutes of closed-door meetings and the most recent decisions of the central bank. The Senate measure is narrower in its focus, but it would require the GAO to scrutinize some several trillion dollars in emergency lending that the Fed provided to big banks after the September 2008 economic meltdown.

The actual amount of public money that has been set aside for private banks is not known. That’s one reason why this audit is so important. But there can be no doubt that the figure is astronomical. The Center for Media and Democracy’s Wall Street Bailout Tally shows that since 2008, the U.S. government has flooded Wall Street banks and financial institutions with $4.7 trillion dollars in taxpayer money, mostly in the form of loans from the Fed reserve. The Fed has never told us which firms got these loans and what type of collateral American taxpayers got in return. This will now be revealed. We will also get an accounting of the Fed’s “stealth” bailout of Fannie Mae and Freddy Mac.

Sanders tried to pass a broader amendment, but when he faced roadblocks — and the prospect that audit language might be excluded entirely from the final bill — he agreed to propose an amendment outlining the one-time audit of post-meltdown Fed activity.  That did not sit well with all senators. Even as Republicans such as New Hampshire’s Judd Gregg tried to prevent any demand for transparency, Louisiana Republican David Vitter proposed tougher language along the lines what Grayson and Paul pushed through the House. While most Democrats and a number of Republicans opposed the tougher language, Sanders joined the most serious reformers in the Democratic caucus — Wisconsin’s Russ Feingold, Washington’s Maria Cantwell, North Dakota’s Byron Dorgan, Arkansas’s Blanche Lincoln, Virginia’s Jim Webb and Oregon’s Ron Wyden — in voting “yes.”

The Vitter amendment failed on a 62-37 vote and Feingold was especially disappointed.  “Unfortunately,” the Wisconsin progressive declared, “the defeat of the Vitter amendment means American taxpayers will still not have a complete picture of how one of the most powerful government agencies makes policy and spends their tax dollars.”

Still, Feingold acknowledged that, “Senator Sanders’ amendment will mean more transparency for the Federal Reserve, so the public will have a better idea of how it is spending taxpayer dollars.”

That transparency is consequential, noted Sanders. “Let’s be clear,” he explained, “when trillions of dollars of taxpayer money are being lent out to the largest financial institutions in this country, the American people have a right to know who received that money and what they did with it.  We also need to know what possible conflicts of interest exist involving the heads of large financial institutions who sat in the room helping to make those decisions.”

The “Audit the Fed” language that is included in the final legislation remains to be seen, as the differences between the House and Senate proposals will have to be reconciled by a conference committee. That will provide an opening for Grayson, Paul, Sanders and their allies to push for the broadest possible transparency. But, make no mistake, there will be pushback.

Fed Chairman Ben Bernanke has repeatedly refused to respond to demands from Sanders and others for information about the banks that have been bailed out by the taxpayers — and that continue to pad their accounts with public dollars. President Obama, Treasury Secretary Tim Geithner and their aides are critics of the “Audit the Fed” push, as well.

So why, with so much official opposition, did the “Audit the Fed” movement win a 96-0 vote in the Senate? Campaigners on the left and right made the issue a high priority. A good deal of credit must go to Sanders and Paul — long-time critics of the Fed who opposed the 2008 Wall Street bailouts and then steered anger at those bailouts toward the “Audit the Fed” movement — which was boosted on the left by websites such as Jane Hamsher’s Firedoglake and on the right by the Paul-linked Campaign for Liberty, as well as by outspoken economists such a Dean Baker and watchdog operations such as CMD’s BanksterUSA project.

Ultimately, however, much of the credit must go to Grayson, who embraced Paul’s proposal — which had languished in the House — and led the campaign to get Democrats to sign on to the bill. As Hamsher says, “Tremendous credit goes to Alan Grayson. It was Grayson who decided to take up Ron Paul’s bill and bring Democratic support for it.

Sanders, who took some hits for compromising, also deserves credit at this point for making sure, even when he was forced to trim back on his amendment, that critical elements of the initial proposal by Paul — especially the defined role for the GAO — were retained. That will make it harder for the Obama White House and their allies in the congressional leadership to gut the audit language in the conference committee.

There will, as well, be additional fights:

“While passage of Senator Sanders’ amendment will provide some long overdue accountability and transparency for the Federal Reserve, the overall bill still needs a lot of work,” said Feingold. In particular, Feingold and other real reformers have focused on the need for the bill to restore the firewall between Main Street banks and Wall Street securities firms and insurance companies, which contributed to financial institutions growing “too big to fail.”

While the bipartisan support for auditing the Fed represents a step in the right direction, Feingold is right when he says it is only one step on a long road toward addressing the way in which bad decisions by Congress “led to deregulation and the increased concentration of economic power and economic decision-making.”

John Nichols is Washington DC correspondent for The Nation magazine.

12-20

High Frequency Trading High-tech Highway Robbery

April 22, 2010 by · Leave a Comment 

By Mike Whitney

April 18, 2010  — The Securities and Exchange Commission (SEC) knows that High-Frequency Trading (HFT) manipulates the market and bilks investors out of tens of billions of dollars every year. But SEC chairman Mary Schapiro refuses to step in and take action. Instead, she’s concocted an elaborate “information gathering” scheme, that does nothing to address the main problem. Schapiro’s plan–to track large blocks of trades by large institutional investors– is an attempt to placate congress while the big Wall Street HFT traders continue to rake in obscene profits. It achieves nothing, except provide the cover Schapiro needs to avoid doing her job.

High-frequency trading (HFT) is algorithmic-computer trading that finds “statistical patterns and pricing anomalies” by scanning the various stock exchanges. It’s high-speed robo-trading that oftentimes executes orders without human intervention. But don’t be confused by all the glitzy “state-of-the-art” hype. HFT is not a way of “allocating capital more efficiently”, but of ripping people off in broad daylight.

It all boils down to this: HFT allows one group of investors to see the data on other people’s orders ahead of time and use their supercomputers to buy in front of them. It’s called front-loading, and it goes on every day right under Schapiros nose.

In an interview on CNBC, HFT-expert Joe Saluzzi was asked if the big HFT players were able to see other investors orders (and execute trades) before them. Saluzzi said, “Yes. The answer is absolutely yes. The exchanges supply you with the data, giving you the flash order, and if your fixed connection goes into their lines first, you are disadvantaging the retail and institutional investor.”

The brash way that this scam is carried off is beyond belief. The deep-pocket bank/brokerages actually pay the NYSE and the NASDAQ to “colocate” their behemoth computers ON THE FLOOR OF THE EXCHANGES so they can shave off critical milliseconds after they’ve gotten a first-peak at incoming trades. It’s like parking the company forklift in front of the local bank vault to ease the transfer of purloined cash. Due to the impressive research of bloggers like Zero Hedge’s, Tyler Durden and Market Ticker’s, Karl Denniger, many people have a fairly good grasp of HFT and understand that the SEC needs to act. But Schapiro has continued to drag her feet while issuing endless proclamations about pursuing the wrongdoers. Baloney. She needs to stop yammering and shut these operations down.

In a recent posting, Market Ticker explained some of the finer-points of high-frequency trading, such as, how the banks/brokerages probe the exchanges with small orders in order to find out how much other investors are willing to pay for a particular stock. Here’s a clip:

“Let’s say that there is a buyer willing to buy 100,000 shares of Broadcom with a limit price of $26.40. That is, the buyer will accept any price up to $26.40. But the market at this particular moment in time is at $26.10, or thirty cents lower.

So the computers, having detected via their “flash orders” that there is a desire for Broadcom shares, start to issue tiny “immediate or cancel” orders – IOCs – to sell at $26.20. If that order is “eaten” the computer then issues an order at $26.25, then $26.30, then $26.35, then $26.40. When it tries $26.45 it gets no bite and the order is immediately canceled.

Now the flush of supply comes at $26.39, and the claim is made that the market has become “more efficient.”

Nonsense; there was no “real seller” at any of these prices! This pattern of offering was intended to do one and only one thing – manipulate the market by discovering what is supposed to be a hidden piece of information – the other side’s limit price!

With normal order queues and flows the person with the limit order would see the offer at $26.20 and might drop his limit. But the computers are so fast that unless you own one of the same speed you have no chance to do this – your order is immediately “raped” at the full limit price!

The presence of these programs will guarantee huge profits to the banks running them and they also guarantee both that the retail buyers will get screwed as the market will move MUCH faster to the upside than it otherwise would.

If you’re wondering how Goldman Sachs and other “big banks and hedge funds” made all their money this last quarter, now you know.” (“High-Frequency Trading is a Scam”, Market Ticker)

The HFT uber-computers are able to find out the highest price that traders will pay in a millisecond and then extort that full amount millions of times to maximize profits. Clearly, this has nothing to do with efficiency or innovation. It’s high-tech highway robbery; institutional bid-rigging on a grand scale, tacitly sanctioned by industry lackeys operating from within the administration. Schapiro was picked by Team Obama for this very reason; because she was known as a regulator with a “light touch” when she headed Finra the financial industry’s self policing agency. As Finra’s chief, Schapiro managed to keep her head in the sand during the Madoff scandal and the auction-rate securities flap. She also issued far fewer fines and penalties than her predecessor. Here’s an excerpt from the Wall Street Journal which sums up Schapiro’s regulatory doctrine:

“The Financial Services Institute, a trade group, was meeting, and Ms. Schapiro addressed the crowd about Finra’s efforts to fight frauds aimed at senior citizens. Frank Congemi, a financial adviser, asked what Finra was doing to regulate “packaged products” such as complex mortgage securities. Mr. Congemi says that Ms. Schapiro replied: “We have rating agencies that rate them.” The credit-rating agencies, by this time, were being heavily criticized for having given triple-A ratings to mortgage bonds that became unsalable as foreclosures rose.” (Wall Street Journal)

If the financial crisis has taught us anything, it’s that the system is NOT self-correcting. And it takes more than just rules. It takes regulators who are willing to regulate.

12-17

White House Quietly Courts Muslims in U.S.

April 22, 2010 by · Leave a Comment 

By Andrea Elliott, NY Times

When President Obama took the stage in Cairo last June, promising a new relationship with the Islamic world, Muslims in America wondered only half-jokingly whether the overture included them. After all, Mr. Obama had kept his distance during the campaign, never visiting an American mosque and describing the false claim that he was Muslim as a “smear” on his Web site.

Nearly a year later, Mr. Obama has yet to set foot in an American mosque. And he still has not met with Muslim and Arab-American leaders. But less publicly, his administration has reached out to this politically isolated constituency in a sustained and widening effort that has left even skeptics surprised.

Muslim and Arab-American advocates have participated in policy discussions and received briefings from top White House aides and other officials on health care legislation, foreign policy, the economy, immigration and national security. They have met privately with a senior White House adviser, Valerie Jarrett, Homeland Security Secretary Janet Napolitano and Attorney General Eric H. Holder Jr. to discuss civil liberties concerns and counterterrorism strategy.

The impact of this continuing dialogue is difficult to measure, but White House officials cited several recent government actions that were influenced, in part, by the discussions. The meeting with Ms. Napolitano was among many factors that contributed to the government’s decision this month to end a policy subjecting passengers from 14 countries, most of them Muslim, to additional scrutiny at airports, the officials said.

That emergency directive, enacted after a failed Dec. 25 bombing plot, has been replaced with a new set of intelligence-based protocols that law enforcement officials consider more effective.

Also this month, Tariq Ramadan, a prominent Muslim academic, visited the United States for the first time in six years after Secretary of State Hillary Rodham Clinton reversed a decision by the Bush administration, which had barred Mr. Ramadan from entering the country, initially citing the U.S.A. Patriot Act. Mrs. Clinton also cleared the way for another well-known Muslim professor, Adam Habib, who had been denied entry under similar circumstances.

Arab-American and Muslim leaders said they had yet to see substantive changes on a variety of issues, including what they describe as excessive airport screening, policies that have chilled Muslim charitable giving and invasive F.B.I. surveillance guidelines. But they are encouraged by the extent of their consultation by the White House and governmental agencies.

“For the first time in eight years, we have the opportunity to meet, engage, discuss, disagree, but have an impact on policy,” said James Zogby, president of the Arab American Institute in Washington. “We’re being made to feel a part of that process and that there is somebody listening.”

In the post-9/11 era, Muslims and Arab-Americans have posed something of a conundrum for the government: they are seen as a political liability but also, increasingly, as an important partner in countering the threat of homegrown terrorism. Under President George W. Bush, leaders of these groups met with government representatives from time to time, but said they had limited interaction with senior officials. While Mr. Obama has yet to hold the kind of high-profile meeting that Muslims and Arab-Americans seek, there is a consensus among his policymakers that engagement is no longer optional.

The administration’s approach has been understated. Many meetings have been private; others were publicized only after the fact. A visit to New York University in February by John O. Brennan, Mr. Obama’s chief counterterrorism adviser, drew little news coverage, but caused a stir among Muslims around the country. Speaking to Muslim students, activists and others, Mr. Brennan acknowledged many of their grievances, including “surveillance that has been excessive,” “overinclusive no-fly lists” and “an unhelpful atmosphere around many Muslim charities.”

“These are challenges we face together as Americans,” said Mr. Brennan, who momentarily showed off his Arabic to hearty applause. He and other officials have made a point of disassociating Islam from terrorism in public comments, using the phrase “violent extremism” in place of words like “jihad” and “Islamic terrorism.”

While the administration’s solicitation of Muslims and Arab-Americans has drawn little fanfare, it has not escaped criticism. A small but vocal group of research analysts, bloggers and others complain that the government is reaching out to Muslim leaders and organizations with an Islamist agenda or ties to extremist groups abroad.

They point out that Ms. Jarrett gave the keynote address at the annual convention for the Islamic Society of North America. The group was listed as an unindicted co-conspirator in a federal case against the Holy Land Foundation for Relief and Development, a Texas-based charity whose leaders were convicted in 2008 of funneling money to Hamas. The society denies any links to terrorism.

“I think dialogue is good, but it has to be with genuine moderates,” said Steven Emerson, a terrorism analyst who advises government officials. “These are the wrong groups to legitimize.” Mr. Emerson and others have also objected to the political appointments of several American Muslims, including Rashad Hussain.

In February, the president chose Mr. Hussain, a 31-year-old White House lawyer, to become the United States’ special envoy to the Organization of the Islamic Conference. The position, a kind of ambassador at large to Muslim countries, was created by Mr. Bush. In a video address, Mr. Obama highlighted Mr. Hussain’s status as a “close and trusted member of my White House staff” and “a hafiz,” a person who has memorized the Koran.

Within days of the announcement, news reports surfaced about comments Mr. Hussain had made on a panel in 2004, while he was a student at Yale Law School, in which he referred to several domestic terrorism prosecutions as “politically motivated.” Among the cases he criticized was that of Sami Al-Arian, a former computer-science professor in Florida who pleaded guilty to aiding members of a Palestinian terrorist group.

At first, the White House said Mr. Hussain did not recall making the comments, which had been removed from the Web version of a 2004 article published by a small Washington magazine. When Politico obtained a recording of the panel, Mr. Hussain acknowledged criticizing the prosecutions but said he believed the magazine quoted him inaccurately, prompting him to ask its editor to remove the comments. On Feb. 22, The Washington Examiner ran an editorial with the headline “Obama Selects a Voice of Radical Islam.”

Muslim leaders watched carefully as the story migrated to Fox News. They had grown accustomed to close scrutiny, many said in interviews, but were nonetheless surprised. In 2008, Mr. Hussain had co-authored a paper for the Brookings Institution arguing that the government should use the peaceful teachings of Islam to fight terrorism.

“Rashad Hussain is about as squeaky clean as you get,” said Representative Keith Ellison, a Minnesota Democrat who is Muslim. Mr. Ellison and others wondered whether the administration would buckle under the pressure and were relieved when the White House press secretary, Robert Gibbs, defended Mr. Hussain.

“The fact that the president and the administration have appointed Muslims to positions and have stood by them when they’ve been attacked is the best we can hope for,” said Ingrid Mattson, president of the Islamic Society of North America.

It was notably different during Mr. Obama’s run for office. In June 2008, volunteers of his campaign barred two Muslim women in headscarves from appearing behind Mr. Obama at a rally in Detroit, eliciting widespread criticism. The campaign promptly recruited Mazen Asbahi, a 36-year-old corporate lawyer and popular Muslim activist from Chicago, to become its liaison to Muslims and Arab-Americans.

Bloggers began researching Mr. Asbahi’s background. For a brief time in 2000, he had sat on the board of an Islamic investment fund, along with Sheikh Jamal Said, a Chicago imam who was later named as an unindicted co-conspirator in the Holy Land case. Mr. Asbahi said in an interview that he had left the board after three weeks because he wanted no association with the imam.

Shortly after his appointment to the Obama campaign, Mr. Asbahi said, a Wall Street Journal reporter began asking questions about his connection to the imam. Campaign officials became concerned that news coverage would give critics ammunition to link the imam to Mr. Obama, Mr. Asbahi recalled. On their recommendation, Mr. Asbahi agreed to resign from the campaign, he said.

He is still unsettled by the power of his detractors. “To be in the midst of this campaign of change and hope and to have it stripped away over nothing,” he said. “It hurts.”

From the moment Mr. Obama took office, he seemed eager to change the tenor of America’s relationship with Muslims worldwide. He gave his first interview to Al Arabiya, the Arabic-language television station based in Dubai. Muslims cautiously welcomed his ban on torture and his pledge to close Guantánamo within a year.

In his Cairo address, he laid out his vision for “a new beginning” with Muslims: while America would continue to fight terrorism, he said, terrorism would no longer define America’s approach to Muslims.

Back at home, Muslim and Arab-American leaders remained skeptical. But they took note when, a few weeks later, Mohamed Magid, a prominent imam from Sterling, Va., and Rami Nashashibi, a Muslim activist from Chicago, joined the president at a White-House meeting about fatherhood. Also that month, Dr. Faisal Qazi, a board member of American Muslim Health Professionals, began meeting with administration officials to discuss health care reform.

The invitations were aimed at expanding the government’s relationship with Muslims and Arab-Americans to areas beyond security, said Mr. Hussain, the White House’s special envoy. Mr. Hussain began advising the president on issues related to Islam after joining the White House counsel’s office in January 2009. He helped draft Mr. Obama’s Cairo speech and accompanied him on the trip. “The president realizes that you cannot engage one-fourth of the world’s population based on the erroneous beliefs of a fringe few,” Mr. Hussain said.

Other government offices followed the lead of the White House. In October, Commerce Secretary Gary Locke met with Arab-Americans and Muslims in Dearborn, Mich., to discuss challenges facing small-business owners. Also last fall, Farah Pandith was sworn in as the State Department’s first special representative to Muslim communities. While Ms. Pandith works mostly with Muslims abroad, she said she had also consulted with American Muslims because Mrs. Clinton believes “they can add value overseas.”

Despite this, American actions abroad — including civilian deaths from drone strikes in Pakistan and the failure to close Guantánamo — have drawn the anger of Muslims and Arab-Americans.

Even though their involvement with the administration has broadened, they remain most concerned about security-related policies. In January, when the Department of Homeland Security hosted a two-day meeting with Muslim, Arab-American, South Asian and Sikh leaders, the group expressed concern about the emergency directive subjecting passengers from a group of Muslim countries to additional screening.

Farhana Khera, executive director of Muslim Advocates, pointed out that the policy would never have caught the attempted shoe bomber Richard Reid, who is British. “It almost sends the signal that the government is going to treat nationals of powerless countries differently from countries that are powerful,” Ms. Khera recalled saying as community leaders around the table nodded their heads.

Ms. Napolitano, who sat with the group for more than an hour, committed to meeting with them more frequently. Ms. Khera said she left feeling somewhat hopeful.

“I think our message is finally starting to get through,” she said.

12-17

At What Cost?

February 28, 2010 by · Leave a Comment 

By Steve Betts, www.thestockmarketbarometer.com

Whenever you embark on a significant activity, and it doesn’t matter whether its business or personal, you have to ask yourself two important questions: why and at what cost. In 1913 the United States adopted a central bank system and an income tax, both of which were and remain unconstitutional. At the time the United States was the richest creditor nation in the world and already had the best central banker in the world, gold! The US settled all transactions in gold and in order to spend more, it would need to have more gold. Gold could not be printed or created in some computer hard drive; it had to be dug out of the ground at great personal and financial sacrifice. Even more than this, gold represented real wealth and that’s why a 1913 dollar bought the same thing as an 1841 dollar, and that’s what a store of wealth is supposed to do. This begs the question why you change something that seemed to work almost to perfection. For the answer to that question, you need to go back a little further, to 1907 to be exact.

In 1907 the markets suffered the worst financial crisis in their history, but this crisis devastated Wall Street while leaving Main Street mostly intact. A lot of big name brokers and bankers went down the tubes as a result of the 1907 panic and that inspired the survivors to get together and create a plan that would prevent another such crisis. The group included Morgan, Vanderbilt, DuPont, and Rothschild, and they all ended up as shareholders in the new and private Federal Reserve System. The problem with gold during a crisis is that you can´t increase the supply overnight, so “bailouts” are not possible. Too big to fail banks and brokerages must therefore fail, and that was an unacceptable and intolerable situation for Wall Street. So they created the Federal Reserve and paper money “to facilitate business and the economy”, which would be backed by gold. In an emergency, you could always print paper and then drain liquidity once the crisis had passed. Additionally, they created the IRS with the mission to tax personal income, so the government would have funds to handle any emergency.

Now we get down to the meat of the issue, at what cost? Everything we do in life has a cost, but usually it’s so miniscule that it is seldom noticed. Going back before 1913 the United States had experienced an industrial revolution that led to the development of a strong middle class in America, and that middle class had as a group, accumulated wealth. That wealth served to make the US the richest creditor nation in the world, and it was decided that wealth would be better served if it were transferred to Wall Street for “safekeeping”. After all, they were in the money business. The private Federal Reserve was created with no assets, allowed to print money backed by gold the middle class had earned, and then charged interest and fees to distribute that money. In 1932 Roosevelt confiscated all the gold held by Americans and in 1973 Nixon eliminated the gold standard altogether. Any attempts to interfere with Fed business was dealt with harshly. 

So the idea was to transfer as much of the wealth as possible from Main Street to Wall Street and it would do so through taxation and the creation of a fiat currency, that would eat away at the purchasing power of the middle class. And that is the true cost of the Federal Reserve. The average American has gone from a saver to a debtor, while the US went from the largest creditor nation to the largest debtor nation ever seen. The transition took a century and is now in the final phases and the massive bailouts that we’ve seen are nothing more than an attempt to drain the last cent from the last American before the whole thing goes under. For more than ten years the Federal Reserve has done everything possible to change the primary trend of the markets from bearish to bullish. Although I note the bull market as having topped in October 2007, the real top was back in 1999, but the Greenspan Fed delayed that with massive amounts of liquidity. Now the Bernanke Fed is trying to do the same thing. In modern history no one has every succeeded in changing the primary trend of a major market.

The result of this misguided policy is to postpone the inevitable, but at a cost. The cost is a series of unintended consequences that only now are beginning to float to the surface. Like icebergs, we see only a small portion of the problem until it’s too late. I contend that it is now too late. The ship of the economy is now run up against the iceberg, huge holes are being gashed into the hull, water is pouring in, and all the passengers are passed out in the bar. Any effort to put more punch into the bowl will prove to be futile and the resulting hangover will be debilitating to say the least. The morning after survivors will swear that famous oath of “never again”, form committees, assign blame, and then start the whole process all over again. For the few that will have any money left, and the courage required, stocks will become cheap and there will be a great buying opportunity. For the large majority there will only be misery.

Of course governments are obliged to throw the public a bone every once in a while, no meat, just a bone. Obama ran on the promise of change and then came in and bailed out Wall Street at the cost of US $2 trillion. He distracted the public’s attention with his proposed health care package that in the end no one wanted. Now he has a new mantra, job creation. He recently put forward the idea of a US $40 billion fund for job promotion and now he recommended the commencement of several nuclear plants that will mean more jobs. Unfortunately the President failed to say that most of the jobs for nuclear plants are high paying technical positions and there aren’t that many required. If you really want to create jobs it’s the small business owner that does it, and he has his back against the wall and it gets worse every month, as you can see in the chart posted above. The number of businesses with cash flow problems is on the rise, meaning they’ll reduce their labor costs instead of hiring new workers.

The question now is what can you do about it? I believe the only solution comes in the form of one ounce coins that contain gold. All markets are barometers of future activity and no market is more sensitive to the qualms and traumas of everyday life than gold. Also, I think it’s fair to say that it has never been this difficult to understand the gold market. The IMF comes out and announces the sale of 191 tons of gold, in an effort to manipulate the price lower, and gold falls, for about an hour. Then the Fed authors a surprise rate hike and gold falls for a couple of hours. One gold guru says the yellow metal is going to US $5,000 while Elliot Wave says it’s going to US $400.00. In one minute gold is up 15.00 and an hour later gold is down 20.00. What do you do and who do you believe? Years ago I took a simple, albeit difficult path, and decided that I would only follow the primary trend. The primary trend in gold turned up in 2001 and has been heading higher ever since. I took my initial position in 2002 and I’ve done my best to add on after significant dips. Sometimes I’ve timed it right and sometimes I haven’t, but the one thing I’ve never done is sell!

Below I’ve posted a monthly chart with respect to the gold bull market and I have some interesting observations. You can see that the current price is right about in the middle of the two ascending bands that define the primary trend. Also, I’ve divided the current bull market into the first and second phases, and I’ve given you a short explanation for each of the first two phases. The question now is whether or not gold has entered a new third phase with the breakout above 1,000.00 and we really won’t know until gold makes the next move. Incidentally, the third phase is highlighted by buying from the general public and there are certainly no signs of that. On the monthly chart gold’s price actually appears to be consolidating for the next move higher. It will continue to consolidate as long as it holds above support at 1,048.90. On the other hand it will require a close above 1,136.70 to bring gold to an upside breakout, and that hasn’t happened yet. On Friday the spot gold closed out the week at 1,117.00 and that’s about a sixteen dollar gain for the five sessions, although it felt like a loss due to the volatility.
So the primary trend for gold is up, it is completely intact and in no danger of being violated, and it appears that we could be close to a break out to the upside. So why is everybody so negative? Part of it has to do with ignorance. The large majority of people view gold as a commodity when in fact it is a store of wealth. These same people view fiat currency as money when in fact it is debt; a “promise to pay” can only be interpreted as debt. Gold on the other hand is the only real money and it says so in the US Constitution. It seems that our founding fathers were a lot smarter than we are!

Over the short run the panorama appears to be improving. Gold recently staged a minor breakout above the upper band of a descending trend line in an effort to move higher. That is a minor victory. The real victory will come when gold closes above the 50% retracement from the December high to the February low and that resistance comes in at 1,136.70.  Until we see a close above that mark, it’s all just a guessing game. Gold had a volatile week with announcements by the IMF and Fed designed to push the price lower and yet it finished higher. The dollar rallied as well and yet gold finished higher, so it would appear that the yellow metal is gaining strength. I have maintained for weeks that the dollar, commodities, and gold are all linked to the Dow over the short run, and I still believe that. Therefore, I won’t get overly excited until I see how gold reacts when the Dow begins to fall in earnest.

In conclusion the dollar, stocks and bonds must head lower over time. The dollar and the bond are debt, while stocks represent value in some company. That value is grossly overvalued as the excess water must be squeezed out. The Fed wants to prevent that and has been doing everything possible for years to stop it. The primary trends in all three are headed down and the Fed wants to change that. If they succeed it will be the first time anyone has ever done that. I suspect they’ll fail. The cost of that failure will be incalculable in terms of both money and social harmony. The standard of living for the average American will drop substantially. Repercussions will follow. The only way to protect yourselves is to buy gold, and physical is preferable to paper. Store it someplace safe and just wait for the storm to pass. I know you are tired of hearing this, and God knows I am tired of saying it, but you’ll come face to face with this reality before the year ends.

Steve Betts
Stock Market Barometer SA
February 21, 2010

12-9

Wars Sending US into Ruin

February 11, 2010 by · Leave a Comment 

Obama the peace president is fighting battles his country cannot afford

By Eric Margolis, QMI Agency

2010-02-10T142132Z_01_BTRE61913W200_RTROPTP_3_NEWS-US-AFGHANISTAN-ASSAULT

U.S. Marines walk during a dust storm in a U.S Marines camp near the town of Marjah in Nad Ali district of Helmand province, February 8, 2010.    

REUTERS/Goran Tomasevic

U.S. President Barack Obama calls the $3.8-trillion US budget he just sent to Congress a major step in restoring America’s economic health.

In fact, it’s another potent fix given to a sick patient deeply addicted to the dangerous drug — debt.

More empires have fallen because of reckless finances than invasion. The latest example was the Soviet Union, which spent itself into ruin by buying tanks.

Washington’s deficit (the difference between spending and income from taxes) will reach a vertiginous $1.6 trillion US this year. The huge sum will be borrowed, mostly from China and Japan, to which the U.S. already owes $1.5 trillion. Debt service will cost $250 billion.

To spend $1 trillion, one would have had to start spending $1 million daily soon after Rome was founded and continue for 2,738 years until today.

Obama’s total military budget is nearly $1 trillion. This includes Pentagon spending of $880 billion. Add secret black programs (about $70 billion); military aid to foreign nations like Egypt, Israel and Pakistan; 225,000 military “contractors” (mercenaries and workers); and veterans’ costs. Add $75 billion (nearly four times Canada’s total defence budget) for 16 intelligence agencies with 200,000 employees.

The Afghanistan and Iraq wars ($1 trillion so far), will cost $200-250 billion more this year, including hidden and indirect expenses. Obama’s Afghan “surge” of 30,000 new troops will cost an additional $33 billion — more than Germany’s total defence budget.

No wonder U.S. defence stocks rose after Peace Laureate Obama’s “austerity” budget.

Military and intelligence spending relentlessly increase as unemployment heads over 10% and the economy bleeds red ink. America has become the Sick Man of the Western Hemisphere, an economic cripple like the defunct Ottoman Empire.

The Pentagon now accounts for half of total world military spending. Add America’s rich NATO allies and Japan, and the figure reaches 75%.

China and Russia combined spend only a paltry 10% of what the U.S. spends on defence.

There are 750 U.S. military bases in 50 nations and 255,000 service members stationed abroad, 116,000 in Europe, nearly 100,000 in Japan and South Korea.

Military spending gobbles up 19% of federal spending and at least 44% of tax revenues. During the Bush administration, the Iraq and Afghanistan wars — funded by borrowing — cost each American family more than $25,000.

Like Bush, Obama is paying for America’s wars through supplemental authorizations ­– putting them on the nation’s already maxed-out credit card. Future generations will be stuck with the bill.

This presidential and congressional jiggery-pokery is the height of public dishonesty.

America’s wars ought to be paid for through taxes, not bookkeeping fraud.

If U.S. taxpayers actually had to pay for the Afghan and Iraq wars, these conflicts would end in short order.

America needs a fair, honest war tax.

The U.S. clearly has reached the point of imperial overreach. Military spending and debt-servicing are cannibalizing the U.S. economy, the real basis of its world power. Besides the late U.S.S.R., the U.S. also increasingly resembles the dying British Empire in 1945, crushed by immense debts incurred to wage the Second World War, unable to continue financing or defending the imperium, yet still imbued with imperial pretensions.

It is increasingly clear the president is not in control of America’s runaway military juggernaut. Sixty years ago, the great President Dwight Eisenhower, whose portrait I keep by my desk, warned Americans to beware of the military-industrial complex. Six decades later, partisans of permanent war and world domination have joined Wall Street’s money lenders to put America into thrall.

Increasing numbers of Americans are rightly outraged and fearful of runaway deficits. Most do not understand their political leaders are also spending their nation into ruin through unnecessary foreign wars and a vainglorious attempt to control much of the globe — what neocons call “full spectrum dominance.”

If Obama really were serious about restoring America’s economic health, he would demand military spending be slashed, quickly end the Iraq and Afghan wars and break up the nation’s giant Frankenbanks.

12-7

Pres. Obama’s Economic Policies

February 4, 2010 by · Leave a Comment 

By Michael Hudson

Reality had to raise its ugly head. Barack Obama was elected with overwhelming approval to inaugurate an era of change. And at his November 25 press conference, he said that his decisive victory gave him a mandate to change the direction in which America is moving. But his recent economic and foreign policy appointments make it clear that when he chose “change” as his campaign slogan, he was NOT referring to the financial, insurance and real estate (FIRE) sectors, nor to foreign policy. These are where the vested interests concentrate their wealth and power. And change already has been accelerating here. Unfortunately, its direction has been for the top 1% of America’s population to raise their share of in the returns to wealth from 37% ten years ago to 57% five years ago and an estimated nearly 70% today.

The change that Mr. Obama is talking about is largely marginal to this wealth, not touching its economic substance – or its direction. No doubt he will bring about a welcome change in race relations, environmental regulations, and a more civil rule of law. And he probably will give wage earners an income-tax break (thereby enabling them to keep on paying their bank debts, incidentally). As for the rich, they prefer not to earn income in the first place. Taxes need to be paid on income, so they take their returns in the form of capital gains. And simply avoiding losses is the order of the day in the present meltdown.

Where losses cannot be avoided, the government will bail out the rich on their financial investments, but not wage earners on their debts. On that Friday night last October when Mr. Obama and Mr. McCain held their final debate, Mr. Obama was fully on board with the bailouts. And this week’s appointment of the “Yeltsin” team who sponsored Russia’s privatization giveaways in the mid-1990s Larry Summers and his protégés from the Clinton’s notorious Robert Rubin regime shows that he knows his place when it comes to the proper relationship between a political candidate and his major backers. It is to protect the vested interests first of all, while focusing voters’ attention on policies whose main appeal is their ability to distract attention from the fact that no real change is being made at the economic core and its power relationships.

This is not what most people hoped for. But their hopes were so strong that it was easier to indulge in happy dreams and put one’s faith in a prince than to look at the systemic problems that need to be restructured in order for real change to occur. Individuals do not determine who owes what to whom, who is employed by whom or what laws govern their work and investment. Institutional economic and political structures are the key. And somehow the focus has been on the politics of personalities, not on the economic forces at work.

This is as true abroad as it is in the United States. Two weeks ago I was at an economic meeting on “financialization” in Germany. Most of the attendees with whom I spoke expressed the hope – indeed, almost a smug conviction – that Obama would be like Gorbachev in Russia: a man who saw the need for deep structural change but chose to bide his time, seeming to “play the game” with the protective coloration of going along, but then introducing a revolutionary reform program once in office.

Instead, after resembling President Carter by running a brilliant presidential primary campaign to win the nomination (will a similarly disappointing administration be about to come?), Obama is looking more like Boris Yeltsin – a political umbrella for the kleptocrats to whom the public domain and decades of public wealth were given with no quid pro quo.

Obama’s ties with the Yeltsin administration are as direct as could be. He has appointed as his economic advisors the same anti-labor, pro-financial team that brought the kleptocrats to power in Russia in the mid-1990s. His advisor Robert Rubin has managed to put his protégés in key Obama administration posts: Larry Summers, who as head of the World Bank forced privatization at give-away prices to kleptocrats; Geithner of the New York Fed; and a monetarist economist from Berkeley, as right-wing a university as Chicago. These are the protective guard-dogs of America’s vested interests.

If you are a billionaire, your first concern is simply to preserve your wealth, to avoid having to take a loss in the value of your financial claims on the economy – claims for repayment of loans and investment, as well as interest and dividends, and enough capital gains to compensate for the price inflation that erodes the spending power of more lowly income-earners.

This year has changed the typical fate of financial wealth in the face of bursting financial bubbles. Traditionally, business booms culminate in a wave of bankruptcies that wipe out bad debts–and the savings that have been invested on the ‘asset’ side of the balance sheet. This year has changed all that. The bad debts are being kept on the books–but transferred from the banks to the federal government, mainly the Federal Reserve and Treasury. The bank bailouts have aimed not so much to protect the banks themselves, but to enable them to pay off on the bad bets they made vis-à-vis the nation’s hedge funds and other institutional investors in the derivatives market.

To participate in a hedge fund, one needs to prove that one can afford to lose their money and not be much the worse off for it in terms of actual living conditions. So the $306 billion in federal guarantees of the junk mortgage packages sold by Citibank, and the $135 billion bailout of the insurance contracts written by A.I.G. to protect swap contracts from loss, could have been avoided without much impact on the “real” economy.

In fact, writing down these financial claims ON the economy would have paved the way for writing down its debt burden. If the subprime and other mortgage debts had been permitted to decline to the neighborhood of 22 cents on a dollar they were trading for, this would have made it possible to write down debts to match the price at which mortgage holders had bought these loans for. But the financial overhead of American wealth “saved” in the form of creditor claims on indebted homeowners, industrial companies and junk-insurance companies such as A.I.G. has been protected against erosion by this year’s federal bailout program.

Bloomberg has added up these programs and finds that they $7.7 trillion dollars – nearly half an entire year’s GDP. By acting to support the market for bad-mortgage loans (but not for real estate itself), the seemingly endless series of Paulson bailouts seeks to be to keep today’s debt overhead intact rather than writing it down. Service charges on this indebtedness will divert peoples’ income from consumption to paying creditors. It will help financial investors, not labor or industry. It will keep the cost of living and doing business high, preventing the U.S. economy from working its way out of debt by becoming competitive once again.

With all these trillions of dollars of bailing out the wealthy, one might easily forget to ask what is being left out. For one thing, the government’s Pension Benefit Guarantee Corp, whose $25 billion deficit is not bailed out. This year, underfunded corporate pension plans are supposed to “catch up” to full funding so as to protect the PBGC, in accordance with a law passed by Congress two years ago. If underfunded plans don’t meet the scheduled 92% coverage for this year, they have to bring their set-asides fully up to the 100% funding level. The stock market plunge has dashed their hopes to do this. The result will be to force many industrial companies into a financial bind.

On the auto front, the Bush Administration has brought pressure to force the big three Detroit companies into bankruptcy as a way to annul their defined-benefit pension plans – with no plans at all bail out money owed to labor by restoring the PBGC to solvency. State and local pension plans are almost entirely unfunded, and are at even more risk as their tax revenues plunge and property tax payments are stopped on housing and commercial buildings that have foreclosed.

And speaking of state and local finances, what role is local government to play in Mr. Obama’s promise to rebuild infrastructure, headed by transportation? Given their strapped position, one is hearing a surge of Wall Street plans to spend enormous sums. Whereas Obama’s economic team made fortunes for Russian kleptocrats by giving them public-sector assets already in place, their American counterparts are going to have to get rich by actually building new projects. In such cases the benefits are as large as the total amount of money being spent – but not in the way that most people understand at first glance. Construction contracts for new public transport systems, bridges and roads and urban or rural modernization may be entirely honest and provided at a fair cost. But it is a byproduct of such investment that it creates an amount that is of equal or often even greater magnitude in the form of rent-of-location – that is, vast windfall gains for well-located real estate.

This is where Mr. Obama’s Chicago political experience comes in so handy. It is in fact a game tailor-made for his team. Hundreds of millions of dollars were made in gentrifying Chicago’s notorious but conveniently centrally located public housing for low-income families. The developments sponsored by Mr. Obama’s mentors, the Pritzker family, the University of Chicago and assorted real estate reverends opened up vast new land sites, with public support to boot. (The house where I grew up in Hyde Park-Kenwood, a block or so from Mr. Obama’s house, was torn down along with the rest of the entire block as part of Mayor Daley’s urban renewal program in the late 1950s – after the University’s block busters had run down the neighborhood, then panicked the whites into selling to the blacks at extortionate price markups and mortgage rate premiums, then tearing down the houses into which the blacks had moved. It’s an old real estate game that one learns quickly in Chicago politics.) As Thorstein Veblen noted, any American city’s politics is best understood by viewing it as a real estate development.

The gains from providing better transport infrastructure typically are so large that transportation investment could be self-financing by taxing these property gains recapturing the added rental value in the form of property windfall taxes. London’s tube extension to Canary Wharf, for example, cost the city £8 billion but increased real estate values along the route by some £13 billion. The city could have financed the entire project by issuing bonds that would have been repaid out of taxes levied on the windfall gains created by this public expenditure.

Likewise in New York City, the transport authority has just announced that subway and bus fares will be jacked up (adding no less than $10 to the monthly commute card) and services cut back sharply. Mayor Bloomberg has just stopped work on the 2nd Avenue subway, its completion will add at least as much to upper East Side property values as the subway costs itself. The city thus could finance its construction not by issuing bonds to be paid off by city and state taxpayers in combination with user fees paid as fares. Taxpayers wouldn’t have to pay, and riders could enjoy subsidized fares simply by taxing the real estate owners.

But I see no prospect of this being done. Real estate is still the name of the game, because it remains the largest asset category in every economy today just as much as under feudalism. The difference from feudalism is that whereas landlords received the rental value of their lands in centuries past, today’s property owners acquire ownership not by military conquest (the Norman invasion of 1066 in England’s case) but by borrowing from the banks. To a mortgage banker, a commercial developer or real estate company is a prime customer, the bulwark of bank balance sheets. It is hard to imagine a new American infrastructure program not turning into a new well of real estate gains for the FIRE sector. Real estate owners on favorably situated sites will sell out to buyers-on-credit, creating a vast new and profitable loan market for banks. The debt spiral will continue upward.

The fact that state and local budgets are too burdened to afford infrastructure spending themselves will lead to it being privatized from the outset. Probably London’s notorious public-private partnerships (a Labour Party refinement more Thatcherite than even Margaret Thatcher herself could have got away with) probably will become the basic model. Users will pay higher fees rather than enjoying the subsidized or free access typical in public infrastructure spending during the Progressive Era. The main purpose of public enterprise back then was to keep prices down for basic services, thus lowering the cost of living and doing business in America. But today, infrastructure spending will be just one more item adding to America’s debt overhead to make its economy even less competitive with foreign ones than it is.

The moral is, next time a candidate promises change, ask him to say just what changes he has in mind. During the Presidential debates, only Dennis Kucinich came out and said each specific law that he had put before Congress to implement each change he promised. But most of the public didn’t want to know the details – they simply liked hearing the word “change.”

Here are some purely fiscal and financial changes that a future presidential candidate might propose – changes that I don’t expect to be hearing any more about during the next four years. Just to get the discussion going, why shouldn’t these merely marginal changes within the existing system be implemented right now by a presidential candidate who is still bragging about his “mandate for change”:

    * Regarding fiscal policy, re-introduce the estate tax, along with (at the very least) the Clinton era’s progressive-tax schedule.

    * Tax capital gains at the same rate as wages and profits, rather than at half the rate; and make these taxes be paid at the point of sale of real estate or other assets, not deferred ad infinitum if the gains simply are invested in yet more wealth.

    * Require a cost-benefit analysis of any publicly backed infrastructure spending so as to recapture all “external economies” (such as windfall real estate price gains) as the first line of financing such investment.

    * Tax corporate borrowing that is used merely to pay stock dividends or buy back one’s own stock at least at 50%.

    * Close the practice of offshore tax avoidance, and bring criminal cases against accounting firms abetting this practice.

    * Only let a building be depreciated once, not repeatedly as a tax writeoff.

    * Refocus state and local taxation on the property tax, remembering that whatever the tax collector relinquishes is simply “freed” to be paid to the banks as interest.

    * In the sphere of bad-debt banking, when a government agency takes over a bank or company that has negative net worth, the stockholders must be wiped out as their stock has lost all market value. Bondholders must stand in line behind the government in case of insolvency.

    * Write down mortgage debts to the ability of property owners to pay and/or the present market value. Banks that have made loans to these borrowers must take responsibility for their decision that the owners could afford to pay. Even better, apply New York State’s existing Fraudulent Conveyance law, and simply annul loans that are beyond the ability of debtors to pay.

None of this involves real structural change. It is simply more economically efficient under existing laws and practices – something like actually enforcing environmental law, anti-fraud and anti-crime laws, and the original intent of our tax legislation. It is a small step back toward the Progressive Era a century ago – the era that set America on the path of prosperity that made the 20th century the American century.

Michael Hudson is a former Wall Street economist. A Distinguished Research Professor at University of Missouri, Kansas City (UMKC), he is the author of many books, including Super Imperialism: The Economic Strategy of American Empire (new ed., Pluto Press, 2002) He can be reached via his website, mh@michael-hudson.com

12-6

America’s Credibility Takes Another Blow

January 28, 2010 by · Leave a Comment 

By David Rothkopf

court_front_med It’s ironic. At precisely the moment that Secretary of State Clinton was rightly striking out at the Chinese for their infringement of the rights of their own citizens to open Internet access, democracy was dying in America.

In fact now, following an era that might well be defined by America’s twin credibility crises of the past decade, another looms.

The first two blows — blows that have left America’s standing in the world weaker today than it has been at any time in the past half century, even with the many steps President Obama has taken to reverse the missteps of the Bush era — undercut two of what might be seen as the three pillars of American standing on the planet.

The initial credibility crisis was triggered by the Bush administration’s reckless disregard for the values upon which the republic was founded. >From Guantanamo to Abu Ghraib, from the illegal invasion of Iraq to the rendition and torture of prisoners, America’s role as a leader by virtue of our moral standing was called into question. The champions of the rule of law were now seen, rightfully, as one of its enemies, arguing as we were that there were two standards: that to which we held the rest of the world and that we chose for ourselves.

Next, America’s role as an economic model for the world, champion of free markets and opportunity for all came under fire. In the run up to the economic crisis of 2008-2009, growing inequality in the United States was leading many critics to question our “leave it to the markets” approach. But then came the crisis and once again, the United States demonstrated that the doctrine we had preached worldwide were not going to be applied at home and moreover, that our system was deeply and fundamentally flawed. Doubt about “American capitalism” were only amplified in the aftermath of the crisis, in which middle class victims of the crisis were hardly helped and many were hurt but in which Wall Street fat cats called the tune, reaped the rewards of government intervention and then flouted their power by shrugging off the government when it was no longer necessary to their business plans.

What was left for Americans to cling to? Our moral standing and our fundamental message to the world had been built on the ideas of respect for the rule of law and free markets. And now the world was left to wonder, if not America, then to whom do we turn? Should we embrace other models?

Admittedly, the Chinese model, which might have had a shot at greater influence given the damage done to the U.S. brand, wasn’t doing itself any favors with its attempt to deny its people both basic rights of all international citizens of the 21st Century … which would also have the effect of making Chinese workers less competitive in the global economy. Hillary Clinton’s speech attacking this was forceful and utterly appropriate. The Chinese whining in response to it was a sign of weakness and with some luck, the Obama administration will ignore it, shrug off the Chinese threats of consequences in other areas of the bilateral relationship, and continue to press home this essential point.

But the argument on behalf of the American way was made immeasurably harder recently by the Supreme Court’s devastating blow to several of the most fundamental precepts of American society — equal rights, for example, or truly free speech (which is to say the right speak and be heard, without having to pay for it).

By a 5-4 vote the justices of the court, with the Republican right in the majority, struck down limits on corporate campaign spending. Further building on the dangerous fiction in American law that corporations ought to have rights akin to those of individuals, the decision effectively unleashes the floodgates of corporate and union money into the political arena.

This is certainly a more powerful threat to democracy than terrorism. It may well be a more powerful threat to democracy than was the fatally-flawed Soviet Union. Because to the extent to which politicians depend on donations to remain in power, they are inevitably influenced by those who have the most money. Not surprisingly, corporate entities, representing many people and often vast economic enterprises, have vastly more financial resources than individuals. Arguing, as American right wingers do, that campaign donations are form of free speech and thus cannot be constrained, ignores the reality that by equating money with free speech we effectively say that those with more money have more free speech, are entitled to greater influence within our society.

The implications are stark. Should this decision go unreversed by subsequent action of the Congress, a future court or a future constitutional amendment, it tips the balance of power in the United States even farther away from average people and in the direction of elites. Since campaign donations do not flow from companies primarily for ideological reasons but rather to advance narrow self-interests, the business of U.S. political class will necessarily be driven by the politics of the business class.

In a nutshell, yesterday’s Supreme Court decision made it very likely that America will not be an effective leader in combating global warming or preserving global resources, it will not be able to effectively resolve the internal threats to its own society like a failing health care system, and it will pursue international policies that are driven less by the broad national interest and more by the agenda of companies that in fact, have increasingly little national identity.

In this respect, this compromise of the third and most important pillar of U.S. international leadership-democracy, may be the most damaging of all. We can repair, as the Obama administration has attempted to do, the abuses of the Bush years. But if the court’s action does in effect institutionalize Calvin Coolidge’s old idea that “the business of America is business” it will be impossible to either effectively redress the flaws in the American economic model or for us to continue to argue that the nation that was the most important pioneer of representative democracy will continue to be able to play that role.

12-5

Shadow War in Afghanistan

January 14, 2010 by · Leave a Comment 

By Tom Engelhardt and Nick Turse

2010-01-09T110013Z_1558274224_GM1E6191GAK01_RTRMADP_3_PAKISTAN-CIA-BOMBER

Taliban leader Hakimullah Mehsud (L) sits beside a man who is believed to be Humam Khalil Abu-Mulal Al-Balawi, the suicide bomber who killed CIA agents in Afghanistan, in this still image taken from video released January 9, 2010. A Pakistan television station showed on Saturday what it said was the suicide bomber double agent who killed CIA agents in Afghanistan sitting with the Pakistani Taliban leader, and reported he shared U.S. and Jordanian state secrets with militants.

REUTERS/Tehrik-i Taliban Pakistan via Reuters TV

It was a Christmas and a New Year from hell for American intelligence, that US$75 billion labyrinth of at least 16 major agencies and a handful of minor ones. As the old year was preparing to be rung out, so were the US’s intelligence agencies, which managed not to connect every obvious clue to a (literally) seat-of-the-pants al-Qaeda operation. It hardly mattered that the underwear bomber’s case – except for the placement of the bomb material – almost exactly, even outrageously, replicated the infamous, and equally inept, “shoe bomber” plot of eight years ago.

That would have been bad enough, but the New Year brought worse. Army Major General Michael Flynn, the US and North Atlantic Treaty Organization (NATO) forces deputy chief of staff for intelligence in Afghanistan, released a report in which he labeled military intelligence in the war zone – but by implication US intelligence operatives generally – as “clueless”. They were, he wrote, “ignorant of local economics and landowners, hazy about who the powerbrokers are and how they might be influenced … and disengaged from people in the best position to find answers … Eight years into the war in Afghanistan, the US intelligence community is only marginally relevant to the overall strategy.”

As if to prove the general’s point, Humam Khalil Abu-Mulal al-Balawi, a Jordanian doctor with a penchant for writing inspirational essays on jihadi websites and an “unproven asset” for the Central Intelligence Agency (CIA), somehow entered a key agency forward operating base in Afghanistan unsearched, supposedly with information on al-Qaeda’s leadership so crucial that a high-level CIA team was assembled to hear it and Washington was alerted.

He proved to be either a double or a triple agent and killed seven CIA operatives, one of whom was the base chief, by detonating a suicide vest bomb, while wounding yet more, including the agency’s number-two operative in the country. The first suicide bomber to penetrate a US base in Afghanistan, he blew a hole in the CIA’s relatively small cadre of agents knowledgeable on al-Qaeda and the Taliban.

It was an intelligence disaster splayed all over the headlines: “Taliban bomber wrecks CIA’s shadowy war”, “Killings Rock Afghan Strategy”, “Suicide bomber who attacked CIA post was trusted informant from Jordan”. It seemed to sum up the hapless nature of America’s intelligence operations, as the CIA, with all the latest technology and every imaginable resource on hand, including the latest in Hellfire missile-armed drone aircraft, was out-thought and out-maneuvered by low-tech enemies.

No one could say that the deaths and the blow to the American war effort weren’t well covered. There were major TV reports night after night and scores of news stories, many given front-page treatment. And yet lurking behind those deaths and the man who caused them lay a bigger American war story that went largely untold. It was a tale of a new-style battlefield that the American public knows remarkably little about, and which bears little relationship to the Afghan war as we imagine it or as our leaders generally discuss it.

2010-01-09T151633Z_01_BTRE60816FS00_RTROPTP_3_INTERNATIONAL-US-JORDAN-BOMBER-CIA

A man reads a copy of the day’s newspaper whose front page shows a photo of suspected suicide bomber Humam Khalil Abu-Mulal al-Balawi in Amman January 9, 2010.

REUTERS/Ali Jarekji

We don’t even have a language to describe it accurately. Think of it as a battlefield filled with muscled-up, militarized intelligence operatives, hired-gun contractors doing military duty, and privatized “native” guard forces. Add in robot assassins in the air 24/7 and kick-down-the-door-style night-time “intelligence” raids, “surges” you didn’t know were happening, strings of military bases you had no idea were out there, and secretive international collaborations you were unaware the US was involved in. In Afghanistan, the American military is only part of the story. There’s also a polyglot “army” representing the US that wears no uniforms and fights shape-shifting enemies to the death in a murderous war of multiple assassinations and civilian slaughter, all enveloped in a blanket of secrecy.

Black ops and black sites

Secrecy is a part of war. The surprise attack is only a surprise if secrecy is maintained. In wartime, crucial information must be kept from an enemy capable of using it. But what if, as in the US’s case, wartime never ends, while secrecy becomes endemic, as well as profitable and privitizable, and much of the information available to both sides on the US’s shadowy new battlefield is mainly being kept from the American people? The coverage of the suicide attack on forward operating base (FOB) Chapman offered a rare, very partial window into that strange war – but only if you were willing to read piles of news reports looking for tiny bits of information that could be pieced together.

We did just that and here’s what we found:

Let’s start with FOB Chapman, where the suicide bombing took place. An old Soviet base near the Pakistani border, it was renamed after a Green Beret who fought beside CIA agents and was the first American to die in the invasion of Afghanistan in 2001. It sits in isolation near the town of Khost, just kilometers from the larger Camp Salerno, a forward operating base used mainly by US Special Operations troops.

Occupied by the CIA since 2001, Chapman is regularly described as “small” or “tiny” and, in one report, as having “a forbidding network of barriers, barbed wire and watchtowers”. Though a US State Department provisional reconstruction team has been stationed there (as well as personnel from the US Agency for International Development and the US Department of Agriculture), and though it “was officially a camp for civilians involved in reconstruction”, FOB Chapman is “well-known locally as a CIA base” – an “open secret”, as another report put it.

The base is guarded by Afghan irregulars, sometimes referred to in news reports as “Afghan contractors”, about whom we know next to nothing. (“CIA officials on Thursday would not discuss what guard service they had at the base.”) Despite the recent suicide bombing, according to Julian Barnes and Greg Miller of the Los Angeles Times, a “program to hire Afghans to guard US forward operating bases would not be canceled. Under that program, which is beginning in eastern Afghanistan, Afghans will guard towers, patrol perimeter fences and man checkpoints.”

Also on FOB Chapman were employees of the private security contractor Xe (formerly Blackwater), which has had a close relationship with the CIA in Afghanistan. We know this because of reports that two of the dead “CIA” agents were Xe operatives.

Someone else of interest was at FOB Chapman at that fateful meeting with the Jordanian doctor Balawi – Sharif Ali bin Zeid, a captain in the Jordanian intelligence service, the eighth person killed in the blast. It turns out that Balawi was an agent of the Jordanian intelligence, which held (and abused) torture suspects kidnapped and disappeared by the CIA in the years of George W Bush’s “global war on terror.”

The service reportedly continues to work closely with the agency and the captain was evidently running Balawi. That’s what we now know about the polyglot group at FOB Chapman on the front lines of the agency’s black-ops war against al-Qaeda, the Taliban and the allied fighters of the Sirajuddin and Jalaluddin Haqqani network in nearby Pakistan. If there were other participants, they weren’t among the bodies.

The agency surges

And here’s something that’s far clearer in the wake of the bombing: among the US’s vast network of bases in Afghanistan, the CIA has its own designated bases – as, by the way, do US Special Operations forces, and according to a Nation reporter, Jeremy Scahill, even private contractor Xe. Without better reporting on the subject, it’s hard to get a picture of these bases, but Siobhan Gorman of the Wall Street Journal tells us that a typical CIA base houses no more than 15-20 agency operatives (which means that Balawi’s explosion killed or wounded more than half of the team on FOB Chapman).

And don’t imagine that we’re only talking about a base or two. In the single most substantive post-blast report on the CIA, Mark Mazzetti of the New York Times wrote that the agency has “an archipelago of firebases in southern and eastern Afghanistan”, most built in the last year. An archipelago? Imagine that. And it’s also reported that even more of them are in the works.

With this goes another bit of information that the Wall Street Journal seems to have been the first to drop into its reports. While you’ve heard about President Barack Obama’s surge in American troops and possibly even State Department personnel in Afghanistan, you’ve undoubtedly heard little or nothing about a CIA surge in the region, and yet the Journal’s reporters tell us that agency personnel will increase by 20-25% in the surge months. By the time the CIA is fully bulked up with all its agents, paramilitaries and private contractors in place, Afghanistan will represent, according to Julian Barnes of the Los Angeles Times, one of the largest “stations” in agency history.

This, in turn, implies other surges. There will be a surge in base-building to house those agents, and a surge in “native” guards – at least until another suicide bomber hits a base thanks to Taliban supporters among them or one of them turns a weapon on the occupants of a base – and undoubtedly a surge in Blackwater-style mercenaries as well.

Keep in mind that the latest figure on private contractors suggests that 56,000 more of them will surge into Afghanistan in the next 18 months, far more than surging US troops, State Department employees and CIA operatives combined. And don’t forget the thousands of non-CIA “uniformed and civilian intelligence personnel serving with the Defense Department and joint interagency operations in the country”, who will undoubtedly surge as well.

Making war

The efforts of the CIA operatives at Chapman were reportedly focused on “collecting information about militant networks in Afghanistan and Pakistan and plotting missions to kill the networks’ top leaders”, especially those in the Haqqani network in the North Waziristan tribal area just across the Pakistani border. They were evidently running “informants” into Pakistan to find targets for the agency’s ongoing drone assassination war.

These drone attacks in Pakistan have themselves been on an unparalleled surge course ever since Obama entered office; 44 to 50 (or more) have been launched in the past year, with civilian casualties running into the hundreds. Like local Pashtuns, the agency essentially doesn’t recognize a border. For them, the Afghan and Pakistani tribal borderlands are a single world.

In this way, as Paul Woodward of the website War in Context has pointed out, “Two groups of combatants, neither of whom wear uniforms, are slugging it out on the Afghan-Pakistan border. Each group has identified what it regards as high-value targets and each is using its own available means to hit these targets. The Taliban/al-Qaeda are using suicide bombers while the CIA is using Hellfire missiles.”

Since the devastating explosion at Chapman, statements of vengeance have been coming out of CIA mouths – of a kind that, when offered by the Taliban or al-Qaeda, we consider typical of a backward, “tribal” society. In any case, the secret war is evidently becoming a private and personal one. Balawi’s suicide attack essentially took out a major part of the agency’s targeting information system.

As one unnamed NATO official told the New York Times, “These were not people who wrote things down in the computer or in notebooks. It was all in their heads … [The CIA is] pulling in new people from all over the world, but how long will it take to rebuild the networks, to get up to speed? Lots of it is irrecoverable.” And the agency was already generally known to be “desperately short of personnel who speak the language or are knowledgeable about the region”. Nonetheless, drone attacks have suddenly escalated – at least five in the week since the suicide bombing, all evidently aimed at “an area believed to be a hideout for militants involved”. These sound like vengeance attacks and are likely to be particularly counterproductive.

To sum up, US intelligence agents, having lost out to enemy “intelligence agents”, even after being transformed into full-time assassins, are now locked in a mortal struggle with an enemy for whom assassination is also a crucial tactic, but whose operatives seem to have better informants and better information.

In this war, drones are not the agency’s only weapon. The CIA also seems to specialize in running highly controversial, kick-down-the-door “night raids” in conjunction with Afghan paramilitary forces. Such raids, when launched by US Special Operations forces, have led to highly publicized and heavily protested civilian casualties. Sometimes, according to reports, the CIA actually conducts them in conjunction with special ops forces.

In a recent American-led night raid in Kunar province, eight young students were, according to Afghan sources, detained, handcuffed and executed. The leadership of this raid has been attributed, euphemistically, to “other government agencies” (OGAs) or “non-military Americans”. These raids, whether successful in the limited sense or not, don’t fit comfortably with the Obama administration’s “hearts and minds” counter-insurgency strategy.

The militarization of the agency

As the identities of some of the fallen CIA operatives at Chapman became known, a pattern began to emerge. There was 37-year-old Harold Brown Jr, who formerly served in the army. There was Scott Roberson, a former Navy SEAL who did several tours of duty in Iraq, where he provided protection to officials considered at high risk. There was Jeremy Wise, 35, an ex-SEAL who left the military last year, signed up with Xe, and ended up working for the CIA. Similarly, 46-year-old Dane Paresi, a retired special forces master sergeant turned Xe hired gun, also died in the blast.

For years, American author and professor Chalmers Johnson, himself a former CIA consultant, has referred to the agency as “the president’s private army.” Today, that moniker seems truer than ever. While the civilian CIA has always had a paramilitary component, known as the Special Activities Division, the unit was generally relatively small and dormant. Instead, military personnel like the army’s special forces or indigenous troops carried out the majority of the CIA’s combat missions.

After the 9/11 attacks, however, George W Bush empowered the agency to hunt down, kidnap and assassinate suspected al-Qaeda operatives, and the CIA’s traditional specialties of spycraft and intelligence analysis took a distinct back seat to Special Activities Division operations, as its agents set up a global gulag of ghost prisons, conducted interrogations by torture, and then added those missile-armed drone and assassination programs.

The military backgrounds of the fallen CIA operatives cast a light on the way the world of “intelligence” is increasingly muscling up and becoming militarized. This past summer, when a former CIA official suggested the agency might be backing away from risky programs, a current official spit back from the shadows: “If anyone thinks the CIA has gotten risk-averse recently, go ask al-Qaeda and the Taliban … The agency’s still doing cutting-edge stuff in all kinds of dangerous places.”

At about the same time, reports were emerging that Blackwater/Xe was providing security, arming drones, and “perform[ing] some of the agency’s most important assignments” at secret bases in Pakistan and Afghanistan. It also emerged that the CIA had paid contractors from Blackwater to take part in a covert assassination program in Afghanistan.

Add this all together and you have the grim face of “intelligence” at war in 2010 – a new micro-brew when it comes to Washington’s conflicts. Today, in Afghanistan, a militarized mix of CIA operatives and ex-military mercenaries as well as native recruits and robot aircraft is fighting a war “in the shadows” (as they used to say in the Cold War). This is no longer “intelligence” as anyone imagines it, nor is it “military” as military was once defined, not when US operations have gone mercenary and native in such a big way.

This is pure “lord of the flies” stuff – beyond oversight, beyond any law, including the laws of war. And worse yet, from all available evidence, despite claims that the drone war is knocking off mid-level enemies, it seems remarkably ineffective. All it may be doing is spreading the war farther and digging it in deeper.

Talk about “counter-insurgency” as much as you want, but this is another kind of battlefield, and “protecting the people” plays no part in it. And this is only what can be gleaned from afar about a semi-secret war that is being poorly reported. Who knows what it costs when you include the US hired guns, the Afghan contractors, the bases, the drones and the rest of the personnel and infrastructure? Nor do we know what else, or who else, is involved, and what else is being done. Clearly, however, all those billions of “intelligence” dollars are going into the blackest of black holes.

Tom Engelhardt, co-founder of the American Empire Project, runs the Nation Institute’s TomDispatch.com. He is the author of The End of Victory Culture, a history of the Cold War and beyond, as well as of a novel, The Last Days of Publishing. He also edited The World According to TomDispatch: America in the New Age of Empire (Verso, 2008), an alternative history of the mad Bush years.

Nick Turse is the associate editor of TomDispatch.com and the winner of a 2009 Ridenhour Prize for Reportorial Distinction as well as a James Aronson Award for Social Justice Journalism. His work has appeared in the Los Angeles Times, the Nation, In These Times, and regularly at TomDispatch. Turse is currently a fellow at New York University’s Center for the United States and the Cold War. He is the author of The Complex: How the Military Invades Our Everyday Lives (Metropolitan Books). His website is NickTurse.com.

(Copyright 2010 Tom Engelhardt and Nick Turse.)

Students Report on Islam in Unique Course

December 24, 2009 by · Leave a Comment 

By Alexandra Carter, UPIU.com

img_3376_large_square geri zeldes

Left:  Students speak with Professor Geri Alumit Zeldes after the “Reporting on Islam” class at Michigan State University; Right:  Professor Zeldes distributes graded story revisions for the “Reporting on Islam” course.

Photos by Alexandra Carter

 

EAST LANSING, Mich., Dec. 11 (UPI) — A new course at Michigan State University teaches students how to deal with the complexities of reporting on Islam in a post-Sept. 11 world.

This semester, students wrote about holiday celebrations and about how Muslim students feel about American university life. They also analyzed news reports on Islam from around the world in the new, “Reporting on Islam” course at Michigan State University.

“[The course] definitely made me uncomfortable at times, but honestly, that is how I know it was worthwhile,” said Dan Redford, a student. “It helped me experience a part of the world and this country that I never had before.”

Students uploaded the stories they wrote and the photos they took to UPIU.com, a service of United Press International for university students. Professor Geri Alumit Zeldes said that she wanted the class to submit its stories to UPIU to “have an outlet, other than me, to share their stories.”

Of the 14 registered students in the course, half had at least one of their stories published online through UPIU. Student Andrew Norman’s story on Islamic punk music was featured in blog in The San Francisco Sentinel and Wall Street Journal.

Student Brian J. Bowe said that using Web tools such as Skype to talk to people in other countries helped “shrink the world,” an exciting aspect of the course.

“Those classroom interactions with people in places like Iraq, Iran and India enriched the experience for me,” Bowe said. “One of the problems in media portrayals of Islam is that we’re frequently talking about Muslims, but not to Muslims. Using technology, we were able to bridge cultures and have very profound dialogues.”

Students also talked to Muslims who live in Michigan as sources for some articles.

“I found our visit to [the Islamic Center of East Lansing] highly beneficial. I would have been timid about going there alone,” said student Jennifer Hoewe. “Since I was joined by my classmates and welcomed by those who attended the mosque, I felt comfortable enough to go again by myself later in the semester as part of an article I wrote.”

The new class comes as students across the United States are showing more interest in Islam and in academic topics affiliated with the faith. Three of the students in “Reporting on Islam” studied Arabic, two of them through the university’s Arabic department, which had roughly 150 students enrolled in classes this fall.

Several of the students in “Reporting on Islam” also are in the Muslim Studies specialization program, which was created by Professor Mohammed Ayoob after the Sept. 11, 2001, attacks. The reporting course was just one of many offered this semester under this specialization, along with classes in arts and humanities, public affairs, religion, political science, anthropology and sociology.

“Reporting on Islam” is a good first step for many students to continue learning about the topic, said Zahkia Smith, a student.

“I think what’s most important coming out of this class is that the very best way to know how to report on Islam is to get involved and actually step into the Muslim community,” Smith said. “The class gives you the right tools. The completion of the class is the signal to dig further.”

“Reporting on Islam” is a pilot course offered jointly through Michigan State’s School of Journalism and its Muslim Studies program. It was started with a grant from the Social Science Research Council, a national non-profit group. In addition, the course is part of the Islam, Muslims, and Journalism Education program, a project on the Internet funded by the same grant that has a goal to generate accurate and balanced reporting.

Similar courses have been taught at other American university campuses, Zeldes said. For example, Marda Dunsky, instructor of Islamic World Studies at DePaul University, teaches the “Reporting the Arab and Muslim World” course.

11-53

Insurgents Intercept Drone Video in King-Size Security Breach

December 17, 2009 by · Leave a Comment 

By Noah Schachtman, Wired Magazine

Even worse…

In Iraq and Afghanistan, the U.S. military depends on an array of drones to snoop on and stalk insurgents. Now it looks as if insurgents are tapping into those same drones’ broadcasts, to see what the flying robot spies see. If true — and widespread — it’s potentially one of the most serious military security breaches in years.

“U.S. military personnel in Iraq discovered the problem late last year when they apprehended a Shiite militant whose laptop contained files of intercepted drone video feeds,” Wall Street Journal reports. “In July, the U.S. military found pirated drone video feeds on other militant laptops, leading some officials to conclude that militant groups trained and funded by Iran were regularly intercepting feeds.”

How’d the militants manage to get access to such secret data? Basically by pointing satellite dishes up, and waiting for the drone feeds to pour in. According to the Journal, militants have exploited a weakness: The data links between the drone and the ground control station were never encrypted. Which meant that pretty much anyone could tap into the overhead surveillance that many commanders feel is America’s most important advantage in its two wars. Pretty much anyone could intercept the feeds of the drones that are the focal point for the secret U.S. war in Pakistan.

Using cheap, downloadable programs like SkyGrabber, militants were apparently able to watch and record the video feed — and potentially be tipped off when U.S. and coalition forces are stalking them. The $26 software was originally designed to let users download movies and songs off of the internet. Turns out, the program lets you nab Predator drone feeds just as easily as pirated copies of The Hangover.

And here’s the real scandal: Military officials have known about this potential vulnerability since the Bosnia campaign. That was over 10 years ago. And, as Declan McCullagh observes, there have been a series of government reports warning of the problem since then. But the Pentagon assumed that their adversaries in the Middle East and Central Asia wouldn’t have the smarts to tap into the communications link. That’s despite presentations like this 1996 doozy from Air Combat Command, which noted that that “the Predator UAV is designed to operate with unencrypted data links.”

If you think militants are going to be content to just observe spy drone feeds, it’s time to reconsider. “Folks are not merely going to listen/watch what we do when they intercept the feeds, but also start to conduct ‘battles of persuasion’; that is, hacking with the intent to disrupt or change the content, or even ‘persuade’ the system to do their own bidding,” Peter Singer, author of Wired for War, tells Danger Room.

This has long been the nightmare scenario within Pentagon cybersecurity circles: a hacker not looking to take down the military grid, but to exploit it for his own purposes. How does a soldier trust an order, if he doesn’t know who else is listening — or who gave the order, in the first place? “For a sophisticated adversary, it’s to his advantage to keep your network up and running. He can learn what you know. He can cause confusion, delay your response times — and shape your actions,” one Defense Department cybersecurity official tells Danger Room.

Despite this rather massive vulnerability, drone operations show no signs of letting up. According to the Associated Press, “two suspected U.S. missile strikes, one using multiple drones, killed 17 people in a Pakistani tribal region.”

Meanwhile, military officials assure are scrambling to plug the hole. “The difficulty, officials said, is that adding encryption to a network that is more than a decade old involves more than placing a new piece of equipment on individual drones,”  the Journal notes. “Instead, many components of the network linking the drones to their operators in the U.S., Afghanistan or Pakistan have to be upgraded to handle the changes.”

So it may be quite some time before this enormous security breach is filled.

– Nathan Hodge and Noah Shachtman

Major Donor to Israel Causes Pleads Guilty…

December 10, 2009 by · Leave a Comment 

Philanthropist pleads guilty to bribes

JTA

LOS ANGELES (JTA) — Elliott Broidy, a leading investor in the Israeli economy and major donor and activist in the Los Angeles Jewish community, pleaded guilty Thursday to the felony charge of rewarding official misconduct.

According to New York State Attorney General Andrew Cuomo, Broidy admitted that he made nearly $1 million in payoffs to four senior New York state officials as he pursued an investment from the state public pension fund. He has agreed to forfeit $18 million in management fees and a judge may impose a sentence of up to four years in prison following Broidy’s guilty plea, the Wall Street Journal reported. The development is part of Cuomo’s wide-ranging pay-to-play probe on whether decisions about how to invest retirees’ money in the giant pension fund were wrongly influenced by money and politics.

Cuomo said that Broidy has acknowledged paying at least $75,000 for high-price luxury trips to Italy and Israel for a top official in the New York State Comptroller and his relatives. Several media sources quoted unnamed sources identifying the official as the former comptroller Alan Hevesi; his lawyer reportedly declined to comment.

By raising $800 million, Broidy turned his Markstone Capital Group into the largest private equity fund in Israel, at a time when the intifada was at its height and most investors were shunning the Jewish state. In Los Angeles, Broidy has been a major donor to the United Jewish Fund and Friends of the Israel Defense Forces, a trustee of the University of Southern California and USC Hillel, and has served on the Hebrew Union College board of governors and as a trustee of Wilshire Boulevard Temple.

He is credited with revitalizing the dormant California-Israel Chamber of Commerce in the mid-1990s, together with Stanley Gold and Stanley Chais. Gold is president and CEO of Shamrock Holdings and outgoing president of the Jewish Federation of Greater Los Angeles. Chais, a large contributor to Israeli and Jewish causes, faces three legal actions as an alleged middleman for Bernard Madoff.

Broidy has also been a GOP heavy hitter, serving as finance chairman of the Republican National Committee and a top fund raiser for the presidential campaigns of President George W. Bush in 2004 Sen. John McCain in 2008.

Gold said that he has known Broidy for some 20 years and worked with him on behalf of the local Jewish federation and Wilshire Boulevard Temple, as well as the California-Israel Chamber of Commerce. “Elliott has given freely of his time and energy to the community, of which he has been an outstanding member,” Gold said. “Our hearts go out to him and his family at this difficult time.”

Gold added, “Elliott is a decent and good man. It is not my style to desert a friend in his hour of need.”

Broidy’s New York attorney Christopher Clark issued a statement saying that his client “regrets the actions that brought about this course of events, but is pleased to have resolved this matter with the New York Attorney General and will be cooperating in the ongoing investigation.”

Clark also said that Broidy has “resigned from all operational, supervisory, and other roles at the firm of Markstone Partners in order to focus his attention on legal matters.”

11-51

Death of ‘Soul of Capitalism’: Bogle, Faber, Moore

November 1, 2009 by · Leave a Comment 

20 reasons America has lost its soul and collapse is inevitable

By Paul B. Farrell, MarketWatch

ARROYO GRANDE, Calif. (MarketWatch) — Jack Bogle published “The Battle for the Soul of Capitalism” four years ago. The battle’s over. The sequel should be titled: “Capitalism Died a Lost Soul.” Worse, we’ve lost “America’s Soul.” And, worldwide, the consequences will be catastrophic.

That’s why a man like Hong Kong contrarian economist Marc Faber warns in his Doom, Boom & Gloom Report: “The future will be a total disaster, with a collapse of our capitalistic system as we know it today.”

Insuring against economic calamity

Gold ETFs are so popular they now hold more of the shiny stuff than most central banks. What will it take to sustain the funds’ big gains? Barron’s Clare McKeen reports.

No, not just another meltdown, another bear-market recession like the one recently triggered by Wall Street’s too-greedy-to-fail banks. Faber is warning that the entire system of capitalism will collapse. Get it? The engine driving the great “American Economic Empire” for 233 years will collapse, a total disaster, a destiny we created.

OK, deny it. But I’ll bet you have a nagging feeling that maybe he’s right, that the end may be near. I have for a long time: I wrote a column back in 1997: “Battling for the Soul of Wall Street.” My interest in “The Soul” — what Jung called the “collective unconscious” — dates back to my Ph.D. dissertation, “Modern Man in Search of His Soul,” a title borrowed from Jung’s 1933 book, “Modern Man in Search of a Soul.” This battle has been on my mind since my days at Morgan Stanley 30 years ago, witnessing the decline.

Has capitalism lost its soul? Guys like Bogle and Faber sense it. Read more about the soul in physicist Gary Zukav’s “The Seat of the Soul,” Thomas Moore’s “Care of the Soul” and sacred texts.

But for Wall Street and American capitalism, use your gut. You know something’s very wrong: A year ago, too-greedy-to-fail banks were insolvent, in a near-death experience. Now, magically, they’re back to business as usual, arrogant, pocketing outrageous bonuses while Main Street sacrifices, and unemployment and foreclosures continue rising as tight credit, inflation and skyrocketing federal debt are killing taxpayers.

Yes, Wall Street has lost its moral compass. It created the mess, but now, like vultures, Wall Streeters are capitalizing on the carcass. They have lost all sense of fiduciary duty, ethical responsibility and public obligation.

Here are the Top 20 reasons American capitalism has lost its soul:

1. Collapse is now inevitable

Capitalism has been the engine driving America and the global economies for over two centuries. Faber predicts its collapse will trigger global “wars, massive government-debt defaults, and the impoverishment of large segments of Western society.” Faber knows that capitalism is not working, capitalism has peaked, and the collapse of capitalism is “inevitable.”

When? He hesitates: “But what I don’t know is whether this final collapse, which is inevitable, will occur tomorrow, or in five or 10 years, and whether it will occur with the Dow at 100,000 and gold at $50,000 per ounce or even confiscated, or with the Dow at 3,000 and gold at $1,000.” But the end is inevitable, a historical imperative.

2. Nobody’s planning for a ‘Black Swan’

While the timing may be uncertain, the trigger is certain. Societies collapse because they fail to plan ahead, cannot act fast enough when a catastrophic crisis hits. Think “Black Swan” and read evolutionary biologist Jared Diamond’s “Collapse: How Societies Choose to Fail or Succeed.”

A crisis hits. We act surprised. Shouldn’t. But it’s too late: “Civilizations share a sharp curve of decline. Indeed, a society’s demise may begin only a decade or two after it reaches its peak population, wealth and power.”

Warnings are everywhere. Why not prepare? Why sabotage our power, our future? Why set up an entire nation to fail? Diamond says: Unfortunately “one of the choices has depended on the courage to practice long-term thinking, and to make bold, courageous, anticipatory decisions at a time when problems have become perceptible but before they reach crisis proportions.”

Sound familiar? “This type of decision-making is the opposite of the short-term reactive decision-making that too often characterizes our elected politicians,” thus setting up the “inevitable” collapse. Remember, Greenspan, Bernanke, Bush, Paulson all missed the 2007-8 meltdown: It will happen again, in a bigger crisis.

3. Wall Street sacked Washington

Bogle warned of a growing three-part threat — a “happy conspiracy” — in “The Battle for the Soul of Capitalism:” “The business and ethical standards of corporate America, of investment America, and of mutual fund America have been gravely compromised.”

But since his book, “Wall Street America” went over to the dark side, got mega-greedy and took control of “Washington America.” Their spoils of war included bailouts, bankruptcies, stimulus, nationalizations and $23.7 trillion new debt off-loaded to the Treasury, Fed and American people.

Who’s in power? Irrelevant. The “happy conspiracy” controls both parties, writes the laws to suit its needs, with absolute control of America’s fiscal and monetary policies. Sorry Jack, but the “Battle for the Soul of Capitalism” really was lost.

4. When greed was legalized

Go see Michael Moore’s documentary, “Capitalism: A Love Story.” “Disaster Capitalism” author Naomi Klein recently interviewed Moore in The Nation magazine: “Capitalism is the legalization of this greed. Greed has been with human beings forever. We have a number of things in our species that you would call the dark side, and greed is one of them. If you don’t put certain structures in place or restrictions on those parts of our being that come from that dark place, then it gets out of control.”

Greed’s OK, within limits, like the 10 Commandments. Yes, the soul can thrive around greed, if there are structures and restrictions to keep it from going out of control. But Moore warns: “Capitalism does the opposite of that. It not only doesn’t really put any structure or restrictions on it. It encourages it, it rewards” greed, creating bigger, more frequent bubble/bust cycles.

It happens because capitalism is now in “the hands of people whose only concern is their fiduciary responsibility to their shareholders or to their own pockets.” Yes, greed was legalized in America, with Wall Street running Washington.

5. Triggering the end of our ‘life cycle’

Like Diamond, Faber also sees the historical imperative: “Every successful society” grows “out of some kind of challenge.” Today, the “life cycle” of capitalism is on the decline.

He asks himself: “How are you so sure about this final collapse?” The answer: “Of all the questions I have about the future, this is the easiest one to answer. Once a society becomes successful it becomes arrogant, righteous, overconfident, corrupt, and decadent … overspends … costly wars … wealth inequity and social tensions increase; and society enters a secular decline.” Success makes us our own worst enemy.

Quoting 18th century Scottish historian Alexander Fraser Tytler: “The average life span of the world’s greatest civilizations has been 200 years” progressing from “bondage to spiritual faith … to great courage … to liberty … to abundance … to selfishness … to complacency … to apathy … to dependence and … back into bondage!”

Where is America in the cycle? “It is most unlikely that Western societies, and especially the U.S., will be an exception to this typical ‘society cycle.’ … The U.S. is somewhere between the phase where it moves ‘from complacency to apathy’ and ‘from apathy to dependence.’”

In short, America is a grumpy old man with hardening of the arteries. Our capitalism is near the tipping point, unprepared for a catastrophe, set up for collapse and rapid decline.

15 more clues capitalism lost its soul … is a disaster waiting to happen

Much more evidence litters the battlefield:

1. Wall Street wealth now calls the shots in Congress, the White House
2. America’s top 1% own more than 90% of America’s wealth
3. The average worker’s income has declined in three decades while CEO compensation exploded over ten times
4. The Fed is now the ‘fourth branch of government’ operating autonomously, secretly printing money at will
5. Since Goldman and Morgan became bank holding companies, all banks are back gambling with taxpayer bailout money plus retail customer deposits
6. Bill Gross warns of a “new normal” with slow growth, low earnings and stock prices
7. While the White House’s chief economist retorts with hype of a recovery unimpeded by the “new normal”
8. Wall Street’s high-frequency junkies make billions trading zombie stocks like AIG, FNMA, FMAC that have no fundamental value beyond a Treasury guarantee
9. 401(k)s have lost 26.7% of their value in the past decade
10. Oil and energy costs will skyrocket
11. Foreign nations and sovereign funds have started dumping dollars, signaling the end of the dollar as the world’s reserve currency
12. In two years federal debt exploded from $11.2 to $23.7 trillion
13. New financial reforms will do little to prevent the next meltdown
14. The “forever war” between Western and Islamic fundamentalists will widen
15. As will environmental threats and unfunded entitlements

“America Capitalism” is a “Lost Soul” … we’ve lost our moral compass … the coming collapse is the end of an “inevitable” historical cycle stalking all great empires to their graves. Downsize your lifestyle expectations, trust no one, not even media.

Faber is uncertain about timing, we are not. There is a high probability of a crisis and collapse by 2012. The “Great Depression 2” is dead ahead. Unfortunately, there’s absolutely nothing you can do to hide from this unfolding reality or prevent the rush of the historical imperative.

President Obama’s 9/9/9 Speech on Healthcare

September 10, 2009 by · Leave a Comment 

THE WHITE HOUSE

Office of the Press Secretary
_________________________________________________________________________
For Immediate Release                                                September 9, 2009

REMARKS BY THE PRESIDENT
TO A JOINT SESSION OF CONGRESS
ON HEALTH CARE

U.S. Capitol
Washington, D.C.

8:16 P.M. EDT

THE PRESIDENT:  Madam Speaker, Vice President Biden, members of Congress, and the American people:

When I spoke here last winter, this nation was facing the worst economic crisis since the Great Depression.  We were losing an average of 700,000 jobs per month.  Credit was frozen.  And our financial system was on the verge of collapse.

As any American who is still looking for work or a way to pay their bills will tell you, we are by no means out of the woods.  A full and vibrant recovery is still many months away.  And I will not let up until those Americans who seek jobs can find them — (applause) — until those businesses that seek capital and credit can thrive; until all responsible homeowners can stay in their homes.  That is our ultimate goal.  But thanks to the bold and decisive action we’ve taken since January, I can stand here with confidence and say that we have pulled this economy back from the brink.  (Applause.)

I want to thank the members of this body for your efforts and your support in these last several months, and especially those who’ve taken the difficult votes that have put us on a path to recovery.  I also want to thank the American people for their patience and resolve during this trying time for our nation.

But we did not come here just to clean up crises.  We came here to build a future.  (Applause.)  So tonight, I return to speak to all of you about an issue that is central to that future — and that is the issue of health care.

I am not the first President to take up this cause, but I am determined to be the last.  (Applause.)  It has now been nearly a century since Theodore Roosevelt first called for health care reform.  And ever since, nearly every President and Congress, whether Democrat or Republican, has attempted to meet this challenge in some way.  A bill for comprehensive health reform was first introduced by John Dingell Sr. in 1943.  Sixty-five years later, his son continues to introduce that same bill at the beginning of each session.  (Applause.)

Our collective failure to meet this challenge — year after year, decade after decade — has led us to the breaking point.  Everyone understands the extraordinary hardships that are placed on the uninsured, who live every day just one accident or illness away from bankruptcy.  These are not primarily people on welfare.  These are middle-class Americans.  Some can’t get insurance on the job.  Others are self-employed, and can’t afford it, since buying insurance on your own costs you three times as much as the coverage you get from your employer.  Many other Americans who are willing and able to pay are still denied insurance due to previous illnesses or conditions that insurance companies decide are too risky or too expensive to cover.

We are the only democracy — the only advanced democracy on Earth — the only wealthy nation — that allows such hardship for millions of its people.  There are now more than 30 million American citizens who cannot get coverage.  In just a two-year period, one in every three Americans goes without health care coverage at some point.  And every day, 14,000 Americans lose their coverage.  In other words, it can happen to anyone.

But the problem that plagues the health care system is not just a problem for the uninsured.  Those who do have insurance have never had less security and stability than they do today.   More and more Americans worry that if you move, lose your job, or change your job, you’ll lose your health insurance too.  More and more Americans pay their premiums, only to discover that their insurance company has dropped their coverage when they get sick, or won’t pay the full cost of care.  It happens every day.

One man from Illinois lost his coverage in the middle of chemotherapy because his insurer found that he hadn’t reported gallstones that he didn’t even know about.  They delayed his treatment, and he died because of it.  Another woman from Texas was about to get a double mastectomy when her insurance company canceled her policy because she forgot to declare a case of acne.  By the time she had her insurance reinstated, her breast cancer had more than doubled in size.  That is heart-breaking, it is wrong, and no one should be treated that way in the United States of America.  (Applause.)

Then there’s the problem of rising cost.  We spend one and a half times more per person on health care than any other country, but we aren’t any healthier for it.  This is one of the reasons that insurance premiums have gone up three times faster than wages.  It’s why so many employers — especially small businesses — are forcing their employees to pay more for insurance, or are dropping their coverage entirely.  It’s why so many aspiring entrepreneurs cannot afford to open a business in the first place, and why American businesses that compete internationally — like our automakers — are at a huge disadvantage.  And it’s why those of us with health insurance are also paying a hidden and growing tax for those without it — about $1,000 per year that pays for somebody else’s emergency room and charitable care.

Finally, our health care system is placing an unsustainable burden on taxpayers.  When health care costs grow at the rate they have, it puts greater pressure on programs like Medicare and Medicaid.  If we do nothing to slow these skyrocketing costs, we will eventually be spending more on Medicare and Medicaid than every other government program combined.  Put simply, our health care problem is our deficit problem.  Nothing else even comes close.  Nothing else.  (Applause.)

Now, these are the facts.  Nobody disputes them.  We know we must reform this system.  The question is how.

There are those on the left who believe that the only way to fix the system is through a single-payer system like Canada’s — (applause) — where we would severely restrict the private insurance market and have the government provide coverage for everybody.  On the right, there are those who argue that we should end employer-based systems and leave individuals to buy health insurance on their own.

I’ve said — I have to say that there are arguments to be made for both these approaches.  But either one would represent a radical shift that would disrupt the health care most people currently have.  Since health care represents one-sixth of our economy, I believe it makes more sense to build on what works and fix what doesn’t, rather than try to build an entirely new system from scratch.  (Applause.)  And that is precisely what those of you in Congress have tried to do over the past several months.

During that time, we’ve seen Washington at its best and at its worst.

We’ve seen many in this chamber work tirelessly for the better part of this year to offer thoughtful ideas about how to achieve reform.  Of the five committees asked to develop bills, four have completed their work, and the Senate Finance Committee announced today that it will move forward next week.  That has never happened before.  Our overall efforts have been supported by an unprecedented coalition of doctors and nurses; hospitals, seniors’ groups, and even drug companies — many of whom opposed reform in the past.  And there is agreement in this chamber on about 80 percent of what needs to be done, putting us closer to the goal of reform than we have ever been.

But what we’ve also seen in these last months is the same partisan spectacle that only hardens the disdain many Americans have towards their own government.  Instead of honest debate, we’ve seen scare tactics.  Some have dug into unyielding ideological camps that offer no hope of compromise.  Too many have used this as an opportunity to score short-term political points, even if it robs the country of our opportunity to solve a long-term challenge.  And out of this blizzard of charges and counter-charges, confusion has reigned.

Well, the time for bickering is over.  The time for games has passed.  (Applause.)  Now is the season for action.  Now is when we must bring the best ideas of both parties together, and show the American people that we can still do what we were sent here to do.  Now is the time to deliver on health care.  Now is the time to deliver on health care.  

The plan I’m announcing tonight would meet three basic goals.  It will provide more security and stability to those who have health insurance.  It will provide insurance for those who don’t.  And it will slow the growth of health care costs for our families, our businesses, and our government.  (Applause.)  It’s a plan that asks everyone to take responsibility for meeting this challenge — not just government, not just insurance companies, but everybody including employers and individuals.  And it’s a plan that incorporates ideas from senators and congressmen, from Democrats and Republicans — and yes, from some of my opponents in both the primary and general election.  

Here are the details that every American needs to know about this plan.  First, if you are among the hundreds of millions of Americans who already have health insurance through your job, or Medicare, or Medicaid, or the VA, nothing in this plan will require you or your employer to change the coverage or the doctor you have.  (Applause.)  Let me repeat this:  Nothing in our plan requires you to change what you have.

What this plan will do is make the insurance you have work better for you.  Under this plan, it will be against the law for insurance companies to deny you coverage because of a preexisting condition.  (Applause.)  As soon as I sign this bill, it will be against the law for insurance companies to drop your coverage when you get sick or water it down when you need it the most.  (Applause.)  They will no longer be able to place some arbitrary cap on the amount of coverage you can receive in a given year or in a lifetime.  (Applause.)  We will place a limit on how much you can be charged for out-of-pocket expenses, because in the United States of America, no one should go broke because they get sick.  (Applause.)  And insurance companies will be required to cover, with no extra charge, routine checkups and preventive care, like mammograms and colonoscopies — (applause) — because there’s no reason we shouldn’t be catching diseases like breast cancer and colon cancer before they get worse.  That makes sense, it saves money, and it saves lives.  (Applause.)

Now, that’s what Americans who have health insurance can expect from this plan — more security and more stability.

Now, if you’re one of the tens of millions of Americans who don’t currently have health insurance, the second part of this plan will finally offer you quality, affordable choices.  (Applause.)  If you lose your job or you change your job, you’ll be able to get coverage.  If you strike out on your own and start a small business, you’ll be able to get coverage.  We’ll do this by creating a new insurance exchange — a marketplace where individuals and small businesses will be able to shop for health insurance at competitive prices.  Insurance companies will have an incentive to participate in this exchange because it lets them compete for millions of new customers.  As one big group, these customers will have greater leverage to bargain with the insurance companies for better prices and quality coverage.  This is how large companies and government employees get affordable insurance.  It’s how everyone in this Congress gets affordable insurance.  And it’s time to give every American the same opportunity that we give ourselves.  (Applause.)

Now, for those individuals and small businesses who still can’t afford the lower-priced insurance available in the exchange, we’ll provide tax credits, the size of which will be based on your need.  And all insurance companies that want access to this new marketplace will have to abide by the consumer protections I already mentioned.  This exchange will take effect in four years, which will give us time to do it right.  In the meantime, for those Americans who can’t get insurance today because they have preexisting medical conditions, we will immediately offer low-cost coverage that will protect you against financial ruin if you become seriously ill.  (Applause.)  This was a good idea when Senator John McCain proposed it in the campaign, it’s a good idea now, and we should all embrace it.  (Applause.)

Now, even if we provide these affordable options, there may be those — especially the young and the healthy — who still want to take the risk and go without coverage.  There may still be companies that refuse to do right by their workers by giving them coverage.  The problem is, such irresponsible behavior costs all the rest of us money.  If there are affordable options and people still don’t sign up for health insurance, it means we pay for these people’s expensive emergency room visits.  If some businesses don’t provide workers health care, it forces the rest of us to pick up the tab when their workers get sick, and gives those businesses an unfair advantage over their competitors.  And unless everybody does their part, many of the insurance reforms we seek — especially requiring insurance companies to cover preexisting conditions — just can’t be achieved.

And that’s why under my plan, individuals will be required to carry basic health insurance — just as most states require you to carry auto insurance.  (Applause.)  Likewise — likewise, businesses will be required to either offer their workers health care, or chip in to help cover the cost of their workers.  There will be a hardship waiver for those individuals who still can’t afford coverage, and 95 percent of all small businesses, because of their size and narrow profit margin, would be exempt from these requirements.  (Applause.)  But we can’t have large businesses and individuals who can afford coverage game the system by avoiding responsibility to themselves or their employees.  Improving our health care system only works if everybody does their part.

And while there remain some significant details to be ironed out, I believe — (laughter) — I believe a broad consensus exists for the aspects of the plan I just outlined:  consumer protections for those with insurance, an exchange that allows individuals and small businesses to purchase affordable coverage, and a requirement that people who can afford insurance get insurance.

And I have no doubt that these reforms would greatly benefit Americans from all walks of life, as well as the economy as a whole.  Still, given all the misinformation that’s been spread over the past few months, I realize — (applause) — I realize that many Americans have grown nervous about reform.  So tonight I want to address some of the key controversies that are still out there.

Some of people’s concerns have grown out of bogus claims spread by those whose only agenda is to kill reform at any cost.  The best example is the claim made not just by radio and cable talk show hosts, but by prominent politicians, that we plan to set up panels of bureaucrats with the power to kill off senior citizens.  Now, such a charge would be laughable if it weren’t so cynical and irresponsible.  It is a lie, plain and simple.  (Applause.)

There are also those who claim that our reform efforts would insure illegal immigrants.  This, too, is false.  The reforms — the reforms I’m proposing would not apply to those who are here illegally.

AUDIENCE MEMBER:  You lie!  (Boos.)

THE PRESIDENT:  It’s not true.  And one more misunderstanding I want to clear up — under our plan, no federal dollars will be used to fund abortions, and federal conscience laws will remain in place.  (Applause.) 

Now, my health care proposal has also been attacked by some who oppose reform as a "government takeover" of the entire health care system.  As proof, critics point to a provision in our plan that allows the uninsured and small businesses to choose a publicly sponsored insurance option, administered by the government just like Medicaid or Medicare.  (Applause.)

So let me set the record straight here.  My guiding principle is, and always has been, that consumers do better when there is choice and competition.  That’s how the market works.  (Applause.)  Unfortunately, in 34 states, 75 percent of the insurance market is controlled by five or fewer companies.  In Alabama, almost 90 percent is controlled by just one company.  And without competition, the price of insurance goes up and quality goes down.  And it makes it easier for insurance companies to treat their customers badly — by cherry-picking the healthiest individuals and trying to drop the sickest, by overcharging small businesses who have no leverage, and by jacking up rates.

Insurance executives don’t do this because they’re bad people; they do it because it’s profitable.  As one former insurance executive testified before Congress, insurance companies are not only encouraged to find reasons to drop the seriously ill, they are rewarded for it.  All of this is in service of meeting what this former executive called "Wall Street’s relentless profit expectations."

Now, I have no interest in putting insurance companies out of business.  They provide a legitimate service, and employ a lot of our friends and neighbors.  I just want to hold them accountable.  (Applause.)  And the insurance reforms that I’ve already mentioned would do just that.  But an additional step we can take to keep insurance companies honest is by making a not-for-profit public option available in the insurance exchange.  (Applause.)  Now, let me be clear.  Let me be clear.  It would only be an option for those who don’t have insurance.  No one would be forced to choose it, and it would not impact those of you who already have insurance.  In fact, based on Congressional Budget Office estimates, we believe that less than 5 percent of Americans would sign up.

Despite all this, the insurance companies and their allies don’t like this idea.  They argue that these private companies can’t fairly compete with the government.  And they’d be right if taxpayers were subsidizing this public insurance option.  But they won’t be.  I’ve insisted that like any private insurance company, the public insurance option would have to be self-sufficient and rely on the premiums it collects.  But by avoiding some of the overhead that gets eaten up at private companies by profits and excessive administrative costs and executive salaries, it could provide a good deal for consumers, and would also keep pressure on private insurers to keep their policies affordable and treat their customers better, the same way public colleges and universities provide additional choice and competition to students without in any way inhibiting a vibrant system of private colleges and universities.  (Applause.)

Now, it is — it’s worth noting that a strong majority of Americans still favor a public insurance option of the sort I’ve proposed tonight.  But its impact shouldn’t be exaggerated — by the left or the right or the media.  It is only one part of my plan, and shouldn’t be used as a handy excuse for the usual Washington ideological battles.  To my progressive friends, I would remind you that for decades, the driving idea behind reform has been to end insurance company abuses and make coverage available for those without it.  (Applause.)  The public option — the public option is only a means to that end — and we should remain open to other ideas that accomplish our ultimate goal.  And to my Republican friends, I say that rather than making wild claims about a government takeover of health care, we should work together to address any legitimate concerns you may have.  (Applause.)

For example — for example, some have suggested that the public option go into effect only in those markets where insurance companies are not providing affordable policies.  Others have proposed a co-op or another non-profit entity to administer the plan.  These are all constructive ideas worth exploring.  But I will not back down on the basic principle that if Americans can’t find affordable coverage, we will provide you with a choice.  (Applause.)  And I will make sure that no government bureaucrat or insurance company bureaucrat gets between you and the care that you need.  (Applause.)

Finally, let me discuss an issue that is a great concern to me, to members of this chamber, and to the public — and that’s how we pay for this plan.

And here’s what you need to know.  First, I will not sign a plan that adds one dime to our deficits — either now or in the future.  (Applause.)  I will not sign it if it adds one dime to the deficit, now or in the future, period.  And to prove that I’m serious, there will be a provision in this plan that requires us to come forward with more spending cuts if the savings we promised don’t materialize.  (Applause.)  Now, part of the reason I faced a trillion-dollar deficit when I walked in the door of the White House is because too many initiatives over the last decade were not paid for — from the Iraq war to tax breaks for the wealthy.  (Applause.)  I will not make that same mistake with health care. 

Second, we’ve estimated that most of this plan can be paid for by finding savings within the existing health care system, a system that is currently full of waste and abuse.  Right now, too much of the hard-earned savings and tax dollars we spend on health care don’t make us any healthier.  That’s not my judgment — it’s the judgment of medical professionals across this country.  And this is also true when it comes to Medicare and Medicaid.

In fact, I want to speak directly to seniors for a moment, because Medicare is another issue that’s been subjected to demagoguery and distortion during the course of this debate.

More than four decades ago, this nation stood up for the principle that after a lifetime of hard work, our seniors should not be left to struggle with a pile of medical bills in their later years.  That’s how Medicare was born.  And it remains a sacred trust that must be passed down from one generation to the next.  (Applause.)  And that is why not a dollar of the Medicare trust fund will be used to pay for this plan.  (Applause.) 

The only thing this plan would eliminate is the hundreds of billions of dollars in waste and fraud, as well as unwarranted subsidies in Medicare that go to insurance companies — subsidies that do everything to pad their profits but don’t improve the care of seniors.  And we will also create an independent commission of doctors and medical experts charged with identifying more waste in the years ahead.  (Applause.)   

Now, these steps will ensure that you — America’s seniors — get the benefits you’ve been promised.  They will ensure that Medicare is there for future generations.  And we can use some of the savings to fill the gap in coverage that forces too many seniors to pay thousands of dollars a year out of their own pockets for prescription drugs.  (Applause.)  That’s what this plan will do for you.  So don’t pay attention to those scary stories about how your benefits will be cut, especially since some of the same folks who are spreading these tall tales have fought against Medicare in the past and just this year supported a budget that would essentially have turned Medicare into a privatized voucher program.  That will not happen on my watch.  I will protect Medicare.  (Applause.) 

Now, because Medicare is such a big part of the health care system, making the program more efficient can help usher in changes in the way we deliver health care that can reduce costs for everybody.  We have long known that some places — like the Intermountain Healthcare in Utah or the Geisinger Health System in rural Pennsylvania — offer high-quality care at costs below average.  So the commission can help encourage the adoption of these common-sense best practices by doctors and medical professionals throughout the system — everything from reducing hospital infection rates to encouraging better coordination between teams of doctors.

Reducing the waste and inefficiency in Medicare and Medicaid will pay for most of this plan.  (Applause.)  Now, much of the rest would be paid for with revenues from the very same drug and insurance companies that stand to benefit from tens of millions of new customers.  And this reform will charge insurance companies a fee for their most expensive policies, which will encourage them to provide greater value for the money — an idea which has the support of Democratic and Republican experts.  And according to these same experts, this modest change could help hold down the cost of health care for all of us in the long run.

Now, finally, many in this chamber — particularly on the Republican side of the aisle — have long insisted that reforming our medical malpractice laws can help bring down the cost of health care.  (Applause.)  Now — there you go.  There you go.  Now, I don’t believe malpractice reform is a silver bullet, but I’ve talked to enough doctors to know that defensive medicine may be contributing to unnecessary costs.  (Applause.)  So I’m proposing that we move forward on a range of ideas about how to put patient safety first and let doctors focus on practicing medicine.  (Applause.)  I know that the Bush administration considered authorizing demonstration projects in individual states to test these ideas.  I think it’s a good idea, and I’m directing my Secretary of Health and Human Services to move forward on this initiative today.  (Applause.)

Now, add it all up, and the plan I’m proposing will cost around $900 billion over 10 years — less than we have spent on the Iraq and Afghanistan wars, and less than the tax cuts for the wealthiest few Americans that Congress passed at the beginning of the previous administration.  (Applause.)  Now, most of these costs will be paid for with money already being spent — but spent badly — in the existing health care system.  The plan will not add to our deficit.  The middle class will realize greater security, not higher taxes.  And if we are able to slow the growth of health care costs by just one-tenth of 1 percent each year — one-tenth of 1 percent — it will actually reduce the deficit by $4 trillion over the long term.

Now, this is the plan I’m proposing.  It’s a plan that incorporates ideas from many of the people in this room tonight — Democrats and Republicans.  And I will continue to seek common ground in the weeks ahead.  If you come to me with a serious set of proposals, I will be there to listen.  My door is always open.

But know this:  I will not waste time with those who have made the calculation that it’s better politics to kill this plan than to improve it.  (Applause.)  I won’t stand by while the special interests use the same old tactics to keep things exactly the way they are.  If you misrepresent what’s in this plan, we will call you out.  (Applause.)  And I will not — and I will not accept the status quo as a solution.  Not this time.  Not now.

Everyone in this room knows what will happen if we do nothing.  Our deficit will grow.  More families will go bankrupt.  More businesses will close.  More Americans will lose their coverage when they are sick and need it the most.  And more will die as a result.  We know these things to be true.

That is why we cannot fail.  Because there are too many Americans counting on us to succeed — the ones who suffer silently, and the ones who shared their stories with us at town halls, in e-mails, and in letters.

I received one of those letters a few days ago.  It was from our beloved friend and colleague, Ted Kennedy.  He had written it back in May, shortly after he was told that his illness was terminal.  He asked that it be delivered upon his death.

In it, he spoke about what a happy time his last months were, thanks to the love and support of family and friends, his wife, Vicki, his amazing children, who are all here tonight.  And he expressed confidence that this would be the year that health care reform — "that great unfinished business of our society," he called it — would finally pass.  He repeated the truth that health care is decisive for our future prosperity, but he also reminded me that "it concerns more than material things."  "What we face," he wrote, "is above all a moral issue; at stake are not just the details of policy, but fundamental principles of social justice and the character of our country."

I’ve thought about that phrase quite a bit in recent days — the character of our country.  One of the unique and wonderful things about America has always been our self-reliance, our rugged individualism, our fierce defense of freedom and our healthy skepticism of government.  And figuring out the appropriate size and role of government has always been a source of rigorous and, yes, sometimes angry debate.  That’s our history.  

For some of Ted Kennedy’s critics, his brand of liberalism represented an affront to American liberty.  In their minds, his passion for universal health care was nothing more than a passion for big government.

But those of us who knew Teddy and worked with him here — people of both parties — know that what drove him was something more.  His friend Orrin Hatch — he knows that.  They worked together to provide children with health insurance.  His friend John McCain knows that.  They worked together on a Patient’s Bill of Rights.  His friend Chuck Grassley knows that.  They worked together to provide health care to children with disabilities.

On issues like these, Ted Kennedy’s passion was born not of some rigid ideology, but of his own experience.  It was the experience of having two children stricken with cancer.  He never forgot the sheer terror and helplessness that any parent feels when a child is badly sick.  And he was able to imagine what it must be like for those without insurance, what it would be like to have to say to a wife or a child or an aging parent, there is something that could make you better, but I just can’t afford it.

That large-heartedness — that concern and regard for the plight of others — is not a partisan feeling.  It’s not a Republican or a Democratic feeling.  It, too, is part of the American character — our ability to stand in other people’s shoes; a recognition that we are all in this together, and when fortune turns against one of us, others are there to lend a helping hand; a belief that in this country, hard work and responsibility should be rewarded by some measure of security and fair play; and an acknowledgment that sometimes government has to step in to help deliver on that promise.

This has always been the history of our progress.  In 1935, when over half of our seniors could not support themselves and millions had seen their savings wiped away, there were those who argued that Social Security would lead to socialism, but the men and women of Congress stood fast, and we are all the better for it.  In 1965, when some argued that Medicare represented a government takeover of health care, members of Congress — Democrats and Republicans — did not back down.  They joined together so that all of us could enter our golden years with some basic peace of mind. 

You see, our predecessors understood that government could not, and should not, solve every problem.  They understood that there are instances when the gains in security from government action are not worth the added constraints on our freedom.  But they also understood that the danger of too much government is matched by the perils of too little; that without the leavening hand of wise policy, markets can crash, monopolies can stifle competition, the vulnerable can be exploited.  And they knew that when any government measure, no matter how carefully crafted or beneficial, is subject to scorn; when any efforts to help people in need are attacked as un-American; when facts and reason are thrown overboard and only timidity passes for wisdom, and we can no longer even engage in a civil conversation with each other over the things that truly matter — that at that point we don’t merely lose our capacity to solve big challenges.  We lose something essential about ourselves.

That was true then.  It remains true today.  I understand how difficult this health care debate has been.  I know that many in this country are deeply skeptical that government is looking out for them.  I understand that the politically safe move would be to kick the can further down the road — to defer reform one more year, or one more election, or one more term.

But that is not what the moment calls for.  That’s not what we came here to do.  We did not come to fear the future.  We came here to shape it.  I still believe we can act even when it’s hard.  (Applause.)  I still believe — I still believe that we can act when it’s hard.  I still believe we can replace acrimony with civility, and gridlock with progress.  I still believe we can do great things, and that here and now we will meet history’s test.

Because that’s who we are.  That is our calling.  That is our character.  Thank you, God bless you, and may God bless the United States of America.  (Applause.)

END                9:03 P.M. EDT

Buffett: US Debt Threatens Economy

August 20, 2009 by · Leave a Comment 

WASHINGTON–Investor Warren Buffett said the US economy has avoided a meltdown and appears on a slow path to recovery, but Congress must deal with enormous debt that might erode US purchasing power.

In an opinion column published Wednesday by the New York Times, Buffett wrote that he “resoundingly applauds” actions by the Federal Reserve and the Bush and Obama administrations to pump trillions of dollars into the financial system.

But the “gusher of federal money” has run up a high level of debt that could fuel inflation, he said.

“The United States economy is now out of the emergency room and appears to be on a slow path to recovery,” Buffett wrote.

“But enormous dosages of monetary medicine continue to be administered and, before long, we will need to deal with their side effects. For now, most of those effects are invisible and could indeed remain latent for a long time. Still, their threat may be as ominous as that posed by the financial crisis itself.”

Buffett, who runs insurance and investment company Berkshire Hathaway Inc, likened the economic threat of “greenback emissions” to the environmental threat of greenhouse gas emissions, leaving the United States with a deficit of $1.8 trillion or 13 percent of gross domestic product this year.

In July, the government posted a $180.68 billion monthly budget deficit, a record for July, marking only the third time in the past 30 years that the government ran a deficit for 11 months in a row.

Buffett said a revived economy will not be able to generate enough revenues to bridge the gap between outlays and receipts, so changes in taxes and spending will be required.

Politicians will not likely have the will to raise taxes or slow spending, so they may opt to quietly let inflation increase, a move that will “confiscate” wealth and allow the United States to evolve into a “banana republic economy”, he said.

“Our immediate problem is to get our country back on its feet and flourishing — ‘whatever it takes’ still makes sense,” Buffet said in the paper.

But once recovery is gained, Congress must end the rise in the debt-to-GDP ratio and keep its growth in obligations in line with its growth in resources, he wrote.

“Unchecked carbon emissions will likely cause icebergs to melt. Unchecked greenback emissions will certainly cause the purchasing power of currency to melt. The dollar’s destiny lies with Congress,” he said.

Last month, in a newspaper column of his own, Federal Reserve chairman Ben Bernanke, said the huge amounts of money the U.S. central bank has pumped into the economy will not undercut its ability to push borrowing costs higher when the time is ripe.

Stressing that the weak U.S. economy will likely warrant exceptionally easy monetary policies for a long time to come, Bernanke outlined in a Wall Street Journal opinion article how the Fed could raise interest rates even with cash flooding the financial system.

“At some point, however, as economic recovery takes hold, we will need to tighten monetary policy to prevent the emergence of an inflation problem down the road,” Bernanke wrote.

The outline of the Fed’s “exit strategy” from the extraordinary monetary policy easing it has undertaken in the past two years to deal with the global financial crisis was the subject of testimony to Congress by Bernanke in his twice-a-year economic report on July 21.

Reuters

Modern DC Corruption … from “the select few”

July 16, 2009 by · Leave a Comment 

By Bill Moyers and Michael Winship, Truthout

greedy

If you want to know what really matters in Washington, don’t go to Capitol Hill for one of those hearings, or pay attention to those staged White House “town meetings.” They’re just for show. What really happens – the serious business of Washington – happens in the shadows, out of sight, off the record. Only occasionally – and usually only because someone high up stumbles – do we get a glimpse of just how pervasive the corruption has become.

Case in point: Katharine Weymouth, the publisher of The Washington Post – one of the most powerful people in DC – invited top officials from the White House, the Cabinet and Congress to her home for an intimate, off-the-record dinner to discuss health care reform with some of her reporters and editors covering the story.

But CEOs and lobbyists from the health care industry were invited, too, provided they forked over $25,000 a head – or up to a quarter of a million if they want to sponsor a whole series of these cozy get-togethers. And what is the inducement offered? Nothing less, the invitation read, than “an exclusive opportunity to participate in the health-care reform debate among the select few who will get it done.”

The invitation reminds the CEO’s and lobbyists that they will be buying access to “those powerful few in business and policy making who are forwarding, legislating and reporting on the issues …

“Spirited? Yes. Confrontational? No.” The invitation promises this private, intimate and off-the-record dinner is an extension “of The Washington Post brand of journalistic inquiry into the issues, a unique opportunity for stakeholders to hear and be heard.”

Let that sink in. In this case, the “stakeholders” in health care reform do not include the rabble – the folks across the country who actually need quality health care but can’t afford it. If any of them showed up at the kitchen door on the night of this little soiree, the bouncer would drop kick them beyond the Beltway.

No, before you can cross the threshold to reach “the select few who will actually get it done,” you must first cross the palm of some outstretched hand. The Washington Post dinner was canceled after a copy of the invite was leaked to the web site Politico.com, by a health care lobbyist, of all people. The paper said it was a misunderstanding – the document was a draft that had been mailed out prematurely by its marketing department. There’s noblesse oblige for you – blame it on the hired help.

In any case, it was enough to give us a glimpse into how things really work in Washington – a clear insight into why there is such a great disconnect between democracy and government today, between Washington and the rest of the country.

According to one poll after another, a majority of Americans not only want a public option in health care, they also think that growing inequality is bad for the country, that corporations have too much power over policy, that money in politics is the root of all evil, that working families and poor communities need and deserve public support if the market system fails to generate shared prosperity.

But, when the insiders in Washington have finished tearing worthy intentions apart and devouring flesh from bone, none of these reforms happen. “Oh,” they say, “it’s all about compromise. All in the nature of the give-and-take-negotiating of a representative democracy.”

That, people, is bull – the basic nutrient of Washington’s high and mighty.

It’s not about compromise. It’s not about what the public wants. It’s about money – the golden ticket to “the select few who actually get it done.”

When Congress passed the Helping Families Save Their Homes Act, “the select few” made sure it no longer contained the cramdown provision that would have allowed judges to readjust mortgages. The one provision that would have helped homeowners the most was removed in favor of an industry that pours hundreds of millions into political campaigns.

So, too, with a bill designed to protect us from terrorist attacks on chemical plants. With “the select few” dictating marching orders, hundreds of factories are being exempted from measures that would make them spend money to prevent the release of toxic clouds that could kill hundreds of thousands.

Everyone knows the credit ratings agencies were co-conspirators with Wall Street in the shameful wilding that brought on the financial meltdown. But when the Obama administration came up with new reforms to prevent another crisis, the credit ratings agencies were given a pass. They’d been excused by “the select few who actually get it done.”

And by the time an energy bill emerged from the House of Representatives the other day, “the select few who actually get it done” had given aw ay billions of dollars worth of emission permits and offsets. As The New York Times reported, while the legislation worked its way to the House floor, “It grew fat with compromises, carve-outs, concessions and out-and-out gifts,” expanding from 648 pages to 1,400 as it spread its largesse among big oil and gas, utility companies and agribusiness.

This week, the public interest groups Common Cause and the Center for Responsive Politics reported that, “According to lobby disclosure reports, 34 energy companies registered in the first quarter of 2009 to lobby Congress around the American Clean Energy and Security Act of 2009. This group of companies spent a total of $23.7 million – or $260,000 a day – lobbying members of Congress in January, February and March.

“Many of these same companies also made large contributions to the members of the Senate Environment and Public Works Committee, which has jurisdiction over the legislation and held a hearing this week on the proposed ‘cap and trade’ system energy companies are fighting. Data shows oil and gas companies, mining companies and electric utilities combined have given more than $2 million just to the 19 members of the Senate Environment and Public Works Committee since 2007, the start of the last full election cycle.”

It’s happening to health care as well. Even the pro-business magazine The Economist says America has the worst system in the developed world, controlled by exe cutives who are not held to account and investors whose primary goal is raising share price and increasing profit – while wasting $450 billion dollars in redundant administrative costs and leaving nearly 50 million uninsured.

Enter “the select few who actually get it done.” Three out of four of the big health care firms lobbying on Capitol Hill have former members of Congress or government staff members on the payroll – more than 350 of them – and they’re all fighting hard to prevent a public option, at a rate in excess of $1.4 million a day.

Health care policy has become insider heaven. Even Nancy-Ann DeParle, the White House health reform director, served on the boards of several major health care corporations.

President Obama has pushed hard for a public option but many fear he’s wavering, and just this week his chief of staff Rahm Emanuel – the insider di tutti insiders – indicated that a public plan just might be negotiable, ready for reengineering, no doubt, by “the select few who actually get it done.”

That’s how it works. And it works that way because we let it. The game goes on and the insiders keep dealing themselves winning hands. Nothing will change – nothing – until the moneylenders are tossed out of the temple, the ATM’s are wrested from the marble halls, and we tear down the sign they’ve placed on government – the one that reads, “For Sale.”

11-30

Obama’s Quiet War

June 27, 2009 by · 2 Comments 

By Jeremy Scahill

2009-06-19T075405Z_01_AAL103_RTRMDNP_3_PAKISTAN-VIOLENCE

An internally displaced woman, who fled a military offensive in the Swat valley region, walks the grounds of the UNHCR (United Nations High Commission for Refugees) Jalozai camp, about 140 km (87 miles) north west of Pakistan’s capital Islamabad, June 19, 2009.   

REUTERS/Ali Imam

In a new interview, Obama said he has “no intention” of sending US troops into Pakistan. But US troops are already in the country and US drones attack Pakistan regularly.

Three days after his inauguration, on January 23, 2009, President Barack Obama ordered US predator drones to attack sites inside of Pakistan, reportedly killing 15 people. It was the first documented attack ordered by the new US Commander in Chief inside of Pakistan. Since that first Obama-authorized attack, the US has regularly bombed Pakistan, killing scores of civilians. The New York Times reported that the attacks were clear evidence Obama “is continuing, and in some cases extending, Bush administration policy.” In the first 99 days of 2009, more than 150 people were reportedly killed in these drone attacks. The most recent documented attack was reportedly last Thursday in Waziristan. Since 2006, the US drone strikes have killed 687 people (as of April). That amounts to about 38 deaths a month just from drone attacks.

The use of these attack drones by Obama should not come as a surprise to anyone who followed his presidential campaign closely. As a candidate, Obama made clear that Pakistan’s sovereignty was subservient to US interests, saying he would attack with or without the approval of the Pakistani government. Obama said if the US had “actionable intelligence” that “high value” targets were in Pakistan, the US would attack. Secretary of State Hillary Clinton, echoed those sentiments on the campaign trail and “did not rule out U.S. attacks inside Pakistan, citing the missile attacks her husband, then- President Bill Clinton, ordered against Osama bin Laden in Afghanistan in 1998. ‘If we had actionable intelligence that Osama bin Laden or other high-value targets were in Pakistan I would ensure that they were targeted and killed or captured,’ she said.”

Last weekend, Obama granted his first extended interview with a Pakistani media outlet, the newspaper Dawn:

Responding to a question about drone attacks inside Pakistan’s tribal zone, Mr Obama said he did not comment on specific operations.

‘But I will tell you that we have no intention of sending US troops into Pakistan. Pakistan and its military are dealing with their security issues.’

There are a number of issues raised by this brief response offered by Obama. First, the only difference between using these attack drones and using actual US soldiers on the ground is that the soldiers are living beings. These drones sanitize war and reduce the US death toll while still unleashing military hell disproportionately on civilians. The bottom line is that the use of drones inside the borders of Pakistan amounts to the same violation of sovereignty that would result from sending US soldiers inside the country. Obama defended the attacks in the Dawn interview, saying:

“Our primary goal is to be a partner and a friend to Pakistan and to allow Pakistan to thrive on its own terms, respecting its own traditions, respecting its own culture. We simply want to make sure that our common enemies, which are extremists who would kill innocent civilians, that that kind of activity is stopped, and we believe that it has to be stopped whether it’s in the United States or in Pakistan or anywhere in the world.”

Despite Obama’s comments about respecting Pakistan “on its own terms,” this is how Reuters recently described the arrangement between Pakistan and the US regarding drone attacks:

U.S. ally Pakistan objects to the U.S. missile strikes, saying they violate its sovereignty and undermine efforts to deal with militancy because they inflame public anger and bolster support for the militants.

Washington says the missile strikes are carried out under an agreement with Islamabad that allows Pakistani leaders to publicly criticise the attacks. Pakistan denies any such agreement.

Pakistan is now one of the biggest recipients of US aid with the House of Representatives recently approving a tripling of money to Pakistan to about $1.5 billion a year for five years. Moreover, US special forces are already operating inside of Pakistan, along the Pakistan-Afghanistan border in Baluchistan. According to the Wall Street Journal, US Special Forces are:

training Pakistan’s Frontier Corps, a paramilitary force responsible for battling the Taliban and al Qaeda fighters, who cross freely between Afghanistan and Pakistan, the officials said. The U.S. trainers aren’t meant to fight alongside the Pakistanis or accompany them into battle, in part because there will be so few Special Forces personnel in the two training camps.

A senior American military officer said he hoped Islamabad would gradually allow the U.S. to expand its training footprint inside Pakistan’s borders.

In February, The New York Times reported that US forces are also engaged in other activities inside of Pakistan:

American Special Operations troops based in Afghanistan have also carried out a number of operations into Pakistan’s tribal areas since early September, when a commando raid that killed a number of militants was publicly condemned by Pakistani officials. According to a senior American military official, the commando missions since September have been primarily to gather intelligence.

It is clear-and has been for a long time- that the Obama administration is radically expanding the US war in Afghanistan deeply into Pakistan. Whether it is through US military trainers (that’s what they were called in Vietnam too), drone attacks or commando raids inside the country, the US is militarily entrenched in Pakistan. It makes Obama’s comment that “[W]e have no intention of sending US troops into Pakistan” simply unbelievable.

For a sense of how significant US operations are and will continue to be for years and years to come, just look at the US plan to build an almost $1 billion massive US “embassy” in Islamabad, which is reportedly modeled after the imperial city they call a US embassy in Baghdad. As we know very clearly from Iraq, such a complex will result in an immediate surge in the deployment of US soldiers, mercenaries and other contractors.

11-27

The American Empire Is Bankrupt

June 27, 2009 by · Leave a Comment 

By Chris Hedges

This week marks the end of the dollar’s reign as the world’s reserve currency. It marks the start of a terrible period of economic and political decline in the United States. And it signals the last gasp of the American imperium. That’s over. It is not coming back. And what is to come will be very, very painful.

Barack Obama, and the criminal class on Wall Street, aided by a corporate media that continues to peddle fatuous gossip and trash talk as news while we endure the greatest economic crisis in our history, may have fooled us, but the rest of the world knows we are bankrupt. And these nations are damned if they are going to continue to prop up an inflated dollar and sustain the massive federal budget deficits, swollen to over $2 trillion, which fund America’s imperial expansion in Eurasia and our system of casino capitalism. They have us by the throat. They are about to squeeze.

There are meetings being held Monday and Tuesday in Yekaterinburg, Russia, (formerly Sverdlovsk) among Chinese President Hu Jintao, Russian President Dmitry Medvedev and other top officials of the six-nation Shanghai Cooperation Organization. The United States, which asked to attend, was denied admittance. Watch what happens there carefully. The gathering is, in the words of economist Michael Hudson, “the most important meeting of the 21st century so far.”

It is the first formal step by our major trading partners to replace the dollar as the world’s reserve currency. If they succeed, the dollar will dramatically plummet in value, the cost of imports, including oil, will skyrocket, interest rates will climb and jobs will hemorrhage at a rate that will make the last few months look like boom times. State and federal services will be reduced or shut down for lack of funds. The United States will begin to resemble the Weimar Republic or Zimbabwe. Obama, endowed by many with the qualities of a savior, will suddenly look pitiful, inept and weak. And the rage that has kindled a handful of shootings and hate crimes in the past few weeks will engulf vast segments of a disenfranchised and bewildered working and middle class. The people of this class will demand vengeance, radical change, order and moral renewal, which an array of proto-fascists, from the Christian right to the goons who disseminate hate talk on Fox News, will assure the country they will impose.

I called Hudson, who has an article in Monday’s Financial Times called The Yekaterinburg Turning Point: De-Dollarization and the Ending of America’s Financial-Military Hegemony. “Yekaterinburg,” Hudson writes, “may become known not only as the death place of the czars but of the American empire as well.” His article is worth reading, along with John Lanchester’s disturbing exposé of the world’s banking system, titled “It’s Finished,” which appeared in the May 28 issue of the London Review of Books.

“This means the end of the dollar,” Hudson told me. “It means China, Russia, India, Pakistan, Iran are forming an official financial and military area to get America out of Eurasia. The balance-of-payments deficit is mainly military in nature. Half of America’s discretionary spending is military. The deficit ends up in the hands of foreign banks, central banks. They don’t have any choice but to recycle the money to buy U.S. government debt. The Asian countries have been financing their own military encirclement. They have been forced to accept dollars that have no chance of being repaid. They are paying for America’s military aggression against them. They want to get rid of this.”

China, as Hudson points out, has already struck bilateral trade deals with Brazil and Malaysia to denominate their trade in China’s yuan rather than the dollar, pound or euro. Russia promises to begin trading in the ruble and local currencies. The governor of China’s central bank has openly called for the abandonment of the dollar as reserve currency, suggesting in its place the use of the International Monetary Fund’s Special Drawing Rights. What the new system will be remains unclear, but the flight from the dollar has clearly begun. The goal, in the words of the Russian president, is to build a “multipolar world order” which will break the economic and, by extension, military domination by the United States. China is frantically spending its dollar reserves to buy factories and property around the globe so it can unload its U.S. currency. This is why Aluminum Corp. of China made so many major concessions in the failed attempt to salvage its $19.5 billion alliance with the Rio Tinto mining concern in Australia. It desperately needs to shed its dollars.

“China is trying to get rid of all the dollars they can in a trash-for-resource deal,” Hudson said. “They will give the dollars to countries willing to sell off their resources since America refuses to sell any of its high-tech industries, even Unocal, to the yellow peril. It realizes these dollars are going to be worthless pretty quickly.”

The architects of this new global exchange realize that if they break the dollar they also break America’s military domination. Our military spending cannot be sustained without this cycle of heavy borrowing. The official U.S. defense budget for fiscal year 2008 is $623 billion, before we add on things like nuclear research. The next closest national military budget is China’s, at $65 billion, according to the Central Intelligence Agency.

There are three categories of the balance-of-payment deficits. America imports more than it exports. This is trade. Wall Street and American corporations buy up foreign companies. This is capital movement. The third and most important balance-of-payment deficit for the past 50 years has been Pentagon spending abroad. It is primarily military spending that has been responsible for the balance-of-payments deficit for the last five decades. Look at table five in the Balance of Payments Report, published in the Survey of Current Business quarterly, and check under military spending. There you can see the deficit.

To fund our permanent war economy, we have been flooding the world with dollars. The foreign recipients turn the dollars over to their central banks for local currency. The central banks then have a problem. If a central bank does not spend the money in the United States then the exchange rate against the dollar will go up. This will penalize exporters. This has allowed America to print money without restraint to buy imports and foreign companies, fund our military expansion and ensure that foreign nations like China continue to buy our treasury bonds. This cycle appears now to be over. Once the dollar cannot flood central banks and no one buys our treasury bonds, our empire collapses. The profligate spending on the military, some $1 trillion when everything is counted, will be unsustainable.

“We will have to finance our own military spending,” Hudson warned, “and the only way to do this will be to sharply cut back wage rates. The class war is back in business. Wall Street understands that. This is why it had Bush and Obama give it $10 trillion in a huge rip-off so it can have enough money to survive.”

The desperate effort to borrow our way out of financial collapse has promoted a level of state intervention unseen since World War II. It has also led us into uncharted territory.

“We have in effect had to declare war to get us out of the hole created by our economic system,” Lanchester wrote in the London Review of Books. “There is no model or precedent for this, and no way to argue that it’s all right really, because under such-and-such a model of capitalism … there is no such model. It isn’t supposed to work like this, and there is no road-map for what’s happened.”

The cost of daily living, from buying food to getting medical care, will become difficult for all but a few as the dollar plunges. States and cities will see their pension funds drained and finally shut down. The government will be forced to sell off infrastructure, including roads and transport, to private corporations. We will be increasingly charged by privatized utilities—think Enron—for what was once regulated and subsidized. Commercial and private real estate will be worth less than half its current value. The negative equity that already plagues 25 percent of American homes will expand to include nearly all property owners. It will be difficult to borrow and impossible to sell real estate unless we accept massive losses. There will be block after block of empty stores and boarded-up houses. Foreclosures will be epidemic. There will be long lines at soup kitchens and many, many homeless. Our corporate-controlled media, already banal and trivial, will work overtime to anesthetize us with useless gossip, spectacles, sex, gratuitous violence, fear and tawdry junk politics. America will be composed of a large dispossessed underclass and a tiny empowered oligarchy that will run a ruthless and brutal system of neo-feudalism from secure compounds. Those who resist will be silenced, many by force. We will pay a terrible price, and we will pay this price soon, for the gross malfeasance of our power elite. 

11-27

Green Shoots?

June 18, 2009 by · Leave a Comment 

By Bob Wood, MMNS

If you’ve spent any time listening to the financial drones recite the rationale for buying stocks now, you might be just about as sick as I am of hearing about so-called “green shoots.” To me, this is just one more disingenuous way to sell you things you shouldn’t be buying.

Every market cycle brings with it a new trend, a strategy devised by Wall Street in order to keep you invested when you should get out or convince you to buy when you should not. The “green shoots” concept is the latest strategy following the demise of the now discredited “Goldilocks” nonsense pounded into our heads by those encouraging us to remain invested as the Dow ascended to its all-time high in late 2007. Once Goldilocks’ obituary had been written, promoters needed to find another angle, another trend for investors to follow. Of course, Goldilocks had only served as a replacement strategy once “the only risk in tech stocks is not owning them” premise failed in the late 1990’s. So “green shoots” it is, at least for now.

Although perennial optimists may find reasons for hope, they should remember that some green shoots wither and die before blossoming into something beautiful. Some have even been known to sprout in barren wastelands. I am about as sure as I can be that these tiny signs of life will soon die out just as investors begin hoping for another meager inch or two of growth.

There are just too many obstacles in the way of an impending economic recovery. The notion that positive signs abound seems like wishful thinking, like placing a higher value on hope than fact in the push to keep investors interested in high-priced stocks that should be avoided.

I have been filling this space for the past 6 ½ years with my beliefs in secular trends, and the idea that domestic markets are squarely in the throes of a long-term bear market. Today, I think my point has been resoundingly made. I’ve explained how few investors ever make money in stocks, regardless of whether we’re in a secular bull or bear market. I think I’ve made my point there, too.

I’m convinced that many investors fail in the long run due not only to the nature of secular bear markets, but also the rampant corruption that appears to permeate even the highest levels of Wall Street and Washington, D.C.

From the ‘’dotcom boom’’ and the ensuing meltdown that wiped out many thousands of investors, to the housing boom that imploded and took many more to the cleaners, domestic markets have simply not rewarded traditional “buy and hold” investors. Many have seen their retirement dreams dashed, even if they truly tried to do all of the right things. Millions of them saved, invested, diversified, and perhaps even hired a professional or two to manage their savings.

And virtually all for naught, and isn’t that how it always seems to happen? This latest round of economic disappointment brings with it invaluable lessons on why the deck is stacked against investors in ways not likely to end any time soon.

In his financial blog, market strategist Barry Ritholtz (www.ritholtz.com/blog) included this excerpt from his new book, Bailout Nation, (http://bailoutnation.net/) about how we got to this point and what triggered catastrophic losses throughout our financial system:

“We’ve come a long way from the days when the man atop the organizational chart   made 40 times what the person on the lowest rung earned. Over the past few    decades, executive compensation has exploded, with some CEOs taking 200, 300, even 400 times the base pay at the company.

With so much of this compensation made via options-based incentives, the bosses     had every reason to swing for the fences. The upside was all theirs, and the downside was   the shareholders’—and taxpayers’.

But don’t for a moment think their terrible track record had a negative impact on their compensation. Despite their performance, these CEOs were paid as if they were enormous successes. The compensation figures that follow are enormous; that they were   paid for such abject failure is a national embarrassment.
It is also an indictment of three major corporate governance issues that have not been discussed widely enough. The first is the crony capitalism that was rife in boardrooms across the United States. The cronyism of major corporate boards, especially those in the finance area, has become legendary. Rubber-stamp directors who rarely buck the chairman or challenge the CEO are unfortunately all too common. These boards did not serve either their companies or their shareholders well.

Also enabling this festival of greed are the large institutions that held the companies’ stock, most especially the big mutual funds that have been AWOL when it comes to policing the senior management. They have the time, expertise, and incentives to do so; it is beyond the capability of individual shareholders. Besides, it makes no economic sense for someone who owns 100 or 1,000 shares of stock to act as overseer and scold to corporate boards. But it was squarely in   the interest of owners of 10 million shares and up to do so. Why the mutual fund complexes failed to protect their shareholders is hard to fathom. Perhaps when it comes to the finance sector, they feared missing out on syndicate deals and hot IPOs if they asked too many questions.

Then there are the so-called compensation consultants. They did a horrific disservice to the shareholders as well as the companies. The role of these primarily ethicless weasels was to give cover for these ridiculous compensation packages. I would love to see a review of the packages as written back then. If the compensation experts were members of an actual profession with standards and ethics, they would be drummed out of that profession. Instead, these people were merely tools used by the C-level execs to transfer vast sums of wealth from the shareholders to themselves.’’

I couldn’t have said it better myself, which has everything to do with why I chose to quote Mr. Ritholtz instead. Unfortunately, this type of scenario is nothing new in America’s business environment, nor has our government done much to prevent the type of shareholder abuse we’ve witnessed over the past two decades. Most regulations were either ignored or watered down so business (at least for the top echelon) could continue as usual, with business and government leaders getting what they wanted all along.

Talk of “green shoots” ignores the fact that very little has changed, and greed, corruption, and meaningful lack of oversight is just one more obstacle for investors to maneuver. How can investors possibly hope to gain from working with a financial system so completely rigged against them?

And why should they even bother trying? I feel great about being out of the domestic markets on both the long and short sides. If the game is rigged, I say why play in it? There are plenty of options to consider, and by now you may have grown tired of hearing about my devotion to investing in international and emerging markets.

But again, results matter, and again, those markets are strongly outperforming our domestic market. Many are higher today than they were at the dawn of this decade. And that’s a strong signal that they’re in the throes of secular bull markets.

I am often asked how I know that foreign markets are more honest and fair than our home markets. My response? “How can they be any less honest than what we’ve seen here, time and time again?”

I’ll take my chances there, but of course, given the structural challenges here and how a resumption of the bear market will affect all equity markets, I prefer to tread softly. I am heavier in cash than I have ever been before, with cash positions representing well over 50% of all capital managed here. Of course, rising commodity prices will slow growth all over the world, but even more so in the U.S.

And given the enormous debt loads to be managed here, a bankrupt government, and a complete failure of leadership, everywhere else still looks better.

Have a great week.

Bob

Bob Wood ChFC, CLU Yusuf Kadiwala. Registered Investment Advisors, KMA, Inc., invest@muslimobserver.com.

11-26

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