Eliot Spitzer: The Fed Is a Ponzi Scheme

Do not miss out on this MSNBC video! Former New York Governor Eliot Spitzer says the Fed is a Ponzi scheme and the guys in the studio depict the fatal flaw of the Fed's strategy. Using cheques and a garbage bag, finance can become easily understood. Enjoy the full 8:38 minutes.

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It certainly is only a coincidence that Spitzer was pressured to step down at the time he had become a persistent nuisance for all those banks that had overleveraged.
Spitzer was exposed for using an escort service and resigned from his governor's post on March 17, 2008. Justice must have become heavily imbalanced in the USA when the former White House occupators under George W. Bush get away with torture and several hundred thousand civilians killed in far-off places in the name of petro-theism.

Gulf spill: Tar balls spark partial shrimping ban

Closed area lies just north of BP well that leaked 170 million gallons of oil

NEW ORLEANS — An area off the Gulf Coast hit hard by the BP oil spill was closed Wednesday to fishing for a deepwater shrimp species after a skipper hauled up tar balls in his net, federal regulators said.

The National Oceanic and Atmospheric Administration said it was closing 4,213 square miles to royal red shrimping "out of an abundance of caution." Royal red shrimp are caught by only a handful of fishermen and they are not one of the main species found on tables across the Gulf Coast. The closed area is one of only a handful of spots where fishermen catch royal red shrimp.

The closed area is off the coasts of Louisiana, Mississippi, and Alabama and lies just north of the BP PLC well that leaked more than 170 million gallons of oil into the Gulf. The leak was set off by an April 20 oil rig explosion that killed 11 workers.

An Alabama skipper reported finding about a half-dozen tar balls in his net Nov. 20, said Karrie Carnes, a NOAA spokeswoman. It took several days to confirm the findings and issue an emergency closure, she said. During that period, she said royal red shrimp fishermen were told about the pending closure and officials made sure no royal red made it to market.

NOAA said the Coast Guard was analyzing the tar balls to determine if they came from oil spilled after the Deepwater Horizon rig explosion.

John Stein, the director of NOAA's seafood safety program, said inspectors at a Pascagoula, Miss., laboratory, where Gulf seafood has been tested since the spill, found no evidence of oil on the shrimp the Alabama fisherman hauled in with the tar balls.

"There was no odor of oil on the shrimp," Stein said.

It was the first closure of a fishery in the Gulf since July 12, Carnes said. NOAA has since gradually reopened most of the area that was closed to commercial and recreational fishing in the wake of the BP spill that saw almost 5 million barrels of oil surge into the sea.

NOAA said that at its peak in early June, more than 88,000 square miles of Gulf waters had been closed to fishing. The only area still closed to fishing due to the spill is a 1,041 square mile patch immediately around the BP well site.

Royal red shrimp live in deeper waters and about 250 fishermen are licensed to catch them in the Gulf, but NOAA said only a handful of fishermen are working at the moment. Those type of shrimp are caught by dragging nets across the bottom of the seafloor. NOAA said fishing is still allowed in shallower waters in the closed area.

'What did they expect?'
George Barisich, the head of the United Commercial Fisherman's Association in Louisiana, said he was not surprised by the discovery of tar balls. Barisich does not catch red royal shrimp.

"What did they expect? It all went away?" Barisich said, deriding federal and state officials for repeatedly saying the oil was gone as they reopened the vast majority of the Gulf in recent weeks.

"The more people who go to work, the more we'll find," Barisich said. "The reason we're not finding (the oil) is because" so few fishermen are working.

Roy Crabtree, a NOAA official who oversees fisheries in the Gulf, said there have been no other reports of tar balls.

"We are taking this situation seriously," Crabtree said. "This fishery is the only trawl fishery that operates at the deep depths where the tar balls were found and we have not received reports of any other gear or fishery interactions with tar balls.

"Our primary concerns are public safety and ensuring the integrity of the Gulf's seafood supply."

Stein said NOAA would send boats to the closed area next week to do sampling. He said the area would be reopened to royal red shrimping only once it was deemed safe.

The Associated Press and Reuters contributed to this report.

EU rescue costs start to threaten Germany itself

The escalating debt crisis on the eurozone periphery is starting to contaminate the creditworthiness of Germany and the core states of monetary union.

Chancellor Angela Merkel would risk popular fury if she had to raise fresh funds for eurozone debtors at a time of welfare cuts in Germany.

Credit default swaps (CDS) measuring risk on German, French and Dutch bonds have surged over recent days, rising significantly above the levels of non-EMU states in Scandinavia.

"Germany cannot keep paying for bail-outs without going bankrupt itself," said Professor Wilhelm Hankel, of Frankfurt University. "This is frightening people. You cannot find a bank safe deposit box in Germany because every single one has already been taken and stuffed with gold and silver. It is like an underground Switzerland within our borders. People have terrible memories of 1948 and 1923 when they lost their savings."

The refrain was picked up this week by German finance minister Wolfgang Schäuble. "We're not swimming in money, we're drowning in debts," he told the Bundestag.

While Germany's public and private debt is not extreme, it is very high for a country on the cusp of an acute ageing crisis. Adjusted for demographics, Germany is already one of the most indebted nations in the world.

Reports that EU officials are hatching plans to double the size of EU's €440bn (£373bn) rescue mechanism have inevitably caused outrage in Germany. Brussels has denied the claims, but the story has refused to die precisely because markets know the European Financial Stability Facility (EFSF) cannot cope with the all too possible event of a triple bail-out for Ireland, Portugal and Spain.

EU leaders hoped this moment would never come when they launched their "shock and awe" fund last May. The pledge alone was supposed to be enough. But EU proposals in late October for creditor "haircuts" have set off capital flight, or a "buyers' strike" in the words of Klaus Regling, head of the EFSF.

Those at the coal-face of the bond markets are certain Portugal will need a rescue. Spain is in danger as yields on 10-year bonds punch to a post-EMU record of 5.2pc.

Axel Weber, Bundesbank chief, seemed to concede this week that Portugal and Spain would need bail-outs when he said that EMU governments may have to put up more money to bolster the fund. "€750bn should be enough. If not, we could increase it. The governments will do what is necessary," he said.

Whether governments will, in fact, write a fresh cheque is open to question. Chancellor Angela Merkel would risk popular fury if she had to raise fresh funds for eurozone debtors at a time of welfare cuts in Germany. She faces a string of regional elections where her Christian Democrats are struggling.

Mr Weber rowed back on Thursday saying that a "worst-case scenario" of triple bail-outs would require a €140bn top-up for the fund. This assurance is unlikely to soothe investors already wondering how Italy could avoid contagion in such circumstances.

"Italy is in a lot of pain," said Stefano di Domizio, from Lombard Street Research. "Bond yields have been going up 10 basis points a day and spreads are now the highest since the launch of EMU. We're talking about €2 trillion of debt so Rome has to tap the market often, and that is the problem."

The great question is at what point Germany concludes that it cannot bear the mounting burden any longer. "I am worried that Germany's authorities are slowly losing sight of the European common good," said Jean-Claude Juncker, chair of Eurogroup finance ministers.

Europe's fate may be decided soon by the German constitutional court as it rules on a clutch of cases challenging the legality of the Greek bail-out, the EFSF machinery, and ECB bond purchases.

"There has been a clear violation of the law and no judge can ignore that," said Prof Hankel, a co-author of one of the complaints. "I am convinced the court will forbid future payments."

If he is right – we may learn in February – the EU debt crisis will take a dramatic new turn.

The U.S. Economy: Stand by for more worse news

A top economic adviser to the Democratic Party, speaking on deep background, told WMR that the domino-like collapse of the economies of Iceland, Greece, Ireland, and, now, possibly Spain, is coming also to the United States.

One of the triggering mechanisms will be at the end of this month when two million idled workers, now collecting unemployment, will be dropped from the rolls. At the end of December, another two million workers will join the ranks of those who have exhausted their unemployment benefits and a total of 4 million Americans will be without unemployment checks and face destitution.

Four million Americans will put financial pressure on municipalities and state governments already facing bankruptcy. Unlike Iceland, Ireland, Greece, Portugal, and, to some extent, Spain, which have strong central government control, the United States is a federal republic and, as such, the collapse of the economy will be state-by-state and begin at the municipality level, according to our source who has contacts within the Obama White House and the Democratic leadership of the Congress.

Municipalities, which guarantee the pensions of their retired employees through the issuance of municipal bonds, will find themselves faced with bankruptcy and the "Muni" bonds will be rated at junk status. Municipalities unable to pay out pensions will discover their pension funds can be bailed out by the Pension Benefit Guaranty Corporation (PBGC) in Washington, a federal corporation set up by the Employee Retirement Income Security Act of 1974.When the first municipality declares bankruptcy and seeks a bailout from the PBGC, there will be a domino effect, with others seeing it as a quick way out. Soon, the PBGC will, itself, be forced into bankruptcy. WMR has been told by our source it is doubtful that a Republican Congress will be interested in bailing out the PBGC.

The wildfire of municipality bankruptcies will then spread to the states, with California and Illinois likely to be the first two states to default on their debts and declare bankruptcy.

In order to raise quick cash for a financially-desperate state government, California Governor Arnold Schwarzenegger plans to sell 24 state buildings, including the Earl Warren Building in San Francisco, headquarters for the California Supreme Court, and then rent them back from the new owners. However, such desperate moves by states, including the selling off of their turnpike systems and state buildings — with parks maybe next on the auction block — is not enough to forestall bankruptcy. Unlike the federal government, which can print as much cash as it likes and needs, states do not have that luxury. However, given the imminent collapse of the national economy, some states may decide to print their own currency, an act that would lead to the dissolution of the present 50-state union.

As far as bank accounts are concerned, our source recommended avoiding large national and regional banks that have a high percentage of toxic assets, especially in the commercial real estate area. The next major bust, after the residential real estate plunge, will be commercial real estate, where values of buildings and shopping centers have been halved. Our source sees smaller, state-based banks, as safer for account holders. Also, as more and more large shopping malls begin to close across the country, the unemployment numbers will also skyrocket.

WMR was also informed that President Obama will not seize the bully pulpit and level with the American people about who and what caused the present economic crisis. "Obama is subservient to his teleprompter," the White House insider source said, "if he'd scrap the teleprompter and speak directly to the American people, he might help things, but right now, he's a disaster."

Wayne Madsen is a Washington, DC-based investigative journalist, author and syndicated columnist. He has written for several renowned papers and blogs.

Madsen is a regular contributor on Russia Today. He has been a frequent political and national security commentator on Fox News and has also appeared on ABC, NBC, CBS, PBS, CNN, BBC, Al Jazeera, and MS-NBC. Madsen has taken on Bill O’Reilly and Sean Hannity on their television shows. He has been invited to testifty as a witness before the US House of Representatives, the UN Criminal Tribunal for Rwanda, and an terrorism investigation panel of the French government.

As a U.S. Naval Officer, he managed one of the first computer security programs for the U.S. Navy. He subsequently worked for the National Security Agency, the Naval Data Automation Command, Department of State, RCA Corporation, and Computer Sciences Corporation.

Madsen is a member of the Society of Professional Journalists (SPJ), Association for Intelligence Officers (AFIO), and the National Press Club. He is a regular contributor to Opinion Maker.

Next Debt Crisis May Start in Washington: Bair

The US needs to take urgent action to cut its debt in order to prevent the next financial crisis, which may start in Washington, Sheila Bair, chair of the Federal Deposits Insurance Corp. (FDIC) wrote in an editorial in the Washington Post.

The federal debt has doubled over the past seven years, to almost $14 trillion, and the growth is a result of both the financial crisis and the government's "unwillingness over many years to make the hard choices necessary to rein in our long-term structural deficit," Bair wrote.

Retiring baby boomers will impact government spending heavily and this year, combined spending on Social Security, Medicare and Medicaid are expected to make up 45 percent of primary federal spending, compared with 27 percent in 1975, she explained.

"Defense spending is similarly unsustainable, and our tax code is riddled with special-interest provisions that have little to do with our broader economic prosperity," Bair wrote. "Overly generous tax subsidies for housing and health care have contributed to rising costs and misallocation of resources."

If no action is taken, US federal debt held by the public could rise from 62 percent of gross domestic product this year to 185 percent in 2035, she warned.

"Eventually, this relentless federal borrowing will directly threaten our financial stability by undermining the confidence that investors have in U.S. government obligations," Bair said.

Portuguese austerity plan, imminent Irish bailout deal fail to alleviate European debt crisis

LISBON, Portugal (AP) — Europe struggled mightily Friday to keep the debt crisis from engulfing country after country. Portugal passed austerity measures to fend off the speculative trades pushing it toward a bailout and Ireland rushed to negotiate its own imminent rescue.

As Portugal and Spain insisted they will not seek outside help, creating an eery sense of deja-vu for investors, Europe braced for what seems inevitable — more expensive bailouts.

The Portuguese Parliament approved an unpopular debt-reducing package, including tax hikes and cuts in pay and welfare benefits. But while that helped to avoid a sharper deterioration in bond markets, the sense among analysts was that the move had only bought a little time.

Adding to the pressure, Ireland's major banks were hit with credit downgrades — one to junk bond status — as speculation mounted that the EU-IMF bailout of Ireland, to be revealed within days, would require investors to take losses, a possibility earlier denied by officials.

"This confusing 'pea-soup' of indecision, vacillation and disunity by the EU is beginning to create unnecessarily seismic waves of fear in international bond and money markets," said David Buik, markets analyst at BGC Partners.

Yields in fiscally weak eurozone countries remained near record highs Friday, stocks slumped across the board and the 16-nation euro lost another 0.8 percent on the day to trade at $1.3241, just off two-month lows.

Portugal's high debt and low growth have alarmed investors, but the government insists it doesn't require an international rescue — a line ominously reminiscent of claims by Greece and Ireland before their massive rescues.

Analysts say markets need more reassurance from EU leaders that the rot can be stopped in Portugal before spreading to Spain, the continent's fourth-largest economy — a scenario that would threaten the 16-nation euro currency itself.

The financial crisis took a step in that direction this week, as it increasingly becomes apparent that bond investors will not be pacified by austerity measures but want weak countries' public finances to be plugged once and for all. Greece, which accepted a bailout six months ago, and Ireland are still far from being able to return to international debt markets.

Ireland wallowed in political turmoil Friday, frightening investors with the prospect of a power vacuum even as it must pass its bailout and austerity plan.

Prime Minister Brian Cowen saw his hold on power slip another notch, as his ruling Fianna Fail party lost a special election for a long-empty seat in parliament. The winner vowed to force Cowen from office before he can pass an emergency 2011 budget being demanded as part of the international rescue.

Dublin still negotiated the final details of an ?85 billion ($113 billion) EU-IMF rescue package, which is expected to be presented within days. Bonds yields rose to a new euro-era high of 9.19 percent, up from 9.02 percent the day before, as investors dumped Ireland's debt.

The New York-based Standard & Poor's credit ratings agency said it was lowering Anglo Irish Bank six notches to a junk-bond B grade. It also cut the ratings on Bank of Ireland one notch to BBB+, and downgraded both Allied Irish Banks and Irish Life & Permanent one notch to BBB.

The agency said Ireland "may be forced to reconsider its current supportive stance toward Anglo's unguaranteed debt."

"There really is a serious question as to whether Anglo Irish Bank should even have a banking license," said Constantin Gurdgiev, a finance lecturer at Trinity College Dublin.

Portugal's Finance Minister Fernando Teixeira dos Santos acknowledged that some in Europe didn't agree with his government's refusal to consider a bailout.

"There are those among our (EU) partners who think the best way to ensure the euro's stability is to push and force those countries which are most in the spotlight to accept assistance," he was quoted as saying in the Jornal de Noticias newspaper Friday.

The European Commission, the European Central Bank and the German government all denied they were pressuring Portugal to take financial aid.

Portuguese Prime Minister Jose Socrates said after Parliament approved the 2011 spending plan that the country had "no alternative at all" to the belt-tightening.

"We must make this effort," Socrates said.

Teixeira dos Santos said he reckoned Portugal, which also suffered a major strike this week by disgruntled workers, has six months to show markets it can bring spending under control.

Analysts, however, say Portugal could face the need for a bailout as early as January.

Markets have been jaded by policymakers' lack of coherence and determination in their response to the debt crisis. So when Spanish Prime Minister Jose Luis Rodriguez Zapatero on Friday declared that there is "absolutely" no chance Spain will seek a bailout, the statement failed to instill confidence.

The yield on Spain's 10-year bonds hovered around 5.2 percent. By contrast, Germany's 10-year bond yield — a benchmark of lending safety — stood at only 2.7 percent.

"Markets remain nervous, and the key to a stabilization in the euro and other global currencies likely hinges on whether we can see some stabilization in eurozone government bond markets in the coming days," said Nick Bennenbroek, head of currency strategy at Wells Fargo.

Though Portugal's banks are said to be sound and the country's budget deficit last year was lower than those of Greece, Ireland and Spain, its high debt load compared to its gross domestic product and its meager growth of around 1 percent a year have made it vulnerable to market jitters. Portugal also has a record of poor financial management.

That contributed to a rise in the yield on Portugal's 10-year bonds to a euro-era record of 7.045 percent Friday before it fell back slightly.

The prime minister said Portugal is on track to lower its budget deficit to 7.3 percent of GDP this year from 9.6 percent last year, the fourth highest in the eurozone. For 2011, Portugal's aim is to lower its deficit to 4.6 percent, below the EU average.

____

Protesters hit Italian streets a 2nd day

ROME, Nov. 25 (UPI) -- Students and teachers opposed to government reforms took to the streets for a second day Thursday, staging protests in cities across Italy, authorities said.

"People like me will no longer exist," Euronews quoted one demonstrator as saying. "Researchers with a permanent contract will disappear, replaced by people hired on short-term contracts. Job precariousness will continue."

The Daily Telegraph reported students blocked entrance to the Colosseum in Rome and the Leaning Tower of Pisa, and rallied in cities across the country in opposition to spending cuts planned by the government of Prime Minister Silvio Berlusconi.

The British newspaper said demonstrators and police clashed in Milan, Florence and Bologna. In Turin and Palermo, participants blocked traffic and set off smoke bombs, while students occupied university buildings in Naples, Ancona and Cagliari.

Italian Education Minister Mariastella Gelmini defended the reform package, saying it would make universities more meritocratic and efficient.

The demonstrations come ahead of confidence votes in parliament to be held Dec. 14 that could lead to early elections.

Thursday's protests followed one in Rome Wednesday during which more than 2,000 students stormed the Italian Senate, protesting the proposed education cuts and calling on the education minister to resign.

They forced their way through the entrance door to the Italian Parliament's upper house Wednesday and threw tear gas, eggs and stones at the windows, state-owned RAI, Radiotelevisione Italiana, reported.

Police used batons to stop the students from reaching the lower house, the independent news agency ANSA reported.

Outside, the students set off smoke bombs and threw eggs at the building.

Eight police officers and several students were injured, ANSA said. At least two students were arrested and 27 were referred to criminal prosecutors, the news agency said.

During the protest, some students chanted "resign, resign," a call ANSA said was directed at Gelmini.

"The government is strangling us but we will set ourselves free from its tyranny," some students with ropes around their necks shouted.

Gelmini contends the cuts are needed to rein in public spending and reduce Italy's deficit.

"These protesters are in danger of defending the baronies, privileges and the status quo," she said.

The violence followed a one-day, nationwide student strike marred by vandalism in some cities last week. Students also demonstrated against the education cuts in major Italian cities Oct. 8.

The protest Wednesday coincided with protests across Britain in which thousands of students walked out of classes and marched to protest the government's plans to cut education spending and steeply increase university tuition. It was the second such protest in Britain this month.

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