Friday, August 28, 2009

Abuse Issue Puts the C.I.A. and Justice Dept. at Odds

WASHINGTON — With the appointment of a prosecutor to investigate detainee abuses, long-simmering conflicts between the Central Intelligence Agency and the Justice Department burst into plain view this week, threatening relations between two critical players on President Obama’s national security team.

The tension between the agencies complicates how the administration handles delicate national security issues, particularly the tracking and capturing of suspected terrorists overseas. It also may distract Mr. Obama, who is trying to move beyond the battles of the Bush years to focus on an ambitious domestic agenda, most notably health care legislation.

The strains became evident inside the administration in the past several weeks. In July, Leon E. Panetta, the C.I.A. director, tried to head off the investigation, administration officials said. He sent the C.I.A.’s top lawyer, Stephen W. Preston, to Justice to persuade aides to Attorney General Eric H. Holder Jr. to abandon any plans for an inquiry.

Mr. Preston presented what was, in effect, a closing argument in defense of the C.I.A., contending that many potential cases against intelligence operatives were legally flawed and noting that they had already been investigated, some more than once. In none, he said, had prosecutors found grounds for charges.

But the Justice Department was unmoved, officials said. Despite the C.I.A. pressure and the stated desire of the White House not to dwell on the past, Mr. Holder went ahead with an investigation that will determine whether agents broke the law in their brutal interrogations.

The officials interviewed for this article spoke anonymously so that they could discuss debates over classified matters.

On the day the decision was announced, Mr. Panetta phoned Mr. Holder, according to people familiar with the call. In the conversation, which lasted less than a minute, the C.I.A. director told the attorney general that the agency would cooperate but expressed his displeasure and swore mildly, if only once.

Mr. Holder and Mr. Panetta are each confronting difficult balancing acts. Mr. Holder inherited a dispirited department accused of carrying out the political wishes of the Bush White House, and he now must show independence while continuing to work with the rest of the administration.

For his part, Mr. Panetta, who is also new to his job and lacks a background in intelligence, must carry out White House orders to make a clean break with some of the Bush administration’s intelligence policies, including ending the C.I.A.’s harsh interrogations. At the same time he must soothe frayed nerves at the C.I.A.

Rahm Emanuel, the White House chief of staff, said that reports of shouting matches were overblown and that the protagonists were simply advocating for their agencies’ viewpoints in robust discussions, as they should. “Leon’s representing his institutional building,” Mr. Emanuel said. “Eric’s representing his institutional responsibilities.”

While top C.I.A. officials are angry at the Justice Department, Mr. Panetta has also quarreled over turf with Dennis C. Blair, the director of national intelligence, to whom he reports. The White House has occasionally been frustrated with both Mr. Panetta and Mr. Holder. And some in the administration have taken aim at Gregory B. Craig, the White House counsel, blaming him for some of the troubles in handling the detainee issue.

The behind-the-scenes fighting began in April when, in response to an A.C.L.U. lawsuit, the Justice Department prepared to release legal opinions written by its lawyers during the Bush administration authorizing the C.I.A. to use brutal interrogation techniques.

Mr. Obama disavowed the harsh methods, like waterboarding and wall-slamming, but the legal opinions were filled with embarrassing details about the C.I.A.’s aggressive approach. Mr. Panetta sought to heavily edit the memos before releasing them but was overruled when Mr. Obama sided with Mr. Holder, who wanted more detailed disclosures, the officials said.

Though he lost on the memos, Mr. Panetta’s camp came away thinking that at least they had won a tacit understanding, said some administration officials; the embarrassing details would be aired, but Justice would back off from any new investigation.

In April, C.I.A. officers felt reassured by Mr. Emanuel’s comments on ABC News, in which he said that Mr. Obama “believes that people in good faith were operating with the guidance they were provided; they shouldn’t be prosecuted.” But White House and Justice officials said that there was no such bargain and that all Mr. Emanuel meant was that C.I.A. officers who followed interrogation guidelines were safe from prosecution.

For his part, Mr. Holder had arrived in office in January thinking he might open an inquiry, and his resolve hardened after reading graphic classified reports of detainee abuse, including several deaths of prisoners in C.I.A. custody in Iraq and Afghanistan.

Still, it came as a shock to the C.I.A. when Newsweek reported in July that Mr. Holder was leaning toward an investigation. Given that the information was contained in an exclusive profile of Mr. Holder, the agency took it as a signal that an inquiry was coming. Mr. Panetta felt blindsided and had several conversations with White House officials about the long-term damage he believed such an inquiry could do to the C.I.A. He said the C.I.A. had already taken disciplinary action against the officers who had committed the most egregious acts.

At the time, Mr. Panetta felt besieged on several fronts. Mr. Blair, the intelligence director, was pushing to appoint the senior intelligence officials in each country overseas, a traditional prerogative of the C.I.A.

And other administration officials complained when the C.I.A. sent documents about the detention program to the Senate Intelligence Committee without giving the White House time to consider whether there were any executive privilege issues.

The interagency debate grew heated enough that Mr. Emanuel summoned Mr. Panetta, Mr. Blair and other officials to the White House to set down rules for what should be provided to Congress. Mr. Panetta complained that he was being chastised for excessive openness after being criticized for excessive secrecy when he pushed to withhold details from the interrogation memos.

The various issues raised by the Bush-era interrogation and detention policies have caused other tensions within the Obama team. Mr. Emanuel and others have concluded that the White House mishandled the planning for the closing of the detention center at Guantánamo Bay, Cuba.

Some in the administration blamed Mr. Craig, the White House counsel, for not anticipating and managing the political reaction to the decisions on Guantánamo and other issues. After The Wall Street Journal suggested that Mr. Craig was on the way out, a White House official said Mr. Emanuel reassured Mr. Craig that it was nonsense, and Mr. Craig’s defenders said he had been handed a thankless task.

Throughout the summer, Mr. Holder indicated that he was still weighing whether to appoint a prosecutor. The C.I.A. dismissed that as empty posturing. To the agency, it was clear that Mr. Holder had already made up his mind and was planning to announce the investigation, as he did Monday even as the inspector general report was released.

Few cabinet officers are closer to Mr. Obama than Mr. Holder, and the issue has been awkward for the two. Aides said that they could not rule out that the two discussed the matter but said that there was never a formal White House meeting about it.

Sensitive to the problems other administrations have had regarding politicizing the Justice Department, Mr. Obama left the decision to Mr. Holder, aides said.


















泰紅衫軍示威前夕 政壇傳聞紛出


  艾比希(Abhisit Vejjajiva)表示,那段郵寄給大眾的錄音,聽起來很像他的聲音,但那是經過剪輯,且誤導群眾,因為他從未下過那樣的指令。


沉寂兩個月 泰國紅衫軍再示威泰國反政府紅衫軍沉寂兩個月後,27日聚集曼谷皇家田廣場(Sanam Luang) 集會示威,要求政府解散國會、恢復1997年憲法。中央社記者林憬屏曼谷傳真 98年6月27日




   強調如期集會的紅衫軍核心領袖之一,也是現任反對黨為泰黨(Puea Thai Party)國會議員賈圖朋(Jatuporn Promphn)澄清,他們與這捲錄音無關,只要能清楚證明這捲錄音是否經過剪接,紅衫軍就不會把它當成政治議題,在30日的集會示威上攻擊政府。


  另一位紅衫軍領袖維拉(Veera Musikapong)則說,他被通知有些第三勢力可能會在紅衫軍這次集會期間,製造動盪。


達賴訪台 國台辦指「破壞兩岸關係」




批達賴來台 國台辦對馬「輕輕放下」



The Dalai Lama, the Tibetan spiritual leader, is seen after the awarding ceremony for the honorary doctorate of the Philipps university in Marburg, Germany, on Monday, Aug. 3, 2009. (AP Photo/Daniel Roland)




報 導中說,近期頻頻關注台灣救災和政治動向的國外媒體也在第一時間報導了國台辦的表態,認為達賴受邀訪台可能會傷害台海關係。美國有線電視新聞網CNN27 日在黃金時段報導該消息時稱:台灣當局同意達賴喇嘛造訪台灣的決定會「激怒北京」,他的到訪可能有損於大陸與台灣近期轉好的關係。英國「每日電訊報」援引 台灣兩岸問題專家蔡瑋的話說:民進黨的舉動很明顯是有政治目的的,其目的就是使馬英九處於更為尷尬的局面。

報導也引述台灣聯 合報的呼籲,「政治算計應止步!」文章說,綠營的算盤不止是邀達賴祈福那麼簡單,這應是一場政治算計工程。文章認為,八八水災的災情慘重,藍綠都難脫責 任,現在應是救災與重建擺中間,政治算計放一旁的時候,藍綠都需自制。而當下綠營突然拋出達賴來台的議題,這一招對綠營會否短多長空還有待觀察。

全民「駭」翻天 ?! 總統府網站資安大漏洞


網友們更是把政治人物與video合成,像是前總統府秘書長薛香川的父親節 ,剪接成kuso的影片,傳到youtube後引起熱烈的點閱,並且還在持續延燒中。

先 前紅極一時的「super 救命兒」影片,網友為發洩對馬政府救災不力的不滿,製作出的kuso影片,讓內閣一起跳韓國團體super junior的《sorry sorry》向人民道歉。大喇喇放在總統府新聞稿網頁,有網友質疑「之前不是才花7百萬重新建置總統府網頁嗎?錢都花到哪裡去了?」








FILE - In this March 4, 2009 file photo, text from "The Zombie Survival Guide" e-book is shown on an iPhone equipped with Amazon's Kindle for iPhone book reader. Many phones are now sophisticated enough, and have good enough screens, that they can be used as e-book reading devices. (AP Photo/Mark Lennihan)










莫拉克颱風農損 屏東最慘莫拉克颱風累計農業損失逾68億元,受災最慘重的是屏東縣,損失金額高達23億元,高雄、台南縣農損也都超過10億元。(圖:中央社商情中心製作)中央社      98年8月11日

今天公布「農產損失」達到49億3203萬元,包含農作物損失49億2455萬元,農作物被害面積 8萬2408公頃,損害程度28%(上次公告27%),換算無收穫面積 2萬3094公頃,受損作物以香蕉倒伏最為嚴重,被害面積達6396公頃,次為木瓜、番石榴、二期水稻、番荔枝(釋迦)、竹筍、蘭花、葉菜類水傷等;又養 蜂損失 749萬元。






72年來首見 豐田汽車將關閉加州廠

(中央社台北28日綜合外電報導)日本豐田汽車(Toyota Motor)將關閉美國加州佛利蒙特 (Fremont)和通用汽車 (General Motors)合資經營25年的汽車裝配廠,這是日本這家最大汽車製造商72年來首度在國內外關廠。

豐田汽車聲明表示,「新聯合汽車製造公司 (NewUnited Motor Manufacturing Inc.,Nummi)將在2010年3月停止生產Corolla轎車和Tacoma輕卡車。通用汽車已在6月份表示,Nummi廠將停止Pontiac Vibes車款的裝配,並退出這項合資企業的營運,以便破產重整。


「由於汽車需求不會很快回到高點,豐田急需削減產能,」富國資本管理公司 (Fukoku)執行長櫻井(Yuuki Sakurai)表示。「Nummi廠有工會組織,營運成本昂貴,這是個不錯的決定。」



The Great Economic Recovery of 2009 Is a Fraud

The stock market has gotten way ahead of itself. Investors are banking on a booming economy to keep the party going. But the gains are just temporary. And when it ends, it's going to end badly.

Of course, writing that sort of thing nowadays is like spitting on Santa Claus. Everyone knows the jolly old man in the red suit is a fictional character. But nobody will tolerate mistreating him.

And so it is with the economy. Most folks realize the pickup in leading economic indicators and the momentum behind the stock market's gains comes as a result of the government throwing trillions of dollars into the system.

It's not a real demand-driven economic boost. But pointing that out could get you branded as a Grinch.

The economic bulls are convinced the stimulus package is working. And depending on how you look at it, it is. Whenever the government throws a few trillion dollars into the economy in a few short months, it's going to create a temporary pop higher. But "temporary" is the key word.

Home sales today are higher this month than last, but way lower from this time last year. Auto sales have picked up due to the "cash for clunkers" program. But all that has happened is we've pressed next year's auto sales into this year. And the pickup in nearly every other consumer durable product is due mostly to restocking depleted inventory levels.

In order to gauge the strength of economic activity, it's better to look at the action in the Baltic Dry Index. This index tracks the price it costs to ship a variety of commodities overseas, and it's one of the most reliable economic indicators available anywhere.

Here's the chart...

While the index is well off the bottom it hit back in December, during the depth of the recession, it is still more than 60% below where it was one year ago.

Maybe a few trillion dollars doesn't buy what it used to.

More worrisome, though, is the recent downdraft since the peak in June. Better than anything, this illustrates the temporary nature of the economic recovery. The index has retraced nearly all its price gains since March.

If the economy were truly in "recovery" mode, and if consumer demand were truly picking up, the Baltic Dry Index should be moving consistently higher.

It's not. And that fact should be a major warning sign for anyone buying stocks and betting the economy's current blip higher is sustainable.

Best regards and good trading,

Jeff Clark

Makena reflects a global struggle

But officials hold to hope for future of plan in wake of foreclosure filings

MAKENA - As Maui County Council Member Mike Victorino put it a day after news broke about the impending Makena Resort foreclosure, "it wasn't exactly a military secret, you know?"

Back in November, it was Victorino who resurrected the proposal for what was to be an 1,800-acre development with 1,100 luxury condos, apartments and homes, a new beach club and a rebuilt Maui Prince Hotel, as well as a host of other improvements that $800 million or so can buy.

In an effort to stimulate the island's economy, most of his colleagues on the Maui County Council agreed and rezoned the land for Everett Dowling and Morgan Stanley Real Estate's Makena Resort venture. But on Monday, Dowling Co. defaulted on a $192.5 million loan for the original purchase price of $575 million from Seibu Group in mid-2007, and the lead lender started foreclosure proceedings in 2nd Circuit Court.

"I think it's just reflective of the market conditions, and it's happening at all levels," said Bob Lightbourn, president of the Realtors Association of Maui. "But we will recover. . . . We will get through this."

But no one interviewed Wednesday, even those associated with the grass-roots group Save Makena, is really celebrating what could be the demise of Makena Resort. The lenders' attorneys have said they fully intend to seek out new investors; and Dowling said he is going to find a way to be part of that group.

"It all seemed like a house of cards; and it's the little people who have to suffer who didn't do anything," said Lucienne de Naie, vice chairwoman of the Hawaii Sierra Club, referring to the more than 500 employees who work at the 310-room hotel and two golf courses.

"I see this as an unfortunate occurrence of chasing bubbles in the world economy rather than sustainable solutions right here."

The employees' jobs are secure for now, but leadership from the workers' union and resort managers, Prince Resorts, said they don't know what the future holds.

The project's supporters had high hopes for the expansion. The Makena Resort was supposed to add 20 percent more employees to its current staff.

Charles Kauluwehi Maxwell Sr., who is Dowling's friend, said he was once a paid cultural consultant years ago on the project for its former owners. The most important issues, he said, are the jobs and that the future owner or owners respect the burial and archaeological sites in Makena.

De Naie and others said they see the pending foreclosure as an opportunity for a new investment group to come in and build a community with homes affordable to a wide spectrum of income groups and with some commercial areas to serve residents' needs.

"Hopefully, this process will be relatively painless," said South Maui state Rep. Joe Bertram III. "Just basically what I would like to see is a revised project, with more mixed-use development and different incomes living together."

Dowling had proposed using the latest in green technology for his endeavor but planned to build 400 affordable housing units somewhere else within the Kihei-Makena Community Plan area.

Years ago, county leaders included the South Maui area in plans for future growth. And the County Council's rezoning meetings last winter attracted hundreds of people for and against building in one of the last large undeveloped regions on the island. Council members permanently attached 44 development conditions to the land, such as requirements for improved infrastructure.

Maui County has had the worst foreclosure rate in the state, which ranks about in the middle of the nation for foreclosures. Honolulu and Maui real estate experts said they expect more big hotels and housing developments in Maui County to default on loans and mortgages.

Council Chairman Danny Mateo voted against the Makena Resort rezoning in December. Now, though, Mateo said the economy needs projects like this one.

"The financial markets are dismal at best," Victorino said. "We just caught up with what's happening around the world. But I still feel it's a very good project.

"I talked to Everett and believe he is committed to getting it back online again. And I am confident people like him will do what's right."

He said it would be easy for critics to say, "I told you so." But looking ahead is the real challenge, he said.


The Shell Game - How the Federal Reserve is Monetizing Debt

Below is the first part of a Martenson Report from a few weeks ago, previously available only to enrolled members but now available for free to everyone.

To read the full report, click this link:

The Shell Game - How The Federal Reserve Is Monetizing Debt

Executive Summary

  • The Federal Reserve and the federal government are attempting to "plug the gap" caused by a slowdown of private credit/debt creation.
  • Non-US demand for the dollar must remain high, or the dollar will fall.
  • Demand for US assets is in negative territory for 2009
  • The TIC report and Federal Reserve Custody Account are reviewed and compared
  • The Federal Reserve has effectively been monetizing US government debt by cleverly enabling foreign central banks to swap their Agency debt for Treasury debt.
  • The shell game that the Fed is currently playing obscures the fact that money is being printed out of thin air and used to buy US government debt.

The Federal Reserve is monetizing US Treasury debt and is doing so openly, both through its $300 billion commitment to buy Treasuries and by engaging in a sleight of hand maneuver that would make a street hustler from Brooklyn blush.

This report will wade through some technical details in order to illuminate a complicated issue, but you should take the time to learn about this because it is essential to understanding what the future may hold.

One of the most important questions of the day concerns how the dollar will fare in the coming months and years. If you are working for a wage, it is essential to know whether you should save or spend that money. If you have assets to protect, where you place those monies is vitally important and could make the difference between a relatively pleasant future and a difficult one. If you have any interest at all in where interest rates are headed, you'll want to understand this story.

There are three major tripwires strung across our landscape, any of which could rather suddenly change the game, if triggered. One is a sudden rush into material goods and commodities, that might occur if (or when) the truly wealthy ever catch on that paper wealth is a doomed concept. A second would occur if (or when) the largest and most dangerous bubble of them all, government debt, finally bursts. And the third concerns the dollar itself.

In this report, we will explore the relationship between those last two tripwires, government debt and the dollar.

Replacing private credit with public credit

Our entire monetary system, and by extension our economy, is a Ponzi economy in the sense that it really only operates well when in expansion mode. Even a slight regression triggers massive panics and disruptions that seem wholly inconsistent with the relative change, unless one understands that expansion is more or less a requirement of our type of monetary and economic system. Without expansion, the system first labors and then destroys wealth far our of proportion to the decline itself.

What fuels expansion in a debt-based money system? Why, new debt (or credit), of course! So one of the things we keep a very close eye on over here at Martenson Central, as they do at the Federal Reserve, is the rate of debt creation.

One of the big themes in the current credit bubble collapse is the extent to which private credit has been collapsing and the corresponding degree to which the Federal Reserve has been purchasing debt and the federal government has stepped up its borrowing. In essence, public debt purchases and new borrowing has attempted to plug the gap left by a shortfall in private debt purchases and borrowing.

That's the scheme right now - the Federal Reserve is creating new money out of thin air to buy debt, while the US government is creating new debt at the most fantastic pace ever seen. The attempt here is to keep aggregate debt growing fast enough to prevent the system from completely seizing up.

How are they doing?

The debt gap

One of the great perks of living in a relatively open society is that we generally get access to pretty good information. The Federal Reserve routinely publishes a document called "Monetary Trends," where they collapse all their points of interest into a nice, tidy collection, and then make it available for all to see.

Here's what caught my eye in the most recent one:

What we see here is federal debt (bottom chart) exploding at a nearly 30% yr/yr rate of change in response to a collapse in corporate and consumer borrowing (top charts).

This raises a most interesting question: "Who is lending the money to accommodate all that federal borrowing?"

Here's where the story gets interesting.

Treasury International Capital (TIC) flows

Lately, a number of observers have made note of a troubling decline in foreign demand for US paper assets, notably bonds. Worse, it's even turned into outright selling which will ultimately translate into dollar weakness.

The relative demand for the dollar "out there" in the international Foreign Exchange (or "Forex") market directly impacts the dollar's strength. If there are more sellers then its value will fall; if there are more buyers, then its value will rise. One way to assess this delicate balance is to ask, "In total, are foreigners buying or selling US assets and what are they doing with those proceeds?"

Luckily for us, the exact answer to this very question is released in a monthly report put out by the Treasury Department, called the Treasury International Capital Flows report, or TIC report for short.

The recent TIC reports have been quite alarming, because they not only reveal the most sudden deceleration in flows in history, but also that they have been negative for some time now. This chart is from the Federal Reserve:

What we see here is that from the early 1990's onward until 2007, foreigners bought progressively more and more US assets and did so by bringing their money to the US and leaving it there. It is only over the past seven months, out of decades, where that process has reversed and become negative. This is a significant event, to say the least.

On the surface, the above chart hints at a potential disaster for a country that is embarking on the largest-ever federal debt binge in history.

After all, if US assets are being shunned by foreigners, how will we find enough buyers? And what will happen to the dollar?

The answers are: "We won't" and "Nothing good."

Digging in

If we dig into deeper into the detail of the report, we find something even more interesting. While the overall flows have been negative, there is an enormous difference between the behaviors of foreign central banks and private investors. Fortunately the TIC report distinguishes between these two broad classes of buyers.

Since the start of 2009 and continuing through the month of May, private investors sold $364 billion dollars worth of US assets, while central banks purchased $50 billion dollars worth (source is a .csv file available here from the Treasury). Added up, some $314 billion dollars of foreign money has left the country since the start of the year.

What this demonstrates is the utter reliance of the entire house of cards upon the continued purchase of US financial assets by foreign central banks. Without the continued cooperation of the foreign central banks in accumulating US assets, suffice it to say that the dollar will fall a lot lower than it already has.

The dollar

Not surprisingly, the dollar recently put in a new closing low for the year (YTD 2009) and is approaching a major area of support and resistance. If it breaks through, we could be looking at a rapid game-changer here.

Of course, I've said all this before, and every time we seem to get close, there's been an upside surprise in store. The forces aligned to prevent a dollar collapse are numerous.

But the same risk remains, and the fundamental picture concerning the dollar has not changed since I first became wary of its fortunes in 2002. In fact, it's grown worse. Federal deficits are higher than I ever imagined possible (13% of GDP!), and now the TIC flows are negative. The only somewhat bright(er) spot is that the trade deficit has shrunk quite a bit. However, it, too, remains solidly in negative territory, meaning it continues to apply pressure to the value of the dollar by increasing the total number of dollars that need to find a quiet resting place outside of the country.

Treasury auctions

During this past business week (July 27th - 31st, 2009), the US Treasury auctioned off more than $243 billion worth of various Treasury bills and bonds. "Indirect bidders," assumed to be mainly central banks, took an astonishing 39% of the total, or nearly $95 billion worth.

With the exception of the 5-year auction, which mysteriously stank up the joint with a worrisome bid-to-cover ratio well below 2.0 (the bond market behaved poorly upon the release of that news item), the story here is that foreign central banks are buying up vast quantities of Treasury offerings.

Wait a minute, hold on there…I thought we just talked about how the TIC report said that foreign central banks have only bought $50 billion in total US paper assets through May - and now they are said to be buying $95 billion during a single week in July alone?

Something is not adding up here.

To understand what, and to get to the essence of the shell game, we need to visit one more source of information - something called the Federal Reserve Custody Account.

The Federal Reserve Custody Account

It turns out that when China's central bank (or any other foreign central bank) decides to buy either US agency or Treasury bonds, they do not walk up to some window somewhere, hand over a pile of cash, and then take some nice looking bonds home with them in a suitcase.

Instead, what happens is that the Federal Reserve actually holds the bonds (or rather an electronic entry representing the bonds) in a special account for these various central banks. This is called the "Custody Account" and it holds US debt 'in custody' for various central banks. Think of it as a magnificently vast brokerage/checking account, run by the Federal Reserve for central banks, and you'll have the right image.

Although the TIC report shows flows of capital into and out of the country, it does not show you what is going on with those funds that are already in the country. If you look again at the first chart in this report, and behold the vast flows of money that came into the US between 1995 and 2008, you can get a sense of how much money got sent to the US and mostly remains parked there.

The custody account currently stands at $2.787 trillion (with a "t") dollars. It has increased by over $430 billion the past 12 months and by more than $275 billion in 2009 alone (through July 29). These are truly shocking numbers, and they tell us that foreign central banks have been accumulating US debt instruments throughout the crisis.

As we can see in the chart below, there has been absolutely no deflection in the growth of the custody account as a consequence of the financial crisis, bottoming trade, or the local needs of the countries involved. It's almost as if the custody account is completely disconnected from the world around it. If you can spot the credit bubble crisis on this chart, you have sharper eyes than me.

What does such a chart imply? We might wonder what sorts of distortions are created by having such a massive monetary spigot aimed from several central banks towards a single country. We also might question just how sustainable such an arrangement really is. It is a complete mystery how such a chart can display nary a wiggle, despite all that has recently transpired.

This next table showing the yearly changes in the custody account actually surprises me quite a bit.

Despite everything that's been going on, the custody account is on track to grow by the largest dollar amount on record this year, nearly $500 billion dollars (if the current pace continues). Where is all this money coming from and for how much longer?

Understanding the gap between the TIC and the Custody numbers

One thing you might have noticed is that the TIC report only shows $50 billion in foreign bank inflows for 2009, while the custody account grew by $277 billion.

How is it possible for the TIC report to show smaller inflows than growth in the custody account? We can see that clearly in this table, which compares the two. (Note: These are 12 monthly yr/yr changes, so the numbers will be different than the YTD numbers I just cited):

One explanation is that the custody account, at some $2.7 trillion dollars, is accumulating a lot of interest. If those interest payments are not "sent home" and remain in the account, then the account will grow by enough to more or less explain the difference. For example, the $135 billion difference shown above could be generated by a 5% return to the custody account, which is not an unthinkable rate of interest for that account.

International check kiting

Some people view the custody account as nothing more than an elaborate version of check kiting, played at the central banking level.

Check kiting

An illegal scheme whereby a false line of credit is established by the exchanging of worthless checks between two banks. For instance, a "check kiter" might have empty checking accounts at two different banks, A and B. The kiter writes a check for $50,000 on the Bank A account and deposits it in the Bank B account. If the kiter has good credit at Bank B, he will be able to draw funds against the deposited check before it clears, i.e., is forwarded to Bank A for payment and paid by Bank A. Since the clearing process usually takes a few days, the kiter can use the $50,000 for a few days, and then deposit it in the Bank A account before the $50,000 check drawn on that account clears.

In this game, Central Bank A prints up a bunch of money and buys the debt of Country B. Then the central bank of Country B prints up a bunch of money and buys the debt of Country A.

Both enjoy the appearance of strong demand for their debt, both governments get money to use, and nobody is the wiser. Except that the world's total stock of central bank reserves keep on growing and growing and growing, as reflected in the custody account, which will someday result in thoroughly unserviceable amounts of debt, an unmanageable flood of money, or both.

If this strikes you as a scam, congratulations; you get it.

If that was all there was to the story, then it would be far less interesting than it actually is. When we dig into the custody account data, we find that the total picture is hiding something quite extraordinary. Even as the total custody account has been growing steadily and faithfully, the composition of that account has been changing dramatically.

Here we note that agency bonds peaked in October of 2008 at nearly a trillion dollars but have declined by $178 billion since then. Treasuries, on the other hand, have increased by over $500 billion over that same span of time. A half a trillion dollars! If you were wondering how the US bond auctions have managed to go so smoothly, here's part of your answer.

What is going on here? How is it possible that central banks are buying so many Treasury bonds, at the fastest rate of accumulation on record?

It would appear that foreign central banks have been swapping agency bonds for Treasury bonds, but that's not how the markets work. First, they would have to sell those bonds, before they could use the proceeds to buy government debt. So to whom did they sell those Agency bonds in order to afford the Treasury bonds?

Here we might recall that the Federal Reserve has been buying agency bonds by the hundreds of billions.

The shell game

Have you ever seen a sidewalk magician run the shell game, where a pea under a shell is magically shuffled around - now you see it under this shell, now you see it under that shell, now it disappears completely - or does it? The more it moves around, the more confused you get. If you can only figure out which shell the pea is hidden under, you win! But where is the pea? The point of the game, from the perspective of the street hustler, is to use complexity of motion to confuse the mark.

These are the three critical points to remember as you read further:

  1. The US government has record amounts of Treasuries to sell.
  2. Foreign central banks, which have a big pile of agency bonds in their custody account, would like to help but want to keep things somewhat under the radar to avoid scaring the debt markets.
  3. The Federal Reserve does not want to be seen directly buying US government debt at auctions (and in fact is not permitted to, but many rules have been 'bent' worse during this crisis), because that could upset the whole illusion that there is unlimited demand for US government paper, but it also desperately wants to avoid a failed auction.

For various reasons, the Federal Reserve cannot just up and start buying all the Treasury paper that becomes available in record amounts, week after week, month after month.

Instead, it uses this three-step shell game to hide what it is doing under a layer of complexity:

Shell #1: Foreign central banks sell agency debt out of the custody account.

Shell #2: The Federal Reserve buys those agency bonds with money created out of thin air.

Shell #3: Foreign central banks use that very same money to buy Treasuries at the next government auction.

Shuffle, shuffle, shuffle, shuffle, shuffle, SHUFFLE, shuffle! Confused yet?

Don't be. If we remove the extraneous motion from this strange act, we find that the Federal Reserve is effectively buying government debt at auction. This is exactly, precisely what Zimbabwe did, but with one more step involved, introducing just enough complexity to keep the entire game mostly, but not completely, hidden from sight. They can scramble the shells all they want, but the pea is still there somewhere - the pea being the fact that the Fed is creating money to fund the purchase of US debt.

At the time, the Federal Reserve program to purchase agency bonds was described like this:

Fed to Pump $1.2 Trillion Into Markets

Greatly Expanded Purchases Are Designed to Lower Interest Rates, Stimulate Borrowing

The Federal Reserve yesterday escalated its massive campaign to stabilize the economy, saying it would flood the financial system with an additional $1.2 trillion.

In its statement yesterday, the Fed said it will increase its purchases of mortgage-backed securities by $750 billion, on top of $500 billion previously announced, and double, to $200 billion, its purchases of [Agency] debt in housing-finance firms such as Fannie Mae and Freddie Mac.

While "stimulating borrowing," "stabilizing the economy," and "lowering interest rates" are laudable goals, the primary goal of the program seems to have been something else entirely - to assure plentiful funds for the massive US Treasury auctions coming due. I saw nothing in any article I read about this program that even suggested that one of the goals was to allow foreign central banks to effectively swap their agency debt for US government debt using money printed from thin air. But that's clearly one of the outcomes.

The Federal Reserve, for its part, has been quite open about these purchases of Agency debt. It even provides an excellent website with nice graphics, allowing us to track the purchase program.


However, this openness only extends to the amounts themselves, not the source(s) of those Agency bonds. This is, in my mind, yet another reason the Fed desperately wishes to avoid an audit. The results would expose the game for what it is.

As we can see in the above chart, the Fed has purchased more than $640 billion of Agency bonds, and has promised to buy more in the near future.

As we now know, at least some of that money has been recycled into US government debt, where "indirect bidders" have been snapping up an unusually high proportion of the recent offerings. (Note: The way Indirect bidders are calculated has recently changed, and I am not entirely clear on how much this influences the numbers we now see….I'm working on it).

A fair question to ask here is, "If there are green shoots everywhere and the stock market is racing off to new yearly highs, why is the Fed continuing to pump money into the system at these mind-boggling rates?" One answer could be, "Because things might not be as rosy as they seem."


The Federal Reserve has effectively been monetizing far more US government debt than has openly been revealed, by cleverly enabling foreign central banks to swap their agency debt for Treasury debt. This is not a sign of strength and reveals a pattern of trading temporary relief for future difficulties.

This is very nearly the same path that Zimbabwe took, resulting in the complete abandonment of the Zimbabwe dollar as a unit of currency. The difference is in the complexity of the game being played, not the substance of the actions themselves.

When the full scope of this program is more widely recognized, ever more pressure will fall upon the dollar, as more and more private investors shun the dollar and all dollar-denominated instruments as stores of value and wealth. This will further burden the efforts of the various central banks around the world as they endeavor to meet the vast borrowing desires of the US government.

One possible result of the abandonment of these efforts is a wholesale flight out of the dollar and into other assets. To US residents, this will be experienced as rapidly rising import costs and increasing costs for all internationally-traded basic commodities, especially food items. For the rest of the world, the results will range from discomforting to disastrous, depending on their degree of dollar linkage.

Under these circumstances, "inflation vs. deflation" is not the right frame of reference for understanding the potential impacts. For example, it would be possible for most of the world to experience falling prices, even as the US experiences rapidly rising prices (and hikes in interest rates) as a consequence of a falling dollar. Is this inflation or deflation? Both, or neither? Instead, we might properly view it as a currency crisis, with prices along for the ride.

Further, all efforts to supplant private debt creation with public debts should be met with skepticism, because gigantic programs are no substitute for the collective decisions of tens of millions of individuals and cannot realistically meet millions of individual needs in a timely or appropriate manner.

The shell game that the Fed is currently playing does not change the basic equation: Money is being printed out of thin air so that it can be used to buy US government debt.

My advice is to keep these potential issues and insights in sharp focus, make what moves you can to diversify out of dollars, and be ready to move rapidly with the rest. This game is far from over.

Gerald Celente on Jeff Rense radio 18 Aug 2009

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Wall St Unspun - Peter Schiff - August/26/09

Check this link ......

Bailed Out Banks Threaten Systemic Collapse If Fed Discloses Information

And so the guns come out blazing. The Clearing House Association, another name for all the banks that were bailed out over the past year with the generous contributions from all of you, dear taxpayers, are now threatening with another instance of complete systemic collapse if Bloomberg's lawsuit is allowed to proceed unchallenged, let alone if any of the "Audit The Fed" measures are actually implemented.

As a reminder, The Clearing House Association consists of ABN Amro, Bank Of America, The Bank Of New York, Deutsche Bank, HSBC, JP Morgan Chase, US Bank and Wells Fargo.

In a declaration filed in the Bloomberg Case (08-CV-9595, Southern District of New York), the banks demonstrate no shame in attempting to perpetuate the status quo with regard to the Federal Reserve and demand that the wool over the eyes of the general population remain firmly planted in perpetuity.

The Clearing House submits this declaration because the Court's Order threatens to impair the ability of our members to access emergency funds through the New York Fed's Discount Window without suffering the severe competitive harm that public disclosure of their identity will cause.

Our members have accessed the New York Fed's Discount Window with the understanding that the Fed will not publicly disclose information about their borrowing, especially their identity. Industry experience, including very recent and searing experience, has shown that negative rumors about a bank's financial condition - even completely unfounded rumors - have caused competitive harm, including bank runs and failures.

Surely transparency would facilitate rumor-mongering to an unprecedented degree. After all rumors spread much easier when everyone knows the true financial condition of banks.

And here, in plain written Times New Roman, you see what racketeering by a major bank consortium looks like:

If the names of our member banks who borrow emergency funds are publicly disclosed, the likelihood that a borrowing bank's customers, counterparties and other market participants will draw a negative inference is great. Public speculation that a financial institution is experiencing liquidity shortfalls - which would be a natural inference from having tapped emergency funds - has caused bank customers to withdraw deposits, counterparties to make collateral calls and lenders to accelerate loan repayment or refuse to make new loans. When an institution's customers flee and its credit dries up the institution may suffer severe capital and liquidity strains leaving it in a weakened competitive position.

Pardon me if I am a broken record here, but would rumors not spread much less if there was more transparency, if investors and other financial intermediaries were fully aware of the conditions of their counterparties, if banks did not have to cover their billions in reserve losses by pretending they are viable and essentially being constant wards of the state?

The Banks' racketeering has gone on for far too long.

And yet, it does not stop: the conclusion from the banks' letter:

In sum, our experience differs from the factual conclusions the Court appears to have reached about the nature of competition in the banking industry:

  • The competitive harm to institutions that are publicized as needing emergency funding is not "speculative," but demonstrated by the recent multiple failures of financial institutions whenever information about their funding difficulty has been disclosed.
  • The disclosure does not involve mere "embarassing publicity" but information that could result in the immediate demise of an institution.
  • The disclosure would not merely "stigmatize [ ]"the institution or make it "look [ ] weak," but goes to its very viability.
  • The disclosure of accessing emergency funding is not an "inherent risk" of market participation, but an extraordinary risk in extraordinary circumstances.
  • Competitors can use the disclosure to advertise or publicize that they are financial stronger because they don't need emergency funding.

In a nutshell - the banks want their complete opacity cake and eat it too, or else, the racket goes, the transparency that will somehow promote massive rumor mongering will again destroy capitalism. In the meantime, the Ken Lewises of the world can continue touting how stable their businesses are based on optimistic future projections, while implicitly, they continue to survive merely thanks to the cash granted them by you, taxpayers.

Full filing here:

Clearinghouse_Decl -

Federal Reserve Says Disclosing Emergency Loans Will Hurt Banks

Aug. 27 (Bloomberg) -- The Federal Reserve argued yesterday that identifying the financial institutions that benefited from its emergency loans would harm the companies and render the central bank’s planned appeal of a court ruling moot.

The Fed’s board of governors asked Manhattan Chief U.S. District Judge Loretta Preska to delay enforcement of her Aug. 24 decision that the identities of borrowers in 11 lending programs must be made public by Aug. 31. The central bank wants Preska to stay her order until the U.S. Court of Appeals in New York can hear the case.

“The immediate release of these documents will destroy the board’s claims of exemption and right of appellate review,” the motion said. “The institutions whose names and information would be disclosed will also suffer irreparable harm.”

The Fed’s “ability to effectively manage the current, and any future, financial crisis” would be impaired, according to the motion. It said “significant harms” could befall the U.S. economy as well.

The central bank didn’t say when it would file its appeal.

Fed lawyer Kit Wheatley told Preska in a conference call today that she did not know how long it would take for the Fed board to search the New York Fed for records.

“We really don’t know what’s in New York,” Wheatley said. “We don’t control the system of record-keeping in New York.”

The Standard

The Fed’s lawyer went on to say that she did not know what records would fall under a “delegated function,” which would be a task assigned to the New York Fed.

Preska interrupted Wheatley, saying that “Ms. Wheatley, I held that’s not the standard. You didn’t search under the regulation. You’re supposed to search under the regulation.”

Preska scheduled another conference call for 2:30 p.m. today to discuss the schedule for a search of the New York Fed.

“Nobody is going to deny you your right to an appeal,” Preska said on the call, “We’re going to do it expeditiously, not in a piecemeal fashion and hand it all off to the Second Circuit.”

The Fed has refused to name the financial firms it lent to or disclose the amounts or the assets put up as collateral under the emergency programs, saying disclosure might set off a run by depositors and unsettle shareholders.

Bloomberg LP, the New York-based company majority-owned by Mayor Michael Bloomberg, sued on Nov. 7 under the Freedom of Information Act on behalf of its Bloomberg News unit.

Public Interest

“Our argument is that the public interest in disclosure outweighs the banks’ interest in secrecy,” said Thomas Golden, a lawyer with New York-based Willkie Farr & Gallagher LLP who represents Bloomberg.

Preska’s Aug. 24 ruling rejected the Fed’s argument that the records should remain private because they are trade secrets and would scare customers into pulling their deposits.

“What has the Fed got to hide?” said Senator Bernie Sanders, a Vermont independent who sponsored a bill to require the Fed to submit to an audit by the Government Accountability Office. “The time has come for the Fed to stop stonewalling and hand this information over to the public,” he said in an e- mail.

The Clearing House Association LLC, an industry-owned group in New York that processes payments between banks, filed a declaration that accompanied the request for a stay.

Negative Consequences

“Experience in the banking industry has shown that when customers and market participants hear negative rumors about a bank, negative consequences inevitably flow,” Norman Nelson, vice president and general counsel for the group, said in the document. “Our members have accessed the discount window with the understanding that the Fed will not disclose information about their borrowing, especially their identity.”

Members of the Clearing House are ABN Amro Holding NV, Bank of America Corp., Bank of New York Mellon Corp., Citigroup Inc.Deutsche Bank AG, HSBC Holdings Plc, JPMorgan Chase Inc., UBS AG, U.S. Bancorp and Wells Fargo & Co.

The case is Bloomberg LP v. Board of Governors of the Federal Reserve System, 08-CV-9595, U.S. District Court, Southern District of New York (Manhattan).

By Mark Pittman

Problem bank list tops 400

Number of troubled lenders continues to mount, hitting its highest level since June 1994, FDIC reports. Deposit insurance fund falls by 20%.

NEW YORK ( -- The number of institutions on the government's so-called "problem bank" list surpassed 400 in the latest quarter, climbing to its highest level in 15 years, according to a government report published Thursday.

The numbers, published as part of a broader survey on the nation's banking system by the Federal Deposit Insurance Corporation, revealed that the number of banks at risk of failing reached 416 during the second quarter.

The FDIC, which insurers bank deposits, has been hit by a wave of relatively large and costly failures as of late, prompting concerns about the size of the agency's insurance fund. To that end, the FDIC reported that the fund decreased by $2.6 billion, or 20%, during the quarter to $10.4 billion.

The number of banks under scrutiny by regulators has moved steadily higher since the recession began in late 2007. A year ago, the number of banks on the FDIC's watch list was 117. At the end of this year's first quarter, the number stood at 305.

FDIC chairman Sheila Bair said she expected the trend to continue.

"We expect the number of problem banks and failures will remain elevated even as the economy begins to recover," she said Thursday.

"We expect the number of problem banks and failures will remain elevated even as the economy begins to recover," she said Thursday.

The names of the banks on the list are never made available to the general public by regulators out of fear that depositors at those institutions may prompt a so-called "run on the bank."

Regulators indicated that the number of assets controlled by those institutions, however, climbed to $299.8 billion in the latest quarter, up from $220 billion in the previous period.

Over the years, the problem bank list has been viewed as a telling, albeit backwards-looking, barometer on the overall health of the nation's banking industry.

Still, few of the lenders that are on the list actually reach the point of failure. On average, just 13% of banks on the FDIC's problem list have been seized and shuttered by regulators.

So far this year, 81 banks have failed, and dozens more are expected to follow as banks cope with continued losses in real estate and various consumer loans.

Gauging performance

As a group, banks lost $3.7 billion during the second quarter, hurt in large part by their decision to set aside money to insulate themselves against bad loans, according to Thursday's report.

In a sign of how much of a trouble spot the issue of credit remains for many lenders, the percentage of loans and leases where borrowers were behind on payments rose to 4.35%, the highest level since banks first started reporting that data to regulators in 1983. Last quarter, the delinquency ratio was 3.76%.

0:00 /4:27New rules for buying a bank

Bair suggested however, that banks might be turning a corner in that respect, citing improvement among some real estate-related loans and a drop in the number of loans more than 30 days past due.

"We're going to need another quarter or two to confirm a trend," she said.

Still, Bair indicated that the agency was bracing for more failures, adding that it would look to replenish the agency's depleted insurance fund. So far this quarter, there have already been two significant bank failures: Texas-based Guaranty and Colonial BancGroup of Alabama.

Bair said Thursday that regulators would likely impose a special assessment on banks sometime next month to help replenish the insurance fund. That's on top of another special assessment against banks earlier this year.

What remains uncertain, however, is whether such precautionary measures would prevent the FDIC from having to tap its $500 billion credit line from the Treasury Department, which was approved earlier this year.

Bair downplayed the idea, but did not rule it out altogether.

Regulators could levy even more assessments against banks to avoid using funds from the Treasury. But such a move could harm many of the banks that are trying to survive the current crisis, notes Frank Barkocy, director of research at Mendon Capital Advisors, a money manager that invests primarily in bank stocks.

Barkocy said that if higher fees "push others to the brink" then the FDIC might want to consider other options, such as money from the Treasury, instead. senior writer Jennifer Liberto contributed to this report.
By David Ellis, staff writer

Breast cancer 'wonder drug' increases risk of rare tumour by 440%

Breast cancer patients given tamoxifen are more than four times more likely to develop a more aggressive tumour than those not prescribed the drug, scientists have warned.

A study of over 1,000 patients found the oestrogen blocking drug reduced the risk of the most common, easy to treat cancer recurring by 60 per cent.

But the chances of a rarer type not sensitive to the female hormone appearing in the opposite breast increased by an alarming 440 per cent.

These are known as ER negative tumours, as opposed to ER positive, and are much more dangerous as there are no drugs that specifically target them.

Dr Christopher Li, of the Fred Hutchinson Cancer Research Centre in Seattle, said: 'This is of concern, given the poorer prognosis of ER-negative tumours, which are also more difficult to treat.'

Tamoxifen has been used to treat breast cancer for more than 20 years and has saved the lives of hundreds of thousands of women worldwide.

But Dr Li, whose findings are published in the journal Cancer Research, said although it has been shown to reduce the risk of dying from the disease it does have risks.

The study confirms preliminary research by the same team published in 2001 which was the first to suggest a link between long-term tamoxifen use and an increased risk of ER-negative second cancers.

Dr Li said: 'The earlier study had a number of limitations. For example, we did not have information on the duration of tamoxifen therapy the women received.

'The current study is larger, is based on much more detailed data, and is the first study specifically designed to determine whether tamoxifen use among breast cancer survivors influences their risk of different types of second breast cancers.'

The latest research assessed history of tamoxifen use among 1,103 breast cancer survivors who were initially diagnosed with ER positive breast cancer between the ages of 40 and 79. Of these, 369 of the women went on to develop a second breast cancer.

Nearly all of the women in the study who took hormonal therapy used tamoxifen specifically. Detailed information about tamoxifen use was ascertained from telephone interviews and medical record reviews.

Oestrogen encourages the growth of some breast cancer cells. Tamoxifen interferes with this action by attaching itself to the molecule, or receptor, on a cancer cell surface that is also used by the hormone.

This, in effect, blocks the oestrogen effect on the cancer cells. Cancer cells without an oestrogen receptor are not affected by tamoxifen.

Dr Li said while the study confirmed a strong association between long-term tamoxifen therapy and an increased risk of ER-negative second cancer, it does not suggest that breast cancer survivors should stop taking hormone therapy to prevent a second cancer.

He added: 'It is clear that oestrogen-blocking drugs like tamoxifen have important clinical benefits and have led to major improvements in breast cancer survival rates.

'However, these therapies have risks, and an increased risk of ER negative second cancer may be one of them.

'Still, the benefits of this therapy are well established and doctors should continue to recommend hormonal therapy for breast cancer patients who can benefit from it.'

By Daily Mail Reporter